AMENDMENT TO
SECURITIES PURCHASE AGREEMENT
This Amendment dated August 23, 1999 (the "Amendment") is an amendment to
the Securities Purchase Agreement dated as of June 15, 1999 (the "Agreement") by
and among PhyCor, Inc., a Tennessee corporation (the "Company"), and the
Investors whose names appear on the signature pages to the Agreement.
WHEREAS, the parties have entered the Agreement;
WHEREAS, the parties hereby agree to amend the Agreement as stated herein;
and
WHEREAS, the parties wish to set forth their understanding in respect to
the terms and conditions relating to the Amendment.
NOW THEREFORE, in consideration of the provisions hereof and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Authorization; Conversion of Notes into Common Stock; Etc. The first
sentence of Section 1.1 is deleted in its entirety and replaced with the
following:
The Company has duly authorized the issue and sale of Series A Zero
Coupon Convertible Subordinated Notes due 2014 (the "Series A Notes") and
Series B Zero Coupon Convertible Subordinated Notes (the "Series B Notes"),
each such Note to be substantially in the form of Exhibit A attached
hereto.
2. Purchase and Sale of Notes; the Closing. Section 1.2 is deleted in its
entirety and replaced with the following:
1.2. Purchase and Sale of Series A Notes; the Closing.
Subject to the terms and conditions hereof, the Company hereby agrees
to sell to each Investor, and each Investor agrees to purchase from the
Company, Series A Notes in the aggregate Principal Amount at Final Maturity
as set forth opposite such Investor's name in Schedule I attached hereto.
Each Series A Note will be issued at an issue price of $375.39 per $1,000
Principal Amount at Final Maturity. The closing of such purchase shall be
held at 10:00 A.M., New York time, on September 3, 1999 provided all the
conditions set forth in Sections 4 and 5 hereto are satisfied or have been
waived, or on such later Business Day as may be agreed to by you and the
Company (the "Closing Date"), at the offices of Xxxxxx Xxxxxxx Xxxxxx &
Xxxxx, A Professional Limited Liability Company, 000 Xxxxx Xxxxxx, Xxxxx
0000, Xxxxxxxxx, Xxxxxxxxx 00000.
On the Closing Date, the Company will deliver to each Investor one or
more Series A Notes, dated the Closing Date and registered in such
Investor's name or in the name of one or more of such Investor's nominees,
in any denominations (in a minimum amount of $500,000) and in the aggregate
principal amount to be purchased by the Investors, all as the Investors may
specify by timely notice to the Company (or, in the absence of such notice,
one Series A Note registered in each Investor's name), in each case against
delivery to the Company of immediately available funds in the amount of the
purchase price of such Series A Notes, such delivery to be by wire transfer
to such account as the Company may direct in writing.
3. Purchase and Sale of Series B Notes; Series B Closing; Shareholder
Approval. Section 1.3 shall be inserted in the Agreement and shall read as
follows:
1.3. Purchase and Sale of Series B Notes; Series B Closing;
Shareholder Approval.
A. Subject to the terms and conditions hereof, unless otherwise
mutually agreed by the parties, the Company shall sell to each Investor,
and each Investor agrees to purchase from the Company, Series B Notes up to
the aggregate Principal Amount at Final Maturity as set forth opposite such
Investor's name in Schedule II attached hereto. Each Note will be issued at
an issue price of $375.39 per $1,000 Principal Amount at Final Maturity.
The closing of such purchase shall be held at 10:00 A.M., New York time, on
the third Business Day following the receipt of shareholder approval of the
Series B Transaction, provided all the conditions set forth in Sections 4
and 5 hereto are satisfied or have been waived, or on such later Business
Day as may be agreed to by you and the Company (each, a "Series B Closing
Date") at the offices of Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, A Professional
Limited Liability Company, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx,
Xxxxxxxxx 00000.
B. On the Series B Closing Date, the Company will deliver to each
Investor one or more Notes, dated the Series B Closing Date and registered
in such Investor's name or in the name of one or more of such Investor's
nominees, in any denominations (in a minimum amount of $500,000) and in the
aggregate principal amount to be purchased by the Investors, all as the
Investors may specify by timely notice to the Company (or, in the absence
of such notice, one Series B Note registered in each Investor's name), in
each case against delivery to the Company of immediately available funds in
the amount of the purchase price of such Series B Notes, such delivery to
be by wire transfer to such account as the Company may direct in writing.
C. Subject to the satisfaction or waiver of all the conditions set
forth in Sections 4 and 5 hereto, upon approval of the Series B Transaction
(as defined in Section 6.16) by the shareholders of the Company, unless
otherwise
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agreed by the parties, the Company shall sell all of the Series B Notes to
the Investors, and the Investors shall be obligated to purchase the Series
B Notes from the Company. In the event the shareholders of the Company fall
to approve the Series B Transaction, the Company shall have no obligation
to sell the Series B Notes to the Investors, and the Investors shall have
no obligation or right to purchase Series B Notes from the Company.
4. Use of Proceeds. The first sentence of Section 6.4 is deleted in its
entirety and replaced with the following:
The Company will use the proceeds of the issuance of the Note to repay
existing debt, to repurchase shares of Common Stock and for general
corporate purposes; provided, however, that any repurchases of shares of
Common Stock hereunder (i) will be approved by the Board of Directors, (ii)
will be made in compliance with all applicable law, (iii) will be made
within 12 months of the Special Meeting and (iv) will not exceed
$10,000,000 in the aggregate and, in the event of a Series B Closing Date,
will not exceed the sum of $10,000,000 plus aggregate proceeds to the
Company from the sale of Series B Notes; and provided further that nothing
herein shall prohibit, restrict or otherwise limit the Company's ability to
effect its $75,000,000 securities repurchase program previously adopted by
the Company as long as such securities repurchase program is completed
within 24 months of the later of (a) the Closing Date and (b) the Series B
Closing Date.
5. Additional Purchases of Common Stock. Sections 6.6A and 6.6B shall be
deleted in their entirety and replaced with the following:
6.6. Additional Purchases of Common Stock.
In the event the Company and the Investors mutually determine that the
Company shall sell less than all of the Series B Notes or the Series B
Transaction is not approved by the Company's shareholders at the Special
Meeting, the Investors may acquire additional shares of Common Stock in
open-market purchases or otherwise ("Permitted Acquisitions") provided that
(i) the Permitted Acquisitions are made no later than six months after such
determination or the Special Meeting, (ii) the number of shares of Common
Stock acquired pursuant to this Section 6.6 shall not exceed the product of
(a) 15,000,000 (subject to appropriate adjustment for any stock split or
similar event) multiplied by (b) one minus the quotient of the aggregate
Principal Amount at Final Maturity of Series B Notes sold to the Investors
divided by $266,389,621, (iii) the aggregate consideration for such
Permitted Acquisitions does not exceed the difference between $100,000,000
and the original issue discount value of the aggregate principal amount of
the Series B Notes sold by the Company to the Investors and (iv) the
Maximum Amount shall not exceed that number of shares which is equal to 46%
of the sum of the then outstanding
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Common Stock plus the number of shares issuable upon conversion of the
issued and outstanding Notes.
6. Covenants. Sections 6.16 and 6.17 shall be inserted in the Agreement and
shall read as follows:
6.16. Shareholders' Meeting.
The Company covenants and agrees that (i) its Board of Directors will,
as soon as reasonably practicable after the Closing Date, call a special
meting of its shareholders (the "Special Meeting") to consider and vote
upon the sale of Series B Notes pursuant to the terms of this Agreement
(the "Series B Transaction") and (ii) its Board of Directors will duly
recommend to the Company's shareholders that the Series B Transaction and
the transaction contemplated thereby be approved unless the Board of
Directors determines in good faith, after consultation with and based upon
the advice of its financial and legal advisors, that such a recommendation
would constitute a breach of its fiduciary duties.
6.17. Proxy Statement.
The Company covenants that the information with respect to the
Company, its officers and directors and its subsidiaries contained in the
definitive proxy material that will be distributed to the Company's
shareholders in connection with the Special Meeting (the "Proxy Statement")
will not, and the Investors and WP covenant that the information supplied
by the Investors and WP and their representatives for inclusion in the
Proxy Statement will not, on the date the Proxy Statement is first mailed
to shareholders, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
are made, not misleading subject to the terms and conditions herein
provided. The Company further agrees to file with the Commission as soon as
practicable after the Closing Date the Proxy Statement with respect to the
Special Meeting to consider approval of the Series B Transaction, use its
best efforts to resolve as promptly as practicable any comments of the
staff of the Commission to such Proxy Statement and promptly thereafter
mail the Proxy Statement to its shareholders. The Proxy Statement shall
conform, at the date of mailing, as to form in all material respects with
applicable requirements of the Exchange Act, or any regulation or rule
issued thereunder.
7. General Terms of Notes. (a) The second sentence of Section 7.1A shall be
deleted in its entirety and replaced with the following sentences:
The aggregate Principal Amount at Final Maturity of the Series A Notes
to be issued hereunder is $266,389,621. The aggregate Principal Amount at
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Final Maturity of the Series B Notes that may be issued hereunder is
$266,389,621.
(b) Section 7.1 is hereby deleted in its entirety and replaced with the
following:
C. The Notes shall be issued at an Issue Price of $375.39 per $1,000
Principal Amount at Final Maturity. There shall be no periodic payments of
interest on the Notes. The calculation of the accrual of Original Issue
Discount in the period during which each Note remains outstanding shall be
on an annual basis using a 360-day year composed of twelve 30-day months,
and such accrual shall commence, with respect to the Series A Notes, on the
Closing Date and, with respect to the Series B Notes, on each Series B
Closing Date. In the event of the maturity, conversion, purchase by the
Company at the option of a Holder or redemption of a Note, Original Issue
Discount, if any, shall cease to accrue on such Note, under the terms and
subject to the conditions of this Agreement and the Notes.
8. Purchase of Notes at the Option of the Holder. The introductory clause
of Section 7.4A is deleted in its entirety and replaced with the following:
A. General. On the tenth anniversary of the Closing Date with respect
to the Series A Notes and each Series B Closing Date with respect to the
Series B Notes (the "Purchase Date"), at the purchase price specified in
paragraph 6 of the Notes (the "Purchase Price"), a Holder of Notes shall
have the option to require the Company to purchase any outstanding Notes
held by such Holder, upon:
9. Adjustments to Conversion Rate. Section 7.7F is deleted in its entirety
and replaced with the following:
A. In the event the litigation referred to in Schedule 7.7 (the
"Subject Litigation") is settled by the Company or a final judgment is
entered against the Company or the Company otherwise is liable to make
payments (whether pursuant to indemnification arrangements or otherwise),
which payments shall include fees and expenses payable by the Company, in
an amount on an after-tax basis in excess of the Company's current
insurance coverage ($10 million pre-tax) plus any supplemental insurance
coverage acquired by the Company (the "Adjustment Amount"), provided,
however, if the Company acquires a supplemental insurance policy, the
Adjustment Amount shall also include the after-tax costs of obtaining such
supplemental policy (a "Special Adjustment Event"), then the Conversion
Rate then in effect shall be further adjusted pursuant to this Section
7.7F. Upon the occurrence of a Special Adjustment Event, the Conversion
Rate shall be adjusted to the Conversion Rate obtained by dividing $375.39
by the New Factor. For purposes hereof, the "New Factor" shall be equal to
the difference between (x) the quotient obtained
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by dividing $375.39 by the Conversion Rate in effect immediately prior to
the Special Adjustment Event and (y) the Adjustment Factor. For purposes
hereof, the "Adjustment Factor" shall equal the product of (A) the "Note
Factor", which is the quotient of (i) $1 million divided by (ii) the sum of
(a) 76,292,550 (the outstanding shares of Common Stock as of June 10, 1999)
and (b) the number of shares then issuable upon conversion of the issued
and outstanding Notes (the "Conversion Shares") for each $1 million of the
Adjustment Amount, times (B) the "Stock Factor" which is the sum of (i) one
plus (ii) the quotient of (1) the Permitted Acquisitions divided by (2) the
Conversion Shares (with adjustments to the Adjustment Factor by linear
interpolation for amounts greater than or less than $1 million, as the case
may be).
10. Definitions. (a) The following definitions shall be added to Section
8.1 where appropriate:
"Conversion Shares" has the meaning specified in Section 7.7F.
"Note Factor" has the meaning specified in Section 7.7F.
"Proxy Statement" has the meaning specified in Section 6.17.
"Series A Notes" has the meaning specified in Section 1.1.
"Series B Notes" has the meaning specified in Section 1.1.
"Series B Closing Date" has the meaning specified in Section 1.3.
"Series B Transaction" has the meaning specified in Section 6.16.
"Special Meeting" has the meaning specified in Section 6.16.
"Stock Factor" has the meaning specified in Section 7.7F.
(b) Clause (iii) of the definition of "Maximum Amount" shall be deleted in
its entirety and replaced with the following:
(iii) during a period of six months from the earlier of (a) the date
the Company and the Investors mutually determine to sell less than all the
Series B Notes or (b) the date of the Special Meeting at which the
shareholders fail to approve the Series B Transaction, the number of shares
of Common Stock that the Investors may purchase in accordance with the
provisions of Section 6.6.
(c) The definition of Permitted Acquisitions shall be deleted in its
entirety and replaced with the following:
"Permitted Acquisitions" has the meaning specified in Section 6.6.
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(d) The definition of Adjustment Threshold shall be deleted in its entirety
and replaced with the following:
"Adjustment Amount" has the meaning specified in Section 7.7.
11. Expenses. Section 17.1 is deleted in its entirety and replaced with the
following:
The Company shall pay up to $2,000,000 of the Investors' expenses in
connection with the transactions contemplated hereby, including the fees
and disbursements of counsel, provided such fees are reasonable and the
Investors submit verification of such expenses. With the exception of the
foregoing sentence, each of the parties hereto shall pay its own expenses.
12. Amendment and Ratification. The parties agree that the Agreement is
hereby amended in accordance with the foregoing provisions of this Amendment The
parties agree that the Agreement, as amended as provided herein, shall remain in
full force and effect.
13. Defined Terms. Capitalized terms used in this Amendment shall have the
same meanings as in the Agreement unless otherwise defined herein.
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IN WITNESS WHEREOF, the parties hereto have signed this Amendment to the
Agreement as of the date first above written.
PHYCOR, INC.
By: /s/ Xxxxxx X. Xxxxx
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Title: Chairman of the Board
WARBURG, XXXXXX EQUITY PARTNERS, L.P.
By: Warburg, Xxxxxx & Co.,
General Partner
By: /s/ Xxxx Xxxxxxxx
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WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS I, C.V.
By: Warburg, Xxxxxx & Co.,
General Partner
By: /s/ Xxxx Xxxxxxxx
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WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS II, C.V.
By: Warburg, Xxxxxx & Co.,
General Partner
By: /s/ Xxxx Xxxxxxxx
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WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS III, C.V.
By: Warburg, Xxxxxx & Co.,
General Partner
By: /s/ Xxxx Xxxxxxxx
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For purposes of Section 6.5 only:
WARBURG, XXXXXX & CO.
By: /s/ Xxxx Xxxxxxxx
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