EXHIBIT 10.23
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement"), dated as of September 26,
2000, is made by and among Health Dream Team, S.C., a company organized under
the laws of Spain ("HDT"), United Surgical Partners International, Inc., a
Delaware corporation ("USPI"), and United Surgical Partners Europe, S.L., a
company organized under the laws of Spain ("USPE"). HDT, USPI and USPE are
sometimes collectively referred to as the "Parties" and individually referred to
as a "Party."
PRELIMINARY STATEMENTS
A. As of the date hereof, USPI has invested $29,752,664 in the common
capital shares (the "USPE Shares") of USPE.
B. HDT desires to purchase 1,000,000 shares of Class B Common Stock of
USPI, par value $.01 per share ("USPI-B Stock"), subject to the terms and
conditions of this Agreement.
C. The Parties desire to set forth the terms upon which USPI may purchase
additional USPE Shares, the terms upon which HDT may acquire additional shares
of USPI-B Stock, and certain other rights and agreements among the Parties.
D. Capitalized terms and mathematical formulas used in this Agreement are
defined or indexed in APPENDIX A and APPENDIX B, respectively, and are
incorporated herein by this reference for all purposes.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE OF STOCK
1.1. PURCHASE OF SHARES. At the Closing (as hereinafter defined) and upon
the terms and subject to the conditions of this Agreement, HDT shall purchase
1,000,000 shares (the "Shares") of the USPI-B Stock. The purchase price (the
"Purchase Price") for the Shares shall be $817,931, with $6,838 to be paid by
HDT to USPI by wire transfer of federal funds to an account of USPI's
designation, and the remaining amount to be paid by HDT's execution and delivery
to USPI of a promissory note in the amount of $811,093, pursuant to SECTION
3.2(A) hereof. At the Closing and upon the terms and subject to the conditions
of this Agreement, USPI shall issue and deliver to HDT a certificate
representing 1,000,000 shares of the USPI-B Stock.
1.2. CLOSING. Subject to the conditions contained in this Agreement, the
consummation of the transactions contemplated by SECTION 1.1 (the "Closing")
shall take place at the offices of USPI, 00000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxx,
Xxxxx 00000, at 10:00 a.m. Dallas time on September 26, 2000, or at such later
date and/or such other location as the parties hereto may mutually designate in
writing.
1.3. REPRESENTATIONS AND WARRANTIES OF HDT. HDT hereby represents and
warrants to USPI as follows:
(a) ENFORCEABILITY. HDT is a company organized under the laws of Spain.
HDT has the requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly authorized, executed and delivered by HDT and constitutes a valid and
binding obligation of HDT, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or other similar laws or
equitable principles affecting the enforcement of creditors' rights generally.
No consents, including but not limited to governmental consents, are required
for HDT to enter into this Agreement and to perform its obligations hereunder.
(b) CONFLICTS. The execution, delivery and performance of this
Agreement by HDT will not conflict with, result in any breach of or constitute a
default under any agreement, instrument, order, judgment, decree, law or
governmental regulation to which HDT is subject.
(c) INVESTMENT REPRESENTATIONS.
(i) HDT acknowledges and understands that the USPI-B Stock has not
been registered under the United States Securities Act of 1933, as amended, and
the rules and regulations thereunder (the "Securities Act"). HDT will purchase
and hold the USPI-B Stock for investment purposes only and not with a view to
the sale or distribution of any part thereof in violation of the Securities Act.
(ii) HDT acknowledges that the USPI-B Stock and each certificate
issued in transfer thereof will bear a legend required under the Securities Act
and any applicable state securities law.
(iii) HDT understands that an investment in the USPI-B Stock is an
illiquid investment, which means that (A) HDT must bear the economic risk of
investment in the USPI-B Stock for an indefinite period of time, since the
USPI-B Stock has not been registered under the Securities Act nor any state
securities laws and cannot be sold unless the USPI-B Stock is either
subsequently registered under the Securities Act and applicable state laws
(which is neither contemplated by nor required of USPI) or an exemption from
such registration is available, and (B) there is no established market for the
USPI-B Stock and that it is not anticipated that any public market for the
USPI-B Stock will develop in the near future.
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(iv) HDT understands that the USPI-B Stock will automatically be
converted into other securities (as hereinafter defined, the "Conversion
Securities") under certain circumstances. HDT acknowledges (A) that it has no
control over such conversion and (B) that the Conversion Securities will
constitute an illiquid investment, which means that (1) HDT must bear the
economic risk of investment in the Conversion Securities for an indefinite
period of time, since the Conversion Securities have not been registered under
the Securities Act nor any state securities laws and cannot be sold unless the
Conversion Securities are either subsequently registered under the Securities
Act and applicable state laws (which is neither contemplated by nor required of
the issuers of such securities) or an exemption from such registration is
available, and (2) there is no established market for the Conversion Securities
and that it is not anticipated that any public market for the Conversion
Securities will develop in the near future.
1.4. REPRESENTATIONS AND WARRANTIES OF USPI. USPI hereby represents and
warrants to HDT as follows:
(a) ENFORCEABILITY. USPI is a corporation organized under the laws of
the State of Delaware. USPI has the requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by USPI
and constitutes a valid and binding obligation of USPI, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws or equitable principles affecting
the enforcement of creditors' rights generally.
(b) CONFLICTS. The execution, delivery and performance of this
Agreement by USPI will not conflict with, result in any breach of or constitute
a default under any agreement, instrument, order, judgment, decree, law or
governmental regulation to which USPI is subject.
(c) AUTHORIZED CAPITALIZATION. The authorized capital stock of USPI
consists of 31,200 shares of Series A Redeemable Preferred Stock, par value $.01
per share, of which 31,200 shares were issued and outstanding as of August 31,
2000; 2,716 shares of Series B Convertible Preferred Stock, par value $.01 per
share, of which no shares were issued and outstanding as of August 31, 2000;
20,000 shares of Series C Convertible Preferred Stock, par value $.01 per share,
of which 18,750 shares were issued and outstanding as of August 31, 2000;
30,000,000 shares of Class A Common Stock, par value $.01 per share ("USPI
A-Stock"), of which 23,519,534 shares were issued and outstanding as of August
31, 2000; 3,000,000 shares of Class B Common Stock, of which no shares were
issued and outstanding as of August 31, 2000; and 40,000,000 shares of Common
Stock, par value $.01 per share (the "USPI Common Stock"), of which 410,140
shares were issued and outstanding as of August 31, 2000. Other than as set
forth in the Certificate (hereinafter defined) or in SCHEDULE 1.4 (c), there are
no options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements or commitments which obligate USPI to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock. Except
as set forth in SCHEDULE 1.4(C), no holder of securities of USPI has rights to
require the registration of securities of USPI.
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(d) AUTHORIZATION OF USPI-B STOCK. The USPI-B Stock being issued to HDT
pursuant to this Agreement is duly authorized, validly issued, fully paid and
non-assessable.
1.5. CONDITIONS OF OBLIGATIONS OF EACH PARTY TO EFFECT THE PURCHASE. The
obligations of each Party to effect the transactions contemplated hereby shall
be subject to the fulfillment at or prior to the Closing of the following
conditions unless waived in writing by each of the Parties hereto.
(a) CERTIFICATE. The Amended and Restated Certificate of Incorporation
of USPI (the "Certificate"), in the form of EXHIBIT A hereto, shall have been
duly adopted and executed and filed with the Secretary of State of the State of
Delaware.
(b) SHAREHOLDERS AGREEMENT. USPI and HDT shall have terminated that
certain Shareholders Agreement, dated June 1, 1998, relating to USPE.
ARTICLE II
ADDITIONAL INVESTMENTS IN USPE
2.1. USPI INVESTMENTS IN USPE. USPI may invest additional sums in USPE at
any time and from time to time in one or more transactions. USPI plans to invest
a minimum of $100 million (including monies previously invested) in USPE subject
to approval, on a case by case basis, by the Board of Directors of USPI,
assuming such projects have reasonable returns, which generally shall be deemed
to occur if projects are available with acquisition multiples ranging from 4 to
7 times first year EBITDA of the project. USPI may infuse additional equity to
purchase certain strategic acquisitions above the mentioned multiples when
approved on a case-by-case basis by the Board of Directors of USPI. Investments
in USPE will take the form of debt to the extent of USPE's borrowing limits
under its Societe Generale Credit Facility dated March 3, 2000. The amount of
any investment which exceeds the borrowing limit would be in the form of an
equity investment. Equity investments made after the date of this Agreement by
USPI in USPE Shares shall constitute "Qualified Investments" to the extent that
the aggregate amount of such equity investments made after the date of this
Agreement is less than or equal to $70,247,336. USPE agrees to accept all
Qualified Investments, and to issue additional USPE Shares to USPI in
consideration for such Qualified Investments. The purchase price per additional
USPE Share will be equal to the weighted average share price on the most recent
$1,000,000 of capital raised through the sale of shares of USPI Common Stock
(including USPI A-Stock or USPI B-Stock, but excluding USPI B-Stock issued
pursuant to SECTION 1.1) to third parties (provided there has been $1,000,000 of
sales of such common stock within the 12-month period preceding the Qualified
Investment). If there has not been $1,000,000 of sales within the 12-month
period preceding the date of the Qualified Investment, then the most recent
$1,000,000 of sales shall be used to determine the purchase price, unless either
USPI or HDT objects to using the most recent sales, then USPI and HDT shall
jointly select a third party appraiser to determine the fair market value
purchase price for the USPE Shares. If USPI has made $70,247,336 in Qualified
Investments or if HDT's USPI B-Stock has been converted into USPE Shares, then
any further investments made by USPI in USPE shall not constitute Qualified
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Investments, and such further investments may be on such terms and conditions,
including purchase price, as USPI and USPE shall determine.
2.2. NOTICE OF QUALIFIED INVESTMENT. USPI shall give written notice of
each Qualified Investment to HDT within five days after the date of consummation
of such investment (each, a "Notice of Qualified Investment").
ARTICLE III
CO-INVESTMENTS BY HDT IN USPI
3.1. HDT CO-INVESTMENTS IN USPI. In connection with each Qualified
Investment, HDT may, but is not obligated to, invest additional sums in USPI by
purchasing additional shares of USPI-B Stock. Any such investments made after
the date of this Agreement by HDT in USPI-B Stock in compliance with this
Agreement shall constitute "HDT Co-Investments." HDT Co-Investments must be made
within 30 days after the date of the corresponding Qualified Investment. The
amount of each HDT Co-Investment shall be determined by HDT separately in its
discretion in connection with each separate Qualified Investment (subject in
each case to a minimum of 0% and a maximum of 8.0% of the Qualified Investment).
USPI agrees to accept all HDT Co-Investments, and to issue additional shares of
USPI-B Stock to HDT in consideration of such HDT Co-Investments at a purchase
price per share of USPI-B Stock equal to the purchase price per share paid for
the USPE Shares in the relevant Qualified Investment. USPI shall cooperate with
the reasonable due diligence requests of HDT by providing information and making
its management personnel available to answer questions. USPI shall provide HDT
with quarterly financial statements relating to its results of operations and
financial conditions. In connection with each HDT Co-Investment, HDT and USPI
agree to execute documentation containing representations, warranties and other
terms and conditions customary in this type of transaction (including
representations by HDT with respect to the matters addressed in SECTIONS 1.3(A),
B) AND (C), and representations by USPI with respect to the matters addressed in
SECTIONS 1.4(A), (B), (C) AND (D)), all of which must be acceptable to both
parties in their reasonable discretion. All HDT Co-Investments shall be made by
wire transfer to USPI of immediately available funds in dollars based upon the
Exchange Rate actually achieved by USPI in consummating the corresponding
Qualified Investment.
3.2. LOANS TO FINANCE HDT INVESTMENTS.
(a) On the date hereof, USPI shall make a recourse loan to HDT in the
amount of $811,093 to pay a portion of the Purchase Price pursuant to SECTION
1.1 hereof. Such loan shall be made pursuant to a Promissory Note substantially
in the form of EXHIBIT B attached hereto.
(b) In connection with each HDT Co-Investment, USPI shall make a
recourse loan to HDT in order to finance a portion of such HDT Co-Investment. If
the HDT Co-Investment is less than or equal to 5.0% of the Qualified Investment,
then such loan shall be in the amount of up to 90% of the HDT Co-Investment. If
the HDT Co-Investment is greater than 5.0% (up to the
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maximum of 8.0% of the Qualified Investment), then the loan shall be in a
principal amount of up to the sum of (i) 90% of the amount of HDT Co-Investment
up to 5.0%, and (ii) 75% of the HDT Co-Investment greater than 5.0%. Each such
loan shall be made pursuant to a Promissory Note substantially in the form of
EXHIBIT B attached hereto.
(c) All such loans made pursuant to paragraphs (a) and (b) above shall
be guaranteed by the shareholders of HDT pursuant to Guaranty Agreements
substantially in the form of EXHIBIT C attached hereto, and secured by a pledge
of the USPI-B Stock pursuant to the Pledge Agreement substantially in the form
of EXHIBIT D attached hereto.
ARTICLE IV
TRANSFER RESTRICTIONS
4.1. INITIAL TRANSFER RESTRICTION. From and after the date hereof until
June 1, 2002, HDT shall not sell, transfer or otherwise dispose of any shares of
USPI-B Stock or USPE Shares (if the USPI B-Stock has been converted into USPE
Shares), except (i) upon conversion in accordance with the provisions of the
Certificate, (ii) pursuant to buy backs in accordance with ARTICLE V, or (iii)
with the prior written consent of USPI, which consent may be withheld in USPI's
sole and absolute discretion.
4.2. RIGHT OF FIRST REFUSAL. After June 1, 2002, HDT may sell for cash all
or any portion of the USPI-B Stock or USPE Shares (if the USPI B-Stock has been
converted into USPE Shares) that it then holds pursuant to a bona fide offer
from an unrelated third party, subject to HDT's compliance with the following
provisions (provided that this SECTION 4.2 shall not apply to conversion of such
USPI-B Stock in accordance with the provisions of the Certificate or buy backs
in accordance with ARTICLE V);
(a) HDT shall promptly deliver a notice of intention to sell (the "Sale
Notice") to USPI setting forth in reasonable detail the USPI-B Stock or USPE
Shares to be sold (the "Subject Securities"), attaching a photocopy of the bona
fide offer extended by the potential purchaser, which must be binding, and
indicating the price and the remaining conditions of the offer, the name of the
potential purchaser, as well as its ultimate controlling shareholder (to HDT's
knowledge).
(b) Upon receipt of such Sale Notice, USPI shall have the first right
and option to elect to purchase at the price and on the terms stated in the Sale
Notice, all or part of the Subject Securities. In the event USPI shall elect to
purchase all or part of the Subject Securities, USPI shall so notify HDT in
writing (the "Election Notice") within 30 days after receipt by USPI of the Sale
Notice (the "Option Period").
(c) Upon receipt of the Election Notice, HDT shall sell to USPI the
Subject Securities subject to such Election Notice at a price and on the terms
stated in the Sale Notice. The closing of such sale shall take place at the
offices of USPI no later than 30 days following the expiration of the
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Option Period (or upon the expiration of such longer period required by law), or
at such other place or earlier date as may be mutually agreed by USPI and HDT.
At such closing, HDT shall deliver a certificate or certificates for the Subject
Securities to be sold, accompanied by stock powers duly authorized in blank,
against receipt of the purchase price therefor by wire transfer of immediately
available funds.
(d) Any Subject Securities not sold pursuant to the provisions of this
SECTION 4.2 may be sold to the person identified in the related Sale Notice for
a period of 90 days following the expiration of the Option Period upon the terms
and conditions set forth in the Sale Notice. Any Subject Securities not sold to
such person on such terms during such 90-day period shall again be subject to
the restrictions contained in this SECTION 4.2.
4.3. RESTRICTIVE LEGEND. Each certificate representing USPI-B Stock or
USPE Shares shall conspicuously bear the following legend until such time as the
USPI-B Stock or USPE Shares, as the case may be, represented thereby are no
longer subject to the provisions hereof
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE RIGHTS
OF THE HOLDER OF THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS AND CONDITIONS OF A STOCKHOLDERS AGREEMENT, DATED AS OF
SEPTEMBER 26, 2000, AMONG THE ISSUER AND THE OTHER PARTIES THERETO, AS THE
SAME MAY BE AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM
TIME TO TIME. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
ISSUER.
ARTICLE V
BUY BACK RIGHTS
If at any time prior to the occurrence of a Triggering Event (i) any
shareholder of HDT who provides services to USPE pursuant to a management
contract between HDT and USPE shall cease to provide services to USPE due to
either the shareholder's voluntary termination of employment or such person's
dismissal declared for just cause in accordance with Article 54 of the Spanish
Workers Statute, and if USPI and HDT do not agree on a replacement who shall
become a shareholder of HDT within 60 days after such discontinuation of
services, or (ii) any of HDT's capital shares shall ultimately be owned by a
person or entity other than a current shareholder of HDT or someone providing
services to USPE under a management contract (whether by judicial or
administrative executory proceeding, realization of a right of pledge or
otherwise), then, and in each such case, USPI shall have an option to purchase
that number of the shares of USPI-B Stock held
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by HDT determined in accordance with the formula B-1 set forth in APPENDIX B at
a purchase price equal (on an "as converted" basis, as if USPI B-Stock was
converted into USPI Common Stock) to the weighted average share price on the
most recent $1,000,000 of capital raised through the sale of shares of USPI
Common Stock (including USPI A-Stock or USPI B-Stock, but excluding USPI B-Stock
issued pursuant to SECTION 1.1) to third parties (provided there has been
$1,000,000 of sales of such common stock within the 12-month period preceding
the date of exercise of the option). If there has not been $1,000,000 of sales
of such common stock within the 12-month period preceding the date of the
exercise of the option, then the most recent $1,000,000 of sales shall be used
to determine the purchase price, unless either USPI or HDT objects to using the
most recent sales, then USPI and HDT shall jointly select a third party
appraiser to determine the fair market value exercise price for the USPI
B-Stock. USPI shall notify HDT of its election to exercise the option within 90
days after USPI receives notice of such discontinuation of services or transfer
of ownership, and USPI shall consummate the option exercise within 30 days after
providing notification to HDT. Notwithstanding the foregoing, USPI shall not
have the option to purchase up to 20% of the outstanding USPI B-Stock which
would otherwise be subject to the option hereinabove provided if the other
shareholders of HDT who provide services to USPE pursuant to a management
contract acquire the underlying shares of HDT which give rise to the repurchase
option.
ARTICLE VI
EXIT PAYMENT
6.1. EXIT PAYMENT. (a) Subject to the provisions of SECTION 6.1(B), an IPO
of either USPE or USPI has not occurred prior to the termination hereof, USPE
shall pay HDT an exit payment (the "Exit Payment") calculated in accordance with
SECTION 6.2 upon the occurrence of a Triggering Event at USPE (other than an
IPO).
(b) If (i) HDT has converted its USPI B-Stock into USPE Shares prior to
the occurrence of an IPO of either USPE or USPI, and (ii) an IPO of USPE has not
occurred prior to the termination hereof, USPE shall pay HDT the Exit Payment
calculated in accordance with SECTION 6.2 upon the occurrence of a Triggering
Event at USPE (other than an IPO at USPE).
6.2. CALCULATION OF EXIT PAYMENT.
(a) If the total investment in USPE Shares made by USPI and HDT both
prior to and after the date of this Agreement (the "Total Investment") is equal
to or exceeds $100 million, the Exit Payment shall be calculated according to
the following table, as modified by subsection (c) below:
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USPE'S EXIT PAYMENT
ANNUAL IRR ($ million)
-------------------------------------------------------------------------------
< 20% 0
-------------------------------------------------------------------------------
20-30% 2
-------------------------------------------------------------------------------
30-40% 4
-------------------------------------------------------------------------------
40-50% 6
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50-55% 8
-------------------------------------------------------------------------------
> 55% 10 (maximum)
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(b) If the Total Investment is less than $100 million, the Exit Payment
shall be calculated according to the table set forth above but such amount shall
be proportionately reduced by the ratio of the Total Investment to $100 million,
and thereafter reduced as specified in subsection (c) below.
(c) The total amount of the Exit Payment to be paid will be the amount
resulting from subsection (a) or (b) above, as appropriate, minus an amount
calculated as follows: (1) $1,760,811 plus (2) with respect to each Qualified
Investment, the amount of such Qualified Investment multiplied by a percentage
equal to 7%.
ARTICLE VII
PROVISIONS REGARDING HDT
7.1. HDT SHAREHOLDERS AGREEMENT. HDT shall cause all of its present and
future shareholders (the "HDT Shareholders") to enter into and be bound by a
shareholders agreement (the "HDT Shareholders Agreement") reasonably acceptable
to USPI which limits transfers of HDT's capital shares. The provisions of the
HDT Shareholders Agreement dealing with transfers of HDT's capital shares may
not be amended without USPI's written consent, which shall not be unreasonably
withheld.
7.2. HDT CHANGE OF CONTROL. If an HDT Change of Control shall occur, (i)
HDT's rights under SECTION 3.1 shall immediately terminate, (ii) the obligations
of USPI and USPE under SECTION 2.1 shall immediately terminate, and (iii) any
investments made by USPI in USPE after the date of such HDT Change of Control
(A) shall not constitute Qualified Investments and (B) may be made on such terms
and conditions, including purchase price, as USPI and USPE shall determine.
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ARTICLE VIII
SALE OF USPE SHARES BY USPI
If at any time USPI intends to transfer, sell or dispose in any way of its
investment in USPE to an Unrelated Third Party in such a way as to cause a
Triggering Event at USPE, HDT shall have the right to sell all or part of the
USPE Shares that HDT would receive (or, as of such date, has received) upon
conversion of the USPI-B Stock pursuant to the provisions of the Certificate in
the economic conditions stated in the final sentence of this paragraph, in which
case USPI shall not proceed with the sale of its USPE Shares until and unless
the potential purchaser of its USPE Shares has effectively extended a binding
offer to HDT, as well, under the same terms and conditions as those offered to
USPI. To this effect, when HDT receives a notification in which it is informed
of USPI's intention to sell, transfer or dispose in any other way of its
investment in USPE to an Unrelated Third Party, HDT shall communicate its
intention of selling the USPE Shares it would receive upon conversion to the
acquiror within a maximum period of 15 days after such notification. The price
per share at which HDT shall exercise its right to sell USPE Shares will be the
price per share offered by the buyer to USPI, and payment and other conditions
shall be the same as those offered to USPI.
ARTICLE IX
MISCELLANEOUS
9.1. TERMINATION. This Agreement shall terminate upon the earlier to occur
of (i) (A) if HDT has not converted its shares of USPI B-Stock into USPE Shares
as of the time a USPI or USPE Triggering Event occurs, at the time of the
occurrence of a USPI or USPE Triggering Event, or (B) if HDT has converted its
shares of USPI B-Stock into USPE Shares prior to the time a USPI or USPE
Triggering Event occurs, at the time of the occurrence of a USPE Triggering
Event, or (ii) the mutual agreement of the Parties.
9.2 COUNTERPARTS; FAX SIGNATURES. This Agreement may be executed in any
number of counterparts, each of which will be deemed to be an original
agreement, but all of which will constitute one and the same agreement. Any
Party may execute and deliver this Agreement by an executed signature page
transmitted by a facsimile machine. If a Party transmits its signature page by a
facsimile machine, such Party will promptly thereafter deliver an originally
executed signature page to the other Parties, provided that any failure to
deliver such an originally executed signature page will not affect the validity,
legality, or enforceability of this Agreement.
9.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the Parties and supersedes all prior agreements and
understandings, both written and oral, and all contemporaneous oral agreements
and understandings with respect to the subject matter of this Agreement,
including, without limitation, that certain Shareholders Agreement, dated June
1, 1998, between USPI and HDT.
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9.4 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE KINGDOM OF SPAIN REGARDLESS OF THE
LAWS THAT MIGHT OTHERWISE GOVERN UNDER CONFLICTS OR CHOICE OF LAW PRINCIPLES.
9.5 NO ASSIGNMENT. No Party may assign its benefits or delegate its duties
under this Agreement without the prior written consent of the other Parties. Any
attempted assignment or delegation without such prior written consent shall be
void.
9.6 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the benefit
of the Parties and no other Person will have any right, interest, or claim under
this Agreement.
9.7 NOTICES. Unless otherwise provided elsewhere in this Agreement, all
claims, consents, designations, notices, waivers, and other communications in
connection with this Agreement shall be in writing. Such claims, consents,
designations, notices, waivers, and other communications will be considered
received (a) on the day of actual delivery when transmitted by hand delivery,
(b) on the day of actual transmittal when transmitted by facsimile with written
confirmation of such transmittal, or (c) two business days following actual
transmittal when transmitted by an internationally recognized courier (such as
UPS or FedEx); in each case when transmitted to a Party at its address or
location set forth below (or to such other address to which such Party has
notified the other Parties in accordance with this Section to send such claims,
consents, designations, notices, waivers, and other communications):
USPI: United Surgical Partners International, Inc.
00000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
Copy to: Xxxxxxxxxx Xxxx & XxXxxxxx PLLC
700 Two American Center
0000 Xxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
USPE: United Surgical Partners Europe, S.L.
c/o United Surgical Partners International, Inc.
00000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000 0000
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HDT: Health Dream Team, S.C.
Paseo de la Castellana, numero 00 xxx, 0x xxxxxx
00000 Xxxxxx, Xxxxx
Attention: Xxxxxxx Masfurroll
Facsimile: 341 91 577 3385
9.8 REPRESENTATION BY LEGAL COUNSEL. Each Party is a sophisticated person
that was advised by experienced legal counsel and other advisors in the
negotiation and preparation of this Agreement.
9.9 SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction will not invalidate the remaining provisions
of this Agreement or affect the validity or enforceability of such provision in
any other jurisdiction. In addition, any such prohibited or unenforceable
provision will be given effect to the extent possible in the jurisdiction where
such provision is prohibited or unenforceable.
9.10 SUCCESSORS. This Agreement will be binding upon and will inure to the
benefit of each Party and its heirs, legal representatives, permitted assigns,
and permitted successors, provided that this Section will not permit the
assignment or other transfer of this Agreement, whether by operation of law, or
otherwise, if such assignment or other transfer is not otherwise permitted under
this Agreement.
9.11 TIME OF THE ESSENCE. Time is of the essence in the performance of
this Agreement and all dates and periods specified in this Agreement.
9.12 WAIVER. No provision of this Agreement will be considered waived
unless such waiver is in writing and signed by the Party that benefits from the
enforcement of such provision. No waiver of any provision in this Agreement,
however, will be deemed a waiver of a subsequent breach of such provision or a
waiver of a similar provision. In addition, a waiver of any breach or a failure
to enforce any term or condition of this Agreement will not in any way affect,
limit, or waive a Party's rights under this Agreement at any time to enforce
strict compliance thereafter with every term and condition of this Agreement.
9.13 LANGUAGE. This Agreement has been signed in both English and Spanish
language versions. Both versions are valid, but in the event of any
inconsistency or ambiguity, the English version shall prevail.
9.14 EUROPEAN HOLDING COMPANY. The Parties acknowledge that USPI may
choose to create an intermediate holding company that would be a wholly-owned
subsidiary of USPI and the holder of some or all of USPI's investments in USPE
("EuroHoldCo"). If USPI determines to create EuroHoldCo, the Parties agree to
execute and deliver such further agreements and instruments, including, without
limitation, amendments to this Agreement, as are necessary and appropriate in
order to permit the creation of EuroHoldCo, and, at the option of USPI, the
transfer of some or all
12
of USPI's investment in USPE to EuroHoldCo, while preserving in substance the
relative rights and benefits (including tax consequences) of the Parties
provided for in this Agreement. Without limiting the generality of the
foregoing, the Parties contemplate that the creation of EuroHoldCo would require
an amendment and restatement of this Agreement addressing, among other items,
the following issues: (i) the modification of SECTIONS 2.1 AND 2.2 to provide
for investments by EuroholdCo in USPE, (ii) the modification of the definition
of the term "Triggering Event" to include events occurring at or with respect to
EuroHoldCo, (iii) the creation of a definition of the "EuroHoldCo Conversion
Ratio", which would be similar in structure to the USPI Conversion Ratio, and
(iv) the inclusion of an IPO at EuroHoldCo in the first clause of SECTION 6.1.
9.15 JUDGMENT CURRENCY. This is an international loan transaction in which
the specification of Spanish pesetas or U.S. dollars is of the essence, and the
stipulated currency shall in each instance be the currency of account and
payment in all instances. A payment obligation in one currency hereunder (the
"Original Currency") shall not be discharged by an amount paid in another
currency ("Other Currency"), whether pursuant to any judgment expressed in or
converted into the Other Currency or otherwise except to the extent that such
tender or recovery results in the effective receipt by the payee of the full
amount of the Original Currency payable to it under this Agreement.
9.16 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein shall survive the execution and delivery of this
Agreement and the Closing, regardless of any investigation at any time made by
or on behalf of any Party hereto.
9.17 USPE OBLIGATIONS. Upon completion of the transaction contemplated by
SECTION 1.1 hereof, USPE shall become a wholly-owned subsidiary of USPI. USPI
has the legal capacity to cause, and it shall cause, USPE to meet all of its
obligations under this Agreement. With respect to USPE Shares issuable upon
conversion of the USPI B-Stock, USPI undertakes to transfer the applicable
number of USPI's USPE Shares to the holder of such converted USPI B-Stock or,
alternatively, to pass or cause to be passed a shareholders' resolution at USPE
in order to agree to a share capital increase in USPE to provide the applicable
number of USPE Shares which shall be subscribed by the holder of the converted
USPI B-Stock by means of a contribution in kind of such holder's converted USPI
B-Stock.
9.18 TAX RESTRUCTURING. In the event HDT elects to convert the USPI
B-Stock into USPE Shares, then the Parties agree to consider structuring the
conversion as a redemption of HDT's USPI B-Stock in exchange for a market rate
promissory note of USPI. The USPI promissory note would be exchanged by HDT for
the USPE Shares. The foregoing transactions must be structured in such a manner
as to preserve in substance the relative rights and benefits (including tax
consequences) of the Parties provided for in this Agreement.
SIGNATURE PAGE FOLLOWS
13
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
HEALTH DREAM TEAM, S.C.
By: /s/ XXXXXXX MASFURROLL
Name: XXXXXXX MASFURROLL
Title: CHAIRMAN
UNITED SURGICAL PARTNERS
INTERNATIONAL, INC.
By: /s/ XXXXXX X. XXXXX
Name: XXXXXX X. XXXXX
Title: CHAIRMAN
UNITED SURGICAL PARTNERS
EUROPE, S.L.
By:/s/ XXXXXXX MASFURROLL
Name: XXXXXXX MASFURROLL
Title: CEO
14
APPENDIX A
"Annual IRR" means the rate of discount in discounted cash flow analysis
calculations which makes the net present value of a series of cash flows over
time equal zero as calculated in accordance with formula B-2 set forth on
Appendix B, and as is commonly calculated by modem spreadsheet software such as
Lotus 1-2-3 and Excel or by hand held financial calculators such as those
manufactured by Hewlett-Packard. The IRR for USPI shall be determined by
calculating all cash outflows in dollars from USPI to USPE from the date of such
transfer of funds, regardless of whether such transfer is characterized as debt
or equity. The cash inflows used for the IRR calculation shall include any and
all payments from USPE to USPI of dividends, interest, returns of capital,
repayment of debt owed or any distributions of funds related to a sale of USPE
or its stock. The date of cash inflows shall be when received by USPI and shall
be denominated in dollars,
"Dollar" or "$" means United States dollars.
"Election Notice" will have the meaning set forth in Section 4.2.
"Exchange Rate" means, with respect to each Qualified Investment, the
exchange rate, in Spanish pesetas per dollar, actually achieved by USPI in
consummating such Qualified Investment, and, with respect to each HDT
Co-Investment, the Exchange Rate actually achieved by USPI in consummating the
corresponding Qualified Investment.
"Exit Payment" will have the meaning set forth in Section 6.2.
"HDT" will have the meaning set forth in the introductory paragraph.
"HDT Change of Control" means any of the following: (i) the consolidation
or merger of HDT with or into any other entity, (ii) a sale or purported sale by
HDT of (A) more than 50% of the USPIB Stock held by HDT at any time, (B) any of
its rights under this Agreement or (C) all or substantially all of its other
properties and assets, (iii) the acquisition of "beneficial ownership" by any
"person" or "group" (other than the HDT shareholders as of the date of this
Agreement) of legal or beneficial ownership, or the right to vote, more than 50%
of any class of HDT's capital shares, whether by way of merger, consolidation or
otherwise, and (iv) any liquidation, dissolution or winding up of HDT, whether
voluntary or involuntary. As used herein, the terms "person", "group" and
"beneficial owner" shall have the meanings set forth in the definition of
"Triggering Event".
"HDT Co-Investment" will have the meaning set forth in Section 3.1.
"IPO" will have the meaning set forth in clause (iv) of the definition of
Triggering Event.
"Option Period" will have the meaning set forth in Section 4.2.
"Party" will have the meaning set forth in the introductory paragraph.
"pesetas" means Spanish pesetas.
A-1
"Qualified investment" will have the meaning set forth in Section 2.1.
"Related Third Party" shall mean, as to any Party, any individual,
partnership or corporation, or any other entity of whatever nature, that is not
part of the Party's group Groups shall be defined as in article 4 of the Spanish
Act 24/1988, dated July28 (Securities Markets Law), or that act on behalf of for
the account of any of the aforementioned.
"Sale Notice" will have the meaning set forth in Section 4.2.
"Securities Act" will have the meaning set forth in Section 1.3.
"Subject Securities" will have the meaning set forth in Section 4.2.
"Total Investment" will have the meaning set forth in Section 6.2.
"Triggering Event" at USPI or USPE means any of the following: (i) a
consolidation or merger of USPI or USPE, as applicable, with or into any other
entity (other than a merger which will not result in more than 50% of the voting
capital stock of USPI or USPE, as applicable, outstanding immediately after the
effective date of such merger being owned of record or beneficially by persons
other than the holders of such voting capital stock immediately prior to such
merger in the same proportions in which such shares were held immediately prior
to such merger), (ii) a sale of all or substantially all of the properties and
assets of USPI or USPE, as applicable, as an entirety in a single transaction or
in a series of related transactions to any other person, (iii) the acquisition
of "beneficial ownership" by any "person" or "group" (other than Welsh, Carson,
Xxxxxxxx & Xxxxx VII, L.P. or its affiliates) of voting stock of USPI or USPE,
as applicable, representing more than 50% of the voting power of all outstanding
shares of such voting stock, whether by way of merger, consolidation or
otherwise, (iv) the completion by USPI or USPE, as applicable, of a firm
commitment underwritten public offering of USPI Common Stock or USPE Shares, as
applicable, registered under applicable securities laws, in which (x) the
aggregate price paid for such shares by the public is at least $30,000,000, or
(y) the price per share paid by the public shall be at least $6 per share
(appropriately adjusted to reflect stock splits and combinations and stock
dividends) (an "IPO"), (v) a sale by USPI, to one or more persons other than
affiliates of USPI, of all USPE Shares as an entirety in a single transaction or
in a series of related transactions (any such sale constituting a Triggering
Event at USPE, not at USPI), and (vi) any liquidation, dissolution or winding up
of USPI or USPE, as applicable, whether voluntary or involuntary.
As used herein (i) the terms "person" and "group" shall have the meanings
set forth in Section 1 3(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not applicable, (ii) the term
"beneficial ownership" shall have the meaning set forth in Rules 13d-3 and 13d-5
under the Exchange Act, whether or not applicable, except that a person shall be
deemed to have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time or upon the occurrence of certain events, and (iii) any
"person" or "group" will be deemed to beneficially own any voting stock of USPI
or USPE, as applicable, so long as such person or group beneficially owns,
directly or indirectly, in the aggregate a majority of the voting stock of a
registered holder of the voting stock of USPI or USPE, as applicable.
A-2
"Unrelated Third Party" shall mean, as to any Party, any individual,
partnership corporation or other entity that is not a Related Third Party.
"USPE" will have the meaning set forth in the introductory paragraph.
"USPE Shares" will have the meaning set forth in Preliminary Statement A.
"USPI" will have the meaning set forth in the introductory paragraph.
"USPI-B Stock" will have the meaning set forth in Preliminary Statement B.
A-3
APPENDIX B
1. Buy Back Rights.
The number of shares of USPI-B Stock held by HDT to be repurchased by USPI
= (the total number of shares of USPI-B Stock held by HDT) times (the percentage
ownership of the equity capital of HDT directly or indirect]v owned or
controlled by the person whose failure to continue to provide services gave rise
to such buy back right).
2. Annual IRR:
Co + C^1 + C^2 + ... + Ct
------ ------ ------ = 0
(1+IRR) (1+1RR)^2 (1+IRR)t
Where Co = initial cash outflow
C^1 = cash outflow (or inflow) at time period #1
t = number of time periods
B-1
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
United Surgical Partners International, Inc., a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is United Surgical Partners International,
Inc. The original Certificate of Incorporation for the Corporation was filed
with the Delaware Secretary of Stale on February 26, 1998.
B. This Amended and Restated Certificate of Incorporation was duly adopted
in accordance with the applicable provisions of Sections 242 and 245 of the
Delaware General Corporation Law.
C This Amended and Restated Certificate of Incorporation amends, restates
and integrates the provisions of the Certificate of Incorporation of this
Corporation.
D. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
FIRST: The name of the corporation is UNITED SURGICAL PARTNERS
INTERNATIONAL, INC
SECOND: The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 0000 Xxxxxx Xxxxxx, xx xxx Xxxx xx
Xxxxxxxxxx, Xxxxxx of New Castle. The name of the Corporation's registered agent
at such address is THE CORPORATION TRUST COMPANY.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 73,053,916 shares, consisting of
31,200 shares of Series A Redeemable Preferred Stock, $.01 par value ("Series A
Preferred Stock"), 2,716 shares of Series B Convertible Preferred Stock, $.01
par value ("Series B Preferred Stock") and 20,000 shares of Series C Convertible
Preferred Stock, $.0l par value ("Series C Preferred Stock") (the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock being
collectively referred to herein as the "Preferred Stock"), 30,000,000 shares of
Class A Common Stock, $.0l par value ("Class A Common Stock"), 3,000,000 shares
of Class B Common Stock, $.0l par value ("Class B Common Stock"), and 40,000,000
shares of Common Stock, $.0l par value ("Common Stock")
All cross-references in each subdivision of this Article FOURTH refer to
other paragraphs in such subdivision unless otherwise indicated.
The following is a statement of the designations, and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of each class of stock of the Corporation:
1.
PREFERRED STOCK
Except as otherwise expressly provided herein, all shares of Preferred
Stock shall be identical and shall entitle the holders thereof to the same
rights and privileges.
1. Cumulative Dividends. The holders of shares of Series A Preferred Stock
and Series B Preferred Stock shall be entitled to receive, on April 30th of each
year beginning April 30, 2000, out of funds legally available for such purpose,
cash dividends at the rate of (x) $50.00 per share per annum on April 30, 2000
arid (y) $75.00 per share per annum thereafter, and no more, payable (as
determined from time to time by the Board of Directors) on each share of
Preferred Stock that shall then be outstanding (each annual period ended April
30th being referred to for the purposes of this subdivision I as a "Dividend
Period"). Such dividends shall be cumulative (so that if for any Dividend Period
such dividends are not paid or declared and set apart therefor, the deficiency
shall be paid, in whole or in part (without interest), on the next succeeding
dividend payment date on which the Corporation has any funds legally available
therefor) and shall accrue from and after the date of issue whether or not
declared and whether or not there are any funds of the Corporation legally
available for the payment of dividends. Accrued but unpaid dividends shall not
bear interest. The Board of Directors of the Corporation may fix a record date
for the determination of holders of Series A Preferred Stock and Series B
Preferred Stock entitled to receive payment of a dividend declared thereon,
which record date shall be no more than 60 days prior to the date fixed for the
payment thereof
As long as any shares of Preferred Stock shall remain outstanding, in no
event (without the written consent of the holders of a majority of the
outstanding Preferred Stock) shall any dividend whatsoever be paid upon, nor any
distribution be made upon, any shares of Class A Common Stock, Class B Common
Stock or Common Stock, other than a dividend or distribution payable in shares
of Class A Common Stock, Class B Common Stock or Common Stock, as the case may
be, nor except for the repurchase of shares (x) from participants under any
stock option plans approved by a majority of the Board of Directors of the
Corporation, (y) pursuant to employment agreements or stock purchase agreements
with employees approved by the Board of Directors of the Corporation, and (z) of
Class B Common Stock pursuant to the Stockholders Agreement dated as of
September 26, 2000, by and among Health Dream Team, S.C., the Corporation and
United Surgical Partners Europe, S.L., as such may be amended from time to time
in accordance with the terms thereof (the "Stockholders Agreement"), shall any
shares of Class A Common Stock, Class B Common Stock or Common Stock be
purchased or redeemed by the Corporation, nor shall any moneys be paid to or
made available for a sinking fund for the purchase or redemption of shares of
any Class A Common Stock, Class B Common Stock or Common Stock, unless, in each
such case, accrued and unpaid dividends on all outstanding
2
shares of Preferred Stock for all prior Quarterly Payment Dates and Dividend
Periods shall have been declared and paid in full and the full dividend on all
outstanding shares of Preferred Stock for the then-current Quarterly Payment
Date and Dividend Period shall have been paid or declared and sufficient funds
for the payment thereof set apart, and any arrears or defaults in any redemption
of shares of Preferred Stock shall have been cured. In the event that the
Corporation shall at any time pay a dividend on the Class A Common Stock or
Common Stock (other than a dividend payable solely in shares of Class A Common
Stock or Common Stock) in accordance with this paragraph, it shall, at the same
time, pay to each holder of Series C Preferred Stock (in addition to any payment
such holder is entitled to receive pursuant to this paragraph 1), a dividend
equal to the dividend that would have been payable to such holder if the shares
of Series C Preferred Stock held by such holder had been converted into Class A
Common Stock or Common Stock, as the case may be, on the date of determination
of holders of Class A Common Stock or Common Stock entitled to receive such
dividend.
2. Redemption. The shares of Series A Preferred Stock and Series B
Preferred Stock (collectively, the "Redeemable Preferred Stock") shall be
redeemable as follows:
2A. Mandatory Redemption. Except as and to the extent expressly prohibited
by applicable law, the Corporation shall redeem (in the manner and with the
effect provided in subparagraphs 2C through 2E below) all shares of Redeemable
Preferred Stock which shall then be outstanding, on the earlier to occur of (i)
the consummation by the Corporation of an initial public offering of its Common
Stock registered under the Securities Act of 1933, as amended (an "Initial
Public Offering") or (ii) April 30, 2008. In case of the occurrence of any of
the following (each a "Change of Control Event"): (i) a consolidation or merger
of the Corporation with or into any other corporation (other than a merger which
will not result in more than 50% of the voting capital stock of the Corporation
outstanding immediately after the effective date of such merger being owned of
record or beneficially by persons other than the holders of such voting capital
stock immediately prior to such merger in the same proportions in which such
shares were held immediately prior to such merger), (ii) a sale of all or
substantially all of the properties and assets of the Corporation as an entirety
in a single transaction or in a series or related transactions to any other
person or (iii) the acquisition of "beneficial ownership" by any "person" or
"group" (other than Welsh, Carson, Xxxxxxxx & Xxxxx VII, L.P. or its affiliates)
of voting stock of the Corporation representing more than 50% of the voting
power of all outstanding shares of such voting stock, whether by way of merger
or consolidation or otherwise, the Corporation shall, not later than 20 days
prior to the effective date of any such Change of Control Event, give notice
thereof to the holder or holders of shares of Redeemable Preferred Stock and, in
the event that within 15 days after receipt of such notice, any holder or
holders of shares of Redeemable Preferred Stock shall elect, by written notice
to the Corporation, to have any or all of its shares of Redeemable Preferred
Stock redeemed, the Corporation shall redeem the same (in the manner and with
the effect provided in subsections 2C through 2E below) not later than the
effective date and time of such Change of Control Event. In addition, at any
time on or after the second anniversary of the date on which shares of Series B
Preferred Stock are first issued, the Corporation shall, not later than 30 days
after receipt of written notice from any holder of shares of Series B Preferred
Stock requesting redemption of any or all of its shares of Series B Preferred
Stock, redeem such shares of Series B Preferred Stock (in the manner and with
the effect provided in subparagraphs 2C through 2E below).
3
As used herein, (i) the terms "person" and "group" shall have the meaning
set forth in Section 1 3(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not applicable, (ii) the term
"beneficial owner" shall have the meaning set forth in Rules 1 3d-3 and 1 3d-S
under the Exchange Act, whether or not applicable, except that a person shall be
deemed to have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time or upon the occurrence of certain events, and (iii) any
"person" or "group" will be deemed to beneficially own any voting stock of the
Corporation so long as such person or group beneficially owns, directly or
indirectly, in the aggregate a majority of the voting stock of a registered
holder of the voting stock of the Corporation.
2B. Optional Redemption. The Corporation may, in its sole discretion,
redeem at any time and from time to time (in the manner and with the effect
provided in subparagraphs 2C through 2E below), any whole number of shares of
Redeemable Preferred Stock. Any date on which the Corporation elects to redeem
shares of Redeemable Preferred Stock as provided in this subparagraph 2B and
each date on which the Corporation shall be required to redeem shares of
Redeemable Preferred Stock as provided in subparagraph 2A above shall be
referred to as a "Redemption Date."
2C. Redemption Price; Notice of Redemption. The Redeemable Preferred Stock
to be redeemed on a Redemption Date shall be redeemed by paying for each share
the sum of (i) $1,000, plus (ii) an amount equal to dividends accrued and unpaid
thereon from the date of issuance of such share of Redeemable Preferred Stock to
such Redemption Date, the sum of (i) and (ii) being herein sometimes referred to
as the "Redemption Price". Not less than 20 days before such Redemption Date,
written notice shall be given by mail, postage prepaid to the holders of record
of the Redeemable Preferred Stock to be redeemed, such notice to be addressed to
each such stockholder at his post office address as shown by the records of the
Corporation, specifying the number of shares to be redeemed, the paragraph or
paragraphs of this Certificate of Incorporation pursuant to which such
redemption shall be made, the Redemption Price and the place and date of such
redemption, which date shall not be a day on which banks in the City of New York
are required or authorized to close. If such notice of redemption shall have
been duly given and if on or before such Redemption Date the funds necessary for
redemption shall have been set aside so as to be and continue to be available
therefor, then, notwithstanding that any certificate for shares of Redeemable
Preferred Stock to be redeemed shall not have been surrendered for cancellation,
after the close of business on such Redemption Date, the shares so called for
redemption shall no longer be deemed outstanding, the dividends thereon shall
cease to accrue, and all rights with respect to such shares shall forthwith
after the close of business on the Redemption Date, cease, except only the right
of the holders thereof to receive, upon presentation of the certificate
representing shares so called for redemption, the Redemption Price therefor,
without interest thereon.
2D. Redeemed or Otherwise Acquired Shares to Be Retired. Any shares of the
Redeemable Preferred Stock redeemed pursuant to this paragraph 2 or otherwise
acquired by the Corporation in any manner whatsoever shall be permanently
retired and shall not under any circumstances be reissued; and the Corporation
may from time to time take such appropriate corporate action as may be necessary
to reduce the number of authorized shares of Redeemable Preferred Stock
accordingly.
4
2E. Shares to be Redeemed. In case of the redemption, for any reason, of
only part of the outstanding shares of Redeemable Preferred Stock on a
Redemption Date, all shares of Redeemable Preferred Stock to be redeemed shall
be selected pro rata, and there shall be so redeemed from each registered holder
in whole shares, as nearly as practicable to the nearest whole share, that
proportion of all the shares to be redeemed which the number of shares held of
record by such holder bears to the total number of shares of Redeemable
Preferred Stock at the time outstanding. Any shares of Redeemable Preferred
Stock that are designated for redemption on a Redemption Date and are not so
redeemed shall be redeemed as soon thereafter as possible and in the manner in
which shares are otherwise redeemed on a Redemption Date, and, in such event, as
provided in this subdivision I, dividends shall continue to accrue on such
shares.
3. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of
Series A Preferred Stock and the holders of the shares of Series B Preferred
Stock shall be entitled, before any distribution or payment is made upon any
Class A Common Stock, Class B Common Stock or Common Stock, to be paid an amount
equal to $1,000 per share plus any accrued but unpaid dividends, and the holders
of the shares of Series C Preferred Stock shall be entitled before any
distribution or payment is made upon any Class A Common or Common Stock to be
paid an amount equal to the Series C Preferred Liquidation Value with respect to
each outstanding share plus any accrued but unpaid dividends thereon (such
amounts being sometimes referred to as the "Preferred Liquidation Payments"). If
upon such liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of the
Preferred Stock of the Corporation shall be insufficient to permit payment to
such holders of the full amount of the Preferred Liquidation Payments, then the
entire assets of the Corporation to be so distributed shall be distributed
ratably per share among the holders of Preferred Stock in proportion to the full
per share amounts to which they respectively are entitled. Upon any such
liquidation, dissolution or winding up of the Corporation, after the holders of
Preferred Stock shall have been paid in full the preferential amounts to which
they shall be entitled as provided herein, the remaining net assets of the
Corporation shall be distributed to the holders of Class A Common Stock, Class B
Common Stock and Common Stock in accordance with this Certificate of
Incorporation, Written notice of such liquidation, dissolution or winding up,
stating a payment date, the amount of the Preferred Liquidation Payments to be
made pursuant hereto and the place where said Preferred Liquidation Payments
shall be payable shall be given by mail, postage prepaid, not less than 30 days
prior to the payment date stated therein to the holders of record of the
Preferred Stock, such notice to be addressed to each such holder at his post
office address as shown by the records of the Corporation; provided, however,
that failure to give notice pursuant to this sentence shall not invalidate the
action involved. A Change of Control Event shall not, for purposes of this
paragraph 3, be deemed a liquidation, dissolution or winding up of the
Corporation,
"Series C Preferred Liquidation Value" determined as of any date shall
mean, in respect of each share of Series C Preferred Stock, an amount equal to
$1,000 (appropriately adjusted to reflect stock splits and combinations and
stock dividends, the "Initial Purchase Price") plus an amount equal to seven
percent (7%) of the Initial Purchase Price, compounded quarterly on each of
March 31, June 30, September 30 and December 31.
5
4. Conversion of Convertible Preferred Stock.
4A(l) Optional Conversion of Series B Preferred Stock. At any time on or
after the second anniversary of the date on which shares of Series B Preferred
Stock are first issued, subject to and upon compliance with the provisions of
this paragraph 4, the holder of any share or shares of Series B Preferred Stock
shall have the right, at its option, to convert any such shares of Series B
Preferred Stock (except that upon any liquidation, dissolution or winding up of
the Corporation or upon any redemption of the Series B Preferred Stock in
accordance with paragraph 2, the right of conversion shall terminate at the
close of business on the last full business day next preceding the date fixed
for payment of the amount distributable on Series B Preferred Stock or payable
with respect thereto) into such number of fully paid and non-assessable whole
shares of Class A Common Stock as is obtained by multiplying the number of
shares of Series B Preferred Stock so to be converted by $1,000 (plus any
accrued and unpaid per share dividends through the time of conversion) and
dividing the result by the greater of (x) $2.00 (such price, or such price as
last adjusted hereunder, the "Series B Base Conversion Price") and (y) the fair
market value per share of Class A Common Stock at the time of conversion as
determined in good faith by the Board of Directors of the Corporation. Such
rights of conversion shall be exercised by the holder thereof by giving written
notice that the holder elects to convert a stated number of shares of Series B
Preferred Stock into Class A Common Stock and by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holder or holders of the
Series B Preferred Stock) at any time during its usual business hours on the
date set forth in such notice, together with a statement of the name or names
(with address), subject to compliance with applicable laws to the extent such
designation shall involve a transfer, in which the certificate or certificates
for shares of Class A Common Stock shall be issued,
4A(2) Optional Conversion of Series C Preferred Stock. At any time on or
after the date on which shares of Series C Preferred Stock are first issued,
subject to and upon compliance with the provisions of this paragraph 4, the
holder of any share or shares of Series C Preferred Stock shall have the right,
at its option, to convert any such shares of Series C Preferred Stock (except
that upon any liquidation, dissolution or winding up of the Corporation or upon
any redemption of the Series C Preferred Stock in accordance with paragraph 2,
the right of conversion shall terminate at the close of business on the last
full business day next preceding the date fixed for payment of the amount
distributable on Series C Preferred Stock or payable with respect thereto) into
such number of fully paid and non-assessable whole shares of Class A Common
Stock as is obtained by multiplying the number of shares of Series C Preferred
Stock so to be converted by the Series C Preferred Liquidation Value and
dividing the result by $3.50, or by the conversion price as last adjusted and in
effect at the date any share of shares of Series C Preferred Stock are
surrendered for conversion (such price, or such price as last adjusted
hereunder, the "Series C Conversion Price's). Such rights of conversion shall be
exercised by the holder thereof by giving written notice that the holder elects
to convert a stated number of shares of Series C Preferred Stock into Class A
Common Stock and by surrender of a certificate or certificates for the shares so
to be converted to the Corporation at its principal office (or such other office
or agency of the Corporation as the Corporation may designate by notice in
writing to the holder or holders of the Series C Preferred Stock) at any time
during its usual business hours on the date set forth in such notice, together
with a statement of the name or names (with address), subject to compliance
6
with applicable laws to the extent such designation shall involve a transfer, in
which the certificate or certificates for shares of Class A Common Stock shall
be issued.
4B. Issuance of Certificates: Time Conversion Effected. Promptly after the
receipt by the Corporation of a written notice referred to in subparagraph 4A(1)
or (2) and surrender of the certificate or certificates for the share or shares
of the Convertible Preferred Stock to be converted, the Corporation shall issue
and deliver, or cause to be issued and delivered, to the holder, registered in
such name or names as such holder may direct, subject to compliance with
applicable laws to the extent such designation shall involve a transfer, a
certificate or certificates for the number of whole shares of Class A Common
Stock issuable upon the conversion of such share or shares of Convertible
Preferred Stock. To the extent permitted by law, such conversion shall be deemed
to have been effected immediately prior to the close of business on the day the
certificate or certificates for such share or shares shall have been surrendered
as aforesaid, and at such time the rights of the holder of such share or shares
of Convertible Preferred Stock shall cease, and the person or persons in whose
name or names any certificate or certificates for shares of Class A Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby.
4C. Fractional Shares Dividends: Partial Conversion. No fractional shares
shall be issued upon conversion of the Convertible Preferred Stock into Class A
Common Stock. In ease the number of shares of Convertible Preferred Stock
represented by the certificate or certificates surrendered pursuant to
subparagraph 4A(l) or (2) exceeds the number of shares converted, the
Corporation shall, upon such conversion, execute and deliver to the holder
thereof, at the expense of the Corporation, a new certificate or certificates
for the number of shares of Convertible Preferred Stock, represented by the
certificate or certificates surrendered which arc not to be converted. If any
fractional interest in a share of Class A Common Stock would, except for the
provisions of the first sentence of this subparagraph 4C, be deliverable upon
any such conversion, the Corporation, in lieu of delivering the fractional share
thereof, shall pay to the holder surrendering the Convertible Preferred Stock
for conversion an amount in cash equal to the current fair value of such
fractional interest as determined in good faith by the Board of Directors of the
Corporation.
4D. Adjustment of Series C Conversion Price Upon Issuance of Common Stock.
Except as provided in subparagraph 4F hereof, if and whenever the Corporation
shall issue or sell, or is in accordance with subparagraphs 4D(1) through 4D(5)
deemed to have issued or sold, any shares of its Common Stock or Class A Common
Stock for a consideration per share less than the Series C Conversion Price in
effect immediately prior to the time of such issue or sale, then, forthwith, the
Series C Conversion Price shall be reduced to the price (calculated to the
nearest cent) determined by dividing (x) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such issue or
sale (including as outstanding all shares of Common Stock issuable upon
conversion of (i) outstanding Class A Common Stock, Series B Preferred Stock and
Series C Preferred Stock and (ii) the Corporation's Convertible Promissory Note
dated June 1, 1999 issued to Baylor Health Services) multiplied by the then
existing Series C Conversion Price, and (2) the consideration, if any, received
by the Corporation upon such issue or sale, by (y) the total number of shares of
Common Stock outstanding immediately after such issue or sale (including as
outstanding all shares of Common Stock issuable upon conversion of (i)
outstanding Class A Common Stock, Series B Preferred
7
Stock and Series C Preferred Stock and (ii) the Corporation's Convertible
Promissory Note dated June 1, 1999 issued to Baylor Health Services, without
giving effect to any adjustment in the number of shares so issuable by reason of
such issue or sale).
For purposes of this subparagraph 4D, the following subparagraphs 4D(1) to
4D(7) shall also be applicable:
4D(1). Issuance of Rights or Options. In case at any time the Corporation
shall in any manner grant any rights to subscribe for or to purchase, or any
options for the purchase of, Common Stock, Class A Common Stock or any stock or
securities convertible into or exchangeable for Common Stock or Class A Common
Stock (such rights or options being herein called "Options" and such convertible
or exchangeable stock or securities being herein called "Convertible
Securities") whether or not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock or Class A Common Stock, as the case may be, is issuable
upon the exercise of such Options or upon conversion or exchange of such
Convertible Securities (determined by dividing (i) the total amount, if any,
received or receivable by the Corporation as consideration for the granting of
such Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options, plus, in the
case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock or Class A Common
Stock issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of such
Options) shall be less than the Series C Conversion Price in effect immediately
prior to the time of the granting of such Options, then the total maximum number
of shares of Common Stock or Class A Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of granting
of such Options and thereafter shall be deemed to be outstanding. Except as
otherwise provided in subparagraph 4E(3), no adjustment of the Series C
Conversion Price shall be made upon the actual issue of such Common Stock or
Class A Common Stock or of such Convertible Securities upon exercise of such
Options or upon the actual issue of such Common Stock or Class A Common Stock,
as the case may be, upon conversion or exchange of such Convertible Securities.
4D(2). Issuance of Convertible Securities. In case the Corporation shall
in any manner issue (whether directly or by assumption in a merger or otherwise)
or sell any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock or Class A Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock and Class A Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Series C Conversion Price in effect immediately prior to
the time of such issue or sale, then the total maximum number of shares of
8
Common Stock or Class A Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except as
otherwise provided in subparagraph 4D(3) below, no adjustment of the Series C
Conversion Price shall be made upon the actual issue of such Common Stock or
Class A Common Stock, as the case maybe, upon conversion or exchange of such
Convertible Securities, and (b) if any such issue or sale of such Convertible
Securities is made upon exercise of any Option to purchase any such Convertible
Securities for which adjustments of the Series C Conversion Price have been or
are to be made pursuant to other provisions of this subparagraph 4D, no further
adjustment of the Series C Conversion Price shall be made by reason of such
issue or sale.
4D(3). Change in Option Price or Conversion Rate. If (i) the purchase
price provided for in any Option referred to in subparagraph 4D(l), (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 4D(1) or 4D(2) or (iii) the
rate at which any Convertible Securities referred to in subparagraph 4D(1) or
4D(2) are convertible into or exchangeable for Common Stock or Class A Common
Stock shall change at any time (in each case other than under or by reason of
provisions designed to protect against dilution), then the Series C Conversion
Price in effect at the time of such event shall, as required, forthwith be
readjusted to such Series C Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold; and on the
expiration of any such Option or the termination of any such right to convert or
exchange such Convertible Securities, the Series C Conversion Price then in
effect hereunder shall, as required, forthwith be increased to the Series C
Conversion Price which would have been in effect at the time of such expiration
or termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination, never been
issued, and the Common Stock or Class A Common Stock, as the case maybe,
issuable thereunder shall no longer be deemed to be outstanding. If the purchase
price provided for in any such Option referred to in subparagraph 4D( 1) or the
rate at which any Convertible Securities referred to in subparagraph 4D(1) or
4D(2) are convertible into or exchangeable for Common Stock or Class A Common
Stock shall be reduced at any time under or by reason of provisions with respect
thereto designed to protect against dilution, then, in case of the delivery of
Common Stock or Class A Common Stock upon the exercise of any such Option or
upon conversion or exchange of any such Convertible Securities, the Series C
Conversion Price then in effect hereunder shall, as required, forthwith be
adjusted to such respective amount as would have been obtained had such Option
or Convertible Securities never been issued as to such Common Stock or Class A
Common Stock, as the case may be, and had adjustments been made upon the
issuance of the shares of Common Stock or Class A Common Stock delivered as
aforesaid, but only if as a result of such adjustment the Series C Conversion
Price then in effect hereunder is thereby reduced.
4D(4). Stock Dividends. In case the Corporation shall declare a dividend
or make any other distribution upon any stock of the Corporation payable in
Common Stock, Class A Common Stock, Options or Convertible Securities, any
Common Stock, Class A Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration, and the Series C
9
Conversion Price shall be reduced as if the Corporation had subdivided its
outstanding shares of Common Stock and Class A Common Stock into a greater
number of shares, as provided in subparagraph 4E hereof.
4D(5). Consideration for Stock. In case any shares of Common Stock, Class
A Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Corporation in connection therewith. In case any shares of Common Stock,
Class A Common Stock, Options or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be deemed to be the fair value of such
consideration as determined in good faith by the Board of Directors of the
Corporation, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Corporation in
connection therewith, In case any Options shall be issued in connection with the
issue and sale of other securities of the Corporation, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the Corporation, such Options shall be deemed to have been issued
without consideration.
4D(6). Treasury Shares. The number of shares of Common Stock and Class A
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Corporation, and the disposition of any such
shares shall be considered an issue or sale of Common Stock or Class A Common
Stock for the purposes of this subparagraph 4D.
4D(7). Record Date. In case the Corporation shall take a record of the
holders of its Common Stock or Class A Common Stock for the purpose of entitling
them (i) to receive a dividend or other distribution payable in Common Stock,
Class A Common Stock, Options or Convertible Securities, or (ii) to subscribe
for or purchase Common Stock, Class A Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock or Class A Common Stock, as the case may be,
deemed to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such right of
subscription or purchase, as the case maybe, provided that such shares of Common
Stock or Class A Common Stock, as the case may be, shall in fact have been
issued or sold.
4E. Subdivision or Combination of Stock. In case the Corporation shall at
any time subdivide its outstanding shares of Class A Common Stock into a greater
number of shares or shall declare or pay a dividend on its outstanding shares of
Class A Common Stock payable in shares of Class A Common Stock, then in each
case the Series B Base Conversion Price and the Series C Base Conversion Price
shall be similarly reduced, and conversely, in case the outstanding shares of
Class A Common Stock of the Corporation shall be combined into a smaller number
of shares, the Base Conversion Price shall be similarly increased.
4F Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Series C Conversion Price upon the occurrence of any of the
following events: (i) the issuance of Class A Common Stock upon conversion of
outstanding shares of Series B Preferred Stock or Series C
10
Preferred Stock, (ii) the issuance and sale of, or grant of options to purchase
shares of Common Stock or Class A Common Stock to employees and advisors of the
Corporation pursuant to the Corporation's stock option plan or otherwise
approved by the Board of Directors of the Company, (iii) the issuance of Common
Stock upon conversion of outstanding shares of Class B Common Stock, and (iv)
the issuance and sale of shares of Class B Common Stock pursuant to the
Stockholders Agreement.
4G. Reorganization. Reclassification. Merger of Sale. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way (including, without limitation, by way of
consolidation or merger) that holders of Class A Common Stock shall be entitled
to receive stock, securities or assets with respect to or in exchange for Class
A Common Stock, then, as a condition of such reorganization or reclassification,
lawful and adequate provision shall be made whereby each holder of a share or
shares of Convertible Preferred Stock shall thereafter have the right to
receive, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Class A Common Stock of the Corporation immediately
theretofore receivable upon the conversion of such share or shares of
Convertible Preferred Stock, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for a number of outstanding
shares of such Class A Common Stock equal to the number of shares of such stock
immediately theretofore so receivable had such reorganization or
reclassification not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of such holder to the end
that the provisions hereof shall thereafter be applicable, as nearly as may be,
in relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights. In the event of a merger or
consolidation of the Corporation as a result of which a greater or lesser number
of shares of common stock of the surviving corporation are issuable to holders
of Class A Common Stock of the Corporation outstanding immediately prior to such
merger or consolidation, the Series B Base Conversion Price and the Series C
Base Conversion Price shall be adjusted in the same manner as though there were
a subdivision or combination of the outstanding shares of Class A Common Stock
of the Corporation. The Corporation will not effect any such consolidation or
merger, or any sale of all or substantially all its assets and properties,
unless prior to the consummation thereof the successor corporation (if other
than the Corporation) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument executed
and mailed or delivered to each holder of shares of Convertible Preferred Stock
at the last address of such holder appearing on the books of the Corporation,
the obligation to deliver to such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to receive.
4H. Notice of Adjustment. Upon any adjustment made pursuant to 4C or 4D,
then and in each such case the Corporation shall give written notice thereof, by
first class mail, postage prepaid, addressed to each holder of shares of
Convertible Preferred Stock at the address of such holder as shown on the books
of the Corporation, which notice shall state the number of shares of Class A
Common Stock or other securities, cash or property issuable upon conversion of
the Convertible Preferred Stock resulting from such adjustment, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
11
4I. Stock to be Reserved. The Corporation will at all times reserve and
keep available out of its authorized but unissued Class A Common Stock, solely
for the purpose of issuance upon the conversion of the Convertible Preferred
Stock as herein provided, such number of shares of Class A Common Stock as shall
then be issuable upon the conversion of all outstanding shares of Convertible
Preferred Stock, All shares of Class A Common Stock which shall be so issued
shall be duly and validly issued and fully paid and non-assessable and free from
all taxes, liens and charges arising out of or by reason of the issue thereof.
The Corporation will take all such action within its control as may be necessary
on its part to assure that all such shares of Class A Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Class A Common
Stock of the Corporation may be listed.
4J. No Reissuance of Convertible Preferred Stock. Shares of Convertible
Preferred Stock which are converted into shares of Class A Common Stock as
provided herein shall not be reissued.
4K. Issue Tax. The issuance of certificates for shares of Class A Common
Stock upon conversion of the Convertible Preferred Stock shall be made without
charge to the holders thereof for any issuance tax in respect thereof, provided
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Convertible Preferred
Stock which is being converted.
4L. Closing of Books. The Corporation will at no time close its transfer
books against the transfer of any Convertible Preferred Stock or of any shares
of Class A Common Stock issued or issuable upon the conversion of any shares of
Convertible Preferred Stock in any manner which interferes with the timely
conversion of such Convertible Preferred Stock.
4M(1). Definition of Class A Common Stock. As used in this paragraph 4,
the term "Class A Common Stock" shall mean and include the Corporation's
authorized Class A Common Stock, $.01 par value, as constituted on the date of
filing of this Certificate of Amendment to the Certificate of Incorporation and
shall also include any capital stock of any class of the Corporation thereafter
authorized which shall not be limited to a fixed sum or percentage of par value
in respect of the rights of the holders thereof to participate in dividends or
in the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares of Class
A Common Stock receivable upon conversion of shares of the Convertible Preferred
Stock, or in case of any reorganization or reclassification of the outstanding
shares thereof, the stock, securities or assets provided for in subparagraphs 4C
and 4D, shall include only shares designated as Class A Common Stock of the
Corporation on June 1, 2000.
4M(2). Definition of Common Stock. As used in this paragraph 4, the term
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
$.01 par value, as constituted on the date of filing of this Certificate of
Amendment to the Certificate of Incorporation and shall also include any capital
stock of any class of the Corporation thereafter authorized which shall not be
limited to a fixed sum or percentage of par value in respect of the rights of
the holders thereof to participate in dividends or in the distribution of assets
upon the
12
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided that the shares of Common Stock receivable upon conversion
of shares of the Convertible Preferred Stock, or in case of any reorganization
or reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in subparagraphs 4C and 4D, shall include only shares
designated as Common Stock of the Corporation on June 1,2000.
5. Restrictions. At any time when shares of Preferred Stock are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by this
Certificate of Incorporation, and in addition to any other vote required by law,
without the prior consent of the holders of a majority of the outstanding
Preferred Stock, given in person or by proxy, either in writing or at a special
meeting called for that purpose, at which meeting the holders of the shares of
such Preferred Stock shall vote together as a class:
(a) The Corporation will not (i) create or authorize the creation of any
additional class or series of shares unless the same ranks junior to the
Preferred Stock as to the distribution of assets upon the liquidation,
dissolution or winding up of the Corporation and as to the distribution of
dividends, (ii) increase the authorized amount of the Preferred Stock or the
authorized amount of any additional class or series of shares unless the same
ranks junior to the Preferred Stock as to the distribution of assets upon the
liquidation, dissolution or winding up of the Corporation and as to the
distribution of dividends, or (iii) create or authorize any obligation or
security convertible into shares of Preferred Stock or into shares of any other
class or series unless the same ranks junior to the Preferred Stock as to the
distribution of assets upon the liquidation, dissolution or winding up of the
Corporation and as to the distribution of dividends, in each such case whether
any such creation or authorization or increase shall be by means of amendment of
the Certificate of Incorporation, merger, consolidation or otherwise.
(b) The Corporation will not amend, alter or repeal the Corporation's
Certificate of Incorporation or By-laws in any manner, or file any directors'
resolutions pursuant to Section 151(g) of the General Corporation Law of the
State of Delaware containing any provision, in either case, which adversely
affects the respective preferences, qualifications, special or relative rights
or privileges of the Preferred Stock or which in any manner adversely affects
the Preferred Stock or the holders thereof. In addition, no action shall be
taken that would adversely alter or change the powers, preferences or special
rights of one, series of Preferred Stock, but not so affect all of the Preferred
Stock, without the consent of the holders of a majority of the outstanding stock
of such series of Preferred Stock voting separately as a class.
In addition, no such action shall be taken that would have the effect of
creating any additional differences between the respective preferences,
qualifications, special or relative rights or privileges of the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock
without the consent of the holders of a majority of the outstanding Series A
Preferred Stock, the consent of the holders of a majority of the outstanding
Series B Preferred Stock and the consent of the holders of a majority of the
outstanding Series C Preferred Stock, voting separately.
(c) The Corporation will not enter into any transaction that will result
in the occurrence of a Change of Control Event.
13
6. Voting. Except as otherwise required by law or this Certificate of
Incorporation, the holders of Series A Preferred Stock and Series B Preferred
Stock shall have no vote on any matters to be voted on by the stockholders of
the Corporation. Except as otherwise provided by law and this Certificate of
Incorporation, the holders of Series C Preferred Stock shall vote together with
the holders of Common Stock on all matters to be voted on by the stockholders of
the Corporation, and each share of Series C Preferred Stock shall entitle the
holder thereof to such number of votes per share on each such action as shall
equal the number of shares of Class A Common Stock (including fractions of a
share) into which each share of Series C Preferred Stock is then convertible.
II.
CLASS A COMMON STOCK, CLASS B COMMON STOCK AND COMMON STOCK
Except as otherwise expressly provided herein, all shares of Common Stock,
Class A Common Stock and Class B Common Stock shall be identical and shall
entitle the holders thereof to the same rights and privileges,
1. Dividends. The holders of shares of Class A Common Stock, Class B
Common Stock and Common Stock shall be entitled to receive such dividends as
from time to time may be declared by the Board of Directors of the Corporation
out of any funds legally available therefor, subject to the provisions of
subdivision I above with respect to the rights of holders of the Preferred
Stock. The Corporation shall declare a dividend on the Class A Common Stock and
Class B Common Stock on each occasion that dividends are declared on the Common
Stock of the Corporation. No dividend shall be paid on or declared and set apart
for the shares of any class of common stock for any dividend period unless at
the same time a like proportionate dividend for the same dividend period shall
be paid on or declared and set apart for the shares and all other classes of
common stock of the Corporation. The holders of shares of Class A Common Stock
and Common Stock shall receive dividends in accordance with the number of shares
of Class A Common Stock or Common Stock then outstanding. Each holder of shares
of Class B Common Stock shall receive a dividend equal to the dividend that
would have been payable to such holder if the shares of Class B Common Stock had
been converted into Common Stock on the date of determination of holders of
Common Stock entitled to receive such dividend.
2. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, (i) pursuant to and as more
particularly described in paragraph 4, all shares of Class B Common Stock shall
automatically convert into the number of shares of Common Stock specified in
paragraph 4, and (ii) subject to the prior rights of the holders of Preferred
Stock, the holders of the shares of Class A Common Stock and Common Stock,
according to the number of shares of Class A Common Stock and Common Stock then
outstanding, shall be entitled to share ratably in all assets of the Corporation
available for distribution to its stockholders; provided, however, (x) that in
the event that the amount available for distribution to the holders of Class A
Common Stock is insufficient to permit the holders of Class A Common Stock to be
paid an amount equal to (1) the original per share purchase price paid to the
Corporation with respect to each such share of Class A Common Stock plus any
accrued but unpaid dividends, or, (2) with respect to those shares of Class A
Common Stock outstanding as a result of the conversion of shares of Series B
Preferred Stock, $2.00 per share
14
plus any accrued but unpaid dividends, or (3) with respect to those shares of
Class A Common Stock outstanding as a result of the conversion of shares of
Series C Preferred Stock, $3.50 per share plus any accrued and unpaid dividends
(such amounts being sometimes referred to as the "Class A Liquidation
Payments"), then the holders of Class A Common Stock shall be entitled before
any distribution or payment is made upon any Common Stock, to be paid an amount
equal to the Class A Liquidation Payments and (y) that if the assets to be
distributed among the holders of the Class A Common Stock shall be insufficient
to permit payment to such holders of the full amount of the Class A Liquidation
Payments, then the entire assets of the Corporation to be so distributed shall
be distributed ratably among the holders of Class A Common Stock. Upon any such
liquidation, dissolution or winding up of the Corporation in which the amount
available for distribution to the holders of Class A Common Stock is sufficient
to permit such holders to be paid the full amount of the Class A Liquidation
Payments (as described in clauses (x) and (y) above), after the holders of Class
A Common Stock shall have been paid in full the preferential amounts to which
they shall be entitled as provided herein, all remaining assets of the
Corporation which are available for distribution to its stockholders shall be
distributed ratably among the holders of Common Stock. Written notice of such
liquidation, dissolution or winding up, stating a payment date, the amount of
the Class A Liquidation Payments and the place where said Class A Liquidation
Payments shall be payable, shall be given by mail, postage prepaid, not less
than 30 days prior to the payment date stated therein, to the holders of record
of Class A Common Stock, such notice to be addressed to each such holder at his
post office address as shown by the records of the Corporation; provided,
however, that failure to give notice pursuant to this sentence shall not
invalidate the action involved. A Change of Control Event shall not, for
purposes of this paragraph 2, be deemed a liquidation, dissolution or winding up
of the Corporation.
3. Conversion of Class A Common Stock.
3A. Optional Conversion of Class A Common Stock. Subject to and upon
compliance with the provisions of this paragraph 3 and after receiving the
written consent of the holders of the majority of the outstanding shares of
Class A Common Stock ("Conversion Consent"), the holder of any share or shares
of Class A Common Stock shall have the right, at its option, to convert any such
shares of Class A Common Stock (except that upon any liquidation, dissolution or
winding up of the Corporation the right of conversion shall terminate at the
close of business on the last full business day next preceding the date fixed
for payment of the amount distributable on Class A Common Stock) into an equal
number of fully paid and non-assessable whole shares of Common Stock. Such
rights of conversion shall be exercised by the holder thereof by giving written
notice (which notice shall attach the Conversion Consent) that the holder elects
to convert a stated number of shares of Class A Common Stock into Common Stock
and by surrender of a certificate or certificates for the shares so to be
converted to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to the holder or holders of the Class A Common Stock) at any time during its
usual business hours on the date set forth in such notice, together with a
statement of the name or names (with address), subject to compliance with
applicable laws to the extent such designation shall involve a transfer, in
which the certificate or certificates for shares of Common Stock shall be
issued.
15
3B. Automatic Conversion of Class A Common Stock. Notwithstanding anything
else herein to the contrary in this Section 3, in the event that, at any time
while any of the Class A Common Stock shall be outstanding, (i) the Corporation
shall complete a firm commitment underwritten public offering of Common Stock
registered under the Securities Act of 1933, as amended, in which (x) the
aggregate price paid for such shares by the public shall be at least $30,000,000
and (y) the price per share paid by the public for such shares shall be at least
$6 per share (appropriately adjusted to reflect stock splits and combinations
and stock dividends) (a "Qualified Offering") or (ii) a majority of the issued
shares of Class A Common Stock shall have been converted into Common Stock, then
all outstanding shares of Class A Common Stock shall be automatically and
without further action on the part of the holders of the Class A Common Stock
converted into shares of Common Stock in accordance with the terms of subsection
3A hereof with the same effect as if the certificates evidencing such shares had
been surrendered for conversion, such conversion to be effective immediately
prior to the closing of such Qualified Offering or immediately prior to the
conversion of Class A Common Stock satisfying clause (ii) above, as the case may
be; provided, however, that certificates evidencing the shares of Common Stock
issuable upon such conversion shall not be issued except on surrender of the
certificates for the shares of the Class A Common Stock so converted.
3C. Issuance of Certificates: Time Conversion Effected. Promptly after the
receipt by the Corporation of the written notice referred to in subparagraph 3A
and surrender of the certificate or certificates for the share or shares of the
Class A Common Stock to be converted, the Corporation shall issue and deliver,
or cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, subject to compliance with applicable laws to
the extent such designation shall involve a transfer, a certificate or
certificates for the number of whole shares of Common Stock issuable upon the
conversion of such share or shares of Class A Common Stock. To the extent
permitted by law, such conversion shall be deemed to have been effected
immediately prior to the close of business on the day the certificate or
certificates for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares of Class A
Common Stock shall cease, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby.
3D. Fractional Shares: Dividends: Partial Conversion. No fractional shares
shall be issued upon conversion of the Class A Common Stock into Common Stock,
nor shall any payment or adjustment be made upon any conversion on account of
any cash dividends on the Class A Common Stock so converted or the Common Stock
issued upon such conversion. In case the number of shares of Class A Common
Stock represented by the certificate or certificates surrendered pursuant to
subparagraph 3A exceeds the number of shares converted, the Corporation shall,
upon such conversion, execute and deliver to the holder thereof, at the expense
of the Corporation, a new certificate or certificates for the number of shares
of Class A Common Stock, represented by the certificate or certificates
surrendered which are not to be converted. If any fractional interest in a share
of Common Stock would, except for the provisions of the first sentence of this
subparagraph 3D, be deliverable upon any such conversion, the Corporation, in
lieu of delivering the fractional share thereof, shall pay to the holder
surrendering the Class A Common Stock for conversion an amount in cash equal to
the current fair value of such fractional interest as determined in good faith
by the Board of Directors of the Corporation.
16
3E. Subdivision or Combination of Stock. In case the Corporation shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares or shall declare or pay a dividend on its outstanding shares of Common
Stock payable in shares of Common Stock, then in each case the Class A Common
Stock shall be similarly subdivided, and conversely, in case the outstanding
shares of Common Stock of the Corporation shall be combined into a smaller
number of shares, the Class A Common Stock shall be similarly combined.
3F. Reorganization. Reclassification, Merger or Sale. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way (including, without limitation, by way of
consolidation or merger) that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provision (in form satisfactory to the holders of at least a
majority of the outstanding shares of Class A Common Stock) shall be made
whereby each holder of a share or shares of Class A Common Stock shall
thereafter have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock of the
Corporation immediately theretofore receivable upon the conversion of such share
or shares of Class A Common Stock, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore so receivable had such reorganization or
reclassification not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of such holder to the end
that the provisions hereof shall thereafter be applicable, as nearly as maybe,
in relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights. In the event of a merger or
consolidation of the Corporation as a result of which a greater or lesser number
of shares of common stock of the surviving corporation are issuable to holders
of Common Stock of the Corporation outstanding immediately prior to such merger
or consolidation, the number of shares of Common Stock into which Class A Common
Stock may be converted shall be adjusted in the same manner as though there were
a subdivision or combination of the outstanding shares of Common Stock of the
Corporation. The Corporation will not effect any such consolidation or merger,
or any sale of all or substantially all its assets and properties, unless prior
to the consummation thereof the successor corporation (if other than the
Corporation) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument (in form reasonably
satisfactory to the holders of at least a majority of the shares of Class A
Common Stock at the time outstanding) executed and mailed or delivered to each
holder of shares of Class A Common Stock at the last address of such holder
appearing on the books of the Corporation, the obligation to deliver to such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to receive,
3G. Notice of Adjustment. Upon any adjustment made pursuant to 3E or 3F,
then and in each such case the Corporation shall give written notice thereof, by
first class mail, postage prepaid, addressed to each holder of shares of Class A
Common Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the number of shares of Common Stock or
other securities, cash or property issuable upon conversion of the Class A
Common Stock resulting from such adjustment, setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
17
3H. Stock to be Reserved. The Corporation will at all times reserve and
keep available out of its authorized but unissued Common Stock, solely for the
purpose of issuance upon the conversion of the Class A Common Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Class A Common Stock. All shares of
Common Stock which shall be so issued shall be duly and validly issued and fully
paid and non-assessable and free from all taxes, liens and charges arising out
of or by reason of the issue thereof, The Corporation will take all such action
within its control as may be necessary on its part to assure that all such
shares of Common Stock may be so issued without violation of any applicable law
or regulation, or of any requirements of any national securities exchange upon
which the Common Stock of the Corporation may be listed.
3I. No Reissuance of Class A Common Stock. Shares of Class A Common Stock
which are converted into shares of Common Stock as provided herein shall not be
reissued,
3J. Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of the Class A Common Stock shall be made without charge to the
holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Class A Common Stock which is being
converted.
3K. Closing of Books. The Corporation will at no time close its transfer
books against the transfer of any Class A Common Stock or of any shares of
Common Stock issued or issuable upon the conversion of any shares of Class A
Common Stock in any manner which interferes with the timely conversion of such
Class A Common Stock,
3L. Definition of Common Stock. As used in this paragraph 3, the term
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
$.01 par value, as constituted on June 1, 2000 and shall also include any
capital stock of any class of the Corporation thereafter authorized which shall
not be limited to a fixed sum or percentage of par value in respect of the
rights of the holders thereof to participate in dividends or in the distribution
of assets upon the voluntary or involuntary liquidation, dissolution or winding
up of the Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of the Class A Common Stock, or in case of any
reorganization or reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in subparagraphs 3E or 3F, shall include only
shares designated as Common Stock of the Corporation on June 1, 2000.
4. Conversion of Class B Common Stock.
4A. Optional Conversion of Class B Common Stock. Subject to and upon
compliance with the provisions of this paragraph 4 and at any time prior to the
occurrence of a Triggering Event (as defined below), the holder of the
outstanding shares of Class B Common Stock shall have the right, at its option,
to convert all such shares of Class B Common Stock into shares of the common
capital stock ("USPE Shares") of United Surgical Partners Europe, S .L., a
company organized under the laws of Spain ("USPE"), in accordance with the
formula set forth in subsection 4D hereof. The conversion right granted by this
subsection 4A shall be on a one-time, all or none basis with respect to all of
the outstanding shares of Class B Common Stock. Such
18
right of conversion shall be exercised by the holder thereof by giving written
notice that the holder elects to convert all of the shares of Class B Common
Stock into USPE Shares and by surrender of a certificate or certificates for the
shares so to be converted to the Corporation at its principal office (or such
other office or agency of the Corporation as the Corporation may designate by
notice in writing to the holder of the Class B Common Stock) at any time during
its usual business hours, together with a statement of the name or names (with
address), subject to compliance with applicable laws to the extent such
designation shall involve a transfer, in which the USPE Shares shall be issued,
To the extent permitted by law, such conversion shall be deemed to have been
effected immediately prior to the close of business on the day the certificate
or certificates for such shares shall have been surrendered as aforesaid, and at
such time the rights of the holder of such shares of Class B Common Stock shall
cease, and the person or persons in whose name or names any certificate or
certificates for USPE Shares shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the shares represented
thereby. Notwithstanding the provisions of the preceding sentence, the holder of
shares of Class B Common Stock shall have the right to deliver written notice of
conversion which provides (i) that the conversion of the Class B Common Stock
into USPE Shares is conditioned upon the occurrence of a specified USPE
Triggering Event, and (ii) that such holder may rescind the conversion notice by
delivering written notice of such rescission to the Corporation in the manner
provided above prior to the conversion of the Class B Common Stock; if the
holder of the Class B Common Stock delivers a conditional notice as provided
herein, the conversion of the Class B Common Stock shall be effective
immediately prior to the applicable USPE Triggering Event (unless rescinded as
provided above).
4B. Automatic Conversion of Class B Common Stock. Upon the occurrence of a
Triggering Event at the Corporation or USPE, all outstanding shares of Class B
Common Stock shall be automatically and without further action on the part of
the holders of the Class B Common Stock converted into shares of Common Stock in
accordance with the terms of subsection 4C hereof, such conversion to be
effective immediately prior to the Triggering Event; provided, however, that
certificates evidencing the shares of Common Stock issuable upon such conversion
shall not be issued except on surrender of the certificates for the shares of
the Class B Common Stock so converted. The Corporation shall provide the holders
of the shares of Class B Common Stock at least 30 days (or such shorter period
as may be acceptable to the holders) prior written notice of the proposed
Triggering Event. Such notice will be sent by first class mail, postage prepaid,
addressed to each holder of shares of Class B Common Stock at the address of
such holder as shown on the books of the Corporation and the Corporation shall
also concurrently provide notice to such holders by e-mail or facsimile
transmission; provided, however, that failure to give notice pursuant to this
sentence shall not invalidate the underlying Triggering Event, Notwithstanding
the foregoing, in addition to any other remedies available under applicable law,
if the Corporation fails to give notice of a Triggering Event pursuant to the
provisions of this Section 4B, the holders of the Class B Common Stock
(immediately prior to the occurrence of such Triggering Event) shall have the
right to cause the Corporation to convert such holders Common Stock issued upon
conversion of such Class B Common Stock into USPE Shares or, if as of such time
a USPE Triggering Event shall have occurred, to exchange such Common Stock into
the consideration that such holder would have received in connection with the
USPE Triggering Event had such holder exercised its conversion rights under
Section 4A prior to such USPE Triggering Event; the right set forth in this
sentence shall expire thirty days
19
after the Corporation shall have delivered notice of the applicable Triggering
Event to such holder.
4C. USPI Conversion Ratio. Each share of Class B Common Stock shall, upon
the occurrence of a Triggering Event, be converted into that number of fully
paid and non-assessable whole shares of Common Stock which results from the
product of one times the USPI Conversion Ratio, The USPI Conversion Ratio is:
(QI x .07) + (HMTIS x ERI/ERL) + ~HMTCO)
----------------------------------------
(HMTIS x ERI/ERL) + (HMTCO)
Where,
QI = the number of shares issued in a Qualified Investment (as defined in
the Stockholders Agreement)
ERI = 160 Spanish pesetas (or, if as of the applicable time, the Spanish
peseta is no longer in use, then equivalent amount as of the applicable date in
Euros)
ERL = the Exchange Rate, in Spanish pesetas per dollar, on the date of the
Triggering Event (or, if as of the applicable time, the Spanish peseta is no
longer in use, then equivalent amount as of the applicable date in Euros)
HMTIS = the number of shares of Class B Common Stock outstanding on the
date hereof (1,000,000)
HMTCO = the number of shares of Class B Common Stock issued in HMT
Co-Investments (as defined in the Stockholders Agreement)
For purposes of this ratio, notwithstanding the fact that QI represents
shares of capital stock of USPE and not USPI, QI, HMTIS and HMTCO shall be
appropriately adjusted to reflect stock splits and combinations and stock
dividends of the Class B Common Stock or the Common Stock but not the USPE
Shares)
4D. USPE Conversion Formula. All of the outstanding shares of Class B
Common Stock shall, upon the exercise of the conversion right granted by
subsection 4A hereof, be converted into that number of fully paid and
non-assessable whole USPE Shares which results in a percentage ownership in USPE
equal to that obtained by applying the following formula:
(BV x .12) + (QI x .07) + MCOINV
--------------------------------
BV+QI
Where,
BV = the Corporation's equity investment in USPE on the date hereof
($29,752,664)
20
QI = the Corporation's additional equity investments in USPE after the
date hereof, in dollars (measured as of the date of each such investment based
upon the Exchange Rate in effect on each such date)
MCOINV = the dollar value of shares of Class B Common Stock issued
pursuant to HMT Co-Investments (as defined in the Stockholders Agreement)
(measured as of the date of each such investment based upon the Exchange Rate in
effect on each such date)
4E. Stock to be Reserved. USPE and the Corporation, as applicable, will at
all times reserve and keep available out of the authorized but unissued USPE
Shares or Common Stock, as applicable, solely for the purpose of issuance upon
conversion in accordance with subsection 4A or 4B, as applicable, such number of
USPE Shares or shares of Common Stock, as applicable, as shall then be issuable
upon the conversion of all outstanding shares of Class B Common Stock, With
respect to USPE Shares issuable upon conversion of the Class B Common Stock,
USPI undertakes to transfer the applicable number of USPI's USPE Shares to the
holder of such converted Class B Common Stock or, alternatively, to pass a
shareholders' resolution at USPE in order to agree to a share capital increase
in USPE to provide the applicable number of USPE Shares which shall be
subscribed by the holder of the converted Class B Common Stock by means of a
contribution in kind of such holder's converted Class B Common Stock. USPE and
the Corporation, as applicable, shall take all such action within their control
as may be necessary on their part to assure that all such shares may be so
issued without violation of any applicable law or regulation, or of any
requirements of any securities exchange upon which such shares may be listed.
0X. Xxxxxxxx of Certificates: No Fractional Shares. Promptly after the
receipt by the Corporation of the written notice referred to in subsection 4A or
the Triggering Event giving rise to a conversion under subsection 4B and
surrender by the holder of the certificate or certificates representing the
holder's shares of Class B Common Stock, USPE or the Corporation, as
appropriate, shall issue and deliver, or cause to be issued and delivered, to
the holder, registered in such name or names as such holder may direct, subject
to applicable law to the extent such designation shall involve a transfer, a
certificate or certificates for the number of whole USPE Shares or shares of
Common Stock, as applicable, issuable upon the conversion of the holder's Class
B Common Stock. If any fractional interest in a USPE Share or share of Common
Stock would, except for the provisions of this subsection, be deliverable upon
conversion, the Corporation, in lieu of delivery by USPE or the Corporation, as
appropriate, of the fractional share thereof, shall pay to the holder upon
surrender of the certificates representing the holder's Class B Common Stock for
conversion an amount in cash equal to the current fair market value of such
fractional interest as determined in good faith by the Board of Directors of the
Corporation.
4G. Subdivision or Combination of Stock. In case the Corporation shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares or shall declare or pay a dividend on its outstanding shares of Common
Stock payable in shares of Common Stock, then in each case the Class B Common
Stock shall be similarly subdivided, and conversely, in case the outstanding
shares of Common Stock of the Corporation shall be combined into a smaller
number of shares, the Class B Common Stock shall be similarly combined.
21
4H. Reorganization. Reclassification, Merger or Sale. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way (including, without limitation, by way of
consolidation or merger) that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provision (in form satisfactory to the holders of at least a
majority of the outstanding shares of Class B Common Stock) shall be made
whereby each holder of a share or shares of Class B Common Stock shall
thereafter have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock of the
Corporation immediately theretofore receivable upon the conversion of such share
or shares of Class B Common Stock, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore so receivable had such reorganization or
reclassification not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of such holder to the end
that the provisions hereof shall thereafter be applicable, as nearly as may be,
in relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights. In the event of a merger or
consolidation of the Corporation as a result of which a greater or lesser number
of shares of common stock of the surviving corporation are issuable to holders
of Common Stock of the Corporation outstanding immediately prior to such merger
or consolidation, the number of shares of Common Stock into which the Class B
Common Stock may be converted shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of Common
Stock of the Corporation. The Corporation will not effect any such consolidation
or merger, or any sale of all or substantially all its assets and properties,
unless prior to the consummation thereof the successor corporation (if other
than the Corporation) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument (in form
reasonably satisfactory to the holders of at least a majority of the outstanding
shares of Class B Common Stock at the time outstanding) executed and mailed or
delivered to each holder of shares of Class B Common Stock at the last address
of such holder appearing on the books of the Corporation, the obligation to
deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
receive.
4I. Notice of Adjustment. Upon any adjustment made pursuant to 4G or 4H,
then and in each such case the Corporation shall give written notice thereof, by
first class mail, postage prepaid, addressed to each holder of shares of Class B
Common Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the number of USPE Shares or shares of
Common Stock or other securities, cash or property issuable upon conversion of
the Class B Common Stock resulting from such adjustment, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
4J. Cancellation of Class B Common Stock upon Conversion. Upon any
conversion under subsection 4A or 4B, the holder's Class B Common Stock shall be
canceled and shall cease to be outstanding.
4K. Issue Tax. The issuance of certificates for USPE Shares or shares of
Common Stock upon conversion of the Class B Common Stock shall be made without
charge to the
22
holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Class B Common Stock which is being
converted.
4L. Definition of Triggering Event. As used in this paragraph 4, the term
"Triggering Event" at the Corporation or USPE means any of the following: (i) a
consolidation or merger of the Corporation or USPE, as applicable, with or into
any other entity (other than a merger which will not result in more than 50% of
the voting capital stock of the Corporation or USPE, as applicable, outstanding
immediately after the effective date of such merger being owned of record or
beneficially by persons other than the holders of such voting capital stock
immediately prior to such merger in the same proportions in which such shares
were held immediately prior to such merger), (ii) a sale of all or substantially
all of the properties and assets of the Corporation or USPE, as applicable, as
an entirety in a single transaction or in a series of transactions to any other
person or persons, (iii) the acquisition of "beneficial ownership" by any
"person" or "group" (other than Welsh, Carson, Xxxxxxxx & Xxxxx VII, L.P. or its
affiliates) of voting stock of the Corporation or USPE, as applicable,
representing more than 50% of the voting power of all outstanding shares of such
voting stock, whether by way of merger, consolidation or otherwise, (iv) the
completion by the Corporation or USPE, as applicable, of a firm commitment
underwritten public offering of Common Stock or USPE Shares, as applicable,
registered under applicable securities laws, in which (x) the aggregate price
paid for such shares by the public is at least $30,000,000, or (y) the price per
share paid by the public shall be at least $6 per share (appropriately adjusted
to reflect stock splits and combinations and stock dividends), (v) a sale by the
Corporation, to one or more persons other than affiliates of the Corporation, of
all USPE Shares as an entirety in a single transaction or in a series of related
transactions (any such sale constituting a Triggering Event at USPE, not at the
Corporation), and (vi) any liquidation, dissolution or winding up of the
Corporation or USPE, as applicable, whether voluntary or involuntary.
As used herein (i) the terms "person" and "group" shall have the meanings
set forth in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), whether or not applicable, (ii) the term "beneficial
ownership" shall have the meaning set forth in Rules 13(d)-3 and 13(d)-5 under
the Exchange Act, whether or not applicable, except that a person shall be
deemed to have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time or upon the occurrence of certain events, and (iii) any
"person" or "group" will be deemed to beneficially own any voting stock of the
Corporation or USPE, as applicable, so long as such person or group beneficially
owns, directly or indirectly, in the aggregate a majority of the voting stock of
a registered holder of the voting stock of the Corporation or USPE, as
applicable.
5. Voting. Except as otherwise required by law or this Certificate of
Incorporation, the holders of the Class A Common Stock, Class B Common Stock and
Common Stock shall be entitled to notice of any stockholders meeting in
accordance with the By-laws of the Corporation and to vote together as a class
upon any matter submitted to the stockholders for a vote as follows: (x) each
holder of Class A Common Stock shall be entitled to 10 votes for each share of
Common Stock which would be issuable to such holder upon the conversion of all
the shares of Class A Common Stock so held on the record date for the
determination of stockholders entitled
23
to vote and (ii) each holder of Class B Common Stock and Common Stock shall have
one vote per share.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors of the Corporation is
expressly authorized and empowered to make, alter or repeal the By-laws of the
Corporation, subject to the power of the stockholders of the Corporation to
alter or repeal any By-law made by the Board of Directors.
SEVENTH: The Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provisions contained in this
Certificate of Incorporation; and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights, preferences and privileges
of whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article.
EIGHTH: (1) The Corporation shall, to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities and other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person. The expenses (including
attorney's fees) incurred by such persons in defending any civil, criminal,
administrative, or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation.
(2) No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided, however, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit,
SIGNATURE PAGE FOLLOWS
24
EXHIBIT B
PROMISSORY NOTE
[Form of Note]
$___________ Dallas, Texas
_________________, 2000
FOR VALUE RECEIVED, the undersigned, HEALTH DREAM TEAM, S.C., a company
incorporated in Spain ("Maker"), promises to pay to the order of UNITED SURGICAL
PARTNERS INTERNATIONAL, INC., a company incorporated in the State of Delaware
("Payee" or the "Company"), on or before the fourth anniversary hereof (the
"Payment Date"), the sum of _________________ Dollars ($___________), together
with simple interest thereon at a rate equal to five percent (5%) per annum
commencing on the date hereof. Mature unpaid principal and interest shall bear
interest at the lesser of (i) ten percent (10%) per annum and (ii) the highest
rate permitted by applicable law, from the date of maturity until paid in full.
No payments of principal on this Note shall be due or payable prior to the
Payment Date unless otherwise accelerated pursuant to Section 2 hereof. On the
Payment Date, the Maker shall pay the Payee an amount equal to the entire unpaid
principal balance of this Note (or, as provided in Section 2(iv) hereof, the
Applicable Prorata Portion thereof) plus all accrued but unpaid interest on the
accelerated portion of such principal amount. The principal and accrued interest
on this Note shall be due and payable in lawful money of the United States of
America, in Dallas, Texas at the office of Payee, 1'7103 Xxxxxxx Xxxx, Xxxxx
000, Xxxxxx, Xxxxx 00000.
1. PREPAYMENTS. Maker shall be entitled to prepay the unpaid principal
balance hereof, in whole or in part, without premium or penalty.
2. ACCELERATION. The outstanding principal amount of this Note, plus
interest accrued thereon through the date of payment, shall accelerate and
become due and payable pursuant to the following provisions:
(i) if at any time while any amount of this Note shall be outstanding, a
Triggering Event (as defined in the Company's Amended and Restated Certificate
of Incorporation (the "Certificate")) shall occur in which the Maker receives as
a cash payment, they, the outstanding principal amount of this Note, plus
interest accrued thereon through the date of payment, equal to such cash payment
shall accelerate and become due and payable as of the seventh day after the date
(if earlier than the Payment Date) of receipt of such cash payment by the Maker;
provided, that if such cash payment is in excess of the outstanding principal
amount of this Note, then the entire outstanding principal amount of this Note,
plus interest accrued thereon through the date of payment, shall accelerate and
become due and payable as of such date;
(ii) if at any time while any amount of this Note shall be outstanding a
Triggering Event shall occur in which the Maker shall receive freely tradable
securities, then the outstanding principal amount of this Note, plus accrued
interest thereon through the date of payment, equal to the value of such
securities (on the date described below) shall accelerate and become due and
payable as of the date (if earlier than the Payment Date) that is six months
after the date of
receipt of such securities by the Maker; provided, that if such securities are
valued (on the date described above) at an amount in excess of the outstanding
principal amount of this Note, then the entire outstanding principal amount of
this Note, plus interest accrued thereon through the date of payment, shall
accelerate and become due and payable as of such date;
(iii) if at any time while any amount of this Note shall be outstanding
the Payee shall complete an IPO (as defined in the Certificate) of its shares of
common stock, then the entire outstanding principal amount of this Note, plus
interest accrued thereon through the date of payment, shall accelerate and
become due and payable as of the date (if earlier than the Payment Date) that is
six months after the consummation of the IPC?; and
(iv) if a guarantor of this Note who previously provided services to
United Surgical Partners Europe, S:L., a company organized under the laws of
Spain ("USPE"), whether pursuant to a management contract or otherwise, ceases
providing services to USPE, then the Applicable Pro Rata Portion of the unpaid
principal balance of this Note and any accrued but unpaid interest thereon shall
become due and payable 120 days after the cessation of services and the Maker
shall make such mandatory prepayment 120 days after the cessation of services,
unless (x) Maker and the Company shall agree upon a replacement manager or
guarantor who shall become a shareholder of Maker and guarantor under this Note
within said time period, (y) the other shareholders of Maker who provide
management services to USPE acquire the guarantor's shares of Maker in
accordance with the provisions of the Stockholders Agreement (hereinafter
defined), or (z) the Company does not exercise its option to acquire from Maker
shares of the Company as a consequence of the guarantor's cessation of services.
The "Applicable Pro Rata Portion" means the entire unpaid principal balance of
this Note and any accrued but unpaid interest thereon times the percentage of
Maker's capital shares held by such guarantor at the time this Note was
initially made.
3. EVENTS of DEFAULT. If not otherwise then due and payable, the entire
unpaid principal balance of this Note shall immediately become due and payable
upon the occurrence of any of the following events (each a "Default"):
3.1 Failure to Pay Note. Any of the indebtedness evidenced hereby is not
paid when due, whether by demand or otherwise, and if such default shall
continue for a period of five (S) days.
3.2 Bankruptcy or Insolvency. Maker:
(a) (i) Executes an assignment for the benefit of creditors, or takes any
action in furtherance thereof; or (ii) admits in writing its inability to pay,
or fails to pay, its debts generally as they become due; or (iii) as a debtor,
files a petition, case, proceeding or other action pursuant to, or voluntarily
seeks the benefit or benefits of, any law, domestic or foreign, as now or
hereafter in effect relating to bankruptcy, insolvency, liquidation, suspension
of payments, receivership, reorganization, arrangement, composition, extension
or adjustment of debts, or similar laws affecting the rights of creditors (such
laws being herein called "Debtor Relief Laws"), or takes any action in
furtherance thereof or in preparation therefor; or (iv) seeks the appointment of
a receiver, trustee, custodian or liquidator of any of the property now or
hereafter encumbered as security for this Note or for any other indebtedness now
or hereafter owing by Maker to Payee; or
2
(b) Suffers the filing of a petition, case, proceeding or other action
against it as a debtor under any Debtor Relief Law or seeking appointment of a
receiver, trustee, custodian or liquidator of any of the property now or
hereafter encumbered as security for this Note or any part thereof, and (i)
admits, acquiesces in or fails to contest diligently the material allegations
thereof, or (ii) the petition, case, proceeding or other action results in entry
of any order for relief or order granting relief sought against it, or (iii) in
a proceeding under the Federal Bankruptcy Code, the case is converted from one
chapter to another, or (iv) fails to have the petition, case, proceeding or
other action permanently dismissed or discharged on or before the earlier of
trial thereon or sixty (60) days next following the date of its filing.
3.3 Nonperformance of Covenants.
(a) Any representation or warranty made by the Maker herein, in the
Stockholders Agreement among Maker, Payee and USPE dated September 26, 2000 (the
Stockholders Agreement"), or in the Management Agreement between Maker and UPE
dated September 6, 2000 (the "Management Agreement"), shall prove to have been
incorrect or untrue in any material respect on or as of the date made; or
(b) The Maker shall default in the observance or performance of any
material term, covenant or agreement contained herein, in the Stockholders
Agreement or in the Management Agreement.
4. CUMULATIVE RIGHTS. No delay on the part of the holder of this Note in
the exercise of any power or right under this Note shall operate as a waiver
thereof, nor shall a single or partial exercise of any such power or right.
Enforcement by the holder of this Note of any security for the payment hereof
shall not constitute an election by it of remedies so as to preclude the
exercise of any other remedy available to it.
5. WAIVER. Maker, and each surety, endorser, guarantor, and other party
ever liable for the payment of any sum of money payable on this Note, jointly
and severally waive demand, presentment, protest, notice of nonpayment, notice
of intention to accelerate, notice of protest, notice of acceleration and any
and all lack of diligence or any delay in collection or the filing of suit
hereon which may occur, and agree that their liability on this Note shall not be
affected by any renewal or extension in the time of payment hereof, by any
indulgences, or by any release or change in any security for the payment of this
Note, and hereby consent to any and all renewals, extensions, indulgences,
releases, or changes, regardless of the number of such renewals, extensions,
indulgences, releases, or changes.
6. ATTORNEYS' FEES AND COSTS. In the event a Default shall occur, and in
the event that thereafter this Note is placed in the hands of an attorney for
collection, or in the event this Note is collected in whole or in part through
legal proceedings of any nature, then and in any such case, Maker promises to
pay all reasonable costs of collection, including but not limited to reasonable
attorneys' fees incurred by the holder hereof on account of such collection,
whether or not suit is filed.
7. NOTICES. Any notice or demand given hereunder by the holder hereof
shall be deemed to have been given and received (a) when actually delivered to
the address of the party
3
to be notified if delivered in person, or (b) if mailed, on the earlier of the
date actually delivered to the address of the party to be notified or (whether
ever so delivered or not) on the third Business Day (hereinafter defined) after
it is enclosed in an envelope, addressed to the party to be notified, properly
stamped, sealed and deposited in the mail, certified, return receipt requested.
For purposes hereof, the address of Maker is
8. GOVERNING LAW. The laws of the State of Delaware shall govern the
construction, validity, enforcement and interpretation hereof, except to the
extent federal laws otherwise govern the validity, construction, enforcement and
interpretation hereof.
9. HEADINGS; CONSTRUCTION. The headings of the sections of this Note are
inserted for convenience only and shall not be deemed to constitute a part
hereof. Words used herein of any gender shall be construed to include any other
gender where appropriate, and words used herein which are either singular or
plural shall be construed to include the other where appropriate.
10. SUCCESSORS AND ASSIGNS. All of the covenants, stipulations, promises
and agreements in this Note contained by or on behalf of Maker shall bind its
successors and assigns, whether so expressed or not; provided, however, that
Maker may not, without the prior consent of Payee, assign any rights, duties or
obligations under this Note.
11. PAYMENTS; BUSINESS DAY. Each payment or prepayment hereon must be paid
at the office of Payee specified above in lawful money as therein specified and
in funds which are or will be available for immediate use by Payee at such
office on or before 2:00 p.m., local Dallas, Texas time, on the day such payment
or prepayment is due. In any case where a payment of principal or interest
hereon is due on a day which is not a Business Day, Maker shall be entitled to
delay such payment until the next succeeding Business Day, but interest, if any,
shall continue to accrue until the payment is, in fact, made. As used herein,
"Business Day" means every day on which national banking associations located in
Dallas, Texas, are authorized to be open for general lending business.
12. WAIVERS OF JURY TRIAL. MAKER AND PAYEE EACH HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS NOTE.
13. NO ORAL AGREEMENTS. THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURE PAGE FOLLOWS
4
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first above written.
HEALTH DREAM TEAM, S.C.
By: _______________________________________
Name: _______________________________________
Title: _______________________________________
("Maker")
EXHIBIT C
GUARANTY
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and to induce United Surgical Partners International,
Inc., a company incorporated in the State of Delaware (herein, with its
successors and assigns, called the "Lender"), at any time or from time to time,
to make loans or extend other accommodations to or for the account of Health
Dream Team, S.C., a company incorporated in Spain (herein called "Borrower'"),
the undersigned (the "Guarantor"), an individual residing in Spain, and a
shareholder of Borrower, hereby absolutely and unconditionally guarantees to
Lender the full and prompt payment when due, whether at maturity or earlier by
reason of acceleration or otherwise, of the debts, accounts, and obligations
herein described.
WHEREAS, the Lender has agreed to advance sums or extend credit to or for
of the Borrower pursuant to the terms of Section 3.2 of a Stockholders Agreement
dated September 26, 2000, by and among Borrower, Lender and United Surgical
Partners Europe, S.L., a company incorporated in Spain (the "Stockholders
Agreement");
WHEREAS, Borrower is indebted to Lender pursuant to a promissory note
dated September 26, 2000, issued pursuant to the Stockholders Agreement in the
original principal amount of $811,093.00 (the "Note");
WHEREAS, as security for repayment of the amounts due any additional
promissory notes issued pursuant to Section 3.2 of the Stockholders Agreement
(together, the "Notes"), Borrower has pledged certain assets to the Lender as
described in a Stock Pledge Agreement dated September 26, 2000 ("Collateral");
and
WHEREAS, in order to induce Lender to extend to Borrower the loan or loans
evidenced by the Notes, Borrower has agreed to procure and deliver, and the
Guarantor has agreed to give this Guaranty, and Lender has refused to extend
said loan or loans to Borrower unless this Guaranty is executed by the Guarantor
and delivered to Lender.
NOW, THEREFORE, in consideration of these premises, the Guarantor hereby
covenants and agrees with Lender as follows:
Section 1. Guaranty.
5
The Guarantor guarantees to Lender the payment and performance of the
debts, liabilities and obligations of Borrower to Lender evidenced by or arising
out of the Notes, and any extensions, renewals or replacements thereof and
including also all amounts paid to the Lender by the Borrower that are recovered
from Lender in any legal proceeding (herein referred to as the "Indebtedness");
provided, however, notwithstanding the foregoing, the liability of the
undersigned shall not exceed the Applicable Pro Rata Portion of the principal
sum of the Indebtedness at any one time outstanding, together with accrued but
unpaid interest thereon, and costs of collection including reasonable attorneys
fees. "Applicable Pro Rata Portion" means the principal sum of the Indebtedness
at any one time outstanding, together with accrued but unpaid interest thereon,
and costs of collection including reasonable attorneys fees times the percentage
of Borrower's capital shares held by Guarantor.
Section 2. No Contingencies.
No act or thing need occur to establish the liability of the Guarantor
hereunder, and no act or thing, except full payment and discharge of the
Indebtedness or the payment by the Guarantor of his Applicable Pro Rata Portion
of the Indebtedness, shall in any way exonerate the Guarantor or modify, reduce,
limit or release the liability of the Guarantor hereunder.
Section 3 Continuing Guaranty; Revocation.
This is an absolute, unconditional and continuing guarantee of payment of
the Indebtedness and shall continue to be in force and be binding upon the
Guarantor, whether or not the Indebtedness is paid in full. The death or
incompetence of the Guarantor shall not revoke this Guaranty as to the
Indebtedness or any part thereof.
Section 4. Intentionally Omitted.
Section 5. Other Collateral.
The Guarantor hereby agrees that Lender may take other guarantees,
collateral or security to further secure the Indebtedness, and any terms,
covenants and conditions contained in any note or agreement evidencing or
relating to the Indebtedness may be altered, extended, changed, modified, or
released without in any manner affecting this Guaranty or releasing the
Guarantor. The Guarantor shall remain liable to pay Guarantor's Applicable Pro
Rata Portion of the Indebtedness as so altered, extended, changed or modified,
notwithstanding the taking of such other guarantees, collateral or security.
Section 6. Subordination.
The Guarantor will not exercise or enforce any right of contribution,
reimbursement, recourse or subrogation available to the Guarantor against any
person liable for payment of the Indebtedness, or as to any collateral security
therefor, unless and until all the Indebtedness shall have been fully paid and
discharged. Any such right of contribution, reimbursement, recourse or
subrogation available to the Guarantor is expressly made subordinate to the
lien, time of payment
6
and in all other respects to the amounts owing to Lender under this Guaranty and
on the Indebtedness.
Section 7. Costs Expenses and Attorneys' Fees.
The Guarantor will pay or reimburse Lender for all costs and expenses
(including reasonable attorneys' fees and legal expenses) actually incurred by
Lender in connection with the protection, defense or enforcement of this
Guaranty.
Section 8. Consent to Certain Actions.
Whether or not any existing relationship between the Guarantor and
Borrower has been changed or ended and whether or not this Guaranty has been
revoked, Lender may, but shall not be obligated to, enter into transactions
resulting in the creation or continuance of the Indebtedness, without any
consent or approval by the undersigned and without any notice to the Guarantor.
The liability of the Guarantor shall not be affected or impaired by any of the
following acts or things (which Lender is expressly authorized to do, omit or
suffer from time to time, both before and after revocation of this Guaranty,
without notice to or approval by the Guarantor): (i) any acceptance of
collateral security, guarantors, accommodation parties or sureties for any or
all of the Indebtedness; (ii) any one or more extensions or renewals of the
Indebtedness (whether or not for longer than the original period) or any
modification of the interest rates, maturities or other contractual term
applicable to any of the Indebtedness; (iii) any waiver or indulgence granted to
Borrower, any delay or lack of diligence in the enforcement of the Indebtedness,
or any failure to institute proceedings, file a claim, give any required notices
or otherwise protect any of the Indebtedness; (iv) any full or partial release
of, settlement with, or agreement not to xxx Borrower or any other guarantor or
other person liable in respect to any of the Indebtedness; (v) any discharge of
any evidence of the Indebtedness or other acceptance of any instrument in
renewal thereof or substitution therefor; (vi) any failure to obtain collateral
security (including rights of setoff) for the Indebtedness, or to see to the
proper or sufficient creation and perfection thereof, or to establish the
priority thereof, or to protect, insure or enforce any collateral security; or
any modification, substitution, discharge, impairment, or loss of any collateral
security; (vii) any foreclosure or enforcement of any collateral security;
(viii) any transfer of any of the Indebtedness or any evidence thereof; (ix) any
order of application of any payments or credits upon the Indebtedness; or (x)
any election by the Lender under Sec. 1111(b)(2) of the United States Bankruptcy
Code.
Section 9. Waiver of Defenses: Deficiency.
The Guarantor waives any and all defenses, claims and discharges of
Borrower, or any other obligor, pertaining to the Indebtedness, except the
defense of discharge by payment in full. Without limiting the generality of the
foregoing, the Guarantor will not assert, plead or enforce against Lender any
defense of waiver, release, discharge in bankruptcy, statute of limitations, res
judicata, statute of frauds, antideficiency statute, fraud, incapacity,
minority, usury, illegality or unenforceability which may be available to
Borrower or any other person liable in respect to any of the Indebtedness, or
any setoff available against Lender to Borrower or any such other person,
whether or not on account of a related transaction.
7
Section 10. Cumulative Remedies.
The Guarantor waives presentment, demand for payment, notice of dishonor
or nonpayment, and protest of any instrument evidencing the Indebtedness,
notices of default and all other notices now or hereafter provided by law.
Lender shall not be required to resort first to Borrower for payment of the
Indebtedness or to other persons or their properties, nor to enforce, realize
upon or exhaust any collateral security for the Indebtedness, before enforcing
this Guaranty. All remedies afforded to Lender by reason of this Guaranty are
separate and cumulative, and no one of such remedies, whether exercised by
Lender or not, shall be deemed an exclusion of any other remedies available to
Lender, and shall in no way limit or prejudice any other legal or equitable
remedies Lender may have against Borrower or any Guarantor pursuant to the
Stockholders Agreement, the Notes or any other documents or instruments executed
or delivered in connection therewith. All payments made by Borrower and the
Guarantor or by any other person, and the proceeds of any security, may be
applied by Lender to the Indebtedness as Lender may determine, whether the same
be due or not. Any remedy or right hereby granted which shall be found to be
unenforceable as to any person or circumstance, for any reason, shall in no way
limit or prevent the enforcement of such remedy or right as to any other person
or circumstance, nor shall such unenforceability limit or prevent enforcement of
any other remedy or right hereby granted.
Section 11. Rescinded Payments.
If any payment applied by Lender to the Indebtedness is thereafter set
aside, recovered, rescinded or required to be returned for any reason
(including, without limitation, the bankruptcy, insolvency or reorganization of
Borrower or any other obligor), the Indebtedness to which such payment was
applied shall, for the purposes of this Guaranty, be deemed to have continued in
existence, notwithstanding such application, and this Guaranty shall be
enforceable as to such Indebtedness as fully as if such application had never
been made.
The liability of the Guarantor under this Guaranty is in addition to and
shall be cumulative with all other liabilities of the Guarantor to the Lender as
guarantor or otherwise, without any limitation as to amount, unless the
instrument or agreement evidencing or creating such other liability specifically
provides to the contrary. Execution of this Guaranty shall not act as a
revocation of any prior guarantee by the Guarantor of the Indebtedness of
Borrower.
Section 13. Liability Acceptance Enforceability, Waiver Governing, Law.
This Guaranty shall be effective upon delivery to the Lender, without
further act, condition or acceptance by Lender and shall be binding upon the
Guarantor and heirs, representatives, successors and assigns of the Guarantor,
and shall inure to the benefit of Lender. The invalidity or unenforceability of
any provision or application of this Guaranty shall not affect other lawful
provisions and application hereof, and to this end, the provisions of this
Guaranty are declared to be severable. This Guaranty may not be waived,
modified, amended, terminated, released or otherwise changed except by a writing
signed by the Guarantor and Lender. The Guarantor waives notice of Lender"s
acceptance hereof and waives the right to a trial by jury in any action based on
or pertaining to this Guaranty. This Guaranty shall be interpreted and construed
in accordance with the laws of the State of Delaware.
8
Section 14. Notice.
Unless otherwise provided elsewhere in this Guaranty, all claims,
consents, designations, notices, waivers, and other communications in connection
with this Guaranty shall be in writing. Such claims, consents, designations,
notices, waivers, and other communications will be considered received (a) on
the day of actual delivery when transmitted by hand delivery, (b) on the day of
actual transmittal when transmitted by facsimile with written confirmation of
such transmittal, or (c) two business days following actual transmittal when
transmitted by an internationally recognized courier (such as UPS or FedEx); in
each case when transmitted to a party at its address or location set forth
below:
Lender: United Surgical Partners International, Inc.
00000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
Copy to: Xxxxxxxxxx Xxxx & XxXxxxxx PLLC
700 Two American Center
0000 Xxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
Guarantor: ________________________________
________________________________
________________________________
Facsimile:______________________
Any party may change the address for such notice by providing the other
party a notice in writing so specifying and providing the new address in the
manner provided above.
Section 15. Setoff.
In addition to all other rights and remedies, the Guarantor agrees that,
without notice to the Guarantor, the Lender may setoff and apply any and all
money owing by Lender to the Guarantor, or any of them, to the payment of the
Indebtedness then outstanding, including interest accrued thereon.
Section 16. Benefit/Subrogation.
The Guarantor represents, warrants, acknowledges and agrees that: (i) the
Guarantor will receive direct economic benefit from the loans and advances made
by Lender to Borrower comprising the Indebtedness, (ii) Lender is making
advances to Borrower in reliance upon this Guaranty, (iii) the Guarantor has
received reasonably equivalent value in return for execution and delivery of
this Guaranty.
9
IN WITNESS WHEREOF, this Guaranty has been duly executed by the Guarantor
effective this ______ day of ____________, 2000.
__________________________
10
EXHIBIT D
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made and entered into as
of the day of , 2000, by and between: (i) HEALTH DREAM TEAM, S.C., a company
incorporated in Spain ("HDT"), and (ii) UNITED SURGICAL PARTNERS INTERNATIONAL,
INC., a company incorporated in the State of Delaware ("USPI").
RECITALS:
A. HDT is indebted to USPI pursuant to that certain Promissory Note (the
"Note") of even date herewith in the face amount of $811,093.00 made by HDT and
payable to the order of USPI.
C. Pursuant to Section 3.2 of a Stockholders Agreement dated September 26,
2000 (the Stockholders Agreement"), by and among HDT, USPI and United Surgical
Partners Europe, S.L., a company organized under the laws of Spain ("USPE"), HDT
may become further indebted to USPI, as evidenced by additional promissory notes
(such additional promissory notes, together with the Note, the "Notes").
B. In order to induce USPI to make the loans to HDT evidenced by the
Notes, HDT has agreed to pledge 1,000,000 shares of Class B Common Stock of USPI
(the "Stock") to USPI, to assure repayment of the Notes by HDT.
AGREEMENT:
Now, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby covenant,
agree, represent and warrant as follows:
1. PLEDGE AND DEPOSIT OF SHARES. HDT hereby pledges and assigns to USPI,
and grants to USPI a security interest in, the Stock, as represented by
certificate number CB-001 now standing in HDT's name, which certificate has been
delivered by HDT to USPI contemporaneously herewith, together with a duly
executed blank stock power attached thereto, all as collateral security for all
amounts which HDT may owe USPI pursuant to the Notes.
The certificates or other instruments evidencing all new shares of capital
stock and all other securities, rights, warrants, options and the like hereafter
created in respect of the Stock, whether by stock split, stock dividend, merger,
consolidation or otherwise, shall be delivered by HDT to, and shall be held by,
USPI under the terms and conditions of this Agreement and subject to the pledge
and security interest herein granted, and the term "Stock" as used herein shall
be deemed to include all such new shares, securities, rights, warrants, options
and the like.
2. VOTING RIGHTS. So long as no "Event of Default" as hereinafter defined,
shall have occurred and be continuing, HDT shall be entitled to exercise any and
all voting
and/or consensual rights and powers relating or pertaining to the Stock or any
part thereof for any purpose not inconsistent with the terms of this Agreement.
Notwithstanding anything to the contrary contained in this Section 2, upon
the occurrence of any Event of Default, USPI shall be entitled to exercise all
voting rights and privileges whatsoever with respect to the Stock, and to that
end HDT hereby constitutes USPI as its proxy and attorney-in-fact for all
purposes of voting the Stock under such circumstances, and this appointment
shall be deemed coupled with an interest and is and shall be irrevocable until
the Notes have been fully paid. HDT shall execute and deliver to USPI any and
all additional proxies and powers of attorney that USPI may desire in order to
vote more effectively the Stock in its own name.
3. STATUS OF STOCK. HDT hereby represents and warrants to USPI that (a)
all of the Stock is free and clear of all liens, charges and encumbrances, and
(b) HDT has the full power and authority to pledge the Stock to USPI pursuant to
this Agreement. No part of the Stock shall be sold, transferred or assigned by
HDT without the prior written consent of USPI, which consent may be arbitrarily
withheld so long as this Agreement is in effect.
4. MAINTENANCE OF PRIORITY of PLEDGE. HDT shall be liable for and shall
from time to time pay and discharge all taxes, assessments and governmental
charges imposed upon the Stock by any federal, state, local or foreign
authority, the liens of which would or might be held prior to the right of USPI
in and to the Stock or which are imposed on the holders or registered owners of
the Stock. HDT shall not, at any time while this Agreement is in effect, do or
suffer any act or thing whereby the rights of USPI in the Stock would or might
be materially impaired or diminished. HDT shall execute and deliver such further
documents and take such further actions as may be required to confirm the rights
of USPI in and to the Stock or otherwise to effectuate the intention of this
Agreement.
5. EVENTS of DEFAULT. Each of the following shall be deemed an "Event of
Default" hereunder:
(a) The occurrence of any "Default" under the Notes not cured within the
applicable grace period;
(b) The occurrence of any default of any kind whatsoever other than as
provided in subparagraph (a) above, under the terms, covenants and conditions of
this Agreement not cured within thirty (U) days following receipt by HDT of
written notice from USPI specifying such default; or
(c) If any representation or warranty made by HDT in this Agreement, the
Stockholders Agreement, the Management Agreement or the Guaranty shall prove to
be untrue and misleading in any material respect.
6. REMEDIES UPON DEFAULT. Upon the occurrence of any Event of Default
referred to in Section S above, USPI shall have all rights and remedies in and
against the Stock and otherwise of a secured party under the Uniform Commercial
Code as enacted in the State of Delaware (the "UCC") and all other applicable
domestic and foreign laws and shall also have all
2
of the rights provided herein, all of which rights and remedies shall be
cumulative to the fullest extent permitted by law. In connection with the
foregoing, USPI shall have the right:
(a) To sell the Stock in one or more lots, and from time to time, upon ten
(10) days prior written notice to HDT of the time and place of sale (which
notice HDT hereby conclusively agrees is commercially reasonable), for cash or
upon credit or for future delivery. HDT hereby waives all rights, if any, of
marshaling the Stock for its obligations to USPI under this Agreement or
otherwise. USPI may, at its sole option, either:
(1) sell the Stock at a public sale or sales, including a sale at or on
any broker's board or stock exchange; or
(2) sell the Stock at a private sale or sales.
(b) USPI may bid for and acquire the Stock or any portion thereof at any
public sale, free from any redemption rights of HDT, and in lieu of paying cash
therefor, may make settlement for the selling price of the Stock or any part
thereof by crediting the net selling price of the Stock against sums payable by
HDT after deducting all of USPI's costs and expenses of every kind and nature
therefrom, including USPI's attorneys' fees incurred in connection with
realizing upon the Stock, provided the same is not prohibited by the laws of the
State of Delaware.
(c) From time to time USPI may, but shall not be obligated to, postpone
the time of any proposed sale of any of the Stock which has been the subject of
a notice as provided above, and also, upon ten (10) days' prior written notice
to HDT (which notice HDT conclusively agrees is commercially reasonable), may
change the time and/or place of such sale.
7. FUTURE ADVANCES. This Agreement secures all additional loans and/or
future advances that may be made hereafter at any time by USPI to HDT pursuant
to Section 3.2 of the Stockholders Agreement. HDT agrees that upon additional
indebtedness being incurred by HDT under the terms of the Stockholders
Agreement, HDT will make any and all undertakings necessary or reasonably
required by USPI to modify or amend this Agreement to effectuate the pledge,
delivery and deposit of all future acquired Stock.
8. MISCELLANEOUS.
8.1 Governing Law. The laws of the State of Delaware shall govern the
construction of this Agreement and the rights, remedies and duties of the
parties hereunder.
8.2 Successors and Assigns. This Agreement shall be binding upon HDT and
its successors and assigns, and shall inure to the benefit of USPI and its
successors and assigns.
8.3 Time of Essence. Time shall be of the essence in the performance of
HDT's and USPI's obligations hereunder.
8.4 Captions. The several captions, headings, sections and subsections of
this Agreement are inserted for convenience only and shall be ignored in
interpreting the provisions of this Agreement.
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8.5 Modifications. This Agreement may be modified or amended only by
written agreement executed by both of the parties hereto.
8.6 Counterparts. This Agreement may be executed in counterparts, any of
which shall be treated for all purposes as an original, and all of which shall
be treated as one and the same agreement.
9. TERMINATION. This Agreement shall terminate when the Notes have been
paid in full, at which time USPI shall reassign and redeliver, without recourse
upon or warranty by USPI and at the expense of HDT (or cause to be so reassigned
and redelivered to HDT or to such person or persons as HDT shall designate),
such of the Stack as shall not have been sold or otherwise applied by USPI
pursuant to the terms hereof, together with appropriate instruments of
reassignment arid release.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first written above.
HEALTH DREAM TEAM, S.C.
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
UNITED SURGICAL PARTNERS
INTERNATIONAL, INC.
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
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STOCK POWER
ASSIGNMENT SEPARATE FROM CERTIFICATE
For Value Received, HEALTH DRAM TEAM, S.C. ("HDT") hereby sells assigns
and transfers unto UNITED SURGICAL PARTNERS INTERNATIONAL, INC., a Delaware
corporation ("USPI"), ________ shares of the Class B Common Stack of USPI,
standing in the name of HDT on the books of said Corporation represented by
Certificate No. CSB-001 herewith and does hereby irrevocably constitute and
appoint _________________________________ attorney to transfer the said stock
can the books of said Corporation with full power of substitution in the
premises.
Dated: September 26, 2000.
HEALTH DREAM TEAM, S.C.
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
("HDT")
