Exhibit 10.38
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement (this "Agreement") is made and entered
into as of the 16th day of February, 1998, by and between American Physicians
Service Group, Inc., a Texas corporation ("APS") and Xxxxxxx X. Xxxxx, M.D. (the
"Shareholder").
R E C I T A L S:
WHEREAS, pursuant to that certain Agreement and Plan of Reorganization
(the "Merger Agreement") entered into by Shareholder of even date herewith and
the other contracts and agreements to which Shareholder was, or was to be, a
party as contemplated in the Merger Agreement (the Merger Agreement and all such
other contracts and agreements are hereinafter referred to collectively as the
"Acquisition Documents"), Shareholder has acquired or will acquire 75,000 shares
(the "PM Shares") of the $0.001 par value per share common stock of APS Practice
Management, Inc., a Texas corporation ("Practice Management") for a
consideration of $5.00 per PM Share (the "Exchange Value"); and
WHEREAS, APS has agreed, on the terms and subject to the conditions
hereof, to exchange certain shares of its $0.10 par value per share common stock
("APS Common") for the PM Shares.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. CONDITIONS TO EXCHANGE RIGHT. In addition to the other terms and
conditions contained in this Agreement, Shareholder shall only be entitled to
exchange the PM Shares for shares of APS Common if each of the following
conditions has been satisfied:
(a) There shall not have been, on or before two (2) years
following the date hereof (the "Determination Date"), any registered public
offering of the common stock of Practice Management, or any other transaction or
event pursuant to which shares of Practice Management of the same class as the
PM Shares shall have become publicly traded.; and
(b) Shareholder shall not be, or have been, at any time on or
prior to the date of the closing of any exchange of stock pursuant to this
Agreement (the "Closing Date"), in breach of, or default under, this Agreement,
any of the Acquisition Documents or any other contract or agreement to which
Shareholder and Practice Management and/or APS are parties, and Shareholder
shall not have threatened to breach or default under this Agreement, any of the
Acquisition Documents or any such other contract or agreement; and
(c) At the Closing Date, Shareholder has all requisite legal
capacity and authority to engage in the transactions contemplated by this
Agreement, is the owner of all the
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PM Shares, and the PM Shares are free of any
and all liens, claims or encumbrances of any kind whatsoever; and
(d) At or before the Closing Date, Practice Management shall
not be, or have been, a party to any merger, consolidation or similar
transaction, or agreement with respect thereto, pursuant to which Practice
Management was not or would not be, the named surviving entity after such
merger, consolidation or other transaction.
2. EXCHANGE NOTICE. In the event all of the conditions described in
Section 1 are satisfied as of the Determination Date and Shareholder elects to
exercise its right to exchange its PM Shares for shares of APS Common,
Shareholder shall provide written notice thereof (the "Exchange Notice") to APS,
which Exchange Notice must be received by APS not later than the date (the
"Expiration Date") which is ninety (90) calendar days after the Determination
Date. In the event (i) any of the conditions required for an exchange to be
permissible, as described in Section 1 above, fail to be satisfied on or prior
to the Determination Date, or (ii) any of the conditions specified in
subsections (b), (c) and (d) of Section 1 fail to be satisfied on or prior to
the Closing Date, or (iii) APS fails to receive an Exchange Notice from
Shareholder on or prior to the Expiration Date; then, in any such case, all of
Shareholder's rights under this Agreement shall automatically terminate and be
of no further force or effect whatsoever.
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3. SHARE CONVERSION.
(a) Shareholder's right to exchange its PM Shares hereunder
shall apply as to all, but not less than all, of the PM Shares which are
eligible for exchange as described in this paragraph (a) of Section 3. Assuming
Shareholder has complied with all of the conditions allowing for an exchange
pursuant to this Agreement, 55,000 of the PM Shares shall be eligible for
conversion as provided in this Agreement; and the remaining 20,000 PM Shares, or
a portion thereof, will only be eligible for an exchange hereunder in the event,
and only to the extent, the Clinic (as hereinafter defined) achieves certain
Practice Accrual Earnings (as hereinafter defined) levels prior to the
Determination Date. For purposes of this Agreement, the terms "Clinic" and
"Practice Accrual Earnings" shall have the meanings set forth in that certain
Management Agreement which is one of the Acquisition Documents. The Practice
Accrual Earnings of Clinic for any twelve (12) consecutive monthly period ending
on or prior to the Determination Date is hereinafter referred to as the "Clinic
PAE." The parties acknowledge and agree that in the event Clinic PAE does not
exceed $450,000 during any twelve (12) consecutive calendar monthly period
ending on or prior to the Determination Date, then no portion of the 20,000 PM
Shares shall be subject to exchange pursuant to this Agreement. In the event
that, during any twelve (12) consecutive calendar monthly period ending on or
prior to the Determination Date, the Clinic PAE exceeds $450,000, then the
percentage of the 20,000 PM Shares which will be eligible for exchange pursuant
to this Agreement (assuming compliance with all other conditions provided for in
this Agreement) will be determined by multiplying 20,000 by a fraction, the
numerator of which is the amount by which Clinic PAE exceeds $400,000 (but not
greater than $100,000 in any event), and the denominator of which is $100,000.
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EXAMPLE: The following is provided purely by way of example only, and
illustrates the calculation of the number of PM Shares eligible for exchange
under this Agreement, assuming satisfaction of all other conditions allowing for
an exchange pursuant to this Agreement.
Assume Clinic PAE is $450,000 for the 12 months ended December
31, 1998, which is the largest twelve (12) month level of
Clinic PAE achieved in any period ended on or prior to the
Determination Date.
Total PM Shares eligible for exchange hereunder would be
65,000 determined as follows:
$450,000 - $400,000 x 20,000 = 10,000
-------------------
$100,000 55,000
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65,000
(b) In the event Shareholder has complied with all of the conditions
allowing for an exchange pursuant to this Agreement, the closing of any such
exchange (the "Closing") shall occur at the offices of APS in Austin, Texas, on
such day and at such time as the parties hereto may mutually agree upon, or in
the failure to so agree, at 10:00 a.m. Austin, Texas time on the first business
day that falls thirty (30) days after the Expiration Date. The maximum number of
PM Shares which Shareholder has the right to exchange pursuant to paragraph (a)
of this Section are hereinafter referred to as the "Exchangeable PM Shares"; and
the "Gross Exchange Value" for purposes of this Agreement is the gross dollar
amount determined by multiplying the Exchangeable PM Shares by the Exchange
Value. For purposes of determining the number of shares of APS Common which may
be received upon any exchange, no consideration will be given to stock
dividends, stock splits, reverse stock splits or recapitalizations to which
Practice
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Management or the PM Shares are subject after the date this Agreement
was originally entered into as first above written. At the Closing, Shareholder
shall be entitled to receive such shares of APS Common as is determined by
dividing the Gross Exchange Value by the average of the "bid" and "ask" prices
for APS Common as quoted by the National Association of Securities Dealers
Automated Quotation System at the close of trading on each of the last five (5)
business days immediately preceding the Closing Date.
(c) At the Closing, Shareholder shall tender its share certificate(s)
for all of the Exchangeable PM Shares, duly endorsed in blank, to APS, and shall
also provide APS with an executed blank stock power, in form and substance
reasonably acceptable to APS, wherein Shareholder represents and warrants to APS
(i) that Shareholder has all necessary legal capacity, power and authority to
engage in the transactions contemplated hereby, and (ii) that Shareholder owns
all interests in and to the Exchangeable PM Shares and that the Exchangeable PM
Shares are being transferred to APS free and clear of all liens, claims or
encumbrances of any kind whatsoever. The shares of APS Common that Shareholder
receives in the exchange are hereinafter referred to as the "New APS Shares."
The parties acknowledge and agree that Shareholder shall receive a whole number
of shares of APS Common only, and that any fractional share amounts resulting
from the foregoing conversion calculation shall be rounded up or down, as the
case may be, to the next whole number of shares. APS shall be under no
obligation to pay any cash or other amounts with respect to any fractional share
amounts, or to issue any fractional share amounts to Shareholder. At the
Closing, Shareholder shall either receive a share certificate for all its New
APS Shares or, if APS' transfer agent is unable to produce such certificate by
the Closing Date, will receive a copy of a registered letter sent from
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APS to the transfer agent instructing the transfer agent to deliver such
certificate in the name of Shareholder directly to Shareholder or Shareholder's
designee.
4. NEW APS SHARES TRANSFERABILITY. APS will have registered the New APS
Shares with the Securities and Exchange Commission, and made such other filings
and taken such other steps as necessary, so that Shareholder may immediately
sell, or otherwise convey, the New APS Shares without restriction (except as
otherwise provided below). Shareholder agrees to cooperate fully and in all
respects with APS in connection with any such registration, whether such
cooperation is requested before or after the Determination Date. Failure of
Shareholder to cooperate fully, including without limitation, promptly providing
complete and accurate information to APS, in connection with the registration of
any APS Common shares, whether such cooperation and/or information is requested
before or after the Determination Date or before or after Shareholder delivers
any Exchange Notice, shall automatically terminate Shareholder's rights under
this Agreement. Notwithstanding anything contained herein to the contrary, in
the event that APS is in the process, either at the Closing Date or at the
Determination Date, of registering and/or selling any of its capital stock in or
pursuant to any underwritten public offering, upon the written request of the
lead underwriter involved therein, Shareholder agrees, and shall then agree in
writing in form and substance reasonably acceptable to APS, to not sell, attempt
to sell, or solicit or accept any offers to sell or otherwise convey, any of the
New APS Shares for such period of time (not to exceed one hundred eighty (180)
days) as may be requested by such lead underwriter.
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5. Miscellaneous.
(a) FEES AND EXPENSES. Each party hereto agrees to bear all
fees and expenses (including without limitation all fees and expenses for its
legal counsel and any accountants or other professional advisors) incurred in
connection with the transactions contemplated hereby.
(b) GOVERNING LAW AND VENUE. This Agreement shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Texas (except the laws of Texas that would render such choice of law
ineffective). Venue for any action relating to this Agreement shall be proper
only in Texas.
(c) COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument.
(d) INUREMENT. This Agreement shall be binding upon the
parties hereto and their respective heirs, legal representatives, successors and
permitted assigns. No party hereto may assign this Agreement, or any of their
rights or obligations hereunder, without the express prior written consent of
all parties hereto in each instance.
(e) NOTICES. Any notices required or permitted to be given
under this Agreement shall be given in writing and shall be deemed received (a)
when personally delivered
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to the relevant party at its address as set forth
below or (b) if sent by mail, on the third day following the date when deposited
in the United States mail, certified or registered mail, postage pre-paid to the
relevant party at its address indicated below:
APS: American Physicians Service Group, Inc.
0000 Xxxxxxx xx Xxxxx Xxxxxxx, Xxxxx X-000
Xxxxxx, Xxxxx 00000-0000
Attn: President
Shareholder: Xxxxxxx X. Xxxxx, M.D.
0000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Any party may change its address for purposes of this Agreement by proper notice
to the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
intending to be legally bound hereby, as of the date first above written.
APS: AMERICAN PHYSICIANS SERVICE GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Printed Name: Xxxxxxx X. Xxxxx
----------------------
Title: Sr. VP Finance
SHAREHOLDER:
/s/ Xxxxxxx X. Xxxxx, M.D.
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