EXHIBIT 2.1
SECOND AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
This Second Amendment to Agreement and Plan of Merger is made as of
December 15, 2004 among SurgiCare, Inc., a Delaware corporation ("SurgiCare"),
DCPS/MBS Acquisition, Inc., a Texas corporation ("Newco"), Xxxxxx Xxxx Physician
Solutions, Ltd., a Texas limited partnership ("DCPS"), Medical Billing Services,
Inc., a Texas corporation ("MBS"), and the sellers party thereto (the
"Sellers").
RECITALS
SurgiCare, Newco, DCPS, MBS and the Sellers are parties to an Amended
and Restated Agreement and Plan of Merger dated as of July 16, 2004, and the
First Amendment to Agreement and Plan of Merger dated as of September 9, 2004
(as so amended, the "Merger Agreement"), which provides for the merger of Newco
with and into MBS and the transfer of the limited partnership interests in DCPS
and the limited liability company interest of the general partner of DCPS,
Xxxxxx Xxxx Management, L.L.C., to SurgiCare, and the subsequent contribution of
such limited partnership and limited liability company interests to MBS.
SurgiCare, Newco, DCPS, MBS and the Sellers wish to amend the Merger Agreement
as set forth herein (as so amended, the "Amended Merger Agreement").
AGREEMENT
In consideration of the foregoing, and the representations, warranties,
covenants and conditions set forth or referred to below, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Certain Definitions. Terms defined in the Amended Merger Agreement and not
otherwise defined herein are used herein with the meanings so defined.
2. Amendments to Merger Agreement. SurgiCare, Newco, DCPS, MBS and the Sellers
hereby agree that, effective as of the date hereof, the Merger Agreement is
hereby amended as follows:
2.1. Amendment to Glossary of Defined Terms. The Glossary of Defined
Terms is hereby amended by adding a reference to "MBS Note Balance Section
2.07(d)" and a reference to "MBS Notes" Section 2.01(a)".
2.2. Amendment to Section 2.01(a)(i). Section 2.01(a)(i) is hereby
amended to read in its entirety as follows:
"(i) except as otherwise set forth in Section 2.01(a)(iv), all
shares of MBS Common Stock (collectively, the "MBS Common Shares")
issued and outstanding immediately prior to the MBS Effective Time
(other than any MBS Common Shares to be
canceled pursuant to Section 2.01(a)(ii)) shall be canceled and
automatically converted into the right to receive, in the aggregate:
A. (1) $1,400,000 in cash, if the Five Day Average
Price is equal to or greater than $0.70, or (2) $1,500,000 in
cash, if the Five Day Average Price is less than $0.70 (the
"MBS Cash Consideration");
B. (1) a number of SurgiCare Class C Common Shares
equal to the product of 10,400,000 multiplied by the Reverse
Split Fraction, if the Five Day Average Price is equal to or
greater than $0.70, or (2) a number of SurgiCare Class C
Common Shares equal to the product of 7,878,800 multiplied by
the Reverse Split Fraction, if the Five Day Average Price is
less than $0.70 (the "MBS Share Consideration"); and
C. subordinated promissory notes of SurgiCare,
substantially in the form attached hereto as Exhibit B, in the
aggregate principal amount of $500,000, if the Five Day
Average Price is less than $0.70 (the "MBS Notes");"
2.3. Amendment to Section 2.01(c). Section 2.01(c) is hereby amended to
read in its entirety as follows:
"(c) Allocation of Consideration. The MBS Cash Consideration,
MBS Share Consideration and MBS Notes, if any, and any additions
thereto or subtractions therefrom in accordance with Section 2.07,
shall be allocated among the MBS Sellers according to the percentages
(the "Stockholder Percentages") set forth on Schedule 2.01(c)(i)
hereto. The DCPS Cash Consideration, DCPS Share Consideration and DCPS
Notes, and any additions thereto or subtractions therefrom in
accordance with Section 2.07, shall be allocated among the DCPS Sellers
according to the percentages set forth on Schedule 2.01(c)(ii) hereto."
2.4. Amendment to Section 2.02. Section 2.02 is hereby amended to read
in its entirety as follows:
"SECTION 2.02 Deliveries at the Closing. At the Closing, (i)
SurgiCare will deliver to DCPS and MBS the various certificates,
instruments and documents referred to in Section 7.03 below, (ii) DCPS
and MBS will deliver to SurgiCare the various certificates, instruments
and documents referred to in Section 7.02 below, (iii) each of the
Sellers will deliver to SurgiCare certificates (to the extent
applicable) representing all of his MBS Common Shares or DCPS
Interests, as applicable, endorsed in blank or accompanied by duly
executed assignment documents, (iv) SurgiCare will deliver to Xxxxx (a)
certificates representing the MBS Share Consideration, (b) the MBS
Notes, if any, and (c) by wire transfer of immediately available funds,
to such account as Xxxxx has specified in writing to SurgiCare at least
two business days prior to the Closing Date, the MBS Cash
Consideration, and (v) SurgiCare will deliver to Xxxx (a) certificates
representing the DCPS Share Consideration, (b) the DCPS Notes and (c)
by wire transfer of immediately available funds, to such account as
Xxxx has specified in writing to SurgiCare at least two business days
prior to the Closing Date, the DCPS Cash Consideration."
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2.5. Amendment to Section 2.07(c). Section 2.07(c) is hereby amended to
read in its entirety as follows:
"(c) Additional Acquisition Consideration. The
Sellers may be eligible to receive additional Acquisition Consideration
consisting of an aggregate of up to a maximum of $1,125,000 in cash and
up to a maximum number of SurgiCare Class A Common Shares equal to
4,500,000 multiplied by the Reverse Split Fraction, as set forth in
this Section 2.07(c) and subject to Section 2.07(e).
(i) With respect to the years ended December
31, 2004 and December 31, 2005, if the aggregate amount of the
Newco EBITDA for such years is greater than $2,000,000 (any
such amounts in excess of $2,000,000 being referred to herein
as the "Newco EBITDA Excess"):
A. the MBS Cash Consideration shall be
increased by an amount equal to the product of 25%
multiplied by the Newco EBITDA Excess; provided,
however, in no event shall the MBS Cash Consideration
be increased by more than an aggregate of $562,500
pursuant to this Section 2.07(c)(i)(A);
B. the DCPS Cash Consideration shall be
increased by an amount equal to the product of 25%
multiplied by the Newco EBITDA Excess; provided,
however, in no event shall the DCPS Cash
Consideration be increased by more than an aggregate
of $562,500 pursuant to this Section 2.07(c)(i)(B);
C. the MBS Share Consideration shall be
increased by an amount of SurgiCare Class A Common
Shares equal to the product of 75% multiplied by a
fraction, the numerator of which is the Newco EBITDA
Excess, and the denominator of which is the quotient
of (1) $0.75 divided by (2) the Reverse Split
Fraction; provided, however, in no event shall the
MBS Share Consideration be increased pursuant to this
Section 2.07(c)(i)(C) by more than an aggregate
number of SurgiCare Class A Common Shares equal to
the product of (x) 2,250,000 multiplied by (y) the
Reverse Split Fraction; and
D. the DCPS Share Consideration shall be
increased by an amount of SurgiCare Class A Common
Shares equal to the product of 75% multiplied by a
fraction, the numerator of which is the Newco EBITDA
Excess, and the denominator of which is the quotient
of (1) $0.75 divided by (2) the Reverse Split
Fraction; provided, however, in no event shall the
DCPS Share Consideration be increased pursuant to
this Section 2.07(c)(i)(D) by more than an aggregate
number of SurgiCare Class A Common Shares equal to
the product of (x) 2,250,000 multiplied by (y) the
Reverse Split Fraction.
(ii) Any increase to the MBS Cash
Consideration or the DCPS Cash Consideration to be made under
this Section 2.07(c) will be paid (or caused to be paid) by
SurgiCare, without interest, by wire transfer of immediately
available
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funds to an account or accounts designated by Xxxxx (in the
case of the MBS Cash Consideration) or Xxxx (in the case of
the DCPS Cash Consideration), promptly after the final
determination of the amount of Newco EBITDA for the year ended
December 31, 2005 (whether by lack of disagreement with the
initial determination, resolution of any disagreement with the
initial determination by the parties, or resolution through
submission of any dispute to the Accountants), but in no event
later than ten days after such final determination.
Notwithstanding anything to the contrary in this Section
2.07(c), the right of the Sellers to receive any cash payment
pursuant to the terms of this Section 2.07(c) shall be subject
to the terms of the Subordination Agreement. If payment of all
or any portion of any amount due under this Section 2.07(c) is
not permitted by the Subordination Agreement, then interest,
compounded on an annual basis, will accrue on the unpaid
balance at the rate of 8% per annum from the date such payment
is due until the date such payment is made, and payment of
such amount (together with such interest) shall be made (or
caused to be made) by SurgiCare on the earliest date as of
which such payment may be made in compliance with the
Subordination Agreement. Any increase to the MBS Share
Consideration or the DCPS Share Consideration to be made under
this Section 2.07(c) will be satisfied by SurgiCare by
delivery to Xxxxx (in the case of the MBS Share Consideration)
or Xxxx (in the case of the DCPS Share Consideration), of
certificates representing such increase to the MBS Share
Consideration or DCPS Share Consideration, in either case
promptly after the final determination of the amount of Newco
EBITDA for the year ended December 31, 2005 (whether by lack
of disagreement with the initial determination, resolution of
any disagreement with the initial determination by the
parties, or resolution through submission of any dispute to
the Accountants), but in no event later than ten days after
such final determination; provided, however, that any issuance
of SurgiCare Class A Common Shares to a Seller hereunder will
be conditioned upon SurgiCare receiving from such Seller
satisfactory assurances that the representations and
warranties set forth in Section 4.24 of this Agreement remain
true and correct in all respects with regards to such Seller
as of the date of such issuance."
2.6. Amendment to Section 2.07(d). Section 2.07(d) is hereby amended to
read in its entirety as follows:
(d) Reduction of Acquisition Consideration. The
Sellers may be required to forfeit a portion of the Acquisition
Consideration, as set forth in this Section 2.07(d) and subject to
Section 2.07(e).
(i) With respect to the years ended December
31, 2004 and the year ended December 31, 2005, if the
aggregate amount of the Newco EBITDA for such years is less
than $2,000,000 (the amount of shortfall below $2,000,000
being referred to herein as the "Newco EBITDA Shortfall"):
A. (1) the outstanding principal amount of
the MBS Notes (the "MBS Note Balance") shall be
reduced by an amount equal to the lesser of (x) the
product (the "MBS EBITDA Shortfall Amount") of 1.25
multiplied by the
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Newco EBITDA Shortfall and (2) the DCPS Note Balance,
and any interest accrued but unpaid on such reduced
principal amount shall be forfeited;
B. the outstanding principal amount of the
DCPS Notes (the "DCPS Note Balance") shall be reduced
by an amount equal to the lesser of (1) the product
(the "DCPS EBITDA Shortfall Amount") of 1.25
multiplied by the Newco EBITDA Shortfall and (2) the
DCPS Note Balance, and any interest accrued but
unpaid on such reduced principal amount shall be
forfeited;
C. to the extent that the MBS EBITDA
Shortfall Amount is greater than the MBS Note
Balance, upon the written election of SurgiCare, the
MBS Share Consideration shall be reduced by an amount
of SurgiCare Class C Common Shares which, if
converted, would represent a number of Class A Common
Shares equal to the quotient of (1) the difference
between the MBS EBITDA Shortfall Amount and the MBS
Note Balance divided by (2) the quotient of (a) $0.33
divided by (b) the Reverse Split Fraction; and
D. to the extent that the DCPS EBITDA
Shortfall Amount is greater than the DCPS Note
Balance, upon the written election of SurgiCare, the
DCPS Share Consideration shall be reduced by an
amount of SurgiCare Class C Common Shares which, if
converted, would represent a number of Class A Common
Shares equal to the quotient of (1) the difference
between the DCPS EBITDA Shortfall Amount and the DCPS
Note Balance divided by (2) the quotient of (a) $0.33
divided by (b) the Reverse Split Fraction.
(ii) Any decrease to be made under this
Section 2.07(d) to (A) the MBS Share Consideration will be
satisfied by Xxxxx by delivery to SurgiCare of certificates
representing such decrease to the MBS Share Consideration,
endorsed in blank or accompanied by duly executed assignment
documents with a medallion signature guarantee, or (B) the
DCPS Share Consideration will be satisfied by Xxxx by delivery
to SurgiCare of certificates representing such decrease to the
DCPS Share Consideration, endorsed in blank or accompanied by
duly executed assignment documents with a medallion signature
guarantee, in either case promptly after the final
determination of the amount of Newco EBITDA for the year ended
December 31, 2005 (whether by lack of disagreement with the
initial determination, resolution of any disagreement with the
initial determination by the parties, or resolution through
submission of any dispute to the Accountants), but in no event
later than ten days after such final determination.
(iii) Until such time as no decrease to the
Acquisition Consideration received by a Seller can be made
pursuant to this Section 2.07(d), including a decrease in the
Acquisition Consideration resulting from a sale of the
Surviving Corporation pursuant to Section 2.07(e), (A) such
Seller will not, without the prior written consent of
SurgiCare, directly or indirectly, sell, transfer, assign,
pledge, hypothecate, tender, encumber, engage in a
Constructive Sale or otherwise dispose of in any manner any of
the SurgiCare Class C Common Shares received by
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such Seller as part of the Acquisition Consideration (or
SurgiCare Class A Common Shares into which such SurgiCare
Class C Common Shares have been converted), or offer, consent
or agree to do any of the foregoing, (B) such SurgiCare Class
C Common Shares (or SurgiCare Class A Common Shares, if
applicable) shall bear a legend disclosing the existence of
the restrictions contained herein and (C) SurgiCare may,
without the consent of such Seller, deliver stop transfer
instructions to SurgiCare's transfer agent with respect to
such SurgiCare Class C Common Shares (or SurgiCare Class A
Common Shares, if applicable)."
2.7. Amendment to Section 2.07(e). Section 2.07(e) is hereby amended to
read in its entirety as follows:
(e) Effect of Termination Without Cause or Sale of
the Surviving Corporation. Sections 2.07(c) and 2.07(d) are subject to
the following provisions in the event that (1) SurgiCare sells (a
"Newco Sale Event") all of the capital stock, or all or substantially
all of the assets, of the Surviving Corporation to an unaffiliated
third party (other than in connection with an acquisition of all or
substantially all of SurgiCare and other than any sale pursuant to the
ROFR granted by Section 6.11 hereof) or (2) the employment of Xxxx or
Xxxxx is terminated by SurgiCare without "Cause" (as defined in the
employment agreements referenced in Section 7.02) (a "Qualifying
Termination"), in either case prior to the second anniversary of the
Closing Date.
(i) If a Newco Sale Event or a Qualifying
Termination of Xxxxx occurs on or prior to December 31, 2005,
(x) the aggregate Newco EBITDA for the years ended December
31, 2004 and December 31, 2005 shall be deemed to be
$4,250,000 solely for purposes of Sections 2.07(c)(i)(A),
2.07(c)(i)(C), 2.07(d)(i)(A) and 2.07(d)(i)(C), and (y)
Section 2.07(d) shall terminate and be of no further force or
effect with respect to Xxxxx, the MBS Notes, if any, or the
MBS Share Consideration following the date of such Newco Sale
Event or Qualifying Termination.
(ii) If a Newco Sale Event or a Qualifying
Termination of Xxxx occurs on or prior to December 31, 2005,
(x) the aggregate Newco EBITDA for the years ended December
31, 2004 and December 31, 2005 shall be deemed to be
$4,250,000 solely for purposes of Sections 2.07(c)(i)(B),
2.07(c)(i)(D), 2.07(d)(i)(B) and 2.07(d)(i)(D), and (y)
Section 2.07(d) shall terminate and be of no further force or
effect with respect to Xxxx, the DCPS Notes or the DCPS Share
Consideration following the date of such Newco Sale Event or
Qualifying Termination.
2.8. Amendment to Section 2.09. Section 2.09 is hereby amended to read
in its entirety as follows:
"SECTION 2.09 MBS Representative. Each MBS Seller hereby
appoints Xxxxx as the agent, proxy and attorney-in-fact for the MBS
Sellers for all purposes under this Agreement (including without
limitation full power and authority to act on the MBS Sellers' behalf)
to take any action, should he elect to do so in his sole discretion,
(i) to consummate the transactions contemplated under this Agreement,
(ii) in the event of such consummation,
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to receive on behalf of each MBS Seller such MBS Seller's Stockholder
Percentage of the MBS Cash Consideration, the MBS Share Consideration
and the MBS Notes, if any, (iii) to pay to each MBS Seller his, her or
its Stockholder Percentage of the MBS Cash Consideration, the MBS Share
Consideration and the MBS Notes, if any, (iv) to execute and deliver,
should he elect to do so in his sole discretion, on behalf of the MBS
Sellers any amendment to this Agreement so long as such amendment shall
apply to all parties to this Agreement, and (v) to take all other
actions to be taken by or on behalf of the MBS Sellers and exercise any
and all rights which the MBS Sellers are permitted or required to do or
exercise under this Agreement."
2.9. Amendment to Section 3.25. Section 3.25 is hereby amended to read
in its entirety as follows:
"SECTION 3.25 Offering Valid. Assuming the accuracy of the
representations and warranties of the Sellers contained in Section
4.24, the offer, sale and issuance of the SurgiCare Class C Common
Shares (and, if applicable, SurgiCare Class A Common Shares), the MBS
Notes, if any, and the DCPS Notes in the Acquisitions will be exempt
from the registration requirements of the Securities Act, and will have
been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. Neither SurgiCare
nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of
the SurgiCare Class C Common Shares, SurgiCare Class A Common Shares,
MBS Notes or DCPS Notes to any Person or Persons so as to bring the
sale of such SurgiCare Class C Common Shares, SurgiCare Class A Common
Shares, MBS Notes or DCPS Notes by SurgiCare within the registration
provisions of the Securities Act or any state securities laws.
SurgiCare has made or will, in accordance with all time periods under
applicable laws, make all requisite filings and has taken or will take
all action necessary to be taken to comply with such state securities
or "blue sky" laws. All prior issuances of SurgiCare's securities have
been conducted in conformity with all applicable securities laws."
2.10. Amendment to Section 4.24. Section 4.24 is hereby amended to read
in its entirety as follows:
"SECTION 4.24 Investment Representations. The Sellers have
been advised that neither the SurgiCare Class C Common Shares (and, if
applicable, SurgiCare Class A Common Shares) constituting the MBS Share
Consideration and the DCPS Share Consideration, nor the MBS Notes, if
any, nor the DCPS Notes have been registered under the Securities Act
or any state securities laws and, therefore, such SurgiCare Class C
Common Shares, SurgiCare Class A Common Shares, MBS Notes and DCPS
Notes may not be resold unless they are registered under the Securities
Act and applicable state securities laws or unless an exemption from
such registration requirements is available. The Sellers are aware that
SurgiCare is under no obligation to effect any such registration with
respect to such SurgiCare Class C Common Shares, SurgiCare Class A
Common Shares, MBS Notes or DCPS Notes or to file for or comply with
any exemption from registration. Each Seller is receiving the SurgiCare
Class C Common Shares, SurgiCare Class A Common Shares, MBS Notes and
DCPS Notes to be acquired by such Seller hereunder for
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his own account and not with a view to, or for resale in connection
with, the distribution thereof in violation of the Securities Act. Each
Seller has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of such
investment, is able to incur a complete loss of such investment and is
able to bear the economic risk of such investment for an indefinite
period of time. Each Seller is an accredited investor as that term is
defined in Regulation D under the Securities Act."
2.11. Amendment to Section 9.03(a). Section 9.03(a) is hereby amended
to read in its entirety as follows:
"(a) "Acquisition Consideration" means the MBS Cash
Consideration, the DCPS Cash Consideration, the MBS Share
Consideration, the DCPS Share Consideration, the MBS Notes, if any, and
the DCPS Notes."
2.12. Amendment to Section 9.13. Section 9.13 is hereby amended to read
in its entirety as follows:
"SECTION 9.13 Set-Off. Amounts owing by any Seller to
SurgiCare or Newco under Section 2.07 of this Agreement may, but shall
not be required to, be set-off against any amounts owing by SurgiCare
or Newco to the Sellers under any provision of this Agreement
(including without limitation Section 2.07), the MBS Notes, if any, or
the DCPS Notes."
2.13. Amendment to Exhibit B. Exhibit B, the Form of Seller Note, is
hereby replaced in its entirety with Exhibit A hereto.
3. Miscellaneous.
3.1. Entire Agreement. This Agreement, the Amended Merger Agreement and
the other agreements referred to herein and therein set forth the entire
understanding between the parties hereto with respect to the subject matter
hereof and thereof. Except to the extent specifically amended hereby, the
provisions of the Merger Agreement shall remain unmodified, and the Amended
Merger Agreement is hereby confirmed as being in full force and effect.
3.2. Assignment. This Agreement shall bind and inure to the benefit of
the parties hereto and their respective permitted successors, assigns, heirs and
representatives.
3.3. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same instrument.
3.4. Governing Law. This Agreement and all claims arising hereunder or
in connection herewith shall be governed by, and construed in accordance with,
the laws of the State of Texas applicable to contracts executed and to be
performed in that state and without regard to any applicable conflicts of law
principles.
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Second Amendment to Merger Agrt.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
by the terms hereof, have caused this Agreement to be executed, under seal, as
of the date first above written by their officers or other representatives
thereunto duly authorized.
SURGICARE: SURGICARE, INC.
By: /s/ Xxxxx XxXxxxx
----------------------------------
Name: Xxxxx XxXxxxx
Title: Chief Executive Officer
NEWCO: DCPS/MBS ACQUISITION, INC.
By: /s/ Xxxxx XxXxxxx
----------------------------------
Name: Xxxxx XxXxxxx
Title: President
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DCPS: XXXXXX XXXX PHYSICIAN SOLUTIONS, LTD.
By: /s/ Xxxxxx Xxxx
----------------------------------
Name: Xxxxxx Xxxx
Title: President
DCPS SELLERS: By: /s/ Xxxxxx Xxxx
----------------------------------
Xxxxxx Xxxx
By: /s/ Xxxxxxx Xxxx
----------------------------------
Xxxxxxx Xxxx
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MBS: MEDICAL BILLING SERVICES, INC.
By: /s/ Xxx X. Xxxxx
----------------------------------
Name: Xxx X. Xxxxx
Title: President
MBS SELLERS: By: /s/ Xxx X. Xxxxx
----------------------------------
Xxx X. Xxxxx
By: /s/ Xxxx Xxxxxx
----------------------------------
Xxxx Xxxxxx
By: /s/ Xxxx Xxxxxx
----------------------------------
Xxxx Xxxxxx
EXHIBIT A
FORM OF SELLER NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SUCH ACT. FURTHERMORE, THIS NOTE MAY BE SOLD OR
OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED HEREIN.
THIS INSTRUMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE
AND JUNIOR, IN THE MANNER AND TO THE EXTENT SET FORTH IN THE SUBORDINATION
AGREEMENT REFERRED TO HEREIN, TO ALL SENIOR INDEBTEDNESS REFERRED TO THEREIN,
AND EACH HOLDER OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY
THE PROVISIONS OF THE SUBORDINATION AGREEMENT.
ORION HEALTHCORP, INC.
SUBORDINATED NOTE DUE _________, 2007
$500,000.00 _______, 2004
FOR VALUE RECEIVED, the undersigned, Orion HealthCorp, Inc., a Delaware
corporation (the "Company"), hereby promises to pay to the order of [Seller]
[("DCPS Seller") or ("MBS Seller"), as applicable] or registered permitted
assigns (such original payee or any such assignee from time to time, the
"Noteholder"), at the address set forth in Section 9.02 of the Agreement and
Plan of Merger referred to in Section 1 hereof, or at such other place as the
Noteholder shall from time to time have designated to the Company in writing, on
________, 2007 (the "Maturity Date"), Five Hundred Thousand Dollars
($500,000.00), and to pay interest thereon as provided in Section 2 hereof.
1. THE NOTE. This Note (the "Note") is issued pursuant to Section 2.01 of the
Amended and Restated Agreement and Plan of Merger dated as of July 16, 2004, as
amended by First Amendment to Agreement and Plan of Merger, dated as of
September 9, 2004, and Second Amendment to Agreement and Plan of Merger dated as
of December 15, 2004, among the Company, DCPS/MBS Acquisition, Inc., Xxxxxx Xxxx
Physician Solutions, Ltd., Medical Billing Services, Inc. and the sellers party
thereto, as amended to date (as so amended to date, the "Agreement and Plan of
Merger"). This Note, together with any notes issued in exchange for it, are
collectively referred to herein as the "Notes". Certain terms are used in this
Note as specifically defined herein.
2. INTEREST PROVISIONS. This Note shall bear interest (computed on the basis of
a 360-day year of twelve 30-day months) from the date hereof, on the principal
amount hereof from time to time unpaid, to and including the maturity hereof and
repayment of all sums due hereunder, at a rate per annum equal to 8%. Interest
shall be payable monthly on the last day of
each month (each an "Interest Payment Date"), commencing on [____________,
2004]. Payments of principal and interest hereunder shall be made by mailing a
check in the amount thereof to the Noteholder at its address appearing in the
register maintained by the Company pursuant to Section 5 hereof.
Notwithstanding any provisions of this Note, in no event shall the
amount of interest paid or agreed to be paid by the Company exceed an amount
computed at the highest rate of interest permissible under applicable law.
3. PAYMENT PROVISIONS. The Company covenants that so long as any of the Notes
are outstanding:
3.1. Payment at Maturity of the Note. Subject at all times to the
Subordination Agreement, on the Maturity Date, or on any accelerated maturity of
the Notes permitted hereby and thereby, the Company will pay the entire
principal amount of this Note then outstanding, together with all accrued and
unpaid interest thereon.
3.2. Voluntary Prepayments. Subject at all times to the Subordination
Agreement, the Company may at any time and from time to time prepay all or part
of the principal amount of the Note then outstanding without penalty or premium.
3.3. Notice of Prepayments. Notice of each voluntary prepayment of the
Note pursuant to Section 3.2 hereof shall be given in accordance with Section
9.02 of the Agreement and Plan of Merger not fewer than three days before the
prepayment date, in each case by mailing to the Noteholder a notice of intention
to prepay specifying the date of prepayment, the aggregate amount of the Note to
be prepaid on such date, the principal amount of the Note to be prepaid on such
date held by the Noteholder, and the accrued interest applicable to such
prepayment.
3.4. Payment and Interest Cut-Off. Upon each prepayment of the Note, in
whole or in part, the Company will pay to the Noteholder the amount of the Note
to be prepaid, as set forth in the notice delivered pursuant to Section 3.3
hereof, together with unpaid interest in respect thereof accrued to and
including the prepayment date.
3.5. Setoff. The Company may, at its sole option, at any time and from
time to time discharge any payment obligation under this Note by setoff against
all or any part of any payment obligation owing by the original Noteholder
pursuant to the Agreement and Plan of Merger, including without limitation any
payment obligation under Section 2.07(d) thereof.
4. DEFAULTS.
4.1. If any one or more of the following events (each such event being
an "Event of Default") shall happen, that is to say:
4.1.1 The Company shall fail to make any payment in respect of
principal of or interest on the Note (other than interest not so paid as a
result of the applicability of restrictions
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contained in the Subordination Agreement) as the same shall become due whether
at maturity, by acceleration or otherwise, and such failure shall continue
uncured and unremedied for 15 business days after the Noteholder has provided
notice thereof to the Company; or
4.1.2 The Company shall:
(a) commence a voluntary case concerning itself under
Title 11 of the United States Code entitled "Bankruptcy" as now or
hereafter in effect, or any successor thereto (the "Bankruptcy Code");
(b) have commenced against it an involuntary case
under said Bankruptcy Code and the petition is dismissed within 60 days
of the commencement of the case; or
(c) have appointed for it a custodian (as defined in
the Bankruptcy Code) to take charge of all or substantially all of its
property; or
(d) have filed against it any proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect, which such proceeding
remains undismissed for a period of 60 days or shall suffer the
appointment of any receiver or custodian or the like for it or all or
substantially all of its property which continues undischarged or
unstayed for a period of 60 days; or
(e) make a general assignment for the benefit of its
creditors; or
then and in each and every such case, subject to the provisions of the
Subordination Agreement, the Noteholder may proceed to protect and enforce its
rights by suit in equity, action at law and/or other appropriate proceeding, and
may by notice to the Company declare (each, an "Acceleration") all or any part
of the unpaid principal amount of the Note then outstanding to be forthwith due
and payable, and thereupon such unpaid principal amount or part thereof,
together with interest accrued thereon and all other sums, if any, payable under
the Note, shall become so due and payable without presentation, presentment,
protest or further demand or notice of any kind, all of which are hereby
expressly waived, and such holder or holders may proceed to enforce payment of
such amount or part thereof in such manner as it or they may elect; provided,
however, notwithstanding the foregoing, in the case of an Event of Default under
Section 4.1.2, Acceleration shall be deemed automatic without notice to the
Company.
4.2. Annulment of Defaults. An Event of Default shall not be deemed to
be in existence for any purpose of this Agreement if the Noteholder shall have
waived such event in writing or stated in writing that the same has been cured
to its reasonable satisfaction. No waiver or statement of satisfactory cure
pursuant to this Section 4.2 shall extend to or affect any subsequent or other
Event of Default not specifically identified in such waiver or statement of
satisfactory cure or impair any of the rights of any holder of the Notes upon
the occurrence thereof.
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5. RESTRICTIONS ON TRANSFER OF NOTE; REGISTER. The Noteholder may not transfer
or assign this Note in full or in part, without obtaining the Company's prior
written consent. The Company shall keep at its principal office a register in
which shall be entered the names and addresses of the registered holders of the
Notes and particulars of the respective Notes held by them and of all transfers
of the Notes.
6. SUBORDINATION OF NOTE.This Note and the rights and obligations evidenced
hereby are subordinate and junior, in the manner and to the extent set forth in
the Subordination Agreement, dated as of ____________, 2004, among the original
Noteholder, the Company, Healthcare Business Credit Corporation, and other
parties named therein (as from time to time in effect, the "Specified
Subordination Agreement"), and any other subordination agreement in favor of any
senior lender of the Company, the terms of which subordination agreement are not
more restrictive with respect to payment of amounts due under this Note than the
terms set forth in the Specified Subordination Agreement (collectively with the
Specified Subordination Agreement, the "Subordination Agreement"), in each case
to all Senior Debt as defined therein.
7. MISCELLANEOUS.
7.1. Notices. Any notice or other communication to the Company or the
Noteholder in connection with this Note shall be deemed to be delivered and
received by such addressee if delivered or made in the manner stipulated in the
notice provisions of Section 9.02 of the Agreement and Plan of Merger (a) in the
case of the Company, to the addresses specified therein or to such other address
as the Company shall have specified to the Noteholder in writing, and (b) in the
case of the Noteholder to the address of the Noteholder contained in the
register referred to in Section 5 hereof.
7.2. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, EACH OF THE COMPANY (BY ITS EXECUTION HEREOF) AND
THE NOTEHOLDER (BY ITS ACCEPTANCE OF THIS NOTE) WAIVES AND COVENANTS THAT IT
WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION ARISING OUT OF OR
BASED UPON OR RELATING TO THIS NOTE OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING.
7.3. Governing Law. This Note shall be governed by and construed in
accordance with the domestic substantive laws of the State of New York without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
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IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
by a duly authorized officer as of the date first written above.
ORION HEALTHCORP, INC.
By___________________________________
Name:
Title:
