<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 11, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
---------------------
AMSURG CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TENNESSEE 62-1493316
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
ONE BURTON HILLS BOULEVARD
SUITE 350
NASHVILLE, TN 37215
(Address of principal executive offices) (Zip code)
</TABLE>
(615) 665-1283
Registrant's telephone number, including area code
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Class A Common Stock, no par value
Class B Common Stock, no par value
================================================================================
<PAGE> 2
AMERICAN HEALTHCORP LOGO
One Burton Hills Boulevard
Nashville, Tennessee 37215
April , 1997
Dear Fellow Stockholder:
This Information Statement contains important information regarding AmSurg
Corp. ("AmSurg"), and how American Healthcorp, Inc. ("AHC") will distribute on a
substantially tax-free basis all of the AmSurg common stock owned by AHC to the
holders of AHC common stock (the "Distribution"). AHC currently owns
approximately 59% of the outstanding AmSurg common stock.
The Distribution will result in your ownership of shares of two independent
public companies: AHC, which will focus its business strategy on operating
hospital-based diabetes treatment centers and providing diabetes disease
management services for managed care organizations and other third party payors,
and AmSurg, which will focus its business strategy on the acquisition,
development and management of practice-based ambulatory surgery centers and the
development and management of specialty physician networks associated with these
centers. We are excited about the prospects of both companies. Your Board of
Directors believes that the Distribution by AHC will enable AHC and AmSurg to
develop, finance and manage their businesses more effectively and should better
position the two companies to provide greater total value to stockholders.
Prior to the Distribution, AmSurg will effect a recapitalization (the
"Recapitalization"), pursuant to which every three shares of outstanding AmSurg
common stock will be converted into one share of AmSurg Class A common stock, no
par value ("Class A Common Stock"). Immediately following the Recapitalization,
AHC will exchange (the "Exchange") all of its shares of Class A Common Stock for
shares of AmSurg Class B common stock, no par value ("Class B Common Stock").
The sole purposes for the Recapitalization and the Exchange are to reduce the
number of outstanding shares of AmSurg common stock on a one for three basis
through a reverse stock split and to increase the voting power of AHC in AmSurg
prior to the Distribution to the extent required in order for the Distribution
to qualify for substantially tax-free treatment for federal income tax purposes.
The shares of Class A Common Stock will have one vote per share on all
matters, while the shares of Class B Common Stock will have seven votes per
share on the election and removal of directors of AmSurg and one vote per share
on all other matters. The Distribution to AHC stockholders will be of the Class
B Common Stock held by AHC, which shares will convert automatically into shares
of Class A Common Stock on the first transfer of any such shares following the
Distribution. The Class A Common Stock and the Class B Common Stock will be
identical in all other respects. Application has been made to list the shares of
Class A Common Stock on the Nasdaq National Market effective upon the
Distribution.
If you are a holder of AHC common stock on April , 1997, the record date
for the Distribution, you will receive, in the Distribution, 69 shares of Class
B Common Stock for every 100 shares of AHC common stock you own on that date, as
such ratio may be adjusted for issuances of AHC common stock after January 31,
1997. Holders of AHC common stock will receive cash in lieu of any fractional
shares of Class B Common Stock. AHC stockholders will be subject to federal
income taxation with respect to approximately 1.5% of the shares of the Class B
Common Stock received by them in the Distribution, the exact amount of which
will be provided by AHC along with other information concerning this taxable
amount. Consummation of the Distribution is expected to occur on May , 1997.
Consummation of the Distribution is subject to the satisfaction or waiver of
various conditions described in this Information Statement.
This Information Statement also sets forth information about AmSurg and the
rights of the Class A Common Stock and Class B Common Stock, and contains
financial statements and other financial information. Due to the importance of
the information contained in this document, you are urged to read the
Information Statement carefully.
STOCKHOLDERS OF RECORD ON THE RECORD DATE FOR THE DISTRIBUTION WILL BE
ENTITLED AUTOMATICALLY TO PARTICIPATE IN THE DISTRIBUTION AND ARE NOT REQUIRED
TO DO ANYTHING TO BECOME ENTITLED TO SO PARTICIPATE. YOU DO NOT NEED TO TURN IN
YOUR AHC STOCK CERTIFICATE. NO STOCKHOLDER APPROVAL OF THE DISTRIBUTION IS
REQUIRED OR SOUGHT. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE NOT REQUESTED
TO SEND US A PROXY.
SINCERELY,
/S/ THOMAS G. CIGARRAN
--------------------------------------
THOMAS G. CIGARRAN
Chairman and Chief Executive Officer
<PAGE> 3
AMSURG LETTERHEAD
April , 1997
Dear American Healthcorp, Inc. Stockholder:
Upon the distribution by American Healthcorp, Inc. ("AHC") of the shares of
AmSurg common stock owned by AHC (the "Distribution"), each of you will become
holders of AmSurg Corp. ("AmSurg") Class B common stock, no par value. As an AHC
stockholder you have indirectly owned an interest in AmSurg because it has
operated as a majority-owned subsidiary of AHC since 1992. As a result of the
Distribution, AmSurg will be an independent public company with the ability to
develop, finance and manage its business separately from AHC. We appreciate your
past support of AmSurg and would like to welcome you as a direct stockholder in
AmSurg at this exciting moment in the company's history. We expect to continue
our business as a leader in the development, acquisition and management of
practice-based ambulatory surgery centers and the development and management of
specialty physician networks associated with those centers. We believe the
Distribution will position us to maximize our growth potential.
AmSurg was formed in April 1992 for the purpose of developing, acquiring
and managing practice-based ambulatory surgery centers, in partnerships with
physician practice groups, throughout the United States. Each of the surgery
centers offers a narrow range of high volume, lower-risk surgical procedures,
generally in a single specialty, and has been designed with a cost structure
that enables AmSurg to charge fees which management believes are generally less
than those charged by hospitals and freestanding outpatient surgery centers for
similar services performed on an outpatient basis. While the majority of
AmSurg's existing ambulatory surgery centers specialize in gastroenterology,
AmSurg's growth strategy focuses on the development and acquisition of
practice-based ambulatory surgery centers, speciality physician networks and
physician practices in five specialties: gastroenterology, ophthalmology,
orthopaedic surgery, urology and otolaryngology.
Several trends in the healthcare industry, including the continued
penetration of managed care into the healthcare arena and the importance of
market share growth in maintaining and increasing profits, have led AmSurg to
expand its growth strategy to include the development of specialty physician
networks. AmSurg believes that it can strengthen its position with managed care
organizations through the development of single specialty physician networks in
combination with practice-based ambulatory surgery centers strategically located
throughout a medical market area.
We are excited about operating AmSurg as an independent publicly traded
company and the opportunities for future development and growth of our business.
We expect these opportunities to translate into greater value to you and all
AmSurg stockholders.
Sincerely,
/s/ KEN P. MCDONALD
------------------------
Ken P. McDonald
President
AMSURG LETTERHEAD
<PAGE> 4
CROSS-REFERENCE SHEET BETWEEN
INFORMATION STATEMENT
AND ITEMS OF FORM 10
<TABLE>
<CAPTION>
FORM 10 ITEM NUMBER AND CAPTION CAPTION IN INFORMATION STATEMENT
- ------------------------------- --------------------------------
<C> <S> <C>
1. Business..................................... Summary; Risk Factors; Selected Historical and Pro Forma
Financial Data of AmSurg; Management's Discussion and
Analysis of Financial Condition and Results of
Operations of AmSurg; Business of AmSurg
2. Financial Information........................ Summary; Risk Factors; Selected Historical and Pro Forma
Financial Data of AmSurg; Management's Discussion and
Analysis of Financial Condition and Results of
Operations of AmSurg; Business of AmSurg
3. Properties................................... Business of AmSurg
4. Security Ownership of Certain Beneficial
Owners and Management...................... Security Ownership of Certain Beneficial Owners and
Management
5. Directors and Executive Officers............. Management of AmSurg
6. Executive Compensation....................... Management of AmSurg
7. Certain Relationships and Related
Transactions............................... The Distribution; Certain Relationships and Related
Transactions
8. Legal Proceedings............................ Business of AmSurg
9. Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters........................ Summary; Description of Capital Stock; Security Ownership
of Certain Beneficial Owners and Management
10. Recent Sales of Unregistered Securities...... Recent Sales of Unregistered Securities
11. Description of Registrant's Securities to be
Registered................................. Description of Capital Stock
12. Indemnification of Directors and Officers.... Management of AmSurg; Description of Capital Stock
13. Financial Statements and Supplementary
Data....................................... Selected Financial Data of AmSurg; Management's
Discussion and Analysis of Financial Condition and
Results of Operations of AmSurg; Index to Financial
Statements
14. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..... Not Applicable
15. Financial Statements and Exhibits............ Index to Financial Statements; Index to Exhibits
</TABLE>
<PAGE> 5
INFORMATION STATEMENT
AMSURG LOGO
COMMON STOCK
(NO PAR VALUE)
This Information Statement/Registration Statement (the "Information
Statement") is being furnished to stockholders of American Healthcorp, Inc., a
Delaware corporation ("AHC"), in connection with the pro rata distribution (the
"Distribution") by AHC to its stockholders of all of the common stock of AmSurg
Corp., a Tennessee corporation ("AmSurg"), owned by AHC. The Distribution is
expected to occur on May , 1997.
Prior to the Distribution, AmSurg will effect a recapitalization (the
"Recapitalization"), pursuant to which every three shares of AmSurg common stock
will be converted into one share of AmSurg Class A common stock, no par value
(the "Class A Common Stock"). The Recapitalization will reduce on a one for
three basis the number of outstanding shares of common stock of AmSurg through a
reverse stock split (the "Reverse Stock Split"). The sole purpose of the Reverse
Stock Split is to permit the shares of Class A Common Stock to trade at
proportionately higher per share prices following the Distribution. Immediately
following the Recapitalization, AHC will exchange (the "Exchange") its shares of
Class A Common Stock for shares of AmSurg Class B common stock, no par value
(the "Class B Common Stock" and, together with the Class A Common Stock, the
"AmSurg Common Stock"). The sole purpose for the Exchange is to increase the
voting power of AHC in AmSurg prior to the Distribution to the extent required
in order for the Distribution to qualify for substantially tax-free treatment
for federal income tax purposes. The shares of Class A Common Stock will have
one vote per share on all matters, while the shares of Class B Common Stock will
have seven votes per share on the election and removal of directors of AmSurg
and one vote per share on all other matters. The shares of Class B Common Stock
will convert automatically into shares of Class A Common Stock on the first
transfer following the Distribution. The shares of Class A Common Stock and
Class B Common Stock will be entitled to share ratably in any dividends other
than dividends payable with respect to AmSurg preferred stock. In all other
respects, the Class A Common Stock and Class B Common Stock are expected to be
identical. No further shares of Class B Common Stock will be issued following
the Distribution.
In the Distribution, each holder of shares of AHC common stock, par value
$.001 per share (the "AHC Common Stock"), on April , 1997 (the "Distribution
Record Date") will receive a dividend of 69 shares of Class B Common Stock for
every 100 shares of AHC Common Stock owned by such holder on the Distribution
Record Date subject to adjustment for issuances of AHC Common Stock after
January 31, 1997, with cash being paid in lieu of fractional interests in a
share of Class B Common Stock.
No consideration will be paid by AHC stockholders for the shares of AmSurg
Common Stock to be received by them in the Distribution nor will they be
required to surrender or exchange shares of AHC Common Stock in order to receive
Class B Common Stock. There is currently no public trading market for the shares
of AmSurg Common Stock and no trading market will exist for Class B Common Stock
as each share of Class B Common Stock automatically converts to Class A Common
Stock on its first transfer. Application has been made to list the shares of
Class A Common Stock on The Nasdaq Stock Market's National Market (the "Nasdaq
National Market") under the symbol "AMSG."
The Distribution is subject to the satisfaction or waiver of a number of
other conditions, as described in "THE DISTRIBUTION -- Conditions" in this
Information Statement. A copy of the Distribution Agreement is set forth as
Appendix A to this Information Statement.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN MATTERS THAT SHOULD BE
CONSIDERED WITH RESPECT TO THE SHARES OF AMSURG COMMON STOCK.
---------------------
THIS INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. ANY SUCH OFFERING MAY ONLY BE
MADE BY MEANS OF A SEPARATE PROSPECTUS PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND OTHERWISE IN COMPLIANCE WITH APPLICABLE LAW.
---------------------
THE SECURITIES TO BE ISSUED IN THE DISTRIBUTION HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Information Statement is April , 1997.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION....................................... 1
SUMMARY..................................................... 2
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA OF AMSURG... 9
SUMMARY PRO FORMA FINANCIAL DATA OF AHC..................... 10
RISK FACTORS................................................ 11
Prior Reliance on AHC..................................... 11
Dependence on Growth Strategy............................. 11
Ability to Manage Growth.................................. 11
Relationships with Physician Partners..................... 11
Dependence on Third-Party Reimbursement................... 12
Medicare-Medicaid Illegal Remuneration ("anti-kickback")
Laws................................................... 12
Physician Self-Referral Laws.............................. 13
Other Government Regulation............................... 13
Competition............................................... 13
Risk Factors Regarding AHC after Distribution............. 14
Effect of the Distribution on the AHC Common Stock........ 14
Certain Federal Income Tax Considerations................. 14
Proposed Treasury Regulation Regarding Tax Deduction for
Amortization of Goodwill............................... 15
No Prior Market for AmSurg Common Stock................... 15
Shares Eligible for Future Sale........................... 15
Dilution and Impact of AmSurg Preferred Stock............. 16
Certain Antitakeover Effects.............................. 16
Risks Associated With Forward-Looking Statements.......... 16
THE DISTRIBUTION............................................ 17
Background and Reasons for the Distribution............... 17
The Recapitalization and Exchange......................... 22
The Distribution Agreement................................ 23
Conditions................................................ 24
Manner of Effecting the Distribution...................... 25
Listing of Class A Common Stock; Restrictions on Resale;
Conversion of Class B Common Stock..................... 25
Interests of Certain Persons in the Distribution.......... 26
The Management Agreement.................................. 26
Adjustment of AHC Stock Options........................... 27
Accounting Treatment...................................... 27
Certain Federal Income Tax Consequences................... 28
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA OF
AMSURG.................................................... 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF AMSURG....................... 32
Overview.................................................. 32
Results of Operations..................................... 33
Liquidity and Capital Resources........................... 34
CAPITALIZATION OF AMSURG.................................... 36
SELECTED PRO FORMA FINANCIAL DATA OF AHC.................... 37
BUSINESS OF AHC AFTER DISTRIBUTION.......................... 38
BUSINESS OF AMSURG.......................................... 39
Industry Overview......................................... 40
Strategy.................................................. 40
Acquisition and Development of Surgery Centers............ 41
Surgery Center Locations.................................. 42
</TABLE>
i
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<TABLE>
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PAGE
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<S> <C>
Surgery Center Operations................................. 43
Physician Specialty Networks and Practices................ 44
Revenues.................................................. 45
Competition............................................... 46
Government Regulation..................................... 46
Properties................................................ 49
Employees................................................. 49
Legal Proceedings and Insurance........................... 49
MANAGEMENT OF AMSURG........................................ 50
Directors and Executive Officers.......................... 50
Committees of the Board of Directors...................... 51
Compensation of Directors................................. 52
Director and Officer Indemnification and Limitation of
Liability.............................................. 52
Executive Compensation.................................... 54
Employment Agreements..................................... 55
Stock Incentive Plans..................................... 56
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 62
Management Agreement...................................... 62
Administrative Services Agreement......................... 62
Advisory Agreements....................................... 62
Lease Arrangement......................................... 63
Other Arrangements........................................ 63
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 64
DESCRIPTION OF CAPITAL STOCK................................ 66
Authorized Capital Stock.................................. 66
1992 Stockholders' Agreement.............................. 68
Registration Agreement.................................... 69
Stockholders' Agreements.................................. 69
Certain Provisions of the Charter, Bylaws, and Tennessee
Law.................................................... 69
SHARES ELIGIBLE FOR FUTURE SALE............................. 72
INDEX TO FINANCIAL STATEMENTS............................... F-1
APPENDICES
Appendix A: Distribution Agreement
Appendix B: Opinion of J.C. Bradford & Co.
Appendix C: Opinion of Morgan Keegan & Co., Inc.
</TABLE>
ii
<PAGE> 8
AVAILABLE INFORMATION
AmSurg has filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form 10 (such registration statement, as it may be
amended or supplemented, the "Registration Statement") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), with respect to the
shares of Class A Common Stock and Class B Common Stock. This Information
Statement does not contain all of the information which is set forth in the
Registration Statement and the exhibits and schedules thereto. The Registration
Statement and the exhibits thereto are available for inspection and copying
without charge at the Public Reference Section of the SEC at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as the Regional Offices of
the SEC at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, Seven World Trade Center, Suite 1300, New York, New York 10048
and at 5670 Wilshire Boulevard, Suite 1100, Los Angeles, California 90036.
Copies of such information are obtainable by mail from the Public Reference
Section of the SEC at 450 Fifth Street N.W., Washington, D.C. 20549 at
prescribed rates. Copies of such material may also be obtained from the SEC's
web site (http://www.sec.gov).
Following the Distribution, AmSurg will be subject to the informational
requirements of the Exchange Act and, in accordance therewith, will file annual,
quarterly and other reports, proxy statements and other information with the
SEC. The reports, proxy statements and other information which will be filed by
AmSurg with the SEC will be available for inspection and copying at the SEC's
Public Reference Section referred to above. Copies of such material will be
obtainable by mail at prescribed rates by writing the Public Reference Section
of the SEC at the address referred to above and from the SEC's web site
(http://www.sec.gov).
NO PERSON IS AUTHORIZED BY AHC OR AMSURG TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS INFORMATION
STATEMENT NOR CONSUMMATION OF THE DISTRIBUTION CONTEMPLATED HEREBY SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF AHC OR AMSURG SINCE THE DATE HEREOF, OR THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
1
<PAGE> 9
SUMMARY
The following summary is not intended to be complete and is qualified in
its entirety by reference to the more detailed information included in this
Information Statement and the Distribution Agreement set forth as Appendix A to
the Information Statement. Stockholders are urged to read this Information
Statement and the Distribution Agreement in their entirety. Unless otherwise
noted, the financial statements and other financial information relating to AHC
and AmSurg and data and information as to the shares of AmSurg Common Stock
included herein give effect to the Recapitalization, the Exchange and the
Distribution. Unless the context otherwise requires, the term "AmSurg" refers to
AmSurg and its subsidiaries and the term "AHC" refers to AHC and its
subsidiaries following the Distribution.
AMSURG
AmSurg was formed in April 1992 for the purpose of developing, acquiring
and managing practice-based ambulatory surgery centers, in partnerships with
physician practice groups, throughout the United States. An AmSurg surgery
center is typically located adjacent to or in the immediate vicinity of the
specialty medical practice of a physician group partner's office. Each of the
surgery centers offers a narrow range of high volume, lower-risk surgical
procedures, generally in a single specialty, and has been designed with a cost
structure that enables AmSurg to charge fees which management believes are
generally less than those charged by hospitals and freestanding outpatient
surgery centers for similar services performed on an outpatient basis. As of
January 31, 1997, AmSurg owned a majority interest in 27 operating centers in
ten states and the District of Columbia, managed another center's operations and
owned a majority interest in two physician practice groups. As of January 31,
1997, AmSurg also had 21 centers under development and had executed letters of
intent to acquire or develop five additional centers. AmSurg is utilizing
selected surgery centers as a base to develop specialty physician networks that
are designed to serve large numbers of covered lives and thus strengthen
AmSurg's position in dealing with managed care organizations. As of January 31,
1997, AmSurg operated four specialty physician networks, located in the south
Florida market and in Knoxville, Tennessee and Montgomery, Alabama.
In recent years, government programs, private insurance companies, managed
care organizations and self-insured employers have implemented various
cost-containment measures to limit the growth of healthcare expenditures. These
cost-containment measures, together with technological advances, have resulted
in a significant shift in the delivery of healthcare services away from
traditional inpatient hospitals to more cost-effective alternate sites,
including ambulatory surgery centers. AmSurg believes that it is a leader in the
development, acquisition and management of practice-based ambulatory surgery
centers in the specialties in which AmSurg has focused.
While the majority of AmSurg's existing ambulatory surgery centers
specialize in gastroenterology, AmSurg's growth strategy focuses on the
development and acquisition of practice-based ambulatory surgery centers,
specialty physician networks and physician practices in five specialties:
gastroenterology, ophthalmology, orthopaedic surgery, urology and
otolaryngology. AmSurg believes that it can strengthen its position with managed
care organizations through the development of single specialty physician
networks in combination with practice-based ambulatory surgery centers
strategically located throughout a medical market area.
AmSurg markets its surgery centers and networks directly to third-party
payors, including health maintenance organizations ("HMOs"), preferred provider
organizations ("PPOs"), other managed care organizations and employers, and
directly to patients. Marketing activities emphasize the high quality of care,
cost advantages and convenience of AmSurg's surgery centers and are focused on
making each center an approved provider under local managed care plans. In
addition, AmSurg is developing networks with selected physician groups in order
to market to managed care payors a comprehensive specialty physician network
that includes its surgery centers.
AmSurg ambulatory surgery centers and specialty physician networks are
typically owned through limited and general partnerships or limited liability
companies in which a subsidiary of AmSurg is a general partner or member and
holds a majority interest. The other partners of the partnerships and members of
the
2
<PAGE> 10
limited liability companies are physicians or physician practice groups that
generally have offices adjacent to or in close proximity to the surgery center.
In development projects, the capital contributed by the physicians and AmSurg,
together with bank financing, provide the partnership or limited liability
company with the funds necessary to construct and equip the surgery center and
to provide initial working capital.
AmSurg is incorporated in Tennessee. Its principal executive offices are
located at One Burton Hills Boulevard, Nashville, Tennessee 37215, and its
telephone number is (615) 665-1283.
AN INVESTMENT IN SHARES OF AMSURG COMMON STOCK IS SUBJECT TO VARIOUS RISKS.
SEE "RISK FACTORS."
THE DISTRIBUTION
DISTRIBUTING COMPANY....... The distributing company is AHC. Following
consummation of the Distribution, AHC, through its
wholly-owned subsidiary, Diabetes Treatment Centers
of America, Inc. ("DTCA"), will continue to operate
hospital-based diabetes treatment centers and to
provide diabetes disease management services for
managed care organizations and other third party
payors. DTCA's hospital-based diabetes treatment
centers are designed to create centers of
excellence for the treatment of diabetes in the
community in which they are located and thereby
increase the hospitals' market share of diabetes
patients and lower the hospitals' cost of providing
services to this population. DTCA's disease
management products are designed to assist
healthcare payors in reducing the total cost and
improving the quality of care for individuals with
diabetes through intensive diabetes education,
patient support and treatment regimens, as well as
comprehensive management of all care delivered to
these individuals. AHC, through its wholly-owned
subsidiary, Arthritis and Osteoporosis Care Center,
Inc. ("AOCC"), operates two arthritis and
osteoporosis treatment centers providing
comprehensive treatment to individuals with
arthritis and osteoporosis. On March 10, 1997, the
last full trading day prior to the announcement of
the execution of the Distribution Agreement and the
filing of this Information Statement with the SEC,
the closing sale price per share of AHC Common
Stock was $13.
PURPOSES OF THE
DISTRIBUTION............... The Distribution is designed to separate the two
principal operating businesses of AHC so that each
may maximize its value by adopting strategies and
pursuing objectives appropriate to its specific
needs. The principal purpose of the Distribution
for the AmSurg operating business is to enable it
to have access to debt and equity capital markets
as an independent, publicly traded company in order
to finance the development and acquisition of
ambulatory surgery centers and specialty physician
networks. The principal purpose of the Distribution
for AHC is to enable AHC to focus its capital
resources on the development of DTCA's
comprehensive diabetes disease management services
for managed care organizations and other third
party payors. The Distribution will enable
management of both AHC and AmSurg to focus on each
company's core business, provide liquidity for the
AmSurg minority stockholders and permit AHC
investors to more precisely choose and monitor
their investments. See "THE
DISTRIBUTION -- Background and Reasons for the
Distribution."
SECURITIES TO BE
DISTRIBUTED................ All of the outstanding shares of Class B Common
Stock, which is expected to be 5,530,131 shares of
Class B Common Stock, will be distributed. As of
January 31, 1997, AHC owned 59% of the outstanding
3
<PAGE> 11
shares of common stock of AmSurg. As of that date,
28% of the remaining shares of AmSurg common stock
were owned by physicians who acquired their shares
in connection with AmSurg's acquisition or
development of ambulatory surgery centers and the
remaining 13% were owned by management and certain
other investors who acquired their shares in
private transactions. See "THE DISTRIBUTION."
DISTRIBUTION AGREEMENT..... The Distribution will be accomplished pursuant to
the terms and conditions of the Distribution
Agreement, dated as of March 7, 1997, by and
between AHC and AmSurg set forth as Appendix A
hereto (the "Distribution Agreement").
DISTRIBUTION RATIO......... 69 shares of Class B Common Stock will be
distributed for each 100 shares of AHC Common Stock
outstanding on the Distribution Record Date subject
to adjustment for issuances of AHC Common Stock
after January 31, 1997. Holders of AHC Common Stock
will receive cash in lieu of any fractional shares
of Class B Common Stock that would otherwise be
distributed. No consideration will be paid by AHC
stockholders for the shares of AmSurg Common Stock
to be received by them, nor will they be required
to surrender or exchange shares of AHC Common Stock
in order to receive shares of AmSurg Common Stock.
See "THE DISTRIBUTION."
AUTOMATIC CONVERSION OF
CLASS B COMMON STOCK UPON
TRANSFER................. Each share of Class B Common Stock will convert
automatically into one share of Class A Common
Stock upon any transfer following the Distribution,
including transfers by gift but excluding transfers
of the Class B Common Stock from the beneficial
owner into street name, from street name to the
beneficial owner and by pledge. Stockholders will
not be required to effect a conversion of their
shares of Class B Common Stock in order to settle
any transfer or to sell their shares on the Nasdaq
National Market. See "DESCRIPTION OF CAPITAL
STOCK."
VOTING AND OTHER RIGHTS OF
CLASS A COMMON STOCK AND
CLASS B COMMON STOCK..... Each share of Class A Common Stock will have one
vote per share on all matters, while each share of
Class B Common Stock will have seven votes per
share in the election and removal of directors of
AmSurg and one vote per share on all other matters.
The Class A Common Stock and Class B Common Stock
will vote together as a single class on all matters
except those that would adversely affect the rights
of either class. The shares of Class A Common Stock
and Class B Common Stock will be entitled to share
ratably in any dividends other than dividends
payable with respect to AmSurg preferred stock.
AmSurg will not have the right to issue any Class B
Common Stock following the Distribution. The Class
A Common Stock and Class B Common Stock will be
identical in all other respects. See "DESCRIPTION
OF CAPITAL STOCK."
TRADING MARKET............. Application has been made to list the shares of
Class A Common Stock on the Nasdaq National Market
under the symbol "AMSG." See "THE
DISTRIBUTION -- Listing of Class A Common Stock;
Restrictions on Resale; Conversion of Class B
Common Stock." The combined trading prices of AHC
Common Stock and Class A Common Stock after the
4
<PAGE> 12
Distribution may be less than, equal to or greater
than the trading price of AHC Common Stock before
the Distribution.
DISTRIBUTION RECORD DATE... April , 1997
DISTRIBUTION DATE.......... The Distribution will take place following the
satisfaction or waiver of the conditions set forth
in the Distribution Agreement. It is anticipated
that the Distribution will take place on May ,
1997. Stock certificates representing the shares of
Class B Common Stock to be distributed will be
mailed by the Distribution Agent as soon as
practicable after the Distribution. No action of an
AHC stockholder is necessary to receive the
certificates.
CONDITIONS TO
DISTRIBUTION............... The Distribution is subject to a number of
conditions, including the following: (i) the
receipt of a letter ruling from the Internal
Revenue Service (the "IRS") with respect to the
substantially tax-free status of the Distribution
for federal income tax purposes; (ii) the listing
of the Class A Common Stock on a national
securities exchange or for inclusion in the Nasdaq
National Market or such other trading market as the
parties may agree; (iii) the approval by the AmSurg
stockholders of the amendment and restatement of
AmSurg's Charter (the "AmSurg Charter"), the
amendment and restatement of the AmSurg Bylaws (the
"AmSurg Bylaws") and various other matters; (iv)
the receipt by the Special Committee of the Board
of Directors of AmSurg of the opinion of J.C.
Bradford & Co. ("J.C. Bradford") that the
Recapitalization, Exchange and the Distribution are
fair, from a financial point of view, to the
stockholders of AmSurg, other than AHC, and the
receipt by the Board of Directors of AHC of the
opinion of Morgan Keegan & Co., Inc. ("Morgan
Keegan") that the Distribution, Recapitalization
and Exchange are fair, from a financial point of
view, to the AHC stockholders, and confirmation of
such opinions prior to the Distribution; and (v)
the approval of the Recapitalization and the
Exchange by the holders of at least a majority of
the voting power of the outstanding shares of
capital stock of AmSurg, with the holders of no
more than 5% of the outstanding shares exercising
dissenters' rights of appraisal under Tennessee
law. AHC, as the holder of 59% of the voting power
of the common stock of AmSurg on January 31, 1997,
has agreed to vote in favor of the Recapitalization
and the Exchange and the amendment and restatement
of the AmSurg Charter and AmSurg Bylaws. The
holders of AmSurg preferred stock also must approve
the amendment and restatement of the AmSurg
Charter. See "THE DISTRIBUTION -- Conditions."
RECAPITALIZATION AND
EXCHANGE................... Immediately prior to consummation of the
Distribution, AmSurg will (a) undergo a
Recapitalization, in which AmSurg will convert
every three shares of AmSurg common stock held by
all existing AmSurg stockholders, including AHC,
into one share of Class A Common Stock and
authorize the issuance of Class B Common Stock to
AHC in the Exchange and (b) effect the Exchange by
issuing 5,530,131 shares of Class B Common Stock to
AHC in exchange for the same number of shares of
Class A Common Stock. The Class B Common Stock will
have as of the date of Distribution approximately
90% of the voting power of the capital stock of
AmSurg in election and removal of directors. As
part of the Recapitalization, AmSurg also will
convert every three shares of Series A Preferred
Stock and Series B Preferred Stock into one share
of Series A Preferred Stock and Series B Preferred
Stock, respectively. The
5
<PAGE> 13
sole purposes of the Recapitalization and the
Exchange are (a) to reduce the number of
outstanding shares of AmSurg common stock on a one
for three basis through a Reverse Stock Split so as
to permit the shares of AmSurg Common Stock to
trade at proportionately higher per share prices
following the Distribution, and (b) to increase the
voting power of AHC immediately prior to the
Distribution as required in order to effect the
Distribution on a substantially tax-free basis for
federal income tax purposes. See "THE
DISTRIBUTION -- The Recapitalization and Exchange."
DISTRIBUTION AGENT,
TRANSFER AGENT AND
REGISTRAR................ SunTrust Bank, the transfer agent for the AHC
Common Stock, will serve as the distribution agent
(the "Distribution Agent") and as the transfer
agent and registrar for the AmSurg Common Stock.
FEDERAL INCOME TAX
CONSEQUENCES............. It is anticipated that the Distribution will be
substantially tax-free for federal income tax
purposes under Section 355 of the Internal Revenue
Code of 1986, as amended (the "Code"). Receipt of a
ruling from the IRS that the Distribution may be
accomplished on a substantially tax-free basis for
federal income tax purposes is a condition to the
Distribution. Stockholders will be subject to
federal income taxation with respect to
approximately 1.5% of the shares of AmSurg Common
Stock received by them and any cash received in
lieu of fractional shares. AHC will distribute as
soon as practicable to its stockholders information
regarding the taxable amount of ordinary income and
of capital gain attributable to the Distribution.
See "THE DISTRIBUTION -- Certain Federal Income Tax
Consequences." Stockholders are urged to consult
with their personal tax advisors concerning any
state, local or foreign tax consequences of the
Distribution.
DIVIDENDS AFTER THE
DISTRIBUTION............. AmSurg does not currently intend to declare or pay
any cash dividends on the shares of Class A Common
Stock and Class B Common Stock and its ability to
do so will be subject to certain limitations. See
"DESCRIPTION OF CAPITAL STOCK -- Authorized Capital
Stock -- Dividend Policy." AHC does not currently
intend to declare or pay any cash dividends on the
shares of AHC Common Stock and its ability to do so
will be subject to certain limitations.
CERTAIN PROVISIONS OF
AMSURG'S CHARTER, BYLAWS
AND
TENNESSEE LAW............ Certain provisions of AmSurg's Charter and Bylaws
and Tennessee law may have the effect of delaying
or making more difficult an acquisition of control
of AmSurg in a transaction not approved by its
Board of Directors. See "RISK FACTORS -- Certain
Antitakeover Effects," and "DESCRIPTION OF CAPITAL
STOCK -- Certain Provisions of the Charter, Bylaws
and Tennessee Law."
ARRANGEMENTS BETWEEN AMSURG
AND AHC AND CERTAIN
OFFICERS OF AHC AFTER THE
DISTRIBUTION............. In connection with the Distribution, AHC and AmSurg
have entered into various agreements that will
result in ongoing relationships between AHC and
AmSurg. AmSurg and AHC have entered into a
Management
6
<PAGE> 14
and Human Resources Agreement (the "Management
Agreement"), pursuant to which AHC will provide
certain financial and accounting services to AmSurg
on a transitional basis for a period of up to one
year to enable AmSurg to become self-sufficient in
these areas. Thomas G. Cigarran, the Chairman and
Chief Executive Officer of AHC, has agreed to serve
as Chairman of the Board of AmSurg following the
Distribution. Mr. Cigarran and Henry D. Herr, the
Chief Financial Officer and a director of AHC, will
serve as advisors to AmSurg for a period of two
years following the Distribution pursuant to
separate advisory agreements. The purpose of these
agreements is to provide AmSurg with advisory
services to AmSurg management in the areas of
strategy, operations, management and organizational
development for a two-year period following the
Distribution. Mr. Herr and James A. Deal, Executive
Vice President of AHC and President of DTCA, also
will serve as directors of AmSurg. The Management
Agreement and the advisory agreements were approved
by a committee of independent directors of AmSurg
(the "Special Committee") and were deemed by the
Special Committee to be fair and in the best
interests of AmSurg. AmSurg will continue to
sublease its corporate headquarters from AHC
pursuant to an existing Sublease Agreement that
expires in December 1999. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
INTERESTS OF CERTAIN
PERSONS IN THE
DISTRIBUTION............. Certain directors and officers of AHC and AmSurg
will have interests in the Distribution that are in
addition to their interests as AHC stockholders
generally and those interests may create potential
conflicts of interest. These interests include
positions with both companies prior to and after
the Distribution. The terms of the Distribution and
the related Recapitalization and Exchange have been
approved by the Special Committee and the Board of
Directors of AHC. See "THE DISTRIBUTION --
Interests of Certain Persons in the Distribution."
RISK FACTORS............... Holders of AHC Common Stock should be aware that
the Distribution and the ownership of AmSurg Common
Stock involve certain risk factors, including (i)
the risk that AmSurg will no longer be able to rely
upon AHC for certain management, administrative and
accounting services, except for certain financial
and accounting services provided by AHC and for
certain advisory services provided by Mr. Cigarran
and Mr. Herr on a transitional basis; (ii) the risk
that AmSurg may not be able to implement its growth
strategy and to manage the growth it does achieve;
and (iii) the risk that the market trading prices
of AHC Common Stock and AmSurg Common Stock may not
equal or exceed on a combined basis the current
market trading prices of AHC Common Stock. See
"RISK FACTORS."
FAIRNESS OPINIONS.......... J.C. Bradford has delivered an opinion to the
Special Committee that the Recapitalization,
Exchange and Distribution are fair, from a
financial point of view, to the stockholders of
AmSurg, other than AHC. The receipt of a
confirmation of that opinion by the Board of
Directors of AmSurg is a condition to the
Distribution. A copy of the opinion is set forth as
Appendix B hereto. Morgan Keegan has delivered an
opinion to the AHC Board of Directors that the
Recapitalization, Exchange and Distribution are
fair, from a financial point of view, to the
stockholders of
7
<PAGE> 15
AHC. The receipt of a confirmation of that opinion
by the Board of Directors of AHC is a condition to
the Distribution. A copy of the opinion is set
forth as Appendix C hereto. See "THE
DISTRIBUTION -- Background and Reasons for the
Distribution; and -- Conditions."
NO HOLDER OF AHC COMMON STOCK WILL BE REQUIRED TO PAY ANY CASH OR OTHER
CONSIDERATION FOR THE SHARES OF AMSURG COMMON STOCK RECEIVED IN THE DISTRIBUTION
OR TO SURRENDER OR EXCHANGE SHARES OF AHC COMMON STOCK OR TO TAKE ANY OTHER
ACTION IN ORDER TO RECEIVE SHARES OF AMSURG COMMON STOCK IN THE DISTRIBUTION.
STOCKHOLDERS WILL BE SUBJECT TO FEDERAL INCOME TAXATION WITH RESPECT TO
APPROXIMATELY 1.5% OF THE SHARES OF THE AMSURG COMMON STOCK RECEIVED BY THEM AND
ANY CASH RECEIVED IN LIEU OF FRACTIONAL SHARES. SEE "THE DISTRIBUTION -- MANNER
OF EFFECTING THE DISTRIBUTION" AND "THE DISTRIBUTION -- CERTAIN FEDERAL INCOME
TAX CONSEQUENCES."
8
<PAGE> 16
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA OF AMSURG
The following table presents summary historical and pro forma financial
data of AmSurg. The information set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations of AmSurg" and the historical and pro forma consolidated financial
statements and notes thereto included elsewhere in this Information Statement.
The historical consolidated statement of operations data set forth below for
each of the years ended December 31, 1994, 1995 and 1996 and the historical
consolidated balance sheet data at December 31, 1996 are derived from, and are
qualified by reference to, the audited consolidated financial statements
included herein, and should be read in conjunction with those financial
statements and notes thereto. The historical consolidated statement of
operations data set forth below for the period from inception through December
31, 1992 and the year ended December 31, 1993 is derived from audited
consolidated financial statements not included herein. See "Index to Financial
Statements." The pro forma combined statement of operations data for the year
ended December 31, 1996 set forth below reflects the effects of the acquisition
of The Endoscopy Center of Ocala, Inc. and six other businesses acquired during
the year ended December 31, 1996 assuming the acquisitions had occurred on
January 1, 1996. None of the other six businesses (five surgery centers and one
physician practice) acquired individually exceeded the significant subsidiary
tests requiring separate financial reporting under applicable SEC regulations.
The historical and pro forma financial information may not be indicative of
AmSurg's future performance and does not necessarily reflect the financial
position and results of operations of AmSurg had AmSurg operated as a separate,
stand-alone entity during the periods covered.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------------- ------------
YEAR ENDED AND AT DECEMBER 31, YEAR ENDED
---------------------------------------------- DECEMBER 31,
1992(1) 1993 1994 1995 1996 1996
------- ------ ------- ------- ------- ------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................................................... $ 576 $6,586 $13,826 $22,489 $35,007 $40,620
------ ------ ------- ------- ------- -------
Expenses:
Salaries and benefits.................................... 456 2,307 4,092 6,243 11,613 13,308
Other operating expenses................................. 288 3,002 5,091 7,563 11,547 13,230
Depreciation and amortization............................ 51 665 1,309 2,397 3,000 3,465
Interest................................................. 3 30 193 722 948 1,298
------ ------ ------- ------- ------- -------
Total expenses..................................... 798 6,004 10,685 16,925 27,108 31,301
------ ------ ------- ------- ------- -------
Income (loss) before income taxes and minority interest.... (222) 582 3,141 5,564 7,899 9,319
Minority interest in earnings of consolidated
partnerships........................................... 87 1,121 2,464 3,938 5,433 6,543
------ ------ ------- ------- ------- -------
Income (loss) before income taxes.......................... (309) (539) 677 1,626 2,466 2,776
Income tax expense....................................... -- -- 26 578 985 1,109
------ ------ ------- ------- ------- -------
Net income (loss).......................................... (309) (539) 651 1,048 1,481 1,667
Accretion of preferred stock discount.................... -- -- -- -- 22 22
------ ------ ------- ------- ------- -------
Net income (loss) attributable to common stockholders...... $ (309) $ (539) $ 651 $ 1,048 $ 1,459 $ 1,645
====== ====== ======= ======= ======= =======
Net income (loss) per share attributable to common
stockholders(2).......................................... $(0.24) $(0.11) $ 0.09 $ 0.12 $ 0.16 $ 0.18
====== ====== ======= ======= ======= =======
Weighted average common shares and equivalents(2).......... 1,302 4,734 7,313 8,581 9,102 9,301
BALANCE SHEET DATA:
Cash and cash equivalents.................................. $ 3,192
Working capital............................................ 4,732
Total assets............................................... 54,653
Long-term debt............................................. 9,218
Minority interest.......................................... 5,674
Preferred stock............................................ 4,982
Stockholders' equity....................................... 28,374
GENERAL CENTER DATA:
Procedures................................................. 1,146 16,051 30,922 55,344 71,323
Centers at period end...................................... 4 6 14 18 27
SAME CENTER DATA(3):
Procedure growth........................................... 10%
Net revenue growth......................................... 14%
</TABLE>
- ---------------
(1) Period from inception through December 31, 1992.
(2) Adjusted to give effect to the Recapitalization which includes a one for
three reverse stock split.
(3) Fifteen centers in same center category.
9
<PAGE> 17
SUMMARY PRO FORMA FINANCIAL DATA OF AHC
The summary unaudited pro forma financial data of AHC set forth below
reflects certain adjustments to the historical consolidated financial statements
of AHC for each of the fiscal years in the five year period ended August 31,
1996, and the three month periods ended November 30, 1995 and 1996 to present
AmSurg as a discontinued operation.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FOR THE YEAR ENDED AND AT AUGUST 31, NOVEMBER 30,
----------------------------------------------- ----------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------ -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Total revenues.............. $37,112 $39,682 $41,144 $36,583 $31,403 $8,023 $ 7,979
------- ------- ------- ------- ------- ------ -------
Expenses:
Salaries and benefits............. 16,488 16,972 18,699 18,878 19,866 4,944 5,261
Other operating expenses.......... 11,860 11,771 12,271 10,865 7,254 1,571 2,009
Depreciation and amortization..... 1,336 1,340 1,293 1,339 1,273 356 330
Interest.......................... 12 8 6 7 5 2 1
------- ------- ------- ------- ------- ------ -------
Total expenses.............. 29,696 30,091 32,269 31,089 28,398 6,873 7,601
------- ------- ------- ------- ------- ------ -------
Income before income taxes and
discontinued operations........... 7,416 9,591 8,875 5,494 3,005 1,150 378
Income tax expense(1)............... 3,040 3,884 3,586 2,252 544 499 171
------- ------- ------- ------- ------- ------ -------
Income from continuing operations... 4,376 5,707 5,289 3,242 2,461 651 207
Discontinued operations........... -- (170) 38 674 799 149 256
------- ------- ------- ------- ------- ------ -------
Net income.......................... $ 4,376 $ 5,537 $ 5,327 $ 3,916 $ 3,260 $ 800 $ 463
======= ======= ======= ======= ======= ====== =======
Income per share from continuing
operations(2)..................... $ 0.52 $ 0.68 $ 0.63 $ 0.40 $ 0.30 $ 0.08 $ 0.03
Income (loss) per share from
discontinued operations(2)........ -- (0.02) 0.00 0.08 0.10 0.02 0.03
------- ------- ------- ------- ------- ------ -------
Net income per share(2)............. $ 0.52 $ 0.66 $ 0.63 $ 0.48 $ 0.40 $ 0.10 $ 0.06
======= ======= ======= ======= ======= ====== =======
Weighted average common shares and
equivalents....................... 8,370 8,404 8,461 8,211 8,161 8,090 8,199
</TABLE>
<TABLE>
<CAPTION>
AS
ADJUSTED(3)
-----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........... $12,562 $ 9,982 $ 9,982
Working capital..................... 13,324 12,279 11,804
Net assets of discontinued
operations........................ 16,361 17,321 --
Total assets........................ 48,487 48,656 33,035
Long-term debt and other long-term
liabilities....................... 2,657 2,178 2,178
Stockholders' equity................ 41,611 42,209 26,113
</TABLE>
- ---------------
(1) Includes nonrecurring income tax benefit in fourth quarter of fiscal 1996 of
$760,000 or $.09 per share.
(2) Per share information does not give effect to the increase in weighted
average number of shares outstanding that is expected to occur as a result
of the adjustment of AHC stock options in connection with the Distribution.
See "THE DISTRIBUTION -- Adjustments of AHC Stock Options; and -- Accounting
Treatment."
(3) Adjusted to give effect to the Distribution and estimated expenses of
$475,000 related thereto and estimated non-cash compensation expense of
$5,970,000 ($4,270,000 net of income taxes) that is expected to be
recognized as a result of the adjustment of AHC stock options in connection
with the Distribution. See "THE DISTRIBUTION -- Adjustments of AHC Stock
Options; and -- Accounting Treatment."
10
<PAGE> 18
RISK FACTORS
In addition to the other information contained in this Information
Statement, holders of AHC Common Stock should carefully consider the following
information concerning AmSurg, AHC, the Recapitalization, Exchange and
Distribution. In addition to the historical information included herein, this
Information Statement includes certain forward-looking statements that are based
on management's beliefs as well as on assumptions made by and information
currently available to management. These statements, which have been included in
reliance on the "safe harbor" provisions of the Private Litigation Reform Act of
1995, are subject to a number of risks and uncertainties, including but not
limited to the factors identified below. Actual results may differ materially
from those anticipated in any such forward-looking statements.
PRIOR RELIANCE ON AHC. AmSurg has historically relied upon AHC for certain
management, administrative and accounting services. After the Distribution,
AmSurg will be responsible for maintaining its own management, administrative
and accounting functions, except for certain financial and accounting services
provided by AHC on a transitional basis for up to one year pursuant to the
Management Agreement and for certain advisory services provided by members of
AHC senior management pursuant to two-year advisory agreements. In particular,
Thomas G. Cigarran, who was the Chairman and Chief Executive Officer of AmSurg
prior to the Distribution, will no longer serve as an officer of AmSurg,
although he will continue to serve as Chairman of the Board of Directors and
will serve as an advisor to AmSurg. Henry D. Herr, who was Vice President and
Secretary of AmSurg prior to the Distribution, will serve as a director and an
advisor to AmSurg after the Distribution, but will no longer serve as an officer
of AmSurg. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
DEPENDENCE ON GROWTH STRATEGY. AmSurg intends to increase its revenues and
earnings, in part, by continuing to develop and to acquire practice-based
ambulatory surgery centers, and by developing specialty physician networks that
may include the acquisition of ownership interests in and provision of
management services to specialty physician networks and practices. There can be
no assurance that AmSurg will be able to acquire or develop additional surgery
centers or interests in physician networks, or that it will be able to provide
management services to physician practices at a profit. In addition, there can
be no assurance that the assets acquired by AmSurg in the future, or the
management services relationships entered into in the future, will ultimately
produce returns that justify their related investment or implementation by
AmSurg.
AmSurg's growth strategy also requires substantial capital investment.
Capital will be needed not only for the acquisition of the assets of surgery
centers and physician practices, but also for their development, effective
integration, operation and expansion. AmSurg may finance future acquisitions by
raising additional capital through debt or equity financings or using shares of
its capital stock for all or a portion of the consideration to be paid in such
acquisitions. In the event that the Class A Common Stock does not maintain a
sufficient valuation, or potential acquisition candidates are unwilling to
accept Class A Common Stock as part of the consideration for the sale of the
assets of their businesses, AmSurg may be required to utilize more of its cash
resources, if available, or rely solely on additional financing arrangements in
order to pursue its acquisition strategy. In such an instance, if AmSurg does
not have sufficient capital resources, its growth could be limited and its
operations impaired. There can be no assurance that AmSurg will be able to
obtain financing or that, if available, such financing will be on terms
acceptable to AmSurg. See "BUSINESS OF AMSURG -- Strategy."
ABILITY TO MANAGE GROWTH. AmSurg has recently experienced rapid growth
that has resulted in new and increased responsibilities for management personnel
and has placed increased demands on AmSurg's management, operational and
financial systems and resources. To accommodate this recent growth and to
compete effectively and manage future growth, AmSurg will be required to
continue to implement and improve its operational, financial and management
information systems and to expand, train, motivate and manage its workforce.
There can be no assurance that AmSurg's personnel, systems, procedures and
controls will be adequate to support AmSurg's operations. Any failure to
implement and improve AmSurg's operational, financial and management systems or
to expand, train, motivate or manage employees could have a material adverse
effect on AmSurg's financial condition and results of operation.
11
<PAGE> 19
RELATIONSHIPS WITH PHYSICIAN PARTNERS. AmSurg's ownership interests in
practice-based ambulatory surgery centers and specialty physician networks
generally are structured through limited and general partnerships or limited
liability companies. AmSurg typically maintains a majority interest in each
partnership or limited liability company, with physicians or physician practice
groups holding minority limited partnership interests or serving as minority
members. AmSurg, as owner of majority interests in such partnerships and limited
liability companies, owes a fiduciary duty to the minority interest holders in
such entities and may encounter conflicts between the respective interests of
AmSurg and the minority holders. In such cases, AmSurg's directors are obligated
to exercise reasonable, good-faith judgment to resolve the conflicts and may not
be free to act solely in the best interest of AmSurg. The success of AmSurg's
business is dependent upon maintaining relationships with the physicians who
provide medical services at the centers, many of whom are limited partners or
members of the limited liability companies that own the AmSurg centers.
In addition, upon the occurrence of certain fundamental regulatory changes,
AmSurg will be obligated to purchase some or all of the minority interests of
the physicians affiliated with AmSurg in the partnerships or limited liability
companies which own and operate AmSurg's surgery centers. The regulatory changes
that could trigger such an obligation include changes that: (i) make the
referral of Medicare and other patients to AmSurg's surgery centers by
physicians affiliated with AmSurg illegal; (ii) create the substantial
likelihood that cash distributions from the partnership or limited liability
company to the physicians associated therewith will be illegal; or (iii) cause
the ownership by the physicians of interests in the partnerships or limited
liability companies to be illegal. There can be no assurance that AmSurg's
existing capital resources would be sufficient for it to meet the obligation, if
it arises, to purchase minority interests held by physicians in the partnerships
or limited liability companies which own and operate AmSurg's surgery centers.
The determination of whether a triggering event has occurred is made by the
concurrence of counsel for AmSurg and the physician partners or, in the absence
of such concurrence, by independent counsel having an expertise in healthcare
law and who is chosen by both parties. Determination is therefore not within the
control of AmSurg. While AmSurg has structured the repurchase obligations to be
as favorable as possible to AmSurg, the triggering of these obligations could
have a material adverse effect on the financial condition and results of
operations of AmSurg. See "BUSINESS OF AMSURG -- Acquisition and Development of
Surgery Centers; and -- Government Regulation."
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT. AmSurg is dependent upon private
and governmental third-party sources of reimbursement for services provided to
patients in AmSurg's centers and physician practices. In addition to market and
cost factors affecting the fee structure implemented by centers and practices
operated by AmSurg, numerous Medicare and Medicaid regulations, cost containment
and utilization decisions of third-party payors and other payment factors over
which AmSurg has no control may adversely affect the amount of payment a center
or practice may receive for its services. The market share growth of managed
care has resulted in some locations in substantial competition among providers
of services for inclusion in managed care contracting. Exclusion from
participation in a managed care contract in a specific location can result in
material reductions in patient volume and reimbursement to a physician practice
or to a practice-based ambulatory surgery center. AmSurg's financial condition
and results of operations may be adversely affected by fixed fee schedules,
capitation payment arrangements, reduced payments to physicians generally,
exclusion from participation in managed care programs or other changes in
payments for healthcare services. See "BUSINESS OF AMSURG -- Government
Regulation -- Reimbursement."
MEDICARE-MEDICAID ILLEGAL REMUNERATION ("ANTI-KICKBACK") LAWS. Federal
"anti-kickback" laws prohibit the offer, payment, solicitation or receipt of any
form of remuneration in return for the referral of Medicare or state health
program patients or patient care opportunities, or in return for the purchase,
lease or order of items or services that are covered by Medicare or state health
programs. The anti-kickback statute is very broad in scope and its provisions
are not well defined by existing case law or regulation. Violations of the
anti-kickback laws may result in substantial civil or criminal penalties for
individuals or entities, including large civil monetary penalties and exclusion
from participation in the Medicare and Medicaid programs. Such exclusion, if
applied to AmSurg's surgery centers or networks, could result in significant
loss of reimbursement and could have a material adverse effect on AmSurg. In
July 1991 and September 1993, the Department of Health and Human Services
("DHHS") Inspector General issued final regulations identifying various "safe
12
<PAGE> 20
harbors," including two related to investment interests, which offer exemption
from the anti-kickback laws. The structure of the partnerships and limited
liability companies operating AmSurg centers and physician networks do not
satisfy all of the requirements of either of the "investment interest" safe
harbors and therefore are not immune from government review or prosecution.
However, AmSurg believes that it conducts the operations of the networks and the
centers in compliance with applicable law. Moreover, neither AmSurg nor any
affiliated physician intends for the compensation arrangements or return on
investment to constitute remuneration in exchange for or to induce the referral
of business or patients between or among the parties. Notwithstanding AmSurg's
belief that the relationship of physician partners to the AmSurg surgery centers
should not constitute illegal remuneration under the anti-kickback laws, no
assurances can be given that a federal or state agency charged with enforcement
of the anti-kickback laws and similar laws or a private party might not assert a
contrary position or that new federal or state laws might not be enacted that
would cause the physician partners' relationships with the AmSurg centers to
become illegal, or result in the imposition of penalties on AmSurg or certain of
its facilities. Even the assertion of a violation could have a material adverse
effect upon the financial condition and results of operations of AmSurg. See
"BUSINESS OF AMSURG -- Government Regulation -- Medicare-Medicaid Illegal
Remuneration Provisions."
PHYSICIAN SELF-REFERRAL LAWS. At both the state and federal level, there
are legislative restrictions on the ability of a physician to refer patients to
healthcare entities when the physician (or immediate family member) has a
financial relationship, directly or indirectly, with the entity receiving the
referral. The financial relationship giving rise to prohibition on referrals may
be either an ownership or investment interest or a compensatory arrangement. At
the federal level, this legislation (42 USC sec. 1395nn) is known as the "Stark
bill" because of its sponsor, Representative Pete Stark. Originally, the Stark
bill applied only to entities providing clinical laboratory services. However,
as of January 1, 1995, the ban on physician financial relationships with
healthcare entities extended to entities providing certain defined "designated
health services" ("Stark II"). AmSurg believes physician ownership of
practice-based ambulatory surgery centers to which they refer patients and
physician networks is not prohibited under Stark II or other similar statutes
recently enacted at the state level. However, these statutes are not clearly
written and are therefore subject to different interpretations with respect to
many important provisions. Violations of these "self-referral" laws may result
in substantial civil or criminal penalties for individuals or entities,
including large civil monetary penalties and exclusion from participation in the
Medicare and Medicaid programs. Such exclusion, if applied to AmSurg's surgery
centers, could result in significant loss of reimbursement and could have a
material adverse effect on AmSurg. There can be no assurances that further
judicial or agency interpretation of existing law or further legislative
restrictions on physician ownership of healthcare entities will not be issued
which may have a material adverse effect upon the financial condition and
results of operations of AmSurg. See "BUSINESS OF AMSURG -- Government
Regulation -- Prohibition on Physician Ownership of Healthcare Facilities."
OTHER GOVERNMENT REGULATION. All facets of the healthcare industry are
highly regulated at the federal and state levels. AmSurg's ability to be
profitable may be adversely affected by licensing and certification
requirements, reimbursement restrictions or reductions and other governmental
regulatory factors. In addition, AmSurg's ability to expand its services in the
future may be adversely affected by health planning laws, including certificate
of need requirements, at the state and/or federal level. A number of other
initiatives have developed during the past several years to reform various
aspects of the healthcare system in the United States. There can be no assurance
that current or future legislative initiatives or government regulation will not
have a material adverse effect on the financial condition or results of
operations of AmSurg or reduce the demand for its services. See "BUSINESS OF
AMSURG -- Government Regulation -- CONs and State Licensing."
COMPETITION. The healthcare business is highly competitive and there are
other companies in the same or similar business of developing, acquiring and
operating practice-based ambulatory surgery centers, specialty physician
networks and physician practices, or who may decide to enter the practice-based
ambulatory surgery center business, the development of specialty physician
networks or the acquisition of physician practices, who have greater financial,
research, marketing and staff resources than AmSurg. In addition, AmSurg
competes with other healthcare providers for contracting with managed care
payors in each of its markets. There is no
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assurance AmSurg can compete effectively with such entities. See "BUSINESS OF
AMSURG -- Competition."
RISK FACTORS REGARDING AHC AFTER DISTRIBUTION. A material portion of AHC's
operating revenues and revenue growth was generated by AmSurg prior to the
Distribution. After the Distribution, AHC's business will consist of its
hospital-based diabetes treatment services business, the comprehensive
management of diabetes care for managed care organizations and other third-party
payors and the operation of arthritis and osteoporosis treatment centers. In the
last fiscal year, revenues from this business have been adversely affected by
termination of certain hospital contracts and development and implementation
costs applicable to DTCA's development of comprehensive diabetes disease
management products for the managed care industry. AHC's ability to generate
revenues and profits from its diabetes disease management contracts with managed
care organizations and other third-party payors is dependent primarily on its
ability to reduce overall healthcare costs for individuals with diabetes while
improving clinical outcomes for these individuals. While AHC believes that it
can reduce the healthcare costs and improve clinical outcomes for individuals
with diabetes through effective management of the disease, AHC's ability to
produce the anticipated improvements in care and cost savings and thus operate
these contracts in a manner that will produce profitability for AHC has not yet
been established, because AHC's comprehensive healthcare management contracts
for people with diabetes are believed to be the first of this type in the
industry and have only been recently implemented or are in the process of being
implemented. During fiscal 1996, 13 DTCA contracts for hospital services were
discontinued or not renewed. Certain hospitals faced with pressures to make
immediate cost reductions have decided to eliminate DTCA's treatment programs.
While AHC believes this business is stabilizing, the general uncertainties
associated with changes taking place in the healthcare industry and DTCA's
client hospitals' reactions to the changes in the industry may continue to
adversely affect revenues and contract retention in future periods. See
"BUSINESS OF AHC AFTER DISTRIBUTION."
Other risks associated with the business of AHC include regulatory risks
for the healthcare industry as a whole, efforts by hospitals and third party
payors to reduce costs, unusual and unforeseen patterns of healthcare
utilizations by individuals with diabetes in the managed care organizations with
which DTCA has executed an agreement, the ability or inability of such managed
care organizations to maintain the covered lives in the plans serviced by DTCA
and the ability or inability of DTCA to attract, retain and effectively manage
the employees required to implement the agreements with managed care
organizations.
Following the Distribution, for a period of two years, Thomas G. Cigarran,
the Chairman and Chief Executive Officer of AHC and Henry D. Herr, the Chief
Financial Officer and a director of AHC, will provide advisory services to
AmSurg. The services, while limited in scope, may impact the amount of time
Messrs. Cigarran and Herr are able to devote to the business of AHC during this
period. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -- Advisory
Agreements."
EFFECT OF THE DISTRIBUTION ON THE AHC COMMON STOCK. After the
Distribution, the AHC Common Stock will continue to be traded on the Nasdaq
National Market. As a result of the Distribution, AHC will no longer own any
AmSurg Common Stock and accordingly its balance sheet and income statement will
no longer reflect the assets and operation of AmSurg. AHC will be entirely
dependent upon the operation of DTCA and AOCC for its earnings and, as a result,
the trading prices of AHC Common Stock are expected to be lower than the trading
prices of AHC Common Stock immediately prior to the Distribution and such
trading prices may also be more volatile than they were prior to the
Distribution. The combined trading prices of AHC Common Stock and Class A Common
Stock after the Distribution may be less than, equal to or greater than the
trading prices of AHC Common Stock prior to the Distribution.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS. AHC has conditioned the
Distribution on the receipt of a ruling from the IRS to the effect that, among
other things, the Distribution will be substantially tax-free under Section 355
of the Code. Approximately 1.5% of the shares of AmSurg Common Stock distributed
in the Distribution will be subject to federal income taxation. In addition,
cash received in lieu of fractional share interests in the AmSurg Common Stock
will generally be taxable to recipients. The continuing validity of the IRS
ruling will be subject to certain factual representations and assumptions. If
such factual representations and assumptions were incorrect in a material
respect, the ruling would be jeopardized. AHC is not aware of
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any facts or circumstances which should cause the representations and
assumptions to be untrue. If the Distribution were taxable, then (i) corporate
level income taxes would be payable by the consolidated group of which AHC is
the common parent, based upon the amount by which the fair market value of the
Class B Common Stock distributed in the Distribution exceeds AHC's basis therein
and (ii) each holder of AHC Common Stock who received shares of Class B Common
Stock in the Distribution would be treated as if the stockholder received a
taxable distribution, taxed as a dividend to the extent of such stockholder's
pro rata share of AHC's current and accumulated earnings and profits. Each AHC
stockholder should consult his or her own tax advisor with respect to the
specific tax consequences of the Distribution to such stockholder, including the
effect of state, local and foreign tax laws. See "THE DISTRIBUTION -- Certain
Federal Income Tax Consequences."
PROPOSED TREASURY REGULATION REGARDING TAX DEDUCTION FOR AMORTIZATION OF
GOODWILL. Effective on August 10, 1993, Section 197 of the Code was enacted to
allow goodwill and other intangible assets purchased after that date to be
amortized as a tax deduction. Previously, no tax deduction was allowed for
purchases of goodwill. On January 16, 1997 the IRS published proposed
regulations implementing Section 197 amortization of intangible assets including
goodwill. The proposed regulations contain certain "anti-churning" provisions
which deny a deduction for goodwill amortization expense in several situations,
including when the seller of the goodwill becomes a related party following the
transaction. The intent of this particular portion of the proposed regulations
is explained as preventing sellers from entering into transactions for the
purpose of converting goodwill without tax deductibility (i.e. goodwill arising
prior to the effective date of Section 197) into goodwill pursuant to Section
197 in which the sellers would then benefit from tax deductible amortization in
future periods. These proposed regulations do not specifically contain an
exception for the form of transaction that AmSurg has utilized in its
acquisitions of interests in practice-based ambulatory surgery centers and
interests in physician practices. However, because the goodwill for which AmSurg
has been claiming amortization deductions was purchased by AmSurg from unrelated
parties after the effective date of Section 197 and, as per agreement with the
sellers, the tax deduction for goodwill amortization is specifically allocated
exclusively to AmSurg, and therefore, the seller receives no tax benefit from
the amortization of the goodwill, AmSurg believes that the proposed regulations
should not be applied to deny a tax deduction to AmSurg. Together with other
taxpayers similarly affected, AmSurg will vigorously attempt to have the
proposed regulations revised in such a way as to recognize the acceptability of
the methodology utilized by AmSurg in accomplishing the purpose as stated in the
legislative record and retaining the tax deductibility of AmSurg's acquired
goodwill. However, there can be no assurance that the proposed regulations will
be amended or modified by the IRS. If the proposed regulations are adopted as
currently written, it will not be clear in these regulations that AmSurg is
entitled to the deduction for the amortization of goodwill associated with the
purchase of interests in practice-based surgery centers and physician practices
and these deductions could be subject to challenge by the IRS. Loss of these tax
deductions would have a material adverse effect on the results of operations of
AmSurg. Due to the lengthy public hearing and adoption process, AmSurg is not
able to estimate a date by which the IRS will take action on the proposed
regulations.
NO PRIOR MARKET FOR AMSURG COMMON STOCK. There has been no prior trading
market for AmSurg Common Stock and there can be no assurance as to the prices at
which the Class A Common Stock will trade after the Distribution. Although it is
anticipated that the Class A Common Stock will be traded on the Nasdaq National
Market, the prices at which Class A Common Stock trades may fluctuate
significantly. Prices for the Class A Common Stock may be influenced by many
factors, including the depth and liquidity of the market for such Class A Common
Stock, investor perceptions of AmSurg and its businesses, and general economic
and market conditions.
SHARES ELIGIBLE FOR FUTURE SALE. AmSurg has a significant number of shares
of AmSurg Common Stock outstanding that were sold in private transactions and
not registered under the Securities Act of 1933, as amended (the "Securities
Act") upon issuance. The unregistered shares ("restricted securities") are
eligible for resale in the public market at prescribed times subject to
compliance with an exemption from the registration requirements of the
Securities Act, such as Rule 144. See "SHARES ELIGIBLE FOR FUTURE SALE." In
addition, certain AmSurg stockholders have certain registration rights with
respect to their shares of Class A Common Stock. See "DESCRIPTION OF CAPITAL
STOCK -- Registration
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Agreement; and -- Stockholders' Agreement." As of January 31, 1997, AmSurg had
issued options to purchase 906,783 shares of Class A Common Stock (of which
602,337 shares are vested) to employees and non-employee directors who, after
the Distribution and following the filing of a registration statement on Form
S-8 by AmSurg, will be able to exercise and immediately sell shares underlying
vested options. Of the 3,803,943 shares of Class A Common Stock that are
anticipated to be "restricted securities" immediately following the
Distribution, 3,502,698 will have satisfied a one-year holding period following
the Distribution. On February 7, 1997 and March 7, 1997, the Board of Directors
approved grants of options for the purchase of 117,166 shares of AmSurg Common
Stock to various AmSurg employees pursuant to the AmSurg 1997 Stock Incentive
Plan. The grant of such options and the Plan are subject to AmSurg stockholder
approval at the stockholders' meeting scheduled to be held on May , 1997. All
options after the Distribution will be to purchase shares of Class A Common
Stock. Prior to the Distribution, there has been no market for the Class A
Common Stock and no prediction can be made as to the effect, if any, that the
sale of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of substantial amounts
of Class A Common Stock in the public market could adversely affect prevailing
market prices and the ability of AmSurg to raise equity capital in the future.
DILUTION AND IMPACT OF AMSURG PREFERRED STOCK. Certain redemption and
conversion features of the AmSurg Series A Redeemable Preferred Stock, no par
value (the "Series A Preferred Stock") and the Series B Convertible Preferred
Stock, no par value (the "Series B Preferred Stock" and, together with the
Series A Preferred Stock, the "AmSurg Preferred Stock"), the award and exercise
of stock options by the management of AmSurg and the issuance of Class A Common
Stock in connection with the acquisitions and development of AmSurg surgery
centers and equity financings may cause dilution of the per share value of the
AmSurg Common Stock held by AmSurg stockholders. The conversion of the Series B
Preferred Stock into Class A Common Stock will result in such investors holding
between six and eight percent of the AmSurg Common Stock on a fully diluted
basis as of November 20, 1996 depending on the timing of the conversion. If not
redeemed by November 20, 1998, the Series A Preferred Stock will be entitled to
an eight percent annual per share cash dividend from that date forward. The
Series A Preferred Stock is also entitled to a 14% annual per share cash
dividend upon certain events of default by AmSurg. If certain liquidity events
have not occurred prior to November 20, 2002, AmSurg will be required to redeem
the Series A Preferred Stock and Series B Preferred Stock. See "DESCRIPTION OF
CAPITAL STOCK."
CERTAIN ANTITAKEOVER EFFECTS. Certain provisions of AmSurg's Charter and
Bylaws and Tennessee statutory law could have the effect of delaying, deferring
or preventing a change in control of AmSurg in a transaction not approved by
AmSurg's Board of Directors. See "DESCRIPTION OF CAPITAL STOCK -- Certain
Provisions of the Charter, Bylaws and Tennessee Law."
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS. This Information
Statement contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Exchange Act ,
which are intended to be covered by the safe harbors created thereby. When used
in this Information Statement, the words "anticipate", "believe", "estimate",
"expect" and similar expressions are intended to identify forward-looking
statements. Investors are cautioned that all forward-looking statements involve
risks and uncertainty. Although AHC and AmSurg believe that the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate, and therefore, there can be no assurance
that the forward-looking statements included in this Information Statement will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, including the risk factors described
herein, the inclusion of such information should not be regarded as a
representation by AHC, AmSurg or any other person that the objectives and plans
of AHC or AmSurg will be achieved. Neither AHC nor AmSurg intends to update any
of these forward-looking statements.
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THE DISTRIBUTION
This section of the Information Statement describes certain aspects of the
Recapitalization, Exchange and Distribution. The following description does not
purport to be complete and is qualified in its entirety by reference to the
Distribution Agreement which is attached as Appendix A to this Information
Statement.
BACKGROUND AND REASONS FOR THE DISTRIBUTION
AmSurg was formed in April 1992 with AHC owning an initial 25% equity
interest. The business strategy of AmSurg was to develop, acquire and manage
practice-based ambulatory surgery centers, in partnerships with physician
practice groups, throughout the United States. The implementation of this
strategy required significant capital resources beyond that which AmSurg could
generate internally and, from 1992 through 1995, AHC provided substantially all
of the needed capital through direct equity investment and guaranties of AmSurg
bank debt. As a result of its investments in AmSurg, as of January 31, 1997, AHC
owned 59% of the outstanding AmSurg common stock. The remaining AmSurg common
stock is owned by physicians who are partners in AmSurg surgery centers (who
collectively owned 28% of the AmSurg common stock) and management and certain
other investors (who collectively owned 13% of the AmSurg common stock).
During 1994, AHC through its wholly-owned subsidiary DTCA began to
implement a business strategy to develop and market new comprehensive diabetes
disease management products for the managed care industry. The development and
marketing of these products have required significant capital and have reduced
the capability of AHC to fund the capital needs of AmSurg. As a result of the
diminished capability of AHC to fund the capital needs of AmSurg, in early 1996,
management of AHC began to consider alternative ways to facilitate AmSurg's
access to capital from sources other than AHC.
As a first step, management of AHC recommended to the AmSurg management
that it address its short-term capital needs by engaging an investment bank to
seek additional capital through a private placement of equity or debt. AmSurg
accepted this recommendation and engaged J.C. Bradford to raise the capital
necessary to meet its short-term needs. As a result of this process, on November
20, 1996, AmSurg raised a net of approximately $5.0 million of additional
capital by issuing to unaffiliated institutional investors a combination of
AmSurg redeemable and convertible preferred stock. Following this transaction,
AmSurg believes that it is adequately funded for its short-term needs but
believes it will need additional debt or equity capital to fund its long-term
growth. See "MANAGEMENT'S DISCUSSION AND ANALYSIS -- Liquidity and Capital
Resources."
Recognizing the need of AmSurg for additional capital, management of AHC
determined that the long-term needs of AmSurg required that AmSurg have access
to the public equity and debt markets and that a public trading market in AmSurg
common stock could be created either through a public offering of a portion of
the AmSurg common stock owned by AHC or through the distribution of the AmSurg
common stock it owned to the stockholders of AHC. In September 1996, management
of AHC determined that it was in the best interests of the stockholders of AHC
to create the public market opportunity for AmSurg through a substantially tax
free spin-off of the AmSurg common stock held by AHC. Management of AHC was
advised that in order for such a spin-off transaction to be substantially tax
free, a recapitalization of AmSurg was necessary to give AHC a class of common
stock with sufficient voting power to be able to distribute "control" of AmSurg
in the Distribution as required for substantially tax free treatment under
Section 355 of the Code. See "-- Certain Federal Income Tax Consequences." As a
result of this determination, in September 1996, AHC proposed to AmSurg the
Distribution and the related Recapitalization and Exchange.
On October 3, 1996, the AmSurg Board of Directors created the Special
Committee to consider whether the proposed Distribution and related
Recapitalization and Exchange would be in the best interests of AmSurg and its
stockholders, including the minority stockholders, and to negotiate the terms
and conditions of any such transaction on behalf of AmSurg. Ken P. McDonald, the
President of AmSurg, as well as a director, and William C. Weaver, III and
Bergein F. Overholt, M.D., both independent directors and AmSurg stockholders,
were appointed to the Special Committee. The Special Committee retained J.C.
Bradford and independent counsel to assist it in its consideration of the
proposed Distribution and the related Recapitalization and Exchange.
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The Special Committee held numerous meetings to consider the proposed
Distribution and related Recapitalization and Exchange and whether it was in the
best interests of AmSurg and its minority stockholders. On November 1, 1996, the
Special Committee resolved to recommend to the AmSurg Board of Directors that
AmSurg and AHC proceed with the necessary steps to effect the Distribution and
related Recapitalization and Exchange, including the filing with the IRS of a
request for a ruling to the effect that the Distribution could be effected on a
substantially tax free basis for federal income tax purposes. On November 8,
1996, the Board of Directors of AmSurg approved the recommendation of the
Special Committee. In reaching their determination, the Special Committee and
the Board of Directors of AmSurg considered a number of factors, including,
without limitation, the following: (i) the long-term need for AmSurg to have
access to the public equity and debt markets to fund its future growth and the
belief that AmSurg would have superior access to capital markets as an
independent, publicly-held company, (ii) the belief that the Distribution was
the best alternative to create a public market, in part because the public
market for AmSurg Common Stock would not be depressed by the "overhang" that
might be caused by the continuing interest of AHC in AmSurg, which would be the
case if AmSurg issued shares to the public in an initial public offering without
AHC divesting its interest in AmSurg, (iii) the fact that existing AmSurg
minority stockholders would have liquidity for their shares through the ability
to sell under Rule 144 or in secondary public offerings following the
Distribution, (iv) the belief that, because of its high growth rate and need for
capital, AmSurg was not at the point in its development at which stockholder
values might be maximized through the sale of the company, (v) the fact that AHC
needed to focus its capital resources on the development of DTCA's diabetes
disease management services business and would have limited available capital
for investment in AmSurg, (vi) the fact that the Distribution would permit the
development of employee benefit plans and policies and other corporate
initiatives designed to better incentivize and attract employees, (vii) the fact
that AHC would not sell any of its AmSurg common stock in a public offering due
to the fact that AHC stockholders could not benefit from such a sale without
adverse tax consequences, (viii) the belief that the proposed one for three
reverse stock split that is part of the Recapitalization is necessary to
increase the trading price of the AmSurg Common Stock to improve the level of
trading interest, thereby providing greater opportunities to access public
equity capital and for AmSurg stockholder liquidity; (ix) the belief that the
two classes of Common Stock contemplated by the Recapitalizations differed
materially only in voting rights for directors and given the immediate automatic
conversion on the transfer of AmSurg Class B Common Stock the two classes would
not be valued materially differently in the trading marketplace; and (x) the
belief that the Recapitalization and the Exchange necessary to obtain
substantially tax free treatment of the Distribution would not materially
disadvantage either AmSurg or its minority stockholders.
On October 16, 1996, the Board of Directors of AHC considered the
recommendations of AHC management to pursue the alternative of the Distribution
and authorized proceeding with the necessary steps to effect the Distribution,
including the filing with the IRS of a request for a ruling that the
Distribution could be effected on a substantially tax free basis. Their
determination was based on a number of factors, including, without limitation,
the following: (i) the fact that AHC could no longer fund the capital needs of
AmSurg and that AmSurg needed access to the public equity and debt markets as an
independent publicly-held company, (ii) the fact that the stockholders of AHC
could not benefit from a public offering of a portion of the AmSurg common stock
held by AHC without adverse tax consequences, (iii) the fact the Distribution
would give the AHC stockholder the ability to share in the growth opportunities
for AmSurg on a substantially tax free basis, (iv) the fact that there is little
synergy between the businesses of DTCA and AmSurg, (v) the need for AHC
management to increase their focus on the business of DTCA, (vi) the
desirability of permitting investors to choose between the two businesses in
making investment decisions, and (vii) the belief that AmSurg was not at the
point in its development at which AHC stockholder values could be maximized
through the sale of AmSurg.
On November 21, 1996, AHC and AmSurg submitted a ruling request to the IRS
with regard to the federal income tax consequences of the Distribution. Between
November 1996 and March 7, 1997, when the Distribution Agreement was approved,
AHC and AmSurg negotiated the terms of the Distribution and the related
Recapitalization and Exchange, the terms and number of votes per share of the
Class A Common Stock and Class B Common Stock, the terms and conditions of the
Distribution Agreement, the Exchange
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Agreement and the Management Agreement and certain governance issues for AmSurg
following the Distribution. Concurrently, the Board of Directors of AHC and the
Special Committee, together with their financial advisors, considered the
fairness of the Distribution and related Recapitalization and Exchange to the
stockholders of AHC and AmSurg. To provide financial advice to the AHC Board of
Directors, AHC retained Morgan Keegan to consider the fairness, from a financial
point of view, of the Recapitalization, Exchange and Distribution to the
stockholders of AHC.
On March 7, 1997, the Special Committee determined that the Distribution
and the related Recapitalization and Exchange are fair to and in the best
interests of AmSurg and its stockholders, including the minority stockholders,
and recommended that the AmSurg Board of Directors approve the Distribution and
the related Recapitalization and Exchange, subject to the satisfaction of the
conditions set forth in the Distribution Agreement. At the March 7, 1997 Special
Committee meeting, J.C. Bradford delivered its opinion, set forth as Appendix B
hereto, that the Recapitalization, Exchange and Distribution are fair to the
stockholders of AmSurg, other than AHC, from a financial point of view. A
description of this opinion, the methodology employed, the analysis on which it
was based and the nature of this engagement of J.C. Bradford is set forth below.
Based on the recommendations of the Special Committee, the opinion of J.C.
Bradford and other factors considered by the AmSurg Board of Directors, on March
7, 1997, the AmSurg Board determined that the Recapitalization, Exchange and
Distribution are fair to and in the best interests of the stockholders of
AmSurg, including the minority stockholders, and approved the Distribution and
the related Recapitalization and Exchange, subject to the satisfaction or waiver
of the conditions set forth in the Distribution Agreement. The principal factors
considered by the Special Committee and the AmSurg Board of Directors in
reaching this conclusion were the ones set forth above in connection with its
November 8, 1996 decision as well as the financial advice and opinion of J.C.
Bradford.
Opinion of J.C. Bradford. On March 7, 1997, the Special Committee received
a written opinion from J.C. Bradford to the effect that, based upon the factors
set forth in such opinion, the Recapitalization, Exchange and Distribution are
fair to the stockholders of AmSurg, other than AHC, from a financial point of
view. The full text of J.C. Bradford's opinion which sets forth certain
assumptions made, matters considered and limitations on the review undertaken,
is set forth in Appendix B and is incorporated herein by reference and should be
read in its entirety in connection with this Information Statement. This summary
is qualified in its entirety by reference to the full text of such opinion.
In conducting its analyses and arriving at its opinion, J.C. Bradford
considered such financial and other information as it deemed appropriate
including, among other things, the following: (i) the proposed terms of the
Recapitalization, Exchange and Distribution; (ii) the historical and current
financial position and results of operations of AHC as set forth in its periodic
reports and proxy materials filed with the SEC; (iii) the audited financial
statements of AmSurg for the fiscal years ended December 31, 1992, 1993, 1994,
1995 and 1996; (iv) certain internal operating data and financial analyses,
including forecasts of AmSurg for the years beginning January 1, 1996 and ending
December 31, 2001 which assume no future changes in accounting principles which
would have a material effect on AmSurg's financial statements; (v) the past and
current business, financial condition and prospects of AmSurg and AHC as
discussed with certain senior officers of AmSurg and AHC; (vi) certain
financial, operating and securities trading data of certain other public
companies that J.C. Bradford believed to be comparable to AmSurg or relevant to
the transaction, with such information taken from individual companies' annual
reports, SEC Forms 10-K and 10-Q; (vii) the financial terms of certain other
transactions that J.C. Bradford believed to be relevant; (viii) data relating to
public companies with two classes of stock, including an analysis of float of
the classes, historical price and volume data, data relating to voting rights of
the stocks, and data relating to economic differences in the classes, such as
different dividend rights; (ix) reported price and trading activity for the
shares of AHC Common Stock; (x) a draft of the Information Statement included in
the Registration Statement on Form 10 for the AmSurg Common Stock filed with the
SEC; (xi) the tax ruling request, as supplemented, to the IRS from AHC and
AmSurg; and (xii) such other financial studies, analyses, and investigations as
J.C. Bradford deemed appropriate for purposes of its opinion.
In making its analyses, J.C. Bradford considered the financial aspects of
other alternatives available to AmSurg, including the sale of all or a portion
of AmSurg to the public through an initial public offering and
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the continuance of AmSurg as an AHC subsidiary. In arriving at its opinion, J.C.
Bradford has relied upon publicly available information and information provided
by AHC and AmSurg (including information contained in this Information
Statement), has not independently verified the information concerning AHC and
AmSurg or other data considered in its review, and has relied upon the accuracy
and the completeness of all such information. In connection with its opinion
provided to the Special Committee, J.C. Bradford was not asked to, and did not,
provide any opinion as to the valuation, future performance or long-term
viability of AmSurg as an independent public company following the
Recapitalization, Exchange and Distribution. J.C. Bradford's opinion does not
opine as to or give any assurances of the price at which the shares of Class A
Common Stock will trade after the Distribution. The opinion of J.C. Bradford is
addressed to the Special Committee in connection with its consideration of the
Recapitalization, Exchange and Distribution and permits the AmSurg Board of
Directors to rely upon it and addresses only the fairness, from a financial
point of view, of the Recapitalization, Exchange and Distribution to the
stockholders of AmSurg, other than AHC. J.C. Bradford's opinion is not a
recommendation to any current or prospective stockholder of AHC or AmSurg as to
any investment decisions such person may take.
J.C. Bradford was engaged by the Special Committee on October 11, 1996 to
provide financial advisory and investment banking services. In connection with
the services performed and to be performed by J.C. Bradford, including the
rendering of its written opinion and updates thereto, AmSurg has agreed to pay
J.C. Bradford a fee of $125,000. AmSurg has also agreed to reimburse J.C.
Bradford for its reasonable expenses, and to indemnify it against certain
liabilities and expenses, including certain liabilities under the federal
securities laws, in connection with its services as a financial advisor.
J.C. Bradford, as part of its investment banking business, engages in the
valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate,
and other purposes.
At the March 7, 1997 meeting of the AHC Board of Directors, the Board
approved the Distribution and the related Recapitalization and Exchange, subject
to the satisfaction or waiver of the conditions set forth in the Distribution
Agreement. At this meeting, the Board determined that the transactions are fair
to and in the best interests of the AHC stockholders. The principal factors
considered by the AHC Board of Directors in reaching this conclusion were the
ones set forth above in connection with its October 16, 1996 decision as well as
the financial advice and opinion of Morgan Keegan. Morgan Keegan delivered its
opinion, set forth as Appendix C hereto, that the Recapitalization, Exchange and
Distribution are fair to the AHC stockholders from a financial point of view. A
description of this opinion, the methodology employed, the analysis on which it
was based and the nature of this engagement of Morgan Keegan is set forth below.
Opinion of Morgan Keegan. On March 7, 1997, the AHC Board of Directors
received a written opinion from Morgan Keegan to the effect that, based upon the
factors set forth in such opinion the Recapitalization, Exchange and the
Distribution are fair to the stockholders of AHC from a financial point of view.
The full text of Morgan Keegan's opinion which sets forth certain assumptions
made, matters considered and limitations on the review undertaken, is set forth
in Appendix C and is incorporated herein by reference and should be read in its
entirety in connection with this Information Statement. This summary is
qualified in its entirety by reference to the full text of such opinion. It is a
condition to the consummation of the Distribution that Morgan Keegan deliver an
updated opinion to the AHC Board, to be dated the Distribution Date, in
substantially the same form as the opinion set forth in Appendix C. See
" -- Conditions." The opinion of Morgan Keegan assumes that the
Recapitalization, Exchange and Distribution are consummated as described in this
Information Statement.
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<PAGE> 28
In its opinion, Morgan Keegan stated that it has, among other things:
<TABLE>
<S> <C>
(i) reviewed the publicly available consolidated financial
statements of AHC and certain other relevant financial and
operating data, including primarily, line of business
operating data, and financial data and projections of AHC
and AmSurg made available to it from published sources and
by officers of AHC;
(ii) reviewed the financial statements of AmSurg contained in the
Information Statement;
(iii) reviewed certain internal financial and operating
information, including primarily projections, relating to
AHC and AmSurg prepared by the managements of AHC and
AmSurg, respectively;
(iv) discussed the business, financial condition and prospects of
AHC with the management of AHC;
(v) discussed the business, financial condition and prospects of
AmSurg with the management of AHC and AmSurg;
(vi) reviewed the financial terms of the Recapitalization,
Exchange and Distribution;
(vii) reviewed the financial terms, to the extent publicly
available, of certain spin-off transactions involving other
companies it deemed relevant to the analysis of the
Distribution, and certain merger transactions involving
other companies it deemed relevant to the analysis of the
potential sale of certain of AHC's subsidiaries to an
unaffiliated purchaser;
(viii) reviewed certain publicly available financial data and stock
trading activity relating to certain healthcare companies it
deemed appropriate in analyzing AHC and AmSurg;
(ix) reviewed the Information Statement included in the
Registration Statement on Form 10 for the AmSurg Common
Stock filed with the SEC on March 11, 1997; and
(x) performed such other analysis and examinations and
considered such other information, financial studies,
analysis and investigations and financial, economic and
market data as it deemed relevant.
</TABLE>
In making its analyses, Morgan Keegan considered the financial aspects of
other alternatives available to AHC, including the sale of certain of AHC's
subsidiaries to an unaffiliated purchaser, the sale of all or a portion of
AmSurg to the public through an initial public offering and the continuance of
AmSurg as an AHC subsidiary. The opinion also states that Morgan Keegan has
relied upon publicly available information and information provided by AHC and
AmSurg (including the information contained in this Information Statement), has
not independently verified the information concerning AHC and AmSurg or other
data considered in its review, and has relied upon the accuracy and completeness
of all such information. In connection with its opinion provided to the AHC
Board of Directors, Morgan Keegan was not asked to, and did not, provide any
opinion as to the valuation, future performance or long-term viability of AHC or
AmSurg as independent public companies following the Recapitalization, Exchange
and Distribution. Morgan Keegan's opinion does not opine as to or give any
assurances of the price at which the shares of AHC Common Stock or Class A
Common Stock will trade after the Distribution. The opinion of Morgan Keegan is
addressed to the Board of Directors of AHC in connection with its consideration
of the Recapitalization, Exchange and Distribution and addresses only the
fairness, from a financial point of view, of the Recapitalization, Exchange and
Distribution to the holders of AHC Common Stock. Morgan Keegan's opinion is not
a recommendation to any current or prospective stockholder of AHC or AmSurg, as
to any investment decisions such person may make.
Morgan Keegan was engaged by AHC on December 12, 1996 to provide general
financial advisory and investment banking services. In connection with the
services performed and to be performed by Morgan Keegan regarding the
Distribution, including the rendering of its written opinion and updates
thereto, AHC has agreed to pay Morgan Keegan a fee of $125,000. AHC also has
agreed to reimburse Morgan Keegan for its reasonable expenses, and to indemnify
it against certain liabilities and expenses, including certain liabilities under
the federal securities laws, in connection with its services as financial
advisor.
Morgan Keegan, as part of its investment banking services, regularly
provides financial advisory services in connection with mergers and
acquisitions, corporate restructuring, strategic alliances, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
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<PAGE> 29
THE RECAPITALIZATION AND EXCHANGE
The Distribution Agreement provides that, on the Distribution Date, AHC and
AmSurg will effect the Recapitalization and Exchange immediately prior to
effecting the Distribution. The sole purposes of these transactions are (i) to
reduce the total number of outstanding shares of AmSurg Common Stock so as to
permit the shares to trade at proportionately higher per share prices following
the Distribution and (ii) to increase the voting power of the shares to be
distributed by AHC as required in order to accomplish the Distribution on a
substantially tax-free basis for federal income tax purposes. The number of
votes per share of Class B Common Stock is required to be sufficient to enable
AHC to distribute, in the Distribution, after giving effect to all issuances of
stock associated with the exercise of stock options, the conversion of the
AmSurg preferred stock into Class A Common Stock and any issuances in
anticipated equity financing and acquisition transactions, "control" of the
AmSurg Board of Directors as defined in the Code and regulations thereto. In
order to satisfy these requirements, the Class B Common Stock will be required
to have on the date of the Recapitalization and Exchange approximately 90% of
the voting power of the capital stock of AmSurg in election and removal of
directors. In order to satisfy these requirements, it will also be necessary to
amend the AmSurg Charter to modify the existing right of the Series A Preferred
Stock and Series B Preferred Stock to elect one director to the Board of
Directors of AmSurg so that this right would exist only if a public offering
yielding at least $20,000,000 in net proceeds to AmSurg and/or its stockholders
has not occurred by May 31, 2000.
The Recapitalization is subject to the approval of the holders of a
majority of the capital stock of AmSurg. A meeting of the stockholders of AmSurg
to approve the Recapitalization and certain related matters has been scheduled
for May , 1997. AHC, as the holder of 59% of the voting power of AmSurg common
stock, has agreed to vote in favor of the Recapitalization and such other
matters. A separate class vote of the holders of the Series A Preferred Stock
and Series B Preferred Stock will be required for the Charter amendment being
considered at such meeting. Pursuant to the Distribution Agreement, AHC and
AmSurg have conditioned the Distribution (and thus the Recapitalization and
Exchange) on holders of no more than five percent of the outstanding shares of
AmSurg common stock exercising their rights to dissent from the proposed
Recapitalization. AHC and AmSurg may waive such condition in their sole
discretion.
The Recapitalization and Exchange are integral parts of the transactions
contemplated by the Distribution Agreement. The Recapitalization and Exchange
will not be effected unless the Distribution will be effected immediately
thereafter.
The Recapitalization will be effected through an amendment to the Charter
of AmSurg. The Recapitalization will: (i) reduce on a one for three basis the
number of outstanding shares of AmSurg Common Stock through the Reverse Stock
Split, with the intention of permitting the shares of Class A Common Stock
distributed in the Distribution to trade at proportionately higher per share
prices; and (ii) authorize the new Class B Common Stock having seven votes per
share in the election and removal of AmSurg directors and one vote in all other
matters, so that, when exchanged for all of the shares of Class A Common Stock
then owned by AHC, AHC will own shares of AmSurg Common Stock having
approximately 90% of the voting power of all outstanding shares of capital stock
of AmSurg in the election and removal of directors on the date of the
Distribution.
In the Recapitalization, the number of outstanding options to purchase
AmSurg common stock will be adjusted on a one for three basis and such options
will become options to purchase shares of Class A Common Stock. The exercise
price per share will be correspondingly increased to preserve the relative value
of the option.
On the Distribution Date, immediately following the Recapitalization and
immediately prior to the Distribution, AHC and AmSurg shall effect the Exchange
in accordance with the terms of the Exchange Agreement. Pursuant to the Exchange
Agreement, AHC will deliver 5,530,131 shares of Class A Common Stock in exchange
for 5,530,131 shares of Class B Common Stock. The sole purpose of the Exchange
is to increase the voting power of AHC immediately prior to the Distribution, to
the extent required in order for the Distribution to qualify for substantially
tax-free treatment, for federal income tax purposes, under Section 355 of the
Code. See "THE DISTRIBUTION -- Certain Federal Income Tax Consequences."
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<PAGE> 30
The Recapitalization and Exchange are intended to qualify for substantially
tax-free treatment, for federal income tax purposes, under Section 368(a)(1)(E)
of the Code.
THE DISTRIBUTION AGREEMENT
On March 7, 1997 AmSurg and AHC entered into the Distribution Agreement
governing the terms and conditions of the Distribution and certain aspects of
the relationship between AmSurg and AHC thereafter. The Distribution Agreement
provides for, among other things, (i) the Recapitalization, Exchange and
Distribution; (ii) cooperation prior to the Distribution between AmSurg and AHC
in order to effectuate the Distribution; and (iii) certain conditions to be
fulfilled or waived prior to the consummation of the Distribution.
The Distribution Agreement also provides that, upon satisfaction or waiver
of certain conditions set forth therein and the completion of the
Recapitalization and Exchange, AHC will, on the Distribution Date, distribute to
the holders of record of shares of AHC Common Stock on the Distribution Record
Date all of the shares of Class B Common Stock owned by AHC by delivering
certificates for such shares to the Distribution Agent for delivery to the
holders of AHC Common Stock. According to the Distribution Agreement, the
Distribution shall be deemed to be effective upon notification by AHC to the
Distribution Agent that the Distribution has been declared and that the
Distribution Agent is authorized to proceed with the Distribution.
Pursuant to the Distribution Agreement, AHC and AmSurg have agreed on (i) a
slate of directors to be elected as the members of the Board of Directors of
AmSurg effective upon the Distribution and any terms and classes for such
directors as may be agreed upon by AHC and AmSurg, (ii) the persons to be the
executive officers of AmSurg effective upon the Distribution, (iii) the terms of
certain amendments to the Bylaws of AmSurg to be effective upon the
Distribution, (iv) the terms of the amendments to the Charter of AmSurg to be
effective upon the Distribution, (v) the terms of a new stock incentive plan to
be effective upon the Distribution, (vi) the terms of the advisory agreements
between each of Henry D. Herr and Thomas G. Cigarran and AmSurg to be effective
for a period of two years following the Distribution and (vii) the terms of
certain arrangements between AmSurg and its directors and officers as described
below under "MANAGEMENT OF AMSURG." In addition, AHC has agreed to vote, in its
capacity as a stockholder of AmSurg, all of its shares of AmSurg common stock in
favor of the Recapitalization, each of the matters referred to in the foregoing
sentence and any other matters requiring the approval of the stockholders of
AmSurg in connection with the transactions contemplated by the Distribution
Agreement.
Pursuant to the Distribution Agreement, AmSurg and AHC have agreed to
cooperate in order to effectuate the Distribution and certain transactions
related thereto, including, among other things, the preparation and filing with
the SEC of this Information Statement, the listing on the Nasdaq National Market
or other national securities exchange of the Class A Common Stock, the request
by AHC from the Division of Corporation Finance of the SEC of a no-action letter
stating that such division will not recommend enforcement action if the
Distribution is effected without registration under the Securities Act, and the
preparation and delivery to AmSurg's stockholders of a proxy statement with
respect to a stockholders' meeting called to approve the terms of the
Recapitalization, the election of the members of AmSurg's Board of Directors
after the Distribution, the amendment and restatement of AmSurg's Charter and
the adoption of the 1997 Stock Incentive Plan and other matters requiring
approval in connection with the transactions contemplated by the Distribution.
AmSurg and AHC also agreed in the Distribution Agreement that (i) none of
the transactions contemplated by the Distribution, including the
Recapitalization and Exchange, will constitute, individually or in the
aggregate, a change in control under the terms of any stock incentive plan,
stock incentive agreement or similar plan or agreement of AmSurg and (ii) in
order to better prepare itself for becoming a publicly traded company, AmSurg
may amend or establish new employee benefit plans and amend or adopt other
corporate documents as the Board of Directors of AmSurg may deem reasonably
necessary or appropriate, subject to stockholder approval if necessary, and that
AHC, as a stockholder of AmSurg, will vote in favor of any such actions
submitted to stockholders of AmSurg to the extent that AHC agrees that such
actions are necessary or appropriate for AmSurg as an independent public
company.
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<PAGE> 31
In accordance with the Distribution Agreement, each of AmSurg and AHC will
be granted access to certain records and information in the possession of the
other. In addition, the Distribution Agreement requires the retention by each of
AmSurg and AHC for a period of seven years following the Distribution of all
such information in its possession, and thereafter requires that each party give
the other prior notice of its intention to dispose of such information.
The Distribution Agreement provides that each of AmSurg and AHC will bear
its own expenses in connection with the transactions contemplated by the
Distribution Agreement, provided, however, that (a) AHC and AmSurg will share
equally the costs of (i) preparing this Information Statement, (ii) preparing
the Distribution Agreement, the Exchange Agreement and the Management Agreement
and (iii) preparing the SEC no-action letter; (b) AmSurg will be responsible for
the costs of (i) preparing and, as required, filing any Charter amendment
required to effect the Recapitalization, (ii) preparing, printing (or
reproducing) and mailing a proxy statement for the purpose of soliciting the
votes of stockholders of AmSurg in order to effect the Recapitalization and to
obtain any other required approvals of the stockholders of AmSurg, (iii) listing
or other inclusion of the shares of Class A Common Stock on the Nasdaq National
Market or other national securities exchange, (iv) any required registration or
qualification of any shares of AmSurg Common Stock under state blue sky and
securities laws, (v) the preparation of stock certificates for the shares of
AmSurg Common Stock to be distributed in connection with the Recapitalization,
the Exchange and the Distribution, (vi) the fees and expenses of J.C. Bradford
as financial advisor to AmSurg, (vii) the fees of counsel to AmSurg and to the
Special Committee, (viii) preparing and auditing the separate financial
statements of AmSurg and its consolidated subsidiaries and (ix) obtaining any
governmental or third party consents or approvals required to be obtained on the
part of AmSurg in connection with the transactions contemplated by this
Agreement; and (c) AHC will be responsible for the costs of (i) preparing the
IRS letter ruling request, (ii) printing (or reproducing) and mailing this
Information Statement, (iii) the fees and expenses of the Distribution Agent in
connection with the Distribution, (iv) the fees and expenses of Morgan Keegan,
as financial advisor to AHC, and the fees of other professional advisors deemed
necessary by AHC, (v) the fees and expenses of counsel to AHC with respect to
services performed on behalf of AHC, (vi) preparing and auditing the financial
statements of AHC and its consolidated subsidiaries (except for the separate
financial statements of AmSurg and its consolidated subsidiaries as provided in
clause (b)(viii) above) and (vii) obtaining any governmental or third party
consents or approvals required to be obtained on the part of AHC in connection
with the transactions contemplated by the Distribution. The expenses of AHC and
AmSurg in connection with the transactions contemplated by the Distribution
Agreement are estimated to be $475,000 and $400,000, respectively.
CONDITIONS
The obligations of AmSurg and AHC to consummate the Distribution (as well
as the Recapitalization and the Exchange) are subject to the fulfillment or
waiver of certain conditions, including the following: (i) the receipt by AHC of
the IRS ruling in form and substance satisfactory to AHC, in its sole
discretion, concerning the treatment of the Distribution under Section 355 of
the Code and the absence of any proposed or pending legislation that would
adversely affect such ruling; (ii) the listing on a national securities exchange
or for inclusion on the Nasdaq National Market of the Class A Common Stock or
such other trading market as the parties may agree; (iii) the approval by the
stockholders of AmSurg of the members of AmSurg's Board of Directors who are to
serve as directors after the Distribution, the amendment and restatement of
AmSurg's Charter and Bylaws in the form to be effective after the Distribution,
for which amendment the Series A Preferred Stock and the Series B Preferred
Stock are entitled to vote as a separate class, and AmSurg's 1997 Stock
Incentive Plan; (iv) the approval of the Recapitalization and Exchange by the
holders of at least a majority of the voting power of the outstanding shares of
capital stock of AmSurg at a meeting of the stockholders of AmSurg, with holders
of no more than 5% of the outstanding shares of AmSurg common stock exercising
their right to seek dissenters' rights of appraisal under Tennessee law; (v) the
receipt by the Special Committee and the Board of Directors of AmSurg of an
opinion of J.C. Bradford acceptable to the Board of Directors of AmSurg as to
the fairness, from a financial point of view, of the Recapitalization, Exchange
and Distribution to the stockholders of AmSurg, other than AHC; and (vi) the
receipt by the Board of Directors of AHC of an opinion from Morgan Keegan as to
the fairness, from a financial point of view, of
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<PAGE> 32
the Recapitalization, Exchange and Distribution to the stockholders of AHC and
such other opinions as AHC may deem necessary in its sole discretion. In
addition, the obligations of AmSurg and AHC to effect the Exchange are subject
to the completion of the Recapitalization, and, in turn, the obligations of AHC
to effect the Distribution in accordance with the Distribution Agreement are
conditioned upon the completion of the Exchange. AHC, as holder of approximately
59% of the voting power of the common stock of AmSurg on January 31, 1997, has
agreed to vote in favor of such matters.
MANNER OF EFFECTING THE DISTRIBUTION
On the Distribution Date, immediately following consummation of the
Exchange, AHC will deliver all of the shares of Class B Common Stock held by AHC
to SunTrust Bank, the Distribution Agent for the AmSurg Common Stock, for
distribution on a pro rata basis to the holders of AHC Common Stock at the close
of business on the Distribution Record Date. It is expected that the
Distribution Agent will begin mailing share certificates representing the Class
B Common Stock as soon as practicable after the Distribution. The shares will be
distributed to the holders of record of the AHC Common Stock on the basis of 69
shares of Class B Common Stock for each 100 shares of AHC Common Stock
outstanding on the Distribution Record Date subject to additional issuances of
AHC Common Stock after January 31, 1997. All such shares of Class B Common Stock
will be fully paid, nonassessable and free of preemptive rights.
No fractional shares shall be delivered to the holders of AHC Common Stock
in the Distribution. The shares that would otherwise be distributed as
fractional shares to holders of the AHC Common Stock will, as soon as
practicable after the Distribution, be aggregated and sold by the Distribution
Agent on behalf of the holders who would otherwise receive fractional shares and
the proceeds of the sale will be paid to the holders of AHC Common Stock in lieu
of such fractional shares. See "-- Certain Federal Income Tax Consequences."
NO HOLDER OF AHC COMMON STOCK WILL BE REQUIRED TO PAY ANY CASH OR OTHER
CONSIDERATION FOR THE SHARES OF AMSURG COMMON STOCK RECEIVED IN THE DISTRIBUTION
OR TO SURRENDER OR EXCHANGE SHARES OF AHC COMMON STOCK OR TO TAKE ANY OTHER
ACTION IN ORDER TO RECEIVE SHARES OF AMSURG COMMON STOCK IN THE DISTRIBUTION.
STOCKHOLDERS WILL BE SUBJECT TO FEDERAL INCOME TAXATION WITH RESPECT TO
APPROXIMATELY 1.5% OF THE SHARES OF AMSURG COMMON STOCK RECEIVED BY THEM AND ANY
CASH RECEIVED IN LIEU OF FRACTIONAL SHARES.
LISTING OF CLASS A COMMON STOCK; RESTRICTIONS ON RESALE; CONVERSION OF CLASS B
COMMON STOCK
AmSurg has applied for listing of the Class A Common Stock on the Nasdaq
National Market. The Class B Common Stock received in the Distribution will
convert automatically into Class A Common Stock on any transfer occurring after
the Distribution with certain limited exceptions. The Class B Common Stock
received pursuant to the Distribution will be freely transferable under the
Securities Act, except for shares of Class B Common Stock received by any person
who may be deemed to be an "affiliate" of AmSurg within the meaning of Rule 144
under the Securities Act. Persons who may be deemed to be affiliates of AmSurg
after the Distribution generally include individuals or entities that control,
are controlled by, or are under common control with AmSurg, and may include the
directors and executive officers of AmSurg as well as any principal stockholder
of AmSurg. The shares of Class A Common Stock outstanding as of the Distribution
were issued in transactions unrelated to the Distribution. Under current law,
the holders of such shares of Class A Common Stock and persons who are
affiliates of AmSurg will be permitted to sell the Class A Common Stock received
pursuant to the Distribution ("restricted securities") only pursuant to an
effective registration statement under the Securities Act or pursuant to an
exemption therefrom, such as the exemptions afforded by Section 4(1) of the
Securities Act and Rule 144 thereunder. Of the 3,803,943 shares of Class A
Common Stock that are anticipated to be "restricted securities" immediately
following the Distribution, 3,502,698 will have satisfied a one-year holding
period. This Information Statement does not cover resales of AmSurg Common Stock
by existing stockholders of AmSurg. See "RISK FACTORS -- Shares Eligible for
Future Sale," "DESCRIPTION OF CAPITAL STOCK" and "SHARES ELIGIBLE FOR FUTURE
SALE."
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<PAGE> 33
A share of Class B Common Stock will convert automatically into a share of
Class A Common Stock upon any transfer occurring following the Distribution,
including a transfer by gift to a family member or other person. However,
transfers of the Class B Common Stock held by a beneficial owner into street
name or shares held in street name transferred into the beneficial owner's name,
and transfers by pledge are not transfers which would convert the shares of
Class B Common Stock into Class A Common Stock. Stock certificates purporting to
represent shares of Class B Common Stock will represent shares of Class A Common
Stock following any transfer of such shares. Stockholders will not be required
to effect a conversion of their shares of Class B Common Stock into shares of
Class A Common Stock in order to settle a transfer or sale of shares received in
the Distribution. The transfer agent will accept a stock certificate purporting
to represent shares of Class B Common Stock as evidence of shares that have been
transferred.
INTERESTS OF CERTAIN PERSONS IN THE DISTRIBUTION
Certain directors and executive officers of AHC and AmSurg have interests
in the Distribution that are in addition to their interests as AHC stockholders
generally and may create potential conflicts of interest. Thomas G. Cigarran,
the Chairman, President and Chief Executive Officer of AHC, is currently the
Chairman and Chief Executive Officer of AmSurg and will retain his position as
director and Chairman of the Board of AmSurg following the Distribution, and
also will serve as an advisor to AmSurg although he will no longer serve as an
executive officer of AmSurg. Henry D. Herr, the Executive Vice President and
Chief Financial Officer, as well as a director, of AHC, is currently Vice
President and Secretary, as well as a director, of AmSurg. Following the
Distribution, Mr. Herr will serve as a director of, and as an advisor to AmSurg.
Both Mr. Cigarran and Mr. Herr will enter into advisory agreements with AmSurg
pursuant to which they will receive shares of restricted stock of AmSurg in
compensation for their services. See "CERTAIN TRANSACTIONS -- Advisory
Agreements." James A. Deal, a member of the AmSurg Board of Directors since
1992, is an Executive Vice President of AHC and serves as President of DTCA. As
directors of AmSurg, Messrs. Cigarran, Herr and Deal will be entitled to receive
director's compensation from AmSurg on the same terms as all other non-employee
directors of AmSurg. See "MANAGEMENT OF AMSURG -- Compensation of Directors."
Because these members of the Board of Directors of AmSurg are affiliated with
AHC, the Board of Directors of AmSurg appointed the Special Committee to
consider whether the Recapitalization, Exchange and Distribution, are fair and
in the best interests of the stockholders of AmSurg, including the minority
stockholders, and to negotiate the terms and conditions of these transactions on
behalf of AmSurg. In approving the Recapitalization, Exchange and Distribution,
the Boards of Directors of AHC and AmSurg were aware of the various interests of
the members of each Board and gave consideration to the potential conflicts
raised by such interests.
THE MANAGEMENT AGREEMENT
On the Distribution Date, AmSurg and AHC will enter into the Management
Agreement pursuant to which AHC will provide certain financial and accounting
services to AmSurg and its subsidiaries on a transitional basis, with the intent
that AmSurg acquire the personnel, systems and expertise necessary to become
self-sufficient in the provision of these services during the period beginning
on the date of the Management Agreement and ending one year later (or earlier if
so elected by AmSurg). Pursuant to the Management Agreement, AHC shall provide
AmSurg with services, including processing payroll and associated payroll tax
returns and accounts payable for the AmSurg corporate office, maintaining
general accounting records for the AmSurg corporate operations and operations of
AmSurg's subsidiaries (including the partnerships and limited liability
companies), preparing consolidated AmSurg financial statements, preparing AmSurg
corporate tax returns and tax returns for AmSurg subsidiaries, preparing
estimated tax reports, and preparing financial statements in connection with
periodic reports required to be filed by AmSurg with the SEC. As compensation
for such services, AmSurg shall pay AHC a fixed fee of $4,166.67 per month and a
variable fee of $625 per month for each ambulatory surgery center in operation
and certain multiples thereof for the corporate office and other operations,
subject to increase if AmSurg requests certain additional services. Pursuant to
the Management Agreement, AmSurg shall have sole responsibility for the accuracy
and integrity of the financial statements and tax returns prepared by AHC, and
AmSurg will provide oversight and review on a timely basis of the services
provided by AHC. In addition, in the absence of gross negligence on
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<PAGE> 34
the part of AHC, AmSurg will indemnify and hold AHC, its directors, officers,
employees and agents and any person who controls AHC within the meaning of the
Securities Act harmless from and against any and all liabilities, claims or
damages (including the cost of investigating any claim and reasonable attorneys'
fees and disbursements) in connection with any services performed by AHC or any
transactions or conduct in connection therewith.
Pursuant to the Management Agreement, AHC will be responsible for any
claims incurred on or prior to the date of such agreement by AmSurg employees
under any medical or dental plans offered by AHC to AmSurg employees on or prior
to the date of such agreement in accordance with the terms of such plans. AHC
will not be responsible for any claims incurred following the date of the
Management Agreement by any AmSurg employees under any plan.
ADJUSTMENT OF AHC STOCK OPTIONS
As a result of the Distribution and pursuant to the terms of the AHC stock
option plans, the vesting of the unvested portion of the outstanding AHC stock
options will be accelerated and the exercise price per share of outstanding
options to purchase shares of AHC Common Stock will be reduced, and the number
of shares underlying such options will be in certain cases increased, to
maintain the value of AHC stock options following the Distribution at
pre-Distribution levels. Holders of AHC stock options on the Distribution Record
Date will not be entitled to receive shares of AmSurg Common Stock in respect of
such options. The amount by which the options will be adjusted will depend on a
comparison of the market price per share of AHC before and after the
Distribution. For a description of the accounting treatment of the option
adjustment, see "-- Accounting Treatment."
ACCOUNTING TREATMENT
Following the approval of the Distribution by the AHC Board of Directors on
March 7, 1997, AHC will present the business of AmSurg as a discontinued
operation to the extent financial information for periods prior to the
Distribution is required to be included in AHC's historical financial
statements.
The Distribution will be treated as a dividend for accounting purposes and
will consequently reduce stockholders' equity by the book value of AHC's
investment in AmSurg.
Expenses of the Distribution and related transactions are expected to be
approximately $475,000 for AHC and $400,000 for AmSurg, and will be generally
non-deductible for federal income tax purposes. These expenses will be recorded
as operating expenses at the time of the Distribution by AmSurg and expenses
associated with discontinued operations in the case of AHC. For a description of
the allocation of certain expenses between AHC and AmSurg, see "-- The
Distribution Agreement."
As a result of the adjustment of AHC stock options, AHC will record
non-cash compensation expense and an equal increase in stockholders' equity
(additional paid-in capital) in an amount equal to the difference between the
aggregate exercise price of outstanding options to purchase shares of AHC Common
Stock having an exercise price below the market price of AHC Common Stock and
the aggregate market price for such shares immediately prior to the
Distribution. The compensation expense and associated increase in additional
paid-in capital will be recognized because generally accepted accounting
principles require such recognition when an adjustment results in a change in
the ratio of the exercise price to the market price per share even though no
change in the aggregate value of the options will take place. Although it would
be possible to adjust the options without changing this ratio, it could only be
accomplished by issuing a large number of new options which would result in
substantial dilution to AHC stockholders. While the adjustment management
anticipates making will result in additional new option issuances, such new
issuances will be significantly less than those which would be required to avoid
recognition of compensation expense and associated increase to additional
paid-in capital as of the Distribution Date. The option adjustments will reduce
earnings as a result of the recognition of compensation expense less the income
tax benefit associated with the compensation expense deduction and will increase
additional paid-in capital by the amount of compensation expense. The adjustment
will also have the effect of decreasing future earnings per share because of the
impact of the additional options on the calculation of common stock equivalents
used in the
27
<PAGE> 35
calculation of earnings per share. Because the amount of these adjustments will
depend upon the market price of AHC Common Stock prior to and after the
Distribution, it is not possible to predict the impact on weighted average
common shares and equivalents. If the Distribution were to have occurred on
January 31, 1997, on which date the closing price of AHC Common Stock was $13,
the estimated impact on earnings and stockholders' equity would have been as
follows:
<TABLE>
<CAPTION>
NET INCOME
INCREASE
(DECREASE)
----------
<S> <C>
Compensation expense........................................ $(5,970,000)
Estimated income tax benefit................................ 1,700,000
-----------
Net decrease in net income........................ $(4,270,000)
===========
</TABLE>
<TABLE>
<CAPTION>
STOCKHOLDERS'
EQUITY
INCREASE
(DECREASE)
-------------
<S> <C>
Increase in paid-in capital from stock options.............. $ 5,970,000
Net decrease in net income.................................. (4,270,000)
-----------
Net increase in stockholders' equity.............. $ 1,700,000
===========
</TABLE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary description of the material federal income tax
consequences of the Distribution. This summary is not a complete description of
all the consequences of the Distribution. Moreover, each AHC stockholder's
individual circumstances may affect the tax consequences of the Distribution to
such stockholder.
THE DISCUSSION SET FORTH BELOW DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN
TAX ASPECTS OF THE DISTRIBUTION. THE DISCUSSION IS BASED ON CURRENTLY EXISTING
PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER
AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE
SUBJECT TO CHANGE AND ANY SUCH CHANGES COULD AFFECT THE CONTINUING VALIDITY OF
THIS DISCUSSION. EACH AHC STOCKHOLDER SHOULD CONSULT SUCH STOCKHOLDER'S OWN TAX
ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE DISTRIBUTION TO
SUCH STOCKHOLDER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND
FOREIGN TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL LAWS OR OTHER
TAX LAWS.
Consummation of the Distribution is conditioned upon the receipt of a
ruling or rulings, in form and substance satisfactory to AHC, from the IRS
providing, in substance, that the Distribution will constitute a substantially
tax-free distribution described in Section 355 of the Code, and AHC will not
recognize any income or gain as a result of the Distribution. Accordingly,
AmSurg and AHC have requested the following rulings concerning the Distribution
from the IRS:
a. Assuming that the Recapitalization and the Exchange qualify as a
"reorganization" within the meaning of Section 368(a)(1)(E) of the Code,
such qualification will not be adversely affected by the Distribution;
b. Assuming that the Recapitalization and the Exchange qualify as a
"reorganization" within the meaning of Section 368(a)(1)(E), the
Recapitalization and Exchange will not adversely affect the rulings
requested below;
c. No gain or loss will be recognized to AHC upon the Distribution to
the AHC stockholders of all of its AmSurg Common Stock;
28
<PAGE> 36
d. No gain or loss will be recognized to (and no amount will be
included in the income of) the AHC stockholders upon receipt of Class B
Common Stock in the Distribution, except with respect to cash received in
lieu of fractional shares and the receipt of AmSurg Common Stock that was
originally received in a transaction in which gain was recognized by AHC,
as described below;
e. The aggregate basis of the common stock of AmSurg and of AHC in the
hands of each AHC stockholder after the Distribution will be the same as
the aggregate basis of the AHC Common Stock held by such stockholder
immediately before the Distribution (plus any gain recognized with respect
to the receipt of AmSurg Common Stock as described below), and such
aggregate basis will be allocated between the common stock of AmSurg and of
AHC held by such stockholder in proportion to the fair market value of each
(immediately after the Distribution);
f. The holding period of the AmSurg Common Stock received without the
recognition of any gain by each AHC stockholder pursuant to the
Distribution will include the holding period of the AHC Common Stock with
respect to which such Class B Common Stock was received, provided that such
AHC Common Stock is held as a capital asset on the date of the
Distribution;
g. An AHC stockholder will recognize gain or loss equal to the
difference between the cash received in lieu of a fractional share interest
of Class B Common Stock and such stockholder's basis in the fractional
share interest for which cash is received; and
h. An AHC stockholder will recognize gain or loss equal to the
difference between the fair market value of the Common Class B Stock that
was originally received in a transaction in which gain was recognized by
AHC and such stockholder's tax basis in such shares.
Approximately 1.5% of the outstanding shares of AmSurg Common Stock owned
by AHC prior to the Distribution were acquired by AHC in taxable transactions.
Accordingly, it is anticipated that each AHC stockholder will recognize gain or
loss with respect to 1.5% of the shares of Class B Common Stock received by such
stockholder in the Distribution. Any gain recognized by stockholders on receipt
of such shares will be taxed as ordinary income to the extent of such
stockholder's ratable share of AHC's accumulated earnings and profits (with the
excess, if any, taxable as gain from the sale or exchange of a capital asset).
AHC will notify its stockholders of its determination of their ratable share of
the amount of its accumulated earnings and profits for this purpose. Corporate
stockholders may be eligible for a dividends received deduction to the extent of
the taxable portion of the Distribution.
The ruling request was submitted to the IRS on November 21, 1996. A ruling
from the IRS, while generally binding on the IRS, may under certain
circumstances be retroactively revoked or modified by the IRS. Neither AmSurg
nor AHC is currently aware of any such circumstances that would cause the IRS to
revoke or modify a ruling received by the parties from the IRS as to the federal
income tax consequences of the Distribution as described above.
The ruling is based on certain facts and representations, some of which
will require confirmation prior to the time of the Distribution from each
beneficial owner of 5% or more of the outstanding AHC Common Stock that, in
effect, such beneficial owner has no present plan or intention to sell, exchange
or otherwise dispose of any stock of AHC or AmSurg.
Consummation of the Distribution is also conditioned upon the receipt of an
opinion, in form and substance satisfactory to AHC, of Bass, Berry & Sims PLC,
as counsel to AHC, providing, in substance, that the Recapitalization and
Exchange will constitute a "reorganization" under Section 368(a)(1)(E) of the
Code, that neither AmSurg nor AHC will recognize any income or gain as a result
of the Recapitalization and Exchange and that no gain or loss will be recognized
by the holders of AmSurg Common Stock upon the exchange of their shares solely
for shares of Class A Common Stock and Class B Common Stock in the
Recapitalization and Exchange. The IRS takes the position that the consequences
of a transaction such as the Recapitalization and Exchange are adequately
established in the tax law and, therefore, it will not issue a so-called
"comfort ruling" as to these matters. Accordingly, AHC has not requested a
ruling from the IRS as to
29
<PAGE> 37
those matters. Therefore, AHC has conditioned its obligation upon the receipt of
an opinion from its counsel, Bass, Berry & Sims PLC, to the effect that:
a. The Recapitalization and the Exchange constitute a tax-free
"reorganization" under Section 368(a)(1)(E) of the Code; AmSurg and AHC
will each be a "party to the reorganization" under Section 368(b) of the
Code;
b. No gain or loss will be recognized by AmSurg or AHC as a result of
the Recapitalization and Exchange;
c. An AmSurg stockholder will not recognize any income, gain or loss
as the result of the receipt of AmSurg Common Stock in the Recapitalization
or Exchange;
d. The aggregate tax basis of the shares of AmSurg Common Stock
received in the Recapitalization or the Exchange will equal the aggregate
tax basis of such stockholder's shares of AmSurg Common Stock prior to the
Recapitalization; and
e. An AmSurg stockholder's holding period for the shares of AmSurg
Common Stock received by such stockholder in the Recapitalization or
Exchange will include the holding period of the AmSurg common stock held by
such stockholder immediately prior to the Recapitalization and Exchange,
provided such AmSurg common stock was held as a capital asset as of the
time of the Recapitalization and Exchange.
An opinion of counsel is not binding on the IRS or the courts. Moreover,
the opinion of counsel will be based upon, among other things, current law and
certain representations to counsel for AHC as to factual matters made by, among
others, AHC and AmSurg which, if incorrect in certain material respects, would
jeopardize the conclusions reached by counsel.
Current Treasury regulations require AHC stockholders who receive AmSurg
Common Stock pursuant to the Distribution to attach to their federal income tax
returns for the year in which the Distribution occurs a detailed statement
setting forth such data as may be appropriate in order to show the applicability
of Section 355 of the Code to the Distribution. AHC will provide an appropriate
statement to each AHC stockholder of record as soon as practicable after the
Distribution.
30
<PAGE> 38
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA OF AMSURG
The following table presents summary historical and pro forma financial
data of AmSurg. The information set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations of AmSurg" and the historical and pro forma consolidated financial
statements and notes thereto included elsewhere in this Information Statement.
The historical consolidated statement of operations data set forth below for
each of the years ended December 31, 1994, 1995 and 1996 and the historical
consolidated balance sheet data at December 31, 1996 are derived from, and are
qualified by reference to, the audited consolidated financial statements, and
should be read in conjunction with those financial statements and notes thereto.
The historical consolidated statement of operations data set forth below for the
period from inception through December 31, 1992 and the year ended December 31,
1993 is derived from audited consolidated financial statements not included
herein. See "Index to Financial Statements." The pro forma combined statement of
operations data for the year ended December 31, 1996 set forth below reflects
the effects of the acquisition of The Endoscopy Center of Ocala, Inc. and six
other businesses acquired during the year ended December 31, 1996 assuming the
acquisitions had occurred on January 1, 1996. None of the other six businesses
(five surgery centers and one physician practice) acquired individually exceeded
the significant subsidiary tests requiring separate financial reporting under
applicable SEC regulations.
The historical and pro forma financial information may not be indicative of
AmSurg's future performance and does not necessarily reflect the financial
position and results of operations of AmSurg had AmSurg operated as a separate,
stand-alone entity during the periods covered.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------------- ------------
YEAR ENDED AND AT DECEMBER 31, YEAR ENDED
---------------------------------------------- DECEMBER 31,
1992(1) 1993 1994 1995 1996 1996
------- ------ ------- ------- ------- ------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................................................... $ 576 $6,586 $13,826 $22,489 $35,007 $40,620
------ ------ ------- ------- ------- -------
Expenses:
Salaries and benefits.................................... 456 2,307 4,092 6,243 11,613 13,308
Other operating expenses................................. 288 3,002 5,091 7,563 11,547 13,230
Depreciation and amortization............................ 51 665 1,309 2,397 3,000 3,465
Interest................................................. 3 30 193 722 948 1,298
------ ------ ------- ------- ------- -------
Total expenses..................................... 798 6,004 10,685 16,925 27,108 31,301
------ ------ ------- ------- ------- -------
Income (loss) before income taxes and minority interest.... (222) 582 3,141 5,564 7,899 9,319
Minority interest in earnings of consolidated
partnerships........................................... 87 1,121 2,464 3,938 5,433 6,543
------ ------ ------- ------- ------- -------
Income (loss) before income taxes.......................... (309) (539) 677 1,626 2,466 2,776
Income tax expense....................................... -- -- 26 578 985 1,109
------ ------ ------- ------- ------- -------
Net income (loss).......................................... (309) (539) 651 1,048 1,481 1,667
Accretion of preferred stock discount.................... -- -- -- -- 22 22
------ ------ ------- ------- ------- -------
Net income (loss) attributable to common stockholders...... $ (309) $ (539) $ 651 $ 1,048 $ 1,459 $ 1,645
====== ====== ======= ======= ======= =======
Net income (loss) per share attributable to common
stockholders(2).......................................... $(0.24) $(0.11) $ 0.09 $ 0.12 $ 0.16 $ 0.18
====== ====== ======= ======= ======= =======
Weighted average common shares and equivalents(2).......... 1,302 4,734 7,313 8,581 9,102 9,301
BALANCE SHEET DATA:
Cash and cash equivalents.................................. $ 3,192
Working capital............................................ 4,732
Total assets............................................... 54,653
Long-term debt............................................. 9,218
Minority interest.......................................... 5,674
Preferred stock............................................ 4,982
Stockholders' equity....................................... 28,374
GENERAL CENTER DATA:
Procedures................................................. 1,146 16,051 30,922 55,344 71,323
Centers at period end...................................... 4 6 14 18 27
SAME CENTER DATA(3):
Procedure growth........................................... 10%
Net revenue growth......................................... 14%
</TABLE>
- ---------------
(1) Period from inception through December 31, 1992.
(2) Adjusted to give effect to the Recapitalization which includes a one for
three reverse stock split.
(3) Fifteen centers in same center category.
31
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF AMSURG
OVERVIEW
AmSurg develops, acquires and manages practice-based ambulatory surgery
centers and specialty physician networks in partnership with physician practice
groups through partnerships or limited liability company interests. As of
January 31, 1997, AHC owned 59% of the common stock of AmSurg.
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements which are based upon current
expectations and involve a number of risks and uncertainties. These statements
which have been included in reliance on the "safe harbor" provisions of the
Private Litigation Reform Act of 1995, may be affected by the risk factors set
forth in this Information Statement and by the important factors, among others,
set forth below, and consequently, actual operations and results may differ
materially from those expressed in these forward-looking statements. The
important factors include: AmSurg's ability to enter into partnership or
operating agreements for new practice-based ambulatory surgery centers and new
specialty physician networks; its ability to contract with managed care payors
for its existing centers and its centers that are currently under development;
its ability to obtain and retain appropriate licensing approvals for its
existing centers and centers currently under development; and its ability to
maintain favorable relations with its physician partners. See "RISK
FACTORS -- Risks Associated with Forward-Looking Statements."
The following table presents the components of changes in the number of
surgery centers in operation and centers under development at the end of fiscal
1994, 1995 and 1996. A center is deemed to be under development when a
partnership or limited liability company has been formed with the physician
group partner to develop the center.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Centers in operation, beginning of year..................... 6 14 18
New center acquisitions placed in operation................. 3 2 6
New development centers placed in operation................. 5 2 3
-- -- --
Centers in operation, end of year........................... 14 18 27
== == ==
Centers under development, end of year...................... 4 13 20
</TABLE>
Twenty-one of the surgery centers in operation as of December 31, 1996
perform gastrointestinal endoscopy procedures; three centers perform eye surgery
procedures; one center performs ear, nose and throat procedures; one center
performs orthopaedic procedures; and one center performs ophthalmology, urology,
general surgery and otolaryngology procedures. In addition, on January 31, 1996,
AmSurg acquired a 70% interest in the assets of a gastroenterology and primary
care physician practice located in Miami, Florida and associated with a surgery
center in which AmSurg already held an ownership interest. While AmSurg
generally owns 51% to 70% of the entities that own the surgery center or
physician group practice, AmSurg's consolidated statements of operations include
100% of the results of operations of the entities, reduced by the minority
partners' share of the net income or loss of the surgery center/practice
entities.
AmSurg intends to expand primarily through the development and acquisition
of additional practice-based ambulatory surgery centers in targeted surgical
specialties. In addition, AmSurg believes that its surgery centers, combined
with its relationships with specialty physician surgical practices in their
markets, will provide AmSurg with other opportunities for growth from surgical
specialty network acquisition and development that may include the acquisition
of specialty physician practices. By using its surgery centers as a base to
develop specialty physician networks that are designed to serve large numbers of
covered lives, AmSurg believes that it will strengthen its market position in
contracting with managed care organizations.
32
<PAGE> 40
AmSurg's principal source of revenue is a facility fee charged for surgical
procedures performed in its surgery centers. The facility fee is generally paid
through third-party reimbursement programs, including governmental and private
insurance programs. AmSurg derived approximately 39%, 37% and 36% of its
revenues in 1994, 1995 and 1996, respectively, from governmental healthcare
programs including Medicare and Medicaid. During 1996, 15% of AmSurg's revenues
were derived from fees for physician services provided by the physician group
practice owned by AmSurg in which AmSurg acquired a majority interest in January
1996.
RESULTS OF OPERATIONS
Fiscal Year Ended December 31, 1996 Compared to Fiscal Year Ended December 31,
1995
Revenues were $35,007,000 for 1996, an increase of $12,518,000, or 56%,
over revenues for 1995. The increase resulted primarily from the growth in the
number of surgery centers in operation, the acquisition of a majority interest
in the Florida physician practice as of January 31, 1996 and an increase of 14%
in same-center revenues at the fifteen centers in operation since January 1,
1995. AmSurg anticipates further revenue growth during 1997 as a result of
additional start-up and acquisition centers placed in operation and from
same-center revenue growth.
Salaries and benefits expense increased by $5,370,000, or 86%, while other
operating expenses increased by $3,984,000, or 53%, for 1996 from 1995. These
increases resulted primarily from the acquisition of the interest in the Florida
physician practice, additional centers in operation and an increase in corporate
staff primarily to support growth in the number of centers in operation and
anticipated future growth. Salaries and benefits expense and other operating
expenses represented in the aggregate approximately 66% of revenues for 1996 as
compared to approximately 61% of revenues for 1995. Physician group practices
generally have lower operating margins than ambulatory surgery centers. Because
the Florida physician practice has both greater revenues and greater operating
expenses as a percentage of revenues than any single center, its acquisition had
a disproportionately large impact on operating margins.
Depreciation and amortization expense increased $603,000, or 25%, in 1996
over 1995, primarily due to the acquisition of majority interests in additional
surgery centers, the acquisition of the interest in the Florida physician
practice and new start-up surgery centers placed in operation. The increase of
$225,000, or 31%, in interest expense for 1996 over 1995 is primarily
attributable to debt assumed or incurred in connection with additional
acquisitions of interests in surgery centers and the Florida physician practice
plus the interest expense associated with newly opened start-up surgery centers
financed partially with bank debt.
Minority partners' interest in center earnings for 1996 rose to $5,434,000
from $3,938,000 for 1995, an increase of 38%, primarily as a result of minority
partners' interest in earnings at surgery centers added to operations and from
increased same-center profitability.
Income tax expense increased 70% in 1996 to $985,000 as a result of
increased income before income taxes and an increase in AmSurg's effective
income tax rate to 40% from 36%. The increase in the effective income tax rate
resulted from the utilization of prior period net operating loss carryforwards
during 1995. The difference between the federal statutory income tax rate of 34%
and AmSurg's effective income tax rates was due primarily to the utilization of
prior period net operating loss carryforwards in 1995 and the impact of state
income taxes.
Fiscal Year Ended December 31, 1995 Compared to Fiscal Year Ended December 31,
1994
Revenues for 1995 were $22,489,000, an increase of $8,663,000, or 63%, over
1994. The increase in revenues resulted primarily from the growth in the number
of surgery centers in operation and from an increase of 9% in same-center
revenues at six centers in operation since January 1, 1994.
Salaries and benefits expense grew by $2,151,000, or 53%, while other
operating expenses grew by $2,472,000, or 49%, from 1994 to 1995. The increases
in salaries and benefits expense and in other operating expenses resulted
primarily from an increased number of centers in operation and from an increase
in corporate staff to support additional centers in operation and anticipated
future growth. Salaries and benefits
33
<PAGE> 41
expense and other operating expenses represented in the aggregate approximately
61% of revenues in 1995 as compared to approximately 66% of revenues in 1994 as
a result of the margin contribution of additional centers in operation.
Depreciation and amortization expense increased by $1,088,000, or 83%, for
1995 over 1994, due primarily to the acquisition of majority interests in
additional practice-based ambulatory surgery centers and from new start-up
centers placed in operation. The increase in interest expense from $193,000 in
1994 to $722,000 in 1995 was primarily attributable to debt assumed or incurred
in connection with additional acquisitions of interests in centers plus the
interest expense associated with newly opened start-up centers financed
partially with bank debt.
Minority partners' interest in center earnings for 1995 rose to $3,938,000
from $2,468,000 in 1994, an increase of 60%, primarily as a result of minority
partners' interest in earnings at surgery centers added to operations and from
increased same-center profitability.
Income tax expense increased to $578,000 in 1995 from $26,000 in 1994 as a
result of increased income before income taxes and an increase in AmSurg's
effective income tax rate to 36% from 4%. The increase in the effective income
tax rate resulted from the utilization of prior period net operating loss
carryforwards to eliminate federal income taxes for 1994 and to reduce federal
income taxes in 1995. The difference between the federal statutory income tax
rate of 34% and AmSurg's effective income tax rates in 1995 and 1994 was due
primarily to the utilization of prior period net operating loss carryforwards
and the impact of state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities for 1996 generated $8,912,000 in cash flow. Investing
activities during 1996 used $16,395,000, including $12,670,000 used to acquire
interests in additional practice-based ambulatory surgery centers and the
interest in the Florida physician practice, and $3,863,000 to acquire property
and equipment for new start-up surgery centers and for new or replacement
property at existing centers. Financing activities for 1996 provided $7,206,000
in cash flow, primarily as a result of (i) net additions to long-term debt of
$3,283,000, (ii) minority partner capital contributions to AmSurg's partnerships
and limited liability companies of $1,681,000, (iii) $2,366,000 in cash proceeds
from the issuance of common stock, and (iv) net proceeds of $4,960,000 from the
issuance of preferred stock; these financing proceeds were partially offset by
$5,084,000 in distributions to surgery center minority partners. At December 31,
1996, AmSurg had $5,030,000 in outstanding term loan borrowings under its
amended and restated bank credit agreement which is repayable through June 2000.
AmSurg also had outstanding borrowings of $3,158,000 under a related revolving
credit facility which provides up to $12,000,000 in available credit through
June 1998 for acquisition and development projects, with repayment of these
borrowings being made through June 2002. Borrowings under the bank credit
agreement and related credit facility bear interest at a rate equal to the prime
rate or 1.75% above LIBOR or a combination thereof at AmSurg's option.
On November 20, 1996, AmSurg issued shares of its Series A Preferred Stock
and Series B Preferred Stock to certain unaffiliated institutional investors for
cash proceeds of approximately $4,960,000, after payment of offering expenses.
The purpose of the offering was to fund the acquisition and development of
surgery centers and to provide other working capital as needed prior to being in
position to access capital markets as an independent public company following
the Distribution. The Series A Preferred Stock, with a liquidation value of
$3,000,000, will accrue dividends of 8% per annum on such liquidation value,
commencing on November 21, 1998. The Series A Preferred Stock is subject to
redemption at any time at the option of AmSurg and is subject to redemption at
the option of the holders on November 20, 2002 and upon the occurrence of
certain events, including a public offering yielding at least $20,000,000 in net
proceeds to AmSurg, and/or its stockholders (or $25,000,000 in net proceeds if
the Distribution does not occur) (a "Qualified IPO"). The Series A Preferred
Stock may also be converted into shares of Class A Common Stock at the option of
the holders following the Distribution or upon a Qualified IPO at the then
current market price of the Class A Common Stock. The Series B Preferred Stock
will be automatically converted into a number of shares of Class A Common Stock
that approximates 6% of the equity of AmSurg determined as of
34
<PAGE> 42
November 20, 1996, with that percentage being ratably increased to 8% of the
equity of AmSurg if a triggering event has not occurred by November 20, 2000. If
a Qualified IPO or other triggering event does not occur by November 20, 2002,
the holders of the Series B Preferred Stock will have the right to sell such
stock to AmSurg at a formula price. See "DESCRIPTION OF CAPITAL STOCK."
Historically AmSurg has depended on AHC for the majority of its equity
financing. A principal purpose of the Distribution is to permit AmSurg to have
access to public debt and equity capital markets as an independent public
company. Management believes that AmSurg will have access to such capital on
more favorable terms as an independent public company than it could have as a
majority-owned subsidiary of AHC, particularly in public equity markets. See
"THE DISTRIBUTION -- Background and Reasons for the Distribution." While AmSurg
anticipates that its operating activities will continue to provide cash flow and
increased revenues, AmSurg will require additional financing in order to fund
its development and acquisition plans and to achieve its long-term strategic
growth plans. This additional financing could take the form of a private or
public offering of debt or equity securities or additional bank financing. No
assurances can be given that the necessary financing will be obtainable on terms
satisfactory to AmSurg.
35
<PAGE> 43
CAPITALIZATION OF AMSURG
The following table sets forth the capitalization of AmSurg as of December
31, 1996. This table should be read in conjunction with AmSurg's financial
statements and notes thereto included elsewhere herein. Information with respect
to AmSurg Preferred Stock and common stock has been adjusted to give effect to
the Recapitalization, Exchange and Distribution.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
-------------------------
HISTORICAL PRO FORMA(1)
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Debt:
$12,000,000 credit agreement.............................. $ 3,158 $ 3,158
Term note................................................. 5,030 5,030
Other long-term debt...................................... 3,647 3,647
------- -------
Total debt........................................ 11,835 11,835
------- -------
Minority interest........................................... 5,674 5,674
Preferred stock, no par value, 5,000,000 shares authorized,
916,666 issued............................................
Series A redeemable preferred stock, 500,000 shares
outstanding............................................ 1,774 1,774
Series B convertible preferred stock, 416,666 shares
outstanding............................................ 3,208 3,208
Stockholders' Equity
Common stock, no par value, 40,000,000 shares authorized,
9,199,525 shares outstanding........................... 26,064 --
Class A common stock, no par value, 25,000,000 shares
authorized, 3,669,394 shares outstanding............... -- 10,435
Class B common stock, no par value, 5,540,000 shares
authorized, 5,530,131 shares outstanding............... -- 15,629
Retained earnings........................................... 2,310 1,910
------- -------
Total capitalization.............................. $50,865 $50,465
======= =======
</TABLE>
- ---------------
(1) Pro forma to give effect to the Recapitalization and Distribution.
36
<PAGE> 44
SELECTED PRO FORMA FINANCIAL DATA OF AHC
The summary unaudited pro forma financial data of AHC set forth below
reflects certain adjustments to the historical consolidated financial statements
of AHC for each of the fiscal years in the five year period ended August 31,
1996, and the three month periods ended November 30, 1995 and 1996 to present
AmSurg as a discontinued operation.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FOR THE YEAR ENDED AND AT AUGUST 31, NOVEMBER 30,
----------------------------------------------- ---------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------ ------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Total revenues............... $37,112 $39,682 $41,144 $36,583 $31,403 $8,023 $7,979
------- ------- ------- ------- ------- ------ ------
Expenses:
Salaries and benefits.............. 16,488 16,972 18,699 18,878 19,866 4,944 5,261
Other operating expenses........... 11,860 11,771 12,271 10,865 7,254 1,571 2,009
Depreciation and amortization...... 1,336 1,340 1,293 1,339 1,273 356 330
Interest........................... 12 8 6 7 5 2 1
------- ------- ------- ------- ------- ------ ------
Total expenses............... 29,696 30,091 32,269 31,089 28,398 6,873 7,601
------- ------- ------- ------- ------- ------ ------
Income before income taxes and
discontinued operations............ 7,416 9,591 8,875 5,494 3,005 1,150 378
Income tax expense(1)................ 3,040 3,884 3,586 2,252 544 499 171
------- ------- ------- ------- ------- ------ ------
Income from continuing operations.... 4,376 5,707 5,289 3,242 2,461 651 207
Discontinued operations............ -- (170) 38 674 799 149 256
------- ------- ------- ------- ------- ------ ------
Net income........................... $ 4,376 $ 5,537 $ 5,327 $ 3,916 $ 3,260 $ 800 $ 463
======= ======= ======= ======= ======= ====== ======
Income per share from continuing
operations(2)...................... $ 0.52 $ 0.68 $ 0.63 $ 0.40 $ 0.30 $ 0.08 $ 0.03
Income (loss) per share from
discontinued operations(2)......... -- (0.02) 0.00 0.08 0.10 0.02 0.03
------- ------- ------- ------- ------- ------ ------
Net income per share(2).............. $ 0.52 $ 0.66 $ 0.63 $ 0.48 $ 0.40 $ 0.10 $ 0.06
======= ======= ======= ======= ======= ====== ======
Weighted average common shares and
equivalents........................ 8,370 8,404 8,461 8,211 8,161 8,090 8,199
</TABLE>
<TABLE>
<CAPTION>
AS
ADJUSTED(3)
-----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $12,562 $9,982 $ 9,982
Working capital...................... 13,324 12,279 11,804
Net assets of discontinued
operations......................... 16,361 17,321 --
Total assets......................... 48,487 48,656 33,035
Long-term debt and other long-term
liabilities........................ 2,657 2,178 2,178
Stockholders' equity................. 41,611 42,209 26,113
</TABLE>
- ---------------
(1) Includes nonrecurring income tax benefit in fourth quarter of fiscal 1996 of
$760,000 or $.09 per share.
(2) Per share information does not give effect to the increase in weighted
average number of shares outstanding that is expected to occur as a result
of the adjustment of AHC stock options in connection with the Distribution.
See "THE DISTRIBUTION -- Adjustment of AHC Stock Options; and -- Accounting
Treatment."
(3) Adjusted to give effect to the Distribution and estimated expenses of
$475,000 related thereto and estimated non-cash compensation expense of
$5,970,000 ($4,270,000 net of income taxes) that is expected to be
recognized as a result of the adjustment of AHC stock options in connection
with the Distribution. See "THE DISTRIBUTION -- Adjustment of AHC Stock
Options; and -- Accounting Treatment."
37
<PAGE> 45
BUSINESS OF AHC AFTER DISTRIBUTION
After the Distribution, AHC will no longer own any AmSurg Common Stock and
accordingly its principal business operations will be conducted through DTCA,
which is the leading provider of diabetes management services. The principal
source of revenues for DTCA historically have been its operating contracts for
hospital-based diabetes treatment centers. While during the last several fiscal
years, revenues from this business have been adversely affected by termination
and renegotiation of certain hospital contracts, AHC believes this business is
stabilizing and expects it to be a source of steady revenue for AHC.
During 1994 AHC began to implement a business strategy in DTCA to develop
comprehensive diabetes disease management products for a new customer group, the
managed care industry, and AHC believes that the substantial portion of its
future revenue growth will result from comprehensive healthcare management
contracts with managed care payors for their enrollees with diabetes. In
furtherance of this strategy, during the last two fiscal years, AHC has incurred
substantial expenditures associated with these comprehensive diabetes disease
management efforts.
AHC's growth strategy is primarily to develop new relationships directly
with payors and others who are ultimately responsible for the healthcare costs
of individuals with diabetes and to further develop its hospital-based diabetes
treatment center business. Pursuant to the strategy with payors, DTCA is
expected to provide management services designed to improve the quality of care
for individuals with diabetes while lowering the overall cost of care. DTCA fees
under these agreements with payors may take the form of shared savings of
overall diabetes enrolled healthcare costs, capitated payments to DTCA that
cover DTCA's services to enrollees but do not include responsibility for
enrolled healthcare claims or some combination of these arrangements. AHC
believes that its current position as the leading provider of diabetes treatment
services to hospitals and physicians will be an advantage in comparison with
other potential competitors or with the payors considering initiating such
services themselves, most of whom have no such actual diabetes treatment or
comprehensive diabetes population management experience.
Since January 1996, DTCA has entered into nine managed care contracts
primarily with Principal Healthcare, Inc. and Health Options, Inc., an HMO
subsidiary of Blue Cross Blue Shield of Florida. DTCA is in the process of
implementing its diabetes disease management products pursuant to these
agreements and through its implementation expects to produce cost savings which
will be shared by DTCA and the HMOs. While DTCA believes that these agreements
will provide substantial revenue and profit opportunities for DTCA over the five
year term of these agreements, it cannot accurately predict the amount or timing
of these revenues or profits or assure that any such revenue or profits will be
obtained. See "RISK FACTORS -- Risk Factors Regarding AHC After Distribution."
38
<PAGE> 46
BUSINESS OF AMSURG
AmSurg was formed in April 1992 for the purpose of developing, acquiring
and managing practice-based ambulatory surgery centers, in partnerships with
physician practice groups, throughout the United States. An AmSurg surgery
center is typically located adjacent to or in the immediate vicinity of the
specialty medical practice of a physician group partner's office. Each of the
surgery centers offers a narrow range of high volume, lower-risk surgical
procedures, generally in a single specialty, and has been designed with a cost
structure that enables AmSurg to charge fees which management believes are
generally less than those charged by hospitals and freestanding outpatient
surgery centers for similar services performed on an outpatient basis. As of
January 31, 1997, AmSurg owned a majority interest in 27 operating centers in
ten states and the District of Columbia, managed another center's operations and
owned a majority interest in two physician practice groups. As of January 31,
1997, AmSurg also had 21 centers under development and had executed letters of
intent to acquire or develop five additional centers. AmSurg is utilizing
selected surgery centers as a base to develop specialty physician networks that
are designed to serve large numbers of covered lives and thus strengthen
AmSurg's position in dealing with managed care organizations. As of January 31,
1997, AmSurg operated four specialty physician networks, located in the south
Florida market and in Knoxville, Tennessee and Montgomery, Alabama.
The following map shows the approximate locations of AmSurg surgery
centers, physician practices and specialty physician networks operating or under
development as of January 31, 1997:
The graphic is a map of the United States showing the number of operating
networks, centers, practices and centers under development by state.
AmSurg was organized as a Tennessee corporation in 1992. AmSurg's principal
executive offices are located at One Burton Hills Boulevard, Suite 350,
Nashville, Tennessee 37215, and its telephone number is 615-665-1283.
39
<PAGE> 47
INDUSTRY OVERVIEW
In recent years, government programs, private insurance companies, managed
care organizations and self-insured employers have implemented various
cost-containment measures to limit the growth of healthcare expenditures. These
cost containment measures, together with technological advances, have resulted
in a significant shift in the delivery of healthcare services away from
traditional inpatient hospitals to more cost-effective alternate sites,
including ambulatory surgery centers.
Industry sources estimate that in 1994, outpatient surgical procedures
represented approximately 64.7% of all surgical procedures performed in the
United States, compared with 31.3% in 1984. As of December 31, 1995, there were
approximately 2,300 freestanding ambulatory surgery centers in the U.S., of
which approximately 130 were owned by hospitals and approximately 505 were owned
by corporate entities. The remaining approximately 1,665 centers were
independently owned, primarily by physicians.
Managed care organizations with significant numbers of covered lives are
seeking to direct large numbers of patients to high-quality, low-cost providers
and provider groups. In order to compete for the growing number of managed care
patients, hospitals, physicians and other providers, including alternate site
outpatient providers, are forming specialty physician networks and other
provider joint ventures.
AmSurg believes that the following factors have contributed to the growth
of ambulatory surgery:
Cost-Effective Alternative. Ambulatory surgery is generally less expensive
than hospital inpatient surgery. In addition, AmSurg believes that surgery
performed at a practice-based ambulatory surgery center is generally less
expensive than hospital-based ambulatory surgery for a number of reasons,
including lower facility development costs, more efficient staffing and space
utilization and a specialized operating environment focused on cost containment.
Interest in ambulatory surgery centers has grown as managed care organizations
have sought a cost-effective alternative to inpatient services.
Physician and Patient Preference. AmSurg believes that many physicians
prefer practice-based ambulatory surgery centers. AmSurg believes that such
centers enhance physicians' productivity by providing them with greater
scheduling flexibility, more consistent nurse staffing and faster turnaround
time between cases, allowing them to perform more surgeries in a defined period
of time. In contrast, hospitals and freestanding ambulatory surgery centers
generally serve a broader group of physicians, including those involved with
emergency procedures, resulting in postponed or delayed surgeries. Additionally,
many physicians choose to perform surgery in a practice-based ambulatory surgery
center because their patients prefer the simplified admissions and discharge
procedures and the less institutional atmosphere.
New Technology. New technology and advances in anesthesia, which have been
increasingly accepted by physicians, have significantly expanded the types of
surgical procedures that are being performed in ambulatory surgery centers.
Lasers, enhanced endoscopic techniques and fiber optics have reduced the trauma
and recovery time. Improved anesthesia has shortened recovery time by minimizing
post-operative side effects such as nausea and drowsiness, thereby avoiding, in
some cases, overnight hospitalization.
STRATEGY
AmSurg believes it is a leading provider of high-quality, lower-cost
specialty physician practice network and outpatient surgery services to managed
care payors through AmSurg's practice-based ambulatory surgery centers,
specialty physician networks and physician practice management and ownership.
The key components of AmSurg's strategy are:
Provide Lower-Risk, High Volume Ambulatory Surgery Services. AmSurg's
surgery centers currently focus on providing lower-risk surgical procedures in
five surgical subspecialties: gastroenterology, ophthalmology, orthopaedic
surgery, urology and otolaryngology. The AmSurg single specialty practice-based
surgery center is designed, built, equipped and staffed for the needs of a
single specialty, which AmSurg believes creates efficiencies in operations.
AmSurg believes that as a result, the single specialty surgery center is a lower
cost unit to build, equip and operate, is more convenient for the physician and
patient, and therefore is potentially more attractive to managed care payors
than hospital-based or freestanding multi-specialty centers.
40
<PAGE> 48
AmSurg believes through the combination of a network of geographically dispersed
physician groups and ambulatory surgery centers in a specific market, it can
establish a high quality, cost efficient service delivery system for a specific
individual specialty that is attractive to managed care payors.
Develop and Acquire Practice-Based Ambulatory Surgery Centers. Although
AmSurg has historically grown primarily by acquisition of existing centers, it
anticipates that its future growth in the surgery center business will come
increasingly from development of new practice-based ambulatory surgery centers.
In order to continue the acquisition and development of ambulatory surgery
centers, AmSurg will require additional capital resources in the form of debt or
equity financing. See "MANAGEMENT'S DISCUSSION AND ANALYSIS -- Liquidity and
Capital Resources".
Develop Specialty Networks. Utilizing single specialty ambulatory surgery
centers to provide a cost advantage, AmSurg's strategy has evolved to include
the development and ownership of specialty physician networks which will offer
specialty physician services, as well as outpatient surgery procedures with wide
geographic coverage to managed care payors. The specialty networks will be
developed to provide broad geographic patient access points in the market
through the network participation of high quality and strategically located
practices, some of which may be acquired or managed by AmSurg.
AmSurg has acquired two physician practices, a urology specialty group and
a gastrointestinal specialty group, in Miami, Florida, one of which is a partner
with AmSurg in a practice-based ambulatory surgery center. The other physician
practice is developing an ambulatory center with AmSurg. As of January 31, 1997,
AmSurg has acquired a majority interest in two specialty physician networks and
has developed and is the majority owner of two other physician specialty
networks. By establishing these networks, AmSurg believes it will be able to
obtain additional contracts with managed care payors and increase the
profitability of its surgery centers and associated physician practices.
ACQUISITION AND DEVELOPMENT OF SURGERY CENTERS
Practice-based ambulatory surgery centers are licensed outpatient surgery
centers generally equipped and staffed for a single medical specialty and are
generally located in or adjacent to a physician group practice. AmSurg has
targeted ownership in centers that perform gastrointestinal endoscopy, eye
surgery, urology, orthopaedics or otolaryngology procedures. These specialties
perform many high volume, lower-risk procedures that are appropriate for the
practice-based setting. The focus at each center on only the procedures in a
single specialty results in these centers generally having significantly lower
capital and operating costs than the costs of hospital and freestanding
ambulatory surgery center alternatives that are designed to provide more
intensive services in a broader array of surgical specialties. In addition, the
practice-based surgery center, which is located in or adjacent to the group
practice, provides a more convenient setting for the patient and for the
physician performing the procedure. Improvements in technology are also enabling
additional types of procedures to be performed in the practice-based setting.
The AmSurg development staff identifies physician practices with existing
centers that are potential acquisition candidates and identifies physician
practices that are potential partners for new center development in the medical
specialties which AmSurg has targeted for development. These candidates are then
evaluated against AmSurg's project criteria which include several factors such
as number of procedures currently being performed by the practice, competition
from and the fees being charged by other surgical providers, relative
competitive market position of the physician practice under consideration, state
certificate of need ("CON") requirements for development of a new center and
other factors.
In presenting the advantages to physicians of developing a new
practice-based ambulatory surgery center in partnership with AmSurg, the AmSurg
development staff emphasizes the proximity of a practice-based surgery center to
a physician's office, the simplified administrative procedures, the ability to
schedule consecutive cases without preemption by inpatient or emergency
procedures, the rapid turnaround time between cases, the high technical
competency of the center's clinical staff that performs only a limited number of
specialized procedures, and state-of-the-art surgical equipment. AmSurg also
focuses on its expertise in developing, operating and managing centers and in
marketing the centers' services to managed care organizations.
41
<PAGE> 49
In a development project, AmSurg, among other things, provides the
following services:
- Financial feasibility pro forma analysis;
- Assistance in state CON approval process;
- Site selection;
- Assistance in space analysis and schematic floor plan design;
- Analysis of local, state, and federal building codes;
- Negotiation of equipment financing with lenders;
- Equipment budgeting, specification, bidding, and purchasing;
- Construction financing;
- Architectural oversight;
- Contractor bidding;
- Construction management; and
- Assistance with licensing, Medicare certification and third party payor
contracts.
AmSurg acquires its interest in ambulatory surgery centers through
development of new centers and acquisition of existing centers. AmSurg's
ownership interests in practice-based ambulatory surgery centers generally are
structured through limited and general partnerships or limited liability
companies. AmSurg generally owns 51% to 70% of the partnerships or limited
liability companies and acts as the general partner in each limited partnership.
In development transactions, capital contributed by the physicians and AmSurg
plus bank financing provides the partnership or limited liability company with
the funds necessary to construct and equip a new surgery center and to provide
initial working capital.
As part of each development and acquisition transaction, AmSurg enters into
a partnership agreement or an operating agreement with its physician partner.
Distributions of available cash flow are made monthly to the partners pro rata
in proportion to their respective percentage ownership interest in the limited
partnership or limited liability company. These agreements generally provide
that AmSurg will oversee the business and administrative operations of the
surgery center, and that the physician partner will provide the center with a
medical director, and with certain specified services such as billing and
collections, transcription, and accounts payable processing. In addition, these
agreements provide that the limited partnership or limited liability company
will lease certain non-physician personnel from the physician practice, who will
provide services at the center. The cost of the salary and benefits of these
personnel are reimbursed to the practice by the limited partnership or limited
liability company. Certain aspects of the limited partnership's or limited
liability company's operations are overseen by an operating board, which is
comprised of representatives of AmSurg and the physician partners.
In connection with AmSurg's management of the business operations at each
center, AmSurg historically received a management fee paid by the partnership or
limited liability company. The partnership or limited liability company also
paid a physician partner a medical director fee and a fee for providing certain
administrative services to the center. Because the management fee usually equals
the value of services provided to the center by the physician practice, AmSurg
has structured its agreements so that AmSurg generally no longer provides for
any of such fees in its partnerships or limited liability companies. For
start-up centers that are being developed, a fee is generally paid by the
partnership or limited liability company to AmSurg for management of the
planning, construction and opening of the center.
The partnership and operating agreements provide that AmSurg will be
obligated to purchase some or all of the minority interests of the physicians
affiliated with AmSurg in the partnerships or limited liability companies which
own and operate AmSurg's surgery centers. The regulatory changes that could
trigger such an obligation include changes that: (i) make the referral of
Medicare and other patients to AmSurg's surgery centers by physicians affiliated
with AmSurg illegal; (ii) create the substantial likelihood that cash
distributions from the partnership or limited liability company to the
physicians associated therewith will be illegal; or (iii) cause the ownership by
the physicians of interests in the partnerships or limited liability companies
to be illegal. There can be no assurance that AmSurg's existing capital
resources would be sufficient for it to meet the obligation, if it arises, to
purchase minority interests held by physicians in the partnerships or limited
liability companies which own and operate AmSurg's surgery centers. The
determina-
42
<PAGE> 50
tion of whether a triggering event has occurred is made by the concurrence of
counsel for AmSurg and the physician partners or, in the absence of such
concurrence, by independent counsel having an expertise in healthcare law and
who is chosen by both parties. Determination is therefore not within the control
of AmSurg. While AmSurg has structured the repurchase obligations to be as
favorable as possible to AmSurg, the triggering of these obligations could have
a material adverse effect on the financial condition and results of operations
of AmSurg. See "-- Government Regulation."
SURGERY CENTER LOCATIONS
AmSurg partnerships and limited liability companies lease certain of the
real property in which its centers operate and the equipment used in certain of
its centers, either from the physician partners or from an unaffiliated party.
The following table sets forth certain information relating to AmSurg's
centers in operation as of January 31, 1997:
<TABLE>
<CAPTION>
YEAR
OR DATE OPERATING OR
ORIGINALLY ACQUISITION PROCEDURE
LOCATION SPECIALTY PRACTICE OPENED DATE ROOMS
-------- ------------------ ---------- ----------- ---------------
<S> <C> <C> <C> <C>
ACQUIRED CENTERS
Knoxville, Tennessee................... Gastroenterology 1987 Nov. 1992 7
Topeka, Kansas......................... Gastroenterology 1990 Nov. 1992 4
Nashville, Tennessee................... Gastroenterology 1989 Nov. 1992 3
Nashville, Tennessee................... Gastroenterology 1988 Dec. 1992 3
Washington, D.C........................ Gastroenterology 1990 Nov. 1993 3
Melbourne, Florida..................... Ophthalmology 1986 Nov. 1993 3
Torrance, California................... Gastroenterology 1990 Feb. 1994 2
Sebastopol, California................. Ophthalmology 1988 Apr. 1994 2
Fort Myers, Florida.................... Gastroenterology 1990 Oct. 1994 1
Maryville, Tennessee................... Gastroenterology 1992 Jan. 1995 3
Miami, Florida......................... Gastroenterology 1995 April 1995 7
Panama City, Florida................... Gastroenterology 1993 July 1996 3
Ocala, Florida......................... Gastroenterology 1993 Aug. 1996 3
Columbia, South Carolina............... Gastroenterology 1988 Oct. 1996 3
Wichita, Kansas........................ Orthopaedics 1991 Nov. 1996 3
Minneapolis, Minnesota................. Gastroenterology 1993 Nov. 1996 2
Crystal River, Florida................. Gastroenterology 1994 Jan. 1997 3
DEVELOPED CENTERS
Santa Fe, New Mexico................... Gastroenterology May 1994 -- 3
Tarzana, California.................... Gastroenterology July 1994 -- 3
Jackson, Tennessee(1).................. Gastroenterology Sept. 1994 -- 6
Beaumont, Texas........................ Gastroenterology Oct. 1994 -- 3
Abilene, Texas......................... Gastroenterology Dec. 1994 -- 3
Cape Coral, Florida.................... Gastroenterology Jan. 1995 -- 2
Melbourne, Florida..................... Otolaryngology March 1995 -- 2
Knoxville, Tennessee................... Ophthalmology June 1996 -- 2
West Monroe, Louisiana................. Gastroenterology June 1996 -- 2
Miami, Florida......................... Gastroenterology Sept. 1996 -- 3
Sidney, Ohio........................... Ophthalmology Dec. 1996 -- 3
Urology
General Surgery
Otolaryngology
</TABLE>
- ---------------
(1) This center is currently being operated by AmSurg pursuant to a management
agreement. AmSurg has an option to purchase 51% of this center.
43
<PAGE> 51
SURGERY CENTER OPERATIONS
Each AmSurg facility is generally designed, built, staffed and equipped to
meet the specific needs of a single specialty physician practice group. AmSurg's
typical ambulatory surgery center averages 3,000 square feet and is located
adjacent to or in the immediate vicinity of the specialty physicians' offices.
Each center developed by AmSurg typically has two to four operating or procedure
rooms with areas for reception, preparation, recovery and administration. Each
surgery center is developed to perform an average of 2,500 procedures per year.
As of January 31, 1997, 22 of the AmSurg centers in operation performed
gastrointestinal endoscopy procedures, three centers performed ophthalmology
procedures, one center performed orthopaedic procedures, one center performed
otolaryngology procedures, and one center performed ophthalmology, urology,
general surgery and otolaryngology procedures. The procedures performed at the
AmSurg centers generally do not require an extended recovery following the
procedures. AmSurg centers are typically staffed with three to five clinical
professionals and administrative personnel who are shared with the physician
practice group. The clinical staff includes nurses and surgical technicians.
The types of procedures performed at each center depend on the specialty of
the practicing physicians. The typical procedures performed or to be performed
most commonly at AmSurg centers in operation or under development within each
specialty are:
- Gastroenterology -- colonoscopy and endoscopy procedures
- Ophthalmology -- cataracts and retinal laser surgery
- Orthopaedics -- knee arthroscopy and carpal tunnel repair
- Urology -- cystoscopy and biopsy
- Otolaryngology -- myringotomy and tonsillectomy
AmSurg markets its surgery centers and networks directly to third-party
payors, including HMOs, PPOs, other managed care organizations and employers,
and directly to patients. Payor-group marketing activities conducted by AmSurg's
management and center administrators emphasize the high quality of care, cost
advantages and convenience of AmSurg's surgery centers and are focused on making
each center an approved provider under local managed care plans. In addition,
AmSurg is pursuing relationships with selected physician groups in its markets
in order to market a comprehensive specialty physician network that includes its
surgery centers to managed care payors.
PHYSICIAN SPECIALTY NETWORKS AND PRACTICES
Provider networks are primarily oriented to local markets. Physician groups
may be members of several networks in a locale. Most networks are either
multi-specialty or primary care based. AmSurg believes that its single specialty
networks, designed around the ambulatory surgery centers and designed to match
the membership base geography of the managed care payors, will be a more
competitive model than networks that do not have those advantages. AmSurg also
has the advantage of being introduced to prospective network members by its
existing practice partners who have already had a positive experience working
with AmSurg in joint ownership of the surgery centers. Pursuant to agreements
with the network, the physicians in these networks also will have the
opportunity to perform their surgical procedures in AmSurg's surgery centers or
develop additional centers with AmSurg as needed. Following the development of
the network, AmSurg will provide management services and marketing services to
the network to secure patient service contracts with managed care payors.
AmSurg further believes that network development will expand services
available to managed care organizations. AmSurg believes that the physician
practice networks with practice-based surgery centers are attractive to managed
care organizations because of the geographic coverage of the network, the lower
costs associated with treatment, the availability of the complete delivery
system for a specific specialty and high levels of patient satisfaction. As a
result, AmSurg believes the development of such networks will capture an
increased volume of managed care contracts, including capitated contracts, and
will increase the market share and profitability of the practices and the AmSurg
surgery centers.
44
<PAGE> 52
As of January 31, 1997, AmSurg was the manager and majority owner of four
physician specialty networks. Two of the network interests were acquired and two
network interests resulted from AmSurg's development efforts. AmSurg's ownership
interests in the networks are similar to those in its surgery centers in that
they are structured through limited partnerships or limited liability companies.
The limited partners of the partnerships and the physician members of the
limited liability companies are individual physicians who are generally
associated with an AmSurg surgery center in operation or under development. Both
AmSurg and the physician partners contribute capital to the partnership or
limited liability company.
In January 1996, as part of its network development strategy AmSurg
acquired a 70% ownership interest in the operations of Gastroenterology Group of
South Florida ("GGSF") in Miami, Florida, a gastroenterology and primary care
practice currently comprised of seven gastroenterologists and five primary care
physicians that provides gastroenterology physician and outpatient endoscopy
services under a contract with a large managed care payor which covers
approximately 120,000 lives. AmSurg and certain GGSF physicians have been
partners in a practice-based endoscopy center that provides outpatient endoscopy
services to this base of covered lives and to other patients. Using GGSF as a
base, AmSurg has expanded its gastroenterology physician network in south
Florida and expects to add additional surgery centers and covered lives as a
result of this expansion.
In January 1997, also as part of its network development strategy, AmSurg
acquired a 60% ownership interest in the operations of Miami Urological
Associates, a urology practice comprised of three urologists and seven
additional contract physicians in Miami, Florida, and a urology network which
contracts with two managed care payors to provide physician and certain
outpatient procedures for approximately 170,000 covered lives. AmSurg and Miami
Urological Associates have entered into a partnership to develop an ambulatory
surgery center for the urology practice. AmSurg expects to expand the acquired
urology network in south Florida and the number of covered lives it serves. In
addition, AmSurg has developed two ophthalmology/eye care networks located in
Knoxville, Tennessee and Montgomery, Alabama.
REVENUES
AmSurg's principal source of revenue is a facility fee charged for surgical
procedures performed in its surgery centers. This fee varies depending on the
procedure, but usually includes all charges for operating room usage, special
equipment usage, supplies, recovery room usage, nursing staff and medications.
Facility fees do not include the charges of the patient's surgeon,
anesthesiologist or other attending physicians, which are billed directly to
third-party payors by such physicians.
Practice-based ambulatory surgery centers such as those owned by AmSurg
depend upon third-party reimbursement programs, including governmental and
private insurance programs, to pay for facility services rendered to patients in
the centers. AmSurg's surgery centers derived approximately 36% of their net
revenues from governmental healthcare programs including Medicare and Medicaid
in 1996. The Medicare program presently pays ambulatory surgery centers in
accordance with a fee schedule which is prospectively determined. There may be
continuing legislative and regulatory initiatives to limit the rate of increase
in expenditures under the Medicare and Medicaid programs in an effort to curtail
or reduce the federal budget deficit. These limitations, if enacted, may
negatively impact AmSurg center revenues and operations.
In addition to payment from governmental programs, ambulatory surgery
centers derive a significant portion of their net revenues from private
healthcare reimbursement plans. These plans include both standard indemnity
insurance programs as well as managed care structures such as PPOs, HMOs and
other similar structures. The strengthening of managed care systems nationally
has resulted in substantial competition among providers of services, including
providers of surgery center services with greater financial resources and market
penetration than AmSurg, to contract with these systems. AmSurg believes that
all payors, both governmental and private, will continue their efforts over the
next several years to reduce healthcare costs and that their efforts will
generally result in a less stable market for healthcare services. While no
assurances can be given concerning the ultimate success of AmSurg's efforts to
contract with healthcare payors, AmSurg believes that AmSurg's position as a
low-cost alternative for certain surgical procedures should enable AmSurg
centers to compete effectively in the evolving healthcare marketplace.
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<PAGE> 53
COMPETITION
AmSurg encounters competition in two separate areas: competition with other
companies for its physician partnership relationships created to establish
surgery centers, practices, and networks, and competition with other providers
for patients and for contracting with managed care payors in each of its
markets.
Competition for Partnership Relationships. AmSurg believes that it does
not have a direct competitor in the development of practice-based ambulatory
surgery centers across the specialties of gastroenterology, ophthalmology,
otolaryngology, urology, and orthopaedic surgery. There are, however, several
large, publicly held companies, or divisions or subsidiaries of large publicly
held companies, that develop freestanding multi-specialty surgery centers, and
these companies may compete with AmSurg in the development of centers.
Many physician groups develop surgery centers without a corporate partner.
It is generally difficult, however, in the rapidly evolving healthcare industry,
for a single practice to effectively create the efficient operations and
marketing programs to compete with other provider networks and companies.
Because of this, as well as the financial investment necessary to develop
surgery centers, physician groups are attracted to corporate partners, such as
AmSurg. Other factors that may influence the physicians' decisions concerning
the choice of a corporate partner are the potential corporate partner's
experience, reputation and access to capital.
There are several companies, many in niche markets, that acquire existing
practice-based ambulatory surgery centers and specialty physician practices.
Many of these competitors have greater resources than AmSurg. Most of AmSurg's
competitors acquire centers through the acquisition of the related physician
practice. The principal competitive factors that affect the ability of AmSurg
and its competitors to acquire surgery centers are price, experience and
reputation, access to capital and willingness to acquire a surgery center
without acquiring the physician practice.
Most networks are either multi-specialty or primary care based. There are a
few national networking companies that specialize in the establishment and
operation of networks. The primary competitive factors AmSurg experiences in the
development of specialty networks include the attraction of physician practice
groups to the network, market penetration and geographic coverage.
Competition for Patients and Managed Care Contracts. AmSurg believes that
its surgery centers can provide lower-cost, high quality surgery in a more
comfortable environment for the patient in comparison to hospitals and to
freestanding surgery centers with which AmSurg competes for managed care
contracts. In addition, the existence of the AmSurg specialty networks provide
the geographic access that managed care companies desire. Competition for
managed care contracts with other providers is focused on pricing of services,
quality of services, and affiliation with key physician groups in a particular
market.
GOVERNMENT REGULATION
The healthcare industry is subject to extensive regulation by a number of
governmental entities at the federal, state and local level. Regulatory
activities affect the business activities of AmSurg, by controlling AmSurg's
growth, requiring licensure and certification for its facilities, regulating the
use of AmSurg's properties, and controlling reimbursement to AmSurg for the
services AmSurg provides.
CONs and State Licensing. CON regulations control the development of
ambulatory surgery centers in certain states. CONs generally provide that prior
to the expansion of existing centers, the construction of new centers, the
acquisition of major items of equipment or the introduction of certain new
services, approval must be obtained from the designated state health planning
agency. State CON statutes generally provide that, prior to the construction of
new facilities or the introduction of new services, a state health planning
designated agency must determine that a need exists for those facilities or
services. AmSurg's development of ambulatory surgery centers generally focuses
on states that do not require CONs. However, acquisitions of surgery centers,
even in states that require CONs for new centers, generally do not require CON
regulatory approval.
State licensing of ambulatory surgery centers is generally a prerequisite
to the operation of each center and to participation in federally funded
programs, such as Medicare and Medicaid. Once a center becomes licensed and
operational, it must continue to comply with federal, state and local licensing
and certification
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<PAGE> 54
requirements in addition to local building and life safety codes. In addition,
every state imposes licensing requirements on individual physicians and
facilities and services operated and owned by physicians. Physician practices
are also subject to federal, state and local laws dealing with issues such as
occupational safety, employment, medical leave, insurance regulations, civil
rights and discrimination and medical waste and other environmental issues.
Reimbursement. AmSurg depends upon third-party programs, including
governmental and private health insurance programs, to reimburse it for services
rendered to patients in its ambulatory surgery centers. In order to receive
Medicare reimbursement, each ambulatory surgery center must meet the applicable
conditions of participation set forth by the Department of Health and Human
Services ("DHHS") relating to the type of facility, its equipment, personnel and
standard of medical care, as well as compliance with state and local laws and
regulations, all of which are subject to change from time to time. Ambulatory
surgery centers undergo periodic on-site Medicare certification surveys. Each of
the existing AmSurg centers is certified as a Medicare provider. Although AmSurg
intends for its centers to participate in Medicare and other government
reimbursement programs, there can be no assurance that these centers will
continue to qualify for participation.
Medicare-Medicaid Illegal Remuneration Provisions. The anti-kickback
statute makes unlawful knowingly and willfully soliciting, receiving, offering
or paying any remuneration (including any kickback, bribe, or rebate) directly
or indirectly to induce or in return for referring an individual to a person for
the furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part under Medicare or Medicaid. Violation is
a felony punishable by a fine of up to $25,000 or imprisonment for up to five
years, or both. The Medicare and Medicaid Patient Program Protection Act of 1987
(the "1987 Act") provides administrative penalties for healthcare practices
which encourage overutilization or illegal remuneration when the costs of
services are reimbursed under the Medicare program. Loss of Medicare
certification and severe financial penalties are included among the 1987 Act's
sanctions. The 1987 Act, which adds to the criminal penalties under preexisting
law, also directs the Inspector General of the DHHS to investigate practices
which may constitute overutilization, including investments by healthcare
providers in medical diagnostic facilities, and to promulgate regulations
establishing exemptions or "safe harbors" for investments by medical service
providers in legitimate business ventures that will be deemed not to violate the
law even though those providers may also refer patients to such a venture.
Regulations identifying safe harbors were published in final form in July 1991
(the "Regulations").
The Regulations set forth two specific exemptions or "safe harbors" related
to "investment interests": the first concerning investment interests in large
publicly traded companies ($50,000,000 in net tangible assets) and the second
for investments in smaller entities. The partnerships and limited liability
companies that own the AmSurg centers do not meet all of the criteria of either
existing "investment interests" safe harbor as announced in the Regulations.
While several federal court decisions have aggressively applied the
restrictions of the anti-kickback statute, they provide little guidance as to
the application of the anti-kickback statute to AmSurg's partnerships and
limited liability companies. AmSurg believes that it is in compliance with the
current requirements of applicable federal and state law because among other
factors:
i. the partnerships and limited liability companies exist to effect
legitimate business purposes, including the ownership, operation and
continued improvement of quality, cost effective and efficient services to
their patients;
ii. the partnerships and limited liability companies function as an
extension of the group practices of physicians who are affiliated with the
surgery centers; the surgical procedures are performed personally by these
physicians without referring the patients outside of their practice;
iii. the physician partners have a substantial investment at risk in
the partnership or limited liability company;
iv. terms of the investment do not take into account volume of the
physician partner's past or anticipated future services provided to
patients of the centers;
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<PAGE> 55
v. the physician partners are not required or encouraged as a
condition of the investment to treat Medicare or Medicaid patients at the
centers or to influence others to refer such patients to the centers for
treatment;
vi. neither the partnership, limited liability company, the AmSurg
subsidiary, nor any of their affiliates will loan any funds or guarantee
any debt on behalf of the physician partners; and
vii. distributions are allocated uniformly by and among all partners
in proportion to their ownership interests.
Notwithstanding AmSurg's belief that the relationship of physician partners
to the AmSurg surgery centers should not constitute illegal remuneration under
the anti-kickback statute, no assurances can be given that a federal or state
agency charged with enforcement of the anti-kickback statute and similar laws
might not assert a contrary position or that new federal or state laws might not
be enacted that would cause the physician partners' ownership interest in the
AmSurg centers to become illegal, or result in the imposition of penalties on
AmSurg or certain of its facilities. Even the assertion of a violation could
have a material adverse effect upon AmSurg. See "RISK
FACTORS -- Medicare-Medicaid Illegal Remuneration ("anti-kickback") Laws."
Prohibition on Physician Ownership of Healthcare Facilities. The so-called
"Stark II" provisions of the Omnibus Budget Reconciliation Act of 1993 ("OBRA
93") amend the federal Medicare statute to prohibit the making by a physician of
referrals for "designated health services" to an entity in which the physician
has an investment interest or other financial relationship, subject to certain
exceptions. A referral under Stark II that does not fall within an exception is
strictly prohibited. This prohibition took effect on January 1, 1995. Sanctions
for violating Stark II can include civil monetary penalties and exclusion from
Medicare and Medicaid.
Ambulatory surgery is not identified as a "designated health service", and
AmSurg, therefore, does not believe that ambulatory surgery is otherwise subject
to the restrictions set forth in Stark II. However, unfavorable regulations yet
to be promulgated pursuant to Stark II or subsequent adverse court
interpretations concerning similar provisions found in recently enacted state
statutes could prohibit reimbursement for treatment provided by the physicians
affiliated with the AmSurg centers to their patients. AmSurg cannot predict
whether other regulatory or statutory provisions will be enacted by federal or
state authorities which would prohibit or otherwise regulate relationships which
AmSurg has established or may establish with other healthcare providers or the
possibility of material adverse effects on its business or revenues arising from
such future actions. AmSurg management believes, however, that AmSurg will be
able to adjust its operations so as to be in compliance with any regulatory or
statutory provision, as may be applicable.
AmSurg is subject to state and federal laws that govern the submission of
claims for reimbursement. These laws generally prohibit an individual or entity
from knowingly and willfully presenting a claim (or causing a claim to be
presented) for payment from Medicare, Medicaid or other third party payors that
is false or fraudulent. The standard for "knowing and willful" often includes
conduct that amounts to a reckless disregard for whether accurate information is
presented by claims processors. Penalties under these statutes include
substantial civil and criminal fines, exclusion from the Medicare program, and
imprisonment. One of the most prominent of these laws is the federal False
Claims Act, which may be enforced by the federal government directly, or by a
qui tam plaintiff on the government's behalf. Under the False Claims Act, both
the government and the private plaintiff, if successful, are permitted to
recover substantial monetary penalties, as well as an amount equal to three
times actual damages. In recent cases, some qui tam plaintiffs have taken the
position that violations of the anti-kickback statute and Stark II should also
be prosecuted as violations of the federal False Claims Act. AmSurg believes
that it has procedures in place to ensure the accurate completion of claims
forms and requests for payment.
Under its agreements with its physician partners, AmSurg is obligated to
purchase the interests of the physicians in the event that their continued
ownership of interests in the partnerships and limited liability companies
becomes prohibited by the statutes or regulations described above. The
determination of such a prohibition is required to be made by counsel of AmSurg
in concurrence with counsel of the physician
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<PAGE> 56
partners, or if they cannot concur, by a nationally recognized law firm with an
expertise in healthcare law jointly selected by AmSurg and the physician
partners. The interest required to be purchased by AmSurg will not exceed the
minimum interest required as a result of the change in the statute or regulation
causing such prohibition. See "RISK FACTORS -- Relationships with Physician
Partners."
PROPERTIES
AmSurg's principal executive offices are located in Nashville, Tennessee
and contain an aggregate of approximately 15,000 square feet of office space,
which AmSurg subleases from AHC pursuant to an agreement that expires in
December 1999. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -- Lease
Arrangement." AmSurg partnerships and limited liability companies generally
lease space for their surgery centers. Twenty-five of the centers and the
physician practices in operation at January 31, 1997 lease space ranging from
1,200 to 7,800 square feet with remaining lease terms ranging from two to
eighteen years. Three centers in operation at January 31, 1997 are located in
buildings owned directly or indirectly by AmSurg.
EMPLOYEES
As of January 31, 1997, AmSurg and its affiliated entities employed 174
persons, 149 of whom were full-time employees and 25 of whom were part-time
employees. Of the above, 44 were employed at AmSurg's headquarters in Nashville,
Tennessee. In addition, approximately 102 employees are leased on a part-time
basis and 135 are leased on a full-time basis from the associated physician
practices. None of these employees is represented by a union. AmSurg believes
its relationship with its employees to be excellent.
LEGAL PROCEEDINGS AND INSURANCE
From time to time, AmSurg may be named a party to legal claims and
proceedings in the ordinary course of business. Management is not aware of any
claims or proceedings against it or its partnerships that might have a material
financial impact on AmSurg.
AmSurg maintains separate medical malpractice insurance through each of its
surgery centers in amounts it deems adequate for its business.
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<PAGE> 57
MANAGEMENT OF AMSURG
DIRECTORS AND EXECUTIVE OFFICERS
Certain information with respect to the directors and executive officers of
AmSurg following the Distribution is set forth below. Following the
Distribution, the Board of Directors will be composed of seven persons who will
be divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as possible, of one-third of the total number of
directors constituting the entire Board of Directors. Each class of directors
shall be elected for a three-year term, except that the initial term will be for
one year in the case of the Class I directors and two years in the case of the
Class II directors. All executive officers are elected by the Board of Directors
and serve until their successors are duly elected by the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH AMSURG
- ---- --- --------------------
<S> <C> <C>
Ken P. McDonald................................. 56 President, Chief Executive Officer and
Director (Class II director with term
expiring in 1999)
Claire M. Gulmi................................. 43 Senior Vice President, Chief Financial
Officer and Secretary
Royce D. Harrell................................ 50 Senior Vice President, Operations, and
Assistant Secretary
Rodney H. Lunn.................................. 46 Senior Vice President, Center Development
David L. Manning................................ 46 Senior Vice President, Development
Thomas G. Cigarran.............................. 54 Chairman of the Board (Class III director
with term expiring in 2000)
James A. Deal................................... 46 Director (Class I director with term
expiring in 1998)
Steven I. Geringer.............................. 51 Director (Class I director with term
expiring in 1998)
Debora A. Guthrie............................... 41 Director (Class III director with term
expiring in 2000)
Henry D. Herr................................... 50 Director (Class II director with term
expiring in 1999)
Bergein F. Overholt, M.D........................ 59 Director (Class III director with term
expiring in 2000)
</TABLE>
KEN P. MCDONALD joined AmSurg in 1993 as a Vice President. Mr. McDonald
became Executive Vice President and Chief Operating Officer in December 1994,
President and a director in July 1996, and will become Chief Executive Officer
effective upon the Distribution. Mr. McDonald was President of NASCO Data
Systems, Inc., a distributor of IBM micro computer products to the value-added
reseller community, from 1988 until he joined AmSurg in 1993.
CLAIRE M. GULMI joined AmSurg in September 1994 as Vice President and Chief
Financial Officer. Ms. Gulmi became Senior Vice President in March 1997.
Following the Distribution, Ms. Gulmi will additionally become the Secretary of
AmSurg. From 1991 to 1994, Ms. Gulmi served as Chief Financial Officer of Music
Holdings, Inc., a music publishing and video distribution company.
ROYCE D. HARRELL joined AmSurg in October 1992 as Senior Vice President,
Operations. Mr. Harrell served, in successive order from 1982 to 1992, as a Vice
President of Development, Senior Vice President of Development and Senior Vice
President, Operations of Forum Group, Inc., an owner and operator of retirement
and healthcare communities and primary care facilities.
RODNEY H. LUNN has been Senior Vice President of Center Development since
1992 and was a director from 1992 until February 1997. Mr. Lunn was a principal
of Practice Development Associates, Inc. ("PDA"),
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a company specializing in developing practice-based surgery centers, from March
1987 until it was acquired by AmSurg in 1992.
DAVID L. MANNING has served as Senior Vice President of Development and
Assistant Secretary of AmSurg since April 1992. Mr. Manning co-founded and was a
principal of PDA from March 1987 until its acquisition by AmSurg in 1992.
THOMAS G. CIGARRAN has served as Chairman of the Board of AmSurg since
1992. Mr. Cigarran served as Chief Executive Officer of AmSurg from January 1993
until the Distribution, and President from January 1993 to July 1996. Following
the Distribution, Mr. Cigarran will serve as an advisor to AmSurg. Mr. Cigarran
is a co-founder of AHC and has served as Chairman of the Board, President and
Chief Executive Officer thereof since 1988. Mr. Cigarran serves as a member of
the Board of Directors of ClinTrials Research, Inc.
JAMES A. DEAL, a director of AmSurg since 1992, has served as Executive
Vice President of AHC since May 1991 and as President of DTCA since 1985.
STEVEN I. GERINGER, a director of AmSurg since March 1997, was President
and Chief Executive Officer of PCS Health Systems, Inc., a unit of Eli Lilly &
Company ("PCS"), and one of the nation's largest providers of managed
pharmaceutical services to managed care organizations and health insurers, from
June 1995 until June 1996, and President and Chief Operating Officer of PCS from
May 1993 through May 1995. Prior to joining PCS, Mr. Geringer was the founder,
Chairman and Chief Executive Officer of Clinical Pharmaceuticals, Inc. of
Nashville, Tennessee.
DEBORA A. GUTHRIE, a director of AmSurg since November 1996, has been
President and Chief Executive Officer of the general partner of Capitol Health
Partners, L.P., a Washington, D.C.-based venture fund specializing in healthcare
industries since October 1995. Prior to forming Capitol Health Partners in 1995,
Ms. Guthrie was President and Chief Executive Officer of Guthrie Capital
Corporation, a venture management company providing financial advisory and
investment banking services to healthcare companies in the Mid-Atlantic and
Southeastern United States.
HENRY D. HERR, a director of AmSurg since 1992, has served as Executive
Vice President of Finance and Administration and Chief Financial Officer of AHC
since 1986. Following the Distribution, Mr. Herr will serve as an advisor to
AmSurg. Mr. Herr served as Chief Financial Officer of AmSurg from April 1992
until September 1994, and as Secretary from April 1992 until the effective date
of the Distribution.
BERGEIN F. OVERHOLT, M.D., a director of AmSurg since November 1992, is
President of Gastrointestinal Associates, P.C. a gastrointestinal specialty
group, and a partner in The Endoscopy Center, Knoxville, Tennessee, which owns a
limited partnership interest in an ambulatory surgery center that is
majority-owned and managed by AmSurg. Dr. Overholt also serves as Chairman,
Laser/Hyperthermia Department, Thompson Cancer Survival Center in Knoxville,
Tennessee and is an Associate Professor of Clinic Medicine, University of
Tennessee in Knoxville, Tennessee.
There are no family relationships, by blood, marriage or adoption, between
or among any of the individuals listed above as directors or executive officers.
Ms. Guthrie, an affiliate of Capitol Health Partners, L.P., was appointed to the
AmSurg Board of Directors in connection with the preferred stock equity
financing in November 1996, in which Capitol Health Partners, L.P. purchased
18.2% of the Series A Preferred Stock and Series B Preferred Stock. See
"DESCRIPTION OF CAPITAL STOCK." Pursuant to the Distribution Agreement, AHC
agreed to the nomination of each of the persons who will be members of the Board
of Directors and agreed to vote for such persons at the next meeting of AmSurg
stockholders occurring prior to the Distribution.
COMMITTEES OF THE BOARD OF DIRECTORS
In order to facilitate the various functions of the AmSurg Board of
Directors following the Distribution, the Board intends to create several
standing committees, including a Nominating Committee, a Compensation Committee,
and an Audit Committee.
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The members of the Nominating Committee will be Ken P. McDonald and Thomas
G. Cigarran. The principal function of the Nominating Committee will be to
recommend to the Board of Directors nominees for election to the Board.
The members of the Compensation Committee will be Bergein F. Overholt,
M.D., Debora A. Guthrie and Steven I. Geringer. No member of this committee will
be a former or current officer or employee of AmSurg. The functions of the
Compensation Committee include recommending to the full Board of Directors the
compensation arrangements for senior management and directors and the adoption
of compensation and benefit plans in which officers and directors are eligible
to participate, and granting options or other benefits under (and otherwise
administering) certain of such plans.
The members of the Audit Committee will be Debora A. Guthrie, James A. Deal
and Henry D. Herr. The principal functions of the Audit Committee will be to
recommend to the full Board of Directors the engagement or discharge of AmSurg's
independent auditors; to review the nature and scope of the audit, including but
not limited to a determination of the effectiveness of the audit effort through
meetings held at least annually with the independent and internal auditors of
AmSurg (collectively, the "auditors") and a determination through discussion
with the auditors that no unreasonable restrictions were placed on the scope or
implementation of their examinations; to review the qualifications and
performance of the auditors, including but not limited to review of the plans
and results of the auditing engagement and each professional service provided by
the independent auditors; to review the financial organization and accounting
practices of AmSurg, including but not limited to review of AmSurg's financial
statements with the auditors and inquiry into the effectiveness of AmSurg's
financial and accounting functions and internal controls through discussions
with the auditors and the officers of AmSurg; and to recommend to the full Board
of Directors policies concerning avoidance of employee conflicts of interest and
to review the administration of such policies.
COMPENSATION OF DIRECTORS
Members of the Board of Directors of AmSurg, other than those who are
employees of AmSurg, receive an annual fee of $10,000, adjusted annually to
reflect changes in the Consumer Price Index, U.S. All City Average Report, of
the U.S. Bureau of Labor Statistics (the "CPI") for their services as directors
and as members of any committees of the Board of Directors on which they serve.
In addition, each non-employee director is reimbursed for out-of-pocket expenses
incurred in attending Board of Directors and committee meetings. Non-employee
directors also are eligible to receive restricted stock awards pursuant to the
1997 Stock Incentive Plan. Under this plan, each non-employee director will
receive an award of restricted stock of a number of shares of Class A Common
Stock equal in value to $10,000, effective upon the Distribution. Thereafter,
each non-employee director who is elected or reelected to the Board of Directors
or who otherwise continues as a director shall automatically, on the date of the
annual meeting of stockholders of AmSurg, be granted and receive an award of
restricted stock of a number of shares of AmSurg Class A Common Stock equal in
value to $10,000, adjusted annually for changes in the CPI. Members of the Board
of Directors of AmSurg who are employees of AmSurg will not receive any
additional compensation for their services as directors or as members of
committees. See "MANAGEMENT OF AMSURG -- Stock Incentive Plans -- 1997 Stock
Incentive Plan."
DIRECTOR AND OFFICER INDEMNIFICATION AND LIMITATION OF LIABILITY
The Tennessee Business Corporation Act (the "TBCA") provides that a
corporation may indemnify any of its directors and officers against liability
incurred in connection with a proceeding if: (a) such person acted in good
faith; (b) in the case of conduct in an official capacity with the corporation,
he reasonably believed such conduct was in the corporation's best interests; (c)
in all other cases, he reasonably believed that his conduct was at least not
opposed to the best interests of the corporation; and (d) in connection with any
criminal proceeding, such person had no reasonable cause to believe his conduct
was unlawful. In actions brought by or in the right of the corporation, however,
the TBCA provides that no indemnification may be made if the director or officer
was adjudged to be liable to the corporation. The TBCA also provides that in
connection with any proceeding charging improper personal benefit to an officer
or director, no indemnification may be made if such officer or director is
adjudged liable on the basis that such personal benefit was
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<PAGE> 60
improperly received. Notwithstanding the foregoing, the TBCA provides that a
court of competent jurisdiction, unless the corporation's charter provides
otherwise, upon application, may order that an officer or director be
indemnified for reasonable expenses if, in consideration of all relevant
circumstances, the court determines that such individual is fairly and
reasonably entitled to indemnification, notwithstanding the fact that: (a) such
officer or director was adjudged liable to the corporation in a proceeding by or
in the right of the corporation; (b) such officer or director was adjudged
liable on the basis that personal benefit was improperly received by him; or (c)
such officer or director breached his duty of care to the corporation.
AmSurg's Charter and Bylaws require AmSurg to indemnify its directors and
officers to the fullest extent permitted by law with respect to all liability
and loss suffered and expense reasonably incurred by such person in any action,
suit or proceeding in which such person was or is made, or threatened to be
made, a party, or is otherwise involved by reason of the fact that such person
is or was a director or officer of AmSurg.
In addition, AmSurg's Charter provides that AmSurg's directors shall not be
personally liable to AmSurg or its stockholders for monetary damages for breach
of any fiduciary duty as a director of AmSurg except to the extent such
exemption from liability or limitation thereof is not permitted under the TBCA.
Under the TBCA, this provision does not relieve AmSurg's directors from personal
liability to AmSurg or its stockholders for monetary damages for breach of
fiduciary duty as a director, to the extent such liability arises from a
judgment or other final adjudication establishing: (a) any breach of the
director's duty of loyalty; (b) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; or (c) any
unlawful distributions. Nor does this provision eliminate the duty of care and,
in appropriate circumstances, equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Tennessee law. Finally,
this provision does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental laws.
AmSurg has entered into indemnification agreements with all of its
directors and executive officers providing that it will indemnify those persons
to the fullest extent permitted by law against claims arising out of their
actions as officers or directors of AmSurg and will advance expenses of
defending claims against them. AmSurg believes that indemnification under these
agreements covers at least negligence and gross negligence by the directors and
officers, and requires AmSurg to advance litigation expenses in the case of
actions, including stockholder derivative actions, against an undertaking by the
officer or director to repay any advances if it is ultimately determined that
the officer or director is not entitled to indemnification.
AmSurg believes that its Charter and Bylaw provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.
At present, there is no litigation or proceeding involving a director or
officer of AmSurg as to which indemnification is being sought, nor is AmSurg
aware of any threatened litigation that may result in claims for indemnification
by any officer or director.
Pursuant to the Management Agreement, AmSurg will indemnify and hold AHC,
its directors, officers, employees and agents and any person who controls AHC
within the meaning of the Securities Act in the absence of gross negligence,
harmless from and against any and all liabilities, claims or damages (including
the cost of investigating any claim and reasonable attorneys' fees and
disbursements) in connection with any services performed by AHC pursuant to the
Management Agreement or any transactions or conduct in connection therewith. See
"THE DISTRIBUTION -- The Management Agreement."
Following the Distribution, AmSurg will have in effect an executive
liability insurance policy which will provide coverage for its directors and
officers. See "THE DISTRIBUTION -- Indemnification." Under this policy, the
insurer will agree to pay, subject to certain exclusions (including violations
of securities laws), for any claim made against a director or officer of AmSurg
for a wrongful act by such director or officer, but only if and to the extent
such director or officer becomes legally obligated to pay such claim or AmSurg
is required to indemnify the director or officer for such claim.
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EXECUTIVE COMPENSATION
The following table provides information as to annual, long-term or other
compensation during fiscal years 1996, 1995 and 1994 for the person who will be,
effective as of the Distribution, the Chief Executive Officer and the persons
who, at the end of fiscal 1996, were the other four most highly compensated
executive officers of AmSurg (collectively, the "Named Executive Officers").
Prior to the Distribution, Thomas G. Cigarran served as Chief Executive Officer
of AmSurg but received no compensation from or with respect to AmSurg.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------
ANNUAL COMPENSATION AWARDS/SECURITIES
---------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
--------------------------- ---- ---------- --------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Ken P. McDonald....................... 1996 $139,050 $ 41,905 68,333 $4,000(1)
President and Chief Executive
Officer 1995 $125,050 $ 25,386 -- $4,000
1994 $ 98,208 $ 9,000 23,333 $4,000
Claire M. Gulmi....................... 1996 $100,000 $ 28,292 6,667 --
Senior Vice President and Chief 1995 $ 86,292 $ 22,652 -- --
Financial Officer(2) 1994 $ 25,000 $ 4,833 16,667 --
Royce D. Harrell...................... 1996 $130,788 $ 38,471 8,333 --
Senior Vice President, 1995 $124,538 $ 36,708 -- --
Operations 1994 $118,500 $ 19,185 6,667 $6,352
Rodney H. Lunn........................ 1996 $132,108 $ 29,169 5,000 $4,320(3)
Senior Vice President, Center 1995 $125,818 $ 18,205 -- $4,320
Development 1994 $119,831 $ 6,000 3,333 $4,320
David L. Manning...................... 1996 $132,108 $106,460 8,333 $4,320(3)
Senior Vice President, 1995 $125,818 $ 26,384 -- $4,320
Development 1994 $119,831 $ 6,000 5,000 $4,320
</TABLE>
- ---------------
(1) Forgiveness of debt.
(2) Ms. Gulmi became Senior Vice President in March 1997.
(3) Automobile allowance.
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<PAGE> 62
OPTION/STOCK APPRECIATION RIGHTS GRANTS IN LAST FISCAL YEAR
The following table provides information as to options granted to the Named
Executive Officers during fiscal 1996. No Stock Appreciation Rights ("SARs")
were awarded in fiscal 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBERS OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- -------------- -------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ken P. McDonald.............. 11,667 5.08% $4.68 01/08/06 34,338 87,018
58,333 25.39 5.37 06/21/06 197,001 499,240
Claire M. Gulmi.............. 6,667 2.90 4.68 01/08/06 19,622 49,725
Royce D. Harrell............. 8,333 3.63 4.68 01/08/06 24,527 62,156
Rodney H. Lunn............... 5,000 2.18 4.68 01/08/06 14,716 37,294
David L. Manning............. 8,333 3.63 4.68 01/08/06 24,527 62,156
</TABLE>
- ---------------
(1) All options were granted on January 8, 1996 except for the grant of 58,333
options to Mr. McDonald on June 21, 1996. All options vest 25% annually
over four years.
The following table provides information as to options exercised by the
Named Executive Officers during fiscal 1996. None of the Named Executive
Officers has exercised separate SARs. In addition, this table includes the
number of shares covered by both exercisable and unexercisable stock options as
of the record date. Also reported are the values for "in-the-money" options,
which represent the positive spread between the exercise price of any existing
stock options and the year-end price.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
NUMBER OF UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)($)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ken P. McDonald........... -- -- 25,417 86,250 66,750 62,500
Claire M. Gulmi........... -- -- 8,333 15,000 19,550 25,550
Royce D. Harrell.......... -- -- 79,625 14,875 244,910 23,470
Rodney H. Lunn............ -- -- 178,667 8,333 847,710 12,650
David L. Manning.......... -- -- 179,500 12,500 849,585 17,525
</TABLE>
- ---------------
(1) Based on an assumed value of $5.58 at year end, which represents the value
determined by the AmSurg Board of Directors for purposes of acquisition
transactions and option grants based on an independent valuation.
EMPLOYMENT AGREEMENTS
AmSurg has employment agreements with each of Mr. McDonald, Ms. Gulmi, Mr.
Harrell, Mr. Lunn and Mr. Manning (the "Employment Agreements"). The Employment
Agreements have an initial one-year term, but contain a provision that
automatically extends the term for an additional one year on the first and each
successive anniversary date of the Employment Agreements until Messrs. McDonald,
Harrell, Lunn and Manning and Ms. Gulmi, respectively, reach age 65 after which
term shall not be automatically extended. The automatic renewal provision can be
canceled by AmSurg prior to each anniversary date of the Employment Agreements.
The Employment Agreements provide that if AmSurg elects not to extend the
executive's employment, the executive will be considered to have been terminated
without cause and will receive his or her base salary, reduced by any salary
earned by the executive from another employer, plus certain benefits for a
period of one year. The executive will also receive the same compensation as
provided above if the executive terminates his or her employment with AmSurg
under certain circumstances at any time within twelve
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<PAGE> 63
months following a Change In Control (as defined in the Employment Agreements).
The Employment Agreements also contain a restrictive covenant pursuant to which
each executive has agreed not to compete with AmSurg during the time AmSurg is
obligated to compensate him or her pursuant to the Employment Agreement.
STOCK INCENTIVE PLANS
1992 Stock Option Plan
AmSurg approved the 1992 Stock Option Plan (the "1992 Plan") in April 1992
to provide key employees with an additional incentive to contribute to the best
interests of AmSurg. The 1992 Plan may be administered by the Board of Directors
or a committee appointed by the Board. The Board or such designated committee
has the power, among other things, (i) to determine which of the eligible
persons shall be granted options to purchase shares of Class A Common Stock,
(ii) to determine whether such options shall be incentive or non-statutory stock
options, (iii) to determine the number of shares for which each option shall be
granted, (iv) to construe, interpret and administer the 1992 Plan, (v) to
prescribe the terms and provisions of each option granted, (vi) to amend the
1992 Plan, and (vii) generally, to exercise such powers and to perform such acts
as are deemed necessary or expedient to promote the best interests of AmSurg.
There are 927,333 shares of Class A Common Stock reserved for issuance upon
exercise of options granted under the 1992 Plan. The price per share under each
option granted shall be determined by the Board or the committee, but in the
case of incentive stock options, shall be no less than 100% of the fair market
value of the Class A Common Stock on the date of grant, and, in the case of
non-statutory options, shall in no event be less than 85% of the fair market
value of the Class A Common Stock on the date of grant.
The option exercise period shall be determined by the Board or committee;
however, incentive stock options shall not be exercisable more than 10 years
from the date of grant (and five years for any individual who, at the time of
grant, owns more than 10% of the total combined voting power of all classes of
stock of AmSurg). No option shall be transferable otherwise than by will or the
laws of descent and distribution and an option is exercisable during the
lifetime of the optionee only by such optionee.
As of the date hereof, incentive stock options for the purchase of 344,000
shares and non-qualified stock options for the purchase of 562,783 shares of
Class A Common Stock have been granted to certain management employees. The
options granted will vest in four equal annual installments. The options are
subject to the terms of the 1992 Plan, will expire 10 years from the date of
grant, and are exercisable at an average exercise price of approximately $2.58
per share. In the event of certain fundamental changes to AmSurg (including
liquidation, dissolution, merger, reorganization or sale of all or substantially
all of the assets of AmSurg), the stock options shall immediately vest and be
fully exercisable by the optionees. If shares subject to an option or stock
appreciation right under the 1992 Plan cease to be subject to such option or
stock appreciation right without the exercise of such option or stock
appreciation right, or if shares of restricted stock or shares underlying other
stock-based awards under the 1992 Plan are forfeited or otherwise terminate
without a payment being made in the form of Class A Common Stock and without the
payment of any dividends thereon, such shares will again be available for future
distribution under the 1992 Plan.
1997 Stock Incentive Plan
The AmSurg Board of Directors has adopted a 1997 Stock Incentive Plan (the
"1997 Incentive Plan") pursuant to which AmSurg may grant options and other
rights with respect to the AmSurg Common Stock to officers, non-employee
directors of AmSurg and key employees following the Distribution. On February 7,
1997 and March 7, 1997, the Board of Directors approved grants of options for
the purchase of 117,166 shares of Class A Common Stock to various employees
pursuant to the 1997 Incentive Plan for a per share exercise price of $5.91. The
1997 Incentive Plan and any stock-based awards made by AmSurg pursuant to the
1997 Incentive Plan are subject to AmSurg stockholder approval at the special
meeting of stockholders scheduled to be held on May , 1997.
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<PAGE> 64
A total of 650,000 shares of Class A Common Stock will be reserved and
available under the 1997 Incentive Plan. An "Outside Director" is a member of
the Board of Directors who is not an officer or employee of AmSurg, its
subsidiaries or affiliates. A director serving as medical director of AmSurg but
not as an employee of AmSurg will be treated as an Outside Director for purposes
of the 1997 Incentive Plan. Following the Distribution, the number of Outside
Directors will be six. The aggregate number of shares of Class A Common Stock
that may be granted to any individual pursuant to any award under the 1997
Incentive Plan is up to 200,000 in any one year. Section 162(m) of the Code
requires the 1997 Incentive Plan to provide a maximum number of shares that may
be granted to any individual in any one year. The maximum amounts provided in
the 1997 Incentive Plan do not reflect the size of awards expected to be made by
AmSurg. If shares subject to an option or stock appreciation right under the
1997 Incentive Plan cease to be subject to such option or stock appreciation
right without the exercise of such option or stock appreciation right, or if
shares of restricted stock or shares underlying other stock-based awards under
the 1997 Incentive Plan are forfeited or otherwise terminate without a payment
being made in the form of Class A Common Stock and without the payment of any
dividends thereon, such shares will again be available for future distribution
under the 1997 Incentive Plan.
In the case of a stock split, stock dividend, reclassification,
recapitalization, merger, reorganization, extraordinary cash dividend, or other
changes in AmSurg's capital structure affecting the Class A Common Stock,
appropriate adjustments or other substitutions will be made in the number of
shares reserved under the 1997 Incentive Plan, the number of shares that may be
issued to any individual and the number of shares and the exercise price of
options and other awards then outstanding under the 1997 Incentive Plan.
The 1997 Incentive Plan will be administered by a committee (the "Plan
Committee") of no less than two non-employee directors appointed to serve on
such committee by the Board. It is expected that such Plan Committee will be the
Compensation Committee.
Awards under the 1997 Incentive Plan may be made to key employees,
including officers, of AmSurg and any subsidiaries or affiliates of AmSurg, to
advisors to AmSurg, its subsidiaries or affiliates and non-employee directors of
AmSurg. The approximate number of employees who would potentially be eligible
for awards under the 1997 Incentive Plan is 33, based on the number of employees
of AmSurg at January 31, 1997, but actual awards will be made only at the
discretion of the Plan Committee.
The Plan Committee will have the authority to grant the following type of
awards under the 1997 Incentive Plan: (1) stock options; (2) stock appreciation
rights; (3) restricted stock and (4) other stock-based awards; provided,
however, that the power to grant and establish the terms and conditions of
awards to Outside Directors under the 1997 Incentive Plan other than pursuant to
Section 9 of the 1997 Incentive Plan, as discussed below, shall be reserved to
the Board of Directors. The decisions of the Plan Committee are subject to
ratification by the full Board of Directors of AmSurg.
1. Stock Options. Incentive stock options ("ISOs") and non-qualified stock
options may be granted for such number of shares as the Plan Committee will
determine and may be granted alone, in conjunction with, or in tandem with,
other awards under the 1997 Incentive Plan, but subject to the per person
limitation on awards.
A stock option will be exercisable at such times and subject to such terms
and conditions as the Plan Committee may determine and over a term to be
determined by the Plan Committee, which term will be no more than 10 years after
the date of grant, or no more than five years in the case of an ISO awarded to
certain 10% stockholders. The option price for any ISO will not be less than
100% (110% in the case of certain 10% stockholders) of the fair market value of
the Class A Common Stock as of the date of grant and for any non-qualified stock
option will be not less than 50% of the fair market value as of the date of
grant. Payment of the option price may be in cash, or, in the case of a
non-qualified stock option, as determined by the Plan Committee, in shares of
Class A Common Stock having a fair market value equal to the option price.
Upon termination of an optionholder's employment for cause, such employee's
stock options will terminate. If an optionholder's employment is involuntarily
terminated without cause, stock options will be exercisable for three months
following termination or until the end of the option period, whichever is
shorter.
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<PAGE> 65
On the disability of an employee, stock options will be exercisable within the
lesser of the remainder of the option period or, in the case of a non-qualified
stock option, three years and, in the case of an ISO, one year from the date of
disability. Upon the retirement of an employee, stock options will be
exercisable within the lesser of the remainder of the option period or, in the
case of a non-qualified stock option, three years and, in the case of an ISO,
three months from the date of retirement. Upon the death of an employee, stock
options will be exercisable by the deceased employee's representative within the
lesser of the remainder of the option period or one year from the date of the
employee's death. Unless otherwise determined by the Plan Committee, only
options which are exercisable on the date of termination, death, disability, or
retirement may be subsequently exercised.
2. SARs. SARs may be granted alone or in conjunction with all or part of a
stock option. Once an SAR has been exercised, the related portion of the stock
option, if any, underlying the SAR will terminate. Upon the exercise of an SAR,
the Plan Committee will pay to the employee in cash, Class A Common Stock or a
combination thereof (the method of payment to be at the discretion of the Plan
Committee), an amount of money equal to the excess between the fair market value
of the stock on the exercise date and the SAR exercise price, multiplied by the
number of SARs being exercised. An SAR granted in tandem with all or part of a
stock option will be exercisable only when the underlying option is exercisable,
subject to any conditions specified by the Plan Committee at the time of grant.
3. Restricted Stock. Restricted stock may be granted alone, in conjunction
with, or in tandem with, other awards under the 1997 Incentive Plan and may be
conditioned upon the attainment of specific performance goals or such other
factors as the Plan Committee may determine. Upon the termination of the
employee's employment for any reason during the restriction period, all
restricted stock either will vest or be subject to forfeiture, in accordance
with the terms and conditions of the initial award. During the restriction
period, the employee will have the right to vote the restricted stock and to
receive any cash dividends. At the time of award, the Plan Committee may require
the deferral and reinvestment of any cash dividends in the form of additional
shares of restricted stock. Stock dividends will be treated as additional shares
of restricted stock and will be subject to the same terms and conditions as the
initial grant.
4. Other Stock-Based Awards. The Plan Committee may also grant other types
of awards that are valued, in whole or in part, by reference to or otherwise
based on the Class A Common Stock. These awards may be granted alone, in
addition to, or in tandem with, stock options, SARs and restricted stock. Such
awards will be made upon terms and conditions as the Plan Committee may in its
discretion provide.
5. Awards to Outside Directors. Pursuant to Section 9 of the 1997
Incentive Plan, effective as of the Distribution each Outside Director will
receive a grant of a number of shares of Class A Common Stock having an
aggregate fair market value on such date equal in value to $10,000, adjusted for
changes in the CPI, which shares shall be restricted as provided in Section 9 of
the 1997 Incentive Plan (the "Outside Director Restricted Stock"). On the date
of each annual meeting of stockholders of AmSurg occurring after the
Distribution, each Outside Director will receive an automatic grant of a number
of shares of Outside Director Restricted Stock having an aggregate fair market
value on such date equal to $10,000 adjusted annually for charges in the CPI.
Each grant of Outside Director Restricted Stock shall vest in increments of
one-third of the shares of Class A Common Stock subject to such grant with the
first one-third increment vesting on the date of grant, the second one-third
increment vesting on the first anniversary of the date of grant and the final
one-third increment vesting on the second anniversary of the date of grant, if
the grantee is still a member of the Board on each of such dates. Until the
earlier of (i) five years from the date of grant and (ii) the date on which the
Outside Director ceases to serve as a director of AmSurg, no Outside Director
Restricted Stock may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, otherwise than by will or by the laws of descent and
distribution. Upon termination of an Outside Director's service as a member of
the Board for any reason other than death, disability or retirement, all shares
of Outside Director Restricted Stock not theretofore vested will be forfeited.
Upon termination of an Outside Director's service as a member of the Board due
to death, disability or retirement, all shares of Outside Director Restricted
Stock will immediately vest.
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<PAGE> 66
Federal Income Tax Aspects of the 1997 Incentive Plan. The following is a
brief summary of the federal income tax aspects of awards made under the 1997
Incentive Plan based upon the federal income tax laws in effect on the date
hereof. This summary is not intended to be exhaustive, and does not describe
state or local tax consequences.
1. Incentive Stock Options. No taxable income is realized by the
participant upon the grant or exercise of an ISO. If Class A Common Stock is
issued to a participant pursuant to the exercise of an ISO, and if no
disqualifying disposition of the shares is made by the participant within two
years of the date of grant or within one year after the transfer of the shares
to the participant, then: (a) upon the sale of the shares, any amount realized
in excess of the option price will be taxed to the participant as a long-term
capital gain, and any loss sustained will be a capital loss, and (b) no
deduction will be allowed to AmSurg for federal income tax purposes. The
exercise of an ISO will give rise to an item of tax preference that may result
in an alternative minimum tax liability for the participant unless the
participant makes a disqualifying disposition of the shares received upon
exercise.
If Class A Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of the holding periods described above, then
generally: (a) the participant will realize ordinary income in the year of
disposition in an amount equal to the excess, if any, of the fair market value
of the shares at exercise (or, if less, the amount realized on the disposition
of the shares) over the option price paid for such shares, and (b) AmSurg will
be entitled to deduct any such recognized amount. Any further gain or loss
realized by the participant will be taxed as short-term or long-term capital
gain or loss, as the case may be, and will not result in any deduction by
AmSurg.
Subject to certain exceptions for disability or death, if an ISO is
exercised more than three months following the termination of the participant's
employment, the option will generally be taxed as a non-qualified stock option.
2. Non-Qualified Stock Options. Except as noted below, with respect to
non-qualified stock options: (a) no income is realized by the participant at the
time the option is granted; (b) generally upon exercise of the option, the
participant realizes ordinary income in an amount equal to the difference
between the option price paid for the shares and the fair market value of the
shares on the date of exercise and AmSurg will be entitled to a tax deduction in
the same amount; and (c) at disposition, any appreciation (or depreciation)
after date of exercise is treated either as short-term or long-term capital gain
or loss, depending upon the length of time that the participant has held the
shares. See "Restricted Stock" for tax rules applicable where the spread value
of an option is settled in an award of restricted stock.
3. SARs. No income will be realized by a participant in connection with
the grant of an SAR. When the SAR is exercised, the participant will generally
be required to include as taxable ordinary income in the year of exercise an
amount equal to the amount of cash and the fair market value of any shares
received. AmSurg will be entitled to a deduction at the time and in the amount
included in the participant's income by reason of the exercise. If the
participant receives Class A Common Stock upon exercise of an SAR, the post-
exercise appreciation or depreciation will be treated in the same manner
discussed above under "Non-Qualified Stock Options."
4. Restricted Stock. A participant receiving restricted stock generally
will recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
the consideration paid for the stock. However, a participant may elect, under
Section 83(b) of the Code within 30 days of the grant of the stock, to recognize
taxable ordinary income on the date of grant equal to the excess of the fair
market value of the shares of restricted stock (determined without regard to the
restrictions) over the purchase price of the restricted stock. Thereafter, if
the shares are forfeited, the participant will be entitled to a deduction,
refund, or loss, for tax purposes only, in an amount equal to the purchase price
of the forfeited shares regardless of whether he made a Section 83(b) election.
With respect to the sale of shares after the forfeiture period has expired, the
holding period to determine whether the participant has long-term or short-term
capital gain or loss generally begins when the restriction period expires and
the tax basis for such shares will generally be based on the fair market value
of such shares on such date. However, if the participant makes an election under
Section 83(b), the holding period will commence on the
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<PAGE> 67
date of grant, the tax basis will be equal to the fair market value of shares on
such date (determined without regard to restrictions), and AmSurg generally will
be entitled to a deduction equal to the amount that is taxable as ordinary
income to the participant in the year that such income is taxable.
5. Dividends and Dividend Equivalents. Dividends paid on restricted stock
generally will be treated as compensation that is taxable as ordinary income to
the participant, and will be deductible by AmSurg. If, however, the participant
makes a Section 83(b) election, the dividends will be taxable as ordinary income
to the participant but will not be deductible by AmSurg.
6. Other Stock-Based Awards. The federal income tax treatment of other
stock-based awards will depend on the nature of any such award and the
restrictions applicable to such award. Such an award may, depending on the
conditions applicable to the award, be taxable as an option, an award of
restricted stock, or in a manner not described herein.
Section 162(m) Provisions. Section 162(m) of the Code imposes a limitation
on the deductibility of certain compensation paid to the chief executive officer
and certain other executive officers of publicly traded companies. Compensation
paid to these officers in excess of $1,000,000 cannot be claimed as a tax
deduction by such companies unless such compensation qualifies for an exemption
as performance-based compensation under Section 162(m) of the Code. It is
anticipated that compensation in respect of stock options and SARs granted under
the 1997 Incentive Plan will qualify for an exemption as performance-based
compensation under Section 162(m) of the Code, if the exercise price per share
for such options and SARs is at least equal to the fair market value per share
of Class A Common Stock on the date of grant. Other awards (if any) granted
under the 1997 Incentive Plan are not expected to qualify for an exemption as
performance-based compensation.
Other Provisions of the 1997 Incentive Plan. Options and other rights that
may be granted under the 1997 Incentive Plan following the Distribution will
vest and become immediately exercisable (to the extent not theretofore vested
and exercisable and the restrictions and forfeiture provisions applicable to
restricted stock and other stock-based awards will lapse) if:
a. any person or entity (including a "group" as defined in Section
13(d) (3) of the Exchange Act), other than AmSurg or a wholly owned
subsidiary of AmSurg or an employee benefit plan of AmSurg or any of its
subsidiaries, becomes the beneficial owner of AmSurg securities having 35%
or more of the combined voting power of all AmSurg securities that may be
cast in the election of directors of AmSurg;
b. as a result of or in connection with a cash tender or exchange
offer, merger or other business combination, sale of assets or contested
election, or any combination of the foregoing transactions, less than a
majority of the combined voting power of the then outstanding securities of
AmSurg or any successor entity entitled to vote generally in the election
of directors of AmSurg or any such successor are held in the aggregate by
holders of AmSurg securities entitled to vote generally in the election of
directors of AmSurg immediately prior to such transaction;
c. during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors cease for any
reason to constitute the majority thereof, unless the election or
nomination for election of such individuals was approved by a vote of at
least two-thirds of the directors then still in office who were directors
at the beginning of such period;
d. the Plan Committee determines that a potential change in control
has occurred as a result of either (i) shareholder approval of an agreement
that would result in one of the events described above or (ii) the
acquisition of beneficial ownership by any person, entity or group (other
than AmSurg, any of its subsidiaries or any AmSurg employee benefit plan)
of AmSurg securities representing 5% or more of the combined voting power
of the outstanding AmSurg securities;
e. in addition to any other restrictions on transfer that may be
applicable under the terms of the 1997 Incentive Plan or the applicable
award agreement, no stock option, SAR, restricted stock award, other
stock-based award or Outside Director Restricted Stock award or other right
issued under the 1997 Incentive Plan is transferable by the participant
without the prior written consent of the Plan Committee,
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<PAGE> 68
or, in the case of an Outside Director, the Board, other than (i) transfers
by a participant to a member of his or her Immediate Family (as that term
is defined in the 1997 Incentive Plan) or a trust for the benefit of the
participant or a member of his or her Immediate Family or (ii) transfers by
will or by the laws of descent and distribution (the designation of a
beneficiary will not constitute a transfer); or
f. the Plan Committee may, at or after grant, condition the receipt of
any payment in respect of any award or the transfer of any shares subject
to an award on the satisfaction of a six-month holding period, if such
holding period is required for compliance with Section 16 under the
Exchange Act.
Following the occurrence of any event that would result in the acceleration
of vesting and exercisability as described above, the holders of stock options
and other rights (to the extent that they have been held for any required
holding period pursuant to Section 16 of the Exchange Act in the case of options
and other rights held by executive officers and directors or other persons
subject to such Section) will, unless otherwise determined by the Plan
Committee, receive cash equal to the difference between the highest price paid
per share of Class A Common Stock in any transaction during the 60 days prior to
the change in control or potential change in control event and the exercise
price of the option or other right.
The 1997 Incentive Plan may be amended, altered or discontinued by the
Board of Directors of AmSurg to the fullest extent permitted by the Exchange Act
and the rules and regulations promulgated thereunder; provided, however, that no
amendment, alteration or discontinuation may be made which would (a) impair the
rights of an optionee or participant without the optionee's or participant's
consent or (b) require shareholder approval pursuant to any other applicable law
or regulation. The Board of Directors may not, without the approval of the
stockholders of AmSurg, make any amendment to or alteration of the 1997
Incentive Plan which would (a) except as a result of the provisions of Section
3(c) of the 1997 Incentive Plan, increase the maximum number of shares that may
be issued under the 1997 Incentive Plan or increase the Section 162(m) Maximum
(as defined in the 1997 Incentive Plan), (b) change the provisions governing
incentive stock options except as required or permitted under the provisions
governing incentive stock options under the Code, or (c) make any change for
which applicable law or regulatory authority would require stockholder approval
or for which stockholder approval would be required to secure full deductibility
of compensation received under the 1997 Incentive Plan under Section 162(m) of
the Code.
The 1997 Incentive Plan will expire on the tenth anniversary of its
effective date.
Other Stock Options
AmSurg also has granted non-qualified stock options for the purchase of
18,000 shares of Class A Common Stock to certain non-employee directors of
AmSurg and to AmSurg's Medical Director and Associate Medical Director. The
options granted will vest in four equal annual installments, will expire 10
years from the date of grant, and are exercisable at an average exercise price
of approximately $4.62 per share. In the event of certain fundamental changes to
AmSurg (including liquidation, dissolution, merger, reorganization or sale of
all or substantially all of the assets of AmSurg), the stock options shall
immediately vest and be fully exercisable by the optionees.
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<PAGE> 69
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENT
On the Distribution Date, AmSurg and AHC will enter into the Management
Agreement pursuant to which AHC will provide certain financial and accounting
services to AmSurg and its subsidiaries on a transitional basis, with the intent
that AmSurg is to acquire the personnel, systems and expertise necessary to
become self-sufficient in the provision of these services during the period
beginning on the date of the Management Agreement and ending one year later (or
earlier if so elected by AmSurg). For a detailed summary of the Management
Agreement see "THE DISTRIBUTION -- The Management Agreement." The terms of the
Management Agreement were reviewed and approved by the Special Committee.
ADMINISTRATIVE SERVICES AGREEMENT
Until December 31, 1996, AmSurg and AHC were parties to a letter agreement
dated November 30, 1992 (the "1992 Letter Agreement"), pursuant to which Henry
D. Herr and Thomas G. Cigarran provided general supervision and business
management services to AmSurg, and AHC provided accounting, financial and
administrative services for the operations of AmSurg and each of the ambulatory
surgery centers managed by AmSurg. For these services, AmSurg paid AHC an annual
fee of approximately $100,000, plus $8,000 per year for administrative,
accounting and financial services relating to the AmSurg corporate operations
and $4,000 per year for services related to each ambulatory surgery center in
operation. Such fees were subject to adjustment as mutually agreed by the
parties, but such adjustment would not be less than a minimum increase equal to
the annual change in the CPI. The actual amounts paid by AmSurg to AHC under the
1992 Letter Agreement for the years ended December 31, 1994, 1995 and 1996 were
$151,846, $186,215 and $213,820, respectively. The annual fees paid to AHC were
not inclusive of costs associated with outside professional tax advisors or
independent accountants. By letter agreement dated January 1, 1997 (the "1997
Letter Agreement"), AHC and AmSurg agreed to continue, on a modified basis, the
administrative services arrangements provided under the 1992 Letter Agreement.
Under the 1997 Letter Agreement, AmSurg has agreed to pay AHC an annual fee of
$85,000 plus out of pocket expenses for services provided by Messrs. Cigarran
and Herr. The services provided by Messrs. Cigarran and Herr are the general
supervision of the business of AmSurg and the provision of advice and
consultation regarding the financial, accounting and administration aspects of
AmSurg's business. The new arrangement also provides that AHC will provide the
services it provided under the 1992 Letter Agreement to each AmSurg ambulatory
surgery center, physician practice and specialty physician network. The fixed
fee for such services is $4,166.67 per month plus $625 per month for each
ambulatory surgery center in operation and $1,250 per month for the corporate
office and each physician practice. The amount paid per month for the specialty
physician networks will be mutually agreed upon by AHC and AmSurg. The 1997
Letter Agreement shall terminate upon the earlier to occur of (i) the mutual
agreement of the parties; (ii) the date on which Class A Common Stock begins to
trade publicly; or (iii) December 31, 1997.
ADVISORY AGREEMENTS
On the Distribution Date, AmSurg and each of Thomas G. Cigarran and Henry
D. Herr will be subject to an Advisory Agreement (the "Advisory Agreements"),
pursuant to which Messrs. Cigarran and Herr will provide certain continuing
services to AmSurg for two years following the Distribution Date. Immediately
prior to the Distribution Date, Mr. Cigarran served as Chairman of the Board of
AmSurg, and Mr. Herr served as Vice President and Secretary of AmSurg. Pursuant
to the Advisory Agreements, Messrs. Cigarran and Herr will provide advisory
services to the senior management of AmSurg in the areas of strategy,
operations, management and organizational development. As compensation for these
services, AmSurg will pay compensation of $200,000 to Mr. Cigarran and $150,000
to Mr. Herr during the two-year term of the Advisory Agreements. The
compensation will be payable in shares of Class A Common Stock, which shares
will be issued as restricted stock pursuant to the terms of the 1997 Incentive
Plan. One-third of the shares to be paid as compensation will vest immediately,
one-third will vest upon the first anniversary of the Distribution and the
remaining one-third of the shares will vest on the second anniversary of the
Distribution.
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The Advisory Agreements provide that Messrs. Cigarran and Herr will not sell the
shares of AmSurg Common Stock received pursuant to the agreement until the
second anniversary of the Distribution, subject to certain limited exceptions.
The Advisory Agreements also contain certain non-compete and confidentiality
provisions. In addition, Messrs. Cigarran and Herr will be eligible to receive
compensation as Outside Directors. Messrs. Cigarran and Herr will also be
entitled to indemnification as provided in the Indemnification Agreement that
each will enter into with AmSurg on the Distribution Date. The terms of the
Advisory Agreements were reviewed and approved by the Special Committee.
LEASE ARRANGEMENT
Pursuant to a sublease dated June 9, 1996 between AHC and AmSurg (the
"Sublease"), AmSurg leases approximately 15,417 square feet of space from AHC in
Nashville, Tennessee where AmSurg's corporate headquarters are located. AHC
passes through the cost of such leased space to AmSurg, and AmSurg is required
to make an aggregate of $960,820 in rental payments to AHC over the term of the
Sublease which expires December 31, 1999.
OTHER ARRANGEMENTS
Bergein F. Overholt, M.D. is a director of AmSurg, and President and a 14%
owner of The Endoscopy Center. The Endoscopy Center is a limited partner and
AmSurg is the general partner and majority owner of The Endoscopy Center of
Knoxville, L.P., which owns and operates an ambulatory surgery center. The
aggregate amount of distributions made by The Endoscopy Center of Knoxville,
L.P. to The Endoscopy Center in 1996 was $1,028,000, of which Dr. Overholt
received his pro rata ownership percentage. On March 7, 1997, the AmSurg Board
of Directors approved the sale to Steven Geringer of 8,460 shares of AmSurg
common stock for an aggregate purchase price of $50,000 in connection with his
joining the AmSurg Board of Directors.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth the "beneficial ownership" (as that term is
defined in the rules of the SEC) of the capital stock of AmSurg immediately
after the Distribution of (a) each director and Named Executive Officer of
AmSurg, both individually and as a group, and (b) each other person expected to
be a "beneficial owner" of more than five percent (5%) of any class of capital
stock of AmSurg immediately after the Distribution, based in each case on
information available to AmSurg and AHC as to ownership of capital stock of
AmSurg and AHC on January 31, 1997. Except as otherwise indicated, AmSurg
stockholders after the Distribution listed in the table have (or will have) sole
voting and investment power with respect to the stock owned (or to be owned) by
them. Pursuant to the SEC's beneficial ownership rules, a person is treated as
the beneficial owner of shares that may be acquired under options that are
exercisable within 60 days as of January 31, 1997.
COMMON STOCK
<TABLE>
<CAPTION>
CLASS A PERCENT CLASS B(2) PERCENT
NAME COMMON STOCK(1) OF CLASS COMMON STOCK OF CLASS
---- --------------- -------- ------------ --------
<S> <C> <C> <C> <C>
Pioneering Management Corp.(3)............. 0 -- 542,271 9.8%
Waddell & Reed, Inc.(4).................... 0 -- 363,630 6.6
William C. Weaver, III(5).................. 490,269(6) 11.4% 18,344 *
Ken P. McDonald............................ 28,333(7) * 0 --
Claire M. Gulmi............................ 10,000(8) * 0 --
Royce D. Harrell........................... 81,708(9) 1.9 0 --
Rodney H. Lunn............................. 240,681(10) 5.6 69 *
David L. Manning........................... 233,583(11) 5.4 0 --
Thomas G. Cigarran(12)..................... 0 -- 424,566 7.7
James A. Deal.............................. 0 -- 208,901 3.8
Steven I. Geringer......................... 0 -- 0 --
Debora A. Guthrie.......................... 0 -- 1,035 *
Henry D. Herr(13).......................... 0 -- 263,659 4.8
Bergein F. Overholt, M.D................... 116,010(14) 2.7 396 *
All directors and executive officers as a
group (11 persons)....................... 710,315 16.6% 898,626 16.2%
</TABLE>
- ---------------
* Less than 1%.
(1) Includes shares issuable within 60 days of January 31, 1997 upon the
exercise of presently outstanding options.
(2) Does not include shares of Class B Common Stock which would be received in
the Distribution in respect of additional shares of AHC Common Stock that
would be issued if AHC options exercisable within 60 days of January 31,
1997 are exercised prior to the Distribution.
(3) The address of Pioneering Management Corp. is 60 State Street, Boston, MA
02109. Information with respect to stock ownership of Pioneering Management
Corp. is based upon the Schedule 13G dated January 3, 1996 filed with the
SEC with respect to ownership of AHC stock.
(4) The address of Waddell & Reed, Inc. is 6300 Lamar Avenue, P.O. Box 29217,
Shawnee Mission, KS 66201-9217. Information with respect to stock ownership
of Waddell & Reed, Inc. is based upon the Schedule 13G dated February 14,
1996 filed with the SEC with respect to ownership of AHC stock.
(5) The address of Mr. Weaver is 4406 Chickering Lane, Nashville, TN 37215.
(6) Includes 200,000 shares held in trust for the benefit of Mr. Weaver's three
children and currently exercisable options for the purchase of 1,250 shares
of Class A Common Stock.
(7) Represents currently exercisable options for the purchase of 28,333 shares
of Class A Common Stock.
(8) Represents currently exercisable options for the purchase of 10,000 shares
of Class A Common Stock.
(9) Represents currently exercisable options for the purchase of 81,708 shares
of Class A Common Stock.
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<PAGE> 72
(10) Includes 1,000 shares held in trust for the benefit of Mr. Lunn's children
and currently exercisable options for the purchase of 179,916 shares of
Class A Common Stock.
(11) Includes currently exercisable options for the purchase of 181,583 shares
of Class A Common Stock.
(12) The address of Mr. Cigarran is One Burton Hills Blvd., Nashville, TN 37215.
(13) The address of Mr. Herr is One Burton Hills Blvd., Nashville, TN 37215.
(14) Includes 4,333 shares owned by The Endoscopy Center, Knoxville, Tennessee,
and 6,666 shares owned by Gastrointestinal Associates, P.C. Dr. Overholt is
a partner of the Endoscopy Center and President of Gastrointestinal
Associates, P.C. Also, includes currently exercisable options for the
purchase of 2,083 shares of Class A Common Stock, 20,100 shares held in
trust for Dr. Overholt's grandchildren, and 2,924 shares for which Dr.
Overholt is custodian on behalf of a minor.
PREFERRED STOCK
<TABLE>
<CAPTION>
SERIES A SERIES B
REDEEMABLE PERCENT CONVERTIBLE PERCENT
NAME AND ADDRESS PREFERRED STOCK OF CLASS PREFERRED STOCK OF CLASS
- ---------------- --------------- -------- --------------- --------
<S> <C> <C> <C> <C>
Electra Investment Trust P.L.C............... 363,637 72.7% 303,030 72.7%
65 Kingsway
London, England WC 2B 6QT
Capitol Health Partners, L.P................. 90,909(1) 18.2 75,757(1) 18.2
3000 P Street, N.W.
Washington, D.C. 20005
Michael E. Stephens.......................... 45,454 9.1 37,879 9.1
One Perimeter Park South
Suite 100N
Birmingham, AL 35243
</TABLE>
- ---------------
(1) Debora A. Guthrie, a director of AmSurg, is President and Chief Executive
Officer of the general partner of Capitol Health Partners, L.P. and
disclaims beneficial ownership of the shares.
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<PAGE> 73
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Upon the Distribution Date, AmSurg will be authorized to issue 25,000,000
shares of its Class A Common Stock, 5,540,000 shares of its Class B Common Stock
and 5,000,000 shares of preferred stock, no par value. Based on ownership of
AmSurg and AHC Common Stock as of January 31, 1997, 3,803,943 shares of AmSurg
Class A Common Stock and 5,530,131 shares of AmSurg Class B Common Stock are
expected to be outstanding immediately following the Distribution, all of which
will be validly issued, fully paid and nonassessable. Based on ownership of
AmSurg and AHC Common Stock as of January 31, 1997, there are expected to be 201
holders of record of Class A Common Stock and 135 holders of record and 2,550
beneficial owners of Class B Common Stock immediately following the
Distribution. As of January 31, 1997, 500,000 shares of Series A Preferred Stock
and 416,666 shares of Series B Preferred Stock were outstanding, all of which
were validly issued, fully paid and non-assessable. There are three holders of
the Series A Preferred Stock and three holders of the Series B Preferred Stock.
AmSurg may issue preferred stock from time to time in one or more series, each
such series to be so designated as to distinguish the shares thereof from the
shares of all other series and classes. The Board of Directors is vested with
the authority to divide any or all classes of authorized but unissued preferred
stock into series and to fix and determine the relative rights and preferences
of the shares of any series so established. Based on options to purchase AmSurg
Common Stock as of January 31, 1997, stock options for the purchase of 906,783
shares of Class A Common Stock are expected to be outstanding immediately
following the Distribution, of which options to purchase 599,004 shares of Class
A Common Stock having an average exercise price of $2.61 per share are expected
to be currently exercisable. The options granted will vest in four equal annual
installments, and will expire 10 years from the date of grant. In the event of
certain fundamental changes to AmSurg (including liquidation, dissolution,
merger, reorganization or sale of all or substantially all of the assets of
AmSurg), the stock options shall immediately vest and be fully exercisable by
the optionees. On February 7, 1997 and March 7, 1997, the Board of Directors
approved grants of options to purchase 117,166 shares of Class A Common Stock to
various AmSurg employees at a per share exercise price of $5.91 pursuant to the
1997 Incentive Plan. The February 7 and March 7, 1997 grants and the 1997
Incentive Plan are subject to AmSurg stockholder approval at the stockholder
meeting scheduled to be held on May , 1997.
Based on ownership of AmSurg and AHC Common Stock as of January 31, 1997,
the AmSurg executive officers and directors or their affiliates are expected to
beneficially own approximately 16.6% of the outstanding Class A Common Stock and
16.2% of the Class B Common Stock immediately following the Distribution. The
holders of Class A Common Stock and the Class B Common Stock are entitled to
receive such dividends, if any, as may be declared from time to time by the
Board of Directors in its discretion from funds legally available therefor. No
dividends have been paid to date and the management of AmSurg does not
anticipate dividends being paid in the foreseeable future.
The following summary of certain terms of AmSurg's capital stock describes
material provisions of, but does not purport to be complete and is subject to
and qualified in its entirety by, the AmSurg Charter, the AmSurg Bylaws, and
applicable provisions of Tennessee corporate law (including but not limited to
the TBCA) and assumes the approval of the Amended and Restated Charter by the
AmSurg stockholders.
Class A Common Stock. The holders of Class A Common Stock are entitled to
one vote per share on all matters to be submitted to a vote of the stockholders
and are not entitled to cumulative voting in the election of directors. Subject
to prior dividend rights and sinking fund or redemption or purchase rights which
may be applicable to any outstanding preferred stock, the holders of Class A
Common Stock are entitled to share ratably with the shares of Class B Common
Stock in such dividends, if any, as may be declared from time to time by the
Board of Directors in its discretion out of funds legally available therefor.
The holders of Class A Common Stock are entitled to share ratably with the
shares of Class B Common Stock in any assets remaining after satisfaction of all
prior claims upon liquidation of AmSurg, including prior claims of any
outstanding preferred stock. AmSurg's Charter does not give holders of Class A
Common Stock any preemptive or other subscription rights, and Class A Common
Stock is not redeemable at the option of the holders, does not have any
conversion rights, and is not subject to call. The rights, preferences and
privileges of holders of Class A
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<PAGE> 74
Common Stock are subject to, and may be adversely affected by, the rights of
holders of shares of the Series A Preferred Stock and Series B Preferred Stock
and any other series of preferred stock that AmSurg may designate and issue in
the future.
Class B Common Stock. The holders of Class B Common Stock are entitled to
seven votes per share in the election of the Board of Directors of AmSurg and
are not entitled to cumulative voting in the election of such directors. The
holders of Class B Common Stock are entitled to one vote per share on all other
matters to be submitted to a vote of the stockholders. The holders of Class B
Common Stock are entitled to vote separately as a group with respect to (i)
amendments to AmSurg's Charter that alter or change the powers, preferences or
special rights of the holders of Class B Common Stock so as to affect them
adversely and (ii) such other matters as may require separate group voting under
the TBCA. Following the Distribution, upon the sale or transfer of any share of
Class B Common Stock, including transfers by gift, such share will automatically
convert into a newly-issued share of Class A Common Stock. However, transfers of
the Class B Common Stock by pledge or from a beneficial owner into a street name
for such beneficial owner, from a street name to the beneficial owner and from
one street name to another street name for the same beneficial owner will not
constitute a transfer which would cause the conversion of the Class B Common
Stock into Class A Common Stock. Subject to prior dividend rights and sinking
fund or redemption or purchase rights which may be applicable to any outstanding
preferred stock, the holders of Class B Common Stock are entitled to share
ratably with the shares of Class A Common Stock in such dividends, if any, as
may be declared from time to time by the Board of Directors in its discretion
out of funds legally available therefor. The holders of Class B Common Stock are
entitled to share ratably with the shares of Class A Common Stock in any assets
remaining after satisfaction of all prior claims upon liquidation of AmSurg,
including prior claims of any outstanding preferred stock. AmSurg's Charter does
not give holders of Class B Common Stock preemptive or other subscription
rights, and Class B Common Stock is not redeemable at the option of the holders,
and is not subject to call. The rights, preferences and privileges of holders of
AmSurg Class B Common Stock are subject to, and may be adversely affected by,
the rights of holders of shares of any series of preferred stock that AmSurg may
designate and issue in the future.
Dividend Policy. AmSurg has not declared a cash dividend on the shares of
AmSurg common stock during its two most recent fiscal years. AmSurg does not
currently intend to declare or pay a cash dividend on the shares of Class A
Common Stock or the Class B Common Stock. In addition, the payment of cash
dividends in the future will depend on AmSurg's earnings, financial condition,
capital needs and other factors deemed relevant by the AmSurg Board of
Directors, including corporate law restrictions on the availability of capital
for the payment of dividends, the rights of holders of any series of preferred
stock that may hereafter be issued and the limitations, if any, on the payment
of dividends under any documents relating to equity investments, then-existing
credit facilities or other indebtedness. Pursuant to the Amended and Restated
Loan Agreement dated as of June 25, 1996 between AmSurg and SunTrust Bank (the
"Loan Agreement"), AmSurg is prohibited from declaring or paying any dividend to
any person other than itself or a subsidiary. It is the current intention of the
Board of Directors to retain earnings, if any, in order to finance the
operations and expansion of AmSurg's business.
Preferred Stock. AmSurg is authorized to issue 5,000,000 shares of
undesignated preferred stock, no par value. AmSurg has established and
designated two series of shares out of the 5,000,000 authorized shares. On
November 20, 1996, AmSurg issued 500,000 shares of Series A Preferred Stock for
a purchase price of $6.00 per share and 416,666 shares of Series B Preferred
Stock for a purchase price of $6.00 per share.
Series A Redeemable Preferred Stock. The holders of Series A Preferred
Stock are entitled to .25 votes per share on all matters to be voted on by
stockholders. The holders of Series A Preferred Stock and Series B Preferred
Stock vote as a separate class on certain matters, and together are entitled to
elect and remove one director to the Board of Directors, in the event that there
has not been a Qualified IPO (as defined in the AmSurg Charter) by May 31, 2000.
The holders of Series A Preferred Stock and Series B Preferred Stock are each
entitled to vote as a separate class, and the affirmative vote of two-thirds of
the outstanding shares of each separate class is required, for any amendment,
modification or waiver with respect to the designation of the Series A Preferred
Stock and Series B Preferred Stock and with respect to any changes in the
capitalization and number of shares of any class of capital stock. The holders
of Series A Preferred Stock have
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<PAGE> 75
the right to receive annually, beginning after November 20, 1998, cash dividends
of $0.48 per share. In addition, upon certain events of default by AmSurg, the
holders of the Series A Preferred Stock have the right to a cash dividend of
$0.84 per share until such default has been cured. All dividends are cumulative.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
AmSurg, the holders of the Series A Preferred Stock will be entitled to be paid
in cash the purchase price of their shares plus any accrued and unpaid dividends
(the "Liquidation Value"), before any distribution or payment is made upon any
other junior securities, including the Series B Preferred Stock. In the event
AmSurg subdivides or combines the outstanding shares of any class of AmSurg
common stock, the Series A Preferred Stock shall automatically be combined or
subdivided so that following such an event, the conversion rate, ownership
interests and voting interests of the Series A Preferred Stock are equitably
preserved. The holders of the Series A Preferred Stock are entitled to convert,
at the then current market price per share of the Class A Common Stock, into
shares of Class A Common Stock for a period of 30 days, any or all of their
shares of Series A Preferred Stock into Class A Common Stock upon the earlier to
occur of (a) 60 days after a Spin-off and (b) a Qualified IPO, as those terms
are defined in the AmSurg Charter. The Distribution will constitute a Spin-off.
The outstanding shares of Series A Preferred Stock are mandatorily redeemable at
a price equal to the Liquidation Value on the earliest to occur of (a) the sale,
lease or disposition by AmSurg of all or substantially all of its assets (an
"AmSurg Sale"); (b) a merger or consolidation of AmSurg with or into another
entity; (c) the sale, transfer or other disposition of all or substantially all
of the capital stock of AmSurg; (d) a Qualified IPO; or (e) November 20, 2002.
In addition, AmSurg may redeem, at any time upon 45 days written notice, all or
part of the outstanding shares of Series A Preferred Stock at a price equal to
the Liquidation Value.
Series B Convertible Preferred Stock. The holders of the Series B
Preferred Stock initially are entitled to 1.05 votes per share on all matters to
be voted on by stockholders. In the event the aggregate number of fully diluted
shares of Class A Common Stock into which the Series B Preferred Stock is
convertible increases above 599,215, the aggregate voting rights of the holders
of the Series B Preferred Stock will be increased by one vote for each
additional fully diluted share over 599,215. The holders of the Series B
Preferred Stock have the right to receive such dividends as may be declared from
time to time by the Board of Directors from funds legally available therefor. In
the event AmSurg subdivides or combines the outstanding shares of any class of
AmSurg common stock, the Series B Preferred Stock shall automatically be
combined or subdivided so that following such an event, the conversion rate,
ownership interests and voting interests of the Series B Preferred Stock are
equitably preserved. The Series B Preferred Stock is junior to the Series A
Preferred Stock and senior to the Class A Common Stock and Class B Common Stock
with respect to the liquidation preference. In the event of an AmSurg Sale or a
Qualified IPO, all of the issued and outstanding shares of Series B Preferred
Stock shall automatically convert into Class A Common Stock at a rate that will
result in the holders of the Series B Preferred Stock holding that number of
shares of Class A Common Stock that approximates 6% of the equity of AmSurg
determined as of November 20, 1996, with that percentage being ratably increased
to 8% of the equity of AmSurg if a triggering event has not occurred by November
20, 2000. In the event that AmSurg reorganizes pursuant to a Spin-off or
otherwise, reclassifies its capital stock, consolidates or merges with or into
another corporation, or sells, transfers or otherwise disposes of all of its
property, assets or business to another corporation other than in an AmSurg
Sale, all of the issued and outstanding shares of Series B Preferred Stock may
be converted into shares of Class A Common Stock. If by November 20, 2002 there
shall not have occurred an AmSurg Sale or a Qualified IPO, then the holders of
Series B Preferred Stock shall have the right to require AmSurg to purchase all
of the issued and outstanding shares of Series B Preferred Stock on an as if
converted basis at the current market price of the underlying Class A Common
Stock.
Transfer Agent and Registrar. SunTrust Bank, Atlanta will be the transfer
agent and registrar for the AmSurg Common Stock.
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1992 STOCKHOLDERS' AGREEMENT
AHC, as a founding stockholder of AmSurg, along with certain private
investors, are parties to a stockholders' agreement dated as of April 2, 1992
(the "1992 Stockholders' Agreement"). In connection with an equity financing of
AmSurg Preferred Stock in November 1996, the 1992 Stockholders' Agreement was
amended to include the purchasers of AmSurg Preferred Stock. The 1992
Stockholders' Agreement provides for certain rights of first refusal with
respect to any shares that AmSurg proposes to issue and co-sale rights among the
stockholders subject thereto. These stockholders also have a right of first
refusal, subject to certain exceptions, to acquire shares of another
stockholder, on a pro rata basis, on the same terms and conditions as are set
forth in a proposed sale transaction with a third party. If a Qualified IPO does
not occur by May 31, 2000, the stockholders have also agreed to vote for a
director selected by the AmSurg Preferred Stock. The 1992 Stockholders'
Agreement, other than certain provisions with respect to the election of
directors after May 31, 2000, will be terminated on the effective date of the
Distribution.
REGISTRATION AGREEMENT
AHC and certain private investors entered into a Registration Agreement
dated April 2, 1992, as amended (the "Registration Agreement"). Pursuant
thereto, the holders of at least 66 2/3% of certain of the Registrable Shares
after a Qualified Initial Public Offering (as those terms are defined in the
Registration Agreement), may by written notice demand registration on Form S-1
or any similar long-form registration under the Securities Act of up to all of
the Registrable Shares owned by such holders. These holders of Registrable
Shares are entitled to only one such long-form demand registration. In
connection with an equity financing of AmSurg Preferred Stock in November 1996,
the purchasers of the AmSurg Preferred Stock became parties to the Registration
Agreement. As a result, shares of Class A Common Stock issued upon conversion of
the Series A Preferred Stock and the Series B Preferred Stock have been included
in the definition of Registrable Shares, and as such, have certain registration
rights. The holders of the Series A Preferred Stock and Series B Preferred Stock
are entitled to two long-form demand registrations. In addition, any holder or
holders of Registrable Shares may demand registration of any or all of their
Registrable Shares on or after the date upon which AmSurg has become entitled as
a registrant to use Form S-3 or any similar short-form registration. This
short-form demand registration right may be invoked on unlimited occasions,
provided the aggregate offering value of the Registrable Shares requested to be
registered is at least $1,000,000. The stockholders are also entitled to
unlimited "piggyback" registration rights whenever AmSurg proposes to register
any of its securities under the Securities Act (other than on Forms S-4 or S-8
or any successor forms). These "piggyback" registration rights entitle these
stockholders to include any of their Registrable Shares in any registration
statement which AmSurg proposes to file, subject to certain limitations
generally imposed by the managing underwriter regarding the number of shares to
be included in the offering.
STOCKHOLDERS' AGREEMENTS
Substantially all stockholders who purchased common stock of AmSurg in
connection with AmSurg's acquisitions of ambulatory surgery centers and other
investments have entered into stockholders' agreements with AmSurg. These
stockholders' agreements limit the ability of the stockholders to dispose of the
AmSurg Common Stock that they own without obtaining the prior written consent of
AmSurg. The stockholders' agreements also prohibit the stockholders from
effecting any public sale or distribution of the AmSurg Common Stock for 180
days following the effective date of any underwritten sale registered under the
Securities Act by AmSurg of its securities for its own account. The AmSurg Board
of Directors waived the 180 day holdback provision at its March 7, 1997 meeting,
subject to completion of the Distribution. In addition, the stockholders'
agreements provide for "piggyback" registration rights. See "SHARES ELIGIBLE FOR
FUTURE SALE." Except with respect to the registration rights of such
stockholders, the stockholders' agreements terminate on the earlier of the
closing of an Initial Public Offering or an Approved Sale of AmSurg (as those
terms are defined in the stockholders' agreements) or 10 years from the date of
such agreements. The registration rights granted pursuant to the stockholders'
agreements terminate upon the later of three years after the date of the
stockholders' agreement or six months following the closing of an Initial Public
Offering.
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CERTAIN PROVISIONS OF THE CHARTER, BYLAWS, AND TENNESSEE LAW
General. The provisions of the Charter, the Bylaws, and Tennessee
statutory law described in this section may delay or make more difficult
acquisitions or changes of control of AmSurg that are not approved by the Board
of Directors. Such provisions have been implemented to enable AmSurg,
particularly (but not exclusively) in the initial years of its existence as an
independent, publicly-owned company, to develop its business in a manner that
will foster its long-term growth without the disruption of the threat of a
takeover not deemed by the Board of Directors to be in the best interests of
AmSurg and its stockholders.
Classified Board of Directors. The Bylaws provide that the number of
directors shall be no fewer than three or more than nine, with the exact number
to be established by the Board of Directors and subject to change from time to
time as determined by the Board of Directors. The AmSurg Charter provides for
the classification of the Board of Directors. Under the terms of the AmSurg
Charter, the members of the Board of Directors are divided into three classes,
serving staggered three-year terms. As a result, one-third of AmSurg's Board of
Directors will be elected each year. See "MANAGEMENT OF AMSURG." This provision
could prevent a party who acquires control of a majority of the outstanding
voting stock from obtaining control of AmSurg's Board of Directors until the
second annual shareholders' meeting following the date the acquiror obtains the
controlling stock interest. This provision may have the effect of discouraging a
potential acquiror from making a tender offer or otherwise attempting to obtain
control of AmSurg, and could also increase the likelihood that incumbent
directors will retain their positions.
The Charter provides that directors may be removed only for "cause" and
only by the affirmative vote of the holders of a majority of the voting power of
all the shares of AmSurg's capital stock then entitled to vote in the election
of directors, voting together as a single class, unless the vote of a special
voting group is otherwise required by law. "Cause" is defined in the Charter as:
(i) a felony conviction of a director or the failure of a director to contest
prosecution for a felony; (ii) conviction of a crime involving moral turpitude;
or (iii) willful and continued misconduct or gross negligence by a director in
the performance of his or her duties as a director. This provision, in
conjunction with the provision of the Bylaws authorizing the Board of Directors
to fill vacant directorships, may prevent stockholders from removing incumbent
directors without cause and filling the resulting vacancies with their own
nominees.
Advance Notice for Stockholder Proposals or Making Nominations at
Meetings. The Bylaws establish an advance notice procedure for stockholder
proposals to be brought before a meeting of stockholders of AmSurg and for
nominations by stockholders of candidates for election as directors at an annual
meeting or a special meeting at which directors are to be elected. Subject to
any other applicable requirements, only such business may be conducted at a
meeting of stockholders as has been brought before the meeting by, or at the
direction of, the Board of Directors, or by a stockholder who has given to the
Secretary of AmSurg timely written notice in proper form, of the stockholder's
intention to bring that business before the meeting. The presiding officer at
such meeting has the authority to make such determinations. Only persons who are
selected and recommended by the Board of Directors, or the committee of the
Board of Directors designated to make nominations, or who are nominated by a
shareholder who has given timely written notice, in proper form, to the
Secretary prior to a meeting at which directors are to be elected will be
eligible for election as directors of AmSurg.
To be timely, notice of nominations or other business to be brought before
any meeting must be received by the Secretary of AmSurg not later than 120 days
in advance of the anniversary date of AmSurg's proxy statement for the previous
year's annual meeting or, in the case of special meetings, at the close of
business on the tenth day following the date on which notice of such meeting is
first given to shareholders.
The notice of any shareholder proposal or nomination for election as
director must set forth various information required under the Bylaws. The
person submitting the notice of nomination and any person acting in concert with
such person must provide, among other things, the name and address under which
they appear on AmSurg's books (if they so appear) and the class and number of
shares of AmSurg's capital stock that are beneficially owned by them.
70
<PAGE> 78
Amendment of the Bylaws and Charter. Except with respect to amendments to
the Bylaws or Charter relating to the classified structure of the Board of
Directors which are required to be approved by the affirmative vote of
two-thirds of the voting power of the shares entitled to vote in the election of
directors, the Bylaws provide that a majority of the members of the Board of
Directors who are present at any regular or special meeting or the holders of a
majority of the voting power of all shares of AmSurg's capital stock represented
at a regular or special meeting have the power to amend, alter, change, repeal,
or restate the Bylaws.
Except as may be set forth in resolutions providing for any class or series
of preferred stock, any proposal to amend, alter, change, or repeal any
provision of the Charter requires approval by the affirmative vote of both a
majority of the members of the Board of Directors then in office and the holders
of a majority of the voting power of all of the shares of AmSurg's capital stock
entitled to vote on the amendments, with stockholders entitled to dissenters'
rights as a result of the Charter amendment voting together as a single class.
The Series A Preferred Stock and Series B Preferred Stock are each entitled to
vote as a separate class in connection with the approval of any amendment to the
Charter which would amend, modify or waive the rights of the holders of the
Series A Preferred Stock or Series B Preferred Stock and any such amendment is
required to be approved by the affirmative vote of at least two-thirds of the
outstanding shares of each class of preferred stock. Stockholders entitled to
dissenters' rights as a result of a Charter amendment are those whose rights
would be materially and adversely affected because the amendment (i) alters or
abolishes a preferential right of the shares; (ii) creates, alters, or abolishes
a right in respect of redemption; (iii) alters or abolishes a preemptive right;
(iv) excludes or limits the right of the shares to vote on any matter, or to
cumulate votes other than a limitation by dilution through issuance of shares or
other securities with similar voting rights; or (v) reduces the number of shares
held by such holder to a fraction if the fractional share is to be acquired for
cash. In general, however, no stockholder is entitled to dissenters' rights if
the security he or she holds is listed on a national securities exchange or the
Nasdaq National Market.
Tennessee Law. The Tennessee Business Combination Act (the "Combination
Act") provides, among other things, that any corporation to which the
Combination Act applies, including AmSurg, shall not engage in any "business
combination" with an "interested stockholder" for a period of five years
following the date that such stockholder became an interested stockholder unless
prior to such date the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder.
The Combination Act defines "business combination," generally, to mean any:
(i) merger or consolidation; (ii) share exchange; (iii) sale, lease, exchange,
mortgage, pledge, or other transfer (in one transaction or a series of
transactions) of assets representing 10% or more of (A) the market value of
consolidated assets, (B) the market value of the corporation's outstanding
shares or (C) the corporation's consolidated net income; (iv) issuance or
transfer of shares from the corporation to the interested stockholder; (v) plan
of liquidation; (vi) transaction in which the interested stockholder's
proportionate share of the outstanding shares of any class of securities is
increased; or (vii) financing arrangements pursuant to which the interested
stockholder, directly or indirectly, receives a benefit except proportionately
as a stockholder.
The Combination Act defines "interested stockholder," generally, to mean
any person who is the beneficial owner, either directly or indirectly, of 10% or
more of any class or series of the outstanding voting stock, or any affiliate or
associate of the corporation who has been the beneficial owner, either directly
or indirectly, of 10% or more of the voting power of any class or series of the
corporation's stock at any time within the five year period preceding the date
in question. Consummation of a business combination that is subject to the
five-year moratorium is permitted after such period if the transaction (i)
complies with all applicable charter and bylaw requirements and applicable
Tennessee law and (ii) is approved by at least two-thirds of the outstanding
voting stock not beneficially owned by the interested stockholder, or when the
transaction meets certain fair price criteria. The fair price criteria include,
among others, the requirement that the per share consideration received in any
such business combination by each of the stockholders is equal to the highest of
(i) the highest per share price paid by the interested stockholder during the
preceding five-year period for shares of the same class or series plus interest
thereon from such date at a treasury bill rate less the aggregate amount of any
cash dividends paid and the market value of any dividends paid other than in
cash
71
<PAGE> 79
since such earliest date, up to the amount of such interest, (ii) the highest
preferential amount, if any, such class or series is entitled to receive on
liquidation, or (iii) the market value of the shares on either the date the
business combination is announced or the date when the interested stockholder
reaches the 10% threshold, whichever is higher, plus interest thereon less
dividends as noted above.
The Tennessee Control Share Acquisition Act (the "Acquisition Act")
prohibits certain stockholders from exercising in excess of 20% of the voting
power in a corporation acquired in a "control share acquisition," as defined in
the Acquisition Act, unless such voting rights have been previously approved by
the disinterested stockholders of the corporation. AmSurg has not elected to
make the Acquisition Act applicable to AmSurg. No assurance can be given that
such election, which must be expressed in a charter or bylaw amendment, will or
will not be made in the future.
The Tennessee Greenmail Act (the "Greenmail Act") prohibits AmSurg from
purchasing or agreeing to purchase any of its securities, at a price in excess
of fair market value, from a holder of 3% or more of any class of such
securities who has beneficially owned such securities for less than two years,
unless such purchase has been approved by the affirmative vote of a majority of
the outstanding shares of each class of voting stock issued by AmSurg or AmSurg
makes an offer of at least equal value per share to all holders of shares of
such class.
The effect of the Greenmail Act may be to render more difficult a change of
control of AmSurg.
Other Change-of-Control Provisions. For a description of certain other
change-of-control provisions, see "MANAGEMENT OF AMSURG -- Employment
Agreements; and -- Stock Incentive Plans."
SHARES ELIGIBLE FOR FUTURE SALE
Following the Distribution, AmSurg will have outstanding an aggregate of
3,803,943 shares of Class A Common Stock and 5,530,131 shares of Class B Common
Stock based on the number of outstanding shares of AmSurg Common Stock on
January 31, 1997. Of the total outstanding shares of Common Stock, the shares of
Class B Common Stock issued to holders of AHC Common Stock in the Distribution
will be freely tradable without restriction or further registration under the
Securities Act, unless held by "affiliates" of AmSurg, as that term is defined
in Rule 144 under the Securities Act (which sales would be subject to certain
volume limitations and other restrictions described below).
The shares of Class A Common Stock issued and outstanding as of the
Distribution were issued in transactions unrelated to the Distribution. Under
current law, absent registration or an exemption from registration other than
Rule 144, such shares will be "restricted securities" as that term is defined in
Rule 144 under the Securities Act and will be eligible for sale or transfer only
in accordance with Rule 144. All of the shares of Class A Common Stock expected
to be outstanding as of the Distribution will be "restricted securities."
The Series A Preferred Stock is convertible into Class A Common Stock upon
the earlier to occur of (a) 60 days following a Spin-off (the Distribution will
constitute a Spin-off) or (b) a Qualified IPO. A Qualified IPO, prior to a
Spin-off, means a public offering of Class A Common Stock yielding net cash
proceeds of at least $25,000,000. The Series B Preferred Stock is automatically
convertible in the event of an AmSurg Sale or Qualified IPO, as those terms are
defined in the AmSurg Charter. In addition, the Series B Preferred Stock may be
converted upon the Distribution and certain other events specified in the AmSurg
Charter. The shares of Class A Common Stock issued upon conversion of the Series
A Preferred Stock and Series B Preferred Stock will be "restricted securities"
as that term is defined in Rule 144 under the Securities Act and will be
eligible for sale or transfer only in accordance with Rule 144 absent
registration or an exemption from registration.
In general, under Rule 144 as currently in effect, a person (or persons
whose share are aggregated), including an affiliate, who has beneficially owned
shares for at least one year (including, if the shares are transferred, the
holding period of any prior owner except an affiliate) is entitled to sell in
"broker's transactions" or to market makers, within any three-month period
commencing 90 days after the date of this
72
<PAGE> 80
Information Statement, a number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of the Class A Common Stock (approximately
38,039 shares immediately after the Distribution) or (ii) generally, the average
weekly trading volume in such class of the Class A Common Stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such sale, and
subject to certain other limitations and restrictions. In addition, a person who
is not deemed to have been an affiliate of AmSurg at any time during the three
months preceding a sale, and who has beneficially owned the shares proposed to
be sold for at least two years, would be entitled to sell such shares under Rule
144(k) without regard to the volume and other requirements described above.
Shares of Class A Common Stock that would otherwise be deemed "restricted
securities" could be sold at any time through an effective registration
statement relating to such shares of Class A Common Stock. Of the 3,803,943
shares of Class A Common Stock that are anticipated to be "restricted
securities" immediately following the Distribution, 3,502,698 will have
satisfied a one-year holding period.
Pursuant to the Registration Agreement, certain stockholders of AmSurg and
the holders of the Series A Preferred Stock and the Series B Preferred Stock
have several demand and unlimited "piggyback" registration rights. In addition,
the other AmSurg stockholders are entitled to unlimited "piggyback" registration
rights in connection with any proposed registration of equity securities by
AmSurg (with certain specified exceptions) pursuant to stockholders' agreements
entered into between AmSurg and these stockholders. All of the outstanding
shares of AmSurg Common Stock are subject to registration rights. For a more
complete description of such registration rights see "DESCRIPTION OF CAPITAL
STOCK."
Immediately following the Distribution, there will be outstanding options
for approximately 1,023,949 shares of AmSurg Class A Common Stock, including
options granted to non-employee directors of AmSurg. Of such options,
approximately 602,338 of these options will be exercisable for shares of Class A
Common Stock and such shares will immediately be able to be sold by the holders
following the Distribution and the filing of a registration statement on Form
S-8 by AmSurg. See "MANAGEMENT OF AMSURG -- Stock Incentive Plans."
Prior to the Distribution, there has not been any public market for either
class of the AmSurg Common Stock. No prediction can be made as to the effect, if
any, that market sales of shares or the availability of shares for sale will
have on the market price prevailing from time to time. Sales of substantial
additional amounts of Class A Common Stock in the public market, or the
perception that such sales could occur, could adversely affect the prevailing
market price of the Class A Common Stock.
73
<PAGE> 81
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AmSurg Corp.
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets as of December 31, 1996 and
1995................................................... F-3
Consolidated Statements of Operations for Each of the
Three Years in the Period Ended December 31, 1996...... F-4
Consolidated Statements of Changes in Stockholders' Equity
for Each of the Three Years in the Period Ended
December 31, 1996...................................... F-5
Consolidated Statements of Cash Flows for Each of the
Three Years in the Period Ended December 31, 1996...... F-6
Notes to the Consolidated Financial Statements............ F-7
Unaudited Pro Forma Financial Information
Introduction.............................................. F-15
Pro Forma Combined Statement of Operations for the Year
Ended December 31, 1996................................ F-15
Notes to the Pro Forma Combined Statements of
Operations............................................. F-16
Endoscopy Center Operations of the Endoscopy Center of
Ocala, Inc.
Independent Auditors' Report.............................. F-17
Statement of Income for the Period from January 1, 1996
through August 21, 1996................................ F-18
Statement of Cash Flows for the Period from January 1,
1996 through August 21, 1996........................... F-19
Notes to the Financial Statements......................... F-20
Financial Statement Schedule -- AmSurg Corp.
Independent Auditors' Report.............................. S-1
Schedule II -- Valuation and Qualifying Accounts.......... S-2
Financial Statement Schedule -- Endoscopy Center Operations
of the Endoscopy Center of Ocala, Inc.
Independent Auditors' Report.............................. S-3
Schedule II -- Valuation and Qualifying Accounts.......... S-4
</TABLE>
F-1
<PAGE> 82
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
AmSurg Corp.
Nashville, Tennessee
We have audited the accompanying consolidated balance sheets of AmSurg
Corp. and subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of AmSurg Corp. and subsidiaries
as of December 31, 1995 and 1996 and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
February 21, 1997
F-2
<PAGE> 83
AMSURG CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (Note 1)........................ $ 3,469,661 $ 3,192,408
Accounts receivable, net of allowance for uncollectible
accounts of $455,628 and $1,272,651.................... 2,878,840 5,640,946
Supplies inventory........................................ 248,002 554,839
Other current assets (Note 1)............................. 466,922 680,761
Deferred tax asset (Notes 1 and 4)........................ 243,000 303,000
----------- -----------
Total current assets.............................. 7,306,425 10,371,954
----------- -----------
Long-term receivables and deposits (Note 2)................. 133,930 643,516
----------- -----------
Property and equipment (Note 1)
Land and improvements..................................... -- 98,540
Buildings and improvements................................ 4,578,990 7,017,163
Moveable equipment........................................ 5,848,399 8,725,140
Construction in progress.................................. 97,165 316,384
----------- -----------
10,524,554 16,157,227
Accumulated depreciation.................................. (2,366,560) (3,821,335)
----------- -----------
Property and equipment, net............................... 8,157,994 12,335,892
----------- -----------
Other assets, net (Note 1).................................. 391,179 530,312
----------- -----------
Excess of cost over net assets of purchased operations, net
(Notes 1 and 2)........................................... 19,116,909 30,771,784
----------- -----------
$35,106,437 $54,653,458
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.......................................... $ 562,961 $ 982,547
Accrued salaries and benefits............................. 516,383 829,582
Accrued liabilities....................................... 740,888 1,128,856
Current income taxes payable (Notes 1 and 4).............. 316,895 82,586
Current portion of long-term debt (Note 5)................ 2,238,496 2,616,714
----------- -----------
Total current liabilities......................... 4,375,623 5,640,285
----------- -----------
Deferred income taxes (Notes 1 and 4)....................... 456,000 765,000
----------- -----------
Long-term debt (Note 5)..................................... 4,785,552 9,218,281
----------- -----------
Minority interest (Note 1).................................. 3,010,070 5,673,960
----------- -----------
Commitments and contingencies (Note 8)
Preferred stock (Note 6)
No par value, 5,000,000 shares authorized, 2,750,000
shares outstanding..................................... -- 4,982,057
----------- -----------
Stockholders' equity (Note 7)
Common stock
No par value, 40,000,000 shares authorized, 24,907,430
and 27,598,577 shares outstanding..................... 21,627,861 26,064,085
Retained earnings......................................... 851,331 2,309,790
----------- -----------
Total stockholders' equity........................ 22,479,192 28,373,875
----------- -----------
$35,106,437 $54,653,458
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-3
<PAGE> 84
AMSURG CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues (Note 1)................................... $13,826,566 $22,489,379 $35,007,216
----------- ----------- -----------
Expenses
Salaries and benefits............................. 4,091,996 6,243,134 11,613,504
Other operating expenses.......................... 5,091,110 7,562,655 11,546,562
Depreciation and amortization (Note 1)............ 1,309,054 2,396,796 3,000,183
Interest.......................................... 193,047 722,390 947,863
----------- ----------- -----------
Total expenses............................ 10,685,207 16,924,975 27,108,112
----------- ----------- -----------
Income before minority interest and income taxes.... 3,141,359 5,564,404 7,899,104
Minority interest (Note 1)........................ 2,464,105 3,938,364 5,433,588
----------- ----------- -----------
Income before income taxes.......................... 677,254 1,626,040 2,465,516
Income tax expense (Notes 1 and 4)................ 26,000 578,000 985,000
----------- ----------- -----------
Net income.......................................... 651,254 1,048,040 1,480,516
Accretion of preferred stock discount (Note 6).... -- -- 22,057
----------- ----------- -----------
Net income attributable to common stockholders...... $ 651,254 $ 1,048,040 $ 1,458,459
=========== =========== ===========
Net income per share attributable to common
stockholders (Note 1)............................. $ 0.03 $ 0.04 $ 0.05
=========== =========== ===========
Weighted average common shares and equivalents (Note
1)................................................ 21,937,814 25,742,923 27,306,780
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE> 85
AMSURG CORP.
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
----------- ---------- -----------
<S> <C> <C> <C>
Balance, December 31, 1993........................... $12,903,385 $ (847,963) $12,055,422
Issuance of stock.................................. 5,592,561 -- 5,592,561
Issuance of stock in conjunction with acquisitions
(Note 2)........................................ 997,649 -- 997,649
Issuance of stock warrant (Note 7)................. 260,787 -- 260,787
Net income......................................... -- 651,254 651,254
----------- ---------- -----------
Balance, December 31, 1994........................... 19,754,382 (196,709) 19,557,673
Issuance of stock.................................. 1,197,279 -- 1,197,279
Issuance of stock in conjunction with acquisitions
(Note 2)........................................ 676,200 -- 676,200
Net income......................................... -- 1,048,040 1,048,040
----------- ---------- -----------
Balance, December 31, 1995........................... 21,627,861 851,331 22,479,192
Issuance of stock.................................. 2,366,262 -- 2,366,262
Issuance of stock in conjunction with acquisitions
(Note 2)........................................ 2,069,962 -- 2,069,962
Net income attributable to common stockholders..... -- 1,458,459 1,458,459
----------- ---------- -----------
Balance, December 31, 1996........................... $26,064,085 $2,309,790 $28,373,875
=========== ========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE> 86
AMSURG CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 651,254 $ 1,048,040 $ 1,480,516
Income tax expense (Note 1 and 4)................. 26,000 578,000 985,000
Minority interest (Note 1)........................ 2,464,105 3,938,364 5,433,588
----------- ----------- ------------
Income before income taxes and minority interest..... 3,141,359 5,564,404 7,899,104
Noncash expenses, revenues, losses and gains included
in income:
Depreciation and amortization (Note 1)............ 1,309,054 2,396,796 3,000,183
Increase in working capital items................. (285,015) (132,418) (856,584)
Other noncash transactions........................ 59,926 106,220 125,190
----------- ----------- ------------
4,225,324 7,935,002 10,167,893
Increase in other assets............................. (373,201) (120,705) (286,031)
Income taxes (net paid).............................. -- (74,105) (970,309)
----------- ----------- ------------
Net cash flows provided by operating
activities................................. 3,852,123 7,740,192 8,911,553
----------- ----------- ------------
Cash flows from investing activities:
Acquisition of majority interest in surgery centers
(Note 2).......................................... (4,537,780) (3,186,512) (12,669,794)
Acquisition of property and equipment................ (4,777,563) (2,138,075) (3,863,052)
Decrease (increase) in long-term receivables......... (116,683) (846) 137,582
----------- ----------- ------------
Net cash flows used in investing
activities................................. (9,432,026) (5,325,433) (16,395,264)
----------- ----------- ------------
Cash flows from financing activities:
Additions to long-term debt (Note 5)................. 3,163,300 2,471,579 10,544,700
Payments on long-term debt (Note 5).................. (516,007) (999,929) (7,261,534)
Distributions to minority partners................... (2,327,128) (3,840,787) (5,084,294)
Issuance of preferred stock (net of issuance
costs)............................................ -- -- 4,960,000
Issuance of common stock (net of issuance costs)..... 5,592,561 1,197,279 2,366,262
Capital contributions by minority partners........... 679,486 476,693 1,681,324
----------- ----------- ------------
Net cash flows provided by (used in)
financing activities....................... 6,592,212 (695,165) 7,206,458
----------- ----------- ------------
Net increase (decrease) in cash and cash equivalents... 1,012,309 1,719,594 (277,253)
Cash and cash equivalents, beginning of year........... 737,758 1,750,067 3,469,661
----------- ----------- ------------
Cash and cash equivalents, end of year................. $ 1,750,067 $ 3,469,661 $ 3,192,408
=========== =========== ============
(Increase) decrease in working capital items excluding
income taxes:
Accounts receivable, net............................. $ (605,969) $ (467,620) $ (1,353,365)
Other current assets................................. (114,893) (183,856) (342,086)
Accounts payable..................................... 28,959 145,612 (419,586)
Accrued expenses..................................... 406,888 373,446 (419,281)
----------- ----------- ------------
$ (285,015) $ (132,418) $ (856,584)
=========== =========== ============
</TABLE>
SUPPLEMENTAL NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
1. Interest payments of $159,534, $550,725 and $909,884 were made during the
years ended December 31, 1994, 1995 and 1996, respectively.
2. Shares of stock valued at $997,649, $676,200 and $2,069,962 were issued in
conjunction with the acquisition of majority interests in various surgery
centers during the years ended December 31, 1994, 1995 and 1996,
respectively. (See Note 2)
See accompanying notes to the consolidated financial statements.
F-6
<PAGE> 87
AMSURG CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AmSurg Corp. (the "Company"), through its wholly-owned subsidiaries, owns
majority interests primarily between 51% and 70% in limited partnerships and
limited liability companies ("LLCs") which own and operate practice-based
ambulatory surgery centers and physician practices. The Company also has
majority ownership interests in other partnerships and LLCs formed to develop
additional centers. All subsidiaries and minority owners are herein referred to
as partnerships and partners, respectively.
At December 31, 1996, approximately 60% of the outstanding common shares of
the Company were owned by American Healthcorp, Inc. ("AHC").
a. Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries and the majority-owned limited partnerships and LLCs in
which the Company is the general partner or member. All material intercompany
profits, transactions and balances have been eliminated.
b. Cash and Cash Equivalents
Cash and cash equivalents are comprised principally of demand deposits at
banks, and other highly liquid short-term investments with maturities less than
three months when purchased.
c. Other Current Assets
Other current assets are comprised of prepaid expenses and other
receivables.
d. Property and Equipment
Property and equipment costs include expenditures which increase value or
extend useful lives. Depreciation for buildings and improvements is recognized
under the straight line method over 20 years, or for leasehold improvements,
over the remaining term of the lease plus renewal options. Depreciation for
moveable equipment is recognized over useful lives of five to ten years.
e. Other Assets
Other assets consist of deferred pre-opening costs, deferred organization
costs and deferred financing costs of the Company and the entities included in
the Company's consolidated financial statements. Deferred pre-opening costs are
being amortized over one year, deferred organization costs are being amortized
over five years, and deferred financing costs are being amortized over the term
of the related debt. Accumulated amortization of other assets at December 31,
1995 and 1996 was $325,528 and $402,402, respectively.
f. Excess of Cost over Net Assets of Purchased Operations
Excess of cost over net assets of purchased operations are being amortized
over 25 years. Accumulated amortization at December 31, 1995 and 1996 was
$1,705,157 and $2,757,394, respectively. The Company has consistently assessed
impairment of the excess of cost over net assets of purchased operations and
other long-lived assets in accordance with criteria consistent with the
provisions of Financial Accounting Standard No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
(See Notes 2 and 9).
g. Income Taxes
The Company files a consolidated tax return which includes all of its
subsidiary corporations and computes its tax provision under Financial
Accounting Standard No. 109 "Accounting for Income Taxes."
F-7
<PAGE> 88
AMSURG CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
h. Revenue Recognition
Revenue is recognized on the date of service, net of estimated contractual
allowances from third party medical service payors including Medicare and
Medicaid. During the years ended December 31, 1994, 1995 and 1996 approximately
39%, 37%, and 36%, respectively, of the Company's revenues were derived from the
provision of services to patients covered under Medicare and Medicaid.
Concentration of credit risk with respect to other payors is limited due to the
large number of such payors.
i. Net Income Per Share
Net income per share is computed by dividing net income by the weighted
average number of common shares and equivalents outstanding.
j. Fair Value of Financial Instruments
Financial Accounting Standard No. 107, "Disclosures About Fair Value of
Financial Instruments," requires disclosure of the fair value of certain
financial instruments. Cash and cash equivalents, receivables and payables are
reflected in the financial statements at cost which approximates fair value.
Management believes that the carrying amounts of long-term debt approximate
market value, because it believes the terms of its borrowings approximate terms
which it would incur currently.
k. Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ACQUISITIONS
In three separate transactions during 1994, the Company acquired a majority
interest in three physician practice-based surgery centers. The purchase price
paid for the assets acquired was $5,966,759 which consisted of cash of
$4,481,730, AmSurg common stock valued at $1,102,649 and a note payable of
$382,380.
In two separate transactions during 1995, the Company acquired a majority
interest in two physician practice-based surgery centers. The purchase price
paid for the interests acquired was $4,415,000 which consisted of cash of
$3,108,800, AmSurg common stock valued at $676,200 and a note payable of
$630,000.
In seven separate transactions during 1996, the Company acquired a majority
interest in six physician practice-based surgery centers and a physician
practice and related entities. The purchase price paid for the interests
acquired was $14,045,080 which consisted of cash of $11,975,118 and AmSurg
common stock valued at $2,069,962.
F-8
<PAGE> 89
AMSURG CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The approximate purchase price of the aforementioned acquisitions was
assigned as follows:
<TABLE>
<CAPTION>
ACQUISITIONS IN
---------------------------------------
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
Current assets................................ $ 361,153 $ 166,996 $ 1,310,381
Property and equipment........................ 664,881 1,459,196 2,887,262
Excess of cost over net assets of purchased
operations.................................. 5,409,025 3,976,358 12,289,386
Liabilities assumed........................... (468,300) (1,187,550) (2,441,949)
---------- ---------- -----------
Net acquisition purchase price...... $5,966,759 $4,415,000 $14,045,080
========== ========== ===========
</TABLE>
Had these transactions occurred January 1, 1994, unaudited pro forma
revenues for the years ended December 31, 1994, 1995 and 1996 would have been
approximately $25,129,000, $33,692,000 and $40,620,000, respectively. Unaudited
pro forma net income for the years ended December 31, 1994, 1995 and 1996 would
have been approximately $538,000, $1,187,000 and $1,645,000, respectively, and
pro forma earnings per share would be $.02, $.04 and $.06, respectively.
An acquisition which occurred in 1995 was structured such that if certain
operating results were not achieved, the then agreed upon purchase price would
be adjusted. Subsequent operations of the center did not meet the predefined
levels. The purchase price adjustment, which is reflected as a long-term
receivable in the accompanying consolidated balance sheet at December 31, 1996,
is being repaid to the Company over a thirty month period.
3. RELATED PARTY TRANSACTIONS
Included in accounts payable at December 31, 1995 and 1996 is $16,066 and
$20,493, respectively, and included in other operating expenses for the years
ended December 31, 1994, 1995 and 1996 is $151,846, $186,215 and $213,820,
respectively, due/paid to AHC for management and financial services provided by
AHC to the Company. These payables/expenses were incurred pursuant to an
agreement effective December 1, 1992, under which AHC was paid $100,000 a year
for the services of AHC's chief executive officer and chief financial officer.
Also under the agreement, AHC was paid approximately $4,000 per year for each
ambulatory surgery center partnership and $8,000 per year for the Company's
corporate operations to provide certain partnership and Company accounting and
income tax services. The Company entered into a new agreement with AHC effective
January 1, 1997 by which the Company will pay AHC an annual fee of $85,000 for
the services of AHC's chief executive officer and chief financial officer. Also,
AHC will be paid an annual fixed fee of $50,000 plus an annual fee of $7,500 for
each ambulatory surgery center and an annual fee of $15,000 for each physician
practice and the Company's corporate operations to provide certain
administrative accounting and financial services. This agreement terminates upon
the earlier of (i) the mutual agreement of the parties, (ii) the date which
AmSurg begins to trade as a separate public company or (iii) December 31, 1997.
The Company also rents approximately 15,000 square feet of office space
from AHC pursuant to a sublease which expires December 1999. Included in other
operating expenses for the year ended December 31, 1996 is $163,212 related to
this sublease.
The Company believes that the foregoing transactions are in its best
interests. It is the Company's current policy that all transactions by the
Company with officers, directors, five percent stockholders and their affiliates
will be entered into only if such transactions are on terms no less favorable to
the Company than could be obtained from unaffiliated parties, are reasonably
expected to benefit the Company and are approved by a majority of the
disinterested independent members of the Company's Board of Directors.
F-9
<PAGE> 90
AMSURG CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES
Income tax expense is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Current
Federal........................................... $ -- $301,000 $593,000
State............................................. 26,000 64,000 143,000
Deferred............................................ -- 213,000 249,000
------- -------- --------
$26,000 $578,000 $985,000
======= ======== ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Deferred tax asset:
Allowance for uncollectible accounts...................... $228,000 $297,000
State operating losses.................................... 26,000 60,000
Valuation allowance on state net operating losses......... (11,000) (60,000)
Other..................................................... -- 6,000
-------- --------
243,000 303,000
-------- --------
Deferred tax liability:
Tax over book depreciation................................ 37,000 66,000
Tax over book amortization................................ 419,000 699,000
-------- --------
456,000 765,000
-------- --------
Net deferred tax liability.................................. $213,000 $462,000
======== ========
Net current deferred tax asset.............................. $243,000 $303,000
Net long-term deferred tax liability........................ 456,000 765,000
-------- --------
$213,000 $462,000
======== ========
</TABLE>
The Company has provided a valuation allowance on its deferred tax asset
related to state net operating losses as it deems such allowance is necessary.
The difference between income tax expense computed using the effective tax
rate and the statutory Federal income tax rate follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
--------- --------- --------
<S> <C> <C> <C>
Statutory Federal income tax..................... $ 230,000 $ 553,000 $838,000
State income taxes, less Federal income tax
benefit........................................ 19,000 60,000 132,000
Increase (decrease) in valuation allowance....... (199,000) (124,000) 49,000
Other............................................ (24,000) 89,000 (34,000)
--------- --------- --------
$ 26,000 $ 578,000 $985,000
========= ========= ========
</TABLE>
F-10
<PAGE> 91
AMSURG CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
---------- -----------
<S> <C> <C>
$12,000,000 credit agreement at prime or 1.75% above LIBOR
(average rate of 7.3% at December 31, 1996) due through
June 10, 2002............................................ $ -- $ 3,157,657
Term loan at prime or 1.75% above LIBOR (7.25% at December
31, 1996) due through June 10, 2000...................... 3,347,493 5,030,590
Other debt at an average rate of 8.5% due through September
23, 2003................................................. 2,986,281 2,508,828
Capitalized lease arrangements at an average rate of 10.0%
due through December 1, 2000............................. 690,274 1,137,920
---------- -----------
7,024,048 11,834,995
Less current portion....................................... 2,238,496 2,616,714
---------- -----------
$4,785,552 $ 9,218,281
========== ===========
</TABLE>
On September 29, 1993, AmSurg entered into a credit agreement with a
lending institution. The credit agreement was amended and restated June 25,
1996. Under the terms of the new agreement, all borrowings outstanding under the
previous credit agreement were converted to a term loan that bears interest at
the prime rate or 1.75% above LIBOR or a combination thereof and is being repaid
on an installment basis through June 10, 2000. The borrowings under the term
loan are secured by $9,842,914 of assets financed by these borrowings.
Borrowings under the term loan totaled $5,030,590 at December 31, 1996 of which
payment of $497,449 was guaranteed by certain partners of AmSurg centers. In
addition, the credit agreement permits AmSurg to borrow up to an additional
$12,000,000 to finance AmSurg acquisition and development projects. New
borrowings under this agreement bear interest at prime or 1.75% above LIBOR or a
combination thereof. AmSurg may borrow under this credit agreement through June
10, 1998. The agreement provides for a fee of .35% on unused commitments and all
additional borrowings are to be repaid on an installment basis through June 10,
2002. The agreement contains covenants relating to the ratio of debt to net
worth, operating performance and minimum net worth and prohibits the payment of
dividends. Borrowings under the $12,000,000 credit agreement totaled $3,157,657
at December 31, 1996.
Various of the AmSurg centers included in the Company's consolidated
financial statements have loans with local lending institutions or have
capitalized lease arrangements. All the loans and capitalized leases are secured
by assets of the centers totaling $4,810,796 and both AmSurg and the partners
have guaranteed payment of the loans and leases. In addition, AmSurg has
unsecured notes payable of $389,222 issued in connection with the acquisition of
two physician practice-based surgery centers during the years ended December 31,
1994 and 1995 (see Note 2).
Principal payments required on long-term debt in the five years subsequent
to December 31, 1996 are $2,616,714, $2,824,276, $2,987,788, $1,855,064 and
$995,777.
F-11
<PAGE> 92
AMSURG CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PREFERRED STOCK
Preferred stock, net of issuance costs, is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
---- ----------
<S> <C> <C>
Series A redeemable preferred stock, 1,500,000 shares
outstanding............................................... $-- $1,774,290
Series B convertible preferred stock, 1,250,000 shares
outstanding............................................... -- 3,207,767
--- ----------
$-- $4,982,057
=== ==========
</TABLE>
On November 20, 1996, the Company issued to unaffiliated institutional
investors a combination of redeemable and convertible preferred stock for net
proceeds totaling $4,960,000. The convertible preferred stock, with a stated
amount of $2.5 million, is convertible into that number of shares of Class A
Common Stock that approximates 6% of the equity of AmSurg determined as of
November 20, 1996, with that percentage being ratably increased to 8% of the
equity of AmSurg if an event of liquidity has not occurred by November 20, 2000.
If such events of liquidity do not occur by November 20, 2002, the holders of
the convertible preferred stock have the right to require the Company to redeem
the stock at current market price as defined. The redeemable preferred stock,
with a stated amount of $3 million, pays a cumulative dividend of 8% commencing
November 21, 1998 and requires the Company to redeem them at the stated amount
plus accrued but unpaid dividends upon the earlier of an event of liquidity or
November 20, 2002. The Company may redeem the redeemable preferred stock at any
time. The redeemable holders can convert to common stock of the Company upon the
occurrence of certain events, including the spin-off of the Company from AHC, at
the then current market price of the common stock. The preferred stock was
recorded at its fair market value, net of issuance costs. The Series A Preferred
Stock is being accreted to its redemption value including potential dividends.
The Series B Preferred Stock is not being accreted because management expects a
conversion upon an event of liquidity.
7. STOCK OPTIONS
The Company has a stock option plan under which it has granted incentive
and non-qualified options to purchase its common stock. Options are granted at
market value on the date of the grant and vest over 4 years at the rate of 25%
per year. Options have a term of 10 years from the date of grant. As of December
31, 1996, 106,900 shares were reserved for future options.
Stock option activity for the three years ended December 31, 1996 is
summarized below:
<TABLE>
<CAPTION>
AVERAGE
NUMBER OF PRICE PER
SHARES SHARE
--------- ---------
<S> <C> <C>
Outstanding at December 31, 1993............................ 1,666,600 $0.48
Options granted........................................... 286,000 1.09
--------- -----
Outstanding at December 31, 1994............................ 1,952,600 0.57
Options granted........................................... 105,000 1.12
--------- -----
Outstanding at December 31, 1995............................ 2,057,600 0.60
Options granted........................................... 689,250 1.67
Options exercised......................................... (8,750) 0.90
Options terminated........................................ (17,750) 1.07
--------- -----
Outstanding at December 31, 1996............................ 2,720,350 $0.87
========= =====
</TABLE>
F-12
<PAGE> 93
AMSURG CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information concerning outstanding and
exercisable options at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YRS.) PRICE EXERCISABLE PRICE
--------------- ----------- ----------- -------- ----------- --------
<C> <C> <C> <C> <C> <C>
$ .25 -- $ .50 1,032,000 5.3 $ .25 1,032,000 $ .25
.50 -- 1.00 652,600 6.3 .86 553,200 .85
1.00 -- 1.50 346,500 8.1 1.11 147,000 1.11
1.50 -- 1.79 689,250 9.3 1.67 0 N/A
--------- ---------
.25 -- 1.79 2,720,350 6.9 .87 1,732,200 .52
========= =========
</TABLE>
The Company accounts for its stock options pursuant to Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation expense has been recognized in connection with the
issuance of stock options. The estimated weighted average fair values of the
options at the date of grant using the Black-Scholes option pricing model as
promulgated by Financial Accounting Standard No. 123, "Accounting for Stock
Based Compensation" in 1995 and 1996 were $.60 and $.91 per share, respectively.
In applying the Black-Scholes model, the Company assumed no dividends, an
expected life for the options of seven years and a forfeiture rate of 3% in both
1995 and 1996 and an average risk free interest rate of 6.6% in 1995 and 6.2% in
1996. The Company also assumed a volatility rate based upon an average of
comparable companies of 46% and 49% in 1995 and 1996, respectively. Had the
Company used the Black-Scholes estimates to determine compensation expense for
the options granted in 1995 and 1996, net income and net income per share
attributable to common shareholders would have been reduced to the following pro
forma amounts.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Net income attributable to common shareholders
As reported............................................... $1,048,040 $1,453,874
Pro forma................................................. 1,028,040 1,241,874
Net income per share attributable to common shareholders
As reported............................................... .04 .05
Pro forma................................................. .04 .05
</TABLE>
In 1994, the Company issued warrants to purchase its common stock to AHC.
These warrants were exercised February 26, 1996 for 257,720 shares at $.90 per
share. The warrants were issued in return for AHC's prior guaranty of Company
debt.
8. COMMITMENTS AND CONTINGENCIES
The Company has various lease agreements for its surgery centers in
operation and under development and for office space including a sublease with
AHC (see Note 3). Rent expense under such lease agreements for the years ended
December 31, 1994, 1995 and 1996 was approximately $772,000, $1,201,000 and
$1,775,000, respectively.
F-13
<PAGE> 94
AMSURG CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The future minimum lease commitments at December 31, 1996 for all
noncancelable operating leases are as follows:
<TABLE>
<S> <C>
Year ended December 31:
1997.............................................. $ 2,390,577
1998.............................................. 2,330,537
1999.............................................. 2,086,174
2000.............................................. 1,700,772
2001.............................................. 1,310,453
Thereafter........................................ 3,522,570
-----------
$13,341,083
===========
</TABLE>
AmSurg and its partnerships are insured with respect to medical malpractice
risk on a claims made basis. Management is not aware of any claims against it or
its partnerships which would have a material financial impact.
9. SUBSEQUENT EVENTS
In two separate transactions in January 1997, the Company acquired a
majority interest in a physician practice-based surgery center and a physician
practice and related entities. The purchase price paid for the interests
acquired was $4,928,110 which consisted of cash of $4,227,747 and AmSurg common
stock valued at $700,363. With these transactions, the Company acquired assets
of $561,517, liabilities assumed of $346,033 and excess cost over net assets of
purchased operations of $4,712,626.
F-14
<PAGE> 95
AMSURG CORP.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma statement of operations of AmSurg Corp.
for the year ended December 31, 1996 is presented to show the effects of the
acquisition of The Endoscopy Center operations of The Endoscopy Center of Ocala,
Inc., acquired on August 21, 1996, and other individually insignificant
businesses acquired during the year ended December 31, 1996 (which are accounted
for as purchases) assuming the acquisitions had occurred on January 1, 1996.
The unaudited pro forma financial information does not purport to represent
what AmSurg Corp.'s financial position or results of operations would actually
have been had the transactions in fact occurred on the dates indicated above,
nor to project AmSurg Corp.'s financial position or results of operations for
any future date or period. In the opinion of AmSurg's management, all
adjustments necessary for a fair presentation have been made. This unaudited pro
forma financial information should be read in conjunction with the accompanying
notes and the financial statements of AmSurg Corp. and the related notes
included elsewhere herein.
<TABLE>
<CAPTION>
1996
THE ENDOSCOPY INDIVIDUALLY
AMSURG CENTER OF INSIGNIFICANT PRO FORMA PRO FORMA
HISTORICAL OCALA(A) ACQUISITIONS(A) ADJUSTMENTS COMBINED
---------- ------------- ---------------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues........................... $35,007 $1,373 $4,302 $ (62)(2) $40,620
------- ------ ------- ------- -------
Expenses:
Salaries and benefits............ 11,613 304 1,331 60(3) 13,308
Other operating expenses......... 11,547 322 1,616 (255)(4) 13,230
Depreciation and amortization.... 3,000 36 170 259(5) 3,465
Interest......................... 948 -- 75 275(6) 1,298
------- ------ ------- ------- -------
Total expenses........... 27,108 662 3,192 339 31,301
Income before minority interest and
income taxes..................... 7,899 711 1,110 (401) 9,319
Minority interest................ 5,433 -- -- 1,110(7) 6,543
------- ------ ------- ------- -------
Income before income taxes......... 2,466 711 1,110 (1,511) 2,776
Income tax expense............... 985 -- -- 124(8) 1,109
------- ------ ------- ------- -------
Net income......................... 1,481 711 1,110 (1,635) 1,667
Accretion of preferred stock
discount...................... 22 22
------- ------ ------- ------- -------
Net income attributable to common
stockholders..................... $ 1,459 $ 711 $1,110 $(1,635) $ 1,645
======= ====== ======= ======= =======
Net income per share attributable
to common stockholders(1)........ $ 0.16 $ 0.18
======= =======
Weighted average common shares and
equivalents(1)................... 9,102 199(9) 9,301
</TABLE>
- ---------------
(a) From January 1, 1996 to date of acquisition.
F-15
<PAGE> 96
AMSURG CORP.
NOTES TO THE PRO FORMA COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS)
1. Net income per share is adjusted to reflect the anticipated recapitalization
to be effected prior to the distribution.
2. Decrease in interest income on the funds used to complete the acquisitions.
3. The pro forma adjustments to salaries and benefits reflect the following:
<TABLE>
<S> <C>
Estimated additional general and administrative costs as a
result of increase in number of centers managed........... $ 248
Management fees paid to previous owners which are
discontinued upon acquisition............................. (188)
-----
$ 60
=====
</TABLE>
4. Reductions principally related to reduced rentals to be paid.
5. Increase in amortization due principally to the increase in excess of cost
over net assets of purchased operations.
6. Increase in interest expense for debt incurred to complete the acquisitions.
7. Minority owners interest in earnings of combined operations.
8. Change to the income tax provision due to combination of operations.
9. Income average weighted shares for stock issued in acquisitions, as adjusted
to reflect the proposed recapitalization.
F-16
<PAGE> 97
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Endoscopy Center of Ocala, Inc.
Ocala, Florida
We have audited the accompanying statements of income and cash flows of the
Endoscopy Center Operations of the Endoscopy Center of Ocala, Inc. for the
period from January 1, 1996 to August 21, 1996. These financial statements are
the responsibility of the Center's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the results of operations and cash flows of the Endoscopy Center
Operations of the Endoscopy Center of Ocala, Inc. for the period from January 1,
1996 through August 21, 1996 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
January 8, 1997
F-17
<PAGE> 98
ENDOSCOPY CENTER OPERATIONS OF THE ENDOSCOPY CENTER OF OCALA, INC.
STATEMENT OF INCOME
PERIOD FROM JANUARY 1, 1996 THROUGH AUGUST 21, 1996
<TABLE>
<S> <C>
Revenues (Note 1)........................................... $1,372,553
Expenses:
Salaries and benefits..................................... 304,129
Supplies and other operating costs........................ 104,253
General and administrative................................ 120,735
Rent charge from affiliate (Note 2)....................... 76,000
Bad debt expense.......................................... 21,032
Depreciation (Note 1)..................................... 35,598
----------
661,747
----------
Net income........................................ $ 710,806
==========
</TABLE>
See accompanying notes to the financial statements.
F-18
<PAGE> 99
ENDOSCOPY CENTER OPERATIONS OF THE ENDOSCOPY CENTER OF OCALA, INC.
STATEMENT OF CASH FLOWS
PERIOD FROM JANUARY 1, 1996 THROUGH AUGUST 21, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $ 710,806
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 35,598
Decrease in accounts receivable........................ 20,874
Increase in accounts payable and accrued expenses...... 5,307
---------
Net cash provided by operating activities......... 772,585
Cash flows from investing activities --
Purchase of furniture and equipment....................... (1,857)
Cash flows from financing activities --
Net cash paid to physician practice....................... (770,728)
---------
Net increase (decrease) in cash and cash equivalents........ --
Cash and cash equivalents, beginning of period.............. --
---------
Cash and cash equivalents, end of period.................... $ --
=========
</TABLE>
See accompanying notes to the financial statements.
F-19
<PAGE> 100
ENDOSCOPY OPERATIONS OF THE ENDOSCOPY CENTER OF OCALA, INC.
NOTES TO THE FINANCIAL STATEMENTS
PERIOD FROM JANUARY 1, 1996 THROUGH AUGUST 21, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Endoscopy Center operations of the Endoscopy Center of Ocala, Inc. (the
"Center") provides outpatient endoscopy procedures at its center in Ocala,
Florida. It is organized as part of an associated physician practice. These
financial statements reflect the operations of the Center only, and do not
include activities of the physician practice.
a. Revenue Recognition
Revenues are reported at the estimated net realizable amounts from
patients, third-party payors and others, including Medicare and Medicaid. Such
revenues are recognized as the related services are performed. Contractual
adjustments resulting from agreements with various organizations to provide
services for amounts which differ from billed charges, are recorded as
deductions from patient service revenues. During the period from January 1, 1996
through August 21, 1996, approximately 62% of the Center's revenues were
provided to patients covered under Medicare and Medicaid. Amounts which are
determined to be uncollectible are charged against the allowance for
uncollectible accounts.
b. Depreciation
Depreciation on furniture and equipment is provided on the declining
balance method over the estimated useful life of the respective assets.
c. Income Taxes
No provision for income taxes has been reflected as the Center's operations
are included with the physician practice and all such federal taxes are paid by
the physicians through an election to be taxed pursuant to Subchapter S of the
Internal Revenue Code.
d. Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from the estimates.
2. RELATED PARTY TRANSACTIONS
The Center occupies space provided by the physician practice. Included in
the statement of income is a charge of $76,000 for such costs which management
believes reflects the fair value of the space provided.
All cash receipts and disbursements related to the Center are made through
bank accounts maintained by the physician practice. Revenues and expenses
related to the Center's operations are separately identified and recorded in the
records of the Center. The net cash transactions of the Center are reflected as
net cash paid to physician practice in the accompanying statement of cash flows.
3. CONTINGENCIES
The Center is insured with respect to medical malpractice risk on a claims
made basis. The Center is not aware of any claims against it which would have a
material financial impact.
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ENDOSCOPY OPERATIONS OF THE ENDOSCOPY CENTER OF OCALA, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. SUBSEQUENT EVENT
Effective August 22, 1996, the Center sold 51% of its assets to AmSurg
Corp. This 51% interest owned by AmSurg plus the 49% interest retained by the
practice were then contributed to a new partnership in return for a 51% and 49%
interest, respectively, in the new partnership entity.
F-21
<PAGE> 102
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
AmSurg Corp.
Nashville, Tennessee
We have audited the consolidated financial statements of AmSurg Corp. (the
"Company") as of December 31, 1995 and 1996 and for each of the three years in
the period ended December 31, 1996, and have issued our report thereon dated
February 21, 1997; such report is included elsewhere in this Form 10. Our audits
also included the consolidated financial statement schedule of the Company,
listed in Item 15. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
February 21, 1997
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<PAGE> 103
SCHEDULE II
AMSURG CORP.
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for Uncollectible
Accounts included under
balance sheet caption
"Accounts receivable"......... $223,398 $ 525,025 $ 81,715(2) $529,735(1) $ 300,403
Year ended December 31, 1995:
Allowance for Uncollectible
Accounts included under
balance sheet caption
"Accounts receivable"......... $300,403 $ 694,078 $ 58,974(2) $597,827(1) $ 455,628
Year ended December 31, 1996:
Allowance for Uncollectible
Accounts included under
balance sheet caption
"Accounts receivable"......... $455,628 $1,227,315 $366,636(2) $776,928(1) $1,272,651
</TABLE>
- ---------------
(1) Charge-off against reserve.
(2) Valuation of allowance for uncollectible accounts at the acquisition of
AmSurg physician practice-based ambulatory surgery centers and physician
practice. Between 51% and 70% was charged to excess of cost over net assets
of purchased companies. See Note 2 of Notes to the Consolidated Financial
Statements.
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<PAGE> 104
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Endoscopy Center of Ocala, Inc.
Ocala, Florida
We have audited the financial statements of The Endoscopy Center operations
of the Endoscopy Center of Ocala, Inc. (the "Center") for the period from
January 1, 1996 to August 21, 1996, and have issued our report thereon dated
January 8, 1997; such report is included elsewhere in this Form 10. Our audit
also included the financial statement schedule of the Center, listed in Item 15.
This financial statement schedule is the responsibility of the Center's
management. Our responsibility is to express an opinion based on our audit. In
our opinion, such financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
January 8, 1997
S-3
<PAGE> 105
THE ENDOSCOPY CENTER OPERATIONS OF THE ENDOSCOPY CENTER OF OCALA, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
PERIOD FROM JANUARY 1, 1996 TO AUGUST 21, 1996
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Uncollectible Accounts
included under balance sheet caption
"Accounts receivable"..................... $54,000 $21,032 $ -- $24,032(1) $51,000
</TABLE>
- ---------------
(1) Charge-off against reserve.
S-4
<PAGE> 106
APPENDIX A
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, dated as of March 7, 1997 (this "Agreement"),
by and between American Healthcorp, Inc., a Delaware corporation ("AHC"), and
AmSurg Corp., a Tennessee corporation ("AmSurg").
W I T N E S S E T H
WHEREAS, AHC currently owns approximately fifty-nine percent (59%) of the
outstanding shares of common stock of AmSurg;
WHEREAS, AmSurg has, since its inception, depended principally on AHC for
its equity financing and has historically depended on AHC for debt financing;
WHEREAS, the Board of Directors of AHC and the Board of Directors of AmSurg
have determined that it is desirable for business reasons and in the best
interests of AHC's and AmSurg's shareholders for AmSurg to have access to
capital markets as an independent publicly traded company without the majority
ownership of AHC;
WHEREAS, subject to the terms and conditions hereof, AHC has agreed to
distribute (the "Distribution") to the holders of AHC's common stock, par value
$.001 per share (the "AHC Common Stock"), on a pro rata basis, all of the shares
of common stock of AmSurg owned by AHC;
WHEREAS, in order to facilitate the trading of the common stock of AmSurg
following the Distribution, AmSurg intends to effect a reverse stock split (or a
transaction having the effect of a reverse stock split) with respect to such
shares of common stock;
WHEREAS, in order to effect the Distribution as a substantially tax-free
transaction under Section 355 of the Internal Revenue Code of 1986, as amended
(the "Code"), AmSurg and AHC have agreed to exchange all of the shares of common
stock of AmSurg currently owned by AHC for shares of a new class of common stock
of AmSurg having a sufficient number of votes per share to give AHC the ability
to distribute "control" within the meaning of Section 368(c) of the Code;
WHEREAS, AHC and AmSurg have determined that it is necessary and desirable
to set forth the principal corporate transactions required to effect the
Distribution, and to set forth the agreements that will govern certain matters
following the Distribution.
NOW, THEREFORE, in consideration of the premises, and of the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall have
the following respective meanings:
"common stock" with respect to AmSurg means any class of common stock
of AmSurg now or hereafter authorized.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"IRS" means the Internal Revenue Service.
"IRS Ruling" means the letter ruling issued by the IRS in response to
the Ruling Request.
"Related Agreements" means the Exchange Agreement and the Management
and Human Resources Agreement, attached hereto as Exhibits to this
Agreement.
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<PAGE> 107
"Ruling Request" means the private letter ruling request filed by AHC
with the IRS on November 21, 1996, as supplemented and amended from time to
time, with respect to certain tax matters relating to the Distribution.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE II
RECAPITALIZATION, EXCHANGE AND DISTRIBUTION
2.1 Recapitalization, Exchange and Distribution. Subject to the
satisfaction of the conditions set forth in Section 2.2 hereof, on the date
established in accordance with Section 2.5 as the date on which the Distribution
shall be effected (the "Distribution Date"):
(a) AmSurg will undertake a recapitalization in accordance with
Section 2.3 hereof (the "Recapitalization");
(b) Upon completion of the Recapitalization, AmSurg and AHC will
effect an exchange of all of the shares of AmSurg common stock owned by AHC
for shares of Class B Common Stock of AmSurg in accordance with Section 2.4
hereof (the "Exchange"); and
(c) Upon completion of the Exchange, AHC will effect the Distribution
in accordance with Section 2.5 hereof.
2.2 Conditions. The obligations of each of AHC and AmSurg to consummate
Recapitalization, the Exchange and the Distribution are subject to the
fulfillment of each of the following conditions, unless otherwise waived in
writing:
(a) The IRS Ruling shall have been granted in form and substance
satisfactory to AHC, in its sole discretion;
(b) A Registration Statement on Form 10 under the Exchange Act (or, if
deemed appropriate by AmSurg and AHC, a Registration Statement under the
Securities Act and a Registration Statement under the Exchange Act) with
respect to each class of common stock of AmSurg to be distributed in the
Distribution and each class of common stock of AmSurg into which such class
or classes may be converted shall have been declared effective by the SEC
or shall otherwise have become effective under the Exchange Act and, if
applicable, the Securities Act;
(c) The shares of each tradable class of common stock of AmSurg to be
distributed in the Distribution and each class of common stock into which
such class or classes may be converted shall have been approved for listing
on a national securities exchange or for inclusion on the Nasdaq National
Market or such other trading market as the parties may agree;
(d) The Recapitalization and the Exchange shall have been approved by
the holders of at least a majority of the voting power of the outstanding
shares of capital stock of AmSurg at a meeting of the shareholders of
AmSurg and, if dissenters' rights apply, holders of no more than 5% of the
outstanding shares of common stock of AmSurg shall have indicated their
intent to seek appraisal for their shares under the Tennessee Business
Corporation Act;
(e) The holders of the Series A Redeemable Preferred Stock and Series
B Convertible Preferred Stock, without par value, of AmSurg shall have
approved the modification and waiver of their rights to elect one director
of AmSurg effected through the AmSurg Charter and the Shareholders'
Agreement, dated as of April 2, 1992, as amended by Amendment No. 1 dated
September 27, 1993 and Amendment No. 2, dated as of November 20, 1996, by
and among AmSurg and the persons identified on the signature pages thereto
as the Founding Investors, the Founding Management and the Preferred Stock
Purchasers, in each case so as to permit AHC to distribute "control" within
the meaning of Section 368(c) of the Code;
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<PAGE> 108
(f) The Special Committee of the Board of Directors of AmSurg shall
have received an opinion, acceptable to it, of J.C. Bradford & Co. as to
the fairness, from a financial point of view, of the Recapitalization,
Exchange and Distribution to shareholders of AmSurg other than AHC and such
other opinions as may be deemed appropriate by such committee and such
opinion or opinions shall not have been withdrawn;
(g) The Board of Directors of AHC shall have received an opinion,
acceptable to it, of Morgan Keegan & Co., Inc. as to the fairness, from a
financial point of view, of the Recapitalization, the Exchange and the
Distribution to the stockholders of AHC, a favorable opinion of Houlihan,
Lokey, Howard & Zukin as to certain solvency issues and such other opinions
as may be deemed appropriate by the Board of Directors of AHC and such
opinions shall not have been withdrawn;
(h) There shall be no proposed legislation or regulation introduced
which, if adopted, would have the effect of amending the Code so as to
alter in any materially adverse respect the substantially tax-free
treatment of the Distribution under Section 355 of the Code or the
classification of the Recapitalization and Exchange as a tax-free
organization under Section 368(a)(1)(E) of the Code;
(i) The matters set forth in Section 2.7(a), (c), (d), (e) and (f)
shall have been approved by the shareholders of AmSurg; and
(j) Any required waiting period applicable to the Exchange or the
Distribution under the HartScott-Rodino Antitrust Improvements Act of 1976,
as amended, shall have expired or otherwise terminated and AHC and AmSurg
shall each have obtained such other consents and approvals of federal,
state and local governmental authorities and other third parties as shall
be deemed necessary or appropriate by the Boards of Directors of AHC and
AmSurg in connection with the transactions contemplated hereby, and there
shall be no suit or governmental proceeding pending or overtly threatened
that would challenge the validity of or seek to enjoin the
Recapitalization, the Exchange or the Distribution.
2.3 Recapitalization. The Recapitalization will be effected, subject to
the satisfaction or waiver of the conditions set forth in Section 2.2 above,
through an amendment to the Charter of AmSurg. The Recapitalization will: (a)
reduce on a one for three basis the number of outstanding shares of common stock
of AmSurg through a reverse stock split (or transaction having the effect of a
reverse stock split), with the intention of permitting the shares of common
stock of AmSurg distributed in the Distribution to trade at proportionately
higher per share prices and thereby improving the trading markets for these
shares in order to facilitate subsequent equity financings and acquisition
transactions (the "Reverse Stock Split") and (b) authorize a new class of common
stock (the "Class B Common Stock") having seven votes per share in the election
of directors of AmSurg so that, when exchanged for all of the shares of common
stock of AmSurg then owned by AHC, AHC will own shares of common stock of AmSurg
sufficient to constitute "control" within the meaning of Section 368(c) of the
Code. The Reverse Stock Split will be accomplished by converting each three
shares of common stock of AmSurg outstanding immediately prior to the Reverse
Stock Split into a single share of a newly authorized class of common stock of
AmSurg, denominated Class A Common Stock (the "Class A Common Stock"). Following
the Recapitalization the only authorized classes of common stock will be Class A
Common Stock and Class B Common Stock. Unless otherwise required by the IRS
Ruling, the Class A Common Stock and Class B Common Stock will have the terms
substantially as set forth in the Amended and Restated Charter approved by the
AmSurg Board of Directors on the date hereof. It is understood and agreed that
the number of votes per share of Class B Common Stock is required to be
sufficient to enable AHC to distribute, in the Distribution, "control" of AmSurg
within the meaning of Section 368(c) of the Code, after giving effect to any
anticipated issuances of capital stock of AmSurg on the exercise of stock
options and any issuances in possible equity financing transactions and
acquisitions, but that AmSurg shall not issue more shares of Class B Common
Stock than are to be issued in the Exchange. The Recapitalization is intended to
qualify for tax free treatment, for federal income tax purposes, under Section
368(a)(1)(E) of the Code. In connection with the Recapitalization, no changes
will be made in any options to purchase shares of AmSurg common stock, except
that the shares of common stock authorized or subject to outstanding options
will become shares of Class A Common Stock, the number of shares authorized
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<PAGE> 109
or subject to outstanding options will be reduced on a one for three basis, and
the exercise price per share will be proportionately increased in the Reverse
Stock Split in accordance with the provisions of the plans under which such
options were granted.
2.4 Exchange. On or prior to the Distribution Date, AHC and AmSurg will
enter into an Exchange Agreement in substantially the form approved by the
AmSurg Board of Directors on the date hereof (the "Exchange Agreement").
Pursuant to the Exchange Agreement, on the Distribution Date, subject to the
satisfaction or waiver of the conditions set forth in Section 2.2 above and the
completion of the Recapitalization, (a) AHC will deliver to AmSurg a number of
shares of Class A Common Stock of AmSurg which will constitute all of the shares
of AmSurg Class A Common Stock held by AHC as provided in the Exchange Agreement
and (b) AmSurg will deliver to AHC the same number of shares of Class B Common
Stock.
2.5 Distribution. Subject to the satisfaction or waiver of the conditions
set forth in Section 2.2 above and the completion of the Recapitalization and
the Exchange, AHC will on the Distribution Date distribute to the AHC Holders
(as hereinafter defined) all of the shares of Class A Common Stock and Class B
Common Stock of AmSurg owned by AHC by delivering certificates for such shares
to the transfer agent for the AHC Common Stock (the "Transfer Agent") for
delivery to the AHC Holders. The Distribution shall be deemed to be effective
upon notification by AHC to the Transfer Agent that the Distribution has been
declared and is effective and that the Transfer Agent is authorized to proceed
with the Distribution. No fractional shares shall be delivered to the AHC
Holders in the Distribution. The shares that would otherwise be distributed as
fractional shares to AHC Holders will be sold by the Transfer Agent on behalf of
AHC Holders who would otherwise receive fractional shares and the proceeds of
such sale will be paid to such AHC Holders in lieu of such fractional shares.
The term "AHC Holders" means the holders of record of shares of AHC Common Stock
on the date established by the Board of Directors of AHC as the record date for
the Distribution (the "Distribution Record Date"). In connection with the
Distribution, the exercise price of all outstanding options to purchase shares
of AHC Common Stock and (if deemed appropriate by the Board of Directors AHC or
the committee of the Board of Directors of AHC administering such plans) the
number of shares of AHC Common Stock underlying such options shall be adjusted
to reflect the effect of the Distribution in accordance with the provisions of
the plans under which such options were granted.
2.6 Certain Related Agreements. Effective upon the Distribution, AHC will
enter into a Management and Human Services Agreement in substantially the form
approved by the AmSurg Board of Directors on the date hereof, and AmSurg will
assume all liabilities with respect to then current or former employees of
AmSurg under employee benefit plans maintained by AHC as provided in such
Management and Human Services Agreement. Following the Distribution, the
Sublease Agreement between AHC and AmSurg will be continued in accordance with
its terms.
2.7 Governance of AmSurg Following the Distribution. Prior to the
Distribution, AHC and AmSurg will agree on (a) a slate of directors to be
elected as the members of the Board of Directors of AmSurg effective upon the
Distribution and any terms and classes for such directors as may be agreed upon
by AHC and AmSurg, (b) the persons to be the executive officers of AmSurg
effective upon the Distribution, (c) the terms of any amendments to the Charter
of AmSurg (other than any amendments to the Charter necessary to implement the
Recapitalization in accordance with Section 2.3 hereof and the amendments
referred to in Section 2.2(e) hereof) to be effective upon the Distribution, (d)
the terms of any amendments to the Bylaws of AmSurg to be effective upon the
Distribution, (e) the terms of a new Employee Stock Incentive Plan to be
effective upon the Distribution and (f) the terms of advisory services to be
provided by each of Thomas G. Cigarran and Henry D. Herr for AmSurg to be
effective following the Distribution.
2.8 Stock Incentive Plans and Agreements of AmSurg. AHC and AmSurg hereby
agree that none of the transactions contemplated by this Distribution Agreement,
including the Recapitalization, the Exchange and the Distribution, will
constitute, individually or in the aggregate, a "change in control" under the
terms of any stock incentive plan, stock incentive agreement, employment or
severance agreement, or similar plan or agreement of AmSurg.
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<PAGE> 110
ARTICLE III
COVENANTS PRIOR TO THE DISTRIBUTION
3.1 Actions Prior to the Distribution. As promptly as practicable after
the date hereof and prior to the Distribution Date:
(a) AHC and AmSurg shall prepare, and shall file with the SEC, either
(i) a Registration Statement on Form 10 under the Exchange Act, which shall
set forth appropriate disclosure concerning AmSurg, the Distribution and
certain other matters, or (ii) if AHC determines that the Distribution may
not be effected without registration under the Securities Act, a
registration statement under the Securities Act on an appropriate form
covering the AmSurg common stock (the "33 Act Registration Statement") and
a registration statement under the Exchange Act (the "34 Act Registration
Statement"), which may include or incorporate by reference the information
contained in the filings referred to in the 33 Act Registration Statement.
AHC and AmSurg will use their best efforts to cause the Registration
Statement on Form 10 or the 34 Act Registration Statement and the 33 Act
Registration Statement, to be declared effective. The Registration
Statement on Form 10 or 33 Act Registration Statement shall also serve as
an Information Statement with respect to the Distribution to be delivered
to the AHC Holders.
(b) AHC and AmSurg shall cooperate in preparing, filing with the SEC
and causing to become effective any registration statements or amendments
thereto which are appropriate to reflect the establishment of, or
amendments to, any employee benefit and other plans contemplated by this
Agreement.
(c) AHC and AmSurg shall take all such action as may be necessary or
appropriate under state securities or "Blue Sky" laws in connection with
the transactions contemplated by this Agreement.
(d) AmSurg shall prepare and file and seek to make effective, an
application to permit the inclusion on The Nasdaq Stock Market's National
Market or the listing on a national securities exchange of each class of
common stock of AmSurg to be distributed in the Distribution and each class
into which such class or classes may be converted; provided, however, that
no class that cannot by its terms be traded shall be required to be so
included or listed.
(e) AHC shall request the Division of Corporation Finance of the SEC
to issue a no-action letter to the effect that it will not recommend
enforcement action to the SEC if the Distribution is effected without
registration under the Securities Act and such other matters as AHC or its
counsel may deem necessary or appropriate.
(f) AmSurg shall duly call and hold a meeting of its shareholders, and
shall prepare and deliver to its shareholders a proxy statement with
respect to such meeting, to approve the terms of the Recapitalization, the
matters referred to in Section 2.7(a), (c), (d), (e) and (f) hereof and any
other matters requiring approval in connection with the transactions
contemplated by this Agreement.
(g) In addition to the actions specifically provided for elsewhere in
this Agreement, each of the parties hereto shall use its reasonable best
efforts to take or cause to be taken, all actions, and to do, or cause to
be done, all things reasonably necessary, proper or advisable under
applicable laws, regulations and agreements to consummate and make
effective the transactions contemplated by this Agreement, including,
without limitation, using its best efforts to obtain the consents and
approvals to enter into any amendatory agreements and to make the filings
and applications necessary or desirable to have been obtained, entered into
or made in order to consummate the transactions contemplated by this
Agreement.
3.2 Amendment to AmSurg Documents. In order to better prepare itself for
becoming a publicly traded company, AmSurg may amend or establish new employee
benefit plans and amend or adopt other corporate documents as the Board of
Directors of AmSurg may deem reasonably necessary or appropriate, subject to
shareholder approval if necessary. AHC, as shareholder of AmSurg, shall vote in
favor of any such actions submitted to shareholders of AmSurg to the extent that
AHC agrees that such actions are necessary or appropriate for AmSurg as an
independent public company.
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<PAGE> 111
3.3 Agreement to Vote. AHC, in its capacity as a shareholder of AmSurg,
hereby agrees to vote all shares of capital stock of AmSurg owned by AHC in
favor of the Recapitalization, the matters referred to in Section 2.7(a), (c),
(d), (e) and (f) and, subject to Section 3.2 above, any other matters requiring
the approval of the shareholders of AmSurg in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
COVENANTS FOLLOWING THE DISTRIBUTION
4.1 Compliance with IRS Ruling. Following the Distribution, each of AHC
and AmSurg shall, and shall use its best efforts to cause each of its respective
affiliates and subsidiaries to, comply with each representation and statement
made, or to be made, to any taxing authority in connection with the IRS Ruling
or any other ruling obtained, or to be obtained, by AmSurg and AHC acting
together, from the IRS or any other taxing authority with respect to any
transaction contemplated by this Agreement.
4.2 Provision of Corporate Records. Except as may otherwise be provided in
a Related Agreement, AHC shall arrange as soon as practicable following the
Distribution Date, to the extent not previously delivered in connection with the
transactions contemplated herein, for the transportation to AmSurg of the AmSurg
Books and Records (as hereinafter defined) in its possession except to the
extent such items are already in the possession of AmSurg or any of its
subsidiaries. The AmSurg Books and Records shall be the property of AmSurg, but
shall be available to AHC for review and duplication as is reasonably necessary
until AHC shall notify AmSurg in writing that such records are no longer of use
to AHC. "AmSurg Books and Records" means the books and records (including
computerized records) of AmSurg and its subsidiaries and any other books and
records of AHC or its subsidiaries which relate principally to the business of
AmSurg and its subsidiaries, are necessary to conduct the business of AmSurg and
its subsidiaries, or are required by law to be retained by AmSurg or its
subsidiaries, including, without limitation, all such books and records relating
to AmSurg employees, original corporate minute books, stock ledgers and
certificates and corporate seals, and all licenses, leases, agreements and
filings, relating to AmSurg or its subsidiaries or their businesses.
4.3 Access to Information. Except as otherwise provided in a Related
Agreement, from and after the Distribution Date, AHC shall afford to AmSurg and
its authorized accountants, counsel and other designated representatives
reasonable access (including using reasonable efforts to give access to persons
or firms possessing information) and duplicating rights during normal business
hours to all records, books, contracts, instruments, computer data and other
data and information relating to pre-Distribution operations (collectively,
"Information") within AHC's possession insofar as such access is reasonably
required by AmSurg for the conduct of its business, subject to appropriate
restrictions for classified or privileged information. Similarly, except as
otherwise provided in a Related Agreement, AmSurg shall afford to AHC and its
authorized accountants, counsel and other designated representatives reasonable
access (including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
Information within AmSurg's possession, insofar as such access is reasonably
required by AHC for the conduct of its business, subject to appropriate
restrictions for classified or privileged information. Information may be
requested under this Article IV for the legitimate business purposes of either
party, including without limitations, audit, accounting, claims, litigation and
tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing this Agreement and transactions contemplated
hereby.
4.4 Production of Witnesses. At all times from and after the Distribution
Date, each of AmSurg and AHC shall use reasonable efforts to make available to
the other, upon written request, its and its subsidiaries' officers, directors,
employees and agents as witnesses to the extent that such persons may reasonably
be required in connection with any legal, administrative or other proceedings in
which the requesting party may be involved.
4.5 Retention of Records. Except as otherwise required by law or agreed to
in a Related Agreement or otherwise in writing, each of AmSurg and AHC may
destroy or otherwise dispose of any of the Information at any time after the
seventh anniversary of this Agreement. Notwithstanding the foregoing, either
party may
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destroy or dispose of such Information at any time if prior to such destruction
or disposal, (a) it shall provide no less than 90 or more than 120 days prior
written notice to the other, specifying in reasonable detail the Information
proposed to be destroyed or disposed of and (b) if a recipient of such notice
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the Information as
was requested at the expense of the party requesting such Information.
4.6 Confidentiality. Each party shall hold, and shall cause its officers,
employees, agents, consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law, all non-public Information
concerning the other party furnished it by such other party or its
representatives pursuant to this Agreement (except to the extent that such
Information can be shown to have been (a) available to such party on a
non-confidential basis prior to its disclosure by the other party, (b) in the
public domain through no fault of such party or (c) later lawfully acquired from
other sources by the party to which it was furnished), and each party shall not
release or disclose such Information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors who
agree to be bound by the provisions of this Section 4.6. Each party shall be
deemed to have satisfied its obligation to hold confidential Information
concerning or supplied by the other party if it exercises the same care as it
takes to preserve confidentiality for its own similar confidential Information.
4.7 Indemnification. From and after the Distribution Date, except as
otherwise provided in any Related Agreement, (a) AHC will indemnify and hold
AmSurg harmless from and against all liabilities with respect to the business
and assets of AHC and its subsidiaries (other than AmSurg and its subsidiaries)
whether arising before or after the Distribution Date, other than liabilities
arising out of the gross negligence or fraud of AmSurg and (b) AmSurg will
indemnify and hold AHC harmless from and against all liabilities with respect to
the business and assets of AmSurg and its subsidiaries, whether arising before
or after the Distribution Date, other than liabilities arising out of the gross
negligence or fraud of AHC.
ARTICLE V
MISCELLANEOUS AND GENERAL
5.1 Termination; Modification or Amendment. This Agreement may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Recapitalization by mutual agreement of AmSurg and AHC. In the event of
such termination, no party shall have any liability of any kind to any other
party. The parties hereto may modify or amend this Distribution Agreement by
written agreement executed and delivered by authorized officers of the
respective parties.
5.2 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to transactions
occurring solely within the State of Delaware.
5.4 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and shall be
deemed to have been duly given (i) on the date of delivery if delivered by
facsimile (upon confirmation of receipt) or personally, (ii) on the first
business day following the date of dispatch if delivered by Federal Express or
other next-day courier service, or (iii) on the third business day following the
date of mailing if delivered by registered or certified mail; return receipt
requested, postage
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prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) If to AHC:
American Healthcorp, Inc.
One Burton Hills Boulevard
Nashville, Tennessee 37215
Attention: Thomas G. Cigarran
with a copy to:
James H. Cheek, III
Bass, Berry & Sims PLC
2700 First American Center
Nashville, TN 37238
(b) If to AmSurg:
AmSurg Corp.
One Burton Hills Boulevard
Nashville, Tennessee 37215
Attention: Ken P. McDonald
with a copy to:
Byron R. Trauger
Doramus, Trauger & Ney
222 Fourth Avenue North
Nashville, Tennessee 37219
5.5 Captions. All section captions herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.
5.6 Assignment. This Agreement and all the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either party
without the prior written consent of the other party and any such assignment of
obligation shall relieve the assigning party from its responsibility hereunder.
Except as expressly otherwise provided herein, nothing contained in this
Agreement or the agreements referred to herein is intended to confer on any
person or entity other than the parties hereto and their respective successors
and permitted assigns any benefit, rights or remedies under or by reason of this
Agreement and such other agreements.
5.7 Further Assurances. AHC and AmSurg will do such additional things as
are necessary or proper to carry out and effectuate the intent of this Agreement
or any part hereof or the transactions contemplated hereby.
5.8 Expenses. Each party will bear its own expenses in connection with the
transactions contemplated by this Agreement; provided, however, that (a) AHC and
AmSurg will share equally the costs of (i) preparing the Registration Statement
on Form 10 (or the 33 Act Registration Statement and 34 Act Registration
Statement, as applicable), (ii) preparing the Distribution Agreement and Related
Agreements and (iii) preparing the no-action letter; (b) AmSurg will be
responsible for the costs of (i) preparing and, as required, filing any charter
amendment or merger required to effect the Recapitalization, (ii) preparing,
printing (or reproducing) and mailing a proxy statement for purposes of
soliciting the votes of shareholders of AmSurg in order to effect the
Recapitalization and to obtain any other required approvals of the shareholders
of AmSurg, (iii) listing or other inclusion of the shares of AmSurg common stock
on the Nasdaq National Market or on a national securities exchange, (iv) the
SEC's registration fees, (v) any required registration or qualification of any
shares of AmSurg common stock under state Blue Sky and securities laws, (vi) the
preparation of stock certificates for the shares of AmSurg common stock to be
distributed in connection with
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<PAGE> 114
the Recapitalization, the Exchange and the Distribution, (vii) the fees and
expenses of J.C. Bradford & Co., (viii) the fees of Doramus, Trauger & Ney and,
with respect to services performed on behalf of AmSurg, Bass, Berry & Sims PLC,
(ix) preparing and auditing the separate financial statements of AmSurg and its
consolidated subsidiaries and (x) obtaining any governmental or third party
consents or approvals required to be obtained on the part of AmSurg in
connection with the transactions contemplated by this Agreement; and (c) AHC
will be responsible for the costs of (i) preparing the Ruling Request, (ii)
printing (or reproducing) and mailing the Information Statement included in the
Registration Statement on Form 10 to AHC Holders, (iii) the fees and expenses of
the Transfer Agent in connection with the Distribution, (iv) the fees and
expenses of Morgan Keegan & Co., Inc. and Houlihan, Lokey, Howard & Zukin, (v)
the fees and expenses of Bass, Berry & Sims PLC with respect to services
performed on behalf of AHC, (vi) preparing and auditing the financial statements
of AHC and its consolidated subsidiaries (except for the separate financial
statements of AmSurg and its consolidated subsidiaries as provided in clause
(b)(ix) above) and (vii) obtaining any governmental or third party consents or
approvals required to be obtained on the part of AHC in connection with the
transactions contemplated by this Agreement.
5.9 Dispute Resolution.
(a) Submission of Disputes to Arbitration. Any claims, demands,
disputes, differences, controversies, and/or misunderstandings arising
under, out of, or in connection with, or in relation to this Agreement
(collectively, a "Dispute"), shall be settled by submission of such Dispute
(if not theretofore resolved by the parties hereto) within 45 days of
assertion to arbitration in accordance with the provisions of this Section
5.9 and the Commercial Arbitration Rules of the American Arbitration
Association.
(b) Selection of Arbitrators.
(i) The parties may agree upon one arbitrator whose decision will
be final and binding on them; otherwise there shall be three
arbitrators, with one named in writing by each party and the third
chosen by these two arbitrators (without necessary delay), and the
decision in writing signed by those assenting thereto of any two of the
arbitrators shall be final and binding on the parties.
(ii) No one shall be nominated or act as an arbitrator who is in
any way financially interested in this Agreement or in the business of
either party hereto.
(c) Consent to Jurisdiction. Any and all arbitrations shall take
place pursuant to the laws of the State of Delaware, and consent is hereby
given to jurisdiction of courts of the State of Delaware over the parties
to this Agreement in reference to any matter arising out of arbitration or
this Agreement, including but not limited to confirmation of any award and
enforcement thereof by entry of judgment thereon or by any other legal
remedy.
(d) Costs of Arbitration. The cost of any arbitration (including the
fees of the arbitrator or arbitrators) pursuant to this Agreement shall be
borne equally by each party to the Dispute, unless otherwise determined by
the arbitrator or arbitrators.
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<PAGE> 115
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first
hereinabove written.
AMERICAN HEALTHCORP, INC.
By: /s/ HENRY D. HERR
------------------------------------
Name: Henry D. Herr
Title: Executive Vice President
AMSURG CORP.
By: /s/ CLAIRE M. GULMI
------------------------------------
Name: Claire M. Gulmi
Title: Senior Vice President
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<PAGE> 116
APPENDIX B
J.C. Bradford (Letterhead)
March 7, 1997
Special Committee of the Board of Directors
AmSurg Corp.
One Burton Hills Boulevard
Suite 350
Nashville, TN 37215
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the outstanding common stock, par value $0.01 per
share (the "AmSurg Common Stock"), of AmSurg Corp. (the "Company" or "AmSurg"),
other than American Healthcorp, Inc. ("AHC") (such shareholders being
collectively referred to herein as the "Unaffiliated Shareholders"), of the
proposed recapitalization (the "Recapitalization") and proposed exchange (the
"Exchange") of the Common Stock, and the proposed distribution (the
"Distribution") to the holders of AHC common stock, par value $0.001 per share
(the "AHC Common Stock") of all the outstanding AmSurg Common Stock owned by
AHC. For purposes of this opinion, we have assumed that the draft Distribution
Agreement in the form previously provided to us will not vary in any material
respect form the Distribution Agreement to be signed by the parties thereto.
The Recapitalization provides for, among other things, the conversion of
all shares of AmSurg Common Stock into shares of newly-issued AmSurg Class A
Common Stock, no par value (the "Class A Common Stock"), which will reduce on a
1 for 3 basis the number of outstanding shares of Common Stock through a reverse
stock split (the "Reverse Stock Split"). Immediately following the Reverse Stock
Split, AHC will exchange its shares of Class A Common Stock for shares of Class
B common stock, no par value (the "Class B Common Stock"). The sole purpose for
the Exchange is to increase the voting power of AHC in AmSurg prior to the
Distribution to the extent required in order for the Distribution to qualify for
substantially tax-free treatment for federal income tax purposes. The shares of
Class A Common Stock will have one vote per share on all matters, while the
shares of Class B Common Stock will have 7 votes per share on the election or
removal of directors of AmSurg and one vote per share on all other matters. The
shares of Class B Common Stock will convert automatically into shares of Class A
Common Stock upon the first transfer following the Distribution. The shares of
Class A and Class B Common Stock will be entitled to share ratably in any
dividends other than dividends payable with respect to AmSurg preferred stock.
In all other respects, the Class A Common Stock and Class B Common Stock will be
identical. No further shares of Class B Common Stock will be issued following
the Distribution.
In the Distribution, each holder of AHC Common Stock on the Distribution
Record Date will receive a dividend of 69 shares of AmSurg Class B Common Stock
for every 100 shares of AHC Common Stock owned by such holder on the
Distribution Record Date, with cash being paid in lieu of fractional interests
in a share of Class B Common Stock.
J.C. Bradford & Co., as part of its investment banking business, engages in
the valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate,
and other purposes.
J.C. Bradford (Address)
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<PAGE> 117
We have acted as financial advisor to the Special Committee of the Board of
Directors of AmSurg in connection with the proposed Recapitalization, Exchange
and Distribution and will receive a fee from the Company for our services. In
addition, the Company has agreed to indemnify us for certain liabilities arising
out of the rendering of this opinion.
In conducting our analyses and arriving at our opinion, we have considered
such financial and other information as we deemed appropriate including, among
other things, the following: (i) the proposed terms of the Recapitalization,
Exchange and Distribution; (ii) the historical and current financial position
and results of operations of AHC as set forth in its periodic reports and proxy
materials filed with the Securities and Exchange Commission; (iii) the audited
financial statements of AmSurg for the fiscal years ended December 31, 1992,
1993, 1994, 1995 and 1996, as contained in the Information Statement; (iv)
certain internal operating data and financial analyses, including forecasts of
AmSurg for the years beginning January 1, 1996 and ending December 31, 2001,
which assume no future changes in accounting principles which would have a
material affect on AmSurg's financial statements; (v) the past and current
business, financial condition and prospects of AmSurg and AHC as discussed with
certain senior officers of AmSurg and AHC; (vi) certain financial, operating and
securities trading data of certain other public companies that we believed to be
comparable to AmSurg or relevant to the transaction, with such information taken
from individual companies' annual reports, SEC Forms 10-K and 10-Q; (vii) the
financial terms of certain other transactions that we believed to be relevant;
(viii) data relating to public companies with two classes of stock, including an
analysis of float of the classes, historical price and volume data, data
relating to voting rights of the stocks, and data relating to economic
differences in the classes, such as different dividend rights; (ix) reported
price and trading activity for the shares of AHC Common Stock; (x) a draft of
the Information Statement included in the registration Statement on Form 10 for
the AmSurg Common Stock filed with the Securities and Exchange Commission; (xi)
the tax ruling request, as supplemented, to the Internal Revenue Service from
AHC and AmSurg; and (xii) such other financial studies, analyses, and
investigations as we deemed appropriate for purposes of our opinion.
We have taken into account our assessment of general economic, market, and
financial and other conditions and our experience in other transactions, as well
as our experience in securities valuation and our knowledge of the industries in
which AmSurg and AHC operate generally. Our opinion is necessarily based upon
the information made available to us and conditions as they exist and can be
evaluated as of the date hereof.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us for purposes of our opinion and have not
assumed any responsibility for, nor undertaken an independent verification of,
such information. With respect to the internal operating data and financial
analyses and forecasts supplied to us, we have assumed that such data, analyses,
and forecasts were reasonably prepared on bases reflecting the best currently
available estimates and judgments of AmSurg's and AHC's respective senior
management as to the recent and likely future performance of their respective
companies. Accordingly, we express no opinion with respect to such analyses or
forecasts or the assumptions on which they are based. Also, we have not
conducted a physical inspection of all of the properties and facilities of
AmSurg and AHC, and we have not made an independent evaluation or appraisal of
the assets and liabilities of AmSurg and AHC or any of their respective
subsidiaries or affiliates and have not been furnished with any such evaluation
or appraisal.
AmSurg is entitled to reproduce this opinion, in whole or in part, in its
Form 10 filed with the Securities and Exchange Commission and in any proxy
statement circulated in connection with the Recapitalization, Exchange and
Distribution as required by applicable law or as may be appropriate; provided,
that any excerpt from or reference to this opinion (including any summary
thereof) in such document must be approved by us in advance in writing.
Notwithstanding the foregoing, this opinion does not constitute a recommendation
to any holder of shares of AmSurg Common Stock to vote in favor of the
Recapitalization, Exchange and Distribution. We were engaged by the Special
Committee of the Board of Directors of AmSurg to render this opinion, upon the
Special Committee's request, in connection with the discharge of its fiduciary
obligations and understand and consent to the fact that the AmSurg Board of
Directors has received copies of this Opinion and is entitled to rely upon it in
connection with the discharge of its fiduciary duties. We have advised
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the Special Committee of the Board of Directors that we do not believe that any
person (including a shareholder of the Company) other than the Special Committee
of the Board of Directors and the Board of Directors has the legal right to rely
upon this opinion for any claim arising under state law and that, should any
such claim be brought against us, this assertion will be raised as a defense. In
the absence of governing authority, this assertion will be resolved by the final
adjudication of such issue by a court of competent jurisdiction. Resolution of
this matter under state law, however, will have no effect on the rights and
responsibilities of any person under the federal securities laws or on the
rights and responsibilities of AmSurg's Board of Directors under applicable
state law.
Based upon and subject to the foregoing, and based upon such other matters
as we consider relevant, it is our opinion that, as of the date hereof, the
Recapitalization, Exchange and Distribution are fair to the Unaffiliated
Shareholders from a financial point of view.
Sincerely,
/s/ J.C. BRADFORD & CO.
--------------------------------------
J.C. BRADFORD & CO.
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<PAGE> 119
MORGAN KEEGAN
- --------------------------------------------------------------------------------
MORGAN KEEGAN & COMPANY, INC.
MORGAN KEEGAN TOWER
FIFTY FRONT STREET
MEMPHIS, TENNESSEE 38103
901/524-4100 TELEX 69-74324
WATS 800/368-7426
MEMBERS NEW YORK STOCK EXCHANGE, INC.
APPENDIX C
March 7, 1997
The Board of Directors
American Healthcorp, Inc.
One Burton Hills Boulevard
Nashville, TN 37215
Gentlemen:
We have acted as financial advisor to American Healthcorp, Inc., a Delaware
corporation ("AHC"), in connection with the proposed recapitalization (the
"Recapitalization") of the common stock of AmSurg Corp., a Tennessee Corporation
("AmSurg"), the proposed exchange of AHC's Class A Common Stock in AmSurg for
Class B Common Stock in AmSurg ("the Exchange") and the proposed distribution
(the "Distribution") to the holders of AHC common stock, par value $0.001 per
share (the "AHC Common Stock"), of 59% of the outstanding common stock, no par
value (the "AmSurg Common Stock") of AmSurg. We have been advised that the
purposes of the Recapitalization, the Exchange and the Distribution are as set
forth in the Information Statement proposed to be sent to the stockholders of
AHC, a draft of which has been furnished to us. The Recapitalization, the
Exchange and the Distribution are described more fully in such Information
Statement. You have requested our opinion as to whether the Recapitalization,
the Exchange and the Distribution are fair to the holders of AHC Common Stock
from a financial point of view. We have assumed that the Distribution will be
substantially tax-free to AHC and its stockholders as set forth in the
Information Statement. We have not been asked to, and do not, express any
opinion as to the valuation, future performance or long-term viability of AmSurg
or AHC as an independent public company following either the Recapitalization,
the Exchange or the Distribution. This opinion does not opine on or give any
assurance of the prices at which the shares of AHC Common Stock, AmSurg Class A
Common Stock, or AmSurg Class B Common Stock will actually trade after the
Distribution.
In connection with our review of the Recapitalization, the Exchange and the
Distribution, and in arriving at our opinion, we have, among other things:
(i) reviewed the publicly available consolidated financial statements
of AHC and certain other relevant financial and operating data of AHC made
available to us from published sources and by officers of AHC;
(ii) reviewed the financial statements of AmSurg contained in the
Information Statement;
(iii) reviewed certain internal financial and operating information,
including certain projections, relating to AHC and AmSurg prepared by the
managements of AHC and AmSurg, respectively;
(iv) discussed the business, financial condition and prospects of AHC
with certain officers of AHC;
(v) discussed the business, financial condition and prospects of
AmSurg with certain officers of AHC and AmSurg;
(vi) reviewed the financial terms of the Recapitalization, the
Exchange and the Distribution;
(vii) reviewed the financial terms, to the extent publicly available,
of certain transactions we deemed relevant;
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(viii) reviewed certain publicly available information relating to
certain companies we deemed appropriate in analyzing AHC and AmSurg;
(ix) reviewed the trading history of AHC Common Stock;
(x) reviewed a draft of the Information Statement to be included in
the Registration Statement on Form 10 for the AmSurg Common Stock to be
filed with the Securities and Exchange Commission (the "Information
Statement") ;
(xi) reviewed the tax ruling request filed on behalf of AHC and AmSurg
that seeks a ruling that, among other things, the Distribution will be
substantially tax-free to AHC and its stockholders; and
(xii) performed such other analyses and examinations and considered
such other information, financial studies, analysis and investigations and
financial, economic and market data as we deemed relevant.
We have not independently verified any of the information concerning AHC or
AmSurg considered in connection with our review of the Recapitalization, the
Exchange and the Distribution and, for purposes of the opinion set forth herein,
we have assumed and relied upon the accuracy and completeness of all such
information. With respect to the financial forecasts and projections made
available to us and used in our analysis, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the managements of AHC and AmSurg as to the expected future
financial performance of their respective companies. In our analysis, we
considered the financial aspects of certain alternatives available to AHC,
including the sale of certain of AHC's subsidiaries to an unaffiliated
purchaser, the sale of all or a portion of AmSurg to the public through an
initial public offering, and the continuance of AmSurg as an AHC subsidiary. Our
opinion is necessarily based upon market, economic, financial and other
conditions as they exist on, and can be evaluated as of, the date of this
letter. Any change in such conditions would require a reevaluation of this
opinion.
In connection with our opinion, we have assumed that the Recapitalization,
the Exchange and the Distribution will be consummated on the terms and subject
to the conditions described in the Information Statement. We have also assumed
that all necessary governmental and regulatory approvals and third-party
consents will be obtained on terms and conditions that will not have a material
adverse effect on AHC or AmSurg.
Morgan Keegan & Company, Inc., as part of its investment banking services,
is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, corporate restructurings, strategic
alliances, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. We have acted as financial advisor to the Board of Directors of AHC in
connection with the Recapitalization, the Exchange and the Distribution and will
receive a fee for our services. Morgan Keegan & Company, Inc. may act as a
market maker and broker in AHC and AmSurg Common Stock following the
Distribution.
This letter and the opinion stated herein are solely for the use of AHC's
Board of Directors and may not be reproduced, summarized, excerpted from or
otherwise publicly referred to in any manner without our prior written consent.
Based upon and subject to the foregoing and such other matters as we deem
relevant, we are of the opinion that as of the date hereof, the
Recapitalization, the Exchange and the Distribution are fair to the holders of
AHC Common Stock from a financial point of view.
We hereby consent to the inclusion of the full extent of our opinion and a
summary thereof in the Registration Statement on Form 10 for AmSurg and the AHC
Information Statement and to references to our name therein.
Sincerely,
/s/ MORGAN KEEGAN & COMPANY, INC.
--------------------------------------
Morgan Keegan & Company, Inc.
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PART II.
RECENT SALES OF UNREGISTERED SECURITIES
During the period beginning February 1, 1994 and ending March 11, 1997,
AmSurg has issued the following securities:
(A) At various times since February 1, 1994, AmSurg has sold an
aggregate of 2,415,990 shares of common stock to certain founding
stockholders and AHC for per share stock prices ranging from $2.94 to
$5.37. These purchases were primarily used to fund the continued operations
of AmSurg, including acquisitions and development of surgery centers during
that period. On February 26, 1996, AHC exercised warrants issued to it by
AmSurg for the purchase of 85,906 shares of AmSurg common stock at a per
share exercise price of $2.70. The warrants were issued in consideration
for AHC's guaranty of AmSurg debt.
(B) At various times since February 1, 1994, AmSurg has granted
options to purchase shares of AmSurg common stock to various employees.
Options to purchase 2,917 shares of AmSurg common stock were exercised on
July 26, 1996 at per share prices ranging from $2.52 to $3.33.
(C) At various times since February 1, 1994, AmSurg has sold an
aggregate of 1,321,097 shares of common stock to physician practices and
individual physicians as partial consideration in connection with the
acquisitions of surgery centers and in private placements to physician
partners in connection with the development of surgery centers. The per
share prices of these sales ranged from $2.94 to $5.91.
(D) On November 20, 1996, AmSurg sold an aggregate of 500,000 shares
of Series A Preferred Stock and 416,666 shares of Series B Preferred Stock
to three investors in a private placement. The per share price for the
Series A Preferred Stock and Series B Preferred Stock was $6.00 for an
aggregate sale price of $5,500,000.
The shares described above were issued without registration under the
Securities Act in reliance upon the exemptions from registration afforded by
Section 4(2) of the Securities Act and Regulation D of the Securities Act.
Reference is made to "THE DISTRIBUTION -- The Exchange" regarding shares of
AmSurg Common Stock to be issued in connection with the Exchange. Such issuance
will occur without registration under the Securities Act in reliance upon the
exemption from registration afforded by Section 3(a)(9) of the Securities Act.
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<PAGE> 122
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
AMSURG CORP.
By: /s/ KEN P. MCDONALD
------------------------------------
Name: Ken P. McDonald
Title: President
Date: March 11, 1997
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<PAGE> 123
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <S> <C>
(2.1) -- Distribution Agreement
(2.2) -- Exchange Agreement
(3.1) -- Amended and Restated Charter of AmSurg
(3.2) -- Amended and Restated Bylaws of AmSurg
*(4.1) -- Specimen certificate representing the Class A Common Stock
*(4.2) -- Specimen certificate representing the Class B Common Stock
(4.3) -- Form of Stockholders' Agreement between AmSurg and certain
investors
*(4.4) -- Preferred Stock Purchase Agreement dated as of November 20,
1996 by and among AmSurg, Electra Investment Trust P.L.C.,
Capitol Health Partners, L.P. and Michael E. Stevens.
(10.1) -- Form of Management and Human Resources Agreement between
AmSurg and AHC
(10.2) -- Registration Agreement, dated April 2, 1992, as amended
November 30, 1992, and November 20, 1996 among AmSurg and
certain named investors therein
(10.3) -- Form of Indemnification Agreement with directors, executive
officers and advisors
(10.4) -- Amended and Restated Loan Agreement dated as of June 25,
1996 between AmSurg and SunTrust Bank, Nashville, N.A.
(10.5) -- Sublease dated as of June 9, 1996 between AHC and AmSurg
(10.6) -- Letter Agreement dated as of December 31, 1996 between
AmSurg and AHC
(10.7) -- 1992 Stock Option Plan
(10.8) -- 1997 Stock Incentive Plan
(10.9) -- Form of Employment Agreement with executive officers
(10.10) -- Form of Advisory Agreement with Thomas G. Cigarran and Henry
D. Herr
(21.1) -- Subsidiaries of AmSurg
(27.1) -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
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<PAGE> 1
EXHIBIT 2.1
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, dated as of March 7, 1997 (this "Agreement"),
by and between American Healthcorp, Inc., a Delaware corporation ("AHC"), and
AmSurg Corp., a Tennessee corporation ("AmSurg").
W I T N E S S E T H
WHEREAS, AHC currently owns approximately fifty-nine percent (59%) of the
outstanding shares of common stock of AmSurg;
WHEREAS, AmSurg has, since its inception, depended principally on AHC for
its equity financing and has historically depended on AHC for debt financing;
WHEREAS, the Board of Directors of AHC and the Board of Directors of AmSurg
have determined that it is desirable for business reasons and in the best
interests of AHC's and AmSurg's shareholders for AmSurg to have access to
capital markets as an independent publicly traded company without the majority
ownership of AHC;
WHEREAS, subject to the terms and conditions hereof, AHC has agreed to
distribute (the "Distribution") to the holders of AHC's common stock, par value
$.001 per share (the "AHC Common Stock"), on a pro rata basis, all of the shares
of common stock of AmSurg owned by AHC;
WHEREAS, in order to facilitate the trading of the common stock of AmSurg
following the Distribution, AmSurg intends to effect a reverse stock split (or a
transaction having the effect of a reverse stock split) with respect to such
shares of common stock;
WHEREAS, in order to effect the Distribution as a substantially tax-free
transaction under Section 355 of the Internal Revenue Code of 1986, as amended
(the "Code"), AmSurg and AHC have agreed to exchange all of the shares of common
stock of AmSurg currently owned by AHC for shares of a new class of common stock
of AmSurg having a sufficient number of votes per share to give AHC the ability
to distribute "control" within the meaning of Section 368(c) of the Code;
WHEREAS, AHC and AmSurg have determined that it is necessary and desirable
to set forth the principal corporate transactions required to effect the
Distribution, and to set forth the agreements that will govern certain matters
following the Distribution.
NOW, THEREFORE, in consideration of the premises, and of the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall have
the following respective meanings:
"common stock" with respect to AmSurg means any class of common stock
of AmSurg now or hereafter authorized.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"IRS" means the Internal Revenue Service.
"IRS Ruling" means the letter ruling issued by the IRS in response to
the Ruling Request.
"Related Agreements" means the Exchange Agreement and the Management
and Human Resources Agreement, attached hereto as Exhibits to this
Agreement.
<PAGE> 2
"Ruling Request" means the private letter ruling request filed by AHC
with the IRS on November 21, 1996, as supplemented and amended from time to
time, with respect to certain tax matters relating to the Distribution.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE II
RECAPITALIZATION, EXCHANGE AND DISTRIBUTION
2.1 Recapitalization, Exchange and Distribution. Subject to the
satisfaction of the conditions set forth in Section 2.2 hereof, on the date
established in accordance with Section 2.5 as the date on which the Distribution
shall be effected (the "Distribution Date"):
(a) AmSurg will undertake a recapitalization in accordance with
Section 2.3 hereof (the "Recapitalization");
(b) Upon completion of the Recapitalization, AmSurg and AHC will
effect an exchange of all of the shares of AmSurg common stock owned by AHC
for shares of Class B Common Stock of AmSurg in accordance with Section 2.4
hereof (the "Exchange"); and
(c) Upon completion of the Exchange, AHC will effect the Distribution
in accordance with Section 2.5 hereof.
2.2 Conditions. The obligations of each of AHC and AmSurg to consummate
Recapitalization, the Exchange and the Distribution are subject to the
fulfillment of each of the following conditions, unless otherwise waived in
writing:
(a) The IRS Ruling shall have been granted in form and substance
satisfactory to AHC, in its sole discretion;
(b) A Registration Statement on Form 10 under the Exchange Act (or, if
deemed appropriate by AmSurg and AHC, a Registration Statement under the
Securities Act and a Registration Statement under the Exchange Act) with
respect to each class of common stock of AmSurg to be distributed in the
Distribution and each class of common stock of AmSurg into which such class
or classes may be converted shall have been declared effective by the SEC
or shall otherwise have become effective under the Exchange Act and, if
applicable, the Securities Act;
(c) The shares of each tradable class of common stock of AmSurg to be
distributed in the Distribution and each class of common stock into which
such class or classes may be converted shall have been approved for listing
on a national securities exchange or for inclusion on the Nasdaq National
Market or such other trading market as the parties may agree;
(d) The Recapitalization and the Exchange shall have been approved by
the holders of at least a majority of the voting power of the outstanding
shares of capital stock of AmSurg at a meeting of the shareholders of
AmSurg and, if dissenters' rights apply, holders of no more than 5% of the
outstanding shares of common stock of AmSurg shall have indicated their
intent to seek appraisal for their shares under the Tennessee Business
Corporation Act;
(e) The holders of the Series A Redeemable Preferred Stock and Series
B Convertible Preferred Stock, without par value, of AmSurg shall have
approved the modification and waiver of their rights to elect one director
of AmSurg effected through the AmSurg Charter and the Shareholders'
Agreement, dated as of April 2, 1992, as amended by Amendment No. 1 dated
September 27, 1993 and Amendment No. 2, dated as of November 20, 1996, by
and among AmSurg and the persons identified on the signature pages thereto
as the Founding Investors, the Founding Management and the Preferred Stock
Purchasers, in each case so as to permit AHC to distribute "control" within
the meaning of Section 368(c) of the Code;
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(f) The Special Committee of the Board of Directors of AmSurg shall
have received an opinion, acceptable to it, of J.C. Bradford & Co. as to
the fairness, from a financial point of view, of the Recapitalization,
Exchange and Distribution to shareholders of AmSurg other than AHC and such
other opinions as may be deemed appropriate by such committee and such
opinion or opinions shall not have been withdrawn;
(g) The Board of Directors of AHC shall have received an opinion,
acceptable to it, of Morgan Keegan & Co., Inc. as to the fairness, from a
financial point of view, of the Recapitalization, the Exchange and the
Distribution to the stockholders of AHC, a favorable opinion of Houlihan,
Lokey, Howard & Zukin as to certain solvency issues and such other opinions
as may be deemed appropriate by the Board of Directors of AHC and such
opinions shall not have been withdrawn;
(h) There shall be no proposed legislation or regulation introduced
which, if adopted, would have the effect of amending the Code so as to
alter in any materially adverse respect the substantially tax-free
treatment of the Distribution under Section 355 of the Code or the
classification of the Recapitalization and Exchange as a tax-free
organization under Section 368(a)(1)(E) of the Code;
(i) The matters set forth in Section 2.7(a), (c), (d), (e) and (f)
shall have been approved by the shareholders of AmSurg; and
(j) Any required waiting period applicable to the Exchange or the
Distribution under the HartScott-Rodino Antitrust Improvements Act of 1976,
as amended, shall have expired or otherwise terminated and AHC and AmSurg
shall each have obtained such other consents and approvals of federal,
state and local governmental authorities and other third parties as shall
be deemed necessary or appropriate by the Boards of Directors of AHC and
AmSurg in connection with the transactions contemplated hereby, and there
shall be no suit or governmental proceeding pending or overtly threatened
that would challenge the validity of or seek to enjoin the
Recapitalization, the Exchange or the Distribution.
2.3 Recapitalization. The Recapitalization will be effected, subject to
the satisfaction or waiver of the conditions set forth in Section 2.2 above,
through an amendment to the Charter of AmSurg. The Recapitalization will: (a)
reduce on a one for three basis the number of outstanding shares of common stock
of AmSurg through a reverse stock split (or transaction having the effect of a
reverse stock split), with the intention of permitting the shares of common
stock of AmSurg distributed in the Distribution to trade at proportionately
higher per share prices and thereby improving the trading markets for these
shares in order to facilitate subsequent equity financings and acquisition
transactions (the "Reverse Stock Split") and (b) authorize a new class of common
stock (the "Class B Common Stock") having seven votes per share in the election
of directors of AmSurg so that, when exchanged for all of the shares of common
stock of AmSurg then owned by AHC, AHC will own shares of common stock of AmSurg
sufficient to constitute "control" within the meaning of Section 368(c) of the
Code. The Reverse Stock Split will be accomplished by converting each three
shares of common stock of AmSurg outstanding immediately prior to the Reverse
Stock Split into a single share of a newly authorized class of common stock of
AmSurg, denominated Class A Common Stock (the "Class A Common Stock"). Following
the Recapitalization the only authorized classes of common stock will be Class A
Common Stock and Class B Common Stock. Unless otherwise required by the IRS
Ruling, the Class A Common Stock and Class B Common Stock will have the terms
substantially as set forth in the Amended and Restated Charter approved by the
AmSurg Board of Directors on the date hereof. It is understood and agreed that
the number of votes per share of Class B Common Stock is required to be
sufficient to enable AHC to distribute, in the Distribution, "control" of AmSurg
within the meaning of Section 368(c) of the Code, after giving effect to any
anticipated issuances of capital stock of AmSurg on the exercise of stock
options and any issuances in possible equity financing transactions and
acquisitions, but that AmSurg shall not issue more shares of Class B Common
Stock than are to be issued in the Exchange. The Recapitalization is intended to
qualify for tax free treatment, for federal income tax purposes, under Section
368(a)(1)(E) of the Code. In connection with the Recapitalization, no changes
will be made in any options to purchase shares of AmSurg common stock, except
that the shares of common stock authorized or subject to outstanding options
will become shares of Class A Common Stock, the number of shares authorized
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<PAGE> 4
or subject to outstanding options will be reduced on a one for three basis, and
the exercise price per share will be proportionately increased in the Reverse
Stock Split in accordance with the provisions of the plans under which such
options were granted.
2.4 Exchange. On or prior to the Distribution Date, AHC and AmSurg will
enter into an Exchange Agreement in substantially the form approved by the
AmSurg Board of Directors on the date hereof (the "Exchange Agreement").
Pursuant to the Exchange Agreement, on the Distribution Date, subject to the
satisfaction or waiver of the conditions set forth in Section 2.2 above and the
completion of the Recapitalization, (a) AHC will deliver to AmSurg a number of
shares of Class A Common Stock of AmSurg which will constitute all of the shares
of AmSurg Class A Common Stock held by AHC as provided in the Exchange Agreement
and (b) AmSurg will deliver to AHC the same number of shares of Class B Common
Stock.
2.5 Distribution. Subject to the satisfaction or waiver of the conditions
set forth in Section 2.2 above and the completion of the Recapitalization and
the Exchange, AHC will on the Distribution Date distribute to the AHC Holders
(as hereinafter defined) all of the shares of Class A Common Stock and Class B
Common Stock of AmSurg owned by AHC by delivering certificates for such shares
to the transfer agent for the AHC Common Stock (the "Transfer Agent") for
delivery to the AHC Holders. The Distribution shall be deemed to be effective
upon notification by AHC to the Transfer Agent that the Distribution has been
declared and is effective and that the Transfer Agent is authorized to proceed
with the Distribution. No fractional shares shall be delivered to the AHC
Holders in the Distribution. The shares that would otherwise be distributed as
fractional shares to AHC Holders will be sold by the Transfer Agent on behalf of
AHC Holders who would otherwise receive fractional shares and the proceeds of
such sale will be paid to such AHC Holders in lieu of such fractional shares.
The term "AHC Holders" means the holders of record of shares of AHC Common Stock
on the date established by the Board of Directors of AHC as the record date for
the Distribution (the "Distribution Record Date"). In connection with the
Distribution, the exercise price of all outstanding options to purchase shares
of AHC Common Stock and (if deemed appropriate by the Board of Directors AHC or
the committee of the Board of Directors of AHC administering such plans) the
number of shares of AHC Common Stock underlying such options shall be adjusted
to reflect the effect of the Distribution in accordance with the provisions of
the plans under which such options were granted.
2.6 Certain Related Agreements. Effective upon the Distribution, AHC will
enter into a Management and Human Services Agreement in substantially the form
approved by the AmSurg Board of Directors on the date hereof, and AmSurg will
assume all liabilities with respect to then current or former employees of
AmSurg under employee benefit plans maintained by AHC as provided in such
Management and Human Services Agreement. Following the Distribution, the
Sublease Agreement between AHC and AmSurg will be continued in accordance with
its terms.
2.7 Governance of AmSurg Following the Distribution. Prior to the
Distribution, AHC and AmSurg will agree on (a) a slate of directors to be
elected as the members of the Board of Directors of AmSurg effective upon the
Distribution and any terms and classes for such directors as may be agreed upon
by AHC and AmSurg, (b) the persons to be the executive officers of AmSurg
effective upon the Distribution, (c) the terms of any amendments to the Charter
of AmSurg (other than any amendments to the Charter necessary to implement the
Recapitalization in accordance with Section 2.3 hereof and the amendments
referred to in Section 2.2(e) hereof) to be effective upon the Distribution, (d)
the terms of any amendments to the Bylaws of AmSurg to be effective upon the
Distribution, (e) the terms of a new Employee Stock Incentive Plan to be
effective upon the Distribution and (f) the terms of advisory services to be
provided by each of Thomas G. Cigarran and Henry D. Herr for AmSurg to be
effective following the Distribution.
2.8 Stock Incentive Plans and Agreements of AmSurg. AHC and AmSurg hereby
agree that none of the transactions contemplated by this Distribution Agreement,
including the Recapitalization, the Exchange and the Distribution, will
constitute, individually or in the aggregate, a "change in control" under the
terms of any stock incentive plan, stock incentive agreement, employment or
severance agreement, or similar plan or agreement of AmSurg.
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<PAGE> 5
ARTICLE III
COVENANTS PRIOR TO THE DISTRIBUTION
3.1 Actions Prior to the Distribution. As promptly as practicable after
the date hereof and prior to the Distribution Date:
(a) AHC and AmSurg shall prepare, and shall file with the SEC, either
(i) a Registration Statement on Form 10 under the Exchange Act, which shall
set forth appropriate disclosure concerning AmSurg, the Distribution and
certain other matters, or (ii) if AHC determines that the Distribution may
not be effected without registration under the Securities Act, a
registration statement under the Securities Act on an appropriate form
covering the AmSurg common stock (the "33 Act Registration Statement") and
a registration statement under the Exchange Act (the "34 Act Registration
Statement"), which may include or incorporate by reference the information
contained in the filings referred to in the 33 Act Registration Statement.
AHC and AmSurg will use their best efforts to cause the Registration
Statement on Form 10 or the 34 Act Registration Statement and the 33 Act
Registration Statement, to be declared effective. The Registration
Statement on Form 10 or 33 Act Registration Statement shall also serve as
an Information Statement with respect to the Distribution to be delivered
to the AHC Holders.
(b) AHC and AmSurg shall cooperate in preparing, filing with the SEC
and causing to become effective any registration statements or amendments
thereto which are appropriate to reflect the establishment of, or
amendments to, any employee benefit and other plans contemplated by this
Agreement.
(c) AHC and AmSurg shall take all such action as may be necessary or
appropriate under state securities or "Blue Sky" laws in connection with
the transactions contemplated by this Agreement.
(d) AmSurg shall prepare and file and seek to make effective, an
application to permit the inclusion on The Nasdaq Stock Market's National
Market or the listing on a national securities exchange of each class of
common stock of AmSurg to be distributed in the Distribution and each class
into which such class or classes may be converted; provided, however, that
no class that cannot by its terms be traded shall be required to be so
included or listed.
(e) AHC shall request the Division of Corporation Finance of the SEC
to issue a no-action letter to the effect that it will not recommend
enforcement action to the SEC if the Distribution is effected without
registration under the Securities Act and such other matters as AHC or its
counsel may deem necessary or appropriate.
(f) AmSurg shall duly call and hold a meeting of its shareholders, and
shall prepare and deliver to its shareholders a proxy statement with
respect to such meeting, to approve the terms of the Recapitalization, the
matters referred to in Section 2.7(a), (c), (d), (e) and (f) hereof and any
other matters requiring approval in connection with the transactions
contemplated by this Agreement.
(g) In addition to the actions specifically provided for elsewhere in
this Agreement, each of the parties hereto shall use its reasonable best
efforts to take or cause to be taken, all actions, and to do, or cause to
be done, all things reasonably necessary, proper or advisable under
applicable laws, regulations and agreements to consummate and make
effective the transactions contemplated by this Agreement, including,
without limitation, using its best efforts to obtain the consents and
approvals to enter into any amendatory agreements and to make the filings
and applications necessary or desirable to have been obtained, entered into
or made in order to consummate the transactions contemplated by this
Agreement.
3.2 Amendment to AmSurg Documents. In order to better prepare itself for
becoming a publicly traded company, AmSurg may amend or establish new employee
benefit plans and amend or adopt other corporate documents as the Board of
Directors of AmSurg may deem reasonably necessary or appropriate, subject to
shareholder approval if necessary. AHC, as shareholder of AmSurg, shall vote in
favor of any such actions submitted to shareholders of AmSurg to the extent that
AHC agrees that such actions are necessary or appropriate for AmSurg as an
independent public company.
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3.3 Agreement to Vote. AHC, in its capacity as a shareholder of AmSurg,
hereby agrees to vote all shares of capital stock of AmSurg owned by AHC in
favor of the Recapitalization, the matters referred to in Section 2.7(a), (c),
(d), (e) and (f) and, subject to Section 3.2 above, any other matters requiring
the approval of the shareholders of AmSurg in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
COVENANTS FOLLOWING THE DISTRIBUTION
4.1 Compliance with IRS Ruling. Following the Distribution, each of AHC
and AmSurg shall, and shall use its best efforts to cause each of its respective
affiliates and subsidiaries to, comply with each representation and statement
made, or to be made, to any taxing authority in connection with the IRS Ruling
or any other ruling obtained, or to be obtained, by AmSurg and AHC acting
together, from the IRS or any other taxing authority with respect to any
transaction contemplated by this Agreement.
4.2 Provision of Corporate Records. Except as may otherwise be provided in
a Related Agreement, AHC shall arrange as soon as practicable following the
Distribution Date, to the extent not previously delivered in connection with the
transactions contemplated herein, for the transportation to AmSurg of the AmSurg
Books and Records (as hereinafter defined) in its possession except to the
extent such items are already in the possession of AmSurg or any of its
subsidiaries. The AmSurg Books and Records shall be the property of AmSurg, but
shall be available to AHC for review and duplication as is reasonably necessary
until AHC shall notify AmSurg in writing that such records are no longer of use
to AHC. "AmSurg Books and Records" means the books and records (including
computerized records) of AmSurg and its subsidiaries and any other books and
records of AHC or its subsidiaries which relate principally to the business of
AmSurg and its subsidiaries, are necessary to conduct the business of AmSurg and
its subsidiaries, or are required by law to be retained by AmSurg or its
subsidiaries, including, without limitation, all such books and records relating
to AmSurg employees, original corporate minute books, stock ledgers and
certificates and corporate seals, and all licenses, leases, agreements and
filings, relating to AmSurg or its subsidiaries or their businesses.
4.3 Access to Information. Except as otherwise provided in a Related
Agreement, from and after the Distribution Date, AHC shall afford to AmSurg and
its authorized accountants, counsel and other designated representatives
reasonable access (including using reasonable efforts to give access to persons
or firms possessing information) and duplicating rights during normal business
hours to all records, books, contracts, instruments, computer data and other
data and information relating to pre-Distribution operations (collectively,
"Information") within AHC's possession insofar as such access is reasonably
required by AmSurg for the conduct of its business, subject to appropriate
restrictions for classified or privileged information. Similarly, except as
otherwise provided in a Related Agreement, AmSurg shall afford to AHC and its
authorized accountants, counsel and other designated representatives reasonable
access (including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
Information within AmSurg's possession, insofar as such access is reasonably
required by AHC for the conduct of its business, subject to appropriate
restrictions for classified or privileged information. Information may be
requested under this Article IV for the legitimate business purposes of either
party, including without limitations, audit, accounting, claims, litigation and
tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing this Agreement and transactions contemplated
hereby.
4.4 Production of Witnesses. At all times from and after the Distribution
Date, each of AmSurg and AHC shall use reasonable efforts to make available to
the other, upon written request, its and its subsidiaries' officers, directors,
employees and agents as witnesses to the extent that such persons may reasonably
be required in connection with any legal, administrative or other proceedings in
which the requesting party may be involved.
4.5 Retention of Records. Except as otherwise required by law or agreed to
in a Related Agreement or otherwise in writing, each of AmSurg and AHC may
destroy or otherwise dispose of any of the Information at any time after the
seventh anniversary of this Agreement. Notwithstanding the foregoing, either
party may
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destroy or dispose of such Information at any time if prior to such destruction
or disposal, (a) it shall provide no less than 90 or more than 120 days prior
written notice to the other, specifying in reasonable detail the Information
proposed to be destroyed or disposed of and (b) if a recipient of such notice
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the Information as
was requested at the expense of the party requesting such Information.
4.6 Confidentiality. Each party shall hold, and shall cause its officers,
employees, agents, consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law, all non-public Information
concerning the other party furnished it by such other party or its
representatives pursuant to this Agreement (except to the extent that such
Information can be shown to have been (a) available to such party on a
non-confidential basis prior to its disclosure by the other party, (b) in the
public domain through no fault of such party or (c) later lawfully acquired from
other sources by the party to which it was furnished), and each party shall not
release or disclose such Information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors who
agree to be bound by the provisions of this Section 4.6. Each party shall be
deemed to have satisfied its obligation to hold confidential Information
concerning or supplied by the other party if it exercises the same care as it
takes to preserve confidentiality for its own similar confidential Information.
4.7 Indemnification. From and after the Distribution Date, except as
otherwise provided in any Related Agreement, (a) AHC will indemnify and hold
AmSurg harmless from and against all liabilities with respect to the business
and assets of AHC and its subsidiaries (other than AmSurg and its subsidiaries)
whether arising before or after the Distribution Date, other than liabilities
arising out of the gross negligence or fraud of AmSurg and (b) AmSurg will
indemnify and hold AHC harmless from and against all liabilities with respect to
the business and assets of AmSurg and its subsidiaries, whether arising before
or after the Distribution Date, other than liabilities arising out of the gross
negligence or fraud of AHC.
ARTICLE V
MISCELLANEOUS AND GENERAL
5.1 Termination; Modification or Amendment. This Agreement may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Recapitalization by mutual agreement of AmSurg and AHC. In the event of
such termination, no party shall have any liability of any kind to any other
party. The parties hereto may modify or amend this Distribution Agreement by
written agreement executed and delivered by authorized officers of the
respective parties.
5.2 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to transactions
occurring solely within the State of Delaware.
5.4 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and shall be
deemed to have been duly given (i) on the date of delivery if delivered by
facsimile (upon confirmation of receipt) or personally, (ii) on the first
business day following the date of dispatch if delivered by Federal Express or
other next-day courier service, or (iii) on the third business day following the
date of mailing if delivered by registered or certified mail; return receipt
requested, postage
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prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) If to AHC:
American Healthcorp, Inc.
One Burton Hills Boulevard
Nashville, Tennessee 37215
Attention: Thomas G. Cigarran
with a copy to:
James H. Cheek, III
Bass, Berry & Sims PLC
2700 First American Center
Nashville, TN 37238
(b) If to AmSurg:
AmSurg Corp.
One Burton Hills Boulevard
Nashville, Tennessee 37215
Attention: Ken P. McDonald
with a copy to:
Byron R. Trauger
Doramus, Trauger & Ney
222 Fourth Avenue North
Nashville, Tennessee 37219
5.5 Captions. All section captions herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.
5.6 Assignment. This Agreement and all the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either party
without the prior written consent of the other party and any such assignment of
obligation shall relieve the assigning party from its responsibility hereunder.
Except as expressly otherwise provided herein, nothing contained in this
Agreement or the agreements referred to herein is intended to confer on any
person or entity other than the parties hereto and their respective successors
and permitted assigns any benefit, rights or remedies under or by reason of this
Agreement and such other agreements.
5.7 Further Assurances. AHC and AmSurg will do such additional things as
are necessary or proper to carry out and effectuate the intent of this Agreement
or any part hereof or the transactions contemplated hereby.
5.8 Expenses. Each party will bear its own expenses in connection with the
transactions contemplated by this Agreement; provided, however, that (a) AHC and
AmSurg will share equally the costs of (i) preparing the Registration Statement
on Form 10 (or the 33 Act Registration Statement and 34 Act Registration
Statement, as applicable), (ii) preparing the Distribution Agreement and Related
Agreements and (iii) preparing the no-action letter; (b) AmSurg will be
responsible for the costs of (i) preparing and, as required, filing any charter
amendment or merger required to effect the Recapitalization, (ii) preparing,
printing (or reproducing) and mailing a proxy statement for purposes of
soliciting the votes of shareholders of AmSurg in order to effect the
Recapitalization and to obtain any other required approvals of the shareholders
of AmSurg, (iii) listing or other inclusion of the shares of AmSurg common stock
on the Nasdaq National Market or on a national securities exchange, (iv) the
SEC's registration fees, (v) any required registration or qualification of any
shares of AmSurg common stock under state Blue Sky and securities laws, (vi) the
preparation of stock certificates for the shares of AmSurg common stock to be
distributed in connection with
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the Recapitalization, the Exchange and the Distribution, (vii) the fees and
expenses of J.C. Bradford & Co., (viii) the fees of Doramus, Trauger & Ney and,
with respect to services performed on behalf of AmSurg, Bass, Berry & Sims PLC,
(ix) preparing and auditing the separate financial statements of AmSurg and its
consolidated subsidiaries and (x) obtaining any governmental or third party
consents or approvals required to be obtained on the part of AmSurg in
connection with the transactions contemplated by this Agreement; and (c) AHC
will be responsible for the costs of (i) preparing the Ruling Request, (ii)
printing (or reproducing) and mailing the Information Statement included in the
Registration Statement on Form 10 to AHC Holders, (iii) the fees and expenses of
the Transfer Agent in connection with the Distribution, (iv) the fees and
expenses of Morgan Keegan & Co., Inc. and Houlihan, Lokey, Howard & Zukin, (v)
the fees and expenses of Bass, Berry & Sims PLC with respect to services
performed on behalf of AHC, (vi) preparing and auditing the financial statements
of AHC and its consolidated subsidiaries (except for the separate financial
statements of AmSurg and its consolidated subsidiaries as provided in clause
(b)(ix) above) and (vii) obtaining any governmental or third party consents or
approvals required to be obtained on the part of AHC in connection with the
transactions contemplated by this Agreement.
5.9 Dispute Resolution.
(a) Submission of Disputes to Arbitration. Any claims, demands,
disputes, differences, controversies, and/or misunderstandings arising
under, out of, or in connection with, or in relation to this Agreement
(collectively, a "Dispute"), shall be settled by submission of such Dispute
(if not theretofore resolved by the parties hereto) within 45 days of
assertion to arbitration in accordance with the provisions of this Section
5.9 and the Commercial Arbitration Rules of the American Arbitration
Association.
(b) Selection of Arbitrators.
(i) The parties may agree upon one arbitrator whose decision will
be final and binding on them; otherwise there shall be three
arbitrators, with one named in writing by each party and the third
chosen by these two arbitrators (without necessary delay), and the
decision in writing signed by those assenting thereto of any two of the
arbitrators shall be final and binding on the parties.
(ii) No one shall be nominated or act as an arbitrator who is in
any way financially interested in this Agreement or in the business of
either party hereto.
(c) Consent to Jurisdiction. Any and all arbitrations shall take
place pursuant to the laws of the State of Delaware, and consent is hereby
given to jurisdiction of courts of the State of Delaware over the parties
to this Agreement in reference to any matter arising out of arbitration or
this Agreement, including but not limited to confirmation of any award and
enforcement thereof by entry of judgment thereon or by any other legal
remedy.
(d) Costs of Arbitration. The cost of any arbitration (including the
fees of the arbitrator or arbitrators) pursuant to this Agreement shall be
borne equally by each party to the Dispute, unless otherwise determined by
the arbitrator or arbitrators.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first
hereinabove written.
AMERICAN HEALTHCORP, INC.
By: /s/ HENRY D. HERR
------------------------------------
Name: Henry D. Herr
Title: Executive Vice President
AMSURG CORP.
By: /s/ CLAIRE M. GULMI
------------------------------------
Name: Claire M. Gulmi
Title: Senior Vice President
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EXHIBIT 2.2
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT, dated as of March ___, 1997, (the
"Agreement"), by and between American Healthcorp, Inc., a Delaware
corporation ("AHC"), and AmSurg Corp., a Tennessee corporation ("AmSurg").
WITNESSETH:
WHEREAS, AHC and AmSurg are parties to a Distribution Agreement,
dated as of March ___, 1997 (the "Distribution Agreement"), pursuant to
which AmSurg has agreed to undertake a recapitalization converting each
three outstanding shares of common stock, without par value, of AmSurg into
one share of Class A Common Stock, without par value (the "Class A Common
Stock") as provided in the Distribution Agreement and authorizing a class of
new class of common stock having certain voting and other rights as described
in the Distribution Agreement (the "Class B Common Stock"); and
WHEREAS, pursuant to the Distribution Agreement, AmSurg has
agreed, subject to the satisfaction of certain terms and conditions, to
issue shares of Class B Common Stock to AHC on the Distribution Date (as
defined in the Distribution Agreement) in exchange for all of the shares of
Class A Common Stock then owned by AHC.
NOW, THEREFORE, in consideration of the premises and the
respective agreements set forth herein and in the Distribution Agreement,
the parties hereto hereby agree as follows:
1. The Exchange. On the Distribution Date, subject to the
satisfaction or waiver of the conditions set forth in Section 2.2 of the
Distribution Agreement and the completion of the Recapitalization:
a. AHC will deliver to AmSurg [5,530,131] shares of
Class A Common Stock of AmSurg, free and clear of any security
interest, lien, mortgage, encumbrance or other interest of third
parties of any kind; and
b. in exchange for the shares delivered pursuant to
Section 1(a) above, AmSurg will issue to AHC [5,530,131] shares of
Class B Common Stock.
All of the shares of Class B Common Stock issued to AHC will, when issued to
AHC as provided herein, be duly authorized, validly issued, fully paid and
nonassessable.
2. Defined Terms. Terms defined in the Distribution Agreement
and used herein will have the meanings provided in the Distribution
Agreement. The term "AmSurg" will include the surviving corporation in any
merger entered into to effect the Recapitalization.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Exchange
Agreement to be duly executed and delivered as of the date first above
written.
AMERICAN HEALTHCORP, INC.
By:
-----------------------------------
AMSURG CORP.
By:
-----------------------------------
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CHARTER
OF
AMSURG CORP.
Pursuant to the provisions of Section 48-20-107 of the Tennessee
Business Corporation Act, the undersigned corporation hereby amends and
restates its Charter to supersede the original Charter and any and all prior
amendments thereto as follows:
The name of the corporation is: AmSurg Corp.
I. The text of the Amended and Restated Charter is as follows:
1. The name of the corporation (hereinafter called the
"Corporation") is AmSurg Corp.
2. The Corporation is for profit.
3. The duration of the Corporation is perpetual.
4. The street address and zip code of the Corporation's principal
office in Tennessee shall be:
One Burton Hills Boulevard
Suite 350
Nashville, TN 37215
County of Davidson
5. (a) The name of the Corporation's registered agent is Claire
M. Gulmi.
(b) The street address, zip code, and county of the
Corporation's registered office and registered agent in Tennessee shall be:
One Burton Hills Boulevard
Suite 350
Nashville, TN 37215
County of Davidson
6. The Corporation is organized to do any and all things and to
exercise any and all powers, rights, and privileges that a corporation may now
or hereafter be organized to do, or to exercise, under the Tennessee Business
Corporation Act, as amended.
7. The aggregate number of shares of capital stock the
Corporation is authorized to issue is [30,540,000] shares, of which [5,540,000]
shares shall be Class B Common Stock, no par value, [25,000,000] shares shall
be Class A Common Stock, no par value (collectively the "Common
<PAGE> 2
Stock"), and 5,000,000 shares shall be preferred stock, no par value (the
"Preferred Stock") of which 1,500,000 shares are designated as Series A
Redeemable Preferred Stock and 1,250,000 shares are designated as Series B
Convertible Preferred Stock.
The preferences, limitations, and relative rights of the above classes
of stock shall be as follows:
(1) Series A Redeemable Preferred Stock. There shall be a series of
Preferred Stock to be known and designated as Series A Redeemable Preferred
Stock. The number of shares constituting such series shall be 1,500,000. Set
forth below in this Section (1) of Article 7 is a statement of the designations
and the powers, preferences and rights, and the qualifications, limitations or
restrictions thereof. All subsection references contained herein shall be to
this Section (1) of Article 7.
(a) Dividends.
(i) During the period prior to and including
November 20, 1998, holders of Series A Redeemable Preferred
Stock shall be entitled to no dividends. Thereafter, holders
of Series A Redeemable Preferred Stock shall be entitled to a
cash dividend per share in an amount, per annum, equal to
eight percent (8%) of the purchase price per share, payable in
arrears in installments on the first day of each calendar
quarter and from funds legally available therefor. The
dividends provided for hereunder shall be cumulative and to
the extent they are not paid as provided for herein because
funds are not legally available therefor or otherwise, they
shall be paid as soon as funds are legally available therefor
and before any dividends or other distribution (including
distributions made as a result of any reorganization,
reclassification, merger, consolidation or disposition of
assets) are made to holders of the Corporation's Common Stock
but subject to the rights, preferences and privileges of any
other series of Preferred Stock then issued and outstanding.
The dividends hereunder shall be entitled to a liquidation
preference pursuant to Subsection (b).
(ii) In the event that the enforcement of any
right or remedy accorded to the holders of the Series A
Redeemable Preferred Stock upon an Event of Default as set
forth in the Purchase Agreement would violate or be restricted
by any covenant contained in any instrument relating to any
Debt of the Corporation to Suntrust Bank, Nashville, N.A.
("Suntrust"), or any amendment, extension, refunding or
refinancing thereof, and upon written request by the
Corporation to each holder, the holders shall refrain from
asserting any such right or remedy. For so long as the Event
of Default remains uncured, or in the event that Suntrust or
any other lender to the Corporation refuses to consent to the
payment of the dividend set forth in Subsection (a)(i), the
holders shall be entitled to a cash dividend per share in an
amount, per annum, equal to fourteen-percent (14%) of the
purchase price per share, payable in arrears and installments
on the first day of each calendar quarter and from funds
legally available
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<PAGE> 3
therefore. The dividends provided for hereunder shall be
cumulative and, to the extent they are not paid as provided
for herein because funds are not legally available therefor or
otherwise, they shall be paid as soon as funds are legally
available therefor and before any dividends or other
distributions (including distributions made as a result of any
reorganization, reclassification, merger, consolidation or
disposition of assets) are made to holders of the
Corporation's Common Stock, but subject to the rights,
preferences and privileges of any other series of Preferred
Stock then issued and outstanding. Upon cure by the
Corporation of such Event of Default, or upon consent by each
lender whose consent is necessary for the payment of a
dividend, and upon payment of all due or accrued dividends,
the cumulative dividend per share under this Subsection
(a)(ii) shall thereupon be reduced to the dividend, if any, to
which the holder would be entitled absent an Event of Default,
or upon consent by all such lenders. The dividends hereunder
shall be entitled to a liquidation preference pursuant to
Subsection (b).
(b) Liquidation. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the Series A
Redeemable Preferred Stock will be entitled to be paid out of the assets of the
Corporation available for distribution to shareholders (whether from capital,
surplus or earnings), before any distribution or payment is made upon any other
Junior Securities, an amount in cash equal to the aggregate Liquidation Value
of all Series A Redeemable Preferred Stock outstanding, and the holders of the
Series A Redeemable Preferred Stock will not be entitled to any further
payment. If, upon any such liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation to be distributed among the holders
of the Series A Redeemable Preferred Stock are insufficient to permit payment
to such holders of the aggregate amount to which they are entitled, then the
entire assets of the Corporation to be distribution to such holders will be
distributed ratably among such holders based upon the aggregate Liquidation
Value of the Series A Redeemable Preferred Stock held by each such holder. The
Corporation will mail written notice of such liquidation, dissolution or
winding up, not less than thirty (30) days prior to the payment date stated
therein, to each record holder of Series A Redeemable Preferred Stock. Neither
the consolidation or merger of the Corporation into or with any other
corporation or corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, nor the reduction of the capital stock of the
Corporation, will be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of this Subsection (b).
(c) Stock Combinations and Subdivisions. Subject to the rights,
preferences and privileges of any Common Stock and other series of Preferred
Stock outstanding from time to time and to the immediately following sentence,
in the event the Corporation in any manner subdivides or combines the
outstanding shares of any class of common stock, the Series A Redeemable
Preferred Stock shall automatically be combined or subdivided in such manner as
may be permitted by applicable law so that following such an event, the
conversion rate, ownership interests and voting interests of the Series A
Redeemable Preferred Stock shall be equitably preserved. Series A Redeemable
Preferred Stock shall not be combined or subdivided unless at the same time
there is a
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<PAGE> 4
proportionate combination or subdivision of all other classes and series of
capital stock of the Corporation.
(d) Voting. The holders of Series A Redeemable Preferred Stock
shall be entitled to vote as a separate class on all such matters as may be
required by law to be submitted to such holders as a separate class and shall
have the following additional rights:
(i) no amendment, modification or waiver will be
binding or effective with respect to any provision of this
Charter unless approved by the affirmative vote of the holders
of at least two-thirds of the outstanding shares of Series A
Redeemable Preferred Stock voting together as a separate
class; and
(ii) the affirmative vote of the holders of
two-thirds of the outstanding shares of Series A Redeemable
Preferred Stock voting together as a separate class shall be
necessary to increase the number of authorized shares of
Preferred Stock or authorize or issue any additional shares of
any series of Preferred Stock or any shares of capital stock
of the Corporation of any class, or any security or
obligations convertible into any capital stock of the
Corporation of any class, other than the Corporation's Series
B Convertible Preferred Stock, in each case ranking on a
parity with or senior to the Series A Redeemable Preferred
Stock as to distribution of assets in liquidation or in the
right of payment of dividends.
In all other matters, subject to voting rights that may be
granted to holders of other classes or series of Preferred
Stock and Common Stock outstanding from time to time, the
holders of Series A Redeemable Preferred Stock shall vote
together with the holders of Common Stock and the holders of
all other series of Preferred Stock as a single class. In all
matters that the holders of Series A Redeemable Preferred
Stock are entitled to so vote, such holders shall be entitled
to .25 votes per share of Series A Redeemable Preferred Stock.
(iii) With respect to the election of members to the
Board of Directors (each, a "Director"), the Purchasers of
Series A Redeemable Preferred Stock and the Purchasers of
Series B Convertible Preferred Stock pursuant to the Purchase
Agreement, voting together as a separate class, shall be
entitled to elect one (1) Director under the circumstances
described below in this Subsection (d)(iii). In addition, the
Purchasers of Series A Redeemable Preferred Stock and the
Purchasers of Series B Convertible Preferred Stock, voting
together as a separate class, shall be entitled to vote on the
removal, with or without cause, of any Director elected by
them pursuant to this Subsection (d)(iii). Any vacancy in the
office of a Director elected by the Purchasers of Series A
Redeemable Preferred Stock and Purchasers of Series B
Convertible Preferred Stock may be filled by a vote of such
Purchasers voting together as a separate class. In the
absence of a vote within 30 days, any such vacancy may be
filled by the remaining Directors. Any Directors elected by
the Board
4
<PAGE> 5
of Directors to fill a vacancy shall serve until the next
annual meeting of shareholders and until his successor has
been duly elected and qualified. The rights of the Purchasers
hereunder shall commence on May 31, 2000 if a Qualified IPO
has not occurred before that date and shall terminate
thereafter upon the occurrence of a Qualified IPO.
(e) Optional Conversion.
(i) Notwithstanding anything in Subsection (f) to
the contrary, at the option of the holders of the Series A
Redeemable Preferred Stock and upon the occurrence of a
Conversion Event, and for a period of thirty (30) days
thereafter, each holder of record of Series A Redeemable
Preferred Stock may, in such holder's sole discretion and at
such holder's option, convert any whole number or all of such
holder's shares of Series A Redeemable Preferred Stock into
fully paid and non-assessable shares of Class A Common Stock
at a rate equal to the Conversion Rate. Any such conversion
may be effected by a holder of Series A Redeemable Preferred
Stock surrendering, on a date no later than thirty (30) days
after the occurrence of a Conversion Event, such holder's
certificate or certificates for the shares of Series A
Redeemable Preferred Stock to be converted, duly endorsed, at
the office of the Corporation or any transfer agent for the
Series A Redeemable Preferred Stock together with a written
notice to the Corporation at such office that such holder
elects to convert all or a specified number of shares of
Series A Redeemable Preferred Stock and stating the name or
names in which such holder desires the certificate or
certificates for such shares of Class A Common Stock to be
issued. Promptly thereafter, the Corporation shall issue and
deliver to such holder or such holder's nominee or nominees, a
certificate or certificates for the number of shares of Class
A Common Stock to which such holder shall be entitled as
provided for herein. Such conversion shall be deemed to have
been made at 12:01 a.m., local time on the day of such
surrender and the person or persons entitled to receive the
shares of Class A Common Stock issuable on such conversion
shall be treated for all purposes as the record holder or
holders of such shares of Class A Common Stock on that date.
The Corporation shall pay all taxes and other charges in
respect of the issuance of shares of Class A Common Stock upon
any such conversion; provided, however, that the Corporation
shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery
of the shares of the Class A Common Stock in a name other than
that in which the shares of Series A Redeemable Preferred
Stock so converted were registered.
(ii) The Corporation shall at all times reserve
and keep available out of the authorized and unissued shares
of Class A Common Stock, solely for the purpose of effecting
the conversion of issued and outstanding shares of Series A
Redeemable Preferred Stock such number of shares of Class A
Common Stock as shall from time to time be sufficient to
effect the conversion of all issued and outstanding shares of
5
<PAGE> 6
Series A Redeemable Preferred Stock and if, at any time, the
number of authorized and unissued shares of Class A Common
Stock shall not be sufficient to effect conversion of the then
issued and outstanding shares of Series A Redeemable Preferred
Stock, the Corporation shall take such corporate action as may
be necessary to increase the number of authorized and unissued
shares of Class A Common Stock to such number as shall be
sufficient for such purposes.
(f) Optional Redemption
(i) The Corporation may, at the option of the
Board of Directors at any time and from time to time, pursuant
to notice to each holder thereof, redeem from funds of the
Corporation legally available therefor, all or part of the
outstanding Series A Redeemable Preferred Stock at a price
equal to the Redemption Price.
(ii) The Corporation shall give written notice
(the "Redemption Notice") by mail, postage prepaid, to all
holders of Series A Redeemable Preferred Stock no later than
forty-five (45) days prior to the date specified for
redemption therein (the "Redemption Date"). The Redemption
Notice shall specify the Redemption Date, the Redemption Price
and the aggregate number of shares offered to be redeemed by
the Corporation (the "Redeemed Shares"). If the Redemption
Notice specifies less than all of the issued and outstanding
shares of Series A Redeemable Preferred Stock as Redemption
Shares, the shares of each holder which will be redeemed will
equal the product of (x) the number of Redemption Shares and
(y) the number of shares owned by each holder divided by the
number of all issued and outstanding shares of Series A
Redeemable Preferred Stock. No later than ten (10) days prior
to the Redemption Date, the Corporation shall give written
notice by mail, postage prepaid, to each holder of the Series
A Redeemable Preferred Stock calling upon each such
shareholder to surrender to the Corporation on the Redemption
Date at the location designated in the notice such holder's
certificate or certificates representing the shares of Series
A Redeemable Preferred Stock to be redeemed by the
Corporation. Each holder shall surrender to the Corporation
the certificate or certificates evidencing such shares on the
Redemption Date at the location designated in such notice.
Upon tendering such certificate or certificates, each such
holder shall be entitled to receive full payment of the
Redemption Price. From and after the Redemption Date (unless
default shall be made by the Corporation in duly paying the
Redemption Price, in which event all of the rights of the
holders of such shares shall continue), the holders of the
shares of Series A Redeemable Preferred Stock so redeemed
shall cease to have any rights as shareholders of the
Corporation with respect to those shares except the right to
receive the Redemption Price upon surrender of the applicable
certificate or certificates. Such shares shall thereafter be
transferred to the Corporation to be held as treasury stock on
the books of the Corporation and shall not be deemed
outstanding for any purpose whatsoever until such time, if at
all, that the Corporation reissues any such shares.
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<PAGE> 7
(g) Mandatory Redemption.
(i) The Corporation shall redeem, from funds of
the Corporation legally available therefor, all of the
outstanding Series A Redeemable Preferred Stock at a price
equal to the Redemption Price on the earlier to occur of (a) a
Mandatory Redemption Event or (b) the Sixth Anniversary (each,
a "Mandatory Redemption Event").
(ii) The Corporation shall give written notice
(the "Redemption Notice") by mail, postage prepaid, to all
holders of Series A Redeemable Preferred Stock no later than
thirty-five (35) days prior to the anticipated date of a
Mandatory Redemption Event. The Redemption Notice shall
specify the date of redemption, which date shall be on or no
more than five (5) days prior to the anticipated date of the
Mandatory Redemption Event (the "Redemption Date"), the
Redemption Price and the aggregate number of shares being
redeemed by the Corporation (which, subject to legally
available funds therefor, shall be all of the issued and
outstanding shares of Series A Redeemable Preferred Stock),
and shall call upon each holder of Series A Redeemable
Preferred Stock to surrender to the Corporation on the
Redemption Date at the location specified in the notice, such
holders' certificate or certificates evidencing such shares.
Upon tendering such certificate or certificates, each
shareholder shall be entitled to receive full payment of the
Redemption Price. From and after the Redemption Date (unless
default shall be made by the Corporation in duly paying the
Redemption Price, in which event all of the rights of the
holders of such shares shall continue), the holders of the
shares of Series A Redeemable Preferred Stock so redeemed
shall cease to have any rights as shareholders of the
Corporation with respect to those shares except the right to
receive the Redemption Price upon surrender of the applicable
certificate or certificates. Such shares shall thereafter be
transferred to the Corporation to be held as treasury stock on
the books of the Corporation and shall not be deemed
outstanding for any purpose whatsoever until such time, if at
all, that the Corporation reissues any such shares.
(h) Definitions. For the purposes of this Section (1) of Article
7 the following terms shall have the following meanings:
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which commercial banks in Nashville, Tennessee are
required or authorized by law to be closed.
"Common Stock" shall mean collectively the Corporation's
authorized shares of Class A Common Stock, no par value and Class B
Common Stock, no par value.
"Conversion Event" shall mean the earlier to occur of (i) that
date which is sixty (60) days after a Spin Off or (ii) upon a
Qualified IPO.
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<PAGE> 8
"Conversion Rate" shall mean:
(i) if the optional conversion is triggered by a
Spin Off, then the Conversion Rate shall equal (x) the
Liquidation Value per share of the Series A Redeemable
Preferred Stock, divided by (y) the average closing price per
share of Class A Common Stock on the Nasdaq National Market
System for the period commencing on the forty-sixth (46th) day
following the consummation of the Spin Off and ending on the
fifteenth (15th) day thereafter; and
(ii) if the optional conversion is triggered by
the occurrence of a Qualified IPO, then the Conversion Rate
shall equal (x) the Liquidation Value per share of the Series
A Redeemable Preferred Stock, divided by (y) the price per
share of Class A Common Stock in the Qualified IPO.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"Independent Auditors" shall mean Deloitte & Touche, LLP or
another "big six" accounting firm.
"Junior Security" means Common Stock and any other equity
security (other than the Series A Redeemable Preferred Stock),
including the Series B Convertible Preferred Stock, of any kind which
the Corporation at any time issues or is authorized to issue.
"Liquidation Value" of any share of Series A Redeemable
Preferred Stock as of any particular date will be the purchase price
amount of such Stock plus accrued and unpaid dividends, if any.
"Mandatory Redemption Event" shall mean the earliest to occur
of: (a) the sale, lease or other disposition by the Company of all or
substantially all of the assets of the Corporation; (b) a merger or
consolidation of the Corporation with or into another entity in a
transaction in which the shareholders of the Corporation own less than
fifty percent (50%) of the voting securities of the surviving or
resulting corporation immediately after such merger or consolidation;
(c) the sale, transfer or other disposition by the Company of all or
substantially all of the capital stock of the Corporation (including,
without limitation, any and all shares, interests, rights to purchase,
warrants, options, participation or other equivalents of or in
(however designated) capital stock of the Corporation; or (d) a
Qualified IPO.
"Preferred Stock" shall mean the Corporation's authorized
shares of preferred stock, no par value.
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<PAGE> 9
"Purchase Agreement" shall mean the Preferred Stock Purchase
Agreement, dated as of November 20, 1996, by and among the
Corporation, Electra Investment Trust PLC, Capitol Health Partners,
L.P. and Michael E. Stephens.
"Purchasers" shall mean Electra Investment Trust PLC, Capitol
Health Partners, L.P. and Michael E. Stephens.
"Qualified IPO" means (i) an initial public offering of Class
A Common Stock of the Corporation yielding net cash proceeds to the
Corporation of at least $25,000,000 or (ii) in the event the
Corporation has completed a Spin Off, a public offering of Class A
Common Stock of the Corporation yielding net cash proceeds to the
Corporation and/or its shareholders of at least $20,000,000.
"Redemption Price" for any shares of Series A Redeemable
Preferred Stock as of any particular date shall mean an amount equal
to the Liquidation Value.
"Secondary Registration" means the offer and sale of
securities to the public by or on behalf of one or more of the holders
of the Corporation's securities pursuant to a registration statement
filed by the Corporation with, and declared effective by, the
Commission.
"Sixth Anniversary" shall mean November 20, 2002.
"Spin Off" means the recapitalization of all of the issued and
outstanding Common Stock in a "reorganization" with the meaning of
Section 368(a)(i)(E) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the distribution of all shares of Common Stock held
by American Healthcorp, Inc. ("AHC") pro rata among the shareholders
of AHC in a tax-free distribution under Section 355 of the Code.
(i) Notices. All written communications provided for hereunder
shall be sent by first-class mail or nationwide overnight delivery service
(with charges prepaid) or via receipted facsimile transmission and shall be
directed to the relevant party at its address stated below:
If to Electra:
Electra Investment Trust PLC
65 Kingsway
London, England WC2B 6QT
Attention: Philip J. Dyke, Company Secretary
Telecopy No.: 011-44-71-404-5388
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<PAGE> 10
with copies to:
Electra, Inc.
70 East 55th Street
New York, New York 10022
Attention: Scott D. Steele
Telecopy No.: (212) 319-3069
and
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Peter J. Hanlon, Esq.
Telecopy No.: (212) 821-8111
If to CHP:
Capitol Health Partners, L.P.
3000 P Street, N.W.
Washington, D.C. 20005
Attention: Debora A. Guthrie
Telecopy No.: (202) 965-2344
with copies to:
Manatt, Phelps & Phillips, LLP
1501 M Street N.W.
Washington, D.C. 20009
Attention: Joseph F. Kelly, Jr.
Telecopy No.: (202) 463-4394
If to Michael E. Stephens:
One Perimeter Park South
Suite 100N
Birmingham, AL 35243
Telecopy No.: (205) 970-6524
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<PAGE> 11
with copies to:
Bradley, Arant Rose & White
2001 Park Place
Suite 1400
Birmingham, AL 35203
Attention: Thomas Carruthers
Telecopy No.: (205)252-0264
If to any other holder of any shares of Preferred Stock
addressed to such holder at such address as such other holder shall
have specified to the Company in writing or, if any such other holder
shall not have so specified an address to the Company, then addressed
to such other holder in care of the last holder of such shares of
Preferred Stock which shall have so specified an address. Each party
may, by notice given hereunder, designate any further or different
addresses to which subsequent notices, certificates or other
communications shall be sent.
If to the Corporation:
AmSurg Corp.
One Burton Hills Boulevard
Suite 350
Nashville, TN 37215
Attention: Claire M. Gulmi
Telecopy No. (615) 665-0755
with copies to:
Bass, Berry & Sims PLC
2700 First American Center
Nashville, TN 37238
Attention: Cynthia Y. Reisz
Telecopy No. (615) 742-6293
(j) Registration of Transfer. The Corporation shall keep at its
principal office (or such other place as the Corporation designates) a register
for the registration of shares of Series A Redeemable Preferred Stock of the
Corporation. Upon the surrender of any certificate representing shares of
Series A Redeemable Preferred Stock at such place, the Corporation shall, at
the request of the registered holder of such certificate, execute and deliver a
new certificate or certificates in exchange therefor representing in the
aggregate the number of shares of Series A Redeemable Preferred Stock
represented by the surrendered certificate (and the Corporation forthwith shall
cancel such surrendered certificate), subject to the requirements of applicable
securities laws and to any restrictions on transfer (including without
limitation, those referred to in any legend on the certificate so surrendered).
Each such new certificate shall be registered in such name and shall represent
such number of shares of Series A Redeemable Preferred Stock as is requested by
the holder of the surrendered certificate and shall be substantially identical
in form to the surrendered certificate. The
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<PAGE> 12
issuance of new certificates shall be made without charge to the holders of the
surrendered certificates for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such issuance; provided,
however, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the surrendered
certificate.
(k) Replacement. Upon receipt of evidence reasonably satisfactory
to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation
of any certificate evidencing one or more shares of Series A Redeemable
Preferred Stock and, in the case of any such loss, theft or destruction, upon
receipt of an unsecured indemnity agreement satisfactory to the Corporation or,
in the case of any such mutilation, upon surrender of such certificate, the
Corporation shall execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of Series A
Redeemable Preferred Stock represented by such lost, stolen, destroyed or
mutilated certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate.
(l) Restrictive Legend. The Series A Redeemable Preferred Stock,
and all shares of Class A Common Stock issued upon conversion hereof, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. SUCH
SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER MAY NOT BE
SOLD, OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
(2) Series B Convertible Preferred Stock. There shall be a series of
Preferred Stock to be known and designated as Series B Convertible Preferred
Stock. The number of shares constituting such series shall be 1,250,000. Set
forth below in this Section (2) of Article 7 is a statement of the designations
and the powers, preferences and rights, and the qualifications, limitations or
restrictions thereof. All subsection references contained herein shall be to
this Section (2) of Article 7.
(a) Dividends. The holders of the Series B Convertible Preferred
Stock shall be entitled to receive, from funds legally available therefor, such
dividends as may be declared by the Board of Directors from time to time.
(b) Liquidation. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the Series B
Convertible Preferred Stock will be entitled to be paid out of the assets of
the Corporation available for distribution to shareholders (whether from
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<PAGE> 13
capital, surplus or earnings), before any distribution or payment is made upon
any other Junior Securities, an amount in cash equal to the aggregate
Liquidation Value of all Series B Convertible Preferred Stock outstanding, and
the holders of the Series B Convertible Preferred Stock will not be entitled
to any further payment. If, upon any such liquidation, dissolution or winding
up of the Corporation, the assets of the Corporation to be distributed among
the holders of the Series B Convertible Preferred Stock are insufficient to
permit payment to such holders of the aggregate amount to which they are
entitled, then the entire assets of the Corporation to be distributed to such
holders will be distributed ratably among such holders based upon the aggregate
Liquidation Value of the Series B Convertible Preferred Stock held by each such
holder. The Corporation will mail written notice of such liquidation,
dissolution or winding up, not less than thirty (30) days prior to the payment
date stated therein, to each record holder of Series B Convertible Preferred
Stock. Neither the consolidation or merger of the Corporation into or with any
other corporation or corporations, nor the sale or transfer by the Corporation
of all or any part of its assets, nor the reduction of the capital stock of the
Corporation, will be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of this Subsection (b).
(c) Stock Combinations and Subdivisions. Subject to the rights,
preferences and privileges of any Common Stock and other series of Preferred
Stock outstanding from time to time and to the immediately following sentence,
in the event the Corporation in any manner subdivides or combines the
outstanding shares of any class of common stock, the Series B Convertible
Preferred Stock shall automatically be combined or subdivided in such manner as
may be permitted by applicable law so that following such an event, the
conversion rate, ownership interest and voting interests of the Series B
Convertible Preferred Stock shall be equitably preserved. Series B Convertible
Preferred Stock shall not be combined or subdivided unless at the same time
there is a proportionate combination or subdivision of all other classes and
series of capital stock of the Corporation.
(d) Voting. The holders of Series B Convertible Preferred Stock
shall be entitled to vote as a separate class on all such matters as may be
required by law to be submitted to such holders as a separate class and shall
have the following additional rights:
(i) no amendment, modification or waiver will be
binding or effective with respect to any provision of this
Designation unless approved by the affirmative vote of the
holders of at least two-thirds of the outstanding shares of
Series B Convertible Preferred Stock voting together as a
separate class; and
(ii) the affirmative vote of the holders of
two-thirds of the outstanding shares of Series B Convertible
Preferred Stock voting together as a separate class shall be
necessary to increase the number of authorized shares of
Preferred Stock or authorize or issue any additional shares of
any series of Preferred Stock or any shares of capital stock
of the Corporation of any class, or any security or
obligations convertible into any capital stock of the
Corporation of any class, in each case ranking
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<PAGE> 14
on a parity with or senior to the Series B Convertible
Preferred Stock as to distribution of assets in liquidation or
in right of payment of dividends.
In all other matters, subject to voting rights that may be
granted to holders of other classes or series of Preferred
Stock and Common Stock outstanding from time to time, the
holders of Series B Convertible Preferred Stock shall vote
together with the holders of Common Stock and the holders of
all other series of Preferred Stock as a single class. In all
matters that the holders of Series B Convertible Preferred
Stock are entitled to so vote, such holders initially shall be
entitled to 1.05 votes per share of Series B Convertible
Preferred Stock. In the event that the number of Fully-Diluted
shares of Class A Common Stock into which the Series B
Convertible Preferred Stock is convertible increases above
1,797,647, then for each such additional Fully-Diluted share,
the aggregate voting rights of the holders of Series B
Convertible Preferred Stock shall increase by one vote.
(iii) With respect to the election of members to
the Board of Directors (each, a "Director"), the Purchasers of
Series A Redeemable Preferred Stock and the Purchasers of
Series B Convertible Preferred Stock pursuant to the Purchase
Agreement, voting together as a separate class, shall be
entitled to elect one (1) Director under the circumstances
described in this Subsection (d)(iii). In addition, the
Purchasers of Series A Redeemable Preferred Stock and the
Purchasers of Series B Convertible Preferred Stock, voting
together as a separate class, shall be entitled to vote on the
removal, with or without cause, of any Director elected by
them pursuant to this Subsection (d)(iii). Any vacancy in the
office of a Director elected by the Purchasers of Series A
Redeemable Preferred Stock and Purchasers of Series B
Convertible Preferred Stock may be filled by a vote of such
Purchasers voting together as a separate class. In the
absence of such a vote within 30 days, any such vacancy may be
filled by the remaining Directors. Any Directors elected by
the Board of Directors to fill a vacancy shall serve until the
next annual meeting of shareholder and until his successor has
been duly elected and qualified. The rights of the Purchasers
hereunder shall commence on May 31, 2000, if a Qualified IPO
has not occurred before that date and shall terminate
thereafter upon the occurrence of a Qualified IPO.
(e) Conversion.
(i) Upon the occurrence of a Triggering Event,
all of the issued and outstanding shares of Series B
Convertible Preferred Stock shall be automatically converted
into that number of fully paid and nonassessable shares of
Class A Common Stock at the Conversion Rate.
The Class A Common Stock shall be allocated among the holders
of Series B Convertible Preferred Stock on a pro-rata basis in
accordance with their respective
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<PAGE> 15
percentage ownership of Series B Convertible Preferred Stock.
Notwithstanding Subsection (e)(ii) below, such conversion
shall be deemed to have been made at 12:01 a.m. on the day of
the date on which the Triggering Event occurs, and the holders
of shares of Series B Convertible Preferred Stock shall be
treated for all purposes as the record holders of such shares
of Class A Common Stock on that date.
(ii) Any conversion provided for in this
Subsection (e) shall be effected by the holders of Series B
Convertible Preferred Stock surrendering their certificates
for such shares, duly endorsed, at the office of the
Corporation or any transfer agent for the Series B Convertible
Preferred Stock, together with written notices stating the
name or names in which each such holder desires the
certificate or certificates for such shares of Class A Common
Stock to be issued. Promptly thereafter, the Corporation shall
issue and deliver to such holders or such holders' nominees, a
certificate or certificates for the number of shares of Class
A Common Stock to which such holder shall be entitled in
accordance with the foregoing provisions. The Corporation
shall pay all taxes and other charges in respect of the
issuance of shares of Class A Common Stock upon any such
conversion; provided, however, that the Corporation shall not
be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of the
shares of the Class A Common Stock in a name other than that
in which the shares of Series B Convertible Preferred Stock so
converted were registered.
(iii) The Corporation shall at all times reserve
and keep available out of the authorized and unissued shares
of Class A Common Stock, solely for the purpose of effecting
the conversion of issued and outstanding shares of Series B
Convertible Preferred Stock, such number of shares of Class A
Common Stock as shall from time to time be sufficient to
effect the conversion of all issued and outstanding shares of
Series B Convertible Preferred Stock and if, at any time, the
number of authorized and unissued shares of Class A Common
Stock shall not be sufficient to effect conversion of the then
issued and outstanding shares of Series B Convertible
Preferred Stock, the Corporation shall take such corporate
action as may be necessary to increase the number of
authorized and unissued shares of Class A Common Stock to such
number as shall be sufficient for such purposes.
(f) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets.
(i) All of the issued and outstanding shares of
Class B Convertible Preferred Stock may be converted at the
Current Market Price per share into shares of Class A Common
Stock in accordance with the applicable provisions of
Subsection (e) in the event the Corporation shall reorganize
its capital pursuant to a Spin Off or otherwise, reclassify
its capital stock, consolidate or merge with or into another
corporation (where there is a change in or distribution with
respect to the Class A Common Stock of the Corporation), or
sell, transfer or otherwise dispose of all of its
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<PAGE> 16
property, assets or business to another corporation other than
in a Company Sale (a "Reorganization Event"). If pursuant to
the terms of such Reorganization Event, shares of common stock
of the successor or acquiring corporation, or any cash, shares
of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation (herein referred to as
"Other Property"), are to be received by or distributed to the
holders of Class A Common Stock of the Corporation, each
holder of Series B Convertible Preferred Stock shall have the
right thereafter to receive, after giving effect to such
conversion, the number of shares of common stock of the
successor or acquiring corporation or of the corporation, if
it is the surviving Corporation, and Other Property receivable
upon or as a result of such Reorganization Event by a holder
of the number of shares of Class A Common Stock for which such
Series B Convertible Preferred Stock is convertible
immediately prior to such event. For purposes of this
Subsection (f), "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any
class which is not preferred as to dividends or assets over
any other class of stock of such corporation and which is not
subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the
happening of a specified event, and any warrants, options or
other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Subsection (f) shall similarly
apply to successive Reorganization Events.
(ii) Upon the occurrence of any Reorganization
Event, the Corporation shall forthwith prepare a certificate
to be executed by the chief financial officer of the
Corporation setting forth, in reasonable detail, the events
described therein and the number of shares or Other Property
receivable by the holders of the Series B Convertible
Preferred Stock. The Corporation shall promptly cause a signed
copy of such certificate to be delivered to each holder of
Series B Convertible Preferred Stock no later than 5 days
prior to the anticipated occurrence of such event. In
addition, holders of Series B Convertible Preferred Stock
shall be entitled to the same rights to receive notice of
corporate action as any holder of Class A Common Stock.
(g) Put to the Corporation.
(i) If, by November 20, 2002 (the "Put Date"),
there shall not have occurred a Triggering Event, then the
holders of Series B Convertible Preferred Stock shall have the
right to sell to the Corporation all of the issued and
outstanding shares of Series B Convertible Preferred Stock,
and the Corporation shall have the obligation to purchase from
such holders any of such shares so put to the Corporation, at
the price (the "Put Price") equal to the Current Market Price.
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<PAGE> 17
(ii) Holders of Series B Convertible Preferred
Stock shall exercise their right to require the Corporation to
purchase their shares as provided for in Subsection (g)(i) by
delivering a written notice to the Corporation (the "Notice")
no later than thirty (30) days after the Put Date. Within
thirty (30) days after receipt by the Corporation of any such
Notice, the Corporation shall deliver to each holder of Series
B Convertible Preferred Stock so exercising its rights under
this Subsection (g) the Put Price to which said holder is
entitled, as determined hereunder, in exchange for the stock
certificate(s) evidencing all of the shares of Series B
Convertible Preferred Stock, duly endorsed for transfer to the
Corporation. In the event that the Corporation is unable to
purchase all of the shares of Series B Convertible Stock put
to it hereunder due to lack of funds legally available
therefor or otherwise, the Corporation shall purchase from the
holders thereof, on a pro-rata basis, that number of shares
which it is able to purchase using funds legally available
therefor, and shall purchase any remaining shares at such time
as funds are legally available therefor.
(h) Definitions. For purposes of this Section (2) of Article 7
the following terms shall have the following meanings:
"Appraised Value" shall mean, in respect of any share of Class
A Common Stock as of any date herein specified, the fair saleable
value of such share of Class A Common Stock determined without giving
effect to a discount for (i) a minority interest or (ii) any lack of
liquidity of the Class A Common Stock or to the fact that the
Corporation may have no class of equity registered under the Exchange
Act as of the last day of the most recent fiscal quarter end (within
60 days prior to such date specified) based upon the value of the
Corporation as determined upon negotiation in good faith between the
holders of a majority of the Series B Convertible Preferred Stock and
the Corporation or, in the absence of an agreement between such
persons within five business days (or such longer period as agreed to
by such persons), by an investment banking firm satisfactory to both
the Corporation and the holders of a majority of the Series B
Convertible Preferred Stock. The Corporation shall retain, at its
sole cost, such investment banking firm as may be necessary for the
determination of Appraised Value.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which commercial banks in Nashville, Tennessee are
required or authorized by law to be closed.
"Commission" means the Securities and Exchange Commission.
"Common Equivalent Shares" shall have the meaning set forth in
the Shareholders' Agreement, dated April 2, 1992, as amended between
the Corporation, its Founding Investors, its Founding Management and
the Preferred Stock Purchasers.
"Common Stock" shall mean collectively the Corporation's
authorized shares of Class A Common Stock, no par value, and Class B
Common Stock, no par value.
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<PAGE> 18
"Company Sale" shall mean the sale or other disposition of all
or substantially all of the stock or assets of the Corporation to an
independent third party in an arms-length transaction, including disposition by
merger, share exchange or lease yielding net cash proceeds to the Company of at
least $25,000,000 or, in the event that the Company has completed a Spin Off,
such disposition yielding net cash proceeds or freely marketable securities to
the Company and/or its shareholders of at least $20,000,000.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for Class A Common Stock, either immediately or upon the occurrence
of a specified date or a specified event.
"Conversion Rate" shall mean that rate which results in the
holders of Series B Convertible Preferred Stock thereafter holding, in
the aggregate, the following percentage of the total issued and outstanding
Fully Diluted Common Stock, after giving effect to the conversion contemplated
herein:
If the Triggering Event occurs on or before November
20, 1998 - 6% of Fully Diluted Shares
If the Triggering Event occurs on or before November
20, 1999 - 6.5% of Fully Diluted Shares
If the Triggering Event occurs on or before November
20, 2000 - 7% of Fully Diluted Shares
If the Triggering Event occurs after November 20,
2000 - 8% of Fully Diluted Shares
"Current Market Price" shall mean, in respect of any share of
Common Stock on any date herein specified, the greater of (i) book
value per share of Common Stock as determined by the Corporation's financial
statements for the most recently ended fiscal quarter, (ii) the Liquidation
Value of the Series B Convertible Preferred Stock, (iii) a valuation per share
of Common Stock of eight (8) times Net EBITDA for the most recently ended four
quarters, and (iv) the Appraised Value per share of Common Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"Fully-Diluted" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock outstanding as of the date hereof,
increased by all shares of Class A Common Stock issuable in respect of Series B
Convertible Preferred Stock and increased by all Common Equivalent
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<PAGE> 19
Shares (using the treasury stock method) issuable upon exercise of
stock options, warrants or convertible securities (other than the
shares issuable upon conversion of the Series A Redeemable Preferred
Stock) and increased by shares issued to the Founding Investors and
Founding Management pursuant to the Corporation's Shareholders'
Agreement dated as of April 2, 1992, as amended, for consideration of
up to $1,300,000. In the event that the Corporation creates an
additional class or series of common stock, Fully Diluted shall take
into account all such outstanding shares of any other class or series.
"Independent Auditors" means Deloitte & Touche, LLP or another
"big six" accounting firm.
"Junior Security" means Common Stock and any other equity
security, other than the Series A Redeemable Preferred Stock, of any
kind which the Corporation at any time issues or is authorized to
issue.
"Liquidation Value" of any share of Series B Convertible
Preferred Stock as of any particular date will be the purchase price
of such Stock.
"Net EBITDA" shall mean the Corporation's earnings before
interest, taxes, depreciation, amortization and extraordinary items
less minority interest expense, all as determined based on the audited
financial statements for such period prepared by the Corporation's
independent auditors in accordance with GAAP.
"Preferred Stock" shall mean the Corporation's authorized
shares of preferred stock, no par value.
"Purchase Agreement" shall mean the Preferred Stock Purchase
Agreement, dated as of November 20, 1996, by and among the
Corporation, Electra Investment Trust PLC, Capitol Health Partners,
L.P. and Michael E. Stephens.
"Purchasers" shall mean Electra Investment Trust PLC, Capitol
Health Partners, L.P. and Michael E. Stephens.
"Qualified IPO" means an initial public offering of Common
Stock of the Corporation yielding net cash proceeds to the Corporation
of at least $25,000,000, or in the event that the Corporation has
completed a Spin Off, a public offering of Common Stock yielding net
cash proceeds to the Corporation and/or its shareholders of at least
$20,000,000.
"Reorganization Event" shall have the meaning set forth in
Subsection (f).
"Spin Off" means the recapitalization of all of the issued and
outstanding Common Stock in a reorganization within the meaning of
Section 368(a)(i)(E) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the distribution of all shares of Common Stock
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<PAGE> 20
held by American Healthcorp, Inc. ("AHC") pro rata among the
shareholders of AHC in a tax-free distribution under Section 355 of
the Code.
"Stock Option Plan" means shares issued pursuant to the
Company's 1992 Stock Option Plan, as it may be amended from time to
time, and any other similar share incentive plans which the Company
may adopt and any options granted to members of the Board of Directors
and Medical Directors of the Company.
"Triggering Event" shall mean the occurrence the earlier of
(i) a Company Sale or (ii) a Qualified IPO.
(i) Notices. All written communications provided for hereunder
shall be sent by first-class mail or nationwide overnight delivery service
(with charges prepaid) or via facsimile transmission and shall be directed to
the relevant party at its address stated below:
If to Electra:
Electra Investment Trust PLC
65 Kingsway
London, England WC2B 6QT
Attention: Philip J. Dyke, Company Secretary
Telecopy No.: 011-44-71-404-5388
with copies to:
Electra, Inc.
70 East 55th Street
New York, New York 10022
Attention: Scott D. Steele
Telecopy No.: (212) 319-3069
and
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Peter J. Hanlon, Esq.
Telecopy No.: (212) 821-8111
If to CHP:
Capitol Health Partners, L.P.
3000 P Street, N.W.
Washington, D.C. 20005
Attention: Debora A. Guthrie
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<PAGE> 21
Telecopy No.: (202) 965-2344
with copies to:
Manatt, Phelps & Phillips, LLP
1501 M Street N.W.
Washington, D.C. 20009
Attention: Joseph F. Kelly, Jr.
Telecopy No.: (202) 463-4394
If to Michael E. Stephens:
One Perimeter Park South
Suite 100N
Birmingham, AL 35243
Telecopy No.: (205) 970-6524
with copies to:
Bradley, Arant Rose & White
2001 Park Place
Suite 1400
Birmingham, AL 35203
Attention: Thomas Carruthers
Telecopy No.: (205) 252-0264
If to any other holder of any shares of Preferred Stock
addressed to such holder at such address as such other holder shall have
specified to the Company in writing or, if any such other holder shall not
have so specified an address to the Company, then addressed to such other
holder in care of the last holder of such shares of Preferred Stock which shall
have so specified an address. Each party may, by notice given hereunder,
designate any further or different addresses to which subsequent notices,
certificates or other communications shall be sent.
If to the Corporation:
AmSurg Corp.
One Burton Hills Boulevard
Suite 350
Nashville, TN 37215
Attention: Claire M. Gulmi
Telecopy No.: (615) 665-0755
with copies to:
Bass, Berry & Sims PLC
2700 First American Center
Nashville, TN 37238
Attention: Cynthia Y. Reisz
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<PAGE> 22
Telecopy No.: (615) 742-6293
(j) Registration of Transfer. The Corporation shall keep
at its principal office (or such other place as the Corporation
designates) a register for the registration of shares of Series B
Convertible Preferred Stock of the Corporation. Upon the surrender of
any certificate representing shares of Series B Convertible Preferred
Stock at such place, the Corporation shall, at the request of the
registered holder of such certificate, execute and deliver a new
certificate or certificates in exchange therefor representing in the
aggregate the number of shares of Series B Convertible Preferred Stock
represented by the surrendered certificate (and the Corporation
forthwith shall cancel such surrendered certificate), subject to the
requirements of applicable securities laws and to any restrictions on
transfer (including without limitation, those referred to in any
legend on the certificate so surrendered). Each such new certificate
shall be registered in such name and shall represent such number of
shares of Series B Convertible Preferred Stock as is requested by the
holder of the surrendered certificate and shall be substantially
identical in form to the surrendered certificate. The issuance of new
certificates shall be made without charge to the holders of the
surrendered certificates for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such
issuance; provided, however, that the Corporation shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the surrendered certificate.
(k) Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder
shall be satisfactory) of the ownership and the loss, theft,
destruction or mutilation of any certificate evidencing one or more
shares of Series B Convertible Preferred Stock and, in the case of any
such loss, theft or destruction, upon receipt of an unsecured
indemnity agreement satisfactory to the Corporation or, in the case of
any such mutilation, upon surrender of such certificate, the
Corporation shall execute and deliver in lieu of such certificate a
new certificate of like kind representing the number of shares of
Series B Convertible Preferred Stock represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
(l) Restrictive Legend. The Series B Convertible
Preferred Stock, and all shares of Common Stock issued upon conversion
hereof, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES AND ANY
SECURITIES OR SHARES ISSUED HEREUNDER MAY NOT BE
SOLD, OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND ANY APPLICABLE
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<PAGE> 23
STATE SECURITIES LAW OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
(3) Common Stock. Except as otherwise provided in this Section (3) of
Article 7, the Class A Common Stock and the Class B Common Stock shall have the
same rights and privileges and shall rank equally, share ratably and be
identical in all respects and as to all matters. All subsection references
contained herein shall be to this Section (3) of Article 7.
(a) Voting.
(i) Except as expressly provided herein, at every
meeting of shareholders of the Corporation, every holder of
Class A Common Stock shall be entitled to one vote and every
holder of Class B Common Stock shall be entitled to seven
votes, in person or by proxy for each share of Class A Common
Stock and Class B Common Stock, respectively standing in such
holder's name on the transfer books of the Corporation in the
election of the Corporation's Board of Directors or the
removal, but only for cause (as defined in Section 9 hereof),
of any Director. On all other matters, the holders of the
Class A Common Stock and the Class B Common Stock shall be
entitled to one vote in person or by proxy for each share of
Class A Common Stock or Class B Common Stock standing in the
name of such holders and in the transfer books of the
Corporation.
(ii) The holders of Class A Common Stock shall be
entitled to vote separately as a group only with respect to
(1) amendments to the Corporation's Charter that alter or
change the powers, preferences or special rights of the
holders of Class A Common Stock so as to affect them
adversely, and (2) such other matters as may require separate
group voting under the Tennessee Business Corporation Law.
The holders of Class B Common Stock shall be entitled to vote
separately as a group only with respect to (1) amendments to
the Corporation's Charter that alter or change the powers,
preferences or special rights of the holders of Class B Common
Stock so as to affect them adversely, and (2) such other
matters as may require separate group voting under the
Tennessee Business Corporation Law. On each other matter, the
holders of Class A Common Stock and Class B Common Stock shall
vote together as a single group, together with the holders of
any series of Preferred Stock entitled to vote on such matter,
subject to any rights of such series of Preferred Stock to
vote as a separate class on such matter.
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<PAGE> 24
(b) Conversion.
(i) Following the distribution of the shares of
Class B Common Stock to the stockholders of American
Healthcorp, Inc. in accordance with the Distribution
Agreement, dated as of [March ___, 1997], by and between
American Healthcorp, Inc. and AmSurg Corp., upon the Transfer
(as hereinafter defined) of any share of Class B Common Stock,
such share will automatically convert into a newly-issued
share of Class A Common Stock. The term "Transfer" shall mean
any sale, assignment, gift or other disposition or transfer of
any kind or character other than: (1) a pledge or
hypothecation or other granting of an interest in any share of
Class B Common Stock as security for a loan or other
obligation so long as the transferor retains ownership of any
such shares subject to such pledge, hypothecation or other
security interest or (2) a transfer to or from street name or
a change in street name if in each such case beneficial
ownership of the shares subject to transfer remains the same.
Following the automatic conversion of any shares of Class B
Common Stock pursuant to this Subsection (b)(i), the holder of
such shares so converted or his agent shall deliver to the
Corporation at its principal offices, or if an agent for the
registration or transfer of shares of Class B Common Stock is
then duly appointed and acting (said agent being hereinafter
referred to as the "Transfer Agent"), then to the office of
the Transfer Agent, the certificate or certificates for the
shares so converted, and (as so required by the Corporation or
the Transfer Agent) accompanied by instruments of transfer, in
form satisfactory to the Corporation and the Transfer Agent,
duly executed by such holder or such holder's duly authorized
attorney, and by transfer tax stamps or funds therefor, if
required pursuant to Subsection (b)(v) below. Until such time
as a holder of shares of Class B Common Stock which have been
automatically converted pursuant to this Subsection (b)(i)
shall surrender such holder's certificates therefor as
provided above, such certificates shall be deemed to represent
the shares of Class A Common Stock to which such holder shall
be entitled upon the surrender thereof.
(ii) As promptly as practicable after the
surrender of a certificate representing shares of Class B
Common Stock in the manner provided in Subsection (b)(i) above
and the payment in cash of any amount required by the
provisions of Subsection (b)(v), the Corporation will deliver
or cause to be delivered at the office of the Transfer Agent
to, or upon the written order of, the holder of such
certificate a certificate or certificates representing the
number of full shares of Class A Common Stock issuable upon
such conversion, issued in such name or names as such holder
may direct.
(iii) No adjustments in respect of dividends shall
be made upon the conversion of any shares of Class B Common
Stock, provided, however, that if a share shall be converted
after the record date for the payment of a dividend or other
distribution on shares of Class B Common Stock but before such
payment, the holder
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<PAGE> 25
of such share at the close of business on such record date
shall be entitled to receive the dividend or other
distribution payable on such share on the date set for payment
of such dividend or other distribution notwithstanding the
conversion of such share or the Corporation's default in
payment of the dividend due on such date.
(iv) The Corporation covenants that it will at all
times reserve and keep available, solely for the purpose of
issuance upon conversion of the outstanding shares of Class B
Common Stock, such number of shares of Class A Common Stock as
shall be issuable upon the conversion of all such outstanding
shares. The Corporation covenants that if any shares of Class
A Common Stock required to be reserved for purposes of
conversion hereunder require registration with or approval of
any government authority under any federal or state law before
such shares of Class A Common Stock may be issued upon
conversion, the Corporation will cause such shares to be duly
registered or approved, as the case may be. The Corporation
covenants that all shares of Class A Common Stock which shall
be issued upon conversion of the shares of Class B Common
Stock, will, upon issue, be fully paid and nonassessable and
not subject to any preemptive rights.
(v) The issuance of certificates for shares of
Class A Common Stock upon surrender of certificates for shares
of Class B Common Stock shall be made without charge for any
stamp or other similar tax in respect of such issuance.
However, if
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any such certificate is to be issued in a name other than that of the holder of
the share or shares of Class B Common Stock converted, the person or persons
requesting the issuance thereof shall pay to the Corporation the amount of any
tax which may be payable in respect of any transfer involved in such issuance
or shall establish to the satisfaction of the Corporation that such tax has
been paid.
(vi) Shares of Class B Common Stock which have
been issued and converted into shares of Class A Common Stock
as provided herein shall not be reissued.
(c) Distribution of Assets. If the Corporation shall be
liquidated, dissolved or wound up, whether voluntarily or
involuntarily, the holders of the Class B Common Stock shall
be entitled to share ratably with the holders of the Class A
Common Stock of the Corporation as a single class in the net
assets of the Corporation; that is, an equal amount of net
assets for each share of Class A Common Stock and Class B
Common Stock. A merger or consolidation of the Corporation
with or into any other Corporation or sale or conveyance of
all or any part of the assets of the Corporation (which shall
not in fact result in the liquidation of the Corporation and
the distribution of assets to shareholders) shall not be
deemed to be a voluntary or involuntary liquidation or
dissolution or winding up of the Corporation within the
meaning of this Subsection (c).
(d) Merger or Consolidation. In the event of a merger,
consolidation, share exchange or other business combination of
the Corporation with or into another entity (whether or not
the Corporation is the surviving entity), the holders of Class
A Common Stock shall be entitled to receive the same per share
consideration as the per share consideration, if any, received
by any holder of the Class B Common Stock in such merger or
consolidation, share exchange or other business combination.
(e) Subdivisions and Combinations of Shares. If the
Corporation in any manner subdivides or combines the
outstanding shares of one class of common stock, the
outstanding shares of the other class of common stock will be
likewise subdivided or combined.
(f) Dividends; Distributions. Holders of Class A Common
Stock and Class B Common Stock shall be entitled to receive,
on an equal basis, such dividends, payable in cash or
otherwise, as may be declared thereon by the Board of
Directors from time to time out of the assets or funds of the
Corporation legally available therefor. In the case of
dividends and other distributions in cash, each share of Class
A Common Stock shall have rights equal to the rights of Class
B Common Stock, and in the case of dividends and other
distributions of stock or property of the Corporation, each
share of Class A Common Stock shall have rights equal to the
rights of Class B Common Stock; provided that, in the case of
dividends or distributions payable in stock of the
Corporation, including distributions pursuant to
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stock splits or divisions which occur after the date shares of
Class B Common Stock are issued, only shares of Class A Common
Stock shall be distributed with respect to Class A Common
Stock and Class B Common Stock; and provided, further that, if
a dividend or distribution is declared with respect to Class A
Common Stock payable in Class A Common Stock, the Board of
Directors shall also declare a pro rata and simultaneous
dividend or distribution on the Class B Common Stock and that
if a dividend or distribution is declared with respect to
Class B Common Stock payable in Class A Common Stock, the
Board of Directors shall also declare a pro rata and
simultaneous dividend or distribution on the Class A Common
Stock.
(g) Issuance of the Class B Common Stock. The
Corporation shall not issue additional shares of Class B
Common Stock after the date shares of Class B Common Stock are
first issued by the Corporation, and all shares of Class B
Common Stock acquired by the Corporation shall be
automatically converted into shares of Class A Common Stock.
(h) Open Market Purchases and Issuer Tender Offers. If
the Corporation publicly offers to purchase any shares of
Class B Common Stock in the open market or in private
transactions or pursuant to an issuer tender offer, the
Corporation shall simultaneously offer to purchase at least
the same number of shares of Class A Common Stock on the same
terms and conditions.
(i) Authorized Shares; Fractional Shares.
(1) The number of authorized shares of Class B Common
Stock may not be increased unless approved by the holders of a
majority of the then outstanding shares of Class A Common
Stock voting separately as a class.
(2) No fractional shares of Class A Common Stock
shall be issued upon conversion of shares of Class B Common
Stock. In lieu of fractional shares, the Transfer Agent shall
pay an amount in cash equal to the fair market value of the
shares of Class A Common Stock on the conversion date
multiplied by the fraction of a share of Class A Common Stock
that would otherwise be issuable.
8. The shareholders of the Corporation shall not have preemptive
rights.
9. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be managed
under the direction of, a Board of Directors consisting of not less than three
nor more than nine directors, the exact number of directors to be determined in
the manner provided in the Bylaws of the Corporation. The Board of Directors
shall be divided into three classes, designated Class I, Class II and Class
III. Each class shall consist, as nearly as possible, of one-third of the
total number of directors constituting the entire Board of Directors. Each
class of directors shall be elected for a three-year term, except at the 1997
annual
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meeting of shareholders, Class I directors shall be elected for a one-year
term; Class II directors shall be elected for a two-year term; and Class III
directors shall be elected for a three-year term. If the number of directors
is changed, any increase or decrease shall be apportioned among the classes so
as to maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that
shall coincide with the remaining term of that class, but in no case will a
decrease in the number of directors shorten the term of any incumbent director.
A director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
A director may be removed from office but only for "cause" by the
affirmative vote of the holders of a majority of the voting power of the shares
entitled to vote for the election of directors, considered for this purpose as
one class. "Cause" shall be defined for purposes of this Section 9 as (i) a
felony conviction of a director or the failure of a director to contest
prosecution for a felony; (ii) conviction of a crime involving moral turpitude;
or (iii) willful and continued misconduct or gross negligence by a director in
the performance of his duties as a director.
Notwithstanding any other provisions of this Charter, the affirmative
vote of holders of two-thirds of the voting power of the shares entitled to
vote at an election of directors shall be required to amend, alter, change or
repeal, or to adopt any provisions as part of this Charter or as part of the
Corporation's Bylaws inconsistent with the purpose and intent of, this Article
9.
10. To the fullest extent permitted by the Tennessee Business
Corporation Act as in effect on the date hereof and as hereafter amended from
time to time, a director of the Corporation shall not be liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director. If the Tennessee Business Corporation Act or any successor
statute is amended after adoption of this provision to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Tennessee Business Corporation
Act, as so amended from time to time, or such successor statute. Any repeal or
modification of this Article 10 by the shareholders of the Corporation shall
not affect adversely any right or protection of a director of the Corporation
existing at the time of such repeal or modification or with respect to events
occurring prior to such time.
11. The Corporation shall indemnify every person who is or was a
party or is or was threatened to be made a party to any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, by
reason of the fact that he or she is or was a director, medical director or
officer or is or was serving at the request of the Corporation as a director,
medical director, officer, employee, agent, or trustee of another corporation
or of a partnership, joint venture, trust, employee benefit plan, or other
enterprise, including service on a committee formed for any purpose (and, in
each case, his or her heirs, executors, and administrators), against all
expense, liability, and loss (including counsel fees, judgments, fines, ERISA
excise taxes, penalties, and
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amounts paid in settlement) actually and reasonably incurred or suffered in
connection with such action, suit, or proceeding, to the fullest extent
permitted by applicable law, as in effect on the date hereof and as hereafter
amended. Such indemnification shall include advancement of expenses in advance
of final disposition of such action, suit, or proceeding, subject to the
provision of any applicable statute.
The indemnification and advancement of expenses provisions of this
Article 11 shall not be exclusive of any other right that any person (and his
or her heirs, executors, and administrators) may have or hereafter acquire
under any statute, this Charter, the Corporation's Bylaws, resolution adopted
by the shareholders, resolution adopted by the Board of Directors, agreement,
or insurance, purchased by the Corporation or otherwise, both as to action in
his or her official capacity and as to action in another capacity. The
Corporation is hereby authorized to provide for indemnification and advancement
of expenses through its Bylaws, resolution of shareholders, resolution of the
Board of Directors, or agreement, in addition to that provided by this Charter.
12. The Bylaws of this Corporation may be amended, altered,
modified, or repealed by resolution adopted by the Board of Directors, subject
to any provisions of law then applicable.
13. The Corporation shall hold a special meeting of shareholders
only in the event (a) of a call of the Board of Directors of the Corporation or
the officers authorized to do so by the Bylaws of the Corporation, or (b) the
holders of at least twenty-five (25%) percent of all the votes entitled to be
cast on any issue proposed to be considered at the proposed special meeting
sign, date, and deliver to the Corporation's secretary one or more written
demands for the meeting describing the purpose or purposes for which it is to
be held.
14. As a result of the recapitalization of the Corporation
effected by this Amended and Restated Charter, each holder of three shares of
Corporation common stock registered on the books of the Corporation immediately
prior to the filing of this Amended and Restated Charter will automatically be
deemed to hold, in respect of such shares, one share of Class A Common Stock
registered on the books of the Corporation immediately after the filing of this
Amended and Restated Charter. In the event that the recapitalization effected
by this Amended and Restated Charter would result in any holder holding
fractional shares of Common Stock, the total number of shares held by such
holder will be rounded up to the next highest whole number. Each certificate
representing shares of Corporation common stock issued prior to the filing of
this Amended and Restated Charter will be deemed to represent the number of
shares of Class A Common Stock that the holder of such shares registered on the
books of the Corporation immediately prior to the filing of this Amended and
Restated Charter would be deemed to hold immediately following the filing of
this Amended and Restated Charter.
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III. The Amended and Restated Charter as set forth above was duly adopted
effective May ___, 1997, by the Board of Directors and shareholders of
the Corporation.
AmSurg Corp.
By:
------------------------------------
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EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
AMSURG CORP.
(THE "CORPORATION")
ARTICLE I.
OFFICES
The Corporation may have such offices, either within or without the
State of Tennessee, as the Board of Directors may designate or as the business
of the Corporation may require from time to time.
ARTICLE II.
SHAREHOLDERS
2.1 ANNUAL MEETING.
An annual meeting of the shareholders of the Corporation shall be held
on such date as may be determined by the Board of Directors. The business to
be transacted at such meeting shall be the election of directors and such other
business as shall be properly brought before the meeting.
2.2 SPECIAL MEETINGS.
A special meeting of shareholders shall be held on call of the Board
of Directors or if the holders of at least twenty-five percent (25%) of all the
votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting sign, date, and deliver to the Corporation's Secretary
one (1) or more written demands for the meeting describing the purpose or
purposes for which such special meeting is to be held, including all statements
necessary to make any statement of such purpose not incomplete, false or
misleading, and include any other information specified in Schedule 14A, Rule
14a-3, Rule 14a-8, or Rule 14a-11 of the Rules and Regulations of the
Securities and Exchange Commission. Only business within the purpose or
purposes described in the meeting notice may be conducted at a special
shareholders' meeting.
<PAGE> 2
2.3 PLACE OF MEETINGS.
The Board of Directors may designate any place, either within or
without the State of Tennessee, as the place of meeting for any annual meeting
or for any special meeting. If no place is fixed by the Board of Directors,
the meeting shall be held at the principal office of the Corporation.
2.4 NOTICE OF MEETINGS; WAIVER.
(A) NOTICE. Notice of the date, time and place of each
annual and special shareholders' meeting and, in the case of a special meeting,
a description of the purpose or purposes for which the meeting is called, shall
be given no fewer than ten (10) days nor more than two (2) months before the
date of the meeting. Such notice shall comply with the requirements of Article
XI of these Bylaws.
(B) WAIVER. A shareholder may waive any notice required
by law, the Corporation's Amended and Restated Charter (the "Charter") or these
Bylaws before or after the date and time stated in such notice. Except as
provided in the next sentence, the waiver must be in writing, be signed by the
shareholder entitled to the notice and be delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. A shareholder's
attendance at a meeting: (1) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of the meeting
(or promptly upon his arrival) objects to holding the meeting or transacting
business at the meeting; and (2) waives objection to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter when it is presented.
2.5 RECORD DATE.
The Board of Directors shall fix as the record date for the
determination of shareholders entitled to notice of a shareholders' meeting, to
demand a special meeting, to vote, or to take any other action, a date not more
than seventy (70) days before the meeting or action requiring a determination
of shareholders.
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<PAGE> 3
A record date fixed for a shareholders' meeting is effective for any
adjournment of such meeting unless the Board of Directors fixes a new record
date, which it must do if the meeting is adjourned to a date more than four (4)
months after the date fixed for the original meeting.
2.6 SHAREHOLDERS' LIST.
After the record date for a meeting has been fixed, the Corporation
shall prepare an alphabetical list of the names of all shareholders who are
entitled to notice of a shareholders' meeting. Such list will show the address
of and number of shares held by each shareholder. The shareholders' list will
be available for inspection by any shareholder, beginning two (2) business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting, at the Corporation's principal office or at a
place identified in the meeting notice in the city where the meeting will be
held. A shareholder or his agent or attorney is entitled on written demand to
inspect and, subject to the requirements of the Tennessee Business Corporation
Act (the "Act"), to copy the list, during regular business hours and at his
expense, during the period it is available for inspection.
2.7 VOTING GROUPS; QUORUM; ADJOURNMENT.
All shares entitled to vote and be counted together collectively on a
matter at a meeting of shareholders shall be a "voting group". Shares entitled
to vote as a separate voting group may take action on a matter at a meeting
only if a quorum of those shares exists with respect to that matter. Except as
otherwise required by the Act or provided in the Charter, a majority of the
votes entitled to be cast on a matter by a voting group constitutes a quorum of
that voting group for action on that matter.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
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If a quorum of a voting group shall not be present or represented at
any meeting, the shares entitled to vote thereat shall have power to adjourn
the meeting to a different date, time or place without notice other than
announcement at the meeting of the new time, date or place to which the meeting
is adjourned. At any adjourned meeting at which a quorum of any voting group
shall be present or represented, any business may be transacted by such voting
group which might have been transacted at the meeting as originally called.
2.8 VOTING OF SHARES.
Unless otherwise provided by the Act or the Charter, each outstanding
share is entitled to one (1) vote on each matter voted on at a shareholders'
meeting. Only shares are entitled to vote. If a quorum exists, approval of
action on a matter (other than the election of directors) by a voting group
entitled to vote thereon is received if the votes cast within the voting group
favoring the action exceed the votes cast opposing the action, unless the
Charter or the Act requires a greater number of affirmative votes. Unless
otherwise provided in the Charter, directors are elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.
2.9 PROXIES.
A shareholder may vote his or her shares in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for him or her by
signing an appointment either personally or through an attorney-in-fact. An
appointment of a proxy is effective when received by the Secretary or other
officer or agent authorized to tabulate votes. An appointment is valid for
eleven (11) months unless another period is expressly provided in the
appointment form. An appointment of a proxy is revocable by the shareholder
unless the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest.
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<PAGE> 5
2.10 ACCEPTANCE OF SHAREHOLDER DOCUMENTS.
If the name signed on a shareholder document (a vote, consent, waiver,
or proxy appointment) corresponds to the name of a shareholder, the
Corporation, if acting in good faith, is entitled to accept such shareholder
document and give it effect as the act of the shareholder. If the name signed
on such shareholder document does not correspond to the name of a shareholder,
the Corporation, if acting in good faith, is nevertheless entitled to accept
such shareholder document and to give it effect as the act of the shareholder
if:
(I) the shareholder is an entity and the name signed
purports to be that of an officer or agent of the entity;
(II) the name signed purports to be that of a fiduciary
representing the shareholder and, if the Corporation requests,
evidence of fiduciary status acceptable to the Corporation has been
presented with respect to such shareholder document;
(III) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the Corporation
requests, evidence of this status acceptable to the Corporation has
been presented with respect to the shareholder document;
(IV) the name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the
Corporation requests, evidence acceptable to the Corporation of the
signatory's authority to sign for the shareholder has been presented
with respect to such shareholder document; or
(V) two or more persons are the shareholder as co-tenants
or fiduciaries and the name signed purports to be the name of at least
one (1) of the co-owners and the person signing appears to be acting
on behalf of all the co-owners.
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<PAGE> 6
The Corporation is entitled to reject a shareholder document if the
Secretary or other officer or agent authorized to tabulate votes, acting in
good faith, has a reasonable basis for doubt about the validity of the
signature on such shareholder document or about the signatory's authority to
sign for the shareholder.
2.11 ACTION WITHOUT MEETING.
Action required or permitted by the Act to be taken at a shareholders'
meeting may be taken without a meeting. If all shareholders entitled to vote
on the action consent to taking such action without a meeting, the affirmative
vote of the number of shares that would be necessary to authorize or take such
action at a meeting is the act of the shareholders.
The action must be evidenced by one (1) or more written consents
describing the action taken, at least one of which is signed by each
shareholder entitled to vote on the action in one (1) or more counterparts,
indicating such signing shareholder's vote or abstention on the action and
delivered to the Corporation for inclusion in the minutes or for filing with
the corporate records.
If the Act or the Charter requires that notice of a proposed action be
given to nonvoting shareholders and the action is to be taken by consent of the
voting shareholders, then the Corporation shall give its nonvoting shareholders
written notice of the proposed action at least ten (10) days before such action
is taken. Such notice shall contain or be accompanied by the same material
that would have been required to be sent to nonvoting shareholders in a notice
of a meeting at which the proposed action would have been submitted to the
shareholders for action.
2.12 PRESIDING OFFICER AND SECRETARY.
Meetings of the shareholders shall be presided over by the Chairman of
the Board (the "Chairman"), or if the Chairman is not present or if the
Corporation shall not have a Chairman, by the President or Chief Executive
Officer, or if neither the Chairman nor the President or Chief Executive
Officer is present, by a chairman chosen by a majority of the shareholders
entitled to vote at such meeting.
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<PAGE> 7
The Secretary or, in the Secretary's absence, an Assistant Secretary shall act
as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present, a majority of the shareholders entitled to vote at such
meeting shall choose any person present to act as secretary of the meeting.
2.13 NOTICE OF NOMINATIONS.
Nominations for the election of directors may be made by the Board of
Directors or a committee appointed by the Board of Directors authorized to make
such nominations or by any shareholder entitled to vote in the election of
directors generally. However, any such shareholder nomination may be made only
if written notice of such nomination has been given, either by personal
delivery or the United States mail, postage prepaid, to the Secretary of the
Corporation not later than (a) with respect to an election to be held at an
annual meeting of shareholders, one hundred twenty (120) days in advance of the
anniversary date of the proxy statement for the previous year's annual meeting,
and (b) with respect to an election to be held at a special meeting of
shareholders for the election of directors called other than by written request
of a shareholder, the close of business on the tenth day following the date on
which notice of such meeting is first given to shareholders, and (c) in the
case of a special meeting of shareholders duly called upon the written request
of a shareholder to fill a vacancy or vacancies (then existing or proposed to
be created by removal at such meeting), within ten (10) business days of such
written request. In the case of any nomination by the Board of Directors or a
committee appointed by the Board of Directors authorized to make such
nominations, compliance with the proxy rules of the Securities and Exchange
Commission shall constitute compliance with the notice provisions of the
preceding sentence.
In the case of any nomination by a shareholder, each such notice shall
set forth: (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address, and
residence address of such person, (ii) the principal occupation or employment
of such person, (iii) the class and number of shares of the Corporation which
are beneficially owned by
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such person, and (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies with respect to nominees
for election as directors, pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (including without limitation such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director, if elected); and (b) as to the shareholder giving the
notice (i) the name and address, as they appear on the Corporation's books, of
such shareholder, and (ii) the class and number of shares of the Corporation
which are beneficially owned by such shareholder; and (c) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder. The President,
Chief Executive Officer, or chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedure.
2.14 NOTICE OF NEW BUSINESS.
At an annual meeting of the shareholders only such new business shall
be conducted, and only such proposals shall be acted upon, as have been
properly brought before the meeting. To be properly brought before the annual
meeting such new business must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors,
(b) otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
shareholder. For a proposal to be properly brought before an annual meeting by
a shareholder, the shareholder must have given timely notice thereof in writing
to the Secretary of the Corporation and the proposal and the shareholder must
comply with Rule 14a-8 under the Securities Exchange Act of 1934. To be
timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation within the time limits
specified by Rule 14a-8.
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<PAGE> 9
A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (a) a brief
description of the proposal desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name
and address, as they appear on the Corporation's books, of the shareholder
proposing such business, (c) the class and number of shares of the Corporation
which are beneficially owned by the shareholder, and (d) any financial interest
of the shareholder in such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 2.14. The President, Chief Executive
Officer, or chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that new business or any shareholder proposal was not
properly brought before the meeting in accordance with the provisions of this
Section 2.14, and if he or she should so determine, he or she shall so declare
to the meeting and any such business or proposal not properly brought before
the meeting shall not be acted upon at the meeting. This provision shall not
prevent the consideration and approval or disapproval at the annual meeting of
reports of officers, directors and committees, but in connection with such
reports no new business shall be acted upon at such annual meeting unless
stated and filed as herein provided.
2.15 CONDUCT OF MEETINGS.
Meetings of the shareholders generally shall follow accepted rules of
parliamentary procedure subject to the following:
(a) The President, Chief Executive Officer, or chairman of the
meeting shall have absolute authority over the matters of procedure, and there
shall be no appeal from the ruling of the President, Chief Executive Officer,
or chairman. If, in his or her absolute discretion, the President, Chief
Executive Officer, or chairman deems it advisable to dispense with the rules of
parliamentary procedure as to any meeting
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of shareholders or part thereof, he or she shall so state and shall state the
rules under which the meeting or appropriate part thereof shall be conducted.
(b) If disorder should arise which prevents the continuation of
the legitimate business of the meeting, the President, Chief Executive Officer,
or chairman may quit the chair and announce the adjournment of the meeting, and
upon so doing, the meeting will immediately be adjourned.
(c) The President, Chief Executive Officer, or chairman may ask or
require that anyone not a bona fide shareholder or proxy leave the meeting.
(d) The resolution or motion shall be considered for vote only if
proposed by a shareholder or a duly authorized proxy and seconded by a
shareholder or duly authorized proxy other than the individual who proposed the
resolution or motion.
(e) Except as the President, Chief Executive Officer, or chairman
may permit, no matter shall be presented to the meeting which has not been
submitted for inclusion in the agenda at least thirty (30) days prior to the
meeting.
ARTICLE III.
DIRECTORS
3.1 POWERS AND DUTIES.
All corporate powers shall be exercised by or under the authority of
and the business and affairs of the Corporation managed under the direction of
the Board of Directors.
3.2 NUMBER AND TERM.
(A) NUMBER. The Board of Directors shall consist of no
fewer than three (3) or more than nine (9) members. The exact number of
directors, within the minimum and maximum, or the range
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for the size of the Board, or whether the size of the Board shall be fixed or
variable-range may be fixed, changed or determined from time to time by the
Board of Directors.
(B) TERM. The Board of Directors shall be divided into
three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as possible, of one-third of the total number of directors
constituting the entire Board of Directors. Each class of directors shall be
elected for a three-year term, except at the 1997 annual meeting of
shareholders, Class I directors shall be elected for a one-year term; Class II
directors shall be elected for a two-year term; and Class III directors shall
be elected for a three-year term. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with
the remaining term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his or her term expires
and until his or her successor shall be elected and shall qualify, subject,
however, to prior death, resignation, retirement, disqualification or removal
from office.
3.3 MEETINGS; NOTICE.
The Board of Directors may hold regular and special meetings either
within or without the State of Tennessee. The Board of Directors may permit
any or all directors to participate in a regular or special meeting by, or
conduct the meeting through the use of, any means of communication by which all
directors participating may simultaneously hear each other during the meeting.
A director participating in a meeting by this means is deemed to be present in
person at the meeting.
(A) REGULAR MEETINGS. Unless the Charter otherwise
provides, regular meetings of the Board of Directors may be held without notice
of the date, time, place, or purpose of the meeting.
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(B) SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman, the President, Chief Executive
Officer, or one-third of the entire Board of Directors. Unless the Charter
otherwise provides, special meetings must be preceded by at least twenty-four
(24) hours' notice of the date, time, and place of the meeting but need not
describe the purpose of such meeting. Such notice shall comply with the
requirements of Article XI of these Bylaws.
(C) ADJOURNED MEETINGS. Notice of an adjourned meeting
need not be given if the time and place to which the meeting is adjourned are
fixed at the meeting at which the adjournment is taken, and if the period of
adjournment does not exceed one (1) month in any one (1) adjournment.
(D) WAIVER OF NOTICE. A director may waive any required
notice before or after the date and time stated in the notice. Except as
provided in the next sentence, the waiver must be in writing, signed by the
director, and filed with the minutes or corporate records. A director's
attendance at or participation in a meeting waives any required notice to him
or her of such meeting unless the director at the beginning of the meeting (or
promptly upon his arrival) objects to holding the meeting or transacting
business at the meeting and does not thereafter vote for or assent to action
taken at the meeting.
3.4 QUORUM.
Unless the Charter requires a greater number, a quorum of the Board of
Directors consists of a majority of the fixed number of directors if the
Corporation has a fixed board size or a majority of the number of directors
prescribed, or if no number is prescribed, the number in office immediately
before the meeting begins, if the Corporation has a variable range board.
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3.5 VOTING.
If a quorum is present when a vote is taken, the affirmative vote of a
majority of directors present is the act of the Board of Directors, unless the
Charter or these Bylaws require the vote of a greater number of directors. A
director who is present at a meeting of the Board of Directors when corporate
action is taken is deemed to have assented to such action unless:
(I) he or she objects at the beginning of the meeting (or
promptly upon his or her arrival) to holding the meeting or
transacting business at the meeting;
(II) his or her dissent or abstention from the action
taken is entered in the minutes of the meeting; or
(III) he or she delivers written notice of his or her
dissent or abstention to the presiding officer of the meeting before
its adjournment or to the Corporation immediately after adjournment of
the meeting. The right of dissent or abstention is not available to a
director who votes in favor of the action taken.
3.6 ACTION WITHOUT MEETING.
Unless the Charter otherwise provides, any action required or
permitted by the Act to be taken at a Board of Directors meeting may be taken
without a meeting. If all directors consent to taking such action without a
meeting, the affirmative vote of the number of directors that would be
necessary to authorize or take such action at a meeting is the act of the Board
of Directors. Such action must be evidenced by one or more written consents
describing the action taken, at least one of which is signed by each director,
indicating the director's vote or abstention on the action, which consents
shall be included in the minutes or filed with the corporate records reflecting
the action taken. Action taken by consent is effective when the last director
signs the consent, unless the consent specifies a different effective date.
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3.7 COMPENSATION.
Directors and members of any committee created by the Board of
Directors shall be entitled to such reasonable compensation for their services
as directors and members of such committee as shall be fixed from time to time
by the Board, and shall also be entitled to reimbursement for any reasonable
expenses incurred in attending meetings of the Board or of any such committee
meetings. Any director receiving such compensation shall not be barred from
serving the Corporation in any other capacity and receiving reasonable
compensation for such other services.
3.8 RESIGNATION.
A director may resign at any time by delivering written notice to the
Board of Directors, the Chairman, President, or Chief Executive Officer, or to
the Corporation. A resignation is effective when the notice is delivered
unless the notice specifies a later effective date.
3.9 VACANCIES.
Unless the Charter otherwise provides, if a vacancy occurs on the
Board of Directors, including a vacancy resulting from an increase in the
number of directors or a vacancy resulting from the removal of a director with
or without cause, either the shareholders or the Board of Directors may fill
such vacancy. If the vacancy is filled by the shareholders, it shall be filled
by a plurality of the votes cast at a meeting at which a quorum is present. If
the directors remaining in office constitute fewer than a quorum of the Board
of Directors, they may fill such vacancy by the affirmative vote of a majority
of all the directors remaining in office. If the vacant office was held by a
director elected by a voting group of shareholders, only the holders of shares
of that voting group shall be entitled to vote to fill the vacancy if it is
filled by the shareholders.
3.10 REMOVAL OF DIRECTORS.
(A) BY SHAREHOLDERS. The shareholders may remove one (1)
or more directors solely for cause as defined in the Charter. If cumulative
voting is authorized, a director may not be removed for
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cause if the number of votes sufficient to elect him or her under cumulative
voting is voted against his or her removal. If cumulative voting is not
authorized, a director may be removed for cause only if the number of votes
cast to remove him or her exceeds the number of votes cast not to remove him or
her.
(B) GENERAL. A director may be removed for cause by the
shareholders only at a meeting called for the purpose of removing him or her,
and the meeting notice must state that the purpose, or one (1) of the purposes,
of the meeting is removal of directors for cause.
3.11 ELECTRONIC COMMUNICATION.
Any one or more members of the Board of Directors or any committee
thereof may participate in a meeting of the Board of Directors or any such
committee by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
3.12 CHAIRMAN OF THE BOARD.
The Chairman of the Board shall be appointed from time to time by the
Board of Directors and shall preside at all meetings of the Board of Directors
and of the shareholders of the Corporation.
ARTICLE IV.
COMMITTEES
Unless the Charter otherwise provides, the Board of Directors may
create one (1) or more committees, each consisting of one (1) or more members.
All members of committees of the Board of Directors which exercise powers of
the Board of Directors must be members of the Board of Directors and serve at
the pleasure of the Board of Directors.
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The creation of a committee and appointment of a member or members to
it must be approved by the greater of (i) a majority of all directors in office
when the action is taken or (ii) the number of directors required by the
Charter or these Bylaws to take action.
Unless otherwise provided in the Act, to the extent specified by the
Board of Directors or in the Charter, each committee may exercise the authority
of the Board of Directors. All such committees and their members shall be
governed by the same statutory requirements regarding meetings, action without
meetings, notice and waiver of notice, quorum, and voting requirements as are
applicable to the Board of Directors and its members.
ARTICLE V.
OFFICERS
5.1 NUMBER.
The officers of the Corporation shall be a President, a Chief
Executive Officer, a Chief Financial Officer, a Secretary and such other
officers as may be from time to time appointed by the Board of Directors or by
the Chairman or Chief Executive Officer with the Board of Directors' approval.
The Chairman may, but need not be, an officer of the Corporation. One person
may simultaneously hold more than one office, except the President may not
simultaneously hold the office of Secretary.
5.2 APPOINTMENT.
The principal officers shall be appointed annually by the Board of
Directors at the first meeting of the Board following the annual meeting of the
shareholders, or as soon thereafter as is conveniently possible. Each officer
shall serve at the pleasure of the Board of Directors and until his or her
successor shall have been appointed, or until his or her death, resignation, or
removal.
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5.3 RESIGNATION AND REMOVAL.
An officer may resign at any time by delivering notice to the
Corporation. Such resignation is effective when such notice is delivered
unless such notice specifies a later effective date. An officer's resignation
does not affect the Corporation's contract rights, if any, with the officer.
The Board of Directors may remove any officer at any time with or
without cause, but such removal shall not prejudice the contract rights, if
any, of the person so removed.
5.4 VACANCIES.
Any vacancy in an office for any reason may be filled for the
unexpired portion of the term by the Board of Directors.
5.5 DUTIES.
(A) CHAIRMAN. The Chairman shall preside at all meetings
of the shareholders and the Board of Directors.
(B) CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
of the Corporation shall have general supervision over the active management of
the business of the Corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect.
(C) PRESIDENT. The President shall have the general
powers and duties of supervision and management usually vested in the office of
the President of a corporation and shall perform such other duties as the Board
of Directors may from time to time prescribe.
(D) CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall, subject to the power of the President and the Chief Executive Officer,
have general and active control of all of the financial matters of the
Corporation and shall have all necessary powers to discharge such
responsibility and shall perform such other duties as the Board of Directors,
the President, the Chief Executive Officer or the Chairman may prescribe.
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(E) VICE PRESIDENT. The Vice President or Vice
Presidents (if any) shall be active executive officers of the Corporation,
shall assist the Chairman, President, and Chief Executive Officer in the active
management of the business, and shall perform such other duties as the Board of
Directors may from time to time prescribe.
(F) SECRETARY AND ASSISTANT SECRETARY . The Secretary or
Assistant Secretary shall attend all meetings of the Board of Directors and all
meetings of the shareholders and shall prepare and record all votes and all
minutes of all such meetings in a book to be kept for that purpose. He or she
shall also perform like duties for any committee when required. The Secretary
or Assistant Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board of Directors when required, and unless
directed otherwise by the Board of Directors, shall keep a stock record
containing the names of all persons who are shareholders of the Corporation,
showing their place of residence and the number of shares held by each of them.
The Secretary or Assistant Secretary shall have the responsibility of
authenticating records of the Corporation. The Secretary or Assistant
Secretary shall perform such other duties as may be prescribed from time to
time by the Board of Directors.
(G) OTHER OFFICERS. Other officers appointed by the
Board of Directors shall exercise such powers and perform such duties as may be
delegated to them.
(H) DELEGATION OF DUTIES. In case of the absence or
disability of any officer of the Corporation or of any person authorized to act
in his or her place, the Board of Directors may from time to time delegate the
powers and duties of such officer to any officer, or any director, or any other
person whom it may select, during such period of absence or disability.
5.6 INDEMNIFICATION, ADVANCEMENT OF EXPENSES, AND INSURANCE.
(A) INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The
Corporation shall indemnify and advance expenses to each director, officer and
medical director of the Corporation, or any
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person who may have served at the request of the Corporation's Board of
Directors or its President or Chief Executive Officer as a director or officer
of another corporation (and, in either case, such person's heirs, executors,
and administrators), to the full extent allowed by the laws of the State of
Tennessee, both as now in effect and as hereafter adopted. The Corporation may
indemnify and advance expenses to any employee or agent of the Corporation who
is not a director or officer (and such person's heirs, executors, and
administrators) to the same extent as to a director or officer, if the Board of
Directors determines that doing so is in the best interests of the Corporation.
(B) NON-EXCLUSIVITY OF RIGHTS. The indemnification and
expense advancement provisions of subsection (a) of this Section 5.6 shall not
be exclusive of any other right which any person (and such person's heirs,
executors and administrators) may have or hereafter acquire under any statute,
provision of the Charter, provision of these Bylaws, resolution adopted by the
shareholders, resolution adopted by the Board of Directors, agreement, or
insurance (purchased by the Corporation or otherwise), both as to action in
such person's official capacity and as to action in another capacity.
(C) INSURANCE. The Corporation may maintain insurance,
at its expense, to protect itself and any individual who is or was a director,
officer, employee, or agent of the Corporation, or who, while a director,
officer, employee, or agent of the Corporation, is or was serving at the
request of the Corporation's Board of Directors or its Chief Executive Officer
as a director, officer, partner, trustee, employee, or agent of another
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise against any expense, liability, or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability, or loss under this Article or the Act.
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ARTICLE VI.
SHARES OF STOCK
6.1 SHARES WITH OR WITHOUT CERTIFICATES.
The Board of Directors may authorize that some or all of the shares of
any or all of the Corporation's classes or series of stock be evidenced by a
certificate or certificates of stock. The Board of Directors may also
authorize the issue of some or all of the shares of any or all of the
Corporation's classes or series of stock without certificates. The rights and
obligations of shareholders with the same class and/or series of stock shall be
identical whether or not their shares are represented by certificates.
(A) SHARES WITH CERTIFICATES. If the Board of Directors
chooses to issue shares of stock evidenced by a certificate or certificates,
each individual certificate shall include the following on its face: (i) the
Corporation's name, (ii) the fact that the Corporation is organized under the
laws of the State of Tennessee, (iii) the name of the person to whom the
certificate is issued, (iv) the number of shares represented thereby, (v) the
class of shares and the designation of the series, if any, which the
certificate represents, and (vi) such other information as applicable law may
require or as may be lawful.
If the Corporation is authorized to issue different classes of
shares or different series within a class, the designations, relative rights,
preferences, and limitations determined for each series (and the authority of
the Board of Directors to determine variations for future series) shall be
summarized on the front or back of each certificate. Alternatively, each
certificate shall state on its front or back that the Corporation will furnish
the shareholder this information in writing, without charge, upon request.
Each certificate of stock issued by the Corporation shall be
signed (either manually or in facsimile) by any two officers of the
Corporation. If the person who signed a certificate no longer holds office
when the certificate is issued, the certificate is nonetheless valid.
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(B) SHARES WITHOUT CERTIFICATES. If the Board of
Directors chooses to issue shares of stock without certificates, the
Corporation, if required by the Act, shall, within a reasonable time after the
issue or transfer of shares without certificates, send the shareholder a
written statement of the information required on certificates by Section 6.1(a)
of these Bylaws and any other information required by the Act.
6.2 SUBSCRIPTIONS FOR SHARES.
Subscriptions for shares of the Corporation shall be valid only if
they are in writing. Unless the subscription agreement provides otherwise,
subscriptions for shares, regardless of the time when they are made, shall be
paid in full at such time, or in such installments and at such periods, as
shall be determined by the Board of Directors. All calls for payment on
subscriptions shall be uniform as to all shares of the same class or of the
same series, unless the subscription agreement specifies otherwise.
6.3 TRANSFERS.
Transfers of shares of the capital stock of the Corporation shall be
made only on the books of the Corporation by (i) the holder of record thereof,
(ii) his or her legal representative, who, upon request of the Corporation,
shall furnish proper evidence of authority to transfer, or (iii) his or her
attorney, authorized by a power of attorney duly executed and filed with the
Secretary of the Corporation or a duly appointed transfer agent. Such
transfers shall be made only upon surrender, if applicable, of the certificate
or certificates for such shares properly endorsed and with all taxes thereon
paid.
6.4 LOST, DESTROYED, OR STOLEN CERTIFICATES.
No certificate for shares of stock of the Corporation shall be issued
in place of any certificate alleged to have been lost, destroyed, or stolen
except on production of evidence, satisfactory to the Board of Directors, of
such loss, destruction, or theft, and, if the Board of Directors so requires,
upon the
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furnishing of an indemnity bond in such amount and with such terms and such
surety as the Board of Directors may in its discretion require.
ARTICLE VII.
CORPORATE ACTIONS
7.1 CONTRACTS.
Unless otherwise required by the Board of Directors, the Chairman, the
President, the Chief Executive Officer, or any Vice President shall execute
contracts or other instruments on behalf of and in the name of the Corporation.
The Board of Directors may from time to time authorize any other officer,
assistant officer, or agent to enter into any contract or execute any
instrument in the name of and on behalf of the Corporation as it may deem
appropriate, and such authority may be general or confined to specific
instances.
7.2 LOANS.
No loans shall be contracted on behalf of the Corporation and no
evidence of indebtedness shall be issued in its name unless authorized by the
Chairman, the President, the Chief Executive Officer, or the Board of
Directors. Such authority may be general or confined to specific instances.
7.3 CHECKS, DRAFTS, ETC.
Unless otherwise required by the Board of Directors, all checks,
drafts, bills of exchange, and other negotiable instruments of the Corporation
shall be signed by either the Chairman, the President, the Chief Executive
Officer, a Vice President or such other officer, assistant officer, or agent of
the Corporation as may be authorized so to do by the Board of Directors. Such
authority may be general or confined to specific business, and, if so directed
by the Board, the signatures of two or more such officers may be required.
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7.4 DEPOSITS.
All funds of the Company not otherwise employed shall be deposited
from time to time to the credit of the Corporation in such banks or other
depositories as the Board of Directors may authorize.
7.5 VOTING SECURITIES HELD BY THE CORPORATION.
Unless otherwise required by the Board of Directors, the Chairman,
President, or Chief Executive officer shall have full power and authority on
behalf of the Corporation to attend any meeting of security holders, or to take
action on written consent as a security holder, of other corporations in which
the Corporation may hold securities. In connection therewith the Chairman, the
President, or the Chief Executive Officer shall possess and may exercise any
and all rights and powers incident to the ownership of such securities which
the Corporation possesses. The Board of Directors may, from time to time,
confer like powers upon any other person or persons.
7.6 DIVIDENDS.
The Board of Directors may, from time to time, declare, and the
Corporation may pay, dividends on its outstanding shares of capital stock in
the manner and upon the terms and conditions provided by applicable law. The
record date for the determination of shareholders entitled to receive the
payment of any dividend shall be determined by the Board of Directors, but
which in any event shall not be less than ten (10) days prior to the date of
such payment.
ARTICLE VIII.
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the Board of
Directors, and in the absence of such determination, shall be the calendar
year.
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ARTICLE IX.
CORPORATE SEAL
The Corporation shall not have a corporate seal.
ARTICLE X.
AMENDMENT OF BYLAWS
These Bylaws may be altered, amended, repealed, or restated, and new
Bylaws may be adopted, at any meeting of the shareholders by the affirmative
vote of a majority of the stock represented at such meeting, or by the
affirmative vote of a majority of the members of the Board of Directors who are
present at any regular or special meeting.
ARTICLE XI.
NOTICE
Unless otherwise provided for in these Bylaws, any notice required
shall be in writing except that oral notice is effective if it is reasonable
under the circumstances and not prohibited by the Charter or these Bylaws.
Notice may be communicated in person, by telephone, telegraph, teletype or
other form of wire or wireless communication, or by mail or private carrier.
If these forms of personal notice are impracticable, notice may be communicated
by a newspaper of general circulation in the area where published, or by radio,
television, or other form of public broadcast communication. Written notice to
a domestic or foreign corporation authorized to transact business in Tennessee
may be addressed to its registered agent at its registered office or to the
corporation or its secretary at its principal office as shown in its most
recent annual report or, in the case of a foreign corporation that has not yet
delivered an annual report, in its application for a certificate of authority.
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Written notice to shareholders, if in a comprehensible form, is
effective when mailed, if mailed postpaid and correctly addressed to the
shareholder's address shown in the Corporation's current record of
shareholders. Except as provided above, written notice, if in a comprehensible
form, is effective at the earliest of the following: (a) when received; (b)
five (5) days after its deposit in the United States mail, if mailed correctly
addressed and with first class postage affixed thereon; (c) on the date shown
on the return receipt, if sent by registered or certified mail, return receipt
requested, and the receipt is signed by or on behalf of the addressee; or (d)
twenty (20) days after its deposit in the United States mail, as evidenced by
the postmark if mailed correctly addressed, and with other than first class,
registered, or certified postage affixed. Oral notice is effective when
communicated if communicated in a comprehensible manner.
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EXHIBIT 4.3
AMSURG CORP
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is entered into the ___ day of
March, 1997 by and between AmSurg Corp., a Tennessee corporation (the
"Corporation"), and _____________________________ a ____________ corporation
(the "Shareholder").
In consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. DEFINITIONS
In addition to capitalized terms elsewhere defined herein, as used in this
Agreement:
"AFFILIATE" as applied to any Person means any Person directly or indirectly
controlling, controlled by, or under common control with, that Person.
"APPROVED SALE" means the sale of the Corporation to an independent third party
in an arm's-length transaction, whether by merger, share exchange, sale of all
or substantially all of its assets or sale of all or substantially all of the
outstanding Common Stock of the Corporation.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Common Stock, no par value, of the Corporation.
"HOLDER" means the Shareholder and any transferee of the Common Stock owned by
the Shareholder if such transfer was effected in accordance with the provisions
of this Agreement.
"INITIAL PUBLIC OFFERING" means an underwritten initial offering pursuant to an
effective registration statement under the Securities Act resulting in a sale
by the Corporation of Common Stock to the public at an aggregate offering price
for the shares sold for the account of the Corporation of at least eight
million dollars ($8,000,000).
"PERSON" means an individual, a partnership, a corporation, an association, a
joint stock corporation, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"PIGGYBACK REGISTRATION" shall have the meaning ascribed thereto in Section 3.1
of this Agreement.
"PRIMARY REGISTRATION" means the offer and sale by the Corporation for its own
account of securities registered under the Securities Act.
"REGISTRABLE SHARES" means at any time (i) any Common Stock originally issued
to the Shareholder; (ii) any Common Stock then outstanding which was issued as,
or was issued directly or indirectly upon the conversion or exercise of other
securities issued as, a dividend or other distribution with respect to or in
replacement of Registrable Shares; and (iii) any Common Stock then issuable
directly or indirectly upon the conversion or exercise of other securities
which were issued as a dividend or other distribution with respect to or in
replacement of Registrable Shares; provided that Registrable Shares shall not
include any shares which have theretofore been registered and sold pursuant to
the Securities Act or which have been sold to the public pursuant to Rule 144
or any similar rule promulgated by the Commission pursuant to the Securities
Act.
"REGISTRATION EXPENSES" shall have the meaning ascribed thereto in Section 5 of
this Agreement.
"SECONDARY REGISTRATION" shall mean the offer and sale of securities to the
public by or on behalf of one or more of the holders of the Corporation's
securities pursuant to a registration statement filed by the Corporation with,
and declared effective by, the Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SHAREHOLDER" has the meaning set forth in the introductory paragraph.
2. RESTRICTIONS ON DISPOSITION OF COMMON STOCK.
2.1 All shares of Common Stock of the Corporation owned beneficially by
the Shareholder, directly or indirectly, shall be subject to the terms and
conditions of this Section 2. All certificates representing the shares of
Common Stock
Page1/Shareholders' Agreement
<PAGE> 2
subject to this Section 2 shall bear an appropriate legend setting forth notice
of this Agreement.
2.2 Except as provided in subsection 2.3, the Shareholder may not dispose
of any shares of Common Stock owned by the Shareholder, or any right or
interest in them (and any attempted disposition in contravention hereof shall
be void), to any person or entity other than the Corporation without obtaining
the prior written consent of the Corporation.
2.3 The Shareholder may transfer any shares without compliance with the
provisions of subparagraph 2.2 hereof: (i) pursuant to a Piggyback
Registration; or (ii) to the Corporation or an Affiliate thereof; or (iii) to
the shareholders of the Shareholder, so long as the shareholders agree in
writing to be bound by the provisions of this Agreement.
3. PIGGYBACK REGISTRATIONS.
3.1 Whenever the Corporation proposes to register any of its securities
under the Securities Act (except on Form S-4 or S-8 or any successor form),
the Corporation will give prompt written notice to all holders of Registrable
Shares of its intention to effect such a registration and will use its best
efforts to include in such registration all Registrable Shares with respect to
which the Corporation has received written requests for inclusion therein
within 10 days after giving notice to the holders of Registrable Shares (a
"Piggyback Registration").
3.2 If a Piggyback Registration is an underwritten Primary Registration on
behalf of the Corporation, and the managing underwriters advise the Corporation
in writing that in their opinion the number of securities requested to be
included in such registration exceeds the number which can successfully be sold
in such offering without causing a diminution in the offering price or
otherwise adversely affecting the offering, the Corporation will include in
such registration, to the extent approved by such underwriters,
(i) first, the securities the Corporation proposes to sell,
(ii) second, other securities requested to be included in such
registration pursuant to the terms of that certain Registration
Agreement dated as of April 2, 1992, as it may be amended from time to
time, by and between the Corporation and certain investors identified
therein, and
(iii) third, other shares of Common Stock, including the Registrable
Shares, requested to be included in such registration pursuant to
contractual registration rights, such shares to be taken on a basis
based on the ratio that the number of shares of Common Stock owned by
each Holder of Registrable Shares bears to the number of shares of
Common Stock owned by all holders of shares of Common Stock who have
contractual registration rights and who have exercised those rights,
other than the holders described in subparagraph (ii) above.
3.3 If a Piggyback Registration is an underwritten Secondary Registration
on behalf of holders of the Corporation's securities, and the managing
underwriters advise the Corporation in writing that in their opinion the number
of securities requested to be included in such registration exceeds the number
which can successfully be sold in such offering, the Corporation will include
in such registration, to the extent approved by such underwriters,
(i) first, the securities requested to be included in such
registration pursuant to the terms of that certain Registration
Agreement dated as of April 2, 1992, as it may be amended from time to
time, by and between the Corporation and certain investors identified
therein, and
(ii) second, other shares of Common Stock, including the
Registrable Shares, requested to be included in such registration
pursuant to contractual registration rights, such shares to be taken
on a basis based on the ratio that the number of shares of Common
Stock owned by each Holder of Registrable Shares bears to the number
of shares of Common Stock owned by all holders of shares of Common
Stock who have contractual registration rights and who have exercised
those rights, other than the holders described in subparagraph (i)
above.
4. HOLDBACK AGREEMENTS
Each holder of Registrable Shares agrees not to effect any public sale or
distribution of equity securities of the Corporation, or any securities
convertible into or exchangeable or exercisable for such securities, for 180
days following the effective date of any underwritten Primary Registration
(except as part of such underwritten registration).
5. REGISTRATION EXPENSES
All expenses incident to the Corporation's performance of or compliance with
the provisions of Section 3 of this Agreement, including, without limitation,
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of the Corporation's independent certified
public accountants, legal counsel to the
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<PAGE> 3
Corporation, underwriters (excluding discounts and commissions attributable to
the Registrable Shares included in such registration, which shall be paid by
the holders of such Registrable Shares) and other persons retained by the
Corporation (all such expenses being herein called "Registration Expenses"),
will be borne by the Corporation.
In addition, the Corporation will pay all internal expenses (including without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit or quarterly
review, the expense of any liability insurance obtained by the Corporation and
the expenses and fees for listing the securities to be registered on each
securities exchange on which any shares of Common Stock are then listed.
6. INDEMNIFICATION
6.1 The Corporation agrees to indemnify, to the extent permitted by law,
each seller of Registrable Shares, its officers and directors and each Person
who controls such seller (within the meaning of the Securities Act or the
Securities Exchange Act) against all losses, claims, damages, liabilities and
expenses (including, without limitation, reasonable attorneys' fees except as
limited by Section 6.4) caused by any untrue or alleged untrue statement of a
material fact contained in any registration statement, prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same:
(i) are caused by or contained in any information furnished in
writing to the Corporation by such seller expressly for use therein or
(ii) caused by such seller's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements
thereto and both (A) such delivery is required by law and (B) such
registration statement or prospectus or any amendments or supplements
thereto does not contain any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact. In
connection with an underwritten offering the Corporation will
indemnify the underwriters, their officers and directors and each
Person who controls such underwriters (within the meaning of the
Securities Act or the Securities Exchange Act) to the same extent as
provided above with respect to the indemnification of the sellers of
Registrable Shares. The reimbursements required by this Section 6.1
will be made by periodic payments during the course of the
investigation or defense, as and when bills are rendered or expenses
incurred.
6.2 In connection with any registration statement in which a seller of
Registrable Shares is participating, each such seller will furnish to
the Corporation in writing such information and affidavits as the Corporation
reasonably requests for use in connection with any such registration statement
or prospectus or any amendment thereof or supplement thereto and, to the extent
permitted by law, will indemnify the Corporation, its directors and officers
and each person who controls the Corporation (within the meaning of the
Securities Act or the Securities Exchange Act) against any losses, claims,
damages, liabilities and expenses (including, without limitation, attorneys'
fees except as limited by Section 6.4) resulting from any untrue statement of a
material fact contained in any registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished
in writing by such seller expressly for use in the registration statement or
the prospectus; provided that the obligation to indemnify will be several, not
joint and several, among such sellers of Registrable Shares, and the liability
of each such seller of Registrable Shares will be in proportion to, and
provided further that such liability will be limited to, the net amount
received by such seller from the sale of Registrable Shares pursuant to such
registration statement.
6.3 Each seller of Registrable Shares agrees to indemnify, to the extent
permitted by law, the Corporation, its directors and officers and each person
who controls the Corporation (within the meaning of the Securities Act or the
Securities Exchange Act) against any losses, claims, damages, liabilities and
expenses (including without limitation, attorneys' fees except as limited by
Section 6.4) caused by the breach by such seller of a covenant or
representation or warranty made by such seller in an underwriting agreement;
provided, however, that each seller's obligation to indemnify will be several,
not joint and several, among the sellers of Registrable Shares, and the
liability of each such seller of Registrable Shares in any event will be
limited to the net amount received by such Seller from the sale of Registrable
Shares pursuant to the registration agreement to which such underwriting
agreement pertains.
6.4 Any Person entitled to indemnification hereunder will
(i) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification and
(ii) unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties
may
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<PAGE> 4
exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory
to the indemnified party. If such defense is assumed, the indemnifying
party will not be subject to any liability for any settlement made by
the indemnified party without its consent (but such consent will not
be unreasonably withheld). An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party
a conflict of interest may exist between such indemnified party and
any other of such indemnified parties with respect to such claim.
6.5 The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities. The Corporation
also agrees to make such provisions as are reasonably requested by any
indemnified party for contribution to such party in the event the Corporation's
indemnification is unavailable for any reason.
7. COMPLIANCE WITH RULE 144
In the event that the Corporation (a) registers a class of securities under
Section 12 of the Securities Exchange Act, (b) issues an offering circular
meeting the requirements of Regulation A under the Securities Act or (c)
commences to file reports under Section 13 or 15(d) of the Securities Exchange
Act, then at the request of any holder of Registrable Shares who proposes to
sell securities in compliance with Rule 144 promulgated by the Commission, the
Corporation will use its best efforts to (i) forthwith furnish to such holder a
written statement as to compliance with the filing requirements of the
Commission as set forth in Rule 144 as such rule may be amended from time to
time and (ii) make available such information as will enable the holders of
Registrable Shares to make sales pursuant to Rule 144.
8. PARTICIPATION IN UNDERWRITTEN
REGISTRATIONS
No Person may participate in any registration hereunder which is underwritten
unless such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Corporation and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. CONFIDENTIALITY
The Shareholder agrees to at all times hold in confidence and keep secret and
inviolate all of the Corporation's confidential information, including, without
limitation, all unpublished matters relating to the business, property,
accounts, books, records, customers and contracts of the Corporation which it
may now or hereafter come to know; provided, that the Shareholder may disclose
any such information which has otherwise entered the public domain or which it
is required to disclose to any governmental authority by law or subpoena or
judicial process.
10. LEGEND
The Corporation will cause each certificate or other instrument representing
securities of the Corporation to be stamped or otherwise imprinted, throughout
the term of this Agreement, with a legend in substantially the following form:
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<PAGE> 5
"The securities represented by this certificate are subject to certain
restrictions set forth in a certain Shareholders' Agreement of AmSurg Corp.
(the "Corporation") dated as of _____________________, a copy of which is
available at the principal office of the Corporation."
11. REMEDIES
Each party to this Agreement will be entitled to enforce its rights under this
Agreement specifically, to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be
an adequate remedy for any breach of the provisions of this Agreement and that
either party may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance or injunctive relief in order
to enforce or prevent any violations of the provisions of this Agreement.
12. NOTICES
Except as otherwise provided in this Agreement, any notice, payment, demand or
communication required or permitted to be given by any provision of this
Agreement shall be duly given
(i) if delivered in writing, personally to the person to whom it
is authorized to be given,
(ii) if sent by certified or registered mail, overnight courier
service, facsimile, or telegraph, as follows:
if to the Corporation, to
AmSurg Corp.
Suite 350
One Burton Hills Boulevard
Nashville, TN 37215
Fax (615) 665-0755
if to the Shareholder, to:
with a copy to:
or to such other address as either party may from time to time specify by
written notice to the other party.
Any such notice shall be deemed to be given as of the date so delivered, if
delivered personally, as of the date on which the same was deposited in the
United States mail, postage prepaid, addressed and sent as aforesaid, or on the
date received if sent by electronic facsimile.
13. AMENDMENTS AND WAIVERS
This Agreement may be amended or any provision hereof waived upon the written
agreement of the Corporation and the holders of a majority of the shares of
Common Stock initially owned by the Shareholder.
14. TERM
This Agreement (other than Sections 3 through 9, and 11 hereof) will terminate
upon the earlier of (a) the closing of the Initial Public Offering or an
Approved Sale, and (b) 10 years after the date hereof. The provisions of
Sections 3, 4, 5 and 8 hereof will terminate upon the later of (x) three years
after the date hereof or (y) six months after the closing of the Initial Public
Offering. The provisions of Section 7 hereof will terminate three years after
the closing of the Initial Public Offering. The provisions of Sections 6, 9 and
11 of this Agreement will not terminate.
15. DESCRIPTIVE HEADINGS
The descriptive headings of this Agreement are inserted for convenience of
reference only and do not constitute a part of and shall not be utilized in
interpreting this Agreement.
16. SUCCESSORS AND ASSIGNS
All covenants and agreements in this Agreement by or on behalf of any of the
parties hereto will bind and inure to the benefit of the respective successors
and assigns of the parties hereto, whether so expressed or not, including any
subsequent holders of the shares of Common Stock owned by the Shareholder.
17. SEVERABILITY
Whenever possible each provision of this Agreement will be interpreted in such
manner as to be effective and valid under
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<PAGE> 6
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
18. GOVERNING LAW
The validity, meaning and effect of this Agreement shall be determined in
accordance with the laws of the State of Tennessee applicable to contracts made
and to be performed in that state.
19. EXECUTION IN COUNTERPART
This Agreement may be executed in any number of counterparts, each of which
when so executed and delivered will be deemed an original, and such
counterparts together will constitute one instrument.
20. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties hereto
concerning the matters referred to herein, and supersedes all prior agreements
and understandings. The parties acknowledge that they have independently
negotiated the provisions of this Agreement, that they have relied upon their
own counsel as to matters of law and application and that neither party has
relied on the other party with regard to such matters. The parties expressly
agree that there shall be no presumption created as a result of either party
having prepared in whole or in part any provisions of this Agreement.
21. ARBITRATION
All disputes relative to interpretation of the provisions of this Agreement
shall be resolved by binding arbitration pursuant to the rules of the American
Arbitration Association then pertaining. Arbitration proceedings shall be held
in ________________________.
The parties may, if they are able to do so, agree upon one arbitrator;
otherwise, there shall be three arbitrators selected to resolve disputes
pursuant to this Section 21, one named in writing by each party within 15 days
after notice of arbitration is served upon either party by the other and a
third arbitrator selected by the two arbitrators selected by the parties within
15 days thereafter.
If the two arbitrators cannot select a third arbitrator within such 15 days,
either party may request that the American Arbitration Association select such
third arbitrator. If one party does not choose an arbitrator within 15 days,
the other party shall request that the American Arbitration Association name
such other arbitrator. No one shall serve as arbitrator who is in any way
financially interested in this Agreement or in the affairs of either party.
Each of the parties hereto shall pay its own expenses of arbitration and
one-half of the expenses of the arbitrators. If any position by either party
hereunder, or any defense or objection thereto, is deemed by the arbitrators to
have been unreasonable, the arbitrators shall assess, as part of their award
against the unreasonable party or reduce the award to the unreasonable party,
all or part of the arbitration expenses (including reasonable attorneys' fees)
of the other party and of the arbitrators.
IN WITNESS WHEREOF, the parties hereto have executed this Shareholders'
Agreement as of the date first set forth above.
AMSURG CORP.
By:
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Title:
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By:
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Title:
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<PAGE> 1
EXHIBIT 10.1
MANAGEMENT AND HUMAN RESOURCES AGREEMENT
This MANAGEMENT AND HUMAN RESOURCES AGREEMENT (as amended and
supplemented from time to time, this "Agreement") is made as of May _____,
1997, by and between AmSurg Corp., a Tennessee corporation ("AmSurg"), and
American Healthcorp, Inc., a Delaware corporation ("AHC").
WITNESSETH:
WHEREAS, AHC and AmSurg are parties to that certain Distribution
Agreement, dated as of March __, 1997 (the "Distribution Agreement"), pursuant
to which, as of the date hereof, AHC has distributed all of the shares of
capital stock of AmSurg owned by AHC to the stockholders of AHC (the
"Distribution");
WHEREAS, AHC is supplying to AmSurg and its Subsidiaries (as defined
herein) certain accounting and financial services pursuant to that certain
January 1, 1997 letter agreement between AHC and AmSurg, as amended (the
"Letter Agreement"); and
WHEREAS, AHC and AmSurg desire that AHC continue to provide the same
types of accounting and financial services to AmSurg and its Subsidiaries on a
transition basis following the Distribution with the intent that AmSurg is to
acquire the personnel, systems and expertise necessary to become
self-sufficient in the provision of these services during the Transition Period
(as defined herein).
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound,
the parties agree that AHC shall provide certain services to AmSurg and its
Subsidiaries pursuant to the following terms and conditions:
ARTICLE I
TRANSITION SERVICES
1.1 Services During the Transition Period. During the Transition
Period (as defined in Section 1.6), AHC shall provide the following accounting
and financial services with respect to the corporate office operations of
AmSurg (collectively, the "Services"): (a) processing payroll and associated
payroll tax returns and accounts payable for the AmSurg corporate office, (b)
maintaining general accounting records for the AmSurg corporate operations and
the operations of its Subsidiaries, (c) preparing consolidated AmSurg financial
statements, (d) preparing such AmSurg corporate tax returns and the tax returns
of its Subsidiaries as may be required during the Transition Period, (e)
preparing such estimated tax reports for AmSurg and its Subsidiaries as may be
required during the Transition Period, and (f) preparing financial statements
in connection with periodic
<PAGE> 2
reports required to be filed by AmSurg with the Securities and Exchange
Commission. Such Services will be provided in a manner and at a time
consistent with services provided by AHC under the Letter Agreement.
1.2 Services Not Included. The Services described in Section 1.1
do not include (a) additional outside professional services or fees needed to
review the referenced tax returns or consultations with outside accounting and
tax advisors on specific issues and questions or the costs of AmSurg's annual
independent audit, (b) accounting and financial services in connection with any
offering of securities or acquisition on behalf of AmSurg or any of its
Subsidiaries, as provided below, (c) services and costs as a result of changes
and modifications requested by AmSurg, (d) services and costs in connection
with the conversion to new systems implemented by AmSurg, and (e) services and
costs in connection with any audit of AmSurg's tax returns. Any services and
costs referred to in clauses (b), (c), (d) and (e) of this Section 1.2 may be
provided if specifically agreed by AHC and AmSurg in a written agreement
identifying such services and costs and the fees therefor. Any such services
and costs so agreed to are referred to herein as "Additional Services."
1.3 Compensation for Services.
(a) As compensation for the Services, AmSurg shall pay
AHC:
(i) A fixed fee of $4,166.67 per month during the
Transition Period, and
(ii) A variable fee of $625.00 per month for each
accounting unit identified on Schedule A hereto during the Transition Period.
(b) As compensation for any Additional Services, AmSurg
will pay to AHC the fees agreed to by AHC and AmSurg in the written agreement
referred to in Section 1.2(b) above relating to such Additional Services.
1.4 Payment. AmSurg shall pay all amounts payable pursuant to
Section 1.3 hereof by check or by wire transfer of immediately available funds
into an account designated by AHC. Each such payment shall be made in arrears
on the fifth day of the calendar month following the provision of the Services
or Additional Services.
1.5 Responsibility for Accuracy and Integrity. It is understood
and agreed, and AmSurg hereby acknowledges, that AmSurg has sole responsibility
for the accuracy and integrity of the financial statements and tax returns
prepared by AHC. AmSurg will provide oversight and review on a timely basis of
the Services and any Additional Services provided by AHC.
1.6 Transition Period. The Services and any Additional Services
will be provided during the period (the "Transition Period") beginning on the
date hereof and ending on the earlier of (a) the end of the twelfth
consecutive month following the date hereof, or (b) the date as of which AmSurg
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<PAGE> 3
elects to terminate the Services and any Additional Services by giving notice
to AHC as provided in Section 5.1 hereof.
1.7 Certain Definitions. For purposes of this Agreement, the
following terms shall have the following respective meanings:
(a) "Entity" means any partnership, limited liability
company, corporation, association, business trust, joint venture, governmental
entity, business entity or other entity of any kind or nature.
(b) "Subsidiary" means, with respect to AmSurg, an Entity
identified on Schedule A hereto which, directly or indirectly through one or
more intermediaries is controlled by AmSurg, including but not limited to, any
ambulatory surgery center, physician practice group or operational specialty
network identified on Schedule A hereto managed by AmSurg.
1.8 Termination of Letter Agreement. The Letter Agreement is
hereby terminated as of the date hereof.
1.9 Services to be Provided by AHC; Quality. All Services and any
Additional Services will be performed by employees of AHC, unless otherwise
reasonably agreed to by AHC and AmSurg. The Services and any Additional
Services will be of a level of quality at least consistent with the services
historically provided under the Letter Agreement.
ARTICLE II
HEALTH INSURANCE
AHC will be responsible for claims incurred on or prior to the date
hereof by AmSurg Employees (as hereinafter defined) under any medical or dental
plans offered by AHC to AmSurg Employees on or prior to the date of this
Agreement in accordance with the terms of such plans. AHC will not be
responsible for any claims incurred following the date of this Agreement by any
AmSurg Employees under any plan. For purposes of this Section 2.1, the term
"AmSurg Employee" means any covered employee or covered former employee of
AmSurg or any of its Subsidiaries and any covered dependent of any such
employee or former employee.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 AHC hereby represents, warrants and covenants to AmSurg and
its Subsidiaries:
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<PAGE> 4
(a) AHC shall use its reasonable efforts in performing
its obligations under this Agreement.
(b) AHC shall comply with all applicable material
statutes, ordinances, rules, regulations, orders of public authorities or
regulatory agencies and laws of the United States and/or any state thereof
(collectively, "Laws") relating to this Agreement or to the provision of the
Services and any Additional Services.
3.2 AmSurg hereby represents, warrants and covenants to AHC that
AmSurg and its Subsidiaries shall comply with all applicable Laws relating to
this Agreement or to the use of the Services and any Additional Services.
ARTICLE IV
ACCESS TO INFORMATION AND CONFIDENTIALITY; ACCURACY
4.1 Access to AmSurg Information During the Transition Period;
Cooperation. AmSurg will provide AHC and its authorized accountants, counsel
and other designated representatives access to all records, books, contracts,
instruments, computer data and other data and information of AmSurg and its
Subsidiaries required or requested by AHC in the performance of the Services
and any Additional Services during the Transition Period. AmSurg shall, and
shall cause each of its Subsidiaries, officers, employees, agents, consultants
and advisors to cooperate with AHC in connection with the Services and any
Additional Services. AHC shall deliver to AmSurg all records of AmSurg in
AHC's possession as soon as practicable upon the termination of the Transition
Period.
4.2 Confidentiality. Each party shall hold, and shall cause its
subsidiaries, officers, employees, agents, consultants and advisors to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law, all
non-public information concerning the other party obtained by such party in the
connection with the performances of the Services hereunder (except to the
extent that such information can be shown to have been (a) available to such
party on a non-confidential basis prior to its disclosure by the other party,
(b) in the public domain through no fault of such party or (c) later lawfully
acquired from other sources by the party to which it was furnished), and each
party shall not release or disclose such information to any other person,
except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors who agree to be bound by the provisions of this
Section 4.2. Each party shall be deemed to have satisfied its obligation to
hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar confidential information.
4.3 Accuracy of Information. AHC shall not be responsible for
determining whether any information provided to AHC in connection with the
Services or any Additional Services is accurate or complete or whether there is
any additional information not furnished to AHC which is required for any
financial statements, estimated tax report or tax return prepared by AHC on
behalf of
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<PAGE> 5
AmSurg. In the absence of gross negligence on behalf of AHC, AHC shall not be
responsible for the accuracy, completion or timely filing of any financial
statements, estimated tax report or tax return prepared by AHC. AmSurg will
indemnify and hold AHC, its directors, officers, employees and agents and any
person who controls AHC within the meaning of the Securities Act of 1933, as
amended, and their respective successors and assigns (each of AHC and such
directors, officers, employees, agents and controlling persons, and their
respective successors and assigns, being referred to herein as an "Indemnified
Person") harmless from and against any and all liabilities, claims or damages
incurred by them in connection with any actual or threatened action, claim or
proceeding arising out of or relating to any Services or Additional Services
performed by AHC or any transactions or conduct in connection therewith, in the
absence of gross negligence on the part of AHC.
After receipt by an Indemnified Person of notice of any complaint or
the commencement of any action or proceeding with respect to which
indemnification is being sought hereunder, such person will promptly notify
AmSurg in writing of such complaint or of the commencement of such action or
proceeding, but failure so to notify AmSurg will relieve AmSurg from any
liability which AmSurg may have hereunder only if, and to the extent that, such
failure results in the forfeiture by AmSurg of substantial rights and defenses,
and will not in any event relieve AmSurg from any obligation or liability that
AmSurg may have to any Indemnified Person otherwise than under this Section
4.3. If AmSurg so elects or is requested by an Indemnified Person, AmSurg will
assume the defense of such action or proceeding, including the employment of
counsel reasonably satisfactory to the Indemnified Person and the payment of
the fees and disbursements of such counsel; provided, however, that without
regard to whether AmSurg assumes such defense, AmSurg shall have the right to
participate in any such action or proceeding. In the event, however, that an
Indemnified Person reasonably determines in its judgment that having common
counsel would present such counsel with a conflict of interest or if the
defendants in, or targets of, any such action or proceeding include both an
Indemnified Person and AmSurg, and such Indemnified Person concludes that there
may be legal defenses available to it or other Indemnified Persons that are
different from or in addition to those available to AmSurg, or if AmSurg fails
to assume the defense of the action or proceeding or to employ counsel
reasonably satisfactory to such Indemnified Person, in either case in a timely
manner, then such Indemnified Party may employ separate counsel reasonably
satisfactory to AmSurg to represent or defend it in any such action or
proceeding and AmSurg will pay the reasonable fees and disbursements of such
counsel. In any action or proceeding the defense of which is assumed by
AmSurg, the Indemnified Person will have the right to participate in such
litigation and retain its own separate counsel at its own expense. AmSurg will
not be liable to any Indemnified Person under this Section 4.3 for the cost of
any settlement, compromise or consent to the entry of any judgment in any
action or proceeding unless AmSurg has consented in writing to such settlement,
compromise or consent, which consent will not be unreasonably withheld or
delayed. AmSurg agrees that it will not, without the prior written consent of
AHC and any Indemnified Person (which consent shall not be unreasonably
withheld or delayed), settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution under this Section 4.3 may be
sought and to which AHC or any other Indemnified Person is an actual party to
such claim, action, suit or proceeding or in connection with which any
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publicly available statement is made which names or refers to AHC or any
Indemnified Person, unless such settlement, compromise or consent includes an
unconditional release of AHC and each other Indemnified Person hereunder from
all liability arising out of such claim, action, suit or proceeding.
AmSurg agrees that if any indemnification sought by an Indemnified
Person pursuant to this Section 4.3 is held to be unavailable for any reason
other than the gross negligence of AHC, then AmSurg and AHC will contribute to
the liabilities, claims or damages for which such indemnification is held
unavailable; provided, however, that no person guilty of fraudulent
misrepresentation shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be taken
into account the relative benefits of this Agreement to AHC as compared to the
benefits to AmSurg of this Agreement and the transactions giving rise to such
liabilities, claims or damages, the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any statement or omission, and any other
equitable considerations appropriate under the circumstances. AmSurg and AHC
agree that it would not be just and equitable if the amount of such
contribution were determined by pro rata or per capita allocation. Neither AHC
nor any Indemnified Person shall be obligated to make contribution hereunder
which in the aggregate exceeds the fees received by AHC under this Agreement,
less the aggregate amount of any damages which AHC and the Indemnified Persons
have otherwise been required to pay in respect of the same or any similar
claim.
AmSurg will promptly reimburse AHC and any other Indemnified Person
for all expenses (including reasonable fees and disbursements of counsel) as
they are incurred by AHC or such other Indemnified Person in connection with
investigating, preparing for or defending, or providing evidence in, any
pending or threatened action, claim, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not AHC or
any other Indemnified Person is a party) and in enforcing this Agreement.
ARTICLE V
MISCELLANEOUS AND GENERAL
5.1 Termination; Modification or Amendment. The Transition
Period may be terminated at any time by AmSurg by giving thirty days' prior
written notice to AHC. It is contemplated that (a) as AmSurg becomes
self-sufficient during the Transition Period certain of the Services may no
longer be required and that appropriate adjustments in the list of Services and
the fees therefor will be made by written agreement AHC and AmSurg, and (b)
Schedule A may be modified from time to time by written agreement between AHC
and AmSurg. The obligations of the parties under Sections 4.2, 4.3 and 5.8
hereof shall survive the Transition Period or any termination of the Transition
Period or this Agreement. The parties hereto may modify or amend this
Agreement by written agreement executed and delivered by authorized officers of
the respective parties.
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<PAGE> 7
5.2 Counterparts. For the convenience of the parties hereto,
this Agreement may be executed in any number of separate counterparts, each
such counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
5.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
transactions occurring solely within the State of Delaware.
5.4 Notices. Any notice, request, instruction or other document
to be given hereunder by any party to the other shall be in writing and shall
be deemed to have been duly given (i) on the date of delivery if delivered by
facsimile (upon confirmation of receipt) or personally, (ii) on the first
business day following the date of dispatch if delivered by Federal Express or
other next-day courier service, or (iii) on the third business day following
the date of mailing if delivered by registered or certified mail, return
receipt requested, postage prepaid. All notices hereunder shall be delivered
as set forth below, or pursuant to such other instructions as may be designated
in writing by the party to receive such notice:
(a) If to AHC:
American Healthcorp, Inc.
One Burton Hills Boulevard
Nashville, Tennessee 37215
Attention: Thomas G. Cigarran
with a copy to:
James H. Cheek III
Bass, Berry & Sims PLC
2700 First American Center
Nashville, TN 37238
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(b) If to AmSurg:
AmSurg Corp.
One Burton Hills Boulevard
Nashville, Tennessee 37215
Attention: Ken P. McDonald
with a copy to:
Byron R. Trauger
Doramus, Trauger & Ney
222 Fourth Avenue North
Nashville, Tennessee 37219
5.5 Captions. All section captions herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the provisions hereof.
5.6 Assignment. This Agreement and all the provisions hereof
shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by either
party without the prior written consent of the other party and any such
assignment of obligation shall not relieve the assigning party from its
responsibility hereunder. Except as provided in Section 4.3 or otherwise
expressly provided herein, nothing contained in this Agreement or the
agreements referred to herein is intended to confer on any person or entity
other than the parties hereto and their respective successors and permitted
assigns any benefit, rights or remedies under or by reason of this Agreement
and such other agreements.
5.7 Further Assurances. AHC and AmSurg will do such additional
things as are necessary or proper to carry out and effectuate the intent of
this Agreement or any part hereof or the transactions contemplated hereby.
5.8 Dispute Resolution.
(a) Submission of Disputes to Arbitration. Any claims,
demands, disputes, differences, controversies, and/or misunderstandings arising
under, out of, or in connection with, or in relation to this Agreement
(collectively, a "Dispute"), shall be settled by submission of such Dispute
(if not theretofore resolved by the parties hereto) within 45 days of assertion
to arbitration in accordance with the provisions of this Section 5.8 and the
Commercial Arbitration Rules of the American Arbitration Association.
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(b) Selection of Arbitrators.
(i) The parties may agree upon one arbitrator
whose decision will be final and binding on them; otherwise there shall be
three arbitrators, with one named in writing by each party and the third chosen
by these two arbitrators (without necessary delay), and the decision in writing
signed by those assenting thereto of any two of the arbitrators shall be final
and binding on the parties.
(ii) No one shall be nominated or act as an
arbitrator who is in any way financially interested in this Agreement or in the
business of either party hereto.
(c) Consent to Jurisdiction. Any and all arbitrations
shall take place pursuant to the laws of the State of Delaware, and consent is
hereby given to jurisdiction of courts of the State of Delaware over the
parties to this Agreement in reference to any matter arising out of arbitration
or this Agreement, including but not limited to confirmation of any award and
enforcement thereof by entry of judgment thereon or by any other legal remedy.
(d) Costs of Arbitration. The cost of any arbitration
(including the fees of the arbitrator or arbitrators) pursuant to this
Agreement shall be borne equally by each party to the Dispute, unless otherwise
determined by the arbitrator or arbitrators.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed and become effective as of the day and year first written above.
AMERICAN HEALTHCORP, INC.
By:
-----------------------------------
Name:
Title:
AMSURG CORP.
By:
-----------------------------------
Name:
Title:
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<PAGE> 10
SCHEDULE A
Subsidiaries and Accounting Units
Facility/Subsidiary Name: Number of Accounting Units*:
*Each AmSurg corporate location will be assigned two accounting units. Each
practice-based ambulatory surgery center will be assigned one accounting unit.
Each managed physician practice group will be assigned two accounting units.
The number of accounting units to be assigned to operational specialty networks
is to be determined by good faith negotiation between AHC and AmSurg.
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EXHIBIT 10.2
AMSURG CORP.
REGISTRATION AGREEMENT
This Registration Agreement (this "Agreement"), dated as of April 2, 1992
is between AmSurg Corp., a Tennessee corporation (the "Corporation"), and the
persons and entities identified on Schedule 1 hereto attached (the "Investors").
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. DEFINITIONS. In addition to capitalized terms elsewhere defined herein,
as used in this Agreement:
"Commission" means the Securities and Exchange Commission.
"Common Shares" means the shares of Common Stock of the Corporation,
no par value.
"Demand Registration" shall have the meaning ascribed thereto in
Section 2(a) of this Agreement.
"Initial Public Offering" means an underwritten initial offering
pursuant to an effective registration statement under the Securities Act
resulting in a sale by the Corporation of Common Shares to the public at an
aggregate offering price for the shares sold for the account of the
Corporation of at least ten million dollars ($10,000,000).
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity or any department,
agency or political subdivision thereof.
"Piggyback Registration" shall have the meaning ascribed thereto in
Section 3(a) of this Agreement.
"Primary Registration" means the offer and sale by the Corporation for
its own account of securities registered under the Securities Act.
"Registrable Shares" means at any time (i) any Common Shares
originally issued to the Investors; (ii) any Common Shares then outstanding
which were issued as, or were issued directly or indirectly upon the
conversion or exercise of other securities issued as, a dividend or other
distribution with respect to or in replacement of Registrable Shares; (iii)
shares of Common Stock issuable upon exercise of outstanding options; and
(iv) any Common Shares then issuable directly or indirectly upon the
conversion or exercise of other securities which were issued as a dividend
or other distribution with respect to or in replacement of Registrable
Shares; provided that Registrable Shares shall not include any shares which
have theretofore been registered and sold pursuant to the Securities Act or
which have been sold to the public pursuant to Rule 144 or any similar rule
promulgated by the Commission pursuant to the Securities Act. For purposes
of this Agreement, a Person will be deemed to be a holder of Registrable
Shares whenever such Person has the then existing right to acquire such
Registrable Shares (by conversion,purchase or otherwise), whether or not
such acquisition has actually been effected.
"Registration Expenses" shall have the meaning ascribed thereto in
Section 6 of this Agreement.
"Secondary Registration" shall mean the offer and sale of securities
to the public by or on behalf of one or more of the holders of the
Corporation's securities pursuant to a registration statement filed by the
Corporation with, and declared effective by, the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Short-Form Registration" has the meaning set forth in Section 2(a).
<PAGE> 2
2. DEMAND REGISTRATION AND SHORT-FORM REGISTRATION. (a) At any time after
180 days after the effective date of the registration statement the Corporation
has filed under the Securities Act with respect to its Initial Public Offering,
the holder or holders of at least 66 2/3% of the Registrable Shares then
outstanding may, by written notice delivered to the Corporation, require
registration under the Securities Act of all or part of their Registrable Shares
on Form S-1 or any similar long form registration ("Demand Registration"). The
Corporation shall not be obligated to effect more than one Demand Registration.
A registration will not count as the permitted Demand Registration until it has
become effective and will not count as the permitted Demand Registration unless
the holders of Registrable Shares initially requesting such Demand Registration
are able to register and sell at least 66 2/3% of the Registrable Shares agreed
by such holders to be included in such Demand Registration; provided that in any
event the Corporation will pay all Registration Expenses in connection with any
registration initiated as a Demand Registration requested hereunder (unless the
holder or holders of Registrable Shares requesting such Demand Registration
request that the registration statement be withdrawn, in which case, such
holders of Registrable Shares shall pay such Registration Expenses). On or after
the date upon which the Corporation has become entitled as a registrant to use
Form S-3 or any similar short-form registration ("Short-Form Registration"), any
holder or holders of Registrable Shares may, at any time, require registration
under the Securities Act of all or any part of their Registrable Shares on a
Short-Form Registration; provided, however, that the aggregate offering value of
the Registrable Shares requested to be registered in any Short-Form Registration
must equal at least $1,000,000. The Corporation will pay all Registration
Expenses in connection with any Short-Form Registration requested hereunder
(unless the holder or holders of Registrable Shares requesting such Short-Form
Registration request that the registration statement be withdrawn, in which
case, such holders of Registrable Shares shall pay such Registration Expenses).
Within ten days after receipt of any request pursuant to this Section 2(a), the
Corporation will give written notice of such request to all other holders of
Registrable Shares and will use its best efforts to include in such registration
all Registrable Shares with respect to which the Corporation has received
written requests for inclusion therein within 15 days after the date the
Corporation's notice is received (or deemed received as provided in Section 19
hereof).
(b) The Corporation will have the right to preempt any Demand Registration
with a Primary Registration by delivering written notice of such intention to
the holders of Registrable Shares who have requested such Demand Registration
within 15 days after the Corporation has received a request for such
registration. In the ensuing Primary Registration, the holders of Registrable
Shares will have such piggyback registration rights as are set forth in Section
3 hereof. Upon the Corporation's preemption of a requested Demand Registration,
such requested registration will not count as the permitted Demand Registration.
(c) If a Demand Registration or a Short-Form Registration is an
underwritten public offering and the managing underwriters advise the
Corporation in writing that in their opinion the number of Registrable Shares
and other securities requested to be included exceeds the number of Registrable
Shares and other securities which can successfully be sold in such offering
without causing a diminution in the offering price or otherwise adversely
affecting the offering, the Corporation will include in such registration, prior
to the inclusion of any securities which are not Registrable Shares, the number
of Registrable Shares requested to be included which in the opinion of such
underwriters can successfully be sold without causing a diminution in the
offering price or otherwise adversely affecting the offering, such Registrable
Shares to be taken pro rata from the respective holders of such Registrable
Shares on the basis of the number of Registrable Shares owned by such holders,
with further successive pro rata allocation among the holders of Registrable
Shares if any such holder of Registrable Shares has requested the registration
of less than all such Registrable Shares it is entitled to register.
(d) The Corporation may postpone for up to three months the filing or the
effectiveness of a registration statement for a Demand Registration or a
Short-Form Registration if the Corporation reasonably determines that such
Demand Registration or Short-Form Registration would have any material adverse
effect upon the Corporation or any of its material assets or operations or any
material pending or proposed transaction, provided, however, that the
Corporation may not postpone any such filing or effectiveness of a registration
statement more than once in any consecutive 12 month period.
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<PAGE> 3
3. PIGGYBACK REGISTRATIONS. (a) Whenever the Corporation proposes to
register any of its securities under the Securities Act (except on Form S-4 or
S-8 or any successor form), the Corporation will give prompt written notice (in
any event within three business days after its receipt of notice of any exercise
of Demand Registration or Short-Form Registration rights) to all holders of
Registrable Shares of its intention to effect such a registration and will use
its best efforts to include in such registration all Registrable Shares with
respect to which the Corporation has received written requests for inclusion
therein within 15 days after giving notice to the holders of Registrable Shares
(a "Piggyback Registration").
(b) If a Piggyback Registration is an underwritten Primary Registration on
behalf of the Corporation, and the managing underwriters advise the Corporation
in writing that in their opinion the number of securities requested to be
included in such registration exceeds the number which can successfully be sold
in such offering without causing a diminution in the offering price or otherwise
adversely affecting the offering, the Corporation will include in such
registration, (i) first, the securities the Corporation proposes to sell, (ii)
second, the Registrable Shares requested to be included in such registration
which in the opinion of such underwriters can successfully be sold without
causing a diminution in the offering price or otherwise adversely affecting the
offering, such Registrable Shares to be taken pro rata from the holders of such
Registrable Shares on the basis of the number of Registrable Shares owned by
such holders, with further successive pro rata allocations among the holders of
Registrable Shares if any such holder of Registrable Shares has requested the
registration of less than all such Registrable Shares it is entitled to
register, and (iii) third, other securities requested to be included in such
registration.
(c) If a Piggyback Registration is an underwritten Secondary Registration
on behalf of holders of the Corporation's securities, and the managing
underwriters advise the Corporation in writing that in their opinion the number
of securities requested to be included in such registration exceeds the number
which can successfully be sold in such offering, the Corporation will include in
such registration, (i) first, the Registrable Shares requested to be included in
such registration which in the opinion of such underwriters can successfully be
sold, such Registrable Shares to be taken pro rata from the holders of such
Registrable Shares on the basis of the number of Registrable Shares owned or
deemed to be owned by such holders, with further successive pro rata allocations
among the holders of Registrable Shares if any such holder of Registrable Shares
has requested the registration of less than all such Registrable Shares it is
entitled to register, and (ii) second, other securities requested to be included
in such registration.
(d) If the Corporation has previously filed a registration statement with
respect to Registrable Shares pursuant to Section 2 or pursuant to this Section
3, and if such previous registration has not been withdrawn or abandoned, the
Corporation shall not be required to file or cause to be effected any other
registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-4 or S-8 or any successor form), whether on its own behalf
or at the request of any holder or holders of such securities until a period of
180 days has elapsed from the effective date of such previous registration.
4. HOLDBACK AGREEMENTS. (a) Each holder of at least 5% of the Registrable
Shares agrees not to effect any public sale or distribution of equity securities
of the Corporation, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 120-day
period beginning on the effective date of any underwritten Demand Registration
or Short-Form Registration (except as part of such underwritten registration),
unless the underwriters managing the registered public offering otherwise agree
or otherwise require. Each holder of Registrable Shares agrees not to effect any
public sale or distribution of equity securities of the Corporation, or any
securities convertible into or exchangeable or exercisable for such securities,
for such period beginning on the effective date of any underwritten Primary
Registration (except as part of such underwritten registration) as the holders
of Registrable Shares and the underwriters managing the registered public
offering shall mutually agree.
(b) The Corporation agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 120-day period beginning on the effective date of any
underwritten Demand Registration, Short-Form Registration or any underwritten
Piggyback Registration (except as part of such underwritten
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registration or pursuant to registrations on Form S-4 or S-8 or any successor
form), unless the underwriters managing the registered public offering otherwise
agree, and (ii) use its best efforts to cause each holder of at least 5% (on a
fully-diluted basis) of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, purchased from the
Corporation at any time after the date of this Agreement (other than in a
registered public offering) to agree not to effect any public sale or
distribution of any such securities during such period (except as part of such
underwritten registration, if otherwise permitted), unless the underwriters
managing the registered public offering otherwise agree.
5. REGISTRATION PROCEDURES. Whenever the holders of Registrable Shares
have requested that any Registrable Shares be registered pursuant to this
Agreement, the Corporation will use its best efforts to effect the registration
and the sale of such Registrable Shares in accordance herewith and with the
intended method of disposition thereof, and pursuant thereto the Corporation
will as expeditiously as practicable:
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Shares and use its best efforts to cause such
registration statement to become and remain effective for such period, not
to exceed three months, as may be reasonably necessary to effect the sale
of such securities;
(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 keep such registration
statement effective for a period, which need not exceed three months, and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during
such period in accordance herewith and with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(c) furnish to each seller of Registrable Shares and the underwriters
of the securities being registered such number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller or
underwriters may reasonably request in order to facilitate the disposition
of the Registrable Shares owned by such seller or the sale of such
securities by such underwriters; and
(d) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdiction as
any seller reasonably requests and do any and all other acts and things
which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable Shares
owned by such seller (provided, however, that the Corporation will not be
required to (i) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this subparagraph;
(ii) consent to general service of process in any such jurisdiction; or
(iii) subject itself to taxation in any such jurisdiction);
(e) use its best efforts to cause all such Registrable Shares to be
listed on each securities exchange on which similar securities issued by
the Corporation are then listed;
(f) provide a transfer agent and registrar for all such Registrable
Shares not later than the effective date of such registration statement;
(g) enter into such customary agreements (including underwriting
agreements in customary form) as the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such
Registrable Shares (including, without limitation, effecting a stock split
or a combination of shares);
(h) make available for inspection by each seller of Registrable
Shares, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter who agrees to hold in confidence
and keep secret and inviolate, all financial and other records, pertinent
corporate documents and properties of the Corporation, and cause the
Corporation's officers, directors, employees and independent accountants to
supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such
registration statement;
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(i) notify each seller of such Registrable Shares, promptly after it
shall receive notice thereof, of the time when such registration statement
has become effective or a supplement to any prospectus forming a part of
such registration statement has been filed;
(j) notify each seller of such Registrable Shares of any request by
the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(k) prepare and file with the Commission, promptly upon the request of
any seller of such Registrable Shares, any amendments or supplements to
such registration statement or prospectus which, in the reasonable written
opinion of counsel selected by the holders of a majority of the Registrable
Shares being registered and concurred in by the reasonable opinion of
counsel for the Corporation, is required under the Securities Act or the
rules and regulations thereunder in connection with the distribution of
Registrable Shares by such seller;
(l) prepare and promptly file with the Commission and promptly notify
each seller of such Registrable Shares of the filing of such amendment or
supplement to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of which any
such prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading;
(m) advise each seller of such Registrable Shares, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding
for such purpose and promptly use all reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order
should be issued;
(n) at least forty-eight hours prior to the filing of any registration
statement or prospectus or twenty-four hours prior to the filing of any
amendment or supplement to such registration statement or prospectus,
furnish a copy thereof to each seller of such Registrable Shares and
refrain from filing any such registration statement, prospectus, amendment
or supplement to which counsel selected by the holders of a majority of the
Registrable Shares being registered 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 the rules and
regulations thereunder, unless, in the case of an amendment or supplement,
in the opinion of counsel for the Corporation the filing of such amendment
or supplement is reasonably necessary to protect the Corporation from any
liabilities under any applicable federal or state law and such filing will
not violate applicable laws; and
(o) at the request of counsel selected by the holders of a majority of
such Registrable Shares in connection with an underwritten offering, use
its best efforts to furnish on the date or dates provided for in the
underwriting agreement: (i) an opinion of counsel, addressed to the
underwriters and the sellers of Registrable Shares, covering such matters
as such underwriters and sellers may reasonably request, including, without
limiting the generality of the foregoing, opinions substantially to the
effect that (A) such registration statement has become effective under the
Securities Act; (B) to the best of such counsel's knowledge, no stop order
suspending the effectiveness thereof has been issued and no proceedings for
that purpose have been instituted or are pending or contemplated under the
Securities Act; (C) the registration statement, the prospectus, and each
amendment or supplement thereto comply as to form in all material respects
with the requirements of the Securities Act and the applicable rules and
regulations of the Commission thereunder (except that such counsel need
express no opinion as to financial statements or other financial or
statistical data or information regarding the underwriters or the selling
shareholders contained therein); (D) while such counsel has not verified
the accuracy, completeness, or fairness of the statements contained in any
registration statement or prospectus, as either may be amended or
supplemented, nothing has come to such counsel's attention that would cause
it to believe that the registration statement, the prospectus, or any
amendment or supplement thereto contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
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<PAGE> 6
necessary to make the statements therein not misleading (except that such
counsel need express no opinion as to financial statements or other
financial or statistical data or information regarding the underwriters or
the selling shareholders contained therein); (E) the descriptions in the
registration statement, the prospectus, or any amendment or supplement
thereto of all legal and governmental proceedings and all contracts and
other legal documents or instruments are accurate in all material respects;
and (F) while such counsel has not verified the accuracy, completeness, or
fairness of the statements contained in any registration statement or
prospectus, as either may be amended or supplemented, such counsel does not
know of any legal or governmental proceedings, pending or threatened,
required to be described in the registration statement, the prospectus, or
any amendment or supplement thereto which are not described as required nor
of any contracts or documents or instruments of the character required to
be described in the registration statement, the prospectus, or any
amendment or supplement thereto or to be filed which are not described or
filed as required; and (ii) a letter or letters from the independent
certified public accountants of the Corporation addressed to the
underwriters, covering such matters as such underwriters may reasonably
request, in which letters such accountants shall state, without limiting
the generality of the foregoing, that they are independent certified public
accountants within the meaning of the Securities Act and that in the
opinion of such accountants the financial statements and other financial
data of the Corporation included in the registration statement, the
prospectus, or any amendment or supplement thereto comply in all material
respects with the applicable accounting requirements of the Securities Act.
6. REGISTRATION EXPENSES. All expenses incident to the Corporation's
performance of or compliance with this Agreement, including, without limitation,
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
and fees and disbursements of the Corporation's independent certified public
accountants, legal counsel to the Corporation, underwriters (excluding discounts
and commissions attributable to the Registrable Shares included in such
registration) and other persons retained by the Corporation (all such expenses
being herein called "Registration Expenses"), will be borne by the Corporation.
In addition, the Corporation will pay all internal expenses (including without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit or quarterly
review, the expense of any liability insurance obtained by the Corporation and
the expenses and fees for listing the securities to be registered on each
securities exchange on which any shares of Common Stock are then listed.
7. INDEMNIFICATION. (a) The Corporation agrees to indemnify, to the extent
permitted by law, each seller of Registrable Shares, its officers and directors
and each Person who controls such seller (within the meaning of the Securities
Act or the Securities Exchange Act) against all losses, claims, damages,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees except as limited by Section 7(e)) caused by any untrue or alleged untrue
statement of a material fact contained in any registration statement, prospectus
or any amendment thereof or supplement thereto or any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same (i) are caused
by or contained in any information furnished in writing to the Corporation by
such seller expressly for use therein or (ii) caused by such seller's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Corporation has furnished such seller with a
sufficient number of copies of same and both (A) such delivery is required by
law and (B) such registration statement or prospectus or any amendments or
supplements thereto does not contain any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact. In connection
with an underwritten offering the Corporation will indemnify such underwriters,
their officers and directors and each Person who controls such underwriters
(within the meaning of the Securities Act or the Securities Exchange Act) to the
same extent as provided above with respect to the indemnification of the sellers
of Registrable Shares. The reimbursements required by this Section 7(a) will be
made by periodic payments during the course of the investigation or defense, as
and when bills are required or expenses incurred.
(b) The Corporation agrees to indemnify, to the extent permitted by law,
each seller of Registrable Shares, its officers and directors and each Person
who controls such seller (within the meaning of the Securities Act or the
Securities Exchange Act) against all losses, claims, damages, liabilities and
expenses
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(including, without limitation, reasonable attorneys' fees except as limited by
Section 7(e)) caused by the breach by the Corporation of any covenant or
representation or warranty made by the Corporation in an underwriting agreement.
(c) In connection with any registration statement in which a seller of
Registrable Shares is participating, each such seller will furnish to the
Corporation in writing such information and affidavits as the Corporation
reasonably requests for use in connection with any such registration statement
or prospectus or any amendment thereof or supplement thereto and, to the extent
permitted by law, will indemnify the Corporation, its directors and officers and
each person who controls the Corporation (within the meaning of the Securities
Act or the Securities Exchange Act) against any losses, claims, damages,
liabilities and expenses (including, without limitation, attorneys' fees except
as limited by Section 7(e)) resulting from any untrue statement of a material
fact contained in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in writing by
such seller; provided that the obligation to indemnify will be several, not
joint and several, among such sellers of Registrable Shares, and the liability
of each such seller of Registrable Shares will be in proportion to, and provided
further that such liability will be limited to, the net amount received by such
seller from the sale of Registrable Shares pursuant to such registration
statement.
(d) Each seller of Registrable Shares agrees to indemnify, to the extent
permitted by law, the Corporation, its directors and officers and each person
who controls the Corporation (within the meaning of the Securities Act or the
Securities Exchange Act) against any losses, claims, damages, liabilities and
expenses (including without limitation, attorneys' fees except as limited by
Section 7(e)) caused by the breach by such seller of a covenant or
representation or warranty made by such seller in an underwriting agreement;
provided, however, that each seller's obligation to indemnify will be several,
not joint and several, among the sellers of Registrable Shares, and the
liability of each such seller of Registrable Shares in any event will be limited
to the net amount received by such Seller from the sale of Registrable Shares
pursuant to the registration agreement to which such underwriting agreement
pertains.
(e) Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(f) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities. The Corporation
also agrees to make such provisions as are reasonably requested by any
indemnified party for contribution to such party in the event the corporation's
indemnification is unavailable for any reason.
8. COMPLIANCE WITH RULE 144. In the event that the Corporation (a)
registers a class of securities under Section 12 of the Securities Exchange Act,
(b) issues an offering circular meeting the requirements of Regulation A under
the Securities Act or (c) commences to file reports under Section 13 or 15(d) of
the Securities Exchange Act, then at the request of any holder of Registrable
Shares who proposes to sell securities in compliance with Rule 144 promulgated
by the Commission, the Corporation will use its best efforts to (i) forthwith
furnish to such holder a written statement as to compliance with the filing
requirements
7
<PAGE> 8
of the Commission as set forth in Rule 144 as such rule may be amended from time
to time and (ii) make available such information as will enable the holders of
Registrable Shares to make sales pursuant to Rule 144.
9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate
in any registration hereunder which is underwritten unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements. The
holders of a majority of the Registrable Shares requested to be registered will
have the right to select the managing underwriters of any offering of the
Corporation's securities in which the Corporation does not participate, subject
to the approval of the Board of Directors and the Corporation will have such
right in any offering in which it participates.
10. NO INCONSISTENT OR MORE FAVORABLE AGREEMENTS. The Corporation will not
hereafter enter into any agreements with respect to its securities which is
inconsistent with, or grants rights more favorable than, the rights granted to
the holders of Registrable Shares entitled to be registered in this Agreement.
The Corporation shall not issue to any shareholder any demand or piggyback
registration rights equal or superior to those of the holders of Registrable
Shares, without the written consent of the holders of a majority of the
Registrable Shares (demand or piggyback registration rights shall be deemed
equal or superior to those of the holders of Registrable Shares if they
adversely affect the rights of the holders of Registrable Shares hereunder);
provided, however, that except in connection with any financing transaction in
which the Corporation issues debt or equity securities in consideration of
$1,000,000 or more, the Corporation also will obtain the prior written consent
of any holder of Registrable Shares whose rights hereunder are or will be
adversely affected by such agreement.
11. ADJUSTMENTS AFFECTING REGISTRABLE SHARES. The Corporation will not
take any action affecting or otherwise cause or permit any change to occur in,
its authorized, issued and outstanding capital stock which would adversely
affect the ability of the holders of Registrable Shares to include such
Registrable Shares in a registration undertaken pursuant to this Agreement or
which would adversely affect the marketability of such Registrable Shares in any
such registration (including, without limitation, effecting a stock split or a
combination of shares).
12. REMEDIES. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
13. AMENDMENTS AND WAIVERS. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended or waived at any time only by
the written agreement of the Corporation and the holders of a majority of the
Registrable Shares; provided, however, that except in connection with any
financing transaction in which the Corporation issues debt or equity securities
in consideration of $1,000,000 or more, the Corporation also will obtain the
written agreement of any holder of Registrable Shares whose rights hereunder are
or will be adversely affected by such amendment or waiver.
14. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto will bind and inure to the benefit of the respective
successors and permitted assigns of the parties hereto, whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of purchasers or holders
of Registrable Shares are also for the benefit of, and enforceable by, any
subsequent holder of Registrable Shares who consents in writing to be bound by
this Agreement.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties covering the matters referred to herein, and supersedes all prior
agreements and understandings.
16. SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
8
<PAGE> 9
17. TERM. This Agreement shall terminate five years after the effective
date of the Initial Public Offering.
18. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are
inserted for convenience of reference only and do not constitute a part of and
shall not be utilized in interpreting this Agreement.
19. NOTICES. Any notices required or permitted to be sent hereunder shall
be delivered personally or mailed, certified mail, return receipt requested, or
delivered by overnight courier service to the addresses set forth below, or to
such other address as any party hereto designates by written notice to the other
parties given in accordance herewith, and shall be deemed to have been received:
(i) upon delivery, when delivered personally; (ii) three business days after
mailing, if mailed; or (iii) one business day after timely delivery to the
courier, if delivered by overnight courier service.
If to the Corporation, to:
AmSurg Corp.
2301 21st Avenue South
Suite 300
Nashville, Tennessee 37212
Attn: Chief Executive Officer
with a copy to:
Bass, Berry & Sims
First American Center
Nashville, Tennessee 37238
Attn: James H. Cheek, III
If to the Investors, to their respective addresses set forth on the
stock record books of the Corporation.
20. GOVERNING LAW. The validity, meaning and effect of this Agreement
shall be determined in accordance with the laws of the State of Tennessee
applicable to contracts made and to be performed within that state.
21. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument.
9
<PAGE> 10
The parties hereto have executed this Registration Agreement as of the date
first set forth above.
AMSURG CORP.
By: /s/ RODNEY H. LUNN
------------------------------------
Title: President
-----------------------------------
AMERICAN HEALTHCORP, INC.
By: /s/ THOMAS G. CIGARRAN
------------------------------------
Title: Chairman
-----------------------------------
/s/ JAMES H. CHEEK, III
--------------------------------------
James H. Cheek, III
Bass, Berry & Sims Profit Sharing
Trust for the benefit of James H.
Cheek, III
By: /s/ JAMES H. CHEEK, III
------------------------------------
James H. Cheek, III
/s/ ROBERT FABER
--------------------------------------
Robert Faber, M.D.
/s/ WILLIAM C. WEAVER, III
--------------------------------------
William C. Weaver, III
/s/ RODNEY H. LUNN
--------------------------------------
Rodney H. Lunn
/s/ DAVID L. MANNING
--------------------------------------
David L. Manning
10
<PAGE> 11
SCHEDULE 1
American Healthcorp, Inc.
James H. Cheek, III
Bass, Berry & Sims Profit Sharing Trust
for the benefit of James H. Cheek, III
Robert Faber, M.D.
William C. Weaver, III
Rodney H. Lunn
David L. Manning
<PAGE> 12
AMENDMENT NO. 1 TO AMSURG CORP.
REGISTRATION AGREEMENT
This is Amendment No. 1 to the AmSurg Corp. Registration Agreement dated as
of April 2, 1992.
WHEREAS, each of the undersigned is a party to the AmSurg Corp.
Registration Agreement dated as of April 2, 1992 (the "Agreement"); and
WHEREAS, the undersigned desire to amend the Agreement as provided for in
Section 13 of the Agreement.
NOW THEREFORE, the following amendment to the Agreement is approved:
All references in the Agreement to the term "Registrable Shares," other
than references in Section 2 of the Agreement, shall include any Common Shares
issued on November 30, 1992 to The Endoscopy Center, a Tennessee general
partnership ("TEC"), and issued on November 23, 1992 to the partners of TEC. It
is the purpose of this Amendment to provide TEC and its partners the same rights
to Piggyback Registrations as the Investors, but not provide TEC or its partners
any rights to a Demand Registration.
Capitalized terms used herein and not otherwise defined shall have the
meaning set forth in the Agreement.
IN WITNESS WHEREOF, this Amendment No. 1 has been executed as of the 30th
day of November, 1992.
AMSURG CORP.
By: /s/ RODNEY H. LUNN
------------------------------------
Title: President
AMERICAN HEALTHCORP, INC.
By:
------------------------------------
Title:
/s/ JAMES H. CHEEK, III
--------------------------------------
James H. Cheek, III
Bass, Berry & Sims Profit Sharing
Trust for the benefit of James H.
Cheek, III
By: /s/ JAMES H. CHEEK, III
------------------------------------
James H. Cheek, III
/s/ ROBERT FABER, M.D.
--------------------------------------
Robert Faber, M.D.
/s/ WILLIAM C. WEAVER, III
--------------------------------------
William C. Weaver, III
/s/ RODNEY H. LUNN
--------------------------------------
Rodney H. Lunn
/s/ DAVID L. MANNING
--------------------------------------
David L. Manning
<PAGE> 13
The Endoscopy Center hereby executes this Amendment No. 1 to AmSurg Corp.
Registration Agreement for the purpose of agreeing to become a party to the
Registration Agreement as described in this Amendment No. 1.
THE ENDOSCOPY CENTER, a
Tennessee general partnership
By:
--------------------------------------
Title: Managing Partner
<PAGE> 14
AMSURG CORP.
AMENDMENT TO REGISTRATION AGREEMENT
This Amendment No. 2 ("Amendment") to the Registration Agreement
("Agreement"), dated as of April 2, 1992, as amended by Amendment No. 1 dated as
of November 30, 1992, is executed this 20th day of November, 1996 between AmSurg
Corp., a Tennessee corporation (the "Corporation") and the persons and entities
identified on Schedule 1 attached hereto (the "Investors").
WITNESSETH:
WHEREAS, the Corporation and certain of the Investors executed the
Agreement as of April 2, 1992, which was amended by Amendment No. 1 executed on
November 30, 1992; and
WHEREAS, the Corporation and Electra Investment P.L.C., Capitol Health
Partners, L.P. and Michael E. Stephens ( the "Preferred Stock Purchasers") have
executed a Preferred Stock Purchase Agreement of even date herewith pursuant to
which the Preferred Stock Purchasers have purchased an aggregate of 1,500,000
shares of Series A Redeemable Preferred Stock and 1,250,000 shares of Series B
Convertible Preferred Stock (collectively, the "Preferred Stock"); and
WHEREAS, as a condition to the purchase of the Preferred Stock by the
Preferred Stock Purchasers, the Corporation agreed to grant certain registration
rights to the Preferred Stock Purchasers with respect to the shares of Common
Stock issuable upon conversion of the Preferred Stock; and
WHEREAS, the Investors are willing to execute this Amendment in order to
induce the Preferred Stock Purchasers to consummate the transactions
contemplated by the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
AGREEMENT
1. Section 1 of the Agreement is hereby amended as follows:
"Preferred Demand Registration" shall have the meaning in Section
2(b) hereof.
<PAGE> 15
"Preferred Stock" means the shares of Series A Redeemable Stock,
no par value, and the shares of Series B Convertible Preferred Stock,
no par value, of the Corporation issued to the Preferred Stock
Purchasers.
"Registrable Shares" means that any time (i) any Common Shares
originally issued to the Investors; (ii) any Common Shares then
outstanding which were issued upon conversion of the Preferred Stock,
or which were issued as, or were issued directly or indirectly upon
the conversion or exercise of other securities issued as, a dividend
or other distribution with respect to or in replacement or exchange of
Registrable Shares; (iii) Common Shares issuable upon exercise of
outstanding options; (iv) any Common Shares then issuable directly or
indirectly upon the conversion or exercise of other securities which
were issued as a dividend or other distribution with respect to or in
replacement of Registrable Shares; provided that Registrable Shares
shall not include any shares which have theretofore been registered
and sold pursuant to the Securities Act or which have been sold to the
public pursuant to Rule 144 or any similar rule or exemptive order
promulgated or issued by the Commission pursuant to the Securities
Act. For purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Shares whenever such Person has the then
existing right to acquire such Registrable Shares (by conversion,
purchase or otherwise), whether or not such acquisition has actually
been effected.
Notwithstanding the foregoing, all references in the Agreement to
the term "Registrable Shares" other than references in Section 2
thereof shall include any Common Shares issued on November 30, 1992 to
The Endoscopy Center, a Tennessee general partnership ("TEC"), and
issued on November 23, 1992 to the parties of TEC, so that TEC and its
partners shall have the same rights to Piggyback Registrations as the
other Investors, but shall not have any rights to a Demand
Registration.
2. Section 2 of the Agreement is hereby amended to read as follows:
2. DEMAND REGISTRATION AND SHORT-FORM REGISTRATION.
(a) At any time after 180 days after the effective date of the
registration statement the Corporation has filed under the Securities
Act with respect to its Initial Public Offering, the holder or holders
of at least 66 2/3% of the Registrable Shares then outstanding (other
than the Registrable Shares held by the Preferred Stock Purchasers)
may, by written notice delivered to the Corporation, require
registration under the Securities Act of all or part of their
Registrable Shares on Form S-1 or any similar long form registration
("Demand Registration"). The Corporation shall not be obligated to
effect more than one Demand Registration. A registration will not
count as the permitted Demand Registration until it has become
effective and will not count as the permitted Demand Registration
unless the holders of such Registrable Shares initially
2
<PAGE> 16
requesting such Demand Registration are able to register at least
66 2/3% of the Registrable Shares agreed by such holders to be
included in such Demand Registration; provided that in any event the
Corporation will pay all Registration Expenses in connection with any
registration initiated as a Demand Registration requested hereunder
(unless the holder or holders of such Registrable Shares requesting
such Demand Registration request that the registration statement be
withdrawn, in which case, such holders of Registrable Shares shall pay
such Registration Expenses).
(b) At any time after the earlier of (i) 180 days after the
effective date of the Initial Public Offering, and (ii) the third
anniversary date of this Amendment, the holders of at least 66 2/3% of
the Preferred Stock may, by written notice delivered to the
Corporation, require registration under the Securities Act of all or
part of their Registrable Shares on Form S-1 or any similar long form
registration ("Preferred Demand Registration"). The Corporation shall
not be obligated to effect more than two Preferred Demand
Registrations. A registration will not count as a permitted Preferred
Demand Registration until it has become effective and will not count
as a permitted Preferred Demand Registration until the Preferred Stock
Purchasers are able to register at least 66 2/3% of the Registrable
Shares agreed by such holders to be included in such Preferred Demand
Registration; provided that in any event, the Corporation shall pay
all Registration Expenses in connection with any registration
initiated as a Preferred Demand Registration requested hereunder
(unless the Preferred Stock Purchaser(s) requesting such Preferred
Demand Registration request(s) that the registration statement be
withdrawn, in which case, the Preferred Stock Purchaser(s) shall pay
such Registration Expenses).
(c) On or after the date upon which the Corporation has become
entitled as a registrant to use Form S-3 or any similar short-form
registration ("Short-Form Registration"), any such holder or holders
of Registrable Shares may, at any time, require registration under the
Securities Act of all or any part of their Registrable Shares on a
Short-Form Registration; provided, however, that the aggregate
offering value of the Registrable Shares requested to be registered in
any Short-Form Registration must equal at least $1,000,000. The
Corporation will pay all Registration Expenses in connection with any
Short- Form Registration requested hereunder (unless the holder or
holders of Registrable Shares requesting such Short-Form Registration
request that the registration statement be withdrawn, in which case,
such holders of Registrable Shares shall pay such Registration
Expenses). Within ten days after receipt of any request pursuant to
this Section 2(a), the Corporation will give written notice of such
request to all other holders of Registrable Shares and will use its
best efforts to include in such registration all Registrable Shares
with respect to which the Corporation has received written requests
for inclusion therein within 15 days after the date the Corporation's
notice is received (or deemed received as provided in Section 19
hereof).
3
<PAGE> 17
(d) The Corporation will have the right to preempt any Demand
Registration or Preferred Demand Registration with a Primary
Registration by delivering written notice of such intention to the
holders of Registrable Shares who have requested such Demand
Registration or Preferred Demand Registration within 15 days after the
Corporation has received a request for such registration. In the
ensuing Primary Registration, the holders of Registrable Shares will
have such piggyback registration rights as are set forth in Section 3
hereof. Upon the Corporation's preemption of a requested Demand
Registration or Preferred Demand Registration, such requested
registration will not count as the permitted Demand Registration or
Preferred Demand Registration.
(e) If a Demand Registration or Preferred Demand Registration or
a Short-Form Registration is an underwritten public offering and the
managing underwriters advise the Corporation in writing that in their
opinion the number of Registrable Shares and other securities
requested to be included exceeds the number of Registrable Shares and
other securities which can successfully be sold in such offering
without causing a diminution in the offering price or otherwise
adversely affecting the offering, the Corporation will include in such
registration, prior to the inclusion of any securities which are not
Registrable Shares, the number of Registrable Shares requested to be
included which in the opinion of such underwriters can successfully be
sold without causing a diminution in the offering price or otherwise
adversely affecting the offering, such Registrable Shares to be taken
pro rata from the respective holders of such Registrable Shares on the
basis of the number of Registrable Shares owned by such holders, with
further successive pro rata allocation among the holders of
Registrable Shares if any such holder of Registrable Shares has
requested the registration of less than all such Registrable Shares it
is entitled to register.
(f) The Corporation may postpone for up to three months the
filing or the effectiveness of a registration statement for a Demand
Registration or Preferred Demand Registration or a Short-Form
Registration if the Corporation reasonably determines that such Demand
Registration or Preferred Demand Registration or Short-Form
Registration would have any material adverse effect upon the
Corporation or any of its material assets or operations or any
material pending or proposed transaction, provided, however, that the
Corporation may not postpone any such filing or effectiveness of a
registration statement more than once in any consecutive 12 month
period.
3. Section 4(a) of the Agreement is hereby amended by the insertion of
the phrase "or Preferred Demand Registration" after the phrase "Demand
Registration" in the fifth line thereof.
4
<PAGE> 18
4. Section 4(b) of the Agreement is hereby amended by the insertion of
the phrase "or Preferred Demand Registration" after the phrase "Demand
Registration" in the fourth line thereof.
5. The second sentence of Section 10 of the Agreement is hereby amended
by the insertion of the phrase "and the written consent of the holders of a
majority of the shares of Preferred Stock" after the phrase "Registrable Shares"
in the sixth line thereof.
6. Section 13 of the Agreement is hereby amended by the insertion of the
phrase "and the written consent of the holders of a majority of the shares of
Preferred Stock" after the phrase "Registrable Shares" in the third line
thereof.
7. Section 14 of the Agreement is hereby amended by adding the following
sentence as the third sentence thereof:
Notwithstanding the foregoing, in the event that American
Healthcorp, Inc. distributes all Registrable Shares held by it pro
rata among its shareholders in a tax-free distribution under Section
355 of the Internal Revenue Code of 1986, as amended, the provisions
of this Agreement shall no longer apply with respect to the subsequent
holders of such Registrable Shares, who shall not be entitled to
participate in any Demand Registration, Short-Form Registration or
Piggy-Back Registration.
8. The second paragraph of Section 19 of the Agreement is hereby amended
to read as follows:
If to the Corporation, to:
AmSurg Corp.
One Burton Hills Boulevard
Suite 350
Nashville, Tennessee 37215
Attention: Chief Executive Officer
with a copy to:
Bass, Berry & Sims PLC
2700 First American Center
Nashville, Tennessee 37238
Attention: Cynthia Y. Reisz
All other provisions of the Agreement, as amended, shall remain in full
force and effect as on the date hereof.
5
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
the Agreement as of the date first set forth above.
AMSURG CORP.
By:
------------------------------------
Title:
---------------------------------
AMERICAN HEALTHCORP, INC.
By:
------------------------------------
Title:
---------------------------------
---------------------------------------
James H. Cheek, III
Bass, Berry & Sims Profit Sharing Trust
for the Benefit of James H. Cheek, III
By:
-----------------------------------
James H. Cheek, III
---------------------------------------
Rodney H. Lunn
---------------------------------------
David L. Manning
---------------------------------------
William C. Weaver, III
6
<PAGE> 20
---------------------------------------
Robert Faber, M.D.
William C. Weaver, III
Custodian for Nancy Collins
Weaver UTUGMA
By:
------------------------------------
Title:
---------------------------------
William C. Weaver, III
Custodian for William C.
Weaver IV UTUGMA
By:
------------------------------------
Title:
---------------------------------
William C. Weaver, III
Custodian for Jane Craig Weaver
UTUGMA
By:
------------------------------------
Title:
---------------------------------
The Robert B. Faber
Grandchildren's Trust
By:
------------------------------------
Title:
---------------------------------
THE ENDOSCOPY CENTER, a
Tennessee general partnership
By:
------------------------------------
Title:
---------------------------------
7
<PAGE> 21
---------------------------------------
Bergein F. Overholt, M.D.
---------------------------------------
R. Leslie Hargrove, M.D.
---------------------------------------
R. Kent Farris, M.D.
---------------------------------------
F. Raymond Porter, M.D.
---------------------------------------
Barry V. Maves, M.D.
---------------------------------------
Charles M. O'Connor, Jr., M.D.
---------------------------------------
Sarkis J. Chobanian, M.D.
ELECTRA INVESTMENT TRUST, PLC
BY:
------------------------------------
TITLE:
---------------------------------
8
<PAGE> 22
CAPITOL HEALTH PARTNERS, L.P
By: CAPITOL HEALTH
ADVISORS L.P.
Its: General Partner
By: CAPITOL HEALTH, INC.
Its: General Partner
By:
----------------------
Debora A. Guthrie
Title: President
---------------------------------------
Michael E. Stephens
Ruth E. Faber TUA 4/1/92 f/b/o
John E. Faber
By:
------------------------------------
Title:
---------------------------------
Ruth E. Faber TUA 4/2/92 f/b/o
Judith Gwynne F. Buzhardt
By:
------------------------------------
Title:
---------------------------------
9
<PAGE> 23
SCHEDULE I
American Healthcorp, Inc.
James H. Cheek, III
Bass, Berry & Sims Profit Sharing Trust for the Benefit of James H. Cheek, III
Rodney H. Lunn
David L. Manning
William C. Weaver, III
Robert Faber, M.D.
William C. Weaver, III, Custodian for Nancy Collins Weaver UTUGMA
William C. Weaver, III, Custodian for William C. Weaver IV UTUGMA
William C. Weaver, III, Custodian for Jane Craig Weaver UTUGMA
The Robert B. Faber Grandchildren's Trust
Ruth E. Faber TUA 4/1/92 f/b/o John E. Faber
Ruth E. Faber TUA 4/2/92 f/b/o Judith Gwynne F. Buzhardt
The Endoscopy Center
Bergein F. Overholt, M.D.
R. Leslie Hargrove, M.D.
R. Kent Farris, M.D.
F. Raymond Porter, M.D.
Barry V. Maves, M.D.
Charles M. O'Connor, Jr., M.D.
Sarkis J. Chobanian, M.D.
10
<PAGE> 24
SCHEDULE I (CONTINUED)
Electra Investment Trust, PLC
Capitol Health Partners, L.P.
Michael E. Stephens
11
<PAGE> 1
EXHIBIT 10.3
FORM OF INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into as of the ____ day of
_____________, 1997, by and between AmSurg Corp., a Tennessee corporation (the
"Company"), and the undersigned (the "Indemnitee").
RECITALS
WHEREAS, it is essential to the Company that it attract and retain as
directors and officers the most capable persons available; and
WHEREAS, both the Company and Indemnitee recognize the increased risk
of litigation and other claims being asserted against directors and officers of
companies in the current environment; and
WHEREAS, the Company and the Indemnitee are also aware of conditions
in the insurance industry that have affected the Company's ability to obtain
adequate directors' and officers' liability insurance coverage on an
economically acceptable basis; and
WHEREAS, Sections 48-51-501 - 48-18-509 of the Tennessee Business
Corporation Act and Article 11 of the Company's Amended and Restated Charter
(the "Charter") provide for the indemnification of the Company's directors and
officers under certain circumstances; and
WHEREAS, the Company and the Indemnitee recognize the potential
inadequacy of the protection available to directors and officers under the
Tennessee Business Corporation Act, the Company's Charter and director's and
officers' liability insurance; and
WHEREAS, Section 48-18-509 of the Tennessee Business Corporation Act
and the Company's Charter specifically contemplate that indemnification
agreements may be entered into between the Company and its directors and
officers; and
WHEREAS, the Indemnitee currently is serving as a director and/or
officer of the Company, and the Company desires that the Indemnitee continue to
serve in such capacity. The Indemnitee is willing to continue to serve in such
capacity if the Indemnitee is adequately protected against the risks associated
with such service; and
[WHEREAS, the Company desires the Indemnitee to serve as an advisor to
the Company pursuant to an Advisory Agreement, dated as of __________, 1997, to
be entered into by the Company and the Indemnitee (the "Advisory Agreement")
and the Indemnitee is unwilling to serve in such capacity unless his service
under the Advisory Agreement is covered under this Agreement;] and
WHEREAS, the Company and the Indemnitee have concluded that the
indemnities available under the Company's charter, bylaws and any insurance now
or hereafter in effect need to be
<PAGE> 2
supplemented to more fully protect the Indemnitee against the risks associated
with the Indemnitee's service to the Company; and
WHEREAS, in recognition of Indemnitee's need for additional protection
against personal liability in order to enhance Indemnitee's continued service
to the Company in an effective manner, and in order to induce Indemnitee to
continue to provide services to the Company as a director or officer thereof,
the Company wishes to provide in this Agreement for the indemnification of
Indemnitee to the fullest extent permitted by law and as set forth in this
Agreement.
NOW THEREFORE, in consideration of the foregoing, the covenants
contained herein and Indemnitee's continued service to the Company, the Company
and Indemnitee, intending to be legally bound, hereby agree as follows:
Section 1. Definitions. The following terms, as used herein, shall
have the following respective meanings:
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings relative to the
foregoing.
"Change in Control" shall be deemed to have taken place if: (i) any
person or entity, including a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, other than the Company or a wholly-owned
subsidiary thereof or any employee benefit plan of the Company or any of its
subsidiaries, becomes the beneficial owner of the Company securities having 35%
or more of the combined voting power of the then outstanding securities of the
Company that may be cast for the election of directors of the Company (other
than as a result of an issuance of securities initiated by the Company in the
ordinary course of business); or (ii) as the result of, or in connection with,
any cash tender or exchange offer, merger or other business combination, sale
of substantially all of the assets or contested election, or any combination of
the foregoing transactions less than a majority of the combined voting power of
the then-outstanding securities of Company or any successor corporation or
entity entitled to vote generally in the election of the directors of the
Company or such other corporation or entity after such transaction is held in
the aggregate by the holders of the Company securities entitled to vote
generally in the election of directors of the Company immediately prior to such
transaction; or (iii) during any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board of Directors of
the Company cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the Company's
shareholders, of each director of the Company first elected during such period
was approved by a vote of at least two-thirds of the directors of the Company
then still in office who were directors of the Company at the beginning of any
such period.
"Claim" means (a) any threatened, pending or completed action, suit,
proceeding or arbitration or other alternative dispute resolution mechanism, or
(b) any inquiry, hearing or investigation,
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whether conducted by the Company or any other Person, that Indemnitee in good
faith believes might lead to the institution of any such action, suit,
proceeding or arbitration or other alternative dispute resolution mechanism, in
each case whether civil, criminal, administrative or other (whether or not the
claims or allegations therein are groundless, false or fraudulent) and
includes, without limitation, those brought by or in the name of the Company or
any director or officer of the Company.
"Company Agent" means any director, officer, medical director,
associate medical director, partner, employee, advisor, consultant, agent,
trustee or fiduciary of the Company, any Subsidiary or any Other Enterprise.
"Covered Event" means any event or occurrence on or after the date of
this Agreement related to the fact that Indemnitee is or was a Company Agent or
related to anything done or not done by Indemnitee in any such capacity, and
includes, without limitation, any such event or occurrence (a) arising from
performance of the responsibilities, obligations or duties imposed by ERISA or
any similar applicable provisions of state or common law, or (b) arising from
any merger, consolidation or other business combination involving the Company,
any Subsidiary or any Other Enterprise, including without limitation any sale
or other transfer of all or substantially all of the business or assets of the
Company, any Subsidiary or any Other Enterprise.
"Determination" means a determination made by (a) a majority vote of a
quorum of Disinterested Directors; (b) Independent Legal Counsel, in a written
opinion addressed to the Company and Indemnitee; (c) the shareholders of the
Company; or (d) a decision by a court of competent jurisdiction not subject to
further appeal.
"Disinterested Director" shall be a director of the Company who is not
or was not a party to the Claim giving rise to the subject matter of a
Determination.
"Expenses" includes attorneys' fees and all other costs, travel
expenses, fees of experts, transcript costs, filing fees, witness fees,
telephone charges, postage, copying costs, delivery service fees and other
expenses and obligations of any nature whatsoever paid or incurred in
connection with investigating, prosecuting or defending, being a witness in or
participating in (including on appeal), or preparing to prosecute or defend, be
a witness in or participate in any Claim, for which Indemnitee is or becomes
legally obligated to pay.
"Independent Legal Counsel" shall mean a law firm or a member of a law
firm that (a) neither is nor in the past five years has been retained to
represent in any material matter the Company, any Subsidiary, Indemnitee or any
other party to the Claim, (b) under applicable standards of professional
conduct then prevailing would not have a conflict of interest in representing
either the Company or Indemnitee in an action to determine Indemnitee's rights
to indemnification under this Agreement and (c) is reasonably acceptable to the
Company and Indemnitee.
"Loss" means any amount which Indemnitee is legally obligated to pay
as a result of any Claim, including, without limitation (a) all judgments,
penalties and fines, and amounts paid or to be paid in settlement, (b) all
interest, assessments and other charges paid or payable in connection
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therewith and (c) any federal, state, local or foreign taxes imposed (net of
the value to Indemnitee of any tax benefits resulting from tax deductions or
otherwise as a result of the actual or deemed receipt of any payments under
this Agreement, including the creation of the Trust).
"Other Enterprise" means any corporation (other than the Company or
any Subsidiary), partnership, joint venture, association, employee benefit
plan, trust or other enterprise or organization to which Indemnitee renders
service at the request of the Company or any Subsidiary.
"Parent" shall have the meaning set forth in the regulations of the
Securities and Exchange Commission under the Securities Act of 1933, as
amended; provided the term "Parent" shall not include the board of directors of
a corporation in its capacity as a board of directors, and provided further
that if the other party to any transaction referred to in Section 11.1.2 has no
Parent as so defined above, "Parent" shall mean such other party.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government (or any subdivision, department, commission or agency thereof),
and includes without limitation any "person", as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.
"Potential Change in Control" shall be deemed to have occurred if (a)
the Company enters into an agreement or arrangement the consummation of which
would result in the occurrence of a Change in Control, (b) any Person
(including the Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in Control or (c)
the Board of Directors of the Company adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control has occurred.
"Subsidiary" means any corporation of which more than 50% of the
outstanding stock having ordinary voting power to elect a majority of the board
of directors of such corporation is now or hereafter owned, directly or
indirectly, by the Company.
"Trust" has the meaning set forth in Section 8.2.
"Voting Securities" means any securities of the Company which vote
generally in the election of directors.
Section 2. Indemnification
2.1. General Indemnity Obligation.
2.1.1. Subject to the remaining provisions of this Agreement,
the Company hereby indemnifies and holds Indemnitee harmless for any Losses or
Expenses arising from any Claims relating to (or arising in whole or in part
out of) any Covered Event, including without limitation, any Claim the basis of
which is any actual or alleged breach of duty, neglect, error, misstatement,
misleading statement, omission or other act done or attempted by Indemnitee in
the capacity as a
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Company Agent, whether or not Indemnitee is acting or serving in such capacity
at the date of this Agreement, at the time liability is incurred or at the time
the Claim is initiated.
2.1.2. The obligations of the Company under this Agreement
shall apply to the fullest extent authorized or permitted by the provisions of
applicable law, as presently in effect or as changed after the date of this
Agreement, whether by statute or judicial decision (but, in the case of any
subsequent change, only to the extent that such change permits the Company to
provide broader indemnification than permitted prior to giving effect thereto).
2.1.3. Indemnitee shall not be entitled to indemnification
pursuant to this Agreement in connection with any Claim initiated by Indemnitee
against the Company or any director or officer of the Company, unless the
Company has joined in or consented to the initiation of such Claim; provided,
the provisions of this Section 2.1.3 shall not apply following a Change in
Control to Claims seeking enforcement of this Agreement, the Charter or Bylaws
of the Company or any other agreement now or hereafter in effect relating to
indemnification for Covered Events.
2.1.4. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the Losses
or Expenses paid with respect to a Claim but not, however, for the total amount
thereof, the Company shall nevertheless indemnify and hold Indemnitee harmless
against the portion thereof to which Indemnitee is entitled.
2.1.5. Notwithstanding any other provision of this Agreement,
to the extent that Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims relating to (or arising in whole or in part out
of) a Covered Event or in defense of any issue or matter therein, including
dismissal without prejudice, the Company shall indemnify and hold Indemnitee
harmless against all Expenses incurred in connection therewith.
2.2. Indemnification for Serving as Witness and Certain Other Claims.
Notwithstanding any other provision of this Agreement, the Company hereby
indemnifies and holds Indemnitee harmless for all Expenses in connection with
(a) the preparation to serve or service as a witness in any Claim in which
Indemnitee is not a party, if such actual or proposed service as a witness
arose by reason of Indemnitee having served as a Company Agent on or after
the date of this Agreement and (b) any Claim initiated by Indemnitee on or
after the date of this Agreement (i) for recovery under any directors' and
officers' liability insurance maintained by the Company or (ii) following a
Change in Control, for enforcement of the indemnification obligations of the
Company under this Agreement, the Charter or Bylaws of the Company or any
other agreement now or hereafter in effect relating to indemnification for
Covered Events, regardless of whether Indemnitee ultimately is determined to
be entitled to such insurance recovery or indemnification, as the case may be.
Section 3. Limitation on Indemnification.
3.1. Coverage Limitations. No indemnification is available pursuant
to the provisions of this Agreement:
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3.1.1. If such indemnification is not lawful;
3.1.2. If Indemnitee's conduct giving rise to the Claim with
respect to which indemnification is requested was knowingly fraudulent, a
knowing violation of law, deliberately dishonest or in bad faith or constituted
willful misconduct;
3.1.3. In respect of any Claim based upon or attributable to
Indemnitee gaining in fact any personal profit or advantage to which Indemnitee
was not legally entitled;
3.1.4. In respect of any Claim based upon or in connection
with a proceeding by or in the right of the Company in which the director was
adjudged liable to the Company;
3.1.5. In respect of any Claim for an accounting of profits
made from the purchase or sale by Indemnitee of securities of the Company
within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended; or
3.1.6. If Indemnitee's conduct giving rise to the Claim with
respect to which indemnification is requested constituted a breach of the duty
of loyalty to the corporation or its shareholders.
3.1.7. In respect of any Claim based upon any violation of
Section 48-18-304 of the Tennessee Business Corporation Act, as amended.
3.2. No Duplication of Payments. The Company shall not be liable
under this Agreement to make any payment otherwise due and payable to the
extent Indemnitee has otherwise actually received payment (whether under the
Charter or the Bylaws of the Company, the D&O Insurance or otherwise) of any
amounts otherwise due and payable under this Agreement.
Section 4. Payments and Determinations.
4.1. Advancement and Reimbursement of Expenses. If requested by
Indemnitee, the Company shall advance to Indemnitee, no later than two business
days following any such request, any and all Expenses for which indemnification
is available under Section 2. In order to obtain such advancement or
reimbursement, the Indemnitee must also furnish to the Company a written
affirmation of his good faith belief that he has conducted himself in good
faith and that he reasonably believed that: (1) in the case of conduct in his
official capacity with the corporation, that his conduct was in its best
interest; and (2) in all other cases, that his conduct was at least not opposed
to its best interests; and (3) in the case of any criminal proceeding, he had no
reasonable case to believe his conduct was unlawful. In addition, Indemnitee
must furnish to the Company a written undertaking, executed personally or on
his behalf, to repay the advance if it is ultimately determined that he is not
entitled to indemnification. Upon any Determination that Indemnitee is not
permitted to be indemnified for any Expenses so advanced, Indemnitee hereby
agrees to reimburse the Company (or, as appropriate, any Trust established
pursuant to Section 8.2) for all such amounts previously paid. Such obligation
of reimbursement shall be unsecured and no interest shall be charged thereon.
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4.2. Payment and Determination Procedures.
4.2.1. To obtain indemnification under this Agreement,
Indemnitee shall submit to the Company a written request, together with such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
4.2.2. Upon written request by Indemnitee for indemnification
pursuant to Section 4.2.1, a Determination with respect to Indemnitee's
entitlement thereto shall be made in the specific case (a) if a Change in
Control shall have occurred, as provided in Section 8.1; and (b) if a Change in
Control shall not have occurred, by (i) the Board of Directors by a majority
vote of a quorum of Disinterested Directors, (ii) Independent Legal Counsel, if
either (A) a quorum of Disinterested Directors is not obtainable or (B) a
majority vote of a quorum of Disinterested Directors otherwise so directs or
(iii) the shareholders of the Company (if submitted by the Board of Directors)
but shares of stock owned by or voted under the control of any Indemnitee who
is at the time party to the proceeding may not be voted. If a Determination is
made that Indemnitee is entitled to indemnification, payment to Indemnitee
shall be made within 10 days after such Determination.
4.2.3. If no Determination is made within 60 days after
receipt by the Company of a request for indemnification by Indemnitee pursuant
to Section 4.2.1, a Determination shall be deemed to have been made that
Indemnitee is entitled to the requested indemnification (and the Company shall
pay the related Losses and Expenses no later than 10 days after the expiration
of such 60-day period), except where such indemnification is not lawful;
provided, however, that (a) such 60-day period may be extended for a reasonable
time, not to exceed an additional 30 days, if the Person or Persons making the
Determination in good faith require such additional time for obtaining or
evaluating the documentation and information relating thereto; and (b) the
foregoing provisions of this Section 4.2.3 shall not apply (i) if the
Determination is to be made by the shareholders of the Company and if (A)
within 15 days after receipt by the Company of the request by Indemnitee
pursuant to Section 4.2.1 the Board of Directors has resolved to submit such
Determination to the shareholders at an annual meeting of the shareholders to
be held within 75 days after such receipt, and such Determination is made at
such annual meeting, or (B) a special meeting of shareholders is called within
15 days after such receipt for the purpose of making such Determination, such
meeting is held for such purpose within 60 days after having been so called and
such Determination is made at such special meeting, or (ii) if the
Determination is to be made by Independent Legal Counsel.
Section 5. Subrogation. In the event of any payment under this
Agreement to or on behalf of Indemnitee, the Company shall be subrogated to the
extent of such payment to all of the rights of recovery of Indemnitee against
any Person other than the Company or Indemnitee in respect of the Claim giving
rise to such payment. Indemnitee shall execute all papers reasonably required
and shall do everything reasonably necessary to secure such rights, including
the execution of such documents reasonably necessary to enable the Company
effectively to bring suit to enforce such rights.
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Section 6. Notification and Defense of Claims.
6.1. Notice by Indemnitee. Indemnitee shall give notice in writing
to the Company as soon as practicable after Indemnitee becomes aware of any
Claim with respect to which indemnification will or could be sought under this
Agreement; provided the failure of Indemnitee to give such notice, or any delay
in giving such notice, shall not relieve the Company of its obligations under
this Agreement except to the extent the Company is actually prejudiced to any
such failure or delay.
6.3. Defense.
6.3.1. In the event any Claim relating to Covered Events is
by or in the right of the Company, the Indemnitee may, at the option of the
Indemnitee, either control the defense thereof or accept the defense provided,
however, that the amounts expended by the Company shall be reimbursed to the
Company by the Indemnitee if the standards and requirements of Sections
48-18-501 - 48-18-509 of the Tennessee Business Corporation Act so require.
6.3.2. In the event any Claim relating to Covered Events is
other than by or in the right of the Company, the Indemnitee may, at the option
of the Indemnitee, either control the defense thereof or require the Company to
defend. In the event that the Indemnitee requires the Company to do defend,
the Company shall promptly undertake to defend any such Claim, at the Company's
sole cost and expense, utilizing counsel of the Indemnitee's choice who has ben
approved by the Company. If appropriate, the Company shall have the right to
participate in the defense of any such Claim.
Section 7. Determinations and Related Matters.
7.1. Presumptions.
7.1.1. If a Change in Control shall have occurred, Indemnitee
shall be entitled to a rebuttable presumption that Indemnitee is entitled to
indemnification under this Agreement and the Company shall have the burden of
proof in rebutting such presumption.
7.1.2. The termination of any claim by judgment, order,
settlement (whether with or without court approval) or conviction, or upon a
plea of nolo contendere or its equivalent, shall not adversely affect either
the right of Indemnitee to indemnification under this Agreement or the
presumptions to which Indemnitee is otherwise entitled pursuant to the
provisions of this Agreement nor create a presumption that Indemnitee did not
meet any particular standard of conduct or have a particular belief or that a
court has determined that indemnification is not permitted by applicable law.
7.2. Appeals; Enforcement.
7.2.1. In the event that (a) a Determination is made that
Indemnitee shall not be entitled to indemnification under this Agreement, (b)
any Determination to be made by Independent Legal Counsel is not made within 90
days of receipt by the Company of a request for indemnification pursuant to
Section 4.2.1 or (c) the Company fails to otherwise perform any of its
obligations under
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this Agreement (including, without limitation, its obligation to make payments
to Indemnitee following any Determination made or deemed to have been made that
such payments are appropriate), Indemnitee shall have the right to commence a
Claim in any court of competent jurisdiction, as appropriate, to seek a
Determination by the court, to challenge or appeal any Determination which has
been made, or to otherwise enforce this Agreement. If a Change of Control
shall have occurred, Indemnitee shall have the option to have any such Claim
conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association. Any such judicial proceeding challenging or appealing
any Determination shall be deemed to be conducted de novo and without prejudice
by reason of any prior Determination to the effect that Indemnitee is not
entitled to indemnification under this Agreement. Any such Claim shall be at
the sole expense of Indemnitee except as provided in Section 8.3.
7.2.2. If a Determination shall have been made or deemed to
have been made pursuant to this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such Determination in any
judicial proceeding or arbitration commenced pursuant to this Section 7.2,
except if such indemnification is unlawful.
7.2.3. The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 7.2 that
the procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement. The Company
hereby consents to service of process and to appear in any judicial or
arbitration proceedings and shall not oppose Indemnitee's right to commence any
such proceedings.
7.3. Procedures. Indemnitee shall cooperate with the Company and
with any Person making any Determination with respect to any Claim for which a
claim for indemnification under this Agreement has been made, as the Company
may reasonably require. Indemnitee shall provide to the Company or the Person
making any Determination, upon reasonable advance request, any documentation
or information reasonably available to Indemnitee and necessary to (a) the
Company with respect to any such Claim or (b) the Person making any
Determination with respect thereto.
Section 8. Change in Control Procedures.
8.1. Determinations. If there is a Change in Control, any
Determination to be made under Section 4 shall be made by Independent Legal
Counsel selected by Indemnitee and approved by the Company (which approval
shall not be unreasonably withheld). The Company shall pay the reasonable fees
of the Independent Legal Counsel and indemnify fully such Independent Legal
Counsel against any and all expenses (including attorneys' fees), claims,
liabilities and damages arising out of or relating to this Agreement or the
engagement of Independent Legal Counsel pursuant hereto.
8.2. Establishment of Trust. Following the occurrence of any
Potential Change in Control, the Company, upon receipt of a written request
from Indemnitee, shall create a Trust (the "Trust")
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for the benefit of Indemnitee, the trustee of which shall be a bank or similar
financial institution with trust powers chosen by Indemnitee. From time to
time, upon the written request of Indemnitee, the Company shall fund the Trust
in amounts sufficient to satisfy any and all Losses and Expenses reasonably
anticipated at the time of each such request to be incurred by Indemnitee for
which indemnification may be available under this Agreement. The amount or
amounts to be deposited in the Trust pursuant to the foregoing funding
obligation shall be determined by mutual agreement of Indemnitee and the
Company or, if the Company and Indemnitee are unable to reach such an
agreement, or, in any event, a Change in Control has occurred by Independent
Legal Counsel (selected pursuant to Section 8.1). The terms of the Trust shall
provide that, except upon the prior written consent of Indemnitee and the
Company, (a) the Trust shall not be revoked or the principal thereof invaded,
other than to make payments to unsatisfied judgment creditors of the Company,
(b) the Trust shall continue to be funded by the Company in accordance with the
funding obligations set forth in this Section, (c) the Trustee shall promptly
pay or advance to Indemnitee any amounts to which Indemnitee shall be entitled
pursuant to this Agreement, and (d) all unexpended funds in the Trust shall
revert to the Company upon a Determination by Independent Legal Counsel
(selected pursuant to Section 8.1) or a court of competent jurisdiction that
Indemnitee has been fully indemnified under the terms of this Agreement. All
income earned on the assets held in the trust shall be reported as income by
the Company for federal, state, local and foreign tax purposes.
8.3. Expenses. Following any Change in Control, the Company shall be
liable for, and shall pay the Expenses paid or incurred by Indemnitee in
connection with the making of any Determination (irrespective of the
determination as to Indemnitee's entitlement to indemnification) or the
prosecution of any Claim pursuant to Section 7.2, and the Company hereby
agrees to indemnify and hold Indemnitee harmless therefrom. If requested by
counsel for Indemnitee, the Company shall promptly give such counsel an
appropriate written agreement with respect to the payment of its fees and
expenses and such other matters as may be reasonably requested by such counsel.
Section 9. Period of Limitations. No legal action shall be brought
and no cause of action shall be asserted by or in the right of the Company, any
Subsidiary, any Other Enterprise or any Affiliate of the Company against
Indemnitee or Indemnitee's spouse, heirs, executors, administrators or personal
or legal representatives after the expiration of two years from the date of
accrual of such cause of action, and any claim or cause of action of the
Company, any Subsidiary, any Other Enterprise or any Affiliate of the Company
shall be extinguished and deemed released unless asserted by the timely filing
of a legal action within such two-year period; provided, however, that if any
shorter period of limitations, whether established by statute or judicial
decision, is otherwise applicable to any such cause of action such shorter
period shall govern.
Section 10. Contribution. If the indemnification provisions of this
Agreement should be unenforceable under applicable law in whole or in part or
insufficient to hold Indemnitee harmless in respect of any Losses and Expenses
incurred by Indemnitee, then for purposes of this Section 10, the Company shall
be treated as if it were, or was threatened to be made, a party defendant to
the subject Claim and the Company shall contribute to the amounts paid or
payable by Indemnitee as a result of such Losses and Expenses incurred by
Indemnitee in such proportion as is appropriate to reflect the relative
benefits accruing to the Company on the one hand and Indemnitee on the other
and the
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relative fault of the Company on the one hand and Indemnitee on the other in
connection with such Claim, as well as any other relevant equitable
considerations. For purposes of this Section 10 the relative benefit of the
Company shall be deemed to be the benefits accruing to it and to all of its
directors, officers, employees and agents (other than Indemnitee) on the one
hand, as a group and treated as one entity, and the relative benefit of
Indemnitee shall be deemed to be an amount not greater than the Indemnitee's
yearly base salary or Indemnitee's compensation from the Company during the
first year in which the Covered Event forming the basis for the subject Claim
was alleged to have occurred. The relative fault shall be determined by
reference to, among other things, the fault of the Company and all of its
directors, officers, employees and agents (other than Indemnitee) on the one
hand, as a group and treated as one entity, and Indemnitee's and such group's
relative intent, knowledge, access to information and opportunity to have
altered or prevented the Covered Event forming the basis for the subject Claim.
Section 11. Miscellaneous Provisions.
11.1. Successors and Assigns, Etc.
11.1.1. This Agreement shall be binding upon and inure to the
benefit of (a) the Company, its successors and assigns (including any direct or
indirect successor by merger, consolidation or operation of law or by transfer
of all or substantially all of its assets) and (b) Indemnitee and the heirs,
personal and legal representatives, executors, administrators or assigns of
Indemnitee.
11.1.2. The Company shall not consummate any consolidation,
merger or other business combination, nor will it transfer 50% or more of its
assets (in one or a series of related transactions), unless the ultimate Parent
of the successor to the business or assets of the Company shall have first
executed an agreement, in form and substance satisfactory to Indemnitee, to
expressly assume all obligations of the Company under this Agreement and agree
to perform this Agreement in accordance with its terms, in the same manner and
to the same extent that the Company would be required to perform this Agreement
if no such transaction had taken place; provided that, if the Parent is not the
Company, the legality of payment of indemnity by the Parent shall be determined
by reference to the fact that such indemnity is to be paid by the Parent rather
than the Company.
11.2. Severability. The provisions of this Agreement are severable.
If any provision of this Agreement shall be held by any court of competent
jurisdiction to be invalid, void or unenforceable, such provision shall be
deemed to be modified to the minimum extent necessary to avoid a violation of
law and, as so modified, such provision and the remaining provisions shall
remain valid and enforceable in accordance with their terms to the fullest
extent permitted by law.
11.3. Rights Not Exclusive; Continuation of Right of Indemnification.
Nothing in this Agreement shall be deemed to diminish or otherwise restrict
Indemnitee's right to indemnification pursuant to any provision of the Charter
or Bylaws of the Company, any agreement, vote of shareholders or Disinterested
Directors, applicable law or otherwise. This Agreement shall be effective as
of the date first above written and continue in effect until no Claims relating
to any
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Covered Event may be asserted against Indemnitee and until any Claims commenced
prior thereto are finally terminated and resolved, regardless of whether
Indemnitee continues to serve as a director of the Company, any Subsidiary or
any Other Enterprise.
11.4. No Employment Agreement. Nothing contained in this Agreement
shall be construed as giving Indemnitee any right to be retained in the employ
of the Company, any Subsidiary or any Other Enterprise.
11.5. Subsequent Amendment. No amendment, termination or repeal of
any provision of the Charter or Bylaws of the Company, or any respective
successors thereto, or of any relevant provision of any applicable law, shall
affect or diminish in any way the rights of Indemnitee to indemnification, or
the obligations of the Company, arising under this Agreement, whether the
alleged actions or conduct of Indemnitee giving rise to the necessity of
such indemnification arose before or after any such amendment, termination or
repeal.
11.6. Notices. Notices required under this Agreement shall be given
in writing and shall be deemed given when delivered in person or sent by
certified or registered mail, return receipt requested, postage prepaid.
Notices shall be directed to the Company at One Burton Hills Boulevard, Suite
350, Nashville, Tennessee 37215, Attention: President, and to Indemnitee at
_________________________ (or such other address as either party may designate
in writing to the other).
11.7. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Tennessee
applicable to contracts made and performed in such state without giving effect
to the principles of conflict of laws.
11.8. Headings. The headings of the Sections of this Agreement are
inserted for convenience only and shall not be deemed to discriminate part of
this Agreement or to affect the construction thereof.
11.9. Counterparts. This Agreement may be executed in any number of
counterparts all of which taken together shall constitute one instrument.
11.10. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall constitute, or be deemed to constitute, a waiver of any other provisions
hereof (whether or not similar) nor shall any such waiver constitute a
continuing waiver.
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The parties hereto have caused this Agreement to be duly executed as
of the day and year first above written.
AMSURG CORP.
By:
-----------------------------------
Title:
--------------------------------
INDEMNITEE
--------------------------------------
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EXHIBIT 10.4
AMENDED AND RESTATED LOAN AGREEMENT
ENTERED INTO by and between AMSURG CORP., a Tennessee corporation
(the "Borrower"), and SUNTRUST BANK, NASHVILLE, N.A., formerly known as Third
National Bank in Nashville (the "Lender"), as of this 25th day of June, 1996.
RECITALS:
1. Borrower and Lender entered into a Loan Agreement dated as of
September 29, 1993, as amended by a First Amendment to Loan Agreement dated as
of December 27, 1993, as further amended by a Second Amendment to Loan
Agreement dated as of September 30, 1994, as further amended by a Third
Amendment to Loan Agreement dated as of February 24, 1995, as further amended
by a Fourth Amendment to Loan Agreement dated as of March 28, 1995, as amended
by a Fifth Amendment to Loan Agreement dated as of June 9, 1995, as amended by
an amendment dated October 12, 1995, and as further amended by a Seventh
Amendment to Loan Agreement dated December 11, 1995 (herein the Loan Agreement,
as amended, shall be referred to as the "Loan Agreement").
2. Borrower desires that the Lender extend it additional credit.
3. Borrower and Lender desire to amend and restate the Loan
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the parties hereto agree that the Loan Agreement is
amended and restated as follows:
Article I. Definitions.
As used in this Agreement, the following terms shall have the
following meanings, unless the context expressly otherwise requires:
The terms defined in this article have the meanings attributed to them
in this article. Singular terms shall include the plural as well as the
singular, and vice versa. Words of masculine, feminine or neuter gender shall
mean and include the correlative words of other genders.
All references herein to a separate instrument are to such separate
instrument as the same may be amended or supplemented from time to time
pursuant to the applicable provisions thereof.
All accounting terms not otherwise defined herein have the meanings
assigned to them, and all computations herein provided for shall be made, in
accordance with generally accepted accounting principles applied on a
consistent basis. All references herein to
<PAGE> 2
"generally accepted accounting principles" refer to such principles as they
exist at the date of application thereof.
All references herein to designated "Articles", "Sections" and other
subdivisions or to lettered Exhibits are to the designated Articles, Sections
and other subdivisions hereof and the Exhibits annexed hereto unless the
context otherwise clearly indicates. All Article, Section, other subdivision
and Exhibit captions herein are used for reference only and in no way limit or
describe the scope or intent of, or in any way affect, this Agreement.
"Acquisition" means the acquisition of a majority ownership interest
in an existing ambulatory surgery center through the formation of a Partnership
or LLC with a physician or group of physicians.
"Advance" or "Advances" means any and all extensions of credit made
pursuant to this Agreement and shall include, without limitation, any and all
advances under the Revolving Credit Note.
"Agreement" means this Loan Agreement (including all exhibits hereto)
as the same may be modified, amended, or supplemented from time to time.
"Applicable Interest Rate" means either the Base Rate or the
LIBOR-Based Rate as applicable.
"Base Rate" means the rate of interest established from time to time
and announced by Lender as its "base rate," such rate being an interest rate
used as an index for establishing interest rates on loans.
"Borrower" means AmSurg Corp., a Tennessee corporation and any
successors thereto, including without limitation, any trustee or receiver in
bankruptcy, in reorganization, or in similar proceedings.
"Business Day" means any day other than a Saturday, Sunday or day on
which commercial banks are authorized to close under the laws of the State of
Tennessee.
"Capitalization" means Borrower's total consolidated Debt plus
Consolidated Net Worth.
"Closing" means the time and place of the execution and/or delivery of
the Loan Documents.
"Closing Date" means the 25th day of June, 1996 or at such other date
as the parties elect.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
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<PAGE> 3
"Collateral" means any and all collateral securing the Indebtedness,
as described in Article III hereof.
"Conditions Precedent" means those matters or events that must be
completed or must occur or exist prior to Lender's being obligated to fund any
Advance, including, but not limited to, those matters described in Article V
hereof.
"Consolidated Net Income" means, for any period, the net income on a
consolidated basis of Borrower, its Subsidiaries, the Partnerships, the LLC's,
and any other Persons that prepare financial statements on a consolidated basis
under Borrower for such period, determined in accordance with GAAP.
"Consolidated Statements" means Financial Statements of the Borrower
on a consolidated basis.
"Consolidated Net Worth" means (i) the aggregate amount of all assets
of the Borrower (determined on a consolidated basis) as may properly be
classified as such, less (ii) the aggregate amount of all liabilities of the
Borrower (determined on a consolidated basis) and all Minority Interests as
shown on the consolidated balance sheets.
"Contingent Liabilities" means all contingent liabilities required to
be disclosed on the consolidated Financial Statements of the Borrower, its
Subsidiaries, the Partnerships, the LLC's in accordance with GAAP as in effect
from time to time, including statement #5 of the Financial Accounting Standards
Board and any successor thereto.
"Conversion Date" means the date that interest on the outstanding
principal balance of any Advance is converted from the Base Rate to the
LIBOR-Based Rate.
"Debt" means, with respect to any Person, all obligations of such
Person, contingent or otherwise, which in accordance with GAAP would be
classified on a balance sheet of such Person as liabilities of such Person, but
in any event including (a) liabilities secured by any mortgage, pledge or lien
existing on Property owned by such Person and subject to such mortgage, pledge
or lien, whether or not the liability secured thereby shall have been assumed
by such Person, (b) all indebtedness and other similar monetary obligations of
such Person, (c) all guaranties, obligations in respect of letters of credit,
endorsements (other than endorsements of negotiable instruments for purposes of
collection in the ordinary course of business), obligations to purchase goods
or services for the purpose of supplying funds for the purchase or payment of
Debt of others and other contingent obligations in respect of, or to purchase,
or otherwise acquire, or advance funds for the purchase of, Debt of others, (d)
all obligations of such Person to indemnify another Person to the
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extent of the amount of indemnity, if any, which would be payable by such
Person at the time of determination of Debt and (e) all obligations of such
Person under capital leases.
"Default" or "Event of Default" means the occurrence of any of the
events specified in Section 8.01 hereof.
"Default Conditions" or "Default Condition" means the occurrence of
any of the events specified in Section 8.04 hereof.
"Development Costs" means the total amount of all costs and expenses
(excluding soft costs and fees payable to Borrower) incurred by a Partnership
or LLC in the development, construction, or renovation of a Project.
"EBITDA" (Earnings Before Interest, Taxes, Depreciation, and
Amortization) for any period means an amount equal to Consolidated Net Income
(or the net deficit, if expenses and charges exceed revenues and proper income
items) for such period, plus amounts that have been deducted for (i)
depreciation, (ii) amortization, (iii) interest expense, (iv) income taxes, (v)
extraordinary and non-recurring items, (vi) the cumulative effects of changes
in accounting principles, and (vii) minority interest, used in determining
Consolidated Net Income for such period, and minus amounts that have been added
for (i) extraordinary and non-recurring items and (ii) the cumulative effects
of changes in accounting principles, in determining Consolidated Net Income for
such period.
"Environmental Law" means any federal, state or local law, statute,
ordinance or regulation applicable or pertaining to health, industrial hygiene,
waste materials, removal of waste materials, oil, gas, or underground storage
tanks, Hazardous Substances, other environmental conditions on, under, or
affecting Borrower's Property or any interest therein.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including (unless the context otherwise requires)
any rules or regulations promulgated thereunder.
"Eurodollar Business Day" means a Business Day on which the relevant
London international financial markets are open for transaction of business
contemplated by this Agreement.
"Financial Statements" means (i) the consolidated financial statement
or statements of Borrower described or referenced in Section 4.06 hereof and
delivered with this Agreement to Lender, and (ii) subsequent financial
statements required to be provided pursuant to this Agreement.
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"Fiscal Quarter" means each of the quarters of the Fiscal Year ending
on March 31st, June 30th, September 30th, and December 31st.
"Fiscal Year" or "Annually" means any twelve-month accounting period
ending December 31st.
"Funded Debt" means all Debt resulting from loans made to Borrower by
banks, savings and loan associations, and financial institutions, all purchase
money mortgages, all conditional sales contracts, all title retention
agreements, and all current maturities of Debt not otherwise specified herein.
"GAAP" means generally accepted accounting principles.
"Indebtedness" means any and all amounts and liabilities owing or to
be owing by Borrower to Lender from time to time whether now existing or
hereafter incurred, and whether in connection with this Agreement or otherwise,
including any amendments hereof, or in connection with loans, participation
interests, drafts, notes, banker's acceptances, letters of credit, guarantees,
or overdrafts of checking or savings accounts of Borrower maintained with
Lender.
"Initial Notice of Interest Rate Election" means the notice required
by Section 2.06(a) herein, which notice shall be in the form of Exhibit A
hereto or in another form approved by Lender.
"Interest Expense" means any and all payments, cash or in-kind, made
or accrued on account of interest obligations incurred, arising under or out of
any Debt of the Borrower (on a consolidated basis), including but not limited
to promissory notes issued to evidence such interest payments and including the
component of amounts payable under capital leases attributable to interest, and
excluding any non-cash items other than notes issued to evidence such interest
payments and the component of amounts payable under capital leases attributable
to interest.
"LLC" means any limited liability company validly formed under the law
of any State for the purpose of making an Acquisition or a Physician Practice
Acquisition, or for the purpose of developing a Project and in which the
Borrower retains a majority ownership interest.
"LLC Note" means a promissory note issued by an LLC to the order of
Borrower and evidencing a loan by Borrower to such LLC of monies initially
advanced by Lender to Borrower under the Revolving Credit Note, which loan is
made for the purpose of developing a Project in which the Borrower retains a
majority ownership interest.
"LLC Note Collateral" means any property, collateral, or assets
securing repayment of an LLC Note.
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<PAGE> 6
"Lender" means SunTrust Bank, Nashville, N.A., its successors and
assigns.
"Letter of Credit" means any letter of credit issued by Lender on
Borrower's account pursuant to and in compliance with Section 2.11 herein.
"LIBOR-Based Rate" means for any Libor Based Rate Interest Period, one
hundred and seventy-five (175) basis points per annum above the average
(rounded upwards, if necessary, to the next higher one/sixteenth of one
percent) of the respective rates per annum by which dollar deposits in
immediately available funds are offered to Lender in the London Interbank
market at approximately 11:00 a.m. (Nashville time) two Eurodollar Business
Days before the first day of such Libor-Based Rate Interest Period for delivery
on the first day of such Libor-Based Rate Interest Period in amounts
approximately equal to the principal amount of the loans on which the
LIBOR-Based Rate is applicable and for the number of days comprised therein.
"LIBOR-Based Rate Period" means with respect to any Advance on which
the Borrower has elected, pursuant to Section 2.06, that the LIBOR-Based Rate
apply, the 30, 60, or 90 day period selected by Borrower commencing on the date
the Advance is made or on any subsequent Conversion Date.
"Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute, or contract, and including, but
not limited to, the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale, or trust receipt or
a lease, consignment, or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases, and other title exceptions and
encumbrances affecting the Property. For the purposes of this Agreement,
Borrower shall be deemed to be the owner of any Property that it has acquired
or holds subject to a conditional sale agreement, financing lease, or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
"Loan" or "Loans" means any borrowing by Borrower under this
Agreement, the Revolving Credit Note, the Term Note, and/or any extension of
credit by Lender to or for Borrower pursuant to this Agreement or any other
Loan Document, including any renewal, amendment, extension, or modification
thereof.
"Loan Documents" means, collectively, each document, paper or
certificate executed, furnished or delivered in connection with this Agreement
(whether before, at, or after the Closing Date), including, without limitation,
this Agreement, the Revolving Credit
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Note, the Term Note, and all other documents, certificates, reports, and
instruments that this Agreement requires or that were executed or delivered (or
both) at Lender's request.
"Minority Interest" means that amount depicted from time to time on
Borrower's most current Consolidated Balance Sheet as "Minority Interest" so
long as such is calculated on a consistent basis and in accordance with GAAP.
"Notice of Interest Rate Election" means the notice required by
Section 2.06(c) and Section 2.06(d) herein and which notice shall be in either
the form of Exhibit B hereto or in such other form as approved by Lender.
"Obligations" means all of Borrower's undertakings in the Loan
Documents including, but not limited to, all agreements, representations,
warranties, and covenants. The term "Obligations" includes the Indebtedness.
"Partnership" means any general or limited partnership validly formed
under the law of any state for the purpose of making an Acquisition or a
Physician Practice Acquisition, or for the purpose of developing a Project and
in which the Borrower retains a majority ownership interest.
"Partnership Agreement" means the general partnership agreement or the
limited partnership agreement of any Partnership.
"Partnership Note" means a promissory note issued by a Partnership to
the order of Borrower and evidencing a loan by Borrower to such Partnership of
monies initially advanced by Lender to Borrower under the Revolving Credit
Note, which loan is made in connection with the development of a Project in
which the Borrower retains a majority ownership interest.
"Partnership Note Collateral" means any property, collateral, or
assets securing repayment of a Partnership Note.
"Physician Practice Acquisition" means the acquisition of the assets
of a physician's practice or the practice of more than one physician by a
Partnership or LLC in circumstances where the physicians whose assets are
acquired are partners or are members in an LLC or immediately thereafter will
become partners in the Partnership or a member in the LLC.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government, or any agency or political subdivision thereof, or any other form
of entity.
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<PAGE> 8
"Principal Office" means the principal office of the Lender located at
201 Fourth Avenue North, Nashville, Tennessee.
"Project" means construction, expansion and/or renovation of an
ambulatory surgery center owned by a Partnership or LLC.
"Property" or "Properties" means any interest in any kind of property
or asset, whether real, personal, or mixed, or tangible or intangible.
"Request for Advance" means a request by Borrower to Lender for
Advances under the Revolving Credit Note all in the form of Exhibit C.
"Revolving Credit Note" means that certain Amended and Restated
Revolving Credit Note issued by Borrower to Lender in the principal amount of
$12,000,000 in the form of Exhibit D hereto, as such may be amended.
"Seller Financing" means either: (i) the extension of credit to
Borrower that enables the Borrower to acquire a majority interest in a
Partnership or LLC, (ii) the extension of credit to Borrower by any seller of a
majority interest in an existing ambulatory surgery center, which sale is made
to Borrower, a Partnership, or an LLC, or (iii) the extension of credit to
Borrower by the seller of the assets in a Physician Practice Acquisition.
"Subsidiary" means any corporation of which more than fifty percent
(50%) of the issued and outstanding voting stock is owned or controlled at the
time as of which any determination is being made directly or indirectly, by
Borrower and/or by one or more of Borrower's Subsidiaries.
"Term Note" means that certain Consolidated, Amended, and Restated
Term Note in the principal amount of $5,749,245.88 issued by Borrower to the
order of Lender dated June 25, 1996 in the form of Exhibit E hereto, as such
may be amended.
"Voting Stock" means securities of any class of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or persons performing similar
functions).
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<PAGE> 9
Article II. The Loans.
Section 2.01 The Revolving Credit Note. Subject to the conditions and
the terms of the Loan Documents and in reliance upon the representations,
warranties, and covenants set forth in the Loan Documents, Lender agrees to
extend the Borrower credit on a revolving credit basis, in the principal amount
of up to $12,000,000 pursuant to the Revolving Credit Note.
Section 2.02 Advances Under the Revolving Credit Note. Advances under
the Revolving Credit Note shall be made only after the Borrower has complied
with the provisions of this Agreement. Borrower shall not be entitled to
receive Advances under the Revolving Credit Note subsequent to June 25, 1998.
Subject to the terms and requirements of this Agreement, Borrower may repay and
re-borrow amounts under the Revolving Note up to the maximum principal amount
thereof, provided, however, the amount available to be advanced to Borrower
under the Revolving Credit Note shall be reduced by the face amount of any
outstanding Letter of Credit issued by Lender or Borrower's behalf pursuant to
Section 2.11 herein.
Section 2.03 Borrowing Procedure. The Borrower hereby authorizes the
Lender to deposit all Advances under the Revolving Credit Note into the
operating account maintained by the Borrower with Lender. Any authorized officer
shall have the authority to request Advances. All requests for Advances shall be
in writing (except that telephonic requests by any authorized officer confirmed
immediately in writing thereafter shall be acceptable). In the event of a
telephonic request, the Lender shall be entitled to rely, without further
investigation, on the fact that the person making the telephone call has
identified himself as one of the authorized officers.
The giving of notice by Borrower that it is requesting an Advance
shall constitute a warranty that, as of the date the notice is given and as of
the date of the Advance, the officers of the Borrower do not have knowledge of
any Default Conditions or Event of Default as defined herein; and that as of
such date, the representations and warranties contained in Article IV are and
will be true and correct, except as to changes occurring after the date of this
Agreement caused by transactions not prohibited under this Agreement. Lender
shall have no liability to Borrower arising out of its compliance with this
procedure.
Section 2.04 Minimum Advance Amounts. Advances under the Revolving
Credit Note shall not be made in amounts less than $100,000 without Lender's
prior written consent.
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Section 2.05 Required Payments.
(a) Commencing on the tenth (10th) day of July, 1996, and on
the tenth (10th) day of each consecutive month through and
including June 10, 1998 the Borrower shall pay to Lender an amount
equal to all then accrued interest.
(b) Commencing on the tenth (10th) day of July, 1998, and
on the tenth (10th) day of each consecutive month through and
including May 10, 2002, the Borrower shall pay to Lender an amount
equal to the product of: (i) the principal balance of the Revolving
Credit Note as such exists on June 10, 1998, divided by (ii) 48, plus
all then accrued interest.
(c) On June 10, 2002 the Revolving Credit Note shall mature
and the Borrower shall pay to the Lender an amount equal to all
outstanding principal, plus all accrued interest.
Section 2.06 Applicable Interest Rate.
(a) With regard to the Revolving Credit Note and at the
time that the Borrower requests an Advance, the Borrower shall
deliver to Lender the Initial Notice of Interest Rate Election which
shall be irrevocable, shall be in the form attached as Exhibit A, and
shall set forth the following: (a) whether the selected interest rate
is the Base Rate or the LIBOR-Based Rate, and (b) if the interest rate
selected is the LIBOR-Based Rate, the maturity selected for the
LIBOR-Based Rate Period. In the event that the Borrower shall fail to
deliver this Initial Notice of Interest Rate Election, then it shall be
conclusively presumed that the Borrower has elected the Base Rate.
(b) With regard to the Term Note and upon the Closing Date,
the Borrower shall advise the Lender in writing: (a) whether the
applicable interest on the Term Note is the Base Rate or the
LIBOR-Based Rate, and (b) if the interest rate selected is the
LIBOR-Based Rate, the maturity selected for the LIBOR-Base Rate Period.
(c) At any time that the outstanding principal balance of
the Term Note or an Advance bears interest at the Base Rate, the
Borrower may elect upon three (3) days prior written notice and
delivery to Lender of a Notice of Interest Rate Election to convert the
Applicable Interest Rate to a LIBOR-Based Rate.
(d) Once the Borrower has selected the LIBOR-Based Rate,
such rate shall remain applicable until the expiration of the then
applicable LIBOR-Based Rate Interest Period. Three (3) days prior to
the expiration of any applicable LIBOR-Based Rate Period, the Borrower
shall deliver to Lender a Notice of
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Interest Rate Election. Should the Borrower fail to deliver such
Notice of Interest Rate Election in a timely manner, then it shall be
conclusively presumed that the Borrower has selected the Base Rate as
the Applicable Interest Rate.
(e) At any time, no more than ten (10) different
LIBOR-Based Rate Periods may be applicable to the Term Note and all
Advances.
(f) The calculation of the Applicable Interest Rate shall
be based on a year of 360 days.
(g) The following provisions shall apply at any time that
the LIBOR-Based Rate is applicable:
(i) Increased Cost. If, as a result of any
change in applicable law, regulation, treaty or directive, in
the interpretation or application thereof or compliance by
Lender with any request or directive (whether or not having
the force of law) from any court or governmental authority,
agency or instrumentality:
(A) the basis of taxation of payments to
Lender of the principal of or interest on any loan on
which a LIBOR-Based Rate is applicable (other than
taxes imposed on the overall net income of Lender) is
changed;
(B) any reserve, special deposit or
similar requirements against assets of, deposits with
or for the account of, or credit extended by, Lender
are imposed, modified or deemed applicable; or
(C) any other condition affecting this
Agreement or the LIBOR-Based Rate is imposed on
Lender or the London eurodollar market;
and Lender determines that, by reason thereof, the actual
out-of-pocket cost to Lender of offering, making, or
maintaining the LIBOR-Based Rate is increased, or the amount
of any sum receivable by Lender hereunder in respect of any of
the LIBOR-Based Rate is reduced;
then, Borrower shall pay to Lender upon demand (which demand
shall be accompanied by a statement setting forth the basis
for the calculation thereof but only to the extent not
theretofore provided to Borrower) such additional amount or
amounts as will compensate Lender for such additional cost or
reduction. Determinations by Lender for purpose of this
section of the additional amounts required to compensate
Lender in respect of the foregoing shall be conclusive, absent
demonstrable error.
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(ii) Eurodollar Deposits Unavailable or Interest
Rate Unascertainable. In the event that the Lender shall have
reasonably determined (which determination shall be conclusive
and binding on the parties hereto, absent demonstrable error)
that deposits of the necessary amount for the relevant
LIBOR-Based Rate Period are not available to Lender in the
London Eurodollar market or that, by reason of circumstances
affecting such market, adequate and reasonable means do not
exist for ascertaining the LIBOR-Based Rate applicable to such
period or term, as the case may be, or that the application or
use of the LIBOR-Based Rate would be impracticable as a result
of a contingency occurring after the Closing Date that
materially and adversely affects the London interbank market,
then Lender shall promptly give notice of such determination
to Borrower and (i) any notice of new LIBOR-Based Rate
selection previously given by Borrower and not yet converted
shall be deemed a selection of the Base Rate and (ii) the
existing LIBOR-Based Rate shall be converted to the Base Rate
on the last day of the then current LIBOR-Based Rate Period
with respect thereof.
(iii) Changes in Law Rendering the LIBOR-Based
Rate Unlawful. If at any time due to any new law, treaty or
regulation, or any interpretation thereof by any governmental
or other regulatory authority charged with the administration
thereof, or for any other reason arising subsequent to the
date hereof, it shall become unlawful for Lender to offer,
charge or collect interest based on the LIBOR-Based Rate, the
obligation of Lender to provide the LIBOR-Based Rate shall,
upon the happening of such event, forthwith be suspended for
the duration of such illegality. Upon the happening of such
event, Lender shall notify Borrower thereof in writing, and
Borrower, at its election, shall, on the earlier of (i) the
last day of the then current LIBOR-Based Rate Period or (ii)
if required by such law, regulation or interpretation, on such
date as shall be specified in such notice, either convert the
unlawful LIBOR-Based Rate to the Base Rate or repay the
Revolving Credit Note, without penalty, to Lender in full,
together with all interest accrued thereon.
(iv) Other Changes Rendering Use of LIBOR-Based
Rate a Severe Hardship. In the event that on any date after
the Closing Date Lender shall reasonably determine (which
determination shall be conclusive and binding on the parties
hereto, absent demonstrable error) that the use and/or
application of the LIBOR-Based Rate will cause the Lender
severe hardship as a result of a contingency occurring after
the date of this Agreement; then, and in
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any such event, the Lender shall give telephonic notice
(immediately confirmed in writing) to the Borrower of such
determination, and the obligation of the Lender to offer or
permit the selection of the LIBOR-Based Rate shall be
terminated at the earlier of the end of the then current
LIBOR-Based Rate Period, and upon such date the Borrower, at
its option shall either repay the Revolving Credit Note,
without penalty, together with all interest accrued thereon,
or convert the Revolving Credit Note to the Base Rate.
(v) Adjustments to Rate to Cover Additional
Cost. It is the intention of the parties that the LIBOR-Based
Rate shall accurately reflect the cost to Lender of
maintaining loans at the LIBOR-Based Rate during the
applicable LIBOR-Based Rate Period. Accordingly:
(i) if by reason of any change after the
date hereof in any applicable law or governmental
rule, regulation or order (or any interpretation
thereof and including the introduction of any new law
or governmental rule, regulation or order), including
any change in the LIBOR reserve requirement, the cost
to Lender of maintaining loans at the LIBOR-Based
Rate or funding the same by means of a London
interbank market time deposit, as the case may be,
shall increase, the LIBOR-Based Rate then charged by
Lender shall be adjusted as necessary to reflect such
change in cost to such Lender, effective as of the
date on which such change in any applicable law,
governmental rule, regulation or order becomes
effective.
(ii) if the Lender shall have determined
that the adoption after the Closing Date of any law,
rule, regulation or guideline regarding capital
adequacy, or any change in any of the foregoing or in
the interpretation or administration of any of the
foregoing by any governmental authority or agency,
central bank or comparable agency charged with the
interpretation or administration thereof, or
compliance by the Lender (or any lending office of
the Lender) or the Lender's holding company with any
request or directive regarding capital adequacy
(whether or not having the force of law) of any such
governmental authority or agency, central bank or
comparable agency, has or would have the effect of
reducing the rate of return on the Lender's capital
or on the capital of the Lender's holding company, as
a consequence of the Lender's obligations under this
Agreement or the Advances made by such Lender
pursuant hereto to a level
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below that which the Lender or the Lender's holding
company could have achieved but for such adoption,
change or compliance (taking into consideration the
Lender's guidelines with respect to capital adequacy)
by an amount deemed by the Lender to be material,
then from time to time the Borrower shall pay to the
Lender such additional amount or amounts as will
compensate the Lender or the Lender's holding company
for any such reduction suffered.
(h) Borrower may prepay the principal amount evidenced by
the Term Note or by any Advance at any time that the Applicable
Interest Rate is the Base Rate. Except as provided specifically in
Section 2.05(i), (iii) and (iv), Borrower may not prepay the Term Note
or any such Advance so long as the Applicable Rate is the LIBOR-Based
Rate, except at the maturity of any applicable LIBOR-Based Rate
Period.
Section 2.07 The Term Note. Subject to the conditions and terms of
the Loan Documents and in reliance upon the representations, warranties, and
covenants set forth in the Loan Documents, Lender agrees to extend the Borrower
credit in the principal amount of $5,749,245.88 pursuant to the Term Note. The
terms of repayment of the Term Note shall be as set forth therein.
Section 2.08 Participation. Lender shall have the right to enter into
one or more participation agreements with one or more participating lenders
approved by Lender on such terms and conditions as Lender shall deem advisable;
provided that at all times the Lender shall retain a minimum of fifty percent
(50%) of the Loans.
Section 2.09 Use of Proceeds. Proceeds of the Revolving Credit Note
will be used to: (i) permit the issuance of Letters of Credit, and (ii) enable
the Borrower to make (x) loans to Partnerships or LLC's for the construction and
renovation of Projects and/or (y) Acquisitions and Physician Practice
Acquisitions. Proceeds of the Term Note were used to refinance existing
indebtedness.
Section 2.10 Payments to Principal Office; Debit Authority. Each
payment under the Revolving Credit Note and Term Note (including any permitted
prepayment and payment of interest) shall be made to Lender at its Principal
Office for the account of Lender in U.S. dollars and in immediately available
funds before 11:00 a.m. Nashville Time on the date such payment is due. The
Lender may, but shall not be obligated to, debit the amount of any such payment
which is not made by such time to any ordinary deposit account of the Borrower
with the Lender.
Section 2.11 Letters of Credit. Provided no Default Condition or Event
of Default has occurred and is continuing, the Lender agrees that at Borrower's
request, it shall cause Letters of Credit
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to be issued to such Persons as designated by Borrower on Borrower's account.
In connection with the issuance of each Letter of Credit, the Borrower shall
execute in favor of Lender an application and agreement for issuance of a
letter of credit in form and substance required by Lender, and the Borrower
shall pay to Lender a fee in an amount equal to one and one-half percent (1
1/2%) of the face amount of the Letter of Credit issued by Lender. The issuance
by Lender of a Letter of Credit shall reduce the available amount to be
advanced by Lender under the Revolving Credit Note by an amount equal to the
face amount of the Letter of Credit for so long as such Letter of Credit
remains outstanding. In the event that the Lender is required to pay to any
Person the proceeds (partial or in full) of a Letter of Credit, the Borrower
agrees to pay to Lender immediately on demand by Lender an amount equal to the
proceeds paid by Lender to such Person, plus interest from the date of such
payment until the date of payment by Borrower at an amount equal to the Base
Rate. Letters of Credit issued by Lender shall not be issued for a time period
in excess of twelve (12) months. The Lender shall have no obligation to issue
Letters of Credit on or after June 25, 1998.
Section 2.12 Right of Offset, Etc. The Borrower hereby agrees that,
in addition to (and without limitation of) any right of set-off, banker's lien
or counterclaim the Lender may otherwise have, the Lender shall be entitled, at
its option, to offset balances held by it at any of its offices against any
principal of or interest on the Obligations hereunder which is not paid within
fifteen (15) days after such payment is due to the Lender, and in the event the
Lender does offset against such balances, it shall promptly notify the Borrower,
provided that its failure to give such notice shall not affect the validity
thereof.
Section 2.13 Usury. The parties to this Agreement intend to conform
strictly to applicable usury laws as presently in effect. Accordingly, if the
transactions contemplated hereby would be usurious under applicable law
(including the laws of the United States of America and the State of Tennessee),
then, in that event, notwithstanding anything to the contrary in any Loan
Document or agreement executed in connection with or as security for the
Obligations, Borrower and Lender agree as follows: (i) the aggregate of all
consideration that constitutes interest under applicable law which is contracted
for, charged, or received under any of the Loan Documents or agreements, or
otherwise in connection with the Obligations, shall under no circumstance exceed
the maximum lawful rate of interest permitted by applicable law, and any excess
shall be credited on the Obligations by the holder thereof (or, if the
Obligations shall have been paid in full, refunded to Borrower); and (ii) in the
event that the maturity of the Obligations is accelerated by reason of an
election of the holder resulting from any Event of Default under this Agreement
or otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include
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more than the maximum amount of interest permitted by applicable law, and
excess interest, if any, for which this Agreement provides, or otherwise, shall
be cancelled automatically as of the date of such acceleration or prepayment
and, if previously paid, shall be credited on the Obligations (or, if the
Obligations shall have been paid in full, refunded to Borrower).
Article III. Collateral.
Section 3.01 Collateral. The Indebtedness and Obligations shall be
secured by the following:
(a) all Partnership Notes, Partnership Note Collateral,
LLC Notes, and LLC Note Collateral;
(b) all deposit accounts, monies, and items of value of
Borrower now or hereafter placed in Lender's possession; and
(c) all other Property of Borrower presently and/or
subsequently pledged or delivered to Lender to secure all or a portion
of the Indebtedness.
Article IV. Representations and Warranties.
To induce Lender to enter this Agreement and extend credit under this
Agreement, Borrower covenants, represents, and warrants to Lender that as of
the date hereof and as of the Closing Date:
Section 4.01 Corporate Existence. Borrower and each Subsidiary are
corporations duly organized, and validly existing, and in good standing under
the laws of the states of their respective incorporation, and the Borrower and
each Subsidiary are duly qualified as a foreign corporation in all jurisdictions
in which the Property owned or the business transacted by each of them makes
such qualification necessary, except where failure to do so would not have a
material, adverse effect on the Borrower or any Subsidiary which acts as a
general partner in a Partnership or member in an LLC.
Each Partnership and LLC that has executed LLC Notes or Partnership
Notes, as applicable, as of the date hereof is duly formed and validly existing
under the laws of the respective State under which it was formed.
Section 4.02 Corporate Power and Authorization. The Borrower is duly
authorized and empowered to execute, deliver, and perform under all Loan
Documents; the Borrower's board of directors has authorized the Borrower to
execute and perform under the Loan Documents; and all other corporate and/or
shareholder action on Borrower's part required for the due execution, delivery,
and performance of the Loan Documents has been duly and effectively taken.
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Section 4.03 Binding Obligations. This Agreement is, and the other
Loan Documents when executed and delivered in accordance with this Agreement
will be, legal, valid and binding upon and against the Borrower and its
Properties enforceable in accordance with their respective terms, subject to no
defense, counterclaim, set-off, or objection of any kind known to or suspected
by Borrower. To the best of Borrower's knowledge and belief, the Lender has
taken no action nor has it failed to take any action that subjects Lender to any
liability to Borrower.
Section 4.04 No Legal Bar or Resultant Lien. The Borrower's execution,
delivery and performance of the Loan Documents do not constitute a default
under, and will not violate any provisions of the charter or bylaws of Borrower,
or any contract or agreement entered into by Borrower and any Person. To
Borrower's knowledge, the Borrower's execution, delivery and performance of the
Loan Documents do not constitute a breach of any law, regulation, order,
injunction, judgment, decree, or writ to which Borrower is subject, or result in
the creation or imposition of any lien upon any Properties of Borrower, other
than those contemplated by the Loan Documents.
Section 4.05 No Consent. The execution, delivery, and performance of
the Loan Documents do not require the consent or approval of any other Person,
except for such consents which have been obtained by Borrower in writing.
Section 4.06 Financial Condition. The Financial Statements for the
period ended December 31, 1995 and the Fiscal Quarter ended March 31, 1996
which have been delivered to Lender, have been prepared on a consolidated basis
in accordance with GAAP, consistently applied, and the Financial Statements
present fairly the consolidated financial condition of Borrower as of the date
or dates and for the period or periods stated therein provided that it is
understood that quarterly Financial Statements are subject to year end
adjustments and do not contain footnotes that would appear on the audited
Financial Statements. No material adverse change in the consolidated financial
condition of Borrower has occurred since the date of the most recent Financial
Statements.
The Financial Statements include all liabilities (direct and
contingent) and all assets of each LLC and Partnership, and such Financial
Statements accurately reflect Borrower's ownership interest therein.
Section 4.07 Investments, Advances, and Guaranties. Except for the
transactions described on Exhibit F, neither Borrower, nor any Subsidiary, nor
any Partnership, nor any LLC has made investments in, advances to, or guaranties
of the obligations of any Person (other than to Borrower or any Subsidiary, a
Partnership, a LLC, or to a partnership or other entity that prepares financial
statements under Borrower on a consolidated basis) in excess of $100,000 in
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the aggregate, or committed or agreed to undertake any of these actions or
obligations, except as referred to or reflected in the Financial Statements or
as permitted hereunder.
Section 4.08 Liabilities and Litigation. Neither Borrower, nor any
Subsidiary, nor any Partnership, nor any LLC has any material liabilities
(individually or in the aggregate) direct or contingent, except as referred to
or reflected in the Financial Statements. There is no litigation, legal or
administrative proceeding, investigation, or other action of any nature pending
or, to the knowledge of Borrower, threatened against or affecting Borrower, or
any Subsidiary, or any Partnership, or any LLC that involves the possibility of
any judgment or liability not fully covered by insurance or that if adversely
decided could reasonably be expected to materially and adversely affect the
business or the Properties of Borrower, or any Subsidiary, or any Partnership,
or any LLC or the ability of Borrower, or any Subsidiary, or any Partnership, or
any LLC to carry on its business as now conducted.
Section 4.09 Taxes; Governmental Charges. Borrower, each Subsidiary,
each Partnership, and each LLC have filed or caused to be filed all tax returns
and reports required to be filed and have paid all taxes, assessments, fees, and
other governmental charges levied upon each of them or upon any of their
respective Properties or income, which are due and payable, including interest
and penalties unless such are contested in good faith and adequate reserves have
been retained therefor. Borrower, each Subsidiary, each Partnership, and each
LLC have made all required withholding deposits.
Section 4.10 Title, Etc. Borrower, each Subsidiary, each Partnership,
and each LLC have good title to their respective Properties, free and clear of
all liens except those referenced or reflected in the Financial Statements or
those securing the Obligations. Borrower, each Subsidiary which acts as a
general partner in a Partnership, each Partnership, and each LLC possess all
trademarks, copyrights, trade names, patents, licenses, and rights therein,
adequate in all material respects for the conduct of their respective business
as now conducted and presently proposed to be conducted, without conflict with
the rights or claimed rights of others.
Section 4.11 No Default. Neither Borrower, nor any Subsidiary, nor
any Partnership, nor any LLC is in default in any material respect that affects
its respective business, Properties, operations, or condition, financial or
otherwise, under any indenture, mortgage, deed of trust, credit agreement, note,
agreement, or other instrument to which Borrower, or any Subsidiary, or any
Partnership, or any LLC is a party or by which it or its respective Properties
are bound. Neither the Borrower, nor any Subsidiary, nor any Partnership, nor
any LLC is in violation in any material respect of its applicable articles of
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incorporation or charter or bylaws or Partnership Agreements or LLC operating
agreements. Neither the Borrower, nor any Subsidiary, nor any Partnership, nor
any LLC has received notice from any Person that it has violated or breached
any applicable articles of incorporation, charter, bylaws, Partnership
Agreements, articles of organization, or operating agreements. No Default
Conditions hereunder have occurred or are continuing as of the date hereof or
at the Closing Date.
Section 4.12 Casualties; Taking of Properties, Etc. Neither the
business nor the Properties of Borrower, nor any Subsidiary which acts as a
general partner in a Partnership, nor any Partnership, nor any LLC have been
materially affected as a result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of property, cancellation of contracts, permits,
concessions by any domestic or foreign government or any agency thereof, riot,
activities of armed forces or acts of God or of any public enemy.
Section 4.13 Regulation U. Neither Borrower, nor any Subsidiary which
acts as a general partner in a Partnership, nor any Partnership, nor any LLC is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System. No part of the Indebtedness shall be used at any time to purchase or to
carry margin stock within the meaning of Regulation U or to extend credit to
others for the purpose of purchasing or carrying any margin stock if to do so
would cause the Lender to violate the provisions of Regulation U.
Section 4.14 Compliance with Laws, Etc. Neither Borrower, nor any
Subsidiary which acts as a general partner in a Partnership, nor any
Partnership, nor any LLC is in violation of any law, judgment, decree, order,
ordinance, or governmental rule or regulation to which Borrower, or any such
Subsidiary, or any Partnership, or any LLC or any of their respective Properties
is subject which, if enforced, would have a material adverse effect on the
Borrower, or such Subsidiaries, or any Partnership, or any LLC. Neither
Borrower, nor any Subsidiary, which acts as a general partner in a Partnership,
nor any Partnership, nor any LLC has failed to obtain any license, permit,
franchise, or other governmental authorization necessary to the ownership of any
of their Properties or to the conduct of their respective business. All
improvements on the real estate owned by, leased to or used by Borrower, or any
Subsidiary which acts as a general partner in any Partnership, or any
Partnership, or any LLC conform in all material respects to all applicable state
and local laws, zoning and building ordinances and health and safety ordinances,
and such real estate is zoned for the various purposes for which such real
estate and improvements thereon are presently being used.
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Section 4.15 ERISA. Borrower, each Subsidiary, each Partnership, and
each LLC are in compliance in all material respects with the applicable
provisions of ERISA. Neither Borrower, nor any Subsidiary, nor any Partnership,
nor any LLC has incurred any "accumulated funding deficiency" within the meaning
of ERISA which is material, and Borrower has not incurred any material liability
to PBGC in connection with any Plan.
Section 4.16 Subsidiaries, Etc. The names, addresses of registered
offices, and states of incorporation of Borrower's Subsidiaries are attached
hereto as Exhibit G. Borrower owns a majority interest of all of the Voting
Stock of each Subsidiary and its ownership interest is noted on Exhibit G. The
Borrower uses no trade names.
The names, addresses of registered offices, and states of formation of
the Partnerships and LLC's are attached hereto as Exhibit H.
Section 4.17 No Material Misstatements. No information, exhibit, or
report furnished or to be furnished by Borrower to Lender in connection with
this Agreement, contain as of the date thereof, or will contain as of the
Closing Date, any material misstatement of fact or failed or will fail to state
any material fact, the omission of which would render the statements therein
materially false or misleading.
Section 4.18 Investment Company Act. Neither Borrower, nor any
Subsidiary, nor any Partnership, nor any LLC is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
Section 4.19 Use of Proceeds; Purpose of the Credit. Borrower has used
or will use proceeds from the Term Note and the Revolving Credit Note
exclusively for the purposes stated in this Agreement.
Section 4.20 Personal Holding Company; Subchapter S. Neither
Borrower, nor any Subsidiary, nor any Partnership, nor any LLC is a "personal
holding company" as defined in Section 542 of the Code, and neither Borrower,
nor any Subsidiary, nor any Partnership, nor any LLC is a "Subchapter S"
corporation within the meaning of the Code.
Section 4.21 Solvency. Borrower, each Subsidiary that is a general
partner in any Partnership, each Partnership, and each LLC are solvent as of the
date hereof and shall remain solvent at all times hereafter. Borrower, and each
Subsidiary that is a general partner in any Partnership, and each Partnership,
and each LLC are generally paying their respective debts as they mature and the
fair value of Borrower's, and such Subsidiary's, and such Partnership's,
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and such LLC's assets substantially exceeds the sum total of their respective
liabilities.
Section 4.22 Capital. Borrower now has capital sufficient to carry on
its business and transactions and all businesses and transactions in which it is
engaged.
Article V. Conditions of Lending.
Section 5.01 Initial Conditions. Lender's obligation to extend credit
hereunder is subject to the Conditions Precedent that Lender shall have received
(or agreed in writing to waive or defer receipt of) all of the following, each
duly executed, dated and delivered as of the Closing Date, in form and substance
satisfactory to Lender and its counsel:
(a) Revolving Credit Note, the Term Note, and Loan
Documents. The Revolving Credit Note, the Term Note, and all other
Loan Documents.
(b) Collateral. Delivery of any collateral required by
Article III herein.
(c) Resolutions of Borrower. Certified copies of
resolutions of the Board of Directors of Borrower authorizing
or ratifying the execution, delivery, and performance, respectively,
of this Agreement and all Loan Documents.
(d) Borrower's Certificate of Existence. A certificate
of existence of Borrower from the State of Tennessee, which
certificate shall contain no facts objectionable to Lender.
(e) Consents, Etc. Certified copies of all documents
evidencing any necessary corporate action, consents, and
governmental approvals (if any) with respect to this Agreement and the
Loan Documents.
(f) Officer's Certificate. A certificate of the secretary
or any assistant secretary of Borrower certifying the names of
the officer or officers of Borrower authorized to sign this Agreement
and the Loan Documents, together with a sample of the true signature
of such officer(s).
(g) Borrower's Charter and By-Laws. A copy of Borrower's
by-laws and charter (including all amendments thereto) certified, in
the case of by-laws, by the secretary or any assistant secretary of
Borrower, and in the case of the charter by the Secretary of State of
Tennessee, as being true and complete copies of the current charter
and by-laws of Borrower.
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(h) Opinions of Counsel for Borrower. The opinions of
counsel for Borrower, addressed to Lender, substantially in the form
of Exhibit I.
(i) Other. Such other documents as Lender may reasonably
request.
Section 5.02 Conditions Prior to Funding. Lender's obligation to fund
any Advance is subject to the additional Conditions Precedent that Lender shall
have received (or agreed in writing to waive or defer receipt of) all of the
following, each duly executed:
Request for Advance. A Request for Advance in the form of
Exhibit C hereto, along with borrowing base certificate signed by the
chief financial officer of Borrower affirming that the total amount
outstanding under all Advances made subsequent to the date hereof,
plus the requested Advance, do not and will not exceed the sum of (i)
85% of Development Costs, plus (ii) 65% of the total cost of all
Acquisitions or a Physician Practice Acquisitions.
Section 5.03 All Borrowings. The Lender's obligations to extend
credit under the Loan Documents are subject to the following additional
Conditions Precedent which shall be met each time an Advance is requested and an
Advance is made:
(a) The representations of the Borrower contained in
Article IV are true and correct in all material respects as of the
date of the requested Advance, with the same effect as though made on
the date additional funds are advanced, except as to changes occurring
after the date of this Agreement caused by transactions not prohibited
under this Agreement; (b) There has been no material adverse change in
the Borrower's financial condition or other condition since the date
of the last borrowing hereunder; (c) No Default Conditions and no
Event of Default have occurred and continue to exist; (d) No material
litigation (including, without limitation, derivative actions),
arbitration proceedings or governmental proceedings not disclosed in
writing by the Borrower to the Lender prior to the date of the
execution and delivery of this Agreement is pending or known to be
threatened against the Borrower, or any Subsidiary, or any
Partnership, or any LLC, and (e) no material development not so
disclosed has occurred in any litigation, arbitration proceedings or
governmental proceedings so disclosed, which could reasonably be
expected to adversely affect the financial position or business of the
Borrower, or any Subsidiary, or any Partnership, or any LLC, or impair
the ability of the Borrower, or any Subsidiary, or any Partnership, or
any LLC, to perform their respective obligations under this Agreement
or any other Loan Documents.
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Article VI. Affirmative Covenants.
Borrower covenants that, during the term of this Agreement (including
any extensions hereof) and until all Indebtedness shall have been finally paid
in full and all Obligations shall have been fully discharged, unless Lender
shall otherwise first consent in writing, Borrower shall:
Section 6.01 Financial Statements and Reports. Promptly furnish to
Lender:
(a) Annual Reports. As soon as available, and in any
event within ninety (90) days after the close of each Fiscal Year, the
audited consolidated Financial Statements of the Borrower setting
forth the audited consolidated balance sheets of Borrower as at the
end of such year, and the audited consolidated statements of income,
statements of cash flows, and consolidated statements of retained
earnings of Borrower for such year, setting forth in each case in
comparative form (beginning when comparative data are available) the
corresponding figures for the preceding Fiscal Year accompanied by the
report of Borrower's certified public accountants, and by an unaudited
consolidating balance sheet and unaudited consolidating statements of
income of Borrower, its Subsidiaries, LLC's, Partnerships, and
partnerships and LLC's that are not borrowing funds from Borrower duly
certified by Borrower's chief financial officer as being correct
reflections of the information used for the audited consolidated
Financial Statements. The audit opinion in respect of the Financial
Statements of Borrower shall be the opinion of a firm of independent
certified public accountants reasonably acceptable to Lender;
(b) Quarterly and Year-to-Date Reports. As soon as
available and in any event within forty-five (45) days after the end
of each of the first three (3) Fiscal Quarters, the unaudited
consolidated balance sheets of Borrower as of the end of such Fiscal
Quarter, and the unaudited consolidated and consolidating statements
of income of Borrower, its Subsidiaries, the LLC's, the Partnerships,
and partnerships and LLC's that are not borrowing funds from Borrower
for such Quarter and for a period from the beginning of the Fiscal
Year to the close of such Fiscal Quarter, all certified by the chief
financial officer or chief accounting officer of Borrower as being
true and correct to the best of his or her knowledge; and
(c) Other Information. Promptly upon its becoming
available, such other material information about Borrower or the
Indebtedness as Lender may reasonably request from time to time.
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All such balance sheets and other Financial Statements referred to in Sections
6.01(a) and (b) hereof shall conform to GAAP on a basis consistent with those
of previous Financial Statements.
Section 6.02 Taxes and Other Liens. Cause to be paid and discharged
promptly all taxes, assessments, and governmental charges or levies imposed upon
it, upon any Subsidiary, upon any LLC, or upon any Partnership or upon any of
its or any Subsidiary's, any LLC's, or any Partnership's income or Property as
well as all claims of any kind (including claims for labor, materials, supplies,
and rent) which, if unpaid, might become a Lien upon any or all of its or any
Subsidiary's, any LLC's, or any Partnership's Property; provided, however, that
neither Borrower, nor any Subsidiary, nor any LLC, nor any Partnership shall be
required to pay any such tax, assessment, charge, levy, or claim if the amount,
applicability, or validity thereof shall currently be contested in good faith by
appropriate proceedings diligently conducted and if Borrower shall establish
reserves therefor adequate under GAAP.
Section 6.03 Maintenance.
(a) Maintain and cause to be maintained its corporate
existence, name, rights, and franchises and the corporate existence,
name, rights and franchises of each Subsidiary that acts as a general
partner in a Partnership, and the existence, name, and rights of each
Partnership and each LLC;
(b) observe and comply (to the extent necessary so that
any failure will not materially and adversely affect the business or
Property of Borrower, or any Subsidiary that is a general partner of
any Partnership, or of any Partnership, or of any LLC) with all
applicable laws, statutes, codes, acts, ordinances, orders, judgments,
decrees, injunctions, rules, regulations, certificates, franchises,
permits, licenses, authorizations, and requirements of all federal,
state, county, municipal, and other governments;
(c) cause its Property and the Property of any Subsidiary
that acts as a general partner in any Partnership, any Partnership,
and any LLC (and any Property leased by or consigned to it, any
Subsidiary that acts as a general partner in any Partnership, any
Partnership, or any LLC or held under title retention or conditional
sales contracts) to be maintained in good and workable condition at
all times and make all repairs, replacements, additions, and
improvements to the Property owned by Borrower, and any Subsidiary
that acts as a general partner in any Partnership, and any
Partnership, and any LLC reasonably necessary and proper to ensure
that the business carried on in connection with such Property may be
conducted properly and efficiently at all times; and
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(d) cause the Borrower, each LLC, and each Subsidiary
that acts as a general partner in a Partnership, and each Partnership
to refrain from doing business in any state in which such business
would require qualifications to do business in such state unless and
until it shall have qualified to do business in such state.
Section 6.04 Further Assurances. Promptly cure any defects in the
creation, issuance, and delivery of the Loan Documents. Borrower at its expense
promptly will execute and deliver to Lender upon request all such other and
further documents, agreements, and instruments in compliance with or
accomplishment of the covenants and agreements of Borrower in the Loan
Documents, or to correct any omissions in the Loan Documents, or to state more
fully the Obligations and agreements set out in any of the Loan Documents, to
file any notices, or to obtain any consents, all as may be reasonably necessary
or appropriate in connection therewith.
Section 6.05 Performance of Obligations.
(a) Pay the Indebtedness according to the terms of the
Loan Documents; and
(b) do and perform, and cause to be done and to be
performed, every act and discharge all of the Obligations provided to
be performed and discharged by Borrower under the Loan Documents, at
the time or times and in the manner specified.
Section 6.06 Insurance. Maintain and continue to maintain, with
financially sound and reputable insurors, insurance satisfactory in type,
coverage and amount to Lender against such liabilities, casualties, risks, and
contingencies and in such types and amounts as is customary in the case of
Persons engaged in the same or similar businesses and similarly situated as that
of Borrower, its Subsidiaries, LLC's, and the Partnerships. Upon request of
Lender, Borrower will furnish or cause to be furnished to Lender from time to
time a summary of the insurance coverage of Borrower in form and substance
satisfactory to Lender and if requested will furnish Lender copies of the
applicable policies. In the case of any fire, accident, or other casualty
causing material loss or damage to any Property of Borrower, any Subsidiary, any
LLC, or any Partnership, and the loss(es) materially impair(s) the operation of
the business of Borrower, any Subsidiary, any LLC, or any Partnership the
proceeds of such policies shall be used, at Borrower's discretion (a) to repair
or replace the damaged Property, or (b) to prepay the Indebtedness.
Section 6.07 Accounts and Records. At Borrower's expense, cause books
of record and account for it and its Subsidiaries, the LLC's, and the
Partnerships to be kept, in which full, true, and correct entries will be made
of all dealings or transactions in accordance with GAAP as applicable, except
only for changes in
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accounting principles or practices with which Borrower's certified public
accountants concur and which changes have been reported to Lender in writing
and with an explanation thereof.
Section 6.08 Right of Inspection. At Borrower's expense, permit any
officer, employee, or agent of Lender to visit and inspect any of the Property
of Borrower or any Subsidiary, to examine Borrower's and any Subsidiary's books
of record and accounts, to take copies and extracts from such books of record
and accounts, and to discuss the affairs, finances, and accounts of Borrower and
any Subsidiary with Borrower's respective officers, accountants, and auditors,
all at such reasonable times and as often as Lender may reasonably desire.
Cause at reasonable times any officer, employee, or agent of Lender to be
permitted to visit and inspect at Borrower's cost any Properties owned by any
Partnership or LLC and to inspect and copy any financial records and books of
records and account of such Partnership or LLC.
Section 6.09 Notice of Certain Events. Promptly notify Lender if
Borrower learns of the occurrence of (i) any event that constitutes a Default
Condition or Event of Default together with a detailed statement by a
responsible officer of Borrower of the steps being taken as a result thereof; or
(ii) the receipt of any notice from, or the taking of any other action by, the
holder of any promissory note, debenture, or other evidence of Debt of Borrower
or of any security (as defined under the Securities Act of 1933, as amended) of
Borrower with respect to a claimed default, together with a detailed statement
by a responsible officer of Borrower specifying the notice given or other action
taken by such holder and the nature of the claimed default and what action
Borrower is taking or proposes to take with respect thereto; or (iii) any legal,
judicial, or regulatory proceedings affecting Borrower in which the amount
involved is material and is not covered by insurance or which, if adversely
determined, would have a material and adverse effect on the business or the
financial condition of Borrower; or (iv) any dispute between Borrower and any
governmental or regulatory authority or any other person, entity, or agency
which, if adversely determined, could reasonably be expected to materially
interfere with the normal business operations of Borrower; or (v) any material
adverse changes, either individually or in the aggregate, in the assets,
liabilities, financial condition, business, operations, affairs, or
circumstances of Borrower from those reflected in the Financial Statements or
from the facts warranted or represented in any Loan Document; or (vi) the
occurrence of a default under a Partnership Note or an LLC Note.
Section 6.10 ERISA Information and Compliance. Comply with ERISA and
all other applicable laws governing any pension or profit sharing plan or
arrangement to which Borrower is a party. Borrower shall provide Lender with
notice of any "reportable event" or "prohibited transaction" or the imposition
of a "withdrawal liability" within the meaning of ERISA.
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Section 6.11 Management. Give notice to Lender of any material change
in the executive officers of Borrower within five (5) days after such change
occurs.
Section 6.12 Reports, Etc. If applicable, furnish to Lender copies of
all filings and reports, of any nature or type, made with or to the Securities
and Exchange Commission (or any successor thereto) within 5 days thereafter, and
including all amendments, modifications, or supplements thereto, as the same are
filed with the Securities and Exchange Commission.
Section 6.13 Calculations. In all calculations made for purposes
required by this Loan Agreement, the Borrower, each Subsidiary, each LLC, each
Partnership, and each partnership and LLC not borrowing funds from the Borrower
shall comply with GAAP, and the Borrower, each Subsidiary, each LLC, each
Partnership, and each partnership and LLC not borrowing funds from the Borrower
shall use the same procedures and methods employed by Borrower, each Subsidiary,
each LLC, each Partnership, and each partnership and LLC not borrowing funds
from the Borrower in preparing the Financial Statements delivered to Lender
prior to the date of this Agreement. All references contained herein to
calculations of or determinations affecting Borrower (on a consolidated basis)
shall refer to the Borrower, each Subsidiary, each LLC, each Partnership, and
each Person that prepares financial statements under Borrower.
Section 6.14 Partnership Notes and LLC Notes, Etc. The Borrower shall
assign to Lender and grant Lender a first perfected security interest in all
Partnership Notes, Partnership Note Collateral, LLC Notes, and LLC Note
Collateral to secure repayment of the Indebtedness and the Obligations pursuant
to such documentation as reasonably required by Lender.
Article VII. Negative Covenants.
Borrower covenants and agrees that, during the term of this Agreement
and any extensions hereof and until the Indebtedness has been paid and
satisfied in full, unless Lender shall otherwise first consent in writing,
neither Borrower, nor any Subsidiary, nor any LLC, nor any Partnership, nor any
other partnership or LLC in which Borrower or a Subsidiary owns an interest
will, either directly or indirectly:
Section 7.01 Debts, Guaranties, and Other Obligations. Incur, create,
assume, or in any manner become or be liable with respect to any Debt; provided
that subject to all other provisions of this Article VII, the foregoing
prohibitions shall not apply to:
(a) Any Indebtedness to Lender;
(b) liabilities, direct or contingent, of Borrower or any
Subsidiary, or any Partnership, or any LLC existing on the
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date of this Agreement that are referenced or reflected in the
Financial Statements; and
(c) Seller Financing and Funded Debt not to exceed
$5,500,000 in the aggregate.
Section 7.02 Liens. Create, incur, assume, or permit to exist any
Lien on any of its Property (now owned or hereafter acquired) except, subject to
all other provisions of this Article, the foregoing restrictions shall not apply
to:
(a) Liens securing the payment of any Indebtedness to
Lender;
(b) Liens for taxes, assessments, or other governmental
charges not yet due or which are being contested in good faith by
appropriate action promptly initiated and diligently conducted, if
Borrower or such Subsidiary shall have made any reserve therefor
required by GAAP;
(c) Liens referred to or reflected in the Financial
Statements identified in Section 4.06 herein; and
(d) Liens on any real or personal property that secures
the Debt permitted by Section 7.01(c) above; and
(e) Liens permitted by Section 7.01(e); and
(f) Landlord liens in states where such liens arise by
operation of law.
Section 7.03 Investments, Loans, and Advances. Make or permit to
remain outstanding any loans or advances to or investments in any Person, except
that, subject to all other provisions of this Article, the foregoing restriction
shall not apply to:
(a) investments in direct obligations of the United
States of America or any agency thereof;
(b) investments in certificates of deposit having
maturities of less than one year, or repurchase agreements issued by
commercial banks in the United States of America having capital and
surplus in excess of $50,000,000, or commercial paper of the highest
quality;
(c) investments in money market funds so long as the
entire investment therein is fully insured or so long as the fund is a
fund operated by a commercial bank of the type specified in (b) above;
(d) Those matters referenced on Exhibit F and loans to
Partnerships or LLC's; and
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(e) other investments not to exceed $500,000.
Section 7.04 Dividends, Distributions, and Redemptions; Issuance of
Stock. Permit Borrower to declare or pay any dividend; nor permit any Subsidiary
to declare or pay any dividend to any Person other than Borrower or another
Subsidiary. Permit Borrower or any Subsidiary to redeem any of its stock or
return capital to shareholders except through existing shareholder agreements
and future shareholder agreements with (i) Persons who are members in an LLC or
who are partners in a Partnership formed subsequent to the Closing Date that
acquire Voting Stock of Borrower, (ii) physicians or physician groups that are
affiliated with the partners in a Partnership or are affiliated with the members
in an LLC formed subsequent to the Closing Date; and (iii) physicians and
physician groups that enter into a business relationship with the Borrower or a
Subsidiary after the Closing Date regarding the development, operation, or
investment in an ambulatory surgery center.
Section 7.05 Nature of Business. (a) Suffer any material change to be
made in the character of its business as carried on at the Closing Date; or (b)
permit the Borrower to own less than 51% of the Voting Stock of any incorporated
Subsidiary; or (c) permit the Borrower or a subsidiary of Borrower to own less
than 51% of the controlling ownership interest of any Partnership or LLC.
Section 7.06 Further Acquisitions, Mergers, Etc. (i) Permit Borrower
to merge or consolidate with any other Person, except under conditions in which
the Borrower is the surviving entity and such merger or consolidation does not
cause the Borrower to be in violation of this Agreement; or (ii) permit any
Subsidiary to merge or consolidate with any Person other than the Borrower or
any other Subsidiary; or (iii) permit the Borrower, any Subsidiary, LLC, or
Partnership to dispose of substantially all of their respective Properties.
Section 7.07 Proceeds of Loan. Permit the proceeds of the Advances to
be used for any purpose other than those permitted under this Agreement.
Section 7.08 Sale or Discount of Receivables. Except to minimize
losses on bona fide debts previously contracted, discount or sell with recourse,
or sell for less than the greater of the face or market value thereof, any of
its notes receivable or Accounts.
Section 7.09 Disposition of Assets. Dispose of any of its assets
having a material value other than in the ordinary course of its present
business upon terms standard in Borrower's industry.
Section 7.10 Partnership Notes or LLC Notes. Forgive, cancel, amend,
alter, or seek to transfer any Partnership Notes or LLC Notes.
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Section 7.11 Financial Covenants.
(a) Net Worth. Permit its Consolidated Net Worth as of
December 31, 1995 to be less than $21,000,000; nor permit its
Consolidated Net Worth as measured at the end of each Fiscal Quarter
thereafter to be less than the sum of: (a) $21,000,000, plus (b) the
amount by which Borrower's additional paid in capital exceeds
$21,000,000, plus (c) 75% of the net, after-tax earnings of the
Borrower as determined on a consolidated basis from the immediately
preceding Fiscal Year.
(b) Funded Debt to EBITDA. As calculated on the last day
of each Fiscal Quarter, permit the ratio of Funded Debt, plus amounts
attributable to capital leases to EBITDA to be greater than 2.25 to
1.0.
(c) EBITDA to Interest Expense. As calculated on the
last day of each Fiscal Quarter, permit the ratio of EBITDA to
Interest Expense to be less than 5.0 to 1.0.
(d) Funded Debt to Capitalization. As calculated on the
last day of each Fiscal Quarter, permit the ratio of Borrower's Funded
Debt (as determined on a consolidated basis but excluding Debt
attributed to a Minority Interest), to Capitalization to be greater
than .5 to 1.0.
(e) For the purpose of calculating EBITDA in parts (b)
and (c) above, EBITDA shall be calculated on an annualized, trailing
six (6) month basis and it shall include the EBITDA of any Acquisition
so long as the calculation thereof is done in a manner reasonably
calculated to comply with GAAP. For the purpose of calculating
Interest Expense in part (c) above, Interest Expense shall be
calculated on a trailing twelve (12) month basis.
Section 7.12 Inconsistent Agreements. Enter into any agreement
containing any provision which would be violated or breached by the performance
by Borrower of its Obligations.
Section 7.13 Restrictions on Physician Practice Acquisitions. (a)
Enter into Physician Practice Acquisitions the aggregate cost of which exceeds
$4,000,000 in any twelve (12) month period without the Lender's prior written
consent; or (b) enter into any single Physician Practice Acquisition the cost of
which exceeds $2,000,000 without the Lender's prior written approval, provided
that the provisions of this subpart (b) do not apply to the following matters:
(i) Melbourne Eye Practice, and (ii) Wichita Eye Practice.
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Article VIII. Events of Default.
Section 8.01 Events of Default. Any of the following events shall be
considered an Event of Default as those terms are used in this Agreement:
(a) Principal and Interest Payments. Borrower fails to
make payment when due of any installment of principal or interest on
the Revolving Credit Note or the Term Note or the Indebtedness within
fifteen (15) days of the date thereof, or Borrower fails to pay when
due any payment due hereunder or under any of the Loan Documents
within fifteen (15) days of the due date thereof; or
(b) Representations and Warranties. Any representation or
warranty made by Borrower in any Loan Document, proves to have
been incorrect in any material respect as of the date thereof; or any
representation, statement (including Financial Statements),
certificate, or data furnished or made by Borrower in any Loan Document
with respect to any Indebtedness, proves to have been untrue in any
material respect, as of the date as of which the facts therein set
forth were stated or certified provided that with regard to Borrower's
representation in Section 4.04 herein, the Lender shall not be entitled
to declare a default hereunder unless the Borrower's representation in
Section 4.04 proves to be untrue with regard to any contract requiring
the payment of money or goods valued at $250,000 or more or the
performance of services valued at $250,000 or more; or
(c) Obligations. Borrower fails to perform its
Obligations as required by and contained in any Loan Document or a
breach occurs of any agreement, representation, or warranty contained
herein or in any Loan Document and such continues for thirty (30) days
after delivery by Lender of written notice to Borrower that it has
failed to perform its Obligations or that a breach has occurred of any
agreement, representation, or warranty contained herein or in any Loan
Document, and following delivery of such written notice from Lender to
Borrower the failure or breach has not been fully cured and/or
corrected; provided and except that the 30 day notice and cure period
shall not be applicable to Events of Default or breaches arising out
of or under the following sections of this Loan Agreement (and in such
cases no notice and cure period beyond any specifically stated therein
shall be applicable):
Section 8.01(a), 8.01(b), 8.01(d), 8.01(e), 8.01(f), 8.01(h),
8.01(i), 8.01(k), 8.01(l), 6.01, 6.04, 6.07, 6.08, 6.09, 6.11,
6.12, 7.01, 7.02, 7.03, 7.05, 7.06, 7.07, 7.08, 7.09, 7.10,
7.11, and 7.12.
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(d) Involuntary Bankruptcy or Receivership Proceedings. A
receiver, custodian, liquidator, or trustee of Borrower, any
Subsidiary, any Partnership, or of any LLC, or of any of their
respective Property, is appointed by the order or decree of any court
or agency or supervisory authority having jurisdiction; or Borrower,
any Subsidiary, any Partnership, or any LLC is adjudicated bankrupt or
insolvent; or any of the Property of Borrower, any Subsidiary, any
Partnership, or LLC is sequestered by court order or a petition is
filed against Borrower, any subsidiary, Partnership, and/or any LLC
under any state or federal bankruptcy, reorganization, debt
arrangement, insolvency, readjustment of debt, dissolution,
liquidation, or receivership law of any jurisdiction, whether now or
hereafter in effect, which proceeding is not dismissed within 60 days
of filing; or
(e) Voluntary Petitions. Borrower, any Subsidiary, any
Partnership, or any LLC takes affirmative steps to prepare to file, or
Borrower, any Subsidiary, any Partnership, or any LLC files a petition
in voluntary bankruptcy or to seek relief under any provision of any
bankruptcy, reorganization, debt arrangement, insolvency, readjustment
of debt, dissolution, or liquidation law of any jurisdiction, whether
now or hereafter in effect, or consents to the filing of any petition
against it under any such law; or
(f) Assignments for Benefit of Creditors, Etc. Borrower,
any Subsidiary, any Partnership, or any LLC makes an assignment for
the benefit of its creditors, or admits in writing its inability to
pay its debts generally as they become due, or consents to the
appointment of a receiver, trustee, or liquidator of Borrower, any
Subsidiary, any Partnership, or any LLC, or of all or any part of its
Properties; or
(g) Discontinuance of Business, Etc. Borrower, any
Subsidiary that acts as a general partner in any Partnership, any
Partnership, or any LLC discontinues its usual business and such has a
material adverse impact on Borrower's financial condition; or
(h) Cross-Default on Other Debt or Security. Subject to
any applicable grace period or waiver prior to any due date, Borrower,
any Subsidiary, any Partnership, any partnerships consolidated with
Borrower on its consolidated Financial Statements, and/or any LLC
fails to make any payment due on any Debt or security (as "security"
is defined for purposes of the federal securities laws) in excess of
an aggregate amount equal to $500,000 or any event shall occur or any
condition shall exist with respect to any Debt or security of
Borrower, any Subsidiary, any Partnership, and/or any LLC or under any
agreement securing or relating to such indebtedness or security the
effect of which is to cause or to permit any
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holder or holders of Debt in excess of an aggregate amount equal to
$500,000 to cause such Debt or security, or a portion thereof, to
become due prior to its stated maturity or prior to its regularly
scheduled dates of payment; or
(i) Undischarged Judgments. If a judgment for the payment
of money in excess of $500,000 in the aggregate is rendered by any
court or other governmental authority against Borrower, any
Subsidiary, any Partnership, and/or any LLC which is not fully covered
by valid collectible insurance (subject, however to a reasonable
deductible); or
(j) Violation of Laws, Etc. Borrower, any Subsidiary,
any Partnership, or any LLC violates or otherwise fails to comply with
any law, rule, regulation, decree, order, or judgment under the laws
of the United States of America, or of any state or jurisdiction
thereof which violation or failure has a material, adverse effect on
Borrower, any Subsidiary, any Partnership, or any LLC; or Borrower
fails or refuses at any and all times to remain current in its or
their financial reporting requirements pursuant to such laws, rules,
and regulations or pursuant to the rules and regulations of any
exchange upon which any shares of Borrower are traded.
(k) Dissolution of Partnerships, Subsidiaries, or LLC's.
Should any Partnership, Subsidiary, or LLC be dissolved prior to
repayment of all amounts owed by such Partnership, Subsidiary, or LLC
to Borrower.
(l) Change of Ownership. Should the majority of stock of
Borrower cease to be owned by American Healthcorp, Inc. unless
otherwise approved in writing by Borrower; provided that this
provision shall not be violated in the event that the stock of the
Borrower is sold pursuant to an IPO transaction, or if American
Healthcorp, Inc. distributes stock of Borrower to shareholders of
American Healthcorp, Inc.
Section 8.02 Remedies. Upon the happening of any Event of Default set
forth above, with the exception of those events set forth in Section
8.01(d) and 8.01(e): (i) Lender may declare the entire principal amount of all
Indebtedness then outstanding, including interest accrued thereon, to be
immediately due and payable without presentment, demand, protest, notice of
protest, or dishonor or other notice of default of any kind, all of which
Borrower hereby expressly waives, (ii) at Lender's sole discretion and option,
all obligations of Lender under this Agreement shall immediately cease and
terminate unless and until Lender shall reinstate such obligations in writing,
(iii) Lender may exercise all rights against Collateral set forth in the
Security Documents or afforded a creditor under applicable law; or (iv) Lender
may bring an action to protect or enforce its rights under the Loan Documents or
seek to collect the Indebtedness and/or enforce the Obligations by any lawful
means.
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Upon the happening of any event specified in Section 8.01(d) and
Section 8.01(e) above: (i) all Indebtedness, including all principal, accrued
interest, and other charges or monies due in connection therewith shall be
immediately and automatically due and payable in full, without presentment,
demand, protest, or dishonor or other notice of any kind, all of which Borrower
hereby expressly waives, (ii) all obligations of Lender under this Agreement
shall immediately cease and terminate unless and until Lender shall reinstate
such obligations in writing, (iii) Lender may exercise all rights against
Collateral set forth in the Security Documents or afforded a creditor under
applicable law; or (iv) Lender may bring an action to protect or enforce its
rights under the Loan Documents or seek to collect the Indebtedness and/or
enforce the Obligations by any lawful means.
Section 8.03 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, Lender is authorized, at any time and from
time to time, without notice to Borrower (any such notice being expressly waived
by Borrower), to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by Lender to or for the credit or the account of Borrower against
any and all of the Obligations, irrespective of whether or not Lender shall have
accelerated the Indebtedness or made any demand under this Agreement or the Note
and although such obligations may be unmatured.
Section 8.04 Default Conditions. Any of the following events shall be
considered a Default Condition:
(a) Borrower suffers a material adverse change in its
financial condition; and
(b) Any event occurs which with the passage of time or
giving of notice would become an Event of Default hereunder or an
Event of Default under the Guaranty.
Upon the occurrence of a Default Condition or at any time thereafter
until such Default Condition no longer exists, the Borrower agrees that the
Lender, in its sole discretion, and without notice to Borrower, may immediately
cease making any Advances under the Loan Documents, all without liability
whatsoever to Borrower or any other Person whomsoever, all of which is
expressly waived hereby. Borrower releases Lender from any and all liability
whatsoever, whether direct, indirect, or consequential, and whether seen or
unforeseen, resulting from or arising out of or in connection with Lender's
determination to cease making Advances pursuant to this Section, unless Lender
acts with gross negligence or willful misconduct.
Article IX. General Provisions.
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Section 9.01 Notices. All communications under or in connection with
this Agreement or any of the other Loan Documents shall be in writing and shall
be mailed by first class certified mail, postage prepaid, or otherwise sent by
telex, telegram, telecopy, or other similar form of rapid transmission confirmed
by mailing (in the manner stated above) a written confirmation at substantially
the same time as such rapid transmission, or personally delivered to an officer
of the receiving party. All such communications shall be mailed, sent, or
delivered as follows:
(a) if to Borrower, to its address shown below, or to
such other address as Borrower may have furnished to Lender in
writing:
1 Burton Hills Boulevard
Nashville, Tennessee 37215
Attention: Claire Gulmi
(b) if to Lender, to its address shown below, or to such
other address or to such individual's or department's attention as it
may have furnished Borrower in writing:
Karen Ahern
SunTrust Bank, Nashville, N.A.
201 Fourth Avenue North
Nashville, Tennessee 37219
Any communication so addressed and mailed by certified mail shall be deemed to
be given when so mailed.
Section 9.02 Deviation from Covenants. The procedure to be followed
by Borrower to obtain the consent of Lender to any deviation from the covenants
contained in this Agreement or any other Loan Document shall be as follows:
(a) Borrower shall send a written notice to Lender
setting forth (i) the covenant(s) relevant to the matter, (ii) the
requested deviation from the covenant(s) involved, and (iii) the
reason for the requested deviation from the covenant(s); and
(b) Lender, within a reasonable time, will send a written
notice to Borrower, signed by an authorized officer of Lender,
permitting or refusing the request, but in no event will any deviation
from the covenants of this Agreement or any other Loan Document be
effective without the express prior written consent of Lender.
Lender's failure to provide such written notice shall be deemed a
refusal of such request.
Section 9.03 Invalidity. In the event that any one or more of the
provisions contained in any Loan Document for any reason shall be held invalid,
illegal, or unenforceable in any respect, such
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invalidity, illegality, or unenforceability shall not affect any other
provision of any Loan Document.
Section 9.04 Survival of Agreements. All representations and
warranties of Borrower in this Agreement and all covenants and agreements in
this Agreement not fully performed before the Closing Date of this Agreement
shall survive the Closing.
Section 9.05 Successors and Assigns. Borrower may not assign its
rights or delegate its duties under this Agreement or any other Loan Document.
All covenants and agreements contained by or on behalf of Borrower in any Loan
Document shall bind the Borrower's successors and assigns and shall inure to the
benefit of Lender and its successors and assigns. In the event that Lender sells
participations in Indebtedness to participating lenders, each of such
participating lenders shall have the rights of set-off against such Indebtedness
and similar rights or Liens to the same extent available to Lender, except as
otherwise provided in this Agreement.
Section 9.06 Renewal, Extension, or Rearrangement. All provisions of
this Agreement relating to Indebtedness shall apply with equal force and effect
to each and all promissory notes executed hereafter which in whole or in part
represent a renewal, extension for any period, increase, or rearrangement of any
part of the Indebtedness originally represented by any part of such other
Indebtedness.
Section 9.07 Waivers. Pursuant to T.C.A. Section 47-50-112, no action
or course of dealing on the part of Lender, its officers, employees,
consultants, or agents, nor any failure or delay by Lender with respect to
exercising any right, power, or privilege of Lender under the Note, this
Agreement, or any other Loan Document shall operate as a waiver thereof, except
as otherwise provided in this Agreement. Lender may from time to time waive any
requirement hereof, including any of the Conditions Precedent; however no waiver
shall be effective unless in writing and signed by the Lender. The execution by
Lender of any waiver shall not obligate Lender to grant any further, similar, or
other waivers.
Section 9.08 Cumulative Rights. Rights and remedies of Lender under
each Loan Document shall be cumulative, and the exercise or partial exercise of
any such right or remedy shall not preclude the exercise of any other right or
remedy.
Section 9.09 Construction. This Agreement, the Note, and the other
Loan Documents constitute a contract made under and shall be construed in
accordance with and governed by the laws of the State of Tennessee.
Section 9.10 Nature of Commitment. With respect to the Loan and the
Advances, Lender's obligation to make the Loan or any Advances shall be deemed
to be pursuant to a contract to make a
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loan or to extend debt financing or financial accommodations to or for the
benefit of Borrower within the meaning of Sections 365(c)(2) and 365(e)(2)(B)
of the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq.
Section 9.11 Disclosures. Every reference in this Agreement to
disclosures of Borrower to Lender (except the Financial Statements), to the
extent that such references refer or are intended to refer to disclosures at or
prior to the execution of this Agreement, shall be deemed strictly to refer only
to written disclosures delivered to Lender concurrently with the execution of
this Agreement and referred to specifically in the Loan Documents. The parties
intend that such disclosures are to be limited to those presented in an orderly
manner at the time of executing this Agreement and are not to be deemed to
include expressly or impliedly any disclosures that previously may have been
delivered from time to time to Lender, except to the extent that such previous
disclosures are again presented to Lender in writing concurrently with the
execution of this Agreement.
Section 9.12 Governance; Exhibits. The terms of this Agreement shall
govern if determined to be in conflict with the terms or provisions in any other
Loan Document. The exhibits attached to this Agreement are incorporated in this
Agreement and shall be considered a part of this Agreement except that in the
event of any conflict between an exhibit and this Agreement or another Loan
Document, the provisions of this Agreement or the Loan Document, as the case may
be, shall prevail over the exhibit.
Section 9.13 Titles of Articles, Sections, and Subsections. All titles
or headings to articles, sections, subsections, or other divisions of this
Agreement or the exhibits to this Agreement are only for the convenience of the
parties and shall not be construed to have any effect or meaning with respect to
the other content of such articles, sections, subsections, or other divisions,
such other content being controlling with respect to the agreement between the
parties.
Section 9.14 Time of Essence. Time is of the essence with regard to
each and every provision of this Agreement.
Section 9.15 Remedies. All remedies for which this Agreement and all
other Loan Documents provide for Lender shall be in addition to all other
remedies available to Lender under the principles of law and equity, and
pursuant to any other body of law, statutory or otherwise.
Section 9.16 Application of Prepayments. Prepayments shall be applied
at Lender's sole discretion (i) first to accrued interest under any of the
Obligations as determined by Lender and (ii) second to reduce principal of any
of the Obligations, all in such manner as determined by Lender.
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Section 9.17 Computations; Accounting Principles. Where the character
or amount of any asset or liability or item of income or expense is required to
be determined, or any consolidation or other accounting computation is required
to be made for the purposes of this Agreement, such determination or
calculation, to the extent applicable and except as otherwise specified in this
Agreement, shall be made in accordance with GAAP applied on a consolidated basis
consistent with those in effect at the Closing Date.
Section 9.18 Costs, Expenses, and Taxes. Borrower agrees to pay on
demand all out-of-pocket costs and expenses of Lender (including the reasonable
fees and out-of-pocket expenses of counsel for Lender) incurred by Lender in
connection with the preparation, execution, delivery, administration,
interpretation, enforcement, or protection of Lender's rights under the Loan
Documents (including any suit for declaratory judgment or interpretation of the
provisions hereof). In addition, Borrower agrees to pay, and to hold Lender
harmless from all liability for, any stamp or other taxes (including taxes under
Tennessee Code Annotated Section 67-4-409 due upon the recordation of mortgages
and financing statements) which may be payable in connection with the execution
or delivery of this Agreement, the Advances, and the Collateral under this
Agreement, or the issuance of the Note or any other Loan Documents delivered or
to be delivered under or in connection with this Agreement. Borrower, upon
request, promptly will reimburse Lender for all amounts expended, advanced, or
incurred by Lender to satisfy any obligation of Borrower under this Agreement or
any other Loan Documents, or to perfect a Lien in favor of Lender, or to protect
the Properties or business of Borrower or to collect the Obligations, or to
enforce the rights of Lender under this Agreement or any other Loan Document,
which amounts will include all court costs, attorney's fees, fees of auditors
and accountants, and investigation expenses reasonably incurred by Lender in
connection with any such matters, together with interest thereon at the rate
applicable to past due principal and interest as set forth in the Loan Documents
but in no event in excess of the maximum lawful rate of interest permitted by
applicable law on each such amount. All obligations for which this Section
provides shall survive any termination of this Agreement.
Section 9.19 Distribution of Information. The Borrower hereby
authorizes the Lender, as the Lender may elect in its sole discretion, to
discuss with and furnish to any affiliate of the Lender, to any government or
self-regulatory agency with jurisdiction over the Lender, or to any participant
or prospective participant, all financial statements, audit reports and other
information pertaining to the Borrower and/or its Subsidiaries whether such
information was provided by Borrower or prepared or obtained by the Lender or
third parties. Neither the Lender nor any of its employees, officers, directors
or agents make any representation or warranty regarding any audit reports or
other analyses of Borrower which the Lender may elect to distribute, whether
such information was provided by Borrower or prepared or
38
<PAGE> 39
obtained by the Lender or third parties, nor shall the Lender or any of its
employees, officers, directors or agents be liable to any Person receiving a
copy of such reports or analyses for any inaccuracy or omission contained in
such reports or analyses or relating thereto.
Section 9.20 Entire Agreement; No Oral Representations Limiting
Enforcement. This Agreement represents the entire agreement between the parties
hereto except for such other agreements set forth in the Loan Documents, and any
and all oral statements heretofore made regarding the matters set forth herein
are merged herein.
Section 9.21 Amendments. The parties hereto agree that this Agreement
may not be modified or amended except in writing signed by the parties hereto.
Section 9.22 Non-Use Fee. As additional consideration for the
Lender's committing and reserving monies to fund the Revolving Credit Note, the
Borrower shall pay to Lender quarterly in arrears a fee at a rate equal to 35
basis points per annum of the average unused portion of the Revolving Credit
Note during the prior Fiscal Quarter. The fee shall be calculated on a 360-day
basis.
Article X. Jury Waiver.
Section 10.01. Jury Waiver. IF ANY ACTION OR PROCEEDING INVOLVING
THIS LOAN AGREEMENT OR ANY LOAN DOCUMENT IS COMMENCED IN ANY COURT OF COMPETENT
JURISDICTION, BORROWER AND LENDER HEREBY WAIVE THEIR RIGHTS TO DEMAND A JURY
TRIAL.
39
<PAGE> 40
ENTERED INTO this date first set forth above.
BORROWER:
AMSURG CORP., a Tennessee corporation
By:
----------------------------------
Title:
-------------------------------
LENDER:
SUNTRUST BANK, NASHVILLE, N.A.
By:
----------------------------------
Title:
-------------------------------
40
<PAGE> 41
INDEX OF EXHIBITS
Exhibit A: Initial Notice of Interest Rate Election (Section
2.05(b)) (form)
Exhibit B: Notice of Interest Rate Election (Section 2.06(c)
and Section 2.06(d)) (form)
Exhibit C: Request for Advance
Exhibit D: Revolving Credit Note (form)
Exhibit E: Term Note
Exhibit F: Exemptions from Section 4.07 (Largo, FL and
Jackson, TN)
Exhibit G: List of Subsidiaries
Exhibit H: List of Partnerships and LLC's
Exhibit I: Opinion Letter of Borrower's Counsel Due at
Closing
41
<PAGE> 42
EXHIBIT A
INITIAL NOTICE OF INTEREST RATE ELECTION
Pursuant to Section 2.06(a) of that Amended and Restated Loan
Agreement dated June 25, 1996 and executed between AmSurg Corp. ("Borrower")
and SunTrust Bank, Nashville, N.A. ("Lender"), the Borrower delivers this
Notice to Lender advising that it makes the following election for the interest
rate applicable to that an Advance under the Amended and Restated Revolving
Credit Note, which Advance is in the principal amount of $____________.
<TABLE>
<S> <C>
(a) Effective date of selected interest rate: , 19 .
----------------------- ----
(b) Applicable Interest Rate selected
---
/ / Base Rate
---
---
/ / Libor-Based Rate
---
(c) if the Borrower has elected the Libor-Based Rate as the Applicable Interest Rate, then the
Borrower designates the maturity for such rate as follows:
---
/ / 30 Days
---
---
/ / 60 Days
---
---
/ / 90 Days
---
</TABLE>
All defined terms contained herein shall have the same meaning as set
forth in the Amended and Restated Loan Agreement.
Submitted by Borrower to Lender as of this __________ day of
________________, 19___.
AMSURG CORP.
By:
--------------------------------
Title:
-----------------------------
<PAGE> 43
EXHIBIT B
NOTICE OF INTEREST RATE ELECTION
Pursuant to Section 2.06(c) and/or Section 2.06(d) of that certain
Amended and Restated Loan Agreement dated June 25, 1996, executed between
AmSurg Corp. ("Borrower") and SunTrust Bank, Nashville, N.A. ("Lender"), the
Borrower delivers this Notice to Lender advising that it makes the following
election for the interest rate applicable to that certain Amended and Restated
Term Note issued by Borrower to the order of Lender in the principal amount of
$5,749,245.88 and dated June 25, 1996:
<TABLE>
<S> <C>
(a) Effective date of selected interest rate: , 19 .
----------------------- ----
(b) Applicable Interest Rate selected
---
/ / Base Rate
---
---
/ / Libor-Based Rate
---
(c) if the Borrower has elected the Libor-Based Rate as the Applicable Interest Rate, then the
Borrower designates the maturity for such rate as follows:
---
/ / 30 Days
---
---
/ / 60 Days
---
---
/ / 90 Days
---
</TABLE>
All defined terms contained herein shall have the same meaning as set
forth in the Amended and Restated Loan Agreement.
Submitted by Borrower to Lender as of this __________ day of
________________, 19___.
AMSURG CORP.
By:
--------------------------------
Title:
-----------------------------
<PAGE> 44
EXHIBIT B
NOTICE OF INTEREST RATE ELECTION
Pursuant to Section 2.06(c) and/or Section 2.06(d) of that certain
Amended and Restated Loan Agreement dated June 25, 1996, executed between AmSurg
Corp. ("Borrower") and SunTrust Bank, Nashville, N.A. ("Lender"), the Borrower
delivers this Notice to Lender advising that it makes the following election
for the interest rate applicable to that certain Amended and Restated Revolving
Credit Note issued by Borrower to the order of Lender in the principal amount
of $12,000,000 and dated June 25, 1996:
<TABLE>
<S> <C>
(a) Effective date of selected interest rate: , 19 .
----------------------- ----
(b) Applicable Interest Rate selected
---
/ / Base Rate
---
---
/ / Libor-Based Rate
---
(c) if the Borrower has elected the Libor-Based Rate as the Applicable Interest Rate, then the
Borrower designates the maturity for such rate as follows:
---
/ / 30 Days
---
---
/ / 60 Days
---
---
/ / 90 Days
---
</TABLE>
All defined terms contained herein shall have the same meaning as set
forth in the Amended and Restated Loan Agreement.
Submitted by Borrower to Lender as of this __________ day of
________________, 19___.
AMSURG CORP.
By:
--------------------------------
Title:
-----------------------------
<PAGE> 45
EXHIBIT C
REQUEST FOR ADVANCE
(Section 5.02)
Pursuant to Section 5.02 of that certain Amended and Restated Loan
Agreement dated June 25, 1996 entered into by and between AmSurg Corp. (the
"Borrower") and SunTrust Bank, Nashville, N.A. (the "Lender") (the "Loan
Agreement"), the Borrower hereby requests that Lender advance it monies under
the Amended and Restated Revolving Credit Note, which Advance is requested in a
principal amount equal to $__________________.
The Borrower advises Lender that no event of Default or Default
Condition exists under the Loan Agreement.
The Borrower affirms that the total amount outstanding under all
Advances made subsequent to June 25, 1996, plus the requested Advance, do not
and will not exceed the sum of (i) 85% of Development Costs, plus (ii) 65% of
the total cost of all Acquisitions or a Physician Practice Acquisitions.
The Borrower requests that the Advance be made by Lender on
_________________, 199____.
All terms used herein shall have the same meaning as set forth in the
Amended and Restated Loan Agreement.
Submitted by Borrower this _____ day of ________________, 199___.
AMSURG CORP.
By:
-------------------------------
Title:
----------------------------
Received by Lender this day of , 199 .
----- --------------- ---
SUNTRUST BANK, NASHVILLE, N.A.
By:
--------------------------------
Title:
-----------------------------
<PAGE> 46
EXHIBIT D
AMENDED AND RESTATED REVOLVING CREDIT NOTE
ENTERED INTO by and between AMSURG CORP., a Tennessee corporation (the
"Borrower"), and SUNTRUST BANK, NASHVILLE, N.A., formerly known as Third
National Bank in Nashville, a national bank (the "Lender"), as of this 25th day
of June, 1996.
RECITALS:
1. The Borrower issued a certain Revolving Credit Note payable to
the order of Lender in the original principal amount of $5,000,000 dated as of
September 29, 1995, as amended and restated pursuant to an Amended and Restated
Credit Note dated February 24, 1996 (the "Note").
2. The Borrower desires that the Lender extend it additional
credit and amend certain of the terms of the Note.
3. The Borrower and the Lender desire to amend and restate the
Note in its entirety as follows:
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the parties hereto agree that the Note shall be
amended and restated in its entirety as follows:
FOR VALUE RECEIVED, AMSURG CORP., a Tennessee corporation
(hereinafter referred to as "Borrower"), promises and agrees to pay to
the order of SUNTRUST BANK, NASHVILLE, N.A. (formerly known as Third
National Bank in Nashville) (the "Lender") at its offices in
Nashville, Tennessee, or at such other place as may be designated in
writing by the holder, in lawful money of the United States of
America, the principal sum of Twelve Million and No/100 Dollars
($12,000,000) or so much thereof as may be advanced from time to time
by the Lender, together with interest on the unpaid principal balance
outstanding from time to time hereon computed from the date of each
advance until maturity at the rate of interest set forth in that
certain Amended and Restated Loan Agreement executed between Borrower
and Lender dated June 25, 1996, as such may be amended from time to
time (herein referred to as the "Loan Agreement"). Interest for each
year shall be computed based upon a 360-day year.
So long as no default has occurred and is continuing hereunder
and so long as no Event of Default or Default Condition has occurred
and is continuing under the Loan Agreement, and subject to the terms
of the Loan Agreement, the Borrower may borrow hereunder, repay such
borrowings, and reborrow hereunder as provided in the Loan Agreement.
Lender shall keep records of all borrowings and repayments. Draws
<PAGE> 47
under this Note shall be evidenced by such documentation as required
by Article II of the Loan Agreement.
Advances under this Note shall be made pursuant to the
procedure specified in the Loan Agreement.
This Note shall be repaid as required by Article II of the
Loan Agreement.
This Note is subject to the terms of the Loan Agreement.
Notwithstanding any provision to the contrary, it is the
intent of the Lender, the Borrower, and all parties liable on this
Note, that neither the Lender nor any subsequent holder shall be
entitled to receive, collect, reserve or apply, as interest, any
amount in excess of the maximum lawful rate of interest permitted to
be charged by applicable law or regulations, as amended or enacted
from time to time. In the event the Note calls for an interest payment
that exceeds the maximum lawful rate of interest then applicable, such
interest shall not be received, collected, charged, or reserved until
such time as that interest, together with all other interest then
payable, falls within the then applicable maximum lawful rate of
interest. In the event the Lender, or any subsequent holder, receives
any such interest in excess of the then maximum lawful rate of
interest, such amount which would be excessive interest shall be
deemed a partial prepayment of principal and treated hereunder as
such, or, if the principal indebtedness evidenced hereby is paid in
full, any remaining excess funds shall immediately be paid to the
Borrower. In determining whether or not the interest paid or payable,
under any specific contingency, exceeds the maximum lawful rate of
interest, the Borrower and the Lender shall, to the maximum extent
permitted under applicable law, (a) exclude voluntary prepayments and
the effects thereof, and (b) amortize, prorate, allocate, and spread,
in equal parts, the total amount of interest throughout the entire
term of the indebtedness; provided that if the indebtedness is paid in
full prior to the end of the full contemplated term hereof, and if the
interest received for the actual period of existence hereof exceeds
the maximum lawful rate of interest, the holder of the Note shall
refund to the Borrower the amount of such excess or credit the amount
of such excess against the principal portion of the indebtedness as of
the date it was received, and, in such event, the Lender shall not be
subject to any penalties provided by any laws for contracting for,
charging, reserving, collecting or receiving interest in excess of the
maximum lawful rate of interest.
Principal and unpaid interest bear interest during the
continuance of any default in payment of principal and interest as
herein provided at the maximum lawful rate of
-2-
<PAGE> 48
interest permitted by law. In case of suit, or if this obligation is
placed in an attorney's hands for collection, or to protect the
security for its payment, the undersigned will pay all costs of
collection and litigation, including a reasonable attorney's fee.
In the event that there occurs any breach of any promise made
in this Note and such breach continues for longer than fifteen (15)
days, or upon the occurrence of an Event of Default as defined in the
Loan Agreement, then, during the continuance of any of such events, at
the option of the holder, the entire indebtedness hereby evidenced
shall become due, payable and collectible then or thereafter, without
notice, as the holder may elect regardless of the date of maturity.
The holder may waive any default before or after the same has been
declared and restore this Note to full force and effect without
impairing any rights hereunder, such right of waiver being a
continuing one.
The makers, endorsers, guarantors and all parties to this Note
and all who may become liable for same, jointly and severally waive
presentment for payment, protest, notice of protest, notice of
nonpayment of this Note, demand and all legal diligence in enforcing
collection, and hereby expressly agree that the lawful owner or holder
of this Note may defer or postpone collection of the whole or any part
thereof, either principal and/or interest, or may extend or renew the
whole or any part thereof, either principal and/or interest, or may
accept additional collateral or security for the payment of this Note,
or may release the whole or any part of any collateral security and/or
liens given to secure the payment of this Note, or may release from
liability on account of this Note any one or more of the makers,
endorsers, guarantors and/or other parties thereto, all without notice
to them or any of them; and such deferment, postponement, renewal,
extension, acceptance of additional collateral or security and/or
release shall not in any way affect or change the obligation of any
such maker, endorser, guarantor or other party to this Note, or of any
who may become liable for the payment thereof.
The Borrower shall pay a "late charge" of five percent (5%) of
any payments of principal and/or interest due when paid more than five
days after the due date thereof (provided that in no event shall said
"late charge" result in the payment of interest in excess of the
maximum lawful rate of interest permitted by applicable law), to cover
the extra expenses involved in handling delinquent payments; and
provided that the late charge shall not be applicable to the payment
due on the Maturity Date.
-3-
<PAGE> 49
The term "maximum lawful rate of interest" as used herein
shall mean a rate of interest equal to the higher or greater of the
following: (a) the "applicable formula rate" defined in Tennessee Code
Annotated Section 47-14-102(2), or (b) such other rate of interest as
may be charged under other applicable laws or regulations.
This Note is a secured Note.
This Note has been executed and delivered in, and shall be
governed by and construed according to the laws of the State of
Tennessee except to the extent pre-empted by applicable laws of the
United States of America.
This Note may not be changed or terminated without the prior
written approval of the Lender and the Borrower. No waiver of any term
or provision hereof shall be valid unless in writing signed by the
holder.
Executed this 25th day of June, 1996.
BORROWER:
AMSURG CORP., a Tennessee
corporation
By:
-----------------------------
Title:
--------------------------
ACCEPTED BY:
SUNTRUST BANK, NASHVILLE, N.A.
By:
------------------------------
Title:
---------------------------
-4-
<PAGE> 50
EXHIBIT E
CONSOLIDATED, AMENDED AND RESTATED TERM NOTE
ENTERED INTO by and between AMSURG CORP., a Tennessee corporation (the
"Borrower"), and SUNTRUST BANK, NASHVILLE, N.A., formerly known as Third
National Bank in Nashville ("Lender") as of this 25th day of June, 1996.
RECITALS:
1. Borrower issued the following promissory notes payable to the
order of Lender (herein collectively referred to as the "Notes"):
(a) that certain Term Note issued by Borrower to the
order of Lender in the original principal amount of $625,000 dated
February 15, 1996;
(b) that certain Acquisition Term Note issued by the
Borrower to the order of Lender in the original principal amount of
$1,430,000 dated April 19, 1995;
(c) that certain Acquisition Term Note issued by the
Borrower to the order of Lender in the original principal amount of
$2,000,000 dated January 30, 1996;
(d) that certain Term Note issued by the Borrower to the
order of Lender in the original principal amount of $359,550 dated
November 1, 1994;
(e) that certain Term Note issued by the Borrower to the
order of Lender in the original principal amount of $990,000 dated May
18, 1994;
(f) that certain Term Note issued by the Borrower to the
order of Lender in the original principal amount of $270,000 dated
April 22, 1996;
(g) that certain Term Note issued by the Borrower to the
order of Lender in the original principal amount of $445,000 dated
March 7, 1994; and
(h) that certain Term Note issued by the Borrower to the
order of Lender in the original principal amount of $460,000 dated
February 1, 1994.
2. The Borrower desires to consolidate and amend the Notes into
this Amended and Restated Term Note.
<PAGE> 51
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the parties hereto agree that the Notes shall
be amended and restated in its entirety as follows:
FOR VALUE RECEIVED, AMSURG CORP., a Tennessee corporation
(hereinafter referred to as "Borrower"), promises and agrees to pay to
the order of SUNTRUST BANK, NASHVILLE, N.A. (formerly known as Third
National Bank in Nashville) (the "Lender") at its offices in
Nashville, Tennessee, or at such other place as may be designated in
writing by the holder, in lawful money of the United States of
America, the principal sum of Five Million Seven Hundred Forty-Nine
Thousand Two Hundred Forty-Five Dollars and 88/100 ($5,749,245.88),
together with interest on the unpaid principal balance outstanding
from time to time hereon computed from the date hereof until maturity
at the rate of interest set forth in that certain Amended and Restated
Loan Agreement executed between Borrower and Lender dated June 25,
1996, as such may be amended from time to time (herein referred to as
the "Loan Agreement"). Interest for each year shall be computed based
upon a 360-day year.
This Note shall be repaid as follows: (a) commencing on the
tenth (10th) day of July, 1996 and on the tenth (10th) day of each
consecutive month thereafter through and including May 10, 2000, the
Borrower shall pay to Lender an amount equal to $119,776, plus all
then accrued interest; and (b) on June 10, 2000, this Note shall
mature, and the Borrower shall pay to Lender an amount equal to all
outstanding principal, plus all then accrued interest.
This Note is subject to the terms of the Loan Agreement.
Notwithstanding any provision to the contrary, it is the
intent of the Lender, the Borrower, and all parties liable on this
Note, that neither the Lender nor any subsequent holder shall be
entitled to receive, collect, reserve or apply, as interest, any
amount in excess of the maximum lawful rate of interest permitted to
be charged by applicable law or regulations, as amended or enacted
from time to time. In the event the Note calls for an interest payment
that exceeds the maximum lawful rate of interest then applicable, such
interest shall not be received, collected, charged, or reserved until
such time as that interest, together with all other interest then
payable, falls within the then applicable maximum lawful rate of
interest. In the event the Lender, or any subsequent holder, receives
any such interest in excess of the then maximum lawful rate of
interest, such amount which would be excessive interest shall be
deemed a partial prepayment of principal and treated hereunder as
such, or, if the principal indebtedness evidenced hereby is paid in
full, any remaining
- 2 -
<PAGE> 52
excess funds shall immediately be paid to the Borrower. In determining
whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum lawful rate of interest, the Borrower
and the Lender shall, to the maximum extent permitted under applicable
law, (a) exclude voluntary prepayments and the effects thereof, and
(b) amortize, prorate, allocate, and spread, in equal parts, the total
amount of interest throughout the entire term of the indebtedness;
provided that if the indebtedness is paid in full prior to the end of
the full contemplated term hereof, and if the interest received for
the actual period of existence hereof exceeds the maximum lawful rate
of interest, the holder of the Note shall refund to the Borrower the
amount of such excess or credit the amount of such excess against the
principal portion of the indebtedness as of the date it was received,
and, in such event, the Lender shall not be subject to any penalties
provided by any laws for contracting for, charging, reserving,
collecting or receiving interest in excess of the maximum lawful rate
of interest.
Principal and unpaid interest bear interest during the
continuance of any default in payment of principal and interest as
herein provided at the maximum lawful rate of interest permitted by
law. In case of suit, or if this obligation is placed in an attorney's
hands for collection, or to protect the security for its payment, the
undersigned will pay all costs of collection and litigation, including
a reasonable attorney's fee.
In the event that there occurs any breach of any promise made
in this Note and such breach continues for longer than fifteen (15)
days, or upon the occurrence of an Event of Default as defined in the
Loan Agreement, then, during the continuance of any of such events, at
the option of the holder, the entire indebtedness hereby evidenced
shall become due, payable and collectible then or thereafter, without
notice, as the holder may elect regardless of the date of maturity.
The holder may waive any default before or after the same has been
declared and restore this Note to full force and effect without
impairing any rights hereunder, such right of waiver being a
continuing one.
The makers, endorsers, guarantors and all parties to this Note
and all who may become liable for same, jointly and severally waive
presentment for payment, protest, notice of protest, notice of
nonpayment of this Note, demand and all legal diligence in enforcing
collection, and hereby expressly agree that the lawful owner or holder
of this Note may defer or postpone collection of the whole or any part
thereof, either principal and/or interest, or may extend or renew the
whole or any part thereof, either principal and/or interest, or may
accept additional collateral or security for the
- 3 -
<PAGE> 53
payment of this Note, or may release the whole or any part of any
collateral security and/or liens given to secure the payment of this
Note, or may release from liability on account of this Note any one or
more of the makers, endorsers, guarantors and/or other parties
thereto, all without notice to them or any of them; and such
deferment, postponement, renewal, extension, acceptance of additional
collateral or security and/or release shall not in any way affect or
change the obligation of any such maker, endorser, guarantor or other
party to this Note, or of any who may become liable for the payment
thereof.
The Borrower shall pay a "late charge" of five percent (5%) of
any payments of principal and/or interest due when paid more than five
days after the due date thereof (provided that in no event shall said
"late charge" result in the payment of interest in excess of the
maximum lawful rate of interest permitted by applicable law), to cover
the extra expenses involved in handling delinquent payments; and
provided that the late charge shall not be applicable to the payment
due on the Maturity Date.
The term "maximum lawful rate of interest" as used herein
shall mean a rate of interest equal to the higher or greater of the
following: (a) the "applicable formula rate" defined in Tennessee Code
Annotated Section 47-14-102(2), or (b) such other rate of interest as
may be charged under other applicable laws or regulations.
This Note is a secured Note.
This Note has been executed and delivered in, and shall be
governed by and construed according to the laws of the State of
Tennessee except to the extent pre-empted by applicable laws of the
United States of America.
This Note may not be changed or terminated without the prior
written approval of the Lender and the Borrower. No waiver of any term
or provision hereof shall be valid unless in writing signed by the
holder.
Executed this 25th day of June, 1996.
BORROWER:
AMSURG CORP., a Tennessee
corporation
By:
-----------------------------
Title:
--------------------------
ACCEPTED BY:
SUNTRUST BANK, NASHVILLE, N.A.
By:
------------------------------
Title:
---------------------------
- 4 -
<PAGE> 54
Exhibit F
---------
1. Loans to Digestive Disease Clinic, P.C., Jackson, Tennessee. AmSurg
has a management agreement but no current ownership in this ASC but
does have an option to acquire a 51% ownership interest in July, 1997.
2. Loan to The Largo Urology ASC, L.P., Largo, Florida. AmSurg will own
40% of this ASC with a right to buy up to 51% after 3 years of
operation.
3. Loan to The Evansville ASC, LLC, Evansville, Indiana. AmSurg current
ownership is 40%. On the date of opening, AmSurg will purchase an
additional 15% bringing ownership to 55%.
<PAGE> 55
Exhibits G and H
AmSurg Corp.
Subsidiaries
As of May 30, 1996
(Note: All subsidiaries are Tennessee entities)
Registered office for all entities is:
One Burton Hills Blvd. Nashville, TN 37215
<TABLE>
<CAPTION>
Subsidiary Corporation and Affiliated Facility Ownership
Limited Partnership Location Interest
==============================================================================
<S> <C> <C>
AmSurg EC Centennial, Inc. Nashville, 100%
Tennessee
The Endoscopy Center of Centennial, L.P. Nashville, 60
Tennessee
- ------------------------------------------------------------------------------
AmSurg EC Topeka, Inc. Topeka, 100
Kansas
The Endoscopy Center of Topkea, L.P. Topeka, 60
Kansas
- ------------------------------------------------------------------------------
AmSurg EC St. Thomas, Inc. Nashville, 100
Tennessee
The Endoscopy Center of St. Thomas, L.P. Nashville, 60
Tennessee
- ------------------------------------------------------------------------------
AmSurg EC Beaumont, Inc. Beaumont, 100
Texas
The Endoscopy Center of Southeast Texas, Beaumont, 51
L.P. Texas
- ------------------------------------------------------------------------------
AmSurg KEC, Inc. Knoxville, 100
Tennessee
The Endoscopy Center of Knoxville, L.P. Knoxville, 51
Tennessee
- ------------------------------------------------------------------------------
AmSurg EC Santa Fe, Inc. Santa Fe, New 100
Mexico
The Endoscopy Center of Santa Fe, L.P. Santa Fe, New 51
Mexico
- ------------------------------------------------------------------------------
AmSurg EC Washington, Inc. Washington, 100
District of
Columbia
The Endoscopy Center of Washington D.C., Washington, 60
L.P. District of
Columbia
- ------------------------------------------------------------------------------
AmSurg Torrance, Inc. Torrance, 100
California
The Endoscopy Center of the South Bay, L.P. Torrance, 51
California
- ------------------------------------------------------------------------------
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
Subsidiary Corporation and Affiliated Facility Ownership
Limited Partnership Location Interest
==============================================================================
<S> <C> <C>
AmSurg Brevard, Inc. Melbourne, 100%
Florida
The Ophthalmology Center of Brevard, L.P. Melbourne, 51
Florida
- ------------------------------------------------------------------------------
AmSurg Encino, Inc. Encino, 100
California
The Valley Endoscopy Center, L.P. Encino, 51
California
- ------------------------------------------------------------------------------
AmSurg Sebastopol, Inc. Sebastopol, 100
California
The Sebastopol ASC, L.P. Sebastopol, 60
California
- ------------------------------------------------------------------------------
AmSurg ENT Brevard, Inc. Melbourne, 100
Florida
The ENT Center of Brevard, L.P. Melbourne, 51
Florida
- ------------------------------------------------------------------------------
AmSurg Abilene, Inc. Abilene, 100
Texas
The Abilene ASC, L.P. Abilene, 60
Texas
- ------------------------------------------------------------------------------
AmSurg West Tennessee, Inc. Jackson, 100
Tennessee
The West Tennessee Center, L.P. Jackson, 40
Tennessee
- ------------------------------------------------------------------------------
AmSurg Dallas, Inc. Dallas, Texas 100
- ------------------------------------------------------------------------------
AmSurg Lakeland, Inc. Lakeland, 100
Florida
The Lakeland Ophthalmology Center, L.P. Lakeland, 51
Florida
- ------------------------------------------------------------------------------
AmSurg SWFLA, Inc. Fort 100
Myers/Cape
Coral,
Florida
AmSurg Southwest Florida, L.P. Fort 60
Myers/Cape
Coral,
Florida
- ------------------------------------------------------------------------------
AmSurg Lorain, Inc. Lorain, Ohio 100
The Lorain ASC, L.P. Lorain, Ohio 60
- ------------------------------------------------------------------------------
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
Subsidiary Corporation and Affiliated Facility Ownership
Limited Partnership Location Interest
=============================================================================
<S> <C> <C>
AmSurg Maryville, Inc. Maryville, 100%
Tennessee
- -----------------------------------------------------------------------------
The Maryville ASC Maryville, 51
Tennessee
AmSurg Holdings, Inc. All LLCs 100
The Knoxville Ophthalmology ASC, LLC Knoxville, 60
Tennessee
The West Monroe Endoscopy ASC, LLC West Monroe, 55
Louisiana
Montgomery Eye Surgery Center, LLC Montgomery, 51
Alabama
The Evansville ASC, LLC Evansville, 40
Indiana
The Sidney ASC, LLC Sidney, Ohio 51
The Bloomington ASC, LLC Bloomington, 51
Minnesota
The Union City ASC, LLC Union City, 51
Tennessee
- ------------------------------------------------------------------------------
AmSurg Miami, Inc. Miami, 100
Florida
The Miami ASC, L.P. Miami, 51
Florida
- ------------------------------------------------------------------------------
AmSurg North Platte, Inc. North Platte, 100
Nebraska
The North Platte ASC, L.P. North Platte, 51
Nebraska
- ------------------------------------------------------------------------------
AmSurg Fort Collins, Inc. Fort Collins, 100
Colorado
The Fort Collins ASC, L.P. Fort 51
Collins,
Colorado
- ------------------------------------------------------------------------------
AmSurg Hanford, Inc. Hanford, 100
California
The Hanford ASC, L.P. Hanford, 63
California
- ------------------------------------------------------------------------------
AmSurg Melbourne Inc. Melbourne, 100
Florida
The Melbourne ASC, L.P. Melbourne, 51
Florida
- ------------------------------------------------------------------------------
AmSurg Largo, Inc Largo, 100
Florida
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
Subsidiary Corporation and Affiliated Facility Ownership
Limited Partnership Location Interest
==============================================================================
<S> <C> <C>
The Largo Urology ASC, L.P. Largo, 40%
Florida
- ------------------------------------------------------------------------------
AmSurg Port Arthur, Inc. Port Arthur, 100
Texas
The Port Arthur ASC, L.P. Port Arthur, 51
Texas
- ------------------------------------------------------------------------------
AmSurg Chicago, Inc. Chicago, 100
Illinois
The Chicago Endoscopy ASC, L.P. Chicago, 51
Illinois
- ------------------------------------------------------------------------------
AmSurg Dade County, Inc. Miami, 100
Florida
Gastroenterology Group of South Florida Miami, 70
Florida
- ------------------------------------------------------------------------------
Amsurg Hillmont, Inc. Philadelphia, 100
PA
The Hillmont ASC, L.P. Philadelphia, 51
PA
- ------------------------------------------------------------------------------
</TABLE>
<PAGE> 59
BASS, BERRY & SIMS PLC
A PROFESSIONAL LIMITED LIABILITY COMPANY
ATTORNEYS AT LAW
<TABLE>
<S> <C>
2700 FIRST AMERICAN CENTER 1700 RIVERVIEW TOWER
NASHVILLE, TENNESSEE 37238-2700 POST OFFICE BOX 1509
TELEPHONE (615) 742-6200 KNOXVILLE, TENNESSEE 37901-1509
TELECOPIER (616) 742-6293 TELEPHONE (423) 521-6200
TELECOPIER (423) 521-6234
</TABLE>
June 25, 1996
SunTrust Bank, Nashville, N.A.
201 Fourth Avenue North
Nashville, Tennessee 37219
Attention: Karen Ahern, Vice President
Dear Ms. Ahern:
We have acted as counsel to AmSurg Corp, a Tennessee corporation (the
"Borrower"), in connection with its execution of that certain Amended and
Restated Loan Agreement of even date herewith (the "Loan Agreement"), by and
between Borrower and SunTrust Bank, N.A., Nashville ("Lender"), and the
transactions described therein. This Opinion Letter is provided to you at the
request of Borrower pursuant to the requirements of the Loan Agreement. The
terms used, but not defined, herein shall have the meanings ascribed to them in
the Loan Agreement or the Accord (see below).
For purposes of this Opinion Letter, we have examined the following:
(a) The Loan Agreement;
(b) The Amended and Restated Revolving Credit Note of even date
herewith, in the principal amount not exceeding $12,000,000, made and
executed by Borrower payable to the order of Lender (the "Revolving
Credit Note");
(c) The Amended and Restated Term Note of even date herewith, in
the principal amount of $5,749,245.88, made and executed by Borrower
payable to the order of Lender (the "Term Note"); and
(d) The charter and by-laws of Borrower, as amended, and the
corporate proceedings of the Borrower authorizing the transactions
that are the subject of the Loan Agreement, the Revolving Credit Note
and the Term Note.
The Loan Agreement, the Revolving Credit Note and the Term Note are
referred to herein as the "Transaction Documents".
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the ("Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and
<PAGE> 60
June 25, 1996
SunTrust Bank, Nashville, N.A.
Page 2
other limitations, all as more particularly described in the Accord, and this
Opinion Letter should be read in conjunction therewith.
Solely as to matters of fact, but not to the legal conclusions that
are the subject of this opinion, we have relied upon representations made by
Borrower in the Transaction Documents.
The Law covered by the opinions expressed herein is limited to the
federal Law of the United States and the Law of the State of Tennessee.
Based on the foregoing, and subject to the assumptions, limitations,
and qualifications set forth herein, we are of the opinion that;
1. Borrower is a corporation, duly organized, validly existing,
and in good standing under the laws of the State of Tennessee. Borrower has
the corporate power and corporate authority under such laws to enter into and
perform its obligations under the Transaction Documents.
2. The Transaction Documents have been duly authorized by all
necessary corporate action on the part of Borrower and have been duly executed
and delivered by the Borrower.
3. The Transaction Documents are enforceable against the Borrower.
Our opinion in paragraph 3 is further subject to the qualification
that certain waivers, procedures, remedies, and other provisions of the
Transaction Documents may be unenforceable under or limited by applicable law;
provided, however, that the inclusion of such waivers, procedures, remedies,
and other provisions does not render the Transaction Documents invalid as a
whole, and subject to the other qualifications and limitations set forth
herein, there exist in the Transaction Documents or pursuant to applicable law,
legally adequate remedies for the practical realization of the principal
benefits reasonably intended to be provided by the Transaction Documents,
subject to the consequences of any delay that may result from limitations
imposed by applicable law.
In making our examinations and in expressing our opinions, we have
assumed that the Transaction Documents have been executed and delivered for
adequate consideration.
The General Qualifications apply to all of the opinions set forth above.
We hereby confirm to you that there are no actions or proceedings
against the Borrower, pending or threatened in writing, before any court,
governmental agency or arbitrator that affect the enforceability of the
Transaction Documents.
<PAGE> 61
June 25, 1996
SunTrust Bank, Nashville, N.A.
Page 3
This Opinion Letter may be relied upon by you only in connection with
the Transaction Documents and may not be used or relied upon by any person for
any purpose whatsoever, except to the extent authorized in the Accord, without
in each instance our prior written consent.
Very truly yours,
<PAGE> 1
EXHIBIT 10.5
SUBLEASE
THIS AGREEMENT made as of the 9th day of June, 1996, between AMERICAN
HEALTHCORP, INC., a Delaware corporation, having an office at One Burton Hills
Boulevard, Nashville, Tennessee 37215 hereinafter referred to as "Landlord",
-and-
AMSURG CORP., a Tennessee corporation, having an office at One Burton Hills
Boulevard, Nashville, Tennessee 37215 hereinafter referred to as "Tenant",
WHEREAS, Landlord, as lessee, entered into a sublease with Primus
Automotive Financial Services, Inc., as lessor, dated December 22, 1995, leasing
certain space on the third floor of the building at One Burton Hills Boulevard,
Nashville, Tennessee known as Burton Hills, Phase I, which sublease is
hereinafter referred to as the "Prime Lease" until it expires on March 15, 1997;
and
WHEREAS, Landlord, as lessee, entered into a lease with Massachusetts
Mutual Life Insurance Company, as lessor, dated June 20, 1985, as amended by
instruments dated August 1, 1986, January 31, 1990, and June 30, 1994, which
lease will be amended further to include said third floor space beginning March
16, 1997, and which lease is hereinafter referred to as the "Prime Lease" from
and after March 16, 1997; and
WHEREAS, the parties hereto have agreed that Landlord shall sublet
approximately 15,417 square feet of such space to Tenant;
NOW, THEREFORE, the parties hereto hereby covenant and agree as follows:
<PAGE> 2
1. Landlord hereby leases to Tenant the 15,417 square feet, more or
less, of the space on the third floor of said building, shown on Exhibit A
attached hereto and made a part hereof, beginning on June 9, 1996, and ending on
December 31, 1999, unless sooner terminated in accordance herewith, yielding and
paying to Landlord a rent at the rate set forth on the attached Exhibit B.
Tenant shall pay the rent and additional rent provided for hereunder in
equal monthly installments in advance and without demand on the first day of
each and every month during the term.
2. The demised premises shall be used for offices and for no other
purpose.
3. Tenant shall not assign this lease nor sublet the demised premises
in whole or in part and shall not permit Tenant's interest in this lease to be
vested in any third party by operation of law or otherwise.
4. If Landlord shall be charged for additional rent or other sums with
respect to the demised premises pursuant to the provisions of the Prime Lease,
Tenant shall be liable for 78.31% of such additional rent or sums. If any such
rent or sums shall be due to additional use by Tenant of electrical current in
excess of Tenant's proportionate part of additional use in the premises demised
under the Prime Lease, such excess shall be paid in entirety by Tenant. If
Tenant shall procure any additional services from the building, such as
alterations or after-hour air conditioning, Tenant shall pay for same at the
rates charged therefor by the Prime Landlord and shall make such payment to the
Landlord or Prime Landlord, as Landlord shall direct.
<PAGE> 3
Landlord may also make certain leasehold improvements from time to time
for the benefit of Tenant. The parties will agree from time to time on
additional payments to be made to Landlord by Tenant to reimburse Landlord for
such improvements.
Any rent or other sums payable by Tenant under this Article 4 shall be
additional rent and collectable as such. If Landlord shall receive any refund of
additional rent, Tenant shall be entitled to the return of so much thereof as
shall be attributable to prior payments by Tenant.
5. This lease is subject to and subordinate to the Prime Lease. Except
as may be inconsistent with the terms hereof, all the terms, covenants, and
conditions in the Prime Lease contained shall be applicable to this Agreement
with the same force and effect as if Landlord were the lessor under the Prime
Lease and Tenant were the lessee thereunder; and in case of any breach hereof by
Tenant, Landlord shall have all the rights against Tenant as would be available
to the lessor against the lessee under the Prime Lease if such breach were by
the lessee thereunder.
6. Notwithstanding anything herein contained, the only services or
rights to which Tenant is entitled hereunder are those to which Landlord is
entitled under the Prime Lease and that for all such services and rights Tenant
will look to the lessor under the Prime Lease.
7. Tenant shall neither do nor permit anything to be done which would
cause the Prime Lease to be terminated or forfeited by reason of any right of
termination or forfeiture reserved or vested in the lessor under the Prime
Lease, and Tenant shall indemnify and hold Landlord harmless from and against
all claims of any kind whatsoever by reason of any breach or default on the part
of Tenant by reason of which the Prime Lease may be terminated or forfeited.
8. Tenant represents that it has read and is familiar with the terms of
the Prime Lease.
<PAGE> 4
9. All prior understandings and agreements between the parties are
merged within this Agreement, which alone fully and completely sets forth the
understanding of the parties; and this lease may not be changed or terminated
orally or in any manner other than by an agreement in writing and signed by the
party against whom enforcement of the change or termination is sought.
10. Any notice or demand which either party may or must give to the
other hereunder shall be in writing and delivered personally or sent by
certified mail to the addresses set forth above. Either party may, by notice in
writing, direct that future notices or demands be sent to a different address.
11. The covenants and agreements herein contained shall bind and inure
to the benefit of Landlord, the Tenant, and their respective executors,
administrators, successors, and assigns.
IN WITNESS WHEREOF, the parties hereto have caused these present to be
executed as of the day and year first above written.
AMERICAN HEALTHCORP, INC.
By: /s/ Henry D. Herr
-------------------------------------
Its: Executive Vice President
------------------------------------
AMSURG CORP.
By: /s/ Ken P. McDonald
-------------------------------------
Its: President
------------------------------------
<PAGE> 5
EXHIBIT B
<TABLE>
<CAPTION>
Period Monthly Base Rental Rate Total Base Rent Due for Period
------ ------------------------ ------------------------------
From To
- ------------------
<S> <C> <C>
06/10/96 - 06/30/96 $22,481.82 X 20/30 $ 14,987.88
07/01/96 - 02/28/97 22,481.82 X 8 mos. 179,854.56
03/01/97 - 03/15/97 22,481.82 X 15/31 10,878.30
03/16/97 - 03/31/97 21,839.48 X 16/31 11,271.99
04/01/97 - 12/31/97 21,839.48 X 9 mos. 196,555.32
01/01/98 - 12/31/98 22,481.82 X 12 mos. 269,781.87
01/01/99 - 12/31/99 23,124.16 X 12 mos. 277,489.92
-----------
$960,819.84
</TABLE>
<PAGE> 1
EXHIBIT 10.6
[LETTERHEAD] AMERICAN HEALTHCORP
December 31, 1996
AmSurg Corp.
Suite 350
One Burton Hills Boulevard
Nashville, Tennessee 37215
Dear Sirs:
This letter shall serve as our agreement effective January 1, 1997, by
which AmSurg Corp. ("AmSurg") will pay to American Healthcorp, Inc. ("AHC") an
annual fee of $85,000 for the services provided to AmSurg by Thomas G. Cigarran
and Henry D. Herr. This fee shall be payable in equal monthly payments, in
arrears, on the twentieth (20th) day of the following month. Mr. Cigarran's
services shall include general supervision of the business of AmSurg in his
role of the Chief Executive Officer of AmSurg, and such other duties as the
Board of Directors of AmSurg may from time to time prescribe. Mr. Herr's
services shall include consultation and advice regarding the financial,
accounting and administrative aspects of AmSurg's business, and such other
duties as the Board of Directors of AmSurg may from time to time prescribe.
AmSurg shall also reimburse these individuals for direct out-of-pocket expenses
incurred by Mr. Cigarran and Mr. Herr in the performance of their AmSurg
duties. This agreement will terminate upon the earlier of (i) the mutual
agreement of the parties, (ii) the date when the stock of AmSurg begins to
trade as a separate public company, or (iii) December 31, 1997.
This letter shall also serve as our agreement, effective January 1,
1997 by which AHC shall provide AmSurg and AmSurg affiliates with certain
administrative, accounting and financial services with respect to AmSurg's
corporate operations, each ambulatory surgery center, physician practice, and
specialty physician network managed by AmSurg. The cost for these services shall
be a fixed fee of $4,166.67 per month plus $625.00 per month for each
"accounting unit". Each ambulatory surgery center shall count as one accounting
unit while each physician practice and the AmSurg corporate office shall count
as two accounting units. AmSurg and AHC shall mutually agree on the number of
accounting units represented by each specialty physician network. The monthly
accounting unit fee for a surgery center, physician practice or specialty
physician network shall include (1) maintaining the general accounting records
of the partnership or limited liability company ("LLC"), (2) preparing
partnership/LLC financial statements and (3) preparing partnership income tax
returns. It does not include additional outside professional fees needed to
review the tax returns or consultation with outside accounting and tax advisors
on specific issues and questions. The monthly fee for the AmSurg corporate
office shall include (1) processing payroll and accounts payable for the AmSurg
corporate office, (2) maintaining the
<PAGE> 2
Page Two
AmSurg Corp.
December 31, 1996
general accounting records for the AmSurg corporate operations, (3) preparing
consolidated AmSurg financial statements and (4) preparing the AmSurg corporate
tax returns. It does not include additional outside professional fees needed to
review the tax returns or for consultation with outside accounting and tax
advisors on specific issues and questions and also does not include the cost of
AmSurg's annual independent audit. The administrative, accounting and financial
services fees shall be payable in equal monthly payments, in arrears, on the
twentieth (20th) day of the following month. This agreement will terminate upon
the earlier of (i) the mutual agreement of the parties, (ii) the date when the
stock of AmSurg begins to trade as a separate public company, or (iii) December
31, 1997.
Please indicate your agreement to the terms outlined above by executing
this letter in the space provided below.
Sincerely,
AMERICAN HEALTHCORP, INC.
By:
---------------------------------
Title:
---------------------------------
Agreed and accepted this ____
day of January, 1997:
AMSURG CORP.
By:
-----------------------------
Title:
-----------------------------
<PAGE> 1
EXHIBIT 10.7
AMSURG CORP.
1992 STOCK OPTION PLAN
1. Purpose. The purpose of the AmSurg Corp. 1992 Stock Option
Plan (the "Plan") is to advance the growth and prosperity of AmSurg Corp. (the
"Company") and its subsidiaries by providing key employees with an additional
incentive to contribute to the best interests of the Company. Without
prejudice to other compensation programs approved from time to time by the
Board of Directors (the "Board") and/or shareholders of the Company, such
additional incentive is to be given key employees by means of stock options
provided for under the Plan. In the discretion of the Committee hereinafter
provided for and the Board, such options may be "Incentive Stock Options"
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), or "non-statutory" stock options.
2. Administration of the Plan.
(a) The Plan shall be administered by the Board unless and
until such time as the Board delegates administration to a committee pursuant
to subparagraph 2(c) (the "Committee"). Upon such date as the Company has a
class of equity security registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Board shall
administer the Plan only if all of its members are disinterested persons. For
the purposes of this paragraph 2, disinterested person shall mean a person who
has not at any time within one year prior to the date in question participated
in the Plan or any other plan of the Company or any of its subsidiaries
entitling the participants therein to acquire stock or stock options of the
Company; provided, however, that a disinterested person may participate in a
plan that meets any of the exceptions contained in Rule 16b-3(c)(2) as
promulgated under the Exchange Act, as it may be amended from time to time.
(b) The Board shall have the power, subject to, and
within, the limits of the express provisions of the Plan:
(i) To determine from time to time which of the
eligible persons shall be granted options under the Plan, the
term of each granted option, the time or times during the term
of each option within which all or portions of each option may
be exercised, whether the options granted shall be Incentive
Stock Options or non-statutory options, and the number of
shares for which each option shall be granted.
(ii) To construe and interpret the Plan and
options granted under it, and to establish, amend and revoke
rules and regulations for its administration. The Board, in
the exercise of this power, shall generally determine all
questions of policy and expediency that may arise and may
correct any defect, omission or inconsistency in the Plan or
in any option agreement in a manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective.
<PAGE> 2
(iii) To prescribe the terms and provisions of each option
granted (which need not be identical).
(iv) To amend the Plan as provided herein.
(v) Generally, to exercise such powers and to perform
such acts as are deemed necessary or expedient to promote the best
interests of the Company.
(c) The Board, by resolution, may delegate administration
of the Plan (including, without limitation, the Board's powers under
subparagraph 2(b)) to a Committee composed of not less than two (2) members,
which committee, upon such time as the Company has a class of equity security
registered under Section 12 of the Exchange Act, will be constituted so as to
permit the Plan to comply with Rule 16b-3 thereunder. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
subject, however, to such constraints, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board at any
time may remove members from or add members to the Committee or may abolish the
Committee and revest in the Board the administration of the Plan. Vacancies on
the Committee, howsoever caused, shall be filled by the Board.
(d) The interpretation and construction by the Board of
any provisions of the Plan or of any option granted under it shall be final,
and the interpretation or construction by any Committee appointed pursuant to
subparagraph 2(c) of any such provisions or option shall also, unless otherwise
determined by the Board, be final. No member of such Committee or of the Board
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted under it.
3. Eligible Employees. The Board or the Committee shall
determine from time to time those officers and key employees of the Company
and its subsidiaries to whom options shall be granted and, pursuant to the
provisions of the Plan, the amount thereof and the terms and conditions,
including requirements as to continued employment by the participant, upon
which such options or rights are granted and are exercisable. Directors of
the Company who are not also employees of the Company or its subsidiaries
shall not be eligible to participate in the Plan.
4. The Stock. The stock subject to the options and other
provisions of the Plan shall be shares of the Company's authorized and unissued
Common Stock, no par value, or reacquired Common Stock held in the treasury.
The total number of shares of the Company's Common Stock that may be
transferred pursuant to the exercise of stock options under the Plan shall not
exceed in the aggregate 1,532,000 shares. Shares subject to options which
terminate or expire prior to exercise shall be available for further option
hereunder.
Each option granted under this Plan shall be subject to the requirement
that if at any time the Board or the Committee shall determine that the
listing, registration or qualification of the shares subject thereto upon any
securities exchange or under any state or Federal law, or the
2
<PAGE> 3
consent or approval of any governmental regulatory body is necessary or
desirable in connection with the issue or transfer of shares subject thereto,
no such option may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board or the Committee.
If required at any time by the Board or the Committee, an option may not be
exercised until the optionee has delivered an investment letter to the Company
containing the representations that all shares being purchased are being
acquired for investment and not with a view to, or for resale in connection
with, any distribution of such shares.
5. Terms and Conditions of Options. All stock options granted
pursuant to the Plan shall be in such form as the Board or the Committee shall
from time to time determine, shall clearly indicate whether such option is an
Incentive Stock Option or a non-statutory stock option, and shall be subject
to the following terms and conditions:
(a) Option Price. The price per share for Common Stock
under each option granted under the Plan shall be determined and fixed by the
Board or the Committee but, in the case of Incentive Stock Options, shall in
no event be less than 100% of the fair market value of the Common Stock on the
date of grant of such option, and, in the case of non-statutory stock options,
shall in no event be less than 85% of the fair market value of the Common
Stock on the date of grant of such option. In the case of the grant of an
Incentive Stock Option to an individual who, at the time of the grant, owns
more than 10% of the total combined voting power of all classes of stock of
the Company, such price per share shall not be less than 110% of the fair
market value of the Common Stock on the date of grant of the option.
(b) Option Period. The period during which an option
may be exercised shall be determined by the Board or the Committee, provided,
however, that in no event shall an Incentive Stock Option be exercisable after
the expiration of 10 years from the date such option was granted; and provided
further that in the case of the grant of an Incentive Stock Option to an
individual who, at the time of the grant, owns more than 10% of the total
combined voting power of all classes of stock of the Company, in no event shall
such option be exercisable more than five years from the date of the grant.
Options may be made exercisable in installments, and such options or
installments thereof may be exercised in part from time to time after they
become exercisable. The maturity of any installment or installments may be
accelerated at the discretion of the Board or the Committee.
In the event that a participant shall cease to be employed by the
Company or one of its subsidiaries for any reason other than his death, all
options held by him pursuant to the Plan and not previously exercised at the
date of such termination shall terminate immediately and become void and of no
effect; provided, however, that the Board or the Committee shall have the right
to extend the exercise period not in excess of three months following the date
of termination of the participant's employment, subject to the further
condition, however, that no Incentive Stock Option shall be exercisable after
the expiration of 10 years from the date it is granted, and subject to the
further condition that in the case of the grant of an Incentive Stock Option to
an individual who, at the time of the grant, owns more than 10% of the total
combined voting
3
<PAGE> 4
power of all classes of stock of the Company, in no event shall such option be
exercisable more than five years from the date of the grant. Notwithstanding
the foregoing, if the termination is due to disability, or to retirement with
the consent of the Company, such disabled or retiring participant shall have
the right to exercise his options which have not previously been exercised at
the date of such termination of employment at any time within three months
after such termination, subject to the condition that no Incentive Stock Option
shall be exercisable after the expiration of 10 years from the date it is
granted, and subject to the further condition that in the case of the grant of
an Incentive Stock Option to an individual who, at the time of the grant, owns
more than 10% of the total combined voting power of all classes of stock of the
Company, in no event shall such option be exercisable more than five years from
the date of the grant. Whether termination of employment is due to disability
or is to be considered retirement with the consent of the Company shall be
determined by the Board or the Committee, which determination shall be final
and conclusive.
If the participant should die while in the employ of the Company or a
subsidiary of the Company or within a period of three months after the
termination of his employment by retirement and shall not have fully exercised
options granted under the Plan, such options may be exercised in whole or in
part at any time within 12 months after the participant's death by the
executors or administrators of the participant's estate or by any person or
persons who shall have acquired the options directly from the participant by
bequest or inheritance, subject to the condition that no Incentive Stock
Option shall be exercisable after the expiration of 10 years from the date it
is granted, and subject to the further condition that in the case of the grant
of an Incentive Stock Option to an individual who, at the time of the grant,
owns more than 10% of the total combined voting power of all classes of stock
of the Company, in no event shall such option be exercisable more than five
years from the date of the grant.
The exercise of an option granted under the Plan shall not affect the
optionee's right or ability to exercise any other option granted under the Plan
or any other stock option plan of the Company or its subsidiaries.
(c) Limitations on Grants. No Incentive Stock Option shall be
granted to any participant under the Plan if the aggregate fair market value
(as of the date the option is granted) of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by such
participant during any calendar year (under all such plans of the Company and
any subsidiary of the Company) exceeds $100,000.
(d) Limitations on Disposition. To obtain the tax benefits
associated with Incentive Stock Options, the optionee must make no disposition
of shares acquired pursuant to the exercise of an Incentive Stock Option
within two years from the granting of such Incentive Stock Option or within
one year from the date of the exercise of such Incentive Stock Option.
(e) Holding Period. Upon such time as the Company has a
class of equity security registered under Section 12 of the Exchange Act,
in order for the grant of an option under the Plan to be exempt from Section
16(b) of the Exchange Act, the optionee must make
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no disposition of the option (other than upon exercise) or the shares acquired
pursuant to the exercise of the option, for a period of six months after the
date of grant of such option.
6. Payment for Stock. Payment for shares subject to options
granted under the Plan shall be made by the optionee in the form of cash or by
means of unrestricted shares of the Company's Common Stock or any combination
thereof. Payment shall be made upon the exercise of the option. Payment in
currency or by check, bank draft, cashier's check or postal money order shall
be considered payment in cash. In the event of payment in the Company's
Common Stock, the shares used in payment of the purchase price shall be
considered payment to the extent of their fair market value on the date of
exercise of the option.
7. Non-Assignability. No option shall be transferable otherwise
than by will or the laws of descent and distribution and an option is
exercisable during the lifetime of the optionee only by him.
8. Adjustment Upon Changes in Stock.
(a) The number of shares of Common Stock available for
the granting of options under the Plan and the number of shares and price per
share of Common Stock subject to outstanding options granted pursuant to the
Plan may be adjusted by the Board or the Committee in an equitable manner to
reflect changes in the capitalization of the Company, including, but not
limited to, such changes as result from merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares and
change in corporate structure. If any adjustment under this subparagraph 8(a)
would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded
and the number of shares available under the Plan and the number covered under
any options granted pursuant to the Plan shall be the next lower number of
shares, rounding all fractions downward.
(b) Notwithstanding the foregoing, in the event of: (1) a
dissolution or liquidation of the Company; (2) a sale of all or substantially
all of the assets of the Company; (3) a merger or share exchange in which the
Company is not the surviving corporation; or (4) other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, any outstanding options hereunder immediately shall be fully
exercisable by an optionee.
(c) Any adjustment made by the Board or the Committee
under this paragraph 8 shall be conclusive and binding on all affected persons.
No Incentive Stock Option granted pursuant to the Plan shall be adjusted in a
manner that causes such Incentive Stock Option to fail to continue to qualify
as an Incentive Stock Option within the meaning of Section 422A of the Code.
9. The Board from time to time may amend this Plan, but except
as provided above with respect to dilutions or other adjustments or mergers or
share exchanges,
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or with the approval of the Company's shareholders, may not (a) increase the
aggregate number of shares available for option hereunder, (b) change the price
at which options may be granted, (c) extend the maximum period during which an
option may be exercised, or (d) change the eligibility requirements for options
hereunder. Rights and obligations under any option granted before amendment of
the Plan shall not be altered or impaired by amendment of the Plan, except with
the consent of the person to whom the option was granted.
10. Fair Market Value of Stock. Whenever pursuant to the terms
of the Plan the fair market value of the Company's Common Stock is required to
be determined as of a particular date, such fair market value shall equal the
last sale price of the Common Stock on the principal exchange on which the
Common Stock is then listed, or if the Common Stock is not then listed on any
exchange, on the National Association of Securities Dealers Automated Quotation
National Market System ("NMS"), or, if price quotations for the Common Stock are
not available on NMS, the mean between the closing bid and asked price of the
Common Stock on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or if no bid quotation is available on NASDAQ, the
fair value of such Common Stock as determined by the Board, in each case, on
the business day immediately preceding the date on which the determination is
made. Fair market value shall be determined in all cases without regard to any
restriction other than a restriction which, by its terms, will never lapse.
11. No Rights as Shareholder. A participant in the Plan shall
have no rights as a shareholder with respect to any shares covered by his
option until the date of the issuance of a stock certificate to him. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued.
12. Indemnification of Committee. In addition to such other
rights of indemnification as they may have as directors or as members of the
Committee, the members of the Committee shall be indemnified by the Company
against the reasonable expenses, including attorneys' fees actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member is liable for negligence or misconduct in
the performance of his duties; provided that within 60 days after institution
of any such action, suit or proceeding, the Committee member shall in writing
offer the Company the opportunity, at its own expense, to handle and defend the
same.
13. Termination. This Plan shall terminate on April 2, 2002,
unless sooner terminated by action of the Board. No option may be granted
hereunder after termination of the Plan, but such termination shall not affect
the validity of any option then outstanding.
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14. Shareholder Approval. The Plan shall be subject to approval
by the holders of a majority of the outstanding shares of Common Stock of the
Company present and voting at a meeting of shareholders, which approval must
occur within the period ending 12 months after the date the Plan is adopted by
the Board, provided, however, that options may be granted thereunder when all
the conditions (other than shareholder approval) precedent to the granting of
options under the Plan have been completed by the Company.
Date Approved by Board:
-----------------------------
Date Approved by Shareholders:
----------------------
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EXHIBIT 10.8
AMSURG CORP.
1997 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the AmSurg Corp. 1997 Stock Incentive Plan (the "Plan")
is to enable AmSurg Corp., a Tennessee corporation (the "Corporation") to
attract, retain and reward key employees of and consultants to the Corporation
and its Subsidiaries and Affiliates, and directors who are not also employees
of the Corporation, and to strengthen the mutuality of interests between such
key employees, consultants, and directors by awarding such key employees,
consultants, and directors performance-based stock incentives and/or other
equity interests or equity-based incentives in the Corporation, as well as
performance-based incentives payable in cash. The creation of the Plan shall
not diminish or prejudice other compensation programs approved from time to
time by the Board.
For purposes of the Plan, the following terms shall be defined as set
forth below:
A. "Affiliate" means any entity other than the Corporation and
its Subsidiaries that is designated by the Board as a participating employer
under the Plan, provided that the Corporation directly or indirectly owns at
least 20% of the combined voting power of all classes of stock of such entity
or at least 20% of the ownership interests in such entity.
B. "Board" means the Board of Directors of the Corporation.
C. "Cause" has the meaning provided in Section 5(j) of the Plan.
D. "Change in Control" has the meaning provided in Section 10(b)
of the Plan.
E. "Change in Control Price" has the meaning provided in Section
10(d) of the Plan.
F. "Common Stock" means (i) prior to the Distribution, the
Corporation's Common Stock, without par value, and (ii) following the
Distribution, the Corporation's Class A Common Stock, without par value.
G. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
H. "Committee" means the Committee referred to in Section 2 of
the Plan.
I. "Corporation" means AmSurg Corp., a corporation organized
under the laws of the State of Tennessee or any successor corporation.
J. "Disability" means disability as determined in accordance with
Corporation's policies in effect from time to time.
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K. "Distribution" means the Distribution contemplated by that
certain Distribution Agreement, dated as of March __, 1997, by and between
American Healthcorp, Inc. and the Corporation.
L. "Early Retirement" means retirement, for purposes of this Plan
with the express consent of the Corporation at or before the time of such
retirement, from active employment with the Corporation and any Subsidiary or
Affiliate prior to age 65, in accordance with any applicable early retirement
policy of the Corporation then in effect or as may be approved by the
Committee.
M. "Effective Date" has the meaning provided in Section 14 of the
Plan.
N. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
O. "Fair Market Value" means with respect to the Common Stock, as
of any given date or dates, unless otherwise determined by the Committee in
good faith, the reported closing price of a share of Common Stock on The Nasdaq
Stock Market National Market or such other market or exchange as is the
principal trading market for the Common Stock, or, if no such sale of a share
of Common Stock is reported on The Nasdaq Stock Market National Market or other
exchange or principal trading market on such date, the fair market value of a
share of Common Stock as determined by the Committee in good faith.
P. "Incentive Stock Option" means any Stock Option intended to be
and designated as an "Incentive Stock Option" within the meaning of Section 422
of the Code.
Q. "Immediate Family" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall
include adoptive relationships.
R. "Non-Employee Director" means a member of the Board who is a
Non-Employee Director within the meaning of Rule 16b-3(b)(3) promulgated under
the Exchange Act and an outside director within the meaning of Treasury
Regulation Sec. 162-27(e)(3) promulgated under the Code.
S. "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option.
T. "Normal Retirement" means retirement from active employment
with the Corporation and any Subsidiary or Affiliate on or after age 65.
U. "Other Stock-Based Award" means an award under Section 8 below
that is valued in whole or in part by reference to, or is otherwise based on,
the Common Stock.
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V. "Outside Director" means a member of the Board who is not an
officer or employee of the Corporation or any Subsidiary or Affiliate of the
Corporation. A Board member who serves as a medical director but is not either
an officer or employee will be deemed to be an Outside Director.
W. "Outside Director Restricted Stock" means an award to an
Outside Director under Section 9 below.
X. "Plan" means this 1997 Stock Incentive Plan, as amended from
time to time.
Y. "Restricted Stock" means an award of shares of Common Stock
that is subject to restrictions under Section 7 of the Plan.
Z. "Restriction Period" has the meaning provided in Section 7 of
the Plan.
AA. "Retirement" means Normal or Early Retirement.
BB. "Section 162(m) Maximum" has the meaning provided in Section
3(a) hereof.
CC. "Stock Appreciation Right" means the right pursuant to an
award granted under Section 6 below to surrender to the Corporation all (or a
portion) of a Stock Option in exchange for an amount equal to the difference
between (i) the Fair Market Value, as of the date such Stock Option (or such
portion thereof) is surrendered, of the shares of Common Stock covered by such
Stock Option (or such portion thereof), subject, where applicable, to the
pricing provisions in Section 6(b)(ii), and (ii) the aggregate exercise price
of such Stock Option (or such portion thereof).
DD. "Stock Option" or "Option" means any option to purchase shares
of Common Stock (including Restricted Stock, if the Committee so determines)
granted pursuant to Section 5 below.
EE. "Subsidiary" means any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation if each of the corporations (other than the last corporation in the
unbroken chain) owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Committee of not less than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. Decisions of the Committee may be ratified by
the Board. The functions of the Committee specified in the Plan may be
exercised by an existing Committee of the Board composed exclusively of
Non-Employee Directors. The initial Committee shall be the Compensation
Committee of the Board.
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The Committee shall have authority to grant, pursuant to the terms of
the Plan, to officers, other key employees, Outside Directors and consultants
eligible under Section 4: (i) Stock Options, (ii) Stock Appreciation Rights,
(iii) Restricted Stock, and/or (iv) Other Stock-Based Awards; provided,
however, that the power to grant and establish the terms and conditions of
awards to Outside Directors under the Plan other than pursuant to Section 9
shall be reserved to the Board.
In particular, the Committee, or the Board, as the case may be, shall
have the authority, consistent with the terms of the Plan:
(a) to select the officers, key employees and Outside
Directors of and consultants to the Corporation and its Subsidiaries
and Affiliates to whom Stock Options, Stock Appreciation Rights,
Restricted Stock, and/or Other Stock-Based Awards may from time to
time be granted hereunder;
(b) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock, and/or Other Stock-Based Awards, or any combination
thereof, are to be granted hereunder to one or more eligible persons;
(c) to determine the number of shares to be covered by each
such award granted hereunder;
(d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including,
but not limited to, the share price and any restriction or limitation,
or any vesting acceleration or waiver of forfeiture restrictions
regarding any Stock Option or other award and/or the shares of Common
Stock relating thereto, based in each case on such factors as the
Committee shall determine, in its sole discretion); and to amend or
waive any such terms and conditions to the extent permitted by Section
11 hereof;
(e) to determine whether and under what circumstances a Stock
Option may be settled in cash or Restricted Stock under Section 5(m)
or (n), as applicable, instead of Common Stock;
(f) to determine whether, to what extent, and under what
circumstances Option grants and/or other awards under the Plan are to
be made, and operate, on a tandem basis vis-a-vis other awards under
the Plan and/or cash awards made outside of the Plan;
(g) to determine whether, to what extent, and under what
circumstances shares of Common Stock and other amounts payable with
respect to an award under this Plan shall be deferred either
automatically or at the election of the participant (including
providing for and determining the amount (if any) of any deemed
earnings on any deferred amount during any deferral period);
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(h) to determine whether to require payment of tax
withholding requirements in shares of Common Stock subject to the
award; and
(i) to impose any holding period required to satisfy Section
16 under the Exchange Act.
The Committee shall have the authority to adopt, alter, and repeal
such rules, guidelines, and practices governing the Plan as it shall, from time
to time, deem advisable; to interpret the terms and provisions of the Plan and
any award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be subject to ratification by the Board, which shall act only on the
recommendation of the Committee as to all matters as to which the Committee has
discretion pursuant to the provisions of the Plan. Subject to such
ratification, the decisions of the Committee shall be final and binding on all
persons, including the Corporation and Plan participants.
SECTION 3. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) As of the Effective Date, the aggregate number of shares of
Common Stock that may be issued under the Plan shall be 1,950,000 shares. The
shares of Common Stock issuable under the Plan may consist, in whole or in
part, of authorized and unissued shares or treasury shares. No officer of the
Corporation or other person whose compensation may be subject to the
limitations on deductibility under Section 162(m) of the Code shall be eligible
to receive awards pursuant to this Plan relating to in excess of 600,000 shares
of Common Stock in any fiscal year (the "Section 162(m) Maximum").
(b) If any shares of Common Stock that have been optioned cease to
be subject to a Stock Option, or if any shares of Common Stock that are subject
to any Restricted Stock or Other Stock-Based Award granted hereunder are
forfeited prior to the payment of any dividends, if applicable, with respect to
such shares of Common Stock, or any such award otherwise terminates without a
payment being made to the participant in the form of Common Stock, such shares
shall again be available for distribution in connection with future awards
under the Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, extraordinary cash dividend, stock dividend, stock split or
other change in corporate structure affecting the Common Stock, an appropriate
substitution or adjustment shall be made in the maximum number of shares that
may be awarded under the Plan, in the number and option price of shares
subject to outstanding Options granted under the Plan, in the number of shares
underlying grants of Restricted Stock and Outside Director Restricted Stock,
the Section 162(m) Maximum and in the number of shares subject to other
outstanding awards granted under the Plan as may be determined to be
appropriate by the Committee, in its sole discretion, provided that the number
of shares subject
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to any award shall always be a whole number. An adjusted option price shall
also be used to determine the amount payable by the Corporation upon the
exercise of any Stock Appreciation Right associated with any Stock Option.
SECTION 4. ELIGIBILITY.
Officers, other key employees and Outside Directors of and consultants
to the Corporation and its Subsidiaries and Affiliates who are responsible for
or contribute to the management, growth and/or profitability of the business of
the Corporation and/or its Subsidiaries and Affiliates are eligible to be
granted awards under the Plan. Outside Directors are eligible to receive
awards pursuant to Section 9 and as otherwise determined by the Board.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone, in addition to, or in tandem with
other awards granted under the Plan and/or cash awards made outside of the
Plan. Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. Incentive Stock
Options may be granted only to individuals who are employees of the Corporation
or any Subsidiary of the Corporation.
The Committee shall have the authority to grant to any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights).
Options granted to officers, key employees, Outside Directors and
consultants under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of
Common Stock purchasable under a Stock Option shall be determined by
the Committee at the time of grant but shall be not less than 100%
(or, in the case of any employee who owns stock possessing more than
10% of the total combined voting power of all classes of stock of the
Corporation or of any of its Subsidiaries, not less than 110%) of the
Fair Market Value of the Common Stock at grant, in the case of
Incentive Stock Options, and not less than 50% of the Fair Market
Value of the Common Stock at grant, in the case of Non-Qualified Stock
Options.
(b) Option Term. The term of each Stock Option shall
be fixed by the Committee, but no Incentive Stock Option shall be
exercisable more than ten years (or, in the case of an employee who
owns stock possessing more than 10% of the total combined voting
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power of all classes of stock of the Corporation or any of its
Subsidiaries or parent corporations, more than five years) after the
date the Option is granted.
(c) Exercisability. Stock Options shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at or after grant;
provided, however, that except as provided in Section 5(g) and (h) and
Section 10, unless otherwise determined by the Committee at or after
grant, no Stock Option shall be exercisable prior to the first
anniversary date of the granting of the Option. The Committee may
provide that a Stock Option shall vest over a period of future service
at a rate specified at the time of grant, or that the Stock Option is
exercisable only in installments. If the Committee provides, in its
sole discretion, that any Stock Option is exercisable only in
installments, the Committee may waive such installment exercise
provisions at any time at or after grant, in whole or in part, based
on such factors as the Committee shall determine in its sole
discretion.
(d) Method of Exercise. Subject to whatever
installment exercise restrictions apply under Section 5(c) , Stock
Options may be exercised in whole or in part at any time during the
option period, by giving written notice of exercise to the Corporation
specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by check,
note, or such other instrument as the Committee may accept. As
determined by the Committee, in its sole discretion, at or (except in
the case of an Incentive Stock Option) after grant, payment in full or
in part may also be made in the form of shares of Common Stock already
owned by the optionee or, in the case of a Non-Qualified Stock Option,
shares of Restricted Stock or shares subject to such Option or another
award hereunder (in each case valued at the Fair Market Value of the
Common Stock on the date the Option is exercised). If payment of the
exercise price is made in part or in full with Common Stock, the
Committee may award to the employee a new Stock Option to replace the
Common Stock which was surrendered. If payment of the option exercise
price of a Non-Qualified Stock Option is made in whole or in part in
the form of Restricted Stock, such Restricted Stock (and any
replacement shares relating thereto) shall remain (or be) restricted
in accordance with the original terms of the Restricted Stock award in
question, and any additional Common Stock received upon the exercise
shall be subject to the same forfeiture restrictions, unless otherwise
determined by the Committee, in its sole discretion, at or after
grant. No shares of Common Stock shall be issued until full payment
therefor has been made. An optionee shall generally have the rights
to dividends or other rights of a shareholder with respect to shares
subject to the Option when the optionee has given written notice of
exercise, has paid in full for such shares, and, if requested, has
given the representation described in Section 13(a).
(e) Transferability of Options. No Non-Qualified
Stock Option shall be transferable by the optionee without the prior
written consent of the Committee other than (i) transfers by the
Optionee to a member of his or her Immediate Family or a trust for the
benefit of the optionee or a member of his or her Immediate Family, or
(ii) transfers by will
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or by the laws of descent and distribution. No Incentive Stock Option
shall be transferable by the optionee otherwise than by will or by the
laws of descent and distribution and all Incentive Stock Options shall
be exercisable, during the optionee's lifetime, only by the optionee.
(f) Bonus for Taxes. In the case of a Non-Qualified
Stock Option or an optionee who elects to make a disqualifying
disposition (as defined in Section 422(a)(1) of the Code) of Common
Stock acquired pursuant to the exercise of an Incentive Stock Option,
the Committee in its discretion may award at the time of grant or
thereafter the right to receive upon exercise of such Stock Option a
cash bonus calculated to pay part or all of the federal and state, if
any, income tax incurred by the optionee upon such exercise.
(g) Termination by Death. Subject to Section 5(k),
if an optionee's employment by the Corporation and any Subsidiary or
(except in the case of an Incentive Stock Option) Affiliate terminates
by reason of death, any Stock Option held by such optionee may
thereafter be exercised, to the extent such option was exercisable at
the time of death or (except in the case of an Incentive Stock Option)
on such accelerated basis as the Committee may determine at or after
grant (or except in the case of an Incentive Stock Option, as may be
determined in accordance with procedures established by the Committee)
by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of one year (or
such other period as the Committee may specify at or after grant) from
the date of such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
(h) Termination by Reason of Disability. Subject to
Section 5(k), if an optionee's employment by the Corporation and any
Subsidiary or (except in the case of an Incentive Stock Option)
Affiliate terminates by reason of Disability, any Stock Option held by
such optionee may thereafter be exercised by the optionee, to the
extent it was exercisable at the time of termination or (except in the
case of an Incentive Stock Option) on such accelerated basis as the
Committee may determine at or after grant (or, except in the case of
an Incentive Stock Option, as may be determined in accordance with
procedures established by the Committee), for a period of (i) three
years (or such other period as the Committee may specify at or after
grant) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period
is the shorter, in the case of a Non-Qualified Stock Option and (ii)
one year from the date of termination of employment or until the
expiration of the stated term of such Stock Option, whichever period
is shorter, in the case of an Incentive Stock Option; provided
however, that, if the optionee dies within the period specified in (i)
above (or other such period as the committee shall specify at or after
grant), any unexercised Non-Qualified Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve months from
the date of such death or until the expiration of the stated term of
such Stock Option, whichever period is shorter. In the event of
termination of employment by reason of Disability, if an Incentive
Stock Option is exercised after the
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expiration of the exercise period applicable to Incentive Stock
Options, but before the expiration of any period that would apply if
such Stock Option were a Non-Qualified Stock Option, such Stock Option
will thereafter be treated as a Non-Qualified Stock Option.
(i) Termination by Reason of Retirement. Subject to
Section 5(k), if an optionee's employment by the Corporation and any
Subsidiary or (except in the case of an Incentive Stock Option)
Affiliate terminates by reason of Normal or Early Retirement, any
Stock Option held by such optionee may thereafter be exercised by the
optionee, to the extent it was exercisable at the time of such
Retirement or (except in the case of an Incentive Stock Option) on
such accelerated basis as the Committee may determine at or after
grant (or, except in the case of an Incentive Stock Option, as may be
determined in accordance with procedures established by the
Committee), for a period of (i) three years (or such other period as
the Committee may specify at or after grant) from the date of such
termination of employment or the expiration of the stated term of such
Stock Option, whichever period is the shorter, in the case of a
Non-Qualified Stock Option and (ii) three months from the date of such
termination of employment or the expiration of the stated term of such
Stock Option, whichever period is the shorter, in the event of an
Incentive Stock Option; provided however, that, if the optionee dies
within the period specified in (i) above (or other such period as the
Committee shall specify at or after grant), any unexercised
Non-Qualified Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of
death for a period of twelve months from the date of such death or
until the expiration of the stated term of such Stock Option,
whichever period is shorter. In the event of termination of employment
by reason of Retirement, if an Incentive Stock Option is exercised
after the expiration of the exercise period applicable to Incentive
Stock Options, but before the expiration of the period that would
apply if such Stock Option were a Non-Qualified Stock Option, the
option will thereafter be treated as a Non-Qualified Stock Option.
(j) Other Termination. Subject to Section 5(k),
unless otherwise determined by the Committee (or pursuant to
procedures established by the Committee) at or (except in the case of
an Incentive Stock Option) after grant, if an optionee's employment by
the Corporation and any Subsidiary or (except in the case of an
Incentive Stock Option) Affiliate is involuntarily terminated for any
reason other than death, Disability or Normal or Early Retirement, the
Stock Option shall thereupon terminate, except that such Stock Option
may be exercised, to the extent otherwise then exercisable, for the
lesser of three months or the balance of such Stock Option's term if
the involuntary termination is without Cause. For purposes of this
Plan, "Cause" means (i) a felony conviction of a participant or the
failure of a participant to contest prosecution for a felony, or (ii)
a participant's willful misconduct or dishonesty, which is directly
and materially harmful to the business or reputation of the
Corporation or any Subsidiary or Affiliate. If an optionee
voluntarily terminates employment with the Corporation and any
Subsidiary or (except in the case of an Incentive Stock Option)
Affiliate (except for Disability, Normal or Early Retirement), the
Stock Option shall thereupon terminate; provided, however, that the
Committee at grant or (except in the case
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of an Incentive Stock Option) thereafter may extend the exercise
period in this situation for the lesser of three months or the balance
of such Stock Option's term.
(k) Incentive Stock Options. Anything in the Plan to
the contrary notwithstanding, no term of this Plan relating to
Incentive Stock Options shall be interpreted, amended, or altered, nor
shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422 of the Code,
or, without the consent of the optionee(s) affected, to disqualify any
Incentive Stock Option under such Section 422. No Incentive Stock
Option shall be granted to any participant under the Plan if such
grant would cause the aggregate Fair Market Value (as of the date the
Incentive Stock Option is granted) of the Common Stock with respect to
which all Incentive Stock Options are exercisable for the first time
by such participant during any calendar year (under all such plans of
the Company and any Subsidiary) to exceed $100,000. To the extent
permitted under Section 422 of the Code or the applicable regulations
thereunder or any applicable Internal Revenue Service pronouncement:
(i) if (x) a participant's employment is
terminated by reason of death, Disability, or Retirement and
(y) the portion of any Incentive Stock Option that is
otherwise exercisable during the post-termination period
specified under Section 5(g), (h) or (i), applied without
regard to the $100,000 limitation contained in Section 422(d)
of the Code, is greater than the portion of such Option that
is immediately exercisable as an "Incentive Stock Option"
during such post-termination period under Section 422, such
excess shall be treated as a Non-Qualified Stock Option; and
(ii) if the exercise of an Incentive Stock
Option is accelerated by reason of a Change in Control, any
portion of such Option that is not exercisable as an Incentive
Stock Option by reason of the $100,000 limitation contained in
Section 422(d) of the Code shall be treated as a Non-Qualified
Stock Option.
(l) Buyout Provisions. The Committee may at any time
offer to buy out for a payment in cash, Common Stock, or Restricted
Stock an Option previously granted, based on such terms and conditions
as the Committee shall establish and communicate to the optionee at
the time that such offer is made.
(m) Settlement Provisions. If the option agreement
so provides at grant or (except in the case of an Incentive Stock
Option) is amended after grant and prior to exercise to so provide
(with the optionee's consent), the Committee may require that all or
part of the shares to be issued with respect to the spread value of an
exercised Option take the form of Restricted Stock, which shall be
valued on the date of exercise on the basis of the Fair Market Value
(as determined by the Committee) of such Restricted Stock determined
without regards to the forfeiture restrictions involved.
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(n) Performance and Other Conditions. The
Committee may condition the exercise of any Option upon the
attainment of specified performance goals or other factors as
the Committee may determine, in its sole discretion. Unless
specifically provided in the option agreement, any such
conditional Option shall vest immediately prior to its
expiration if the conditions to exercise have not theretofore
been satisfied.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights
may be granted in conjunction with all or part of any Stock Option
granted under the Plan. In the case of a Non-Qualified Stock Option,
such rights may be granted either at or after the time of the grant of
such Stock Option. In the case of an Incentive Stock Option, such
rights may be granted only at the time of the grant of such Stock
Option. A Stock Appreciation Right or applicable portion thereof
granted with respect to a given Stock Option shall terminate and no
longer be exercisable upon the termination or exercise of the related
Stock Option, subject to such provisions as the Committee may specify
at grant where a Stock Appreciation Right is granted with respect to
less than the full number of shares covered by a related Stock Option.
A Stock Appreciation Right may be exercised by an optionee, subject to
Section 6(b), in accordance with the procedures established by the
Committee for such purpose. Upon such exercise, the optionee shall be
entitled to receive an amount determined in the manner prescribed in
Section 6(b). Stock Options relating to exercised Stock Appreciation
Rights shall no longer be exercisable to the extent that the related
Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights
shall be subject to such terms and conditions, not inconsistent with
the provisions of the Plan, as shall be determined from time to time
by the Committee, including the following:
(i) Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that
the Stock Options to which they relate shall be exercisable in
accordance with the provisions of Section 5 and this Section 6
of the Plan.
(ii) Upon the exercise of a Stock Appreciation
Right, an optionee shall be entitled to receive an amount in
cash and/or shares of Common Stock equal in value to the
excess of the Fair Market Value of one share of Common Stock
over the option price per share specified in the related Stock
Option multiplied by the number of shares in respect of which
the Stock Appreciation Right shall have been exercised, with
the Committee having the right to determine the form of
payment. When payment is to be made in shares, the number of
shares to be paid shall be calculated on the basis of the Fair
Market Value of the shares on the date of exercise. When
payment is to be made in cash, such amount shall be calculated
on the basis of the Fair Market Value of the Common Stock on
the date of exercise.
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(iii) Stock Appreciation Rights shall be
transferable only when and to the extent that the underlying
Stock Option would be transferable under Section 5(e) of the
Plan.
(iv) Upon the exercise of a Stock Appreciation
Right, the Stock Option or part thereof to which such Stock
Appreciation Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in
Section 3 of the Plan on the number of shares of Common Stock
to be issued under the Plan.
(v) The Committee, in its sole discretion, may
also provide that, in the event of a Change in Control
and/or a Potential Change in Control, the amount to be paid
upon the exercise of a Stock Appreciation Right shall be based
on the Change in Control Price, subject to such terms and
conditions as the Committee may specify at grant.
(vi) The Committee may condition the exercise of
any Stock Appreciation Right upon the attainment of specified
performance goals or other factors as the Committee may
determine, in its sole discretion.
SECTION 7. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be
issued either alone, in addition to, or in tandem with other awards
granted under the Plan and/or cash awards made outside the Plan. The
Committee shall determine the eligible persons to whom, and the time
or times at which, grants of Restricted Stock will be made, the number
of shares of Restricted Stock to be awarded to any person, the price
(if any) to be paid by the recipient of Restricted Stock (subject to
Section 7(b)), the time or times within which such awards may be
subject to forfeiture, and the other terms, restrictions and
conditions of the awards in addition to those set forth in Section
7(c). The Committee may condition the grant of Restricted Stock upon
the attainment of specified performance goals or such other factors as
the Committee may determine, in its sole discretion. The provisions
of Restricted Stock awards need not be the same with respect to each
recipient.
(b) Awards and Certificates. The prospective recipient
of a Restricted Stock award shall not have any rights with respect to
such award, unless and until such recipient has executed an agreement
evidencing the award and has delivered a fully executed copy thereof
to the Corporation, and has otherwise complied with the applicable
terms and conditions of such award.
(i) The purchase price for shares of Restricted
Stock shall be established by the Committee and may be zero.
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(ii) Awards of Restricted Stock must be accepted
within a period of 60 days (or such shorter period as the
Committee may specify at grant) after the award date, by
executing a Restricted Stock Award Agreement and paying
whatever price (if any) is required under Section 7(b)(i).
(iii) Each participant receiving a Restricted Stock
award shall be issued a stock certificate in respect of such
shares of Restricted Stock. Such certificate shall be
registered in the name of such participant, and shall bear an
appropriate legend referring to the terms, conditions, and
restrictions applicable to such award.
(iv) The Committee shall require that the stock
certificates evidencing such shares be held in custody by the
Corporation until the restrictions thereon shall have lapsed,
and that, as a condition of any Restricted Stock award, the
participant shall have delivered a stock power, endorsed in
blank, relating to the shares of Common Stock covered by such
award.
(c) Restrictions and Conditions. The shares of
Restricted Stock awarded pursuant to this Section 7 shall be subject
to the following restrictions and conditions:
(i) In accordance with the provisions of this
Plan and the award agreement, during a period set by the
Committee commencing with the date of such award (the
"Restriction Period"), the participant shall not be permitted
to sell, transfer, pledge, assign, or otherwise encumber
shares of Restricted Stock awarded under the Plan, except to
the extent permitted under Section 13(h) below. Within these
limits, the Committee, in its sole discretion, may provide for
the lapse of such restrictions in installments and may
accelerate or waive such restrictions, in whole or in part,
based on service, performance, such other factors or criteria
as the Committee may determine in its sole discretion.
(ii) Except as provided in this paragraph (ii) and
Section 7(c)(i), the participant shall have, with respect to
the shares of Restricted Stock, all of the rights of a
shareholder of the Corporation, including the right to vote
the shares, and the right to receive any cash dividends. The
Committee, in its sole discretion, as determined at the time
of award, may permit or require the payment of cash dividends
to be deferred and, if the Committee so determines,
reinvested, subject to Section 14(e), in additional Restricted
Stock to the extent shares are available under Section 3, or
otherwise reinvested. Pursuant to Section 3 above, stock
dividends issued with respect to Restricted Stock shall be
treated as additional shares of Restricted Stock that are
subject to the same restrictions and other terms and
conditions that apply to the shares with respect to which such
dividends are issued. If the Committee so determines, the
award agreement may also impose restrictions on the right to
vote and the right to receive dividends.
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(iii) Subject to the applicable provisions of the
award agreement and this Section 7, upon termination of a
participant's employment with the Corporation and any
Subsidiary or Affiliate for any reason during the Restriction
Period, all shares still subject to restriction will vest, or
be forfeited, in accordance with the terms and conditions
established by the Committee at or after grant.
(iv) If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to
such Restriction Period, certificates for an appropriate
number of unrestricted shares shall be delivered to the
participant promptly.
(d) Minimum Value Provisions. In order to better ensure
that award payments actually reflect the performance of the
Corporation and service of the participant, the Committee may provide,
in its sole discretion, for a tandem performance-based or other award
designed to guarantee a minimum value, payable in cash or Common Stock
to the recipient of a restricted stock award, subject to such
performance, future service, deferral, and other terms and conditions
as may be specified by the Committee.
SECTION 8. OTHER STOCK-BASED AWARDS.
(a) Administration. Other Stock-Based Awards, including,
without limitation, performance shares, convertible preferred stock,
convertible debentures, exchangeable securities and Common Stock
awards or options valued by reference to earnings per share or
Subsidiary performance, may be granted either alone, in addition to,
or in tandem with Stock Options, Stock Appreciation Rights, or
Restricted Stock granted under the Plan and cash awards made outside
of the Plan; provided that no such Other Stock-Based Awards may be
granted in tandem with Incentive Stock Options if that would cause
such Stock Options not to qualify as Incentive Stock Options pursuant
to Section 422 of the Code. Subject to the provisions of the Plan,
the Committee shall have authority to determine the persons to whom
and the time or times at which such awards shall be made, the number
of shares of Common Stock to be awarded pursuant to such awards, and
all other conditions of the awards. The Committee may also provide
for the grant of Common Stock upon the completion of a specified
performance period. The provisions of Other Stock-Based Awards need
not be the same with respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made
pursuant to this Section 8 shall be subject to the following terms and
conditions:
(i) Shares subject to awards under this Section 8
and the award agreement referred to in Section 8(b)(v) below,
may not be sold, assigned, transferred, pledged, or otherwise
encumbered prior to the date on which the shares are issued,
or, if later, the date on which any applicable restriction,
performance, or deferral period lapses.
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(ii) Subject to the provisions of this Plan and
the award agreement and unless otherwise determined by the
Committee at grant, the recipient of an award under this
Section 8 shall be entitled to receive, currently or on a
deferred basis, interest or dividends or interest or dividend
equivalents with respect to the number of shares covered by
the award, as determined at the time of the award by the
Committee, in its sole discretion, and the Committee may
provide that such amounts (if any) shall be deemed to have
been reinvested in additional shares of Common Stock or
otherwise reinvested.
(iii) Any award under Section 8 and any shares of
Common Stock covered by any such award shall vest or be
forfeited to the extent so provided in the award agreement, as
determined by the Committee in its sole discretion.
(iv) In the event of the participant's Retirement,
Disability, or death, or in cases of special circumstances,
the Committee may, in its sole discretion, waive in whole or
in part any or all of the remaining limitations imposed
hereunder (if any) with respect to any or all of an award
under this Section 8.
(v) Each award under this Section 8 shall be
confirmed by, and subject to the terms of, an agreement or
other instrument by the Corporation and the participant.
(vi) Common Stock (including securities
convertible into Common Stock) issued on a bonus basis under
this Section 8 may be issued for no cash consideration.
Common Stock (including securities convertible into Common
Stock) purchased pursuant to a purchase right awarded under
this Section 8 shall be priced at least 85% of the Fair Market
Value of the Common Stock on the date of grant.
SECTION 9. AWARDS TO OUTSIDE DIRECTORS.
(a) The provisions of this Section 9 shall apply only to
awards to Outside Directors in accordance with this Section 9. The
Committee shall have no authority to determine the timing of or the
terms or conditions of any award under this Section 9.
(b) Effective as of the Distribution, each person serving
as an Outside Director on such date will receive a grant of a number
of shares of Common Stock (rounded up to the next whole share) having
an aggregate Fair Market Value on such date equal to $10,000, which
shares shall be restricted as provided in this Section 9.
(c) On the date of the Annual Meeting of Shareholders of
the Corporation occurring after the Distribution, unless this Plan has
been previously terminated, each Outside Director will receive an
automatic grant of a number of shares of Common Stock (rounded up to
the next whole share) having an aggregate Fair Market Value on such
date equal to
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$10,000 (subject to increase based upon any increase in the Consumer
Price Index for Urban Wage Earning and Clerical Workers, U.S. All City
Average Report, of the U.S. Bureau of Labor Statistics or, if such
index is no longer available, a similar index), which shares shall be
restricted as provided in this Section 9.
(d) Each grant of Outside Director Restricted Stock shall
vest in increments of one-third of the shares of Common Stock subject
to such grant with the first one-third increment vesting on the date
of grant, the second one-third increment on the first anniversary of
the date of grant and the final one-third increment on the second
anniversary of the date of grant, if the grantee is still a member of
the Board on such dates. Upon the vesting of the shares, the
Corporation will deliver the stock certificate(s) evidencing the
vested shares to the Outside Director, all restrictions on the shares
imposed by this Plan (other than pursuant to Section 13(a) below) will
be lifted and such shares will no longer be deemed to be "Outside
Directors Restricted Stock" hereunder.
(e) Until the earlier of (i) five years from the date of
grant and (ii) the date on which the Outside Director ceases to serve
as a director of the Corporation (the "Outside Director Period of
Restriction"), no Outside Director Restricted Stock may be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and
distribution.
Each certificate representing Outside Director Restricted Stock
granted pursuant to this Section 9 shall bear the following legend:
"The sale or other transfer of the shares represented by this
certificate, whether voluntary, involuntary, or by operation
of law, is subject to certain restrictions on transfer set
forth in the AmSurg Corp. 1997 Stock Incentive Plan (the
"Plan"). A copy of the Plan and the rules of such Plan may be
obtained from the Secretary of AmSurg Corp."
Once the Outside Director Period of Restriction has lapsed, the
grantee shall be entitled to have the legend required by this Section
9 removed from such stock certificate(s); provided however, that such
certificate shall be subject to any legend required by applicable
state or federal law.
(f) Upon termination of an Outside Director's service as
a member of the Board for any reason other than death, disability or
retirement, all shares of Outside Restricted Stock not theretofore
vested will be forfeited. Upon termination of an Outside Director's
service as a member of the Board due to death, disability or
retirement, all shares of Outside Director Restricted Stock will
immediately vest.
(g) Grantees of Outside Director Restricted Stock shall
enter into a restricted stock agreement with the Corporation setting
forth the terms provided herein. Each
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participant receiving an award of Outside Director Restricted Stock
shall be issued one or more stock certificates evidencing the shares
of Outside Director Restricted Stock. Such certificates shall be
registered in the name of the Outside Director, and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to the award. The stock certificates shall be held in the
custody of the Corporation until the award or portion thereof
represented by such certificate is vested. The Corporation may
require the Outside Director to deliver a stock power, endorsed in
blank, relating to the shares of Common Stock covered by the award.
(h) Outside Directors will have the right to vote the
shares and to receive cash dividends with respect to the shares of
Outside Director Restricted Stock. Stock dividends issued with
respect to Outside Director Restricted Stock will be treated as
additional shares of Outside Director Restricted Stock subject to the
same restrictions and vesting schedule as the shares of Outside
Director Restricted Stock with respect to which they were received.
(i) Shares of Outside Director Restricted Stock shall be
subject to Section 10. The number of shares underlying each grant of
Outside Director Restricted Stock shall be adjusted automatically in
the same manner as the number of shares under Section 3 hereof at any
time that awards of Restricted Stock are adjusted as provided in
Section 3.
SECTION 10. CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. In the event of:
(1) a "Change in Control" as defined in Section
10(b); or
(2) a "Potential Change in Control" as defined in
Section 10(c), but only if and to the extent so determined by
the Committee or the Board at or after grant (subject to any
right of approval expressly reserved by the Committee or the
Board at the time of such determination),
(i) Subject to the limitations set forth below in
this Section 10(a), the following acceleration provisions
shall apply:
(a) Any Stock Appreciation Rights or any Stock
Option awarded under the Plan not previously
exercisable and vested shall become fully exercisable
and vested.
(b) The restrictions applicable to any
Restricted Stock, Outside Director Restricted Stock
and Other Stock-Based Awards, in each case to the
extent not already vested under the Plan, shall lapse
and such shares and awards shall be deemed fully
vested.
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(ii) Subject to the limitations set forth below in
this Section 10(a), the value of all outstanding Stock
Options, Stock Appreciation Rights, Restricted Stock, Outside
Director Restricted Stock and Other Stock-Based Awards, in
each case to the extent vested, shall, unless otherwise
determined Board or by the Committee in its sole discretion
prior to any Change in Control, be cashed out on the basis of
the "Change in Control Price" as defined in Section 10(d) as
of the date such Change in Control or such Potential Change in
Control is determined to have occurred or such other date as
the Board or Committee may determine prior to the Change in
Control.
(iii) The Board or the Committee may impose
additional conditions on the acceleration or valuation of any
award in the award agreement.
(b) Definition of Change in Control. For purposes of
Section 10(a), a "Change in Control" means the happening of any of the
following:
(i) any person or entity, including a "group" as
defined in Section 13(d)(3) of the Exchange Act, other than
the Corporation or a wholly-owned subsidiary thereof or any
employee benefit plan of the Corporation or any of its
Subsidiaries, becomes the beneficial owner of the
Corporation's securities having 35% or more of the combined
voting power of the then outstanding securities of the
Corporation that may be cast for the election of directors of
the Corporation (other than as a result of an issuance of
securities initiated by the Corporation in the ordinary course
of business); or
(ii) as the result of, or in connection with, any
cash tender or exchange offer, merger or other business
combination, sales of assets or contested election, or any
combination of the foregoing transactions, less than a
majority of the combined voting power of the then outstanding
securities of the Corporation or any successor corporation or
entity entitled to vote generally in the election of the
directors of the Corporation or such other corporation or
entity after such transaction are held in the aggregate by the
holders of the Corporation's securities entitled to vote
generally in the election of directors of the Corporation
immediately prior to such transaction; or
(iii) during any period of two consecutive years,
individuals who at the beginning of any such period constitute
the Board cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for
election by the Corporation's shareholders, of each director
of the Corporation first elected during such period was
approved by a vote of at least two-thirds of the directors of
the Corporation then still in office who were directors of the
Corporation at the beginning of any such period.
(c) Definition of Potential Change in Control. For
purposes of Section 10(a), a "Potential Change in Control" means the
happening of any one of the following:
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(i) The approval by shareholders of an agreement
by the Corporation, the consummation of which would result in
a Change in Control of the Corporation as defined in Section
10(b); or
(ii) The acquisition of beneficial ownership,
directly or indirectly, by any entity, person or group (other
than the Corporation or a Subsidiary or any Corporation
employee benefit plan (including any trustee of such plan
acting as such trustee)) of securities of the Corporation
representing 5% or more of the combined voting power of the
Corporation's outstanding securities and the adoption by the
Committee of a resolution to the effect that a Potential
Change in Control of the Corporation has occurred for purposes
of this Plan.
(d) Change in Control Price. For purposes of this
Section 10, "Change in Control Price" means the highest price per
share paid in any transaction reported on The Nasdaq Stock Market
National Market or such other exchange or market as is the principal
trading market for the Common Stock, or paid or offered in any bona
fide transaction related to a Potential or actual Change in Control of
the Corporation at any time during the 60 day period immediately
preceding the occurrence of the Change in Control (or, where
applicable, the occurrence of the Potential Change in Control event),
in each case as determined by the Committee except that, in the case
of Incentive Stock Options and Stock Appreciation Rights relating to
Incentive Stock Options, such price shall be based only on
transactions reported for the date on which the optionee exercises
such Stock Appreciation Rights or, where applicable, the date on which
a cash out occurs under Section 10(a)(ii).
SECTION 11. AMENDMENTS AND TERMINATION.
The Board may at any time amend, alter or discontinue the Plan;
provided, however, that, without the approval of the Corporation's
shareholders, no amendment or alteration may be made which would (a) except as
a result of the provisions of Section 3(c) of the Plan, increase the maximum
number of shares that may be issued under the Plan or increase the Section
162(m) Maximum, (b) change the provisions governing Incentive Stock Options
except as required or permitted under the provisions governing incentive stock
options under the Code, or (c) make any change for which applicable law or
regulatory authority (including the regulatory authority of The Nasdaq Stock
Market National Market or any other market or exchange on which the Common
Stock is traded) would require shareholder approval or for which shareholder
approval would be required to secure full deductibility of compensation
received under the Plan under Section 162(m) of the Code. No amendment,
alteration, or discontinuation shall be made which would impair the rights of
an optionee or participant under a Stock Option, Stock Appreciation Right,
Restricted Stock, Other Stock-Based Award or Outside Director Restricted Stock
theretofore granted, without the participant's consent.
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The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one for one or other basis), including
previously granted Stock Options having higher option exercise prices. Solely
for purposes of computing the Section 162(m) Maximum, if any Stock Options or
other awards previously granted to a participant are canceled and new Stock
Options or other awards having a lower exercise price or other more favorable
terms for the participant are substituted in their place, both the initial
Stock Options or other awards and the replacement Stock Options or other awards
will be deemed to be outstanding (although the canceled Stock Options or other
awards will not be exercisable or deemed outstanding for any other purposes).
SECTION 12. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Corporation, nothing contained herein shall give
any such participant or optionee any rights that are greater than those of a
general creditor of the Corporation. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or payments in lieu of or with
respect to awards hereunder; provided, however, that, unless the Committee
otherwise determines with the consent of the affected participant, the
existence of such trusts or other arrangements is consistent with the
"unfunded" status of the Plan.
SECTION 13. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing
shares pursuant to a Stock Option or other award under the Plan to
represent to and agree with the Corporation in writing that the
optionee or participant is acquiring the shares without a view to
distribution thereof. The certificates for such shares may include
any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates for shares of Common Stock
or other securities delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the
Common Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such
restrictions.
(b) Nothing contained in this Plan shall prevent the
Board from adopting other or additional compensation arrangements,
subject to shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only in
specific cases.
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(c) The adoption of the Plan shall not confer upon any
employee of the Corporation or any Subsidiary or Affiliate any right
to continued employment with the Corporation or a Subsidiary or
Affiliate, as the case may be, nor shall it interfere in any way with
the right of the Corporation or a Subsidiary or Affiliate to terminate
the employment of any of its employees at any time.
(d) No later than the date as of which an amount first
becomes includible in the gross income of the participant for Federal
income tax purposes with respect to any award under the Plan, the
participant shall pay to the Corporation, or make arrangements
satisfactory to the Committee regarding the payment of, any Federal,
state, or local taxes of any kind required by law to be withheld with
respect to such amount. The Committee may require withholding
obligations to be settled with Common Stock, including Common Stock
that is part of the award that gives rise to the withholding
requirement. The obligations of the Corporation under the Plan shall
be conditional on such payment or arrangements and the Corporation and
its Subsidiaries or Affiliates shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind
otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or
dividend equivalents in additional Restricted Stock (or other types of
Plan awards) at the time of any dividend payment shall only be
permissible if sufficient shares of Common Stock are available under
Section 3 for such reinvestment (taking into account then outstanding
Stock Options and other Plan awards).
(f) The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the
laws of the State of Tennessee.
(g) The members of the Committee and the Board shall not
be liable to any employee or other person with respect to any
determination made hereunder in a manner that is not inconsistent with
their legal obligations as members of the Board. In addition to such
other rights of indemnification as they may have as directors or as
members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses,
including attorneys' fees actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may
be a party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted thereunder, and against
all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the
Corporation) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the
performance of his duties; provided that within 60 days after
institution of any such action, suit or proceeding, the Committee
member shall in writing offer the Corporation the opportunity, at its
own expense, to handle and defend the same.
21
<PAGE> 22
(h) In addition to any other restrictions on transfer
that may be applicable under the terms of this Plan or the applicable
award agreement, no Stock Option, Stock Appreciation Right, Restricted
Stock award, Other Stock-Based Award or Outside Director Restricted
Stock award or other right issued under this Plan is transferable by
the participant without the prior written consent of the Committee,
or, in the case of an Outside Director, the Board, other than (i)
transfers by a participant to a member of his or her Immediate Family
or a trust for the benefit of the participant or a member of his or
her Immediate Family or (ii) transfers by will or by the laws of
descent and distribution. The designation of a beneficiary will not
constitute a transfer.
(i) The Committee may, at or after grant, condition the
receipt of any payment in respect of any award or the transfer of any
shares subject to an award on the satisfaction of a six-month holding
period, if such holding period is required for compliance with Section
16 under the Exchange Act.
SECTION 14. EFFECTIVE DATE OF PLAN.
The Plan shall be effective upon adoption by the Board (the "Effective
Date"), subject to approval by the holders of a majority of the votes of the
Corporation's capital stock.
SECTION 15. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Restricted Stock award,
Other Stock-Based Award or award of Outside Director Restricted Stock award
shall be granted pursuant to the Plan on or after the tenth anniversary of the
Effective Date of the Plan, but awards granted prior to such tenth anniversary
may be extended beyond that date.
22
<PAGE> 1
EXHIBIT 10.9
FORM OF EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into this ___ day of _____________, 1997, by
and between AmSurg Corp., a Tennessee corporation with its principal place of
business at One Burton Hills Boulevard, Nashville, Tennessee 37215 ("Company")
and ________________________ ("Officer");
WITNESSETH:
1. EMPLOYMENT. The Company employs Officer and Officer hereby
accepts employment under the terms and conditions hereinafter set forth.
2. DUTIES. Officer is engaged as ____________________________ of
the Company. Her powers and duties in that capacity shall be those normally
associated with the positions of ____________________________. During the term
of this Agreement, Officer shall also serve without additional compensation in
such other offices of the Company to which she may be elected or appointed by
the Board of Directors.
3. TERM. Subject to provisions of termination as hereinafter
provided, the initial term of Officer's employment under this Agreement shall
begin on July 1, 1996, and shall terminate on July 1, 1997. On each annual
anniversary date of this Agreement, unless the Company notifies Officer that
her employment under this Agreement will not be extended, her employment under
this Agreement shall automatically be extended for a one (1) year period on the
same terms and conditions as are set forth herein; provided, however, that the
term of this Agreement shall not be automatically extended after Officer
reaches age sixty-five (65).
If the Company elects not to extend Officer's employment under this
Agreement, it shall do so by notifying Officer in writing not less than sixty
(60) days prior to the applicable anniversary date of this Agreement. If the
Company does not elect to extend Officer's employment under this Agreement
prior to the date Officer reaches age sixty-five (65) other than for cause,
Officer shall be considered to have been terminated without just cause upon the
expiration of her employment, and Officer will receive the payments and
benefits set forth in Section 8 hereof.
4. COMPENSATION. For all duties rendered by Officer, the Company
shall pay Officer a minimum salary of $_____________per year, payable in equal
monthly installments at the end of each month. In addition thereto, commencing
July 1, 1997 the salary of Officer shall be increased and adjusted upward,
based upon any increase in the Consumer Price Index for Urban Wage Earners and
Clerical Workers, U. S. All City Average Report, of the U. S. Bureau of Labor
Statistics (the "Consumer Price Index") or such index fulfilling the same or
similar purpose in the event the Consumer Price Index is no longer maintained
(the Consumer Price Index or such other index, the "Cost of Living Index").
The base month shall be July 1996. Such increase shall not be made retroactive
for the first year, but commencing July 1, 1997, such increase shall be made,
no more frequently than annually, based upon any such increase in the Cost of
Living Index. In determining the adjustment annually, the base figures for
computation shall be the amount of $_________ plus all annual cost of living
adjustments previously made. In addition thereto, each year beginning July
<PAGE> 2
1, 1997, Officer's compensation will be reviewed by the Board of the Company,
or the Compensation Committee thereof, and after taking into consideration
performance, the Committee may increase Officer's compensation. In the event
the Company establishes a bonus plan for compensating executive or managerial
employees, Officer may participate in such a plan, provided that any bonuses
paid under such plan shall be in addition to the compensation provided for in
this Agreement. All compensation payable hereunder shall be subject to
withholding for federal income taxes, FICA and all other applicable federal,
state and local withholding requirements.
5. EXTENT OF SERVICE. Officer shall devote substantially her
entire time, attention and energies to the business of the Company and shall
not during the term of this Agreement take an active role in any other business
activity without the prior written consent of the Company; but this shall not
prevent Officer from making real estate or other investments of a passive
nature.
6. DISABILITY. In the case of illness or incapacity resulting in
Officer being unable to perform her services, the Company shall provide through
insurance or on its own account coverage for Officer that will provide payment
of full salary and benefits for twelve (12) months. For the period beyond
twelve (12) months, the Company shall provide such coverage to Officer as is
then available to Officer in accordance with Company policy. To the extent
that payments are received from Worker's Compensation or other Company paid
plans, the Company's obligations will be reduced by amounts so received.
7. TERMINATION FOR CAUSE. For the purposes of this Agreement,
the Company shall have "cause" upon (i) a felony conviction of Officer or the
failure of Officer to contest prosecution for a felony, (ii) conviction of a
crime involving moral turpitude, or (iii) willful and continued misconduct or
gross negligence by Officer in the performance of her duties as an officer.
For purposes of this Section 7, "willful" shall be determined by the Board of
Directors of the Company. In making such determination, the Board of Directors
of the Company shall not act unreasonably or arbitrarily.
8. TERMINATION WITHOUT CAUSE. Officer's employment under this
Agreement may be terminated (i) by the Company at any time without cause and
(ii) at any time within twelve (12) months following the occurrence of a Change
In Control (as defined in Section 17 herein) by Officer for Good Reason (as
defined in Section 17 herein) provided:
The Company shall pay Officer one year's salary, payable in twelve
monthly installments following the date of termination of employment, based
upon the annual rate payable as of the date of termination, without further
cost of living adjustments, subject to the following:
(a) Officer shall continue to be covered under health and
life insurance plans of the Company for one (1) year.
Officer's benefits shall be reduced, however, by any
such coverage that Officer receives incident to any
employment during said one-year period.
2
<PAGE> 3
(b) No payments shall be made to Officer past age
sixty-five (65) years regardless of the term
remaining after termination.
(c) There shall be no further extension of the Agreement.
(d) Amounts payable by the Company shall be offset and
reduced by any amount earned by Officer in any active
employment that she may receive during said one-year
period from any other source whatsoever, except said
sums shall not include income from dividends,
investments or passive income. As a condition for
Officer receiving her compensation from the Company,
she agrees to furnish the Company annually with full
information regarding such other employment and to
permit inspection of her records at any such
employment and copy of her Federal income tax
returns.
(e) The Company shall receive credit for unemployment
insurance, social security insurance or like amounts
received by Officer.
(f) The payments will cease upon death of Officer
regardless of term remaining.
9. RESTRICTIVE COVENANTS.
(a) Confidential Information. Officer agrees not to
disclose, either during the time she is employed by
the Company or following the termination of her
employment by the Company, any confidential
information concerning the Company, including, but
not limited to, customer lists, contract terms,
financial costs, sales data, or business
opportunities whether for existing, new or developing
businesses.
(b) Non-Compete. Upon voluntary termination of Officer's
employment, upon termination of Officer's employment
by the Company for cause, or upon termination of
Officer's employment without cause, Officer agrees
not to enter into or engage in any phase of the
business conducted by the Company in any state in
which the Company is conducting business on the date
of termination of Officer's employment with the
Company, either as an individual for her own account,
as a partner or joint venturer, or as an employee,
agent, officer, director, or substantial shareholder
of a corporation or otherwise for a period of one (1)
year following the date of Officer's termination of
her employment with the Company. As of the date of
execution of this Agreement, the business conducted
by the Company was defined as single specialty
surgery centers, single specialty physician networks
and single specialty physician practices.
Notwithstanding the foregoing, in the event Officer's
employment is not terminated for cause, if Officer
reasonably shows
3
<PAGE> 4
that her proposed employment is not directly
competitive with the Company's business, Officer may
enter into such employment.
(c) Non-Solicitation. Upon termination or expiration of
her employment, whether voluntary or involuntary,
Officer agrees not to directly or indirectly solicit
business from any entity, organization or person
which has contracted with the Company, which has been
doing business with the Company, from which the
Company was soliciting business at the time of
Officer's termination, or from which the Officer knew
or had reason to know that the Company was going to
solicit business at the time of Officer's
termination, for a one-year period from the date of
Officer's termination of her employment with the
Company.
(d) Enforcement. Officer and the Company acknowledge and
agree that any of the covenants contained in this
Section 9 may be specifically enforced through
injunctive relief, but such right to injunctive
relief shall not preclude Company from other remedies
which may be available to it.
(e) Termination. Notwithstanding any provision to the
contrary otherwise contained in this Agreement, the
agreements and covenants contained in this Section 9
shall not terminate upon Officer's termination of her
employment with the Company or upon the termination
of this Agreement under any other provision of this
Agreement.
10. VACATION. During each year of this Agreement, Officer shall
be entitled to vacation in accordance with Company policy in effect from time
to time.
11. BENEFITS. In addition to the benefits specifically provided
for herein, Officer shall be entitled to participate in all benefit plans
maintained by the Company for employees generally according to the terms of
such plans.
12. NOTICES. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing, and if sent by registered or
certified mail to her residence in the case of Officer, or to its principal
office in the case of the Company.
13. WAIVER OF BREACH. The waiver by either party of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by the other party.
14. ASSIGNMENT. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company. The Officer acknowledges that the
services to be rendered by her are unique and personal, and the Officer may not
assign any of her rights or delegate any of her duties or obligations under
this Agreement.
4
<PAGE> 5
15. ENTIRE AGREEMENT. This instrument contains the entire
agreement of the parties. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought. This Agreement
shall be governed by the laws of the State of Tennessee.
16. HEADINGS. The sections, subjects and headings in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
17. DEFINITIONS. For purposes of this Agreement the following
definitions shall apply:
a. "Change in Control" shall mean the occurrence of any
of the following:
(i) the acquisition of at least a majority of the
outstanding shares of Common Stock (or
securities convertible into Common Stock) of
the Company by any person, entity or group
(as used in Section 13(d)(3) and Rule
13d-5(b)(1) under the Exchange Act);
(ii) the merger or consolidation of the Company
with or into another corporation or other
entity, or any share exchange or similar
transaction involving the Company and another
corporation or other entity, if as a result
of such merger, consolidation, share exchange
or other transaction, the persons who owned
at least a majority of the Common Stock of
the Company prior to the consummation of such
transaction do not own at least a majority of
the Common Stock of the surviving entity
after the consummation of such transaction;
(iii) the sale of all, or substantially all, of the
assets of the Company; or
(iv) any change in the composition of the Board of
Directors of the Company, such that persons
who at the beginning of any period of up to
two years constituted at least a majority of
the Board of Directors of the Company, or
persons whose nomination was approved by such
majority, cease to constitute at least a
majority of the Board of Directors of the
Company at the end of such period.
b. "Good Reason" shall exist if after the occurrence of
a Change of Control:
(i) there is a significant change in the nature
or the scope of Officer's authority and
responsibilities;
(ii) there is a reduction in Officer's rate of
base salary or (for reasons other than
Company performance or stock price) overall
compensation; or
5
<PAGE> 6
(iii) The Company changes the principal location in
which Officer is required to perform services
outside a fifty mile radius of such location
without Officer's consent.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written.
----------------------------------
[Officer]
AMSURG CORP.
By:
-------------------------------
6
<PAGE> 1
EXHIBIT 10.10
ADVISORY AGREEMENT
This Advisory Agreement is entered into as of the _______ day of
_______, 1997, by and between AmSurg Corp., a Tennessee corporation
("AmSurg"), and ________________________ ("Advisor").
WITNESSETH:
WHEREAS, Advisor serves as the ___________________________________ of
American Healthcorp, Inc., a Delaware corporation ("AHC") and, prior to the
consummation of the Distribution referred to below, as _______________________
_________________ of AmSurg.
WHEREAS, pursuant to the terms of, and subject to the conditions set
forth in, the Distribution Agreement, dated as of March ___, 1997, by and
between AmSurg and AHC (the "Distribution Agreement"), AHC will distribute all
of the shares of AmSurg common stock owned by AHC to the holders of AHC's
common stock (the "Distribution") and, as a result, AmSurg will become an
independent, publicly traded corporation;
WHEREAS, effective upon the Distribution, AmSurg wishes to retain
Advisor to serve as Chairman of the Board of AmSurg following the Distribution.
NOW, THEREFORE, in consideration of the premises hereof and of the
mutual promises and agreements contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. ADVISORY ARRANGEMENT. AmSurg shall hire Advisor as an
advisor, and Advisor hereby agrees to serve as an advisor to AmSurg, on and
after the date of the Distribution under the terms and conditions hereinafter
set forth. Advisor hereby resigns as________________________ of AmSurg
effective upon the Distribution. Advisor shall not be deemed an officer or
employee of AmSurg effective upon the Distribution.
2. DUTIES. Advisor shall provide advisory services to the senior
management of AmSurg in the areas of strategy, operations management and
organization development.
3. TERM. Subject to the terms and conditions set forth herein,
Advisor shall serve as an Advisor hereunder for a period beginning on the date
of the Distribution and ending at the end of the twenty-fourth month following
the Distribution.
4. BASE COMPENSATION. For all services rendered by Advisor,
AmSurg shall pay Advisor an aggregate base compensation of $__________ ("Base
Compensation"). The Base Compensation shall be paid to Advisor in the form of
shares (the "Shares") of Class A Common Stock, without par value, of AmSurg
(the "Class A Common Stock") as provided in this Section 4. The number of
Shares shall be determined by (i) dividing the Base Compensation by the dollar
amount per share of AmSurg common stock as determined in the last professional
valuation of the shares of AmSurg
<PAGE> 2
common stock performed by a third party at the request of AmSurg prior to the
Distribution or, if a sale of AmSurg common stock (other than on exercise of a
stock option) occurs after the date of such valuation but prior to the
Distribution, the purchase price per share paid in such sale and (ii)
multiplying the resulting quotient by one-third. The Shares will be issued as
Restricted Stock (as such term is defined in the AmSurg Corp. 1997 Stock
Incentive Plan (the "Plan")) in accordance with Section 7 of the Plan,
effective upon the Distribution. Except as otherwise provided in Section 7 of
this Agreement or Section 10 of the Plan, one-third of the Shares will vest
upon the Distribution, one-third of the Shares will vest on the first
anniversary of the Distribution and the remaining one-third of the Shares will
vest on the second anniversary of the Distribution. Until the second
anniversary of the date of the Distribution, Advisor will not sell, assign or
transfer the Shares except Advisor may sell, assign or transfer vested Shares
(i) upon a Change in Control (as defined in the Plan), (ii) upon any Potential
Change in Control (as defined in the Plan) as a result of which awards under
the Plan become vested, (iii) upon any termination of the advisory relationship
under this Agreement or (iv) to the extent permitted by Section 13(h) of the
Plan.
5. ADDITIONAL COMPENSATION. While Advisor is serving as an
Advisor hereunder, Advisor will be eligible to receive compensation as an
Outside Director of AmSurg including awards of restricted stock.
6. EXPENSES. Advisor shall be reimbursed for ordinary and
necessary business expenses incurred by Advisor on behalf of AmSurg upon
presentation of vouchers in accordance with the usual and customary procedure
of AmSurg in relation to such expense items.
7. TERMINATION BY AMSURG. AmSurg may terminate the advisory
relationship hereunder at any time during the term of this Agreement by giving
written notice to Advisor. Upon any such termination, other than for Cause (as
hereinafter defined), all of the Shares will vest. "Cause" shall mean (i) a
felony conviction of Advisor or the failure of Advisor to contest prosecution
for a felony, (ii) conviction of a crime involving moral turpitude, or (iii)
willful and continued misconduct or gross negligence by Advisor in the
performance of his duties as an advisor to AmSurg.
8. TERMINATION BY ADVISOR. Advisor may terminate the advisory
relationship hereunder at any time upon sixty (60) days written notice to
AmSurg. Upon such termination by Advisor, all Shares not theretofore vested
will be forfeited.
9. CONFIDENTIAL INFORMATION. Advisor agrees not to disclose,
either during the time he is providing services to AmSurg or following
termination of the Advisory relationship hereunder, to any person (other than a
person to whom disclosure is necessary in connection with the performance of
his duties as a Advisor to AmSurg or to any person specifically authorized by a
general partner of AmSurg) any material confidential information concerning
AmSurg or any of its Affiliates, including, but not limited to, strategic
plans, investment strategy, research, financial analysis, contract terms,
financial costs, pricing terms, or business opportunities whether for existing,
new or developing businesses. Advisor and AmSurg acknowledge and agree that
any of the covenants contained in this Section 9 may be specifically enforced
through injunctive relief but such right to injunctive relief shall not
preclude AmSurg from other remedies which may be available to it.
Notwithstanding any
2
<PAGE> 3
provision to the contrary or otherwise contained in this Agreement, the
agreement and covenants contained in this Section 9 shall not terminate upon
Advisor's termination of the advisory relationship hereunder or upon the
termination of this Agreement under any other provision of this Agreement.
10. NON-COMPETE COVENANT.
(a) During the term of this Agreement, Advisor agrees not
to enter into or engage in any phase of the business
conducted by AmSurg in any state in which AmSurg is
conducting business, either as an individual for his
own account, as a partner or joint venturer, or as an
employee, agent, officer, director, or substantial
shareholder of a corporation or otherwise. As of the
date of execution of this Agreement, the business
conducted by AmSurg was defined as single specialty
surgery centers, single specialty physician networks
and single specialty physician practices.
(b) During the term of this Agreement, Advisor agrees not
to directly or indirectly solicit business from any
entity, organization or person which has contracted
with AmSurg, which has been doing business with
AmSurg, or from which the Advisor knows or has reason
to know that AmSurg is going to solicit business.
(c) Advisor and AmSurg acknowledge and agree that any of
the covenants contained in this Section 10 may be
specifically enforced through injunctive relief, but
such right to injunctive relief shall not preclude
AmSurg from other remedies which may be available to
it.
11. INDEMNIFICATION. Advisor will be entitled to indemnification
as provided in the Indemnification Agreement, dated as of the date of the
Distribution, by and between AmSurg and Advisor, and in the Charter and Bylaws
of AmSurg.
12. NO ALIENATION OF BENEFITS. No interest of Advisor or his
spouse or any other beneficiary of Advisor under this Agreement, or any right
to receive any payment hereunder, shall be subject in any manner to sale,
transfer, assignment, pledge, attachment, garnishment, or other alienation or
encumbrance of any kind, nor may such interest or right to receive a payment or
distribution be taken, voluntarily or involuntarily, for the satisfaction of
the obligations or debts of, or other claims against, Advisor or his spouse or
other beneficiary, including claims for alimony, support, separate maintenance,
and claims in bankruptcy proceedings.
13. BENEFITS UNFUNDED. All rights of Advisor and his spouse or
other beneficiary under this Agreement shall at all times be entirely unfunded
and no provision shall at any time be made with respect to segregating any
assets of AmSurg for payment of any amounts due hereunder. Neither Advisor nor
his spouse or other beneficiary shall have any interest in or rights against
any specific assets of AmSurg, and Advisor and his spouse or other beneficiary
shall have only the rights of a general unsecured creditor of AmSurg.
3
<PAGE> 4
14. NOTICES. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and sent by registered or
certified mail to his residence in the case of Advisor, or to its principal
office in the case of AmSurg and the date of mailing shall be deemed the date
which such notice has been provided.
15. ASSIGNMENT. The rights and obligations of the AmSurg under
this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the AmSurg. The Advisor acknowledges that the
services to be rendered by him are unique and personal, and Advisor may not
assign any of his rights or delegate any of his duties or obligations under
this Agreement without the written consent of the Board of Directors of AmSurg.
16. ENTIRE AGREEMENT. This instrument contains the entire
agreement of the parties and supersedes all other prior agreements, employment
contracts and understandings, both written and oral, express or implied with
respect to the subject matter of this Agreement and may not be changed orally
but only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
17. APPLICABLE LAW. This Agreement shall be governed by the laws
of the State of Tennessee, without giving effect to the principles of conflicts
of law thereof.
18. HEADINGS. The sections, subjects and headings of this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
20. EFFECTIVENESS. This Agreement will not be effective if the
Distribution does not occur.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first written above.
---------------------------------------
[Advisor]
AMSURG CORP.
4
<PAGE> 5
By:
------------------------------------
Title:
---------------------------------
5
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARY LIST
AS OF MARCH 10, 1997
(PAGE 1 OF 4)
<TABLE>
<CAPTION>
STATE OF OWNERSHIP
NAME OF SUBSIDIARY ORGANIZATION OWNED BY PERCENTAGE
- --------------------------------------------- ------------ --------------------------- ------------
<S> <C> <C> <C>
AmSurg KEC, Inc. TN AmSurg Corp. 100%
The Endoscopy Center of Knoxville, L.P. TN AmSurg KEC, Inc. 51%
AmSurg EC Topeka, Inc. TN AmSurg Corp. 100%
The Endoscopy Center of Topeka, L.P. TN AmSurg EC Topeka, Inc. 60%
AmSurg EC St. Thomas, Inc. TN AmSurg Corp. 100%
The Endoscopy Center of St. Thomas, L.P. TN AmSurg EC St. Thomas, Inc. 60%
AmSurg EC Centennial, Inc. TN AmSurg Corp. 100%
The Endoscopy Center of Centennial, L.P. TN AmSurg EC Centennial, Inc. 60%
AmSurg EC Beaumont, Inc. TN AmSurg Corp. 100%
The Endoscopy Center of Southeast Texas, L.P. TN AmSurg EC Beaumont, Inc. 60%
AmSurg EC Santa Fe, Inc. TN AmSurg Corp. 100%
The Endoscopy Center of Santa Fe, L.P. TN AmSurg EC Santa Fe, Inc. 60%
AmSurg EC Washington, Inc. TN AmSurg Corp. 100%
The Endoscopy Center of Washington D.C., L.P. TN AmSurg EC Washington, Inc. 60%
AmSurg Torrance, Inc. TN AmSurg Corp. 100%
The Endoscopy Center of the South Bay, L.P. TN AmSurg Torrance, Inc. 51%
AmSurg Encino, Inc. TN AmSurg Corp. 100%
The Valley Endoscopy Center, L.P. TN AmSurg Encino, Inc. 51%
AmSurg Brevard, Inc. TN AmSurg Corp. 100%
The Ophthalmology Center of Brevard, L.P. TN AmSurg Brevard, Inc. 51%
AmSurg Sebastopol, Inc. TN AmSurg Corp. 100%
The Sebastopol ASC, L.P. TN AmSurg Sebastopol, Inc. 60%
AmSurg ENT Brevard, Inc. TN AmSurg Corp. 100%
The ENT Center of Brevard, L.P. TN AmSurg ENT Brevard, Inc. 51%
</TABLE>
<PAGE> 2
SUBSIDIARY LIST
AS OF MARCH 10, 1997
(PAGE 2 OF 4)
<TABLE>
<CAPTION>
STATE OF OWNERSHIP
NAME OF SUBSIDIARY ORGANIZATION OWNED BY PERCENTAGE
- --------------------------------------------- ------------ --------------------------- ------------
<S> <C> <C> <C>
AmSurg Abilene, Inc. TN AmSurg Corp. 100%
The Abilene ASC, L.P. TN AmSurg Abilene, Inc. 60%
AmSurg West Tennessee, Inc. TN AmSurg Corp. 100%
The West Tennessee Center, L.P. TN AmSurg West Tennessee, Inc. 40%
AmSurg Lakeland, Inc. TN AmSurg Corp. 100%
AmSurg SWFLA, Inc. TN AmSurg Corp. 100%
AmSurg Southwest Florida, L.P. TN AmSurg SWFLA, Inc. 60%
AmSurg Lorain, Inc. TN AmSurg Corp. 100%
The Lorain ASC, L.P. TN AmSurg Lorain, Inc. 51%
AmSurg Maryville, Inc. TN AmSurg Corp. 100%
The Maryville ASC TN AmSurg Maryville, Inc. 51%
AmSurg Holdings, Inc. TN AmSurg Corp. 100%
The Knoxville Ophthalmology ASC, LLC TN AmSurg Holdings, Inc. 60%
The West Monroe Endoscopy ASC, LLC TN AmSurg Holdings, Inc. 55%
Montgomery Eye Surgery Center, LLC TN AmSurg Holdings, Inc. 51%
The Evansville ASC, LLC TN AmSurg Holdings, Inc. 40%
The Sidney ASC, LLC TN AmSurg Holdings, Inc. 51%
The Bloomington ASC, LLC TN AmSurg Holdings, Inc. 51%
The Union City ASC, LLC TN AmSurg Holdings, Inc. 51%
The Cleveland ASC, LLC TN AmSurg Holdings, Inc. 51%
The Milwaukee ASC, LLC TN AmSurg Holdings, Inc. 51%
The Eye Care Network, LLC TN AmSurg Holdings, Inc. 51%
The Alabama Eye Care Network, LLC TN AmSurg Holdings, Inc. 51%
The Columbia ASC, LLC TN AmSurg Holdings, Inc. 51%
The Wichita Orthopaedic ASC, LLC TN AmSurg Holdings, Inc. 51%
The Minneapolis Endoscopy ASC, LLC TN AmSurg Holdings, Inc. 51%
The Chevy Chase ASC, LLC TN AmSurg Holdings, Inc. 51%
The Willoughby ASC, LLC TN AmSurg Holdings, Inc. 51%
The Oklahoma City ASC, LLC TN AmSurg Holdings, Inc. 51%
The Cincinnati ASC, LLC TN AmSurg Holdings, Inc. 51%
The Mountain West Gastroenterlogy ASC, LLC TN AmSurg Holdings, Inc. 51%
AmSurg Miami, Inc. TN AmSurg Corp. 100%
The Miami ASC, L.P. TN AmSurg Miami, Inc. 70%
</TABLE>
<PAGE> 3
SUBSIDIARY LIST
AS OF MARCH 10, 1997
(PAGE 3 OF 4)
<TABLE>
<CAPTION>
STATE OF OWNERSHIP
NAME OF SUBSIDIARY ORGANIZATION OWNED BY PERCENTAGE
- --------------------------------------------- ------------ ------------------------------ ------------
<S> <C> <C> <C>
AmSurg North Platte, Inc. TN AmSurg Corp. 100%
AmSurg Fort Collins, Inc. TN AmSurg Corp. 100%
AmSurg Hanford, Inc. TN AmSurg Corp. 100%
The Hanford ASC, L.P. TN AmSurg Hanford, Inc. 63%
AmSurg Dallas, Inc. TN AmSurg Corp. 100%
AmSurg Port Arthur, Inc. TN AmSurg Corp. 100%
The Port Arthur ASC, L.P. TN AmSurg Port Arthur, Inc. 51%
AmSurg Melbourne, Inc. TN AmSurg Corp. 100%
The Melbourne ASC, L.P. TN AmSurg Melbourne, Inc. 51%
AmSurg Chicago, Inc. TN AmSurg Corp. 100%
The Chicago Endoscopy ASC, L.P. TN AmSurg Chicago, Inc. 51%
AmSurg Hillmont, Inc. TN AmSurg Corp. 100%
The Hillmont ASC, L.P. TN AmSurg Hillmont, Inc. 51%
AmSurg Northwest Florida, Inc. TN AmSurg Corp. 100%
The Northwest Florida ASC, L.P. TN AmSurg Northwest Florida, Inc. 51%
AmSurg Palmetto, Inc. TN AmSurg Corp. 100%
The Palmetto ASC, L.P. TN AmSurg Palmetto, Inc. 51%
AmSurg Hallandale, Inc. TN AmSurg Corp. 100%
The Hallandale Surgery ASC, L.P. TN AmSurg Hallandale, Inc. 51%
AmSurg Ocala, Inc. TN AmSurg Corp. 100%
The Ocala Endoscopy ASC, L.P. TN AmSurg Ocala, Inc. 51%
AmSurg South Florida Network, Inc. TN AmSurg Corp. 100%
The GI Network of South Florida, L.P. TN AmSurg South Florida Network, Inc. 51%
AmSurg Largo, Inc. TN AmSurg Corp. 100%
The Largo Urology ASC, L.P. TN AmSurg Largo, Inc. 40%
AmSurg Dade County, Inc. TN AmSurg Corp. 100%
Gastroenterology Group of South Florida TN AmSurg Dade County, Inc. 70%
</TABLE>
<PAGE> 4
SUBSIDIARY LIST
AS OF MARCH 10, 1997
(PAGE 4 OF 4)
<TABLE>
<CAPTION>
STATE OF OWNERSHIP
NAME OF SUBSIDIARY ORGANIZATION OWNED BY PERCENTAGE
- ------------------------------------- -------------------- --------------------------- ------------
<S> <C> <C> <C>
AmSurg Panama City, Inc. TN AmSurg Corp. 100%
The Panama City Eye ASC, L.P. TN AmSurg Panama City, Inc. 51%
AmSurg MEA, Inc. TN AmSurg Corp. 100%
AmSurg Miami Urology, Inc. TN AmSurg Corp. 100%
The Miami Urology Group, L.P. TN AmSurg Miami Urology, Inc. 60%
The Miami Urology ASC, L.P. TN AmSurg Miami Urology, Inc. 60%
AmSurg Crystal River, Inc. TN AmSurg Corp. 100%
The Capital River Endosocopy ASC, L.P. TN AmSurg Crystal River, Inc. 51%
AmSurg Abilene Eye, Inc. TN AmSurg Corp. 100%
The Abilene Eye ASC, L.P. TN AmSurg Abilene Eye, Inc. 51%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,192,408
<SECURITIES> 0
<RECEIVABLES> 5,640,946
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<INVENTORY> 554,839
<CURRENT-ASSETS> 10,371,954
<PP&E> 16,157,227
<DEPRECIATION> 3,821,335
<TOTAL-ASSETS> 54,653,458
<CURRENT-LIABILITIES> 5,640,285
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4,982,057
0
<COMMON> 26,064,085
<OTHER-SE> 2,309,790
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<INTEREST-EXPENSE> 947,863
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