EXHIBIT 10.4
Conformed Copy as amended by
First Amendment to Debt Exchange Agreement
dated as of July 16, 2004
THE SECURITIES OFFERED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS
OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE UPON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE SECURITIES PURCHASED HEREUNDER MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND OTHER
APPLICABLE LAWS PURSUANT TO REGISTRATION OR EXEMPTION FROM
REGISTRATION REQUIREMENTS THEREUNDER.
AMENDED AND RESTATED
DEBT EXCHANGE AGREEMENT
This
Amended and Restated Debt Exchange Agreement is made as of February
9, 2004 among SurgiCare, Inc., a Delaware corporation
(“SurgiCare”), Brantley Venture Partners III, L.P.
(“Brantley III”) and Brantley Capital Corporation
(“Brantley Capital”; each of Brantley III and Brantley
Capital is sometimes referred to herein as a
“Subscriber” and collectively as the
“Subscribers”). The Agreement amends and restates in
its entirety the Debt Exchange Agreement dated as of
November 18, 2003 entered into between SurgiCare and the
Subscribers (the “Prior Agreement”).
RECITALS
Prior
to the date hereof, Brantley III advanced a total of $1,271,171 in
loans to Integrated Physician Solutions, Inc., a Delaware
corporation (“IPS”), pursuant to one or more promissory
notes (collectively, the “Brantley III
Notes”).
Prior
to the date hereof, Brantley Capital advanced a total of $1,985,448
in loans to IPS pursuant to one or more promissory notes
(collectively, the “Brantley Capital Notes”; the
Brantley III Notes and the Brantley Capital Notes are sometimes
referred to herein collectively as the “Exchange
Notes”). In connection with the issuance of one or more of
the Brantley Capital Notes, IPS agreed to pay to Brantley Capital
the amount of $593,100 in respect of accrued dividends (the
“Brantley Capital Dividend Amount”), which amount
remains outstanding as of the date hereof.
SurgiCare
has proposed to amend and restate its Certificate of Incorporation
to provide that, as amended and in effect at the closing of the
transactions contemplated by this Agreement, SurgiCare will be
authorized to issues shares of Class A Common Stock, par value
$.001 per share (“Class A Common”), Class B
Common Stock, par value $.001 per share (“Class B
Common”), and Class C Common Stock, par value $.001 per
share (“Class C Common”), having the terms
described in the draft Amended and Restated Certificate of
Incorporation attached hereto as Exhibit A (the “Amended
SurgiCare Charter”). Simultaneously with the filing of the
Amended SurgiCare Charter and pursuant thereto, SurgiCare will
effect a reverse stock split whereby each outstanding share of
common stock, par value $0.005 per share (the “Pre-Split
Common Stock”), of SurgiCare shall be reclassified and
reduced to a fraction of a share of Class A Common as
contemplated by the Brantley IV Subscription Agreement (as
hereinafter defined).
Brantley
Partners IV, L.P. (“Brantley IV”) proposes to make an
investment (the “Brantley IV Investment”) in SurgiCare
consisting of cash and the contribution of certain notes issued by
IPS and SurgiCare evidencing loans made by Brantley IV to them.
Such investment will be made pursuant to an Amended and Restated
Stock Subscription Agreement dated as of the date hereof (the
“Brantley IV Subscription Agreement”) between SurgiCare
and Brantley IV, having the terms described in the draft thereof
attached hereto as Exhibit B.
SurgiCare
proposes to acquire (the “Acquisitions”), either
directly or indirectly through one or more subsidiaries:
(i) IPS, pursuant to an Amended and Restated Agreement and
Plan of Merger dated as of the date hereof (the “IPS -
SurgiCare Merger Agreement”), among SurgiCare, IPS
Acquisition, Inc., a Delaware corporation and a wholly-owned
subsidiary of SurgiCare, and IPS, having the terms described in the
draft Agreement and Plan of Merger attached hereto as
Exhibit C; and (ii) Dennis Cain Physician Solutions,
Ltd., a Texas limited partnership (“DCPS”), and Medical
Billing Services, Inc., a Texas corporation (“MBS”),
pursuant to an Agreement and Plan of Merger (the “DCPS/MBS
Merger Agreement” and, together with the IPS —
SurgiCare Merger Agreement, the “Acquisition
Agreements”), among SurgiCare, DCPS/MBS Acquisition, Inc., a
Texas corporation and a wholly-owned subsidiary of SurgiCare, DCPS,
MBS and the Sellers party thereto, having the terms described in
the draft Agreement and Plan of Merger attached hereto as
Exhibit D.
Each
Subscriber is willing to exchange the Exchange Notes held by such
Subscriber and, in the case of Brantley Capital, the right to
receive the Brantley Capital Dividend Amount, for a number of
shares of Class A Common determined as set forth herein, and
SurgiCare is willing to effect such exchange, all on the terms and
conditions set forth herein.
For
United States federal income tax purposes, the exchange of the
Exchange Notes and the right to receive the Brantley Capital
Dividend Amount for shares of Class A Common under this
Agreement, together with the Acquisitions and the Brantley IV
Investment, are intended to qualify as transfers to a corporation
controlled by the transferors under the provisions of
Section 351 of the United States Internal Revenue Code of
1986, as amended.
AGREEMENT
In
consideration of the foregoing, and the representations,
warranties, covenants and conditions set forth below, the parties
hereto, intending to be legally bound, hereby agree as
follows:
1. Certain
Definitions. In addition to the terms defined elsewhere in this
Agreement, as used in this Agreement the following terms shall have
the following meanings:
1.1. The term
“Brantley III Exchange Securities” means a number of
shares of Class A Common equal to the Brantley III Loan Amount
divided by the Class A Common Closing Price, rounded up
to the nearest whole number.
1.2. The term
“Brantley III Loan Amount” means the aggregate
principal amount of, and all accrued and unpaid interest on, the
Brantley III Notes outstanding immediately prior to the
Closing.
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1.3. The term
“Brantley Capital Dividend Securities” means a number
of shares of Class A Common equal to the number of shares of
Class A Common, if any, that Brantley Capital would receive
pursuant to Section 2.01(a)(i)(C) of the IPS – SurgiCare
Merger Agreement if Brantley Capital held a number of additional
IPS Series A-2 Shares (as defined in the IPS – SurgiCare
Merger Agreement) immediately prior to the Effective Time (as
defined in the IPS – SurgiCare Merger Agreement) representing
a claim (in respect of liquidation preference and accrued but
unpaid dividends) equal to the Brantley Capital Dividend Amount
(assuming solely for purposes of calculating such number of shares
that Brantley Capital would receive pursuant to
Section 2.01(a)(i)(C) of the IPS — SurgiCare Merger
Agreement that the amount of the Brantley Capital Dividend
Securities is zero). It is understood that in determining the
number of shares that Brantley Capital would receive pursuant to
Section 2.01(a)(i)(C) of the IPS — SurgiCare Merger Agreement
as set forth in the preceding sentence, the additional IPS
Series A-2 Shares deemed to be held by Brantley Capital for
purposes of such calculation shall be deemed to be pari passu with
all outstanding IPS Series A-2 Shares and shall be subject to
any applicable pro rata distribution provisions affecting such IPS
Series A-2 Shares.
1.4. The term
“Brantley Capital Exchange Securities” means a number
of shares of Class A Common equal to the Brantley Capital Loan
Amount divided by the Class A Common Closing Price,
rounded up to the nearest whole number.
1.5. The term
“Brantley Capital Loan Amount” means the aggregate
principal amount of, and all accrued and unpaid interest on, the
Brantley Capital Notes outstanding immediately prior to the
Closing.
1.6. The term
“Class A Common Closing Price” means an amount
equal to the Five Day Average Price divided by the Reverse
Split Fraction.
1.7. The term
“Closing” means the closing of the purchase of
Subscription Securities, as contemplated by Section 2 of this
Agreement.
1.8. The term
“Five Day Average Price” means the average of the daily
average of the high and low price per share of the Pre-Split Common
Stock on the American Stock Exchange, or such other stock exchange
or other similar system on which the Pre-Split Common Stock shall
be listed at the time, for the five trading days immediately
preceding the Closing Date.
1.9. The term
“Person” means any individual, partnership,
corporation, limited liability company, association, trust, joint
venture, unincorporated organization or other entity.
1.10. The term
“Reverse Split Fraction” means a number equal to
0.10.
1.11. The term
“Specified Securities” means the Subscription
Securities, other than any such securities which have been sold in
a registered public offering or to the public pursuant to
Rule 144 under the Securities Act.
1.12. The term
“Subscription Securities” means, collectively, the
Brantley III Exchange Securities, the Brantley Capital Exchange
Securities and the Brantley Capital Dividend Securities.
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1.13. The term
“Subsidiary” of any Person means any corporation,
partnership, joint venture or other legal entity of which such
Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 10% or more of the stock
or other equity interests, the holders of which are generally
entitled to vote for the election of the board of directors or
other governing body of such corporation or other legal
entity.
2. Exchange
of Exchange Notes for Subscription Securities.
2.1. On the terms
and subject to the conditions hereof, SurgiCare hereby agrees to
sell to each Subscriber, and by its acceptance hereof such
Subscriber, severally and not jointly or jointly and severally with
the other Subscriber, agrees to purchase from SurgiCare for
investment, on the Closing Date (as defined in the IPS —
SurgiCare Merger Agreement), such Subscriber’s Subscription
Securities in exchange for the surrender of the Exchange Notes held
by such Subscriber to SurgiCare for cancellation and, in the case
of Brantley Capital, the right to receive the Brantley Capital
Dividend Amount.
2.2. The exchange
of the Exchange Notes and the right to receive the Brantley Capital
Dividend Amount for the Subscription Securities shall take place at
the same time and location as, and shall be substantially
contemporaneous with, the closings pursuant to the Brantley IV
Subscription Agreement, the IPS — SurgiCare Merger Agreement
and the DCPS/MBS Merger Agreement. If at any time prior to the
Closing hereunder the Brantley IV Subscription Agreement or either
of the Acquisition Agreements shall be terminated, any party to
this Agreement may, upon notice to the others, terminate this
Agreement, after which this Agreement will no longer be of any
further force or effect; provided, however, that no such
termination of this Agreement shall relieve any party from
liability for breach prior to such termination.
2.3. At the
Closing, against surrender of the Exchange Notes by or on behalf of
each Subscriber to SurgiCare for cancellation, SurgiCare will
deliver to such Subscriber certificates for the Subscription
Securities to be acquired by such Subscriber acquired pursuant to
Section 2.1, registered in the name of such Subscriber.
Brantley Capital agrees that it shall have no further rights in
respect of the Brantley Capital Dividend Amount following the
Closing, whether or not any Brantley Capital Dividend Securities
are issued hereunder.
3. Representations
and Warranties of SurgiCare. SurgiCare represents and warrants to
the Subscriber that:
3.1. SurgiCare is
duly organized, validly existing and in good standing under the
laws of the State of Delaware. SurgiCare has made available to the
Subscriber true and complete copies of SurgiCare’s
Certificate of Incorporation and the By-Laws as in effect on the
date hereof. Prior to the Closing Date, such documents will be
amended to be, as of the Closing Date, in the respective forms of
the Amended SurgiCare Charter and Exhibit E (Form of Amended
By-Laws).
3.2. SurgiCare has
or prior to the Closing Date will have taken all corporate action
required to authorize the execution and delivery of this Agreement
and the issuance of the Subscription Securities.
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3.3. The
Subscription Securities, when issued upon exchange of the Exchange
Notes and the right to receive the Brantley Capital Dividend Amount
as contemplated by Section 2.1, will be duly authorized,
validly issued, fully paid and non-assessable and free and clear of
any and all preemptive or similar preferential rights to
purchase.
3.4. All of the
representations and warranties of SurgiCare set forth in the
Brantley IV Subscription Agreement are true and correct; and as of
the Closing Date such representations and warranties will continue
to be true and correct in all material respects (except for such
representations and warranties which are qualified as to
materiality, which will continue to be true in all respects). All
of the representations and warranties of SurgiCare set forth in the
IPS – SurgiCare Merger Agreement are true and correct; and as
of the Closing Date such representations and warranties will
continue to be true and correct in all material respects (except
for such representations and warranties which are qualified as to
materiality, which will continue to be true in all respects). All
of the representations and warranties of SurgiCare set forth in the
DCPS/MBS Merger Agreement will be true and correct as of the date
thereof; and as of the Closing Date such representations and
warranties will continue to be true and correct in all material
respects (except for such representations and warranties which are
qualified as to materiality, which will continue to be true in all
respects). SurgiCare has provided each Subscriber with true and
complete copies of the Brantley IV Subscription Agreement, the IPS
– SurgiCare Merger Agreement, the DCPS/MBS Merger Agreement
and all material agreements and other documents relating to the
Acquisitions and the Brantley IV Investment, including, in each
case, any and all amendments thereto, and the transactions
contemplated by the Amended SurgiCare Charter.
3.5. Each of the
Brantley IV Investment Agreement, each of the Acquisition
Agreements and this Agreement is, or at or prior to the Closing
will be, a legal, valid and binding obligation of SurgiCare and
each other party thereto, enforceable against SurgiCare and such
other parties in accordance with its respective terms.
3.6. Immediately
after the consummation of the transactions contemplated hereby and
by the Acquisition Agreements and the Brantley IV Investment
Agreement, the shares of stock and other equity interests of
SurgiCare outstanding will be owned by the Persons (or groups) and
in the amounts set forth in Schedule 1 hereto.
3.7. In reliance
on the representations and warranties of each Subscriber contained
in Section 4.2 hereof, no registration of the offer or sale of
the Subscription Securities to such Subscriber hereunder is
required under the Securities Act.
4. Representations
and Warranties of the Subscribers. Each Subscriber, severally and
not jointly or jointly and severally with the other Subscriber,
represents and warrants with respect to such Subscriber
that:
4.1. Such
Subscriber has full legal capacity, power and authority to execute
and deliver this Agreement and to fully perform its obligations
hereunder. This Agreement has been duly authorized, executed and
delivered by such Subscriber and is the legal, valid and binding
obligation of such Subscriber enforceable against it in accordance
with the terms hereof, and the consummation of the transactions
contemplated hereby has been duly and validly authorized
by
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all
necessary action on the part of such Subscriber. The execution and
delivery of this Agreement by such Subscriber, and the performance
by such Subscriber of its obligations hereunder, will not result in
a material breach or material default under any organizational
document, agreement, instrument or other document by which such
Subscriber is bound or otherwise result in a material violation of
any instrument, judgment, decree, order, statute, rule or
regulation by which such Subscriber is bound.
4.2. Investment
Representations.
(a) Such
Subscriber has been advised that the Subscription Securities to be
acquired by such Subscriber pursuant hereto have not been
registered under the Securities Act or any state securities laws
and, therefore, cannot 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. Such
Subscriber is aware that SurgiCare is under no obligation to effect
any such registration with respect to the Subscription Securities
or to file for or comply with any exemption from registration. Such
Subscriber is acquiring the Subscription Securities to be acquired
hereunder for its own account and not with a view to, or for resale
in connection with, the distribution thereof in violation of the
Securities Act. Such Subscriber has such knowledge and experience
in financial and business matters, including investments in
companies similar to SurgiCare, that such Subscriber 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.
Such Subscriber is an accredited investor as that term is defined
in Rule 501 under Regulation D promulgated under the
Securities Act. Such Subscriber was not organized for the sole
purpose of investing in the Subscription Securities to be acquired
by such Subscriber.
(b) Such
Subscriber has had an opportunity to discuss SurgiCare’s
business, management and financial affairs with SurgiCare’s
executive officers. Such Subscriber has also had an opportunity to
ask questions and receive answers from the executive officers of
SurgiCare concerning the terms and conditions of the offering of
the Subscription Securities to be acquired by such Subscriber
pursuant hereto and to obtain the information it believe necessary
or appropriate to evaluate the suitability of an investment in such
Subscription Securities.
5. Conditions
to Acquisition of Subscription Securities.
5.1.
SurgiCare’s obligation to issue and sell the Subscription
Securities shall be subject to the satisfaction of the following
conditions:
(a) all
representations and warranties of each Subscriber contained in this
Agreement shall be true and correct as of the Closing, and each
Subscriber shall have delivered to SurgiCare a certificate duly
executed on behalf of such Subscriber, by a general partner or
other duly authorized senior representative, certifying that the
condition set forth in this Section 5.1(a) has been satisfied;
and
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(b) on the Closing
Date, substantially contemporaneously with the issuance and sale of
the Subscription Securities hereunder, all conditions to
SurgiCare’s obligation to close under the Acquisition
Agreements (other than any conditions relating to the consummation
of the purchase and sale of the Subscription Securities under this
Agreement or the Brantley IV Investment) and the Brantley IV
Subscription Agreement shall have been satisfied or waived by
SurgiCare.
5.2. Each
Subscriber’s obligation to purchase and pay for the
Subscription Securities to be acquired by such Subscriber pursuant
hereto shall be subject to the satisfaction of the following
conditions:
(a) all
representations and warranties of SurgiCare contained in this
Agreement shall be true and correct as of the Closing, and
SurgiCare shall have delivered to such Subscriber a certificate
duly executed on behalf of SurgiCare by its chief executive officer
and chief financial officer ce
