1
Exhibit 1.1
$75,000,000
FPA MEDICAL MANAGEMENT, INC.
6 1/2% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2001
PURCHASE AGREEMENT
December 13, 1996
XXXXX XXXXXX INC.
BEAR, XXXXXXX & CO. INC.
XXXXXX BROTHERS INC.
XXXXXXXXXXX & CO., INC.
XXXXXXX & COMPANY, INC.
As Initial Purchasers
c/o XXXXX XXXXXX INC.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
FPA Medical Management, Inc., a Delaware corporation (the
"Company"), proposes, upon the terms and conditions set forth herein, to issue
and sell to you, as the initial purchasers (the "Initial Purchasers"),
$75,000,000 aggregate principal amount of its 6 1/2% Convertible Subordinated
Debentures due 2001 (the "Firm Debentures"). The Company also proposes, upon the
terms and conditions set forth herein, to issue and sell to the Initial
Purchasers up to an additional $11,250,000 aggregate principal amount of its 6
1/2% Convertible Subordinated Debentures due 2001 (the "Additional Debentures").
The Firm Debentures and the Additional Debentures are hereinafter collectively
referred to as the "Debentures." The Debentures will be issued pursuant to the
provisions of an Indenture, to be dated as of December 18, 1996 (the
"Indenture"), between the Company and First Union National Bank, as Trustee (the
"Trustee"). The Company's common stock, $.002 par value, is hereinafter referred
to as the "Common Stock."
The Company wishes to confirm as follows its agreement with the
Initial Purchasers in connection with the purchase and resale of the Debentures.
1. Preliminary Offering Memorandum and Offering Memorandum. The
Debentures will be offered and sold to the Initial Purchasers without
registration under the Securities Act of 1933, as amended (the "Act"), in
reliance on an exemption pursuant to Section 4(2) under the Act. The Company has
prepared a preliminary offering memorandum, dated November 26, 1996 (the
"Preliminary Offering Memorandum"), and an offering memorandum, dated December
13, 1996 (the "Offering Memorandum"), setting forth information regarding the
Company and the Debentures. Any references herein to the Preliminary Offering
Memorandum and the Offering Memorandum shall be deemed to include all amendments
and supplements thereto and any documents incorporated by reference therein,
including those documents which have been filed under the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Securities and
Exchange Commission (the "Commission") thereunder (collectively, the "Exchange
Act"). As used herein, the term "Incorporated Documents" means the documents
which
2
at the time are incorporated by reference in the Preliminary Offering
Memorandum, the Offering Memorandum or any amendment or supplement thereto. The
Company hereby confirms that it has authorized the use of the Preliminary
Offering Memorandum and the Offering Memorandum in connection with the offering
and resale of the Debentures by the Initial Purchasers.
The Company understands that the Initial Purchasers propose to make
offers and sales (the "Exempt Resales") of the Debentures purchased by the
Initial Purchasers hereunder only on the terms and in the manner set forth in
the Offering Memorandum and Section 2 hereof as soon as the Initial Purchasers
deem advisable after this Agreement has been executed and delivered (i) to
persons who are or whom the Initial Purchasers reasonably believe to be
qualified institutional buyers ("Qualified Institutional Buyers") as defined in
Rule 144A under the Act, as such rule may be amended from time to time ("Rule
144A"), in transactions under Rule 144A, (ii) to a limited number of other
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Act) that are institutional investors (the "Institutional Accredited Investors")
and that agree to comply with the transfer restrictions set forth in the letter
containing certain representations and agreements substantially in the form
attached hereto as Exhibit A and (iii) outside the United States to non-U.S.
persons in offshore transactions in reliance upon Regulation S (as those terms
are defined in Regulation S under the Act) ("Regulation S") under the Act (such
persons specified in clauses (i), (ii) and (iii) being referred to herein as the
"Eligible Purchasers"). As used herein the terms "offshore transactions,"
"United States" and "U.S. persons" have the meanings given them in Regulation S.
It is understood and acknowledged that upon original issuance
thereof, and until such time as the Debentures (and all securities issued in
exchange therefor, in substitution thereof or upon conversion thereof (including
the Common Stock)) have been (i) effectively registered under the Act and
disposed of in accordance with an effective registration statement under the
Act, (ii) distributed to the public pursuant to Rule 144 or (ii) sold or
transferred pursuant to Rule 144(k) under the Act (or any similar provisions
then in force), any certificate representing such securities shall bear the
following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) UNLESS SUCH OFFER, SALE OR OTHER TRANSFER IS (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON WHO IS OR WHO THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) TO AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),(2),(3)
OR (7) UNDER THE SECURITIES ACT) THAT IS AN INSTITUTIONAL INVESTOR AND THAT
PRIOR TO SUCH TRANSFER, FURNISHES TO FIRST UNION NATIONAL BANK OR AMERICAN STOCK
TRANSFER & TRUST COMPANY A SIGNED LETTER CONTAINING
2
3
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THE SECURITY EVIDENCED HEREBY (WHICH FORM OF LETTER CAN BE OBTAINED FROM
FIRST UNION NATIONAL BANK OR AMERICAN STOCK TRANSFER & TRUST COMPANY, (E)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (F)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT SUBJECT TO THE COMPANY'S, FIRST UNION NATIONAL BANK'S AND
AMERICAN STOCK TRANSFER AND TRUST COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSES (C), (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN EACH OF THE FOREGOING CASES PROVIDED THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO FIRST UNION NATIONAL BANK AND AMERICAN STOCK TRANSFER & TRUST
COMPANY, AND SUBJECT TO ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF THE THEN HOLDER OF THIS SECURITY AFTER THE RESALE
RESTRICTION TERMINATION DATE.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Debentures and, if such Debentures are
subsequently converted into Common Stock, the Common Stock, will have the
registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), dated the date hereof, in the form of Exhibit
B hereto, for so long as such Debentures and Common Stock constitute "Transfer
Restricted Securities" (as defined in the Registration Rights Agreement).
Pursuant to the Registration Rights Agreement, the Company will agree (i) to
file with the Commission under the circumstances set forth therein a
registration statement on the appropriate form under the Act relating to the
resale of the Debentures and the Common Stock by certain holders thereof from
time to time in accordance with the methods of distribution set forth in such
registration statement and Rule 415 under the Act (the "Shelf Registration
Statement") and (ii) to use its best efforts to cause such Shelf Registration
Statement to be declared effective. This Agreement, the Indenture and the
Registration Rights Agreement are hereinafter referred to collectively as the
"Operative Documents."
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Indenture or the Offering Memorandum.
2. Agreements to Sell, Purchase and Resell. (a) The Company hereby
agrees, subject to all the terms and conditions set forth herein, to issue and
sell to each Initial Purchaser and, upon the basis of the representations,
warranties and agreements of the Company herein contained and subject to all the
terms and conditions set forth herein, each Initial Purchaser agrees to purchase
from the Company, at a purchase price of 97.5% of the principal amount thereof,
the principal amount of Firm Debentures set forth opposite the name of such
Initial Purchaser in Schedule I hereto.
(b) The Company also agrees, subject to all the terms and conditions
set forth herein, to sell to the Initial Purchasers, and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, the Initial Purchasers
shall have the right to purchase from the Company pursuant to an option (the
"over-allotment option"), which may be exercised at any time and from time to
time prior to 9:00 P.M., New York City time, on the 30th day after the date of
the Offering Memorandum (or, if such 30th day shall be a Saturday or Sunday or a
holiday, on the next business day thereafter when the New York Stock Exchange is
open for trading), up to $11,250,000 principal amount of Additional Debentures
at the same purchase price as the Firm Debentures, plus accrued interest, if
any, from the date of issuance of the Firm Debentures to the date of delivery
and payment. Upon any exercise of the over-allotment option, each Initial
Purchaser, severally and not jointly, agrees to purchase that principal amount
of Additional Debentures which bears the same proportion to the aggregate
principal amount of Additional Debentures to be purchased by the
3
4
Initial Purchasers as the principal amount of Firm Debentures set forth opposite
the name of such Initial Purchaser bears to the aggregate principal amount of
Firm Debentures.
(c) The Initial Purchasers have advised the Company that they
propose to offer the Debentures for sale upon the terms and conditions set forth
in this Agreement and in the Offering Memorandum. Each Initial Purchaser hereby
agrees that it will not take any action that would constitute a public offering
of the Debentures in any jurisdiction and further agrees that, with respect to
the offer or sale of any Debentures or the delivery or distribution of any
Offering Memorandum, it will comply with applicable laws and regulations in such
jurisdictions or to which it is otherwise subject. Each Initial Purchaser hereby
represents and warrants to the Company that such Initial Purchaser (i) is a
Qualified Institutional Buyer within the meaning of Rule 144A and, assuming the
accuracy of the Company's representations and warranties contained herein, is
purchasing the Debentures pursuant to a private sale exempt from registration
under the Act and is not purchasing the Debentures with a view to or for offer
or sale in connection with any distribution that would be in violation of
foreign or U.S. federal or state securities laws, (ii) will not solicit offers
for, or offer or sell, the Debentures by means of any form of general
solicitation or general advertising or in any manner involving a public offering
within the meaning of Section 4(2) of the Act and (iii) has solicited and will
solicit offers for the Debentures only from, and has offered and will offer,
sell or deliver the Debentures prior to the filing of the Shelf Registration
Statement, only to (A) persons who are or whom the Initial Purchasers reasonably
believe to be Qualified Institutional Buyers, or if any such person is buying
for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to the Initial
Purchaser that each such account is a Qualified Institutional Buyer, to whom
notice has been given that such sale or delivery is being made in reliance on
Rule 144A, in each case, in transactions under Rule 144A, (B) to Institutional
Accredited Investors and (C) outside the United States to certain persons in
offshore transactions in reliance on Regulation S. The Initial Purchasers have
advised the Company that they will offer the Debentures to Eligible Purchasers
at a price initially equal to 100% of the principal amount thereof, plus accrued
interest, if any, from the date of issuance of the Firm Debentures. Such price
may be changed by the Initial Purchasers at any time thereafter without notice.
(d) The Initial Purchasers represent and warrant that they (i) have
not offered or sold and prior to the date that is six months after the closing
date with respect to the Offering will not offer or sell any Debentures to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which will not involve an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995
(the "Regulations"); (ii) have complied with and will comply with all applicable
provisions of the Financial Services Act of 1986 and the Regulations with
respect to anything done by them in relation to the Debentures in, from, or
otherwise involving the United Kingdom; and (iii) have only issued or passed on
and will only issue or pass on to any person in the United Kingdom any document
received by them in connection with the offer of the Debentures if that person
is of a kind described in Article 11(3) of the Financial Services Act of 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.
(e) The Initial Purchasers represent and warrant that they have
offered and sold the Debentures and agree that they will offer and sell the
Debentures (i) as part of their distribution at any time, and (ii) otherwise
until 40 days after the later of the commencement of the offering of the
Debentures and the Closing Date, only in accordance with Rule 903 of Regulation
S or as otherwise permitted pursuant to paragraph (c) above. Accordingly, the
Initial Purchasers represent and agree that none of such Initial Purchasers,
their affiliates nor any persons acting on their behalf have engaged or will
engage in any directed selling efforts (as defined in Regulation S under the
Act) with respect to the Debentures, and they have complied and will comply with
the offering restrictions requirement of Regulation S. Such Initial Purchasers
agree that, at or prior to confirmation of the sale of Debentures to non-U.S.
persons (as defined in Regulation S under the Act) other than a sale pursuant to
Rule 144A, they will have sent to each
4
5
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Debentures from such Initial Purchasers during the
restricted period a confirmation or notice to substantially the following
effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time or
(ii) otherwise until 40 days after the later of the commencement of the
offering and the closing date, except in either case in accordance with
Regulation S (or Rule 144A) under the Securities Act. Terms used above
have the meaning given to them by Regulation S."
The Initial Purchasers understand that the Company and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Sections
7(c) and 7(h) hereof, counsel to the Company and counsel to the Initial
Purchasers will rely upon the accuracy and truth of the foregoing
representations and agreements and the Initial Purchasers hereby consent to such
reliance.
3. Delivery of the Debentures and Payment Therefor. Delivery to the
Initial Purchasers of and payment for the Firm Debentures shall be made at the
office of Xxxxx Xxxxxx Inc., 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, at 10:00
A.M., New York City time, on December 18, 1996 (the "Closing Date"). The place
of closing for the Firm Debentures and the Closing Date may be varied by
agreement between the Initial Purchasers and the Company.
Delivery to the Initial Purchasers of and payment for any Additional
Debentures to be purchased by the Initial Purchasers shall be made at the
aforementioned office of Xxxxx Xxxxxx Inc. at such time on such date (the
"Option Closing Date"), which may be the same as the Closing Date but shall in
no event be earlier than the Closing Date nor earlier than two nor later than
ten business days after the giving of the notice hereinafter referred to, as
shall be specified in a written notice from the Initial Purchasers to the
Company of the Initial Purchasers' determination to purchase the principal
amount of Additional Debentures specified in such notice. The place of closing
for any Additional Debentures and the Option Closing Date for such Additional
Debentures may be varied by agreement between the Initial Purchasers and the
Company.
The Firm Debentures and any Additional Debentures which the Initial
Purchasers may elect to purchase will be delivered to the Initial Purchasers
against payment of the purchase price therefor in immediately available funds.
Debentures being sold by the Initial Purchasers in Exempt Resales to Qualified
Institutional Buyers in reliance on Rule 144A will be initially evidenced by a
global security and will be registered in the name of Cede & Co. ("Cede"), as
nominee of The Depository Trust Company ("DTC"). Debentures being sold by the
Initial Purchasers in Exempt Resales to certain persons in offshore transactions
in reliance on Regulation S will be initially evidenced by a global security
which will be deposited with, or on behalf of, DTC and registered in the name of
Cede as DTC's nominee, for the accounts of Xxxxxx Guaranty Trust Company of New
York, Brussels office, or Citibank, N.A., as operators of the Euroclear System
and Cedel, S.A., respectively. The Debentures to be delivered to the Initial
Purchasers shall be made available to the Initial Purchasers in New York City
for inspection and packaging not later than 9:30 a.m., New York City time, on
the business day next preceding the Closing Date or the Option Closing Date, as
the case may be.
4. Agreements of the Company. The Company agrees with the Initial
Purchasers as follows:
(a) The Company will advise the Initial Purchasers promptly and, if
requested by them, will confirm such advice in writing, within the period of
time referred to in paragraph (e) below, of any material change in the condition
(financial or otherwise), results of operations or business of the
5
6
Company, the Subsidiaries and the Professional Corporations (each as defined
herein), taken as a whole, or of the happening of any event which makes any
statement of a material fact made in the Offering Memorandum (as then amended or
supplemented) untrue or which requires the making of any additions to or changes
in the Offering Memorandum (as then amended or supplemented) in order to make
the statements therein not misleading, or of the necessity to amend or
supplement the Offering Memorandum (as then amended or supplemented) to comply
with any applicable law.
(b) The Company will furnish to the Initial Purchasers, without
charge, as of the date of the Offering Memorandum, such number of copies of the
Offering Memorandum (as then amended or supplemented) as they may reasonably
request.
(c) The Company will not make any amendment or supplement to the
Preliminary Offering Memorandum or to the Offering Memorandum of which the
Initial Purchasers shall not previously have been advised and provided a copy of
prior to the making thereof or to which they shall reasonably object after being
so advised or file any document which upon filing becomes an Incorporated
Document without delivering a copy of such document to the Initial Purchasers
prior to such filing.
(d) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to the Initial Purchasers, without charge,
in such quantities as the Initial Purchasers shall have reasonably requested or
may hereafter reasonably request, copies of the Preliminary Offering Memorandum.
The Company consents to the use, in accordance with the securities or Blue Sky
laws of the jurisdictions in which the Debentures are offered by the Initial
Purchasers and by dealers, prior to the date of the Offering Memorandum, of each
Preliminary Offering Memorandum so furnished by the Company. The Company
consents to the use of the Offering Memorandum (and of any amendment or
supplement thereto) in accordance with the securities or Blue Sky laws of the
jurisdictions in which the Debentures are offered by the Initial Purchasers and
by all dealers to whom Debentures may be sold, in connection with the offering
and sale of the Debentures.
(e) If, at any time prior to completion of the distribution of the
Debentures by the Initial Purchasers to Eligible Purchasers, any event shall
occur as a result of which it becomes necessary to amend or supplement the
Offering Memorandum (as then amended or supplemented) in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or to file under the Exchange Act any document which upon
filing becomes an Incorporated Document, to comply with any applicable law, the
Company will, subject to Section 4(c) hereof, forthwith prepare an appropriate
supplement or amendment thereto, or will prepare and file such document, as the
case may be, and will expeditiously furnish to the Initial Purchasers and
dealers a reasonable number of copies thereof.
(f) The Company will cooperate with the Initial Purchasers and with
their counsel in connection with the registration or qualification of the
Debentures and the Common Stock issuable upon conversion of the Debentures for
offering and sale by the Initial Purchasers and by dealers under the securities
or Blue Sky laws of such jurisdictions as the Initial Purchasers may designate
and will file such consents to service of process or other documents necessary
or appropriate in order to effect such qualification; provided that in no event
shall the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would subject it to
service of process in suits, other than those arising out of the offering or
sale of the Debentures, in any jurisdiction where it is not now so subject.
(g) So long as any of the Debentures are outstanding, the Company
will furnish to the Initial Purchasers (i) as soon as available, a copy of each
report of the Company mailed to stockholders or filed with the Commission and
(ii) such other publicly available information concerning the Company and the
Subsidiaries as the Initial Purchasers may reasonably request.
6
7
(h) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than
pursuant to Section 10 hereof or by notice given by the Initial Purchasers
terminating this Agreement pursuant to Section 9 or Section 11 hereof) or if
this Agreement shall be terminated by the Initial Purchasers because of any
failure or refusal on the part of the Company to comply with the terms or
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
the Initial Purchasers for all out-of-pocket expenses (including the reasonable
fees and expenses of their counsel) incurred by them in connection herewith.
(i) The Company will apply the net proceeds from the sale of the
Debentures in the manner described in the Offering Memorandum under the caption
"Use of Proceeds."
(j) The Company will not, without the prior written consent of Xxxxx
Xxxxxx Inc., sell, contract to sell or otherwise dispose of any Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock,
or grant any options or warrants or rights to purchase Common Stock, for a
period of 90 days after the date of the Offering Memorandum, except (i) pursuant
to this Agreement, (ii) upon conversion of the Debentures in accordance with
their terms, (iii) upon the exercise of stock options pursuant to the stock
option plans and upon the exercise of warrants, in each case described in the
Offering Memorandum or a document incorporated by reference therein, (iv)
pursuant to the AHI Merger (as and to the extent described in the Offering
Memorandum or a document incorporated by reference therein) or (v) to comply
with its obligations under the Registration Rights Agreement dated as of
November 29, 1996 between the Company and Foundation Health Corporation.
(k) The Company has furnished or will furnish to the Initial
Purchasers "lock-up" letters, in form and substance reasonably satisfactory to
the Initial Purchasers, signed by each of its current directors and officers and
such stockholders of the Company designated by the Initial Purchasers.
(l) Except as stated in this Agreement, the Preliminary Offering
Memorandum and the Offering Memorandum, the Company has not taken, nor will it
take, directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Debentures to facilitate the sale or resale of the Debentures. The Company will
not distribute any offering material in connection with the Exempt Resales other
than the Preliminary Offering Memorandum and the Offering Memorandum.
(m) The Company will use its reasonable best efforts to cause the
Debentures to be eligible for trading on The PORTAL Market.
(n) From and after the Closing Date, so long as any of the
Debentures are "restricted securities" within the meaning of Rule 144(a)(3)
under the Act, the Company will furnish to holders of the Debentures and
prospective purchasers of Debentures designated by such holders, upon request of
such holders or such prospective purchasers, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Act to permit compliance with
Rule 144A in connection with resale of the Debentures, if at the time of such
request the Company is not subject to Section 13 or 15(d) of the Exchange Act.
(o) The Company agrees not to sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Debentures in a manner that would
require the registration under the Act of the sale to the Initial Purchasers or
the Eligible Purchasers of the Debentures.
(p) The Company agrees to comply in all material respects with all
of the terms and conditions of the Indenture, the Registration Rights Agreement
and all agreements set forth in the representation letters of the Company to DTC
relating to the approval of the Debentures by DTC for "book entry" transfer.
7
8
(q) The Company agrees that prior to or simultaneously with any
registration of the Debentures pursuant to the Registration Rights Agreement, or
at such earlier time as may be so required, the Indenture shall be qualified
under the Trust Indenture Act of 1939, as amended (the "1939 Act"), and will
cause to be entered into any necessary supplemental indentures in connection
therewith.
5. Representations and Warranties of the Company. The Company
represents and warrants to the Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum
have been prepared by the Company for use by the Initial Purchasers in
connection with the Exempt Resales. No order or decree preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum or any amendment or
supplement thereto, or any order asserting that the transactions contemplated by
this Agreement are subject to the registration requirements of the Act, has been
issued, and no proceeding for that purpose has commenced or is pending or, to
the knowledge of the Company, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering Memorandum
as of their respective dates and the Offering Memorandum as of the Closing Date
did not and will not at any time contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that this representation and warranty does not
apply to statements in or omissions from the Preliminary Offering Memorandum and
the Offering Memorandum (or any supplement or amendment thereto) made in
reliance upon and in conformity with information relating to the Initial
Purchasers furnished to the Company in writing by or on behalf of the Initial
Purchasers expressly for use therein.
(c) The Incorporated Documents heretofore filed with the Commission
were filed in a timely manner and, when they were filed (or, if any amendment
with respect to any such document was filed, when such document was filed),
conformed in all material respects to the requirements of the Exchange Act and
did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and any further Incorporated Documents will, when so
filed, be filed in a timely manner and conform in all material respects to the
requirements of the Exchange Act and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(d) The Indenture has been duly and validly authorized by the
Company and, upon its execution and delivery by the Company and assuming due
authorization, execution and delivery by the Trustee, will be a valid and
binding agreement of the Company, enforceable in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles, and
the Indenture conforms in all material respects to the description thereof in
the Offering Memorandum; no qualification of the Indenture under the 1939 Act is
required in connection with the offer and sale of the Debentures contemplated
hereby or in connection with the Exempt Resales.
(e) The Debentures have been duly authorized by the Company and,
when executed by the Company and authenticated by the Trustee in accordance with
the Indenture and delivered to the Initial Purchasers against payment therefor
in accordance with the terms hereof, will have been validly issued and
delivered, and will constitute valid and binding obligations of the Company
entitled to the benefits of the Indenture and enforceable in accordance with
their terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles, and the Debentures will conform in all material respects
to the description thereof in the Offering Memorandum.
8
9
Except as described in the Offering Memorandum, no person has the right,
contractual or otherwise, to cause the Company to sell or otherwise issue to
them, or to permit them to underwrite the sale of, any of the Debentures.
(f) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
are free of any preemptive or similar rights and were issued and sold in
compliance with all applicable federal and state securities laws; the shares of
Common Stock issuable upon conversion of the Debentures have been duly
authorized and reserved for issuance and, when delivered upon conversion of the
Debentures, will be validly issued, fully paid and nonassessable and free of any
preemptive or similar rights; the authorized capital stock of the Company
conforms in all material respects to the description thereof in the Offering
Memorandum and the authorized and outstanding capital stock of the Company is as
set forth under the caption "Capitalization" in the Offering Memorandum. Except
as described in or contemplated by the Offering Memorandum, there are no
outstanding options, warrants or other rights calling for the issuance of, and
there are no commitments, plans or arrangements to issue, any shares of capital
stock of the Company or any security convertible into or exchangeable or
exercisable for capital stock of the Company.
(g) The only entities in which the Company has a material direct or
indirect equity or other ownership interest are the corporations listed,
together with their states of incorporation, on Schedule II hereto, collectively
(the "Subsidiaries"). Each of the Company and the Subsidiaries has been duly
organized, each is validly existing as a corporation in good standing under the
laws of its state of incorporation and has full corporate power and authority to
carry on its business as it is currently being conducted (and, in the case of
the Company, to authorize the offering of the Debentures and to execute, deliver
and perform this Agreement and to issue, sell and deliver the Debentures) and to
own, lease and operate its properties, and, except where such failure would not
have a material adverse effect, singly or in the aggregate, on the condition
(financial or otherwise), results of operations or business of the Company, the
Subsidiaries and the Professional Corporations, taken as a whole (a "Material
Adverse Effect"), each is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification. The Company does not own, lease or license any asset or property
or conduct any business outside the United States of America. Except as
disclosed in the Offering Memorandum, each of Family Practice Associates of San
Diego, Inc., an Osteopathic corporation, FPA Medical Group of California, as
Osteopathic corporation, FPA Medical Group of New Jersey, a professional
corporation, FPA Medical Group of Pennsylvania, a medical corporation, Arizona
Managed Care Providers Ltd., Xxxxxxx Xxxxxxx, M.D., a professional, d/b/a/
Xxxxxxx Medical Group, FPA Independent Practice Association, an Osteopathic
corporation, FPA Medical Group of South Carolina, P.C., VIP IPA, a professional
medical corporation, Foundation Health IPA, Century Family Medical Group, Inc.,
FPA Medical Group of Delaware, P.A., Family Practice Associates of Southern
California, an Osteopathic Medical Corporation, FPA Medical Group of Texas, a
Texas Professional Association, and Sterling Healthcare of Texas, a Texas
professional association (collectively, the "Professional Corporations") has all
requisite corporate power and authority, and all necessary authorizations,
approvals, consents, orders, licenses, certificates and permits of and from all
governmental or regulatory bodies and all other persons and entities, to own,
lease and license its assets and properties and conduct its businesses as now
being conducted and as described in the Offering Memorandum except where the
lack of such authorization, approval, consent, order, license, certificate or
permit would not have a Material Adverse Effect; no such authorization,
approval, consent, order, license, certificate or permit relating specifically
to the type of business conducted by the Company, any of its Subsidiaries or any
of the Professional Corporations contains a materially burdensome restriction
other than as disclosed in the Offering Memorandum. The Subsidiaries and the
Professional Corporations are the only entities whose financial positions and
results of operations are consolidated with those of the Company in preparation
of the financial statements included in the Offering Memorandum.
(h) All of the issued and outstanding shares of capital stock of the
Subsidiaries have been duly authorized and validly issued and are owned directly
or indirectly by the Company, and all such
9
10
shares in the Subsidiaries are fully paid and nonassessable and are beneficially
owned, directly or indirectly, by the Company free and clear of any security
interest, mortgage, pledge, claim, lien, encumbrance or adverse interest of any
nature (each, a "Lien"), except for liens created in connection with The
Company's acquisition of certain entities from Foundation Health Corporation and
its Amended and Restated Credit Agreement dated as of November 29, 1996. There
are no outstanding subscriptions, rights, warrants, options, calls, convertible
or exchangeable securities, commitments of sale, or Liens related to or
entitling any person to purchase or otherwise to acquire any shares of the
capital stock of any of the Subsidiaries.
(i) Each of the firms of accountants that has certified or shall
certify the applicable consolidated financial statements included or
incorporated by reference in the Offering Memorandum are independent public
accountants with respect to the Company, the Subsidiaries and the Professional
Corporations, as required by the Act. The consolidated historical financial
statements, together with related notes, set forth or incorporated by reference
in the Offering Memorandum comply as to form in all material respects with the
requirements of the Act applicable to a prospectus included in a registration
statement on Form S-3. Except as otherwise expressly stated therein, such
historical financial statements fairly present the consolidated financial
position of the Company, the Subsidiaries and Professional Corporations and of
acquired companies or companies the acquisition of which is probable
("Acquisition Companies"), at the respective dates indicated and the results of
their operations and their cash flows for the respective periods indicated, in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout such periods. The other financial and statistical information
and data relating to the Company, the Subsidiaries, the Professional
Corporations and the Acquisition Companies included in the Offering Memorandum
are, in all material respects, accurately presented and prepared on a basis
consistent with applicable financial statements and the books and records of the
Company. The pro forma financial statements included or incorporated by
reference in the Offering Memorandum have been prepared on a basis consistent
with such historical statements, except for the pro forma adjustments specified
therein and as otherwise expressly stated therein, give effect to assumptions
made on a reasonable basis and present fairly the historical and proposed
transactions contemplated by the Offering Memorandum. Except as otherwise
expressly stated therein, the other financial and statistical information and
data included in the Offering Memorandum (both historical and pro forma) are in
all material respects accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company.
(j) Except as disclosed in the Offering Memorandum, as of the date
hereof, (i) neither the Company nor any of the Subsidiaries or Professional
Corporations has incurred any liabilities or obligations, direct or contingent,
which are material to the Company and the Subsidiaries and Professional
Corporations, taken as a whole, nor entered into any transaction not in the
ordinary course of business that is material to the Company and the Subsidiaries
and Professional Corporations, taken as a whole, (ii) there has been no decision
or judgment in the nature of litigation adverse to the Company, the Subsidiaries
or the Professional Corporations which is material to the Company, the
Subsidiaries and the Professional Corporations, taken as a whole, (iii) there
has been no material adverse change in the condition (financial or otherwise),
results of operations, business or prospects of the Company, the Subsidiaries
and Professional Corporations, taken as a whole, (iv) neither the Company nor
any of the Subsidiaries or Professional Corporations has sustained any material
loss or interference with its assets, businesses or properties from fire,
explosion, earthquake, flood or other calamity, whether or not covered by
insurance, or from any court or legislative or other governmental action, order
or decree, (v) none of the Company, the Subsidiaries or the Professional
Corporations has received a notice of, or been threatened with, termination of a
contractual relationship with a third party payor, which such termination would,
individually or in the aggregate, have a Material Adverse Effect, and (vi)
neither the Agreement and Plan of Merger by and among the Company, FPA
Acquisition Corp. and AHI Healthcare Systems, Inc. ("AHI") dated as of November
8, 1996 (the "AHI Merger Agreement") nor the transaction contemplated by the AHI
Merger Agreement shall have been terminated nor threatened to be terminated by
any party thereto or pursuant to the terms of the AHI Merger Agreement (any of
the above, a "Material Adverse Change").
10
11
(k) Except as would not have a Material Adverse Effect, neither the
Company nor any of the Subsidiaries or Professional Corporations is in violation
of, or in default in the performance of, their respective charters or bylaws, or
of any law, ordinance, administrative or governmental rule or regulation
applicable to the Company or any of the Subsidiaries or Professional
Corporations or of any decree of any court or governmental agency or body, or
any bond, debenture, note or any other evidence of indebtedness or any
indenture, mortgage, deed of trust or other material contract, lease or other
instrument to which the Company or any of the Subsidiaries or Professional
Corporations is a party or by which any of them is bound, or to which any of the
property or assets of any of them is subject. There are no agreements,
contracts, indentures, leases or other instruments that would be required to be
described in the Offering Memorandum if it were a prospectus included in a
registration statement on Form S-3 but are not described as would be required,
or that are required to be described in or filed as an exhibit to any
Incorporated Document that are not described or filed as are required. The
descriptions of the terms of any such contracts or documents contained in the
Offering Memorandum are correct and complete in all material respects. Each
material agreement to which the Company, a Subsidiary or a Professional
Corporation is a party is in full force and effect and is valid and enforceable
by the Company, such Subsidiary or such Professional Corporation, as the case
may be, in accordance with its terms, assuming the due authorization, execution
and delivery thereof by each of the other parties thereto.
(l) Each of this Agreement, the Registration Rights Agreement and
the AHI Merger Agreement has been duly and validly authorized, executed and
delivered by the Company and is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that (i) enforcement may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or (ii) rights to indemnity hereunder may
be limited by federal or state securities laws or the public policy underlying
such laws.
(m) Except as would not have a Material Adverse Effect, the
execution, delivery, and performance of this Agreement, the Indenture, the
Registration Rights Agreement and the AHI Merger Agreement and the consummation
of the transactions contemplated hereby and thereby will not (i) conflict with
or result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) or require consent under, or result in the creation or
imposition of any Lien upon any property or assets of the Company or any of the
Subsidiaries or Professional Corporations, pursuant to the terms of any
agreement, instrument, franchise, license or permit to which the Company or any
of the Subsidiaries or Professional Corporations is a party or by which any of
such corporations or their respective properties or assets may be bound or (ii)
violate or conflict with any provision of the charter or by-laws of the Company
or the Subsidiaries or Professional Corporations or any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over the Company or the
Subsidiaries or Professional Corporations or any of their respective properties
or assets. No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of the Subsidiaries or Professional Corporations or any of the their
respective properties or assets is required for the execution, delivery and
performance of this Agreement, the Indenture, the Registration Rights Agreement
or the AHI Merger Agreement and the consummation of the transactions
contemplated hereby and thereby, including the issuance, sale and delivery of
the Debentures to be issued, sold and delivered by the Company hereunder and the
issuance of the Common Stock upon conversion of the Debentures, except in
connection with the registration under the Act of the Debentures and the
underlying Common Stock in accordance with the Registration Rights Agreement,
the qualification of the Indenture under the 1939 Act and such consents,
approvals, authorizations, orders, registrations, filings, qualifications,
licenses and permits as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the Debentures by the
Initial Purchasers.
11
12
(n) Except as described in the Offering Memorandum, there is no
action, suit or proceeding before or by any court or governmental agency or
body, domestic or foreign, pending against the Company, any of the Subsidiaries
or the Professional Corporations which would reasonably be expected to have a
Material Adverse Effect, or materially and adversely affect the Company's
ability to perform its obligations pursuant to this Agreement, the Indenture,
the Registration Rights Agreement or the AHI Merger Agreement or the Company's
obligations pursuant to the transactions contemplated hereby and thereby and, to
the best of the Company's knowledge, no such proceedings are contemplated or
threatened. No action has been taken with respect to the Company or any of the
Subsidiaries or Professional Corporations, and no statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency which
prevents the issuance of the Debentures and the underlying Common Stock,
prevents or suspends the use of the Preliminary Offering Memorandum or the
Offering Memorandum or suspends the sale of the Debentures in any jurisdiction
referred to in Section 4(f) hereof, no injunction, restraining order or order of
any nature by a Federal or state court of competent jurisdiction has been issued
with respect to the Company or any of the Subsidiaries or Professional
Corporations which would prevent the issuance of the Debentures, prevent or
suspend the use of the Preliminary Offering Memorandum or the Offering
Memorandum or suspend the sale of the Debentures in any jurisdiction referred to
in Section 4(f) hereof; and no action, suit or proceeding before any court or
arbitrator or any governmental body, agency or official (domestic or foreign),
is pending against or, to the best knowledge of the Company, threatened against,
the Company or any of the Subsidiaries or Professional Corporations which, if
adversely determined, could reasonably be expected to (a) interfere with or
adversely affect the issuance of the Debentures being sold by the Company
hereunder or (b) in any manner invalidate this Agreement, the Indenture, the
Registration Rights Agreement or the AHI Merger Agreement.
(o) Except as would not have a Material Adverse Effect and as
disclosed in the Offering Memorandum, the Company, each of the Subsidiaries and
each of the Professional Corporations possess such licenses, certificates,
authorizations, approvals, franchises, trademarks, service marks, trade names,
permits and other rights issued by local, state, federal or foreign regulatory
agencies or bodies (collectively, "Permits") as are necessary to own, lease,
enter into options to lease or purchase and operate their respective properties
and to conduct the businesses now conducted (as described in the Prospectus) by
them; the Company, each of the Subsidiaries and each of the Professional
Corporations, to the Company's knowledge, have fulfilled and performed all of
their material obligations with respect to such Permits, and neither the Company
nor any of the Subsidiaries, and to the best knowledge of the Company, none of
the Professional Corporations, has received any notice of proceedings relating
to the revocation or modification of any Permit, and no such Permits contain any
restrictions that are materially burdensome to the Company, any of the
Subsidiaries or the Professional Corporations.
(p) Neither the Company nor any of the Subsidiaries and, to the best
knowledge of the Company, none of the Professional Corporations, has, directly
or indirectly, paid or delivered any fee, commission or other sum of money or
item of property, however characterized, to any finder, agent, government
official or other party, in the United States or any other country, which is in
any manner related to the business or operations now conducted or proposed to be
conducted (as described in the Offering Memorandum) of the Company and any of
the Subsidiaries which the Company knows or has reason to believe to have been
illegal under any Federal, state or local laws of the United States or any other
country having jurisdiction with respect to the Company, its subsidiaries and
the Professional Corporations.
(q) All tax returns required to be filed by the Company and each of
the Subsidiaries in any jurisdiction have been filed, other than those that are
being contested in good faith, and all taxes, including withholding taxes,
penalties and interest, assessments, fees and other governmental charges due or
claimed to be due from such entities have been paid, other than those contested
in good faith and for which adequate reserves have been provided or those
currently payable without penalty or interest.
12
13
(r) Except as otherwise set forth in the Offering Memorandum or as
would not have a Material Adverse Effect, each of the Company and the
Subsidiaries and Professional Corporations has good and marketable title, free
and clear of all Liens, to all property and assets necessary for the conduct of
their respective businesses or described in the Offering Memorandum as being
owned by it. All leases to which the Company, any of the Subsidiaries or any of
the Professional Corporation is a party are valid and binding and no default has
occurred or is continuing thereunder, and the Company, the Subsidiaries and the
Professional Corporations enjoy peaceful and undisturbed possession under all
such leases to which any of them is a party as lessee with such exceptions as do
not materially interfere with the use made by the Company, the Subsidiaries or
the Professional Corporations.
(s) The Company, the Subsidiaries and the Professional Corporations
maintain insurance covering their properties, operations, personnel and
businesses which insures against such losses and risks as is adequate in
accordance with customary industry practice to protect the Company, the
Subsidiaries and the Professional Corporations and their businesses. None of the
Company, the Subsidiaries and the Professional Corporations has received notice
from any insurer or agent of such insurer that substantial capital improvements
or other expenditures will have to be made to continue such insurance. All such
insurance is outstanding and duly in force on the date hereof and will be
outstanding and duly in force on the Closing Date and on each Additional Closing
Date (as defined below).
(t) Neither the Company nor any of the Subsidiaries is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(u) Except as disclosed in the Offering Memorandum, no holder of any
security of the Company has any right to require registration of shares of
Common Stock or any other security of the Company.
(v) The Company and the Subsidiaries maintain systems of internal
accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or specific
authorizations; (2) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (3) access to assets is
permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(w) Based upon the assumptions and subject to the qualifications set
forth therein, the statements made in the Offering Memorandum under the caption
"Certain United States Federal Income Tax Consequences" accurately summarize the
material United States federal income tax consequences of the ownership,
conversion and disposition of the Debentures for United States holders who
acquire Debentures on original issue and who hold Debentures as "capital assets"
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code").
(x) When the Debentures are issued and delivered pursuant to this
Agreement, such Debentures will not be of the same class (within the meaning of
Rule 144A(d)(3) under the Act) as any security of the Company that is listed on
a national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated interdealer quotation system.
(y) After giving effect to the intended use of proceeds from the
offering of the Debentures as described in the Offering Memorandum under the
caption "Use of Proceeds," the Debentures will not constitute "corporate
acquisition indebtedness" within the meaning of Section 279 of the Code.
(z) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D ("Regulation D") under the Act) of the Company has directly, or
through any agent (provided that no
13
14
representation is made as to the Initial Purchasers or any person acting on
their behalf), (i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any security (as defined in the Act) which is or will
be integrated with the offering and sale of the Debentures in a manner that
would require the registration of the Debentures under the Act or (ii) engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the offering of the Debentures.
(aa) The Company is not required to deliver the information
specified in Rule 144A(d)(4) in connection with the offering and resale of the
Debentures by the Initial Purchasers.
(ab) Assuming (i) that the representations and warranties of the
Initial Purchasers in Section 2 hereof are true, (ii) the Initial Purchasers
comply with the covenants set forth in Section 2 hereof and (iii) that each
person to whom the Initial Purchasers offer, sell or deliver the Debentures is a
Qualified Institutional Buyer, an Institutional Accredited Investor or a person
other than a U.S. person outside the United States in reliance on Regulation S
under the Act, the purchase and sale of the Debentures pursuant hereto
(including the Initial Purchasers' proposed offering of the Debentures on the
terms and in the manner set forth in the Offering Memorandum and Section 2
hereof) is exempt from the registration requirements of the Act. None of the
Company, the Subsidiaries or Professional Corporations or other affiliates or
any person acting on their behalf (provided that no representation is made as to
the Initial Purchasers or any person acting on their behalf) has engaged in any
directed selling efforts (as that term is defined in Regulation S) with respect
to the Debentures, and the Company, the Subsidiaries and the Professional
Corporations and each person acting on their behalf (provided that no
representation is made as to the Initial Purchasers or any person acting on
their behalf) have complied with the offering restrictions requirement of
Regulation S.
(ac) Except as permitted by the Act, the Company has not distributed
and, prior to the later to occur of (i) the Closing Date or the Option Closing
Date, if any, and (ii) completion of the distribution of the Debentures, will
not distribute any offering material in connection with the offering and sale of
the Debentures other than the Preliminary Offering Memorandum and the Offering
Memorandum.
(ad) Except as described in the Offering Memorandum, to the
Company's knowledge (i) the AHI SEC Reports (as defined below) do not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (ii) since the
respective dates of the AHI SEC Reports and except as otherwise disclosed
therein (A) neither AHI nor any of the AHI Affiliates (as defined below) has
incurred any liabilities or obligations, direct or contingent, which are
material to AHI and the AHI Affiliates, taken as a whole (the "AHI Group"), nor
entered into any transaction not in the ordinary course of business that is
material to the AHI Group, (B) there has been no decision or judgment in the
nature of litigation adverse to any member of the AHI Group which is material to
the AHI Group, (C) there has been no material adverse change in the condition
(financial or otherwise) or in the results of operations or business of the AHI
Group, (D) there has been no material loss or interference with the assets,
business or properties of the AHI Group from fire, explosion, earthquake, flood
or other calamity, whether or not covered by insurance, or from any court or
legislative or other governmental action, order or decree and (E) no member of
the AHI Group has received a notice of, or been threatened with, termination of
a contractual relationship with a third party payor, which termination would
have a material adverse effect on the condition (financial or otherwise),
results of operations or business of the AHI Group. For purposes of the
foregoing, "AHI SEC Reports" shall mean the Annual Report on Form 10-K of AHI
for the year ended December 31, 1995 as filed with the Commission pursuant to
the Exchange Act, all other reports filed with the Commission by AHI pursuant to
the Exchange Act subsequent to December 31, 1995 and any amendments to any such
reports; and "AHI Affiliates" shall mean all subsidiaries (as defined in the
Act) of AHI and all entities whose financial positions and results of operations
are consolidated with those of AHI in preparation of the financial statements of
AHI included in the AHI SEC Reports.
14
15
6. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in the Preliminary Offering Memorandum or in the
Offering Memorandum or in any amendment or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission which has been made therein or omitted
therefrom in reliance upon and in conformity with the information relating to
such Initial Purchaser furnished in writing to the Company by or on behalf of
such Initial Purchaser expressly for use in connection therewith; provided,
however, that the indemnification contained in this paragraph (a) with respect
to the Preliminary Offering Memorandum shall not inure to the benefit of any
Initial Purchaser (or to the benefit of any person controlling such Initial
Purchaser) on account of any such loss, claim, damage, liability or expense
arising from the sale of Debentures by such Initial Purchaser to any person if
the untrue statement or alleged untrue statement or omission or alleged omission
of a material fact contained in the Preliminary Offering Memorandum was
corrected in the Offering Memorandum and such Initial Purchaser sold Debentures
to that person without sending or giving, at or prior to the written
confirmation of sale, a copy of the Offering Memorandum (as then amended or
supplemented) if the Company had previously furnished sufficient copies thereof
to such Initial Purchaser. The foregoing indemnity agreement shall be in
addition to any liability which the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Initial Purchaser or any person controlling any Initial Purchaser in respect of
which indemnity may be sought against the Company, such Initial Purchaser or
such controlling person shall promptly notify the Company, and the Company shall
assume the defense thereof, including the employment of counsel and payment of
all fees and expenses; provided, however, that the omission so to notify the
Company shall not relieve the Company from any liability that it may have to any
Initial Purchaser (except to the extent that the Company is materially
prejudiced or otherwise forfeits substantive rights or defenses by reason of
such failure). Such Initial Purchaser or any such controlling person shall have
the right to employ separate counsel in any such action, suit or proceeding and
to participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Initial Purchaser or such controlling person
unless (i) the Company has agreed in writing to pay such fees and expenses, (ii)
the Company has failed to assume the defense and employ counsel or (iii) the
named parties to any such action, suit or proceeding (including any impleaded
parties) include both such Initial Purchaser or such controlling person and the
Company and such Initial Purchaser or such controlling person shall have been
advised by its counsel that representation of such indemnified party and the
Company by the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel has
been proposed) due to actual or potential differing interests between them (in
which case the Company shall not have the right to assume the defense of such
action, suit or proceeding on behalf of such Initial Purchaser or such
controlling person). It is understood, however, that the Company shall, in
connection with any one such action, suit or proceeding or separate but
substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such Initial
Purchasers and controlling persons not having actual or potential differing
interests among themselves, which firm shall be designated in writing by Xxxxx
Xxxxxx Inc., and that all such fees and expenses shall be reimbursed as they are
incurred. The Company shall not be liable for any settlement of any such action,
suit or proceeding effected without its written consent, but if settled with
such written consent, or if there be a final judgment for the plaintiff in any
such action, suit or proceeding, the Company agrees to indemnify and hold
harmless any Initial Purchaser and any such controlling person, to the extent
provided in the preceding paragraph, from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
15
16
(c) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors and officers and any
person who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to each Initial Purchaser, but only with respect to information
relating to such Initial Purchaser furnished in writing to the Company by or on
behalf of such Initial Purchaser expressly for use in the Preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or supplement thereto.
If any action, suit or proceeding shall be brought against the Company, any of
its directors or officers or any such controlling person based on the
Preliminary Offering Memorandum or the Offering Memorandum, or any amendment or
supplement thereto, and in respect of which indemnity may be sought against any
Initial Purchaser pursuant to this paragraph (c), such Initial Purchaser shall
have the rights and duties given to the Company by paragraph (b) above (except
that if the Company shall have assumed the defense thereof such Initial
Purchaser shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at such Initial Purchaser's expense), and the Company, its
directors and officers and any such controlling person shall have the rights and
duties given to the Initial Purchasers by paragraph (b) above. The foregoing
indemnity agreement shall be in addition to any liability which the Initial
Purchasers may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Initial Purchasers on the other hand from the
offering of the Debentures, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the Initial
Purchasers on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Initial Purchasers on the other hand shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
discounts and commissions received by the Initial Purchasers, in each case as
set forth in the table on the cover page of the Offering Memorandum; provided
that, in the event that the Initial Purchasers shall have purchased any
Additional Debentures hereunder, any determination of the relative benefits
received by the Company and the Initial Purchasers from the offering of the
Debentures shall include the net proceeds (before deducting expenses) received
by the Company, and the discounts and commissions received by the Initial
Purchasers, from the sale of such Additional Debentures, in each case computed
on the basis of the respective amounts set forth in the notes to the table on
the cover page of the Offering Memorandum. The relative fault of the Company on
the one hand and the Initial Purchasers on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or by the Initial
Purchasers on the other hand and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
(e) The Company and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 6 were determined
by a pro rata allocation (even if the Initial Purchasers were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section
16
17
6, no Initial Purchasers shall be required to contribute any amount in excess of
the amount by which the total price of the Debentures underwritten by it and
distributed to the public exceeds the amount of any damages which such Initial
Purchasers has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 6 are several in proportion to the respective numbers
of Firm Debentures set forth opposite their names in Schedule I hereto (or such
numbers of Firm Debentures increased as set forth in Section 10 hereof) and not
joint.
(f) No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 6 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Initial Purchaser or any person
controlling any Initial Purchaser, the Company, its directors or officers or any
person controlling the Company, (ii) acceptance of any Debentures and payment
therefor hereunder and (iii) any termination of this Agreement. A successor to
any Initial Purchaser or any person controlling any Initial Purchaser, or to the
Company, its directors or officers, or any person controlling the Company, shall
be entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 6.
7. Conditions of the Initial Purchasers' Obligations. The several
obligations of the Initial Purchasers to purchase the Firm Debentures hereunder
are subject to the following conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum or any amendment or supplement thereto or
any order asserting that the transactions contemplated by this Agreement are
subject to the registration requirements of the Act shall have been issued and
no proceedings for that purpose shall have been commenced or shall be pending
or, to the knowledge of the Company, be contemplated. No stop order suspending
the sale of the Debentures in any jurisdiction designated by the Initial
Purchasers shall have been issued and no proceedings for that purpose shall have
been commenced or shall be pending or, to the knowledge of the Company, shall be
contemplated.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), results of
operations or business of the Company, the Subsidiaries or the AHI Group not
contemplated by the Offering Memorandum, which in the opinion of the Initial
Purchasers, would materially adversely affect the market for the Debentures, or
(ii) any event or development relating to or involving the Company, the
Subsidiaries, the Professional Corporations or any officer or director thereof
or the AHI Group or any officer or director thereof which makes any statement
made in the Offering Memorandum untrue or which, in the opinion of the Company
and its counsel or the Initial Purchasers and their counsel, requires the making
of any addition to or change in the Offering Memorandum in order to state a
material fact required by any law (or that would have been required had the
Offering Memorandum been a prospectus included in a registration statement on
Form S-3) to be stated therein or necessary in order to make the statements
therein not misleading, if amending or supplementing the Offering
17
18
Memorandum to reflect such event or development would, in the opinion of the
Initial Purchasers, materially adversely affect the market for the Debentures.
(c) The Initial Purchasers shall have received on the Closing Date
an opinion of Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, counsel for the Company, dated
the Closing Date and addressed to the Initial Purchasers, to the effect that:
(i) The Incorporated Documents filed with the Commission (except for
the financial statements and the notes thereto and the schedules and other
financial and statistical data included therein, as to which such counsel
need not express any opinion) comply as to form in all material respects
with the requirements of the Exchange Act;
(ii) The Indenture has been duly and validly authorized, executed
and delivered by the Company and, assuming due authorization, execution
and delivery by the Trustee, is a valid and binding agreement of the
Company, enforceable in accordance with its terms, except as enforcement
of rights to indemnity and contribution thereunder may be limited by
Federal or state securities laws or principles of public policy and except
to the extent that enforceability thereof is subject to (i) applicable
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect affecting creditors'
rights generally and (ii) general principles of equity whether such
principles are considered in a proceeding at law or in equity; and no
qualification of the Indenture under the 1939 Act is required in
connection with the offer and sale of the Debentures contemplated hereby
or in connection with the Exempt Resales;
(iii) The Debentures have been duly and validly authorized by the
Company and when executed by the Company in accordance with the Indenture
and, assuming due authentication of the Debentures by the Trustee, upon
delivery to the Initial Purchasers against payment therefor in accordance
with the terms hereof, will have been validly issued and delivered, and
will constitute valid and binding obligations of the Company entitled to
the benefits of the Indenture, except to the extent that enforceability
thereof is subject to (i) applicable bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting creditors' rights generally and (ii) general
principles of equity, whether such principles are considered in a
proceeding at law or in equity;
(iv) The shares of Common Stock issuable upon conversion of the
Debentures have been duly authorized and reserved for issuance and, when
issued and delivered upon conversion of the Debentures, in accordance with
the terms thereof, will be validly issued, fully paid and nonassessable
and will be free of any preemptive rights under the Delaware General
Corporation Law and the Company's certificate of incorporation and by-laws
(each as amended) and, to the knowledge of such counsel, other rights that
entitle any person to acquire any Common Stock upon the issuance of the
Debentures and the issuance of the Common Stock by the Company upon
conversion of the Debentures;
(v) No registration of the Debentures under the Act is required for
the sale of the Debentures to the Initial Purchasers as contemplated in
this Agreement or for the Exempt Resales (assuming (A) that all
representations and warranties made by the Initial Purchasers and the
Company in this Agreement and in the Offering Memorandum are true, correct
and accurate (including but not limited to the representations by the
Initial Purchasers and the Company regarding the absence of general
solicitation in connection with the Exempt Resales and regarding offers
and sales outside the United States in reliance on Regulation S), (B) the
Initial Purchasers comply with all of the covenants set forth in this
Agreement (including but not limited to the covenants set forth in Section
2 hereof), (C) none of the Company, the Subsidiaries or the Professional
Corporations or any person acting on their behalf have complied with the
offering
18
19
restrictions requirements of Regulation S, (D) that each person to whom
the Initial Purchasers offer, sell or deliver the Debentures in the Exempt
Resales is (x) a Qualified Institutional Buyer, (y) an Institutional
Accredited Investor or (z) a person other than a U.S. person outside the
United States in reliance on Regulation S under the Act, and (E) that the
representations made by each person to whom Debentures are sold in
reliance on Rule 144A or Regulation S are true, correct and accurate);
(vi) When the Debentures are issued and delivered pursuant to this
Agreement, such Debentures will not be of the same class (within the
meaning of Rule 144A(d)(3) under the Act) as any security of the Company
that is listed on a national securities exchange registered under Section
6 of the Exchange Act or that is quoted in a United States automated
interdealer quotation system;
(vii) The Company is not required to deliver the information
specified in Rule 144A(d)(4) in connection with the offering and resale of
the Debentures by the Initial Purchasers;
(viii) Based upon the assumptions and subject to the qualifications
set forth therein, the statements made in the Offering Memorandum under
the caption "Certain United States Federal Income Tax Consequences"
accurately summarize the material United States federal income tax
consequences of the ownership, conversion and disposition of the
Debentures for United States persons who acquire Debentures on original
issue and who hold Debentures as "capital assets" within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended;
(ix) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering
Memorandum (and any amendment or supplement thereto);
(x) Each Subsidiary and Professional Corporation is a corporation
duly incorporated and validly existing and in good standing under the laws
of the jurisdiction of its organization, with full corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum (and any amendment or
supplement thereto); and all the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and are owned of record by the Company
directly or indirectly through one of the other Subsidiaries to such
counsel's knowledge free and clear of any adverse claim, except as
disclosed in the Offering Memorandum (or any amendment or supplement
thereto);
(xi) The authorized capital stock of the Company is as set forth
under the caption "Capitalization" in the Offering Memorandum, and the
authorized capital stock of the Company conforms in all material respects
as to legal matters to the description contained in the Offering
Memorandum under the caption "Description of Capital Stock";
(xii) All the shares of capital stock of the Company outstanding
prior to the issuance of the Debentures have been duly authorized and
validly issued, are fully paid and nonassessable and were issued and sold
in all material respects in compliance with all applicable federal
securities laws;
(xiii) The Company has the corporate power and authority to enter
into this Agreement and the Registration Rights Agreement and to issue,
sell and deliver the Debentures to the Initial Purchasers as provided
herein, and each of this Agreement and the Registration Rights Agreement
has been duly authorized, executed and delivered by the Company and is a
valid, legal and binding
19
20
agreement of the Company, enforceable against the Company in accordance
with its terms, except as enforcement of rights to indemnity and
contribution hereunder may be limited by federal or state securities laws
or principles of public policy and subject to the qualification that the
enforceability of the Company's obligations hereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights generally and by
general equitable principles;
(xiv) Neither the offer, sale or delivery of the Debentures, the
issuance of Common Stock upon conversion of the Debentures in accordance
with the terms of the Debentures, the execution, delivery or performance
of this Agreement, the Indenture, the Registration Rights Agreement and
the AHI Merger Agreement, compliance by the Company with the provisions
hereof and thereof nor consummation by the Company of the transactions
contemplated hereby and thereby (A) conflicts with or constitutes a breach
of, or a default under, the certificate of incorporation or bylaws, or
other organizational documents, of the Company or any indenture, bond,
note, lease or other agreement or instrument to which the Company is a
party or by which the Company or its properties is bound that is described
in the Offering Memorandum or is made an exhibit to any Incorporated
Document, (B) will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or (C)
will result in any violation of any existing law, regulation, ruling
(assuming compliance with all applicable state securities or Blue Sky laws
and, in the case of the Registration Rights Agreement, the Act and the
1939 Act), judgment, injunction, order or decree known to such counsel and
applicable to the Company or any of its properties. When used in this
opinion, the phrase "conflict with" shall comprehend obligations or
options to take action under the Debentures, this Agreement, the
Indenture, the Registration Rights Agreement and the AHI Merger Agreement
which, if performed today, would constitute a breach or default under, or
result in the creation or imposition of any lien on the Company's property
or other assets under, or result in any requirement for mandatory
prepayment or purchase of debt or in a resetting of interest rates under a
relevant document listed in this clause (xiv). The opinion expressed in
this clause (xiv) assumes, without investigation, that the transactions
contemplated by this Agreement, the Indenture, the Registration Rights
Agreement and the AHI Merger Agreement will not result in a violation of
covenants containing financial ratios or any other provisions in the
agreements to which the Company is a party that are based upon the
financial statements or the financial conditions of the Company, the
Subsidiaries and the Professional Corporations;
(xv) No consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official is required on the
part of the Company or any of the Subsidiaries or Professional
Corporations (except as may be required under state securities or Blue Sky
laws governing the purchase and distribution of the Debentures, such as
may be required under the 1939 Act and such as may be required under the
Act in connection with the performance by the Company of its obligations
under the Registration Rights Agreement) for the valid issuance and sale
of the Debentures to the Initial Purchasers as contemplated by this
Agreement;
(xvi) Such counsel shall confirm that to the knowledge of such
counsel, (A) other than as described in the Offering Memorandum there are
no legal or governmental proceedings pending or threatened against the
Company or any of the Subsidiaries or Professional Corporations, or to
which the Company or any of the Subsidiaries or Professional Corporations
or any of their respective properties is subject, which are of the type
that would be required to be described in any of the Incorporated
Documents and (B) there are no agreements, contracts, indentures, leases
or other instruments that are of the type that would be required to be
described in the Offering Memorandum if it were a prospectus included in a
registration statement on Form S-3 but are not described as would be
required or that are required to be filed as an exhibit to any
Incorporated Document that are not filed as required;
20
21
(xvii) The statements in the Offering Memorandum, insofar as they
are descriptions of contracts, agreements or other legal documents, or
refer to statements of law or legal conclusions, are accurate in all
material respects and present fairly the information required to be shown;
(xviii) Except as described in the Offering Memorandum, such counsel
does not know of any holder of any securities of the Company or any other
person who has a contractual right to cause the Company to sell or
otherwise issue to them any of the Debentures or the right to have any
securities of the Company included in the Shelf Registration Statement or
the right, as a result of the filing of the Shelf Registration Statement,
to require the Company to register under the Act any securities of the
Company; and
(xix) The Company is not an "investment company" or a person
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
In addition, such counsel shall state that, although such counsel
has not undertaken, except as otherwise indicated in its opinion, to determine
independently, and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements in the Offering Memorandum, such
counsel has participated in the preparation of the Offering Memorandum,
including review and discussion of the content thereof, and nothing has come to
the attention of such counsel that has caused it to believe that the Offering
Memorandum, as of its date and as of the Closing Date or the Option Closing
Date, as the case may be, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading or that any amendment or supplement to the Offering
Memorandum, as of its date and as of the Closing Date or the Option Closing
Date, as the case may be, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
opinion with respect to the financial statements and the notes thereto and the
schedules and other financial and statistical data included or incorporated by
reference in the Offering Memorandum).
In rendering their opinion as aforesaid, counsel may rely, as to
factual matters, upon certificates of officers of the Company attached to such
opinion.
(d) The Initial Purchasers shall have received on the Closing Date
an opinion of Xxxxx X. Xxxxxxxx, Esq., Senior Vice President and General Counsel
of the Company, dated the Closing Date and addressed to the Initial Purchasers,
to the effect that:
(i) To the knowledge of such counsel, neither the Company nor any of
the Subsidiaries or Professional Corporations is in violation of any law,
ordinance, administrative or governmental rule or regulation applicable to
the Company or any of the Subsidiaries or Professional Corporations, the
violation of which would have a Material Adverse Effect, or of any decree
of any court or governmental agency or body having jurisdiction over the
Company or any of the Subsidiaries or Professional Corporations;
(ii) To the knowledge of such counsel, each of the Company and the
Subsidiaries and Professional Corporations has all necessary Permits
(except where the failure to so have any such Permits, individually or in
the aggregate, would not have a Material Adverse Effect) to own its
properties and to conduct its business as now being conducted as described
in the Offering Memorandum;
(iii) The Company is duly registered and qualified to conduct its
business and is in good standing as a foreign corporation in each
jurisdiction or place where the nature of its properties
21
22
or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify would
not have a Material Adverse Effect;
(iv) Each Subsidiary and Professional Corporation is duly registered
and qualified to conduct its business and is in good standing as a foreign
corporation in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify or to be
in good standing would not have a Material Adverse Effect;
(v) To the knowledge of such counsel, neither the Company nor any of
the Subsidiaries or Professional Corporations is in violation of its
certificate of incorporation or bylaws, or other organizational documents,
or in default in the performance of any material obligation, agreement or
condition contained in any bond, debenture, note or other evidence of
indebtedness, or in any agreement, indenture, lease or other instrument to
which the Company or any of the Subsidiaries or Professional Corporations
is a party or by which any of them or any of their respective properties
may be bound, in each case that is described in the Offering Memorandum or
is made an exhibit to any Incorporated Document; and
(vi) To the knowledge of such counsel, neither the offer, sale or
delivery of the Debentures, the issuance of Common Stock upon conversion
of the Debentures in accordance with the terms of the Debentures, the
execution, delivery or performance of this Agreement, the Indenture, the
Registration Rights Agreement and the AHI Merger Agreement, compliance by
the Company of the provisions hereof and thereof nor consummation by the
Company of the transactions contemplated hereby and thereby (A) conflicts
with or constitutes a breach of, or a default under, the certificate of
incorporation or by-laws, or other organizational documents, of any of the
Subsidiaries or Professional Corporations or any indenture, bond, note,
lease or other agreement or instrument to which any of the Subsidiaries or
Professional Corporations is a party or by which any of them or any of
their respective properties is bound that is described in the Offering
Memorandum or is made an exhibit to any Incorporated Document, (B) will
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or (C) will result in any
violation of any existing law, regulation, ruling (assuming compliance
with all applicable state securities or Blue Sky laws and, in the case of
the Registration Rights Agreement, the Act and the 1939 Act), judgment,
injunction, order or decree applicable to the Subsidiaries and the
Professional Corporations.
In addition, such counsel shall state that, although such counsel
has not undertaken, except as otherwise indicated in their opinion, to determine
independently, and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements in the Offering Memorandum, such
counsel has participated in the preparation of the Offering Memorandum,
including review and discussion of the content thereof, and nothing has come to
the attention of such counsel that has caused it to believe that the Offering
Memorandum, as of its date and as of the Closing Date or the Option Closing
Date, as the case may be, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading or that any amendment or supplement to the Offering
Memorandum, as of its date and as of the Closing Date or the Option Closing
Date, as the case may be, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
opinion with respect to the financial statements and the notes thereto and the
schedules and other financial and statistical data included or incorporated by
reference in the Offering Memorandum).
(e) The Initial Purchasers shall have received on the Closing Date
an opinion of Xxxxx Xxxxxxxxxx, counsel for the Initial Purchasers, dated the
Closing Date, and addressed to the Initial
22
23
Purchasers, with respect to the matters referred to in clauses (i), (ii), (iii),
(iv), (v) and (xiii) of the foregoing paragraph (c) and the penultimate
paragraph of the foregoing paragraph (c) and such other related matters as the
Initial Purchasers may request.
(f) The Initial Purchasers shall have received letters addressed to
the Initial Purchasers and dated the date hereof from Deloitte & Touche LLP,
Coopers & Xxxxxxx L.L.P. and Stevenson, Jones, Xxxx, Xxxxxxx & Xxxxxxxxx, P.C.,
independent certified public accountants, and a letter dated the Closing Date
from Deloitte & Touche LLP, substantially in the forms heretofore approved by
the Initial Purchasers.
(g) (i) There shall not have been any change in the capital stock of
the Company nor any material increase in the short-term or long-term debt of the
Company (other than in the ordinary course of business) from that set forth or
contemplated in the Offering Memorandum (or any amendment or supplement
thereto); (ii) there shall not have been, since the respective dates as of which
information is given in the Offering Memorandum (or any amendment or supplement
thereto), except as may otherwise be stated in the Offering Memorandum (or any
amendment or supplement thereto), any material adverse change in the condition
(financial or other), results of operations or business of the Company, the
Subsidiaries and the Professional Corporations, taken as a whole; (iii) the
Company, the Subsidiaries and the Professional Corporations shall not have any
liabilities or obligations, direct or contingent (whether or not in the ordinary
course of business), that are material to the Company, the Subsidiaries and the
Professional Corporations, taken as a whole, other than those reflected in the
Offering Memorandum (or any amendment or supplement thereto); and (iv) all the
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects on and as of the date hereof and on
and as of the Closing Date as if made on and as of the Closing Date, and the
Initial Purchasers shall have received a certificate, dated the Closing Date and
signed by the chief executive officer and the chief financial officer of the
Company (or such other officers as are acceptable to the Initial Purchasers), to
the effect set forth in this Section 7(g) and in Section 7(h) hereof.
(h) The Company shall not have failed in any material respect at or
prior to the Closing Date to have performed or complied with any of its
agreements herein contained and required to be performed or complied with by it
hereunder at or prior to the Closing Date.
(i) The Initial Purchasers shall have received a certificate dated
the Closing Date signed by the chief financial officer of the Company
substantially in the form approved by the Initial Purchasers respecting the
Company's compliance with the financial covenants set forth in its credit
agreement with Banque Paribas, as agent.
(j) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrading its rating assigned to any
class of securities of the Company or (ii) it is reviewing its ratings assigned
to any class of securities of the Company with a view to possible downgrading,
or with negative implications, or direction not determined.
(k) The Debentures shall have been designated for trading on PORTAL.
(l) The Company shall have executed and delivered the Indenture and
the Registration Rights Agreement.
(m) The Company shall have furnished or caused to be furnished to
the Initial Purchasers such further certificates and documents as the Initial
Purchasers shall have reasonably requested.
23
24
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers and counsel for the
Initial Purchasers.
Any certificate or document signed by any officer of the Company and
delivered to the Initial Purchasers, or to counsel for the Initial Purchasers,
shall be deemed a representation and warranty by the Company to the Initial
Purchasers as to the statements made therein.
The obligations of the Initial Purchasers to purchase any Additional
Debentures hereunder are subject to the satisfaction on and as of any Option
Closing Date of the conditions set forth in this Section 7, except that, if any
Option Closing Date is other than the Closing Date, the certificates, opinions
and letters referred to in paragraphs (c) through (g) and paragraphs (i) and (m)
shall be dated the Option Closing Date in question and the opinions called for
by paragraphs (c) through (e) shall be revised to reflect the sale of Additional
Debentures.
8. Expenses. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction of the
Offering Memorandum (including financial statements thereto), and each amendment
or supplement thereto; (ii) the printing (or reproduction) and delivery
(including postage, air freight charges and charges for counting and packaging)
of such copies of the Offering Memorandum, the Preliminary Offering Memorandum,
the Incorporated Documents, and all amendments or supplements to any of them as
may be reasonably requested for use in connection with the offering and sale of
the Debentures; (iii) the preparation, printing, authentication, issuance and
delivery of certificates for the Debentures, including any stamp taxes in
connection with the original issuance and sale of the Debentures; (iv) the
printing (or reproduction) and delivery of this Agreement, the preliminary and
supplemental Blue Sky Memoranda and all other agreements or documents printed
(or reproduced) and delivered in connection with the offering of the Debentures;
(v) the application for designation of the Debentures on PORTAL; (vi) the
registration of the Common Stock and the listing of the shares of Common Stock
issuable upon conversion of the Debentures on the Nasdaq National Market; (vii)
the qualification of the Debentures and the shares of Common Stock issuable upon
conversion of the Debentures for offer and sale under the securities or Blue Sky
laws of the several states as provided in Section 4(f) hereof (including the
reasonable fees, expenses and disbursements of counsel for the Initial
Purchasers relating to the preparation, printing or reproduction and delivery of
the preliminary and supplemental Blue Sky Memoranda and such qualification);
(viii) the transportation and other expenses incurred by or on behalf of Company
representatives in connection with presentations to prospective purchasers of
the Debentures; (ix) the performance by the Company of its obligations under the
Indenture and the Registration Rights Agreement; and (x) the fees and expenses
of the Company's accountants and the fees and expenses of counsel (including
local and special counsel) for the Company.
9. Effective Date of Agreement. This Agreement shall become
effective upon the execution and delivery hereof by all the parties hereto.
Until such time as this Agreement shall have become effective, it may be
terminated by the Company, by notifying the Initial Purchasers, or by the
Initial Purchasers, by notifying the Company. Any notice under this Section 9
may be given by telegram, telecopy or telephone but shall be subsequently
confirmed by letter.
10. Default by an Initial Purchaser. If any one or more of the
Initial Purchasers shall fail or refuse to purchase the Debentures which it is
obligated to purchase on the Closing Date, and arrangements satisfactory to the
non-defaulting Initial Purchasers or by another party or parties satisfactory to
the non-defaulting Initial Purchasers and the Company for the purchase of such
Debentures by the non-defaulting Initial Purchasers and the Company are not made
within thirty-six (36) hours after such default, this Agreement shall terminate
without liability on the part of the non-defaulting Initial Purchasers or the
Company. In any such case which does not result in termination of this
Agreement, either the non-defaulting Initial Purchasers or the Company shall
have the right to postpone the Closing Date, but in no
24
25
event for longer than seven days, in order that the required changes, if any, in
the Offering Memorandum or any other documents or arrangements may be effected.
Any action taken under this paragraph shall not relieve the defaulting Initial
Purchasers from liability in respect of such default under this Agreement. The
term "Initial Purchaser" as used in this Agreement includes, for all purposes of
this Agreement, any party not identified in this Agreement who purchases
Debentures which a defaulting Initial Purchaser is obligated, but fails or
refuses to purchase.
11. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchasers, without
liability on the part of the Initial Purchasers to the Company, by notice to the
Company, if prior to the Closing Date or any Option Closing Date (if different
from the Closing Date and then only as to the Additional Debentures), as the
case may be, (i) trading in securities generally on the New York Stock Exchange,
American Stock Exchange or The Nasdaq Stock Market's National Market shall have
been suspended or materially limited, (ii) a general moratorium on commercial
banking activities in New York shall have been declared by either federal or
state authorities, or (iii) there shall have occurred any outbreak or escalation
of hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in the judgment of
the Initial Purchasers, impracticable or inadvisable to commence or continue the
offering of the Debentures on the terms set forth on the cover page of the
Offering Memorandum or to enforce contracts for the resale of the Debentures by
the Initial Purchasers. Notice of such termination may be given to the Company
by telegram, telecopy or telephone and shall be subsequently confirmed by
letter.
12. Information Furnished by the Initial Purchasers. The statements
set forth in the last paragraph on the cover page, the stabilization legend on
page 4 and the third, fourth, fifth and sixth paragraphs under the caption "Plan
of Distribution" in the Preliminary Offering Memorandum and Offering Memorandum
constitute the only information furnished by or on behalf of the Initial
Purchasers as such information is referred to in Sections 5(b) and 6 hereof.
13. Miscellaneous. Except as otherwise provided in Sections 4, 9 and
11 hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 0000 Xxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000, Attention:
Xxxxx X. Xxxxxxxx, Senior Vice President, General Counsel and Secretary, or (ii)
if to the Initial Purchasers, to Xxxxx Xxxxxx Inc., 000 Xxxxxxxxx Xxxxxx, Xxx
Xxxx, XX 00000, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
Initial Purchasers, the Company, its directors, its officers and the controlling
persons referred to in Section 6 hereof and their respective successors and
assigns, to the extent provided herein, and no other person shall acquire or
have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from the Initial Purchasers of any of the Debentures
in his status as such purchaser.
14. Applicable Law; Counterparts. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed within the State of New York without
giving effect to the choice of laws or conflict of laws principles thereof.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
25
26
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Initial Purchasers.
Very truly yours,
FPA MEDICAL MANAGEMENT, INC.
By: /s/ XXXXX X. XXXXXXXX
________________________________
Confirmed as of the date first above mentioned.
XXXXX XXXXXX INC.
BEAR, XXXXXXX & CO. INC.
XXXXXX BROTHERS INC.
XXXXXXXXXXX & CO., INC.
XXXXXXX & COMPANY, INC.
By: XXXXX XXXXXX INC.
By: /s/ XXXXXXXX X. XXXXXXX
_____________________________________
26
27
SCHEDULE I
FPA Medical Management, Inc.
Principale Amount
Initial Purchaser of Firm Debentures
----------------- ------------------
Xxxxx Xxxxxx Inc. .................. $37,500,000
Bear, Xxxxxxx & Co. Inc. ........... 11,250,000
Xxxxxx Brothers Inc. ............... 11,250,000
Xxxxxxxxxxx & Co., Inc. ............ 11,250,000
Xxxxxxx & Company, Inc. ............ 3,750,000
-----------
Total ........................... $75,000,000
===========
28
SCHEDULE II
FPA MEDICAL MANAGEMENT, INC.
NAME STATE OF INCORPORATION
---- ----------------------
29
EXHIBIT A
FORM OF LETTER TO BE DELIVERED BY INSTITUTIONAL ACCREDITED INVESTORS
FPA Medical Management, Inc.
0000 Xxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Xxxxx Xxxxxx Inc.
Bear, Xxxxxxx & Co. Inc.
Xxxxxx Brothers Inc.
Xxxxxxxxxxx & Co. Inc.
Xxxxxxx & Company, Inc.
As Initial Purchasers
c/o Xxxxx Xxxxxx Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Gentlemen:
We are delivering this letter in connection with an offering of 6 1/2%
Convertible Subordinated Debentures due 2001 (the "Debentures"), which are
convertible into shares of the Common Stock, $.002 par value per share (the
"Common Stock"), of FPA Medical Management, Inc. (the "Company"), all as
described in the Offering Memorandum (the "Offering Memorandum") relating to the
offering.
We hereby confirm that:
(i) we are an institution that is an "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933, as amended (the "Securities Act"), or an entity in which all of the
equity owners are accredited investors within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act (an "Institutional
Accredited Investor");
(ii)(A) any purchase of Debentures by us will be for our own account
or for the account of one or more other Institutional Accredited Investors
or as fiduciary for the account of one or more trusts, each of which is an
"accredited investor" within the meaning of Rule 501(a)(7) under the
Securities Act and for each of which we exercise sole investment
discretion or (B) we are a "bank," within the meaning of Section 3(a)(2)
of the Securities Act, or a "savings and loan association" or other
institution described in Section 3(a)(5)(A) of the Securities Act that is
acquiring Debentures as fiduciary for the account of one or more
institutions for which we exercise sole investment discretion;
(iii) in the event that we purchase any Debentures, we will acquire
Debentures having a minimum principal amount of not less than $100,000 for
our own account or for any separate account for which we are acting;
(iv) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of
purchasing the Debentures;
(v) we are not acquiring Debentures with a view to distribution
thereof or with any present intention of offering or selling Debentures or
the Common Stock issuable upon conversion thereof, except as permitted
below; provided that the disposition of our property and property of any
accounts for which we are acting as fiduciary shall remain at all times
within our control; and
(vi) we have received a copy of the Offering Memorandum and
acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such
30
questions of representatives of the Company and receive answers thereto,
as we deem necessary in connection with our decision to purchase
Debentures.
We understand that the Debentures are being offered in a transaction not
involving any public offering within the United States within the meaning of the
Securities Act and any applicable state securities laws and that the Debentures
and the shares of Common Stock issuable upon conversion thereof have not been
registered under such laws, and we agree, on our own behalf and on behalf of
each account for which we acquire any Debentures, that if in the future we
decide to resell or otherwise transfer such Debentures or the Common Stock
issuable upon conversion thereof, such Debentures or Common Stock may be resold
or otherwise transferred only (a) to the Company, or any of its subsidiaries or
(b) pursuant to a registration statement which has been declared effective under
the Securities Act or (c) for so long as the Debentures are eligible for resale
pursuant to Rule 144A under the Securities Act, to a person who is or who the
holder reasonably believes is a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act ("QIB") that purchases for its own
account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) to an Institutional
Accredited Investor that, prior to such transfer, furnishes to the transfer
agent or registrar for such securities a signed letter containing certain
representations and agreements relating to the restrictions on transfer of such
securities (the form of which letter can be obtained from such transfer agent or
registrar), (e) pursuant to offers and sales to non-U.S. persons that occur
outside the United States within the meaning of Regulation S under the
Securities Act, or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of its property
or the property of such investor account or accounts be at all times within its
or their control and subject to any applicable securities laws. We further agree
to provide any person purchasing from us any of the Debentures or the Common
Stock issuable upon conversion thereof other than pursuant to clause (b) above a
notice advising such purchaser that resales of such securities are restricted as
stated herein. We understand that the registrar and transfer agent for the
Debentures and the Common Stock will not be required to accept for registration
of transfer any Debentures or any shares of Common Stock issued upon conversion
of the Debentures except upon presentation of evidence satisfactory to the
Company that the foregoing restrictions on transfer have been complied with. We
further understand that any Debentures and any certificates representing Common
Stock will be in the form of definitive physical certificates and that such
certificates will bear a legend reflecting the substance of this paragraph other
than certificates representing Common Stock transferred pursuant to clause (b)
above.
We acknowledge that the Company, others and you will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
------------------------------
(Name of Purchaser)
------------------------------
By:
Name:
Title:
Address:
31
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
