EXECUTION COPY
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
DATED AS OF MAY 2, 1995
BY AND AMONG
AMERICHOICE CORPORATION,
THE NEW INVESTORS
AND
EACH OF THE EXISTING STOCKHOLDERS
TABLE OF CONTENTS
SECTION 1. Definitions........................................................2
SECTION 2. Restrictions on Transfer...........................................9
(a) General Restricted Transfers.......................................10
(b) Restrictive Legends................................................10
(c) Notice of Proposed Transfer........................................10
(d) Non-Applicability of Restrictions on Transfer......................11
(e) Prohibited Transfers...............................................11
(f) Termination of Restrictions........................................11
SECTION 3. Right of First Refusal............................................11
(a) Offer of Stock.....................................................11
(b) Terms of Offer.....................................................12
(c) Purchase by Company................................................12
(d) Purchase by Stockholders...........................................12
(e) Closing............................................................13
(f) Rejection of Right of First Refusal................................13
(g) Continued Effect of Restrictions...................................13
SECTION 4. Change of Control.................................................14
(a) Purchase of Stock..................................................14
(b) Adjustment to Fair Market Value....................................14
SECTION 5. Take-Along Rights.................................................15
(a) Right to Sell......................................................15
(b) Take-Along Notice..................................................15
(c) Closing............................................................15
(d) Waiver of Take-Along Right.........................................15
SECTION 6. Registration Rights...............................................16
(a) Required Registrations.............................................16
(b) Incidental Registration............................................18
(c) Registration Procedures............................................18
(d) Expenses...........................................................20
(e) Indemnification....................................................21
(f) Participation in Underwritten Registrations........................24
(g) Marketing Restrictions.............................................24
(h) Sale of Preferred Stock to Underwriter.............................27
(i) Grant of Subsequent Registration Rights............................27
(j) Transfer of Registration Rights....................................27
SECTION 7. Voting Agreement..................................................28
(a) The Voting Agreement...............................................28
(b) Board of Directors Designees.......................................28
(i) CLE Designees......................................................28
(ii) Xxxxx Designees....................................................28
(iii) New Investor Designee..............................................28
(iv) Xxxxxx Designee....................................................29
(v) Xxxx Designee......................................................29
(vi) Xxxxxx Designee....................................................29
(c) Best Efforts to Elect Board of Directors Designees.................29
(d) Removal of Designees...............................................30
(e) Board of Directors Vacancies.......................................30
(f) Committee Designees................................................30
(i) Audit Committee....................................................30
(ii) Compensation Committee.............................................30
(iii) Executive Committee................................................31
(g) Best Efforts to Appoint Committee Designees........................31
(h) Management Company Designees.......................................31
SECTION 8. Covenants of the Company...........................................32
(a) Corporate Existence and Licenses...................................32
(b) Independent Public Accountants.....................................32
(c) Payment of Taxes; Maintenance of Properties........................32
(d) Insurance..........................................................33
(e) Payment of Indebtedness, etc.......................................34
(f) Financial Statements and Information...............................34
(i) Annual Budget......................................................34
(ii) Monthly Financial Statements and Reports...........................35
(iii) Quarterly Financial Statements and Reports.........................35
(iv) Annual Financial Statements and Reports............................35
(v) Reports of Auditors................................................35
(vi) Additional Information.............................................35
(vii) Certificate of Independent Public Accountants......................36
(g) Discussion and Inspection Rights...................................36
(h) Tax Treatment of Dividends.........................................36
(i) Notice of Claimed Default or Deficiency............................37
(j) Attendance at Board of Directors Meetings..........................38
(k) Blue Sky...........................................................38
(l) Compliance with Laws...............................................38
(m) Filing of Commission Reports; Rule 144 Requirements................38
(n) Transactions with Affiliates.......................................39
(o) Subsidiaries.......................................................39
(p) Expenditures.......................................................39
(q) Maintenance of Contracts...........................................39
(r) Disposal of Assets.................................................39
SECTION 9. Options...........................................................40
SECTION 10. Amendment and Termination........................................41
SECTION 11. Indemnification; Contribution....................................42
SECTION 12. Miscellaneous Provisions.........................................43
(a) Binding Effect.....................................................43
(b) Additional Shares..................................................44
(c) Notices............................................................44
(d) Governing Law......................................................45
(e) Entire Agreement...................................................45
(f) Headings...........................................................45
(g) Severability.......................................................46
(h) Execution of Counterparts..........................................46
(i) Waiver.............................................................46
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT ("AGREEMENT") is
made and entered into this 2nd day of May, 1995 by and among AMERICHOICE
CORPORATION, a Delaware corporation (the "COMPANY"), CLE, Inc., a Nevada
corporation ("CLE"), XXXXXXX XXXXXXX and XXXXXXXX XXXXXXX, as tenants in
common ("WELTERS"), AW FAMILY LIMITED PARTNERSHIP, XXXXX XXXX AS TRUSTEE FOR
XXXXXX X. XXXXXXX, XXXXX XXXX AS TRUSTEE FOR XXXXXX X. XXXXXXX, XXXXX XXXX AS
TRUSTEE FOR XXXXXXX XXXXXX, XXXXX XXXX AS TRUSTEE FOR XXXXXX X. XXXXXX, XXXXX
XXXX ("XXXX"), EGR FAMILY LIMITED PARTNERSHIP, XXXX X. XXXXXX ("XXXXXX"),
XXXXXX HOLDINGS, L.L.C., XXXXX XXXXXX, ("XXXXXX"), XXXXXX X. XXXXX, XX.
("XXXXX"), for himself and as Guardian for Xxxxxxx Xxxxx, XXXXXX XXXXXX XXXXX,
XXXXXXX XXXXX, XXXXX XXXXXX, XXXX XXXXX XXXXX, XXXX XXXXXX XXXXX, XXXXXX BANK,
N.A., TRUSTEE FOR FIRST PLAZA GROUP TRUST ("FIRST PLAZA"), and ADVENT VI L.P.,
ADVENT VII L.P., ADVENT ATLANTIC AND PACIFIC II L.P., CHESTNUT CAPITAL
INTERNATIONAL III LIMITED PARTNERSHIP, ADVENT NEW YORK L.P., ADVENT INDUSTRIAL
II L.P. and TA VENTURE INVESTORS LIMITED PARTNERSHIP (collectively, "TA
INVESTORS" and together with First Plaza, the "NEW INVESTORS").
W I T N E S S E T H:
WHEREAS, on December 30, 1994, the Existing Stockholders and the
Company entered into the Existing Stockholders' Agreement, to provide for the
disposition of the shares of Stock and to make certain other arrangements with
respect to the Company; and
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated the
date hereof, by and among the parties hereto (the "STOCK PURCHASE AGREEMENT"),
the New Investors have agreed to purchase, and the Company and the Existing
Stockholders have agreed to sell, an aggregate of 15,484 shares of Series A
Common Stock; and
WHEREAS, the Stockholders and the Company consider it in their mutual
and beneficial interests to amend the Stockholders' Agreement and provide the
New Investors certain rights regarding the shares of Common Stock acquired in
the Stock Purchase Agreement and to provide certain other arrangements with
respect to the New Investors' relationship with the Company and the Existing
Stockholders; and
WHEREAS, the Existing Stockholders, the Company and the New Investors
have agreed to amend and restate the agreements contained in the Existing
Stockholders'
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Agreement on the terms provided herein and to make certain other agreements with
respect to the Company.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties hereto, it is mutually agreed by and among the
Stockholders and the Company as follows:
SECTION 1. DEFINITIONS
Unless otherwise expressly provided, the following terms, when used in
this Agreement, shall be defined as follows:
(a) An "AFFILIATE" of, or Person "AFFILIATED" with, a specified
Person, is a Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the Person specified, it being deemed for purposes of this definition of
Affiliate as used in this Agreement that all of the New Investors are Affiliates
of one another.
(b) The term "ANNUAL BUDGET" shall mean an annual operating plan
summary and corresponding budget for the Company, which shall be approved by the
Board of Directors and subject to revision or updating by the Board of
Directors.
(c) The term "AUDIT COMMITTEE" shall mean the Audit Committee of
the Board of Directors. The Audit Committee is empowered to (i) recommend
independent auditors, (ii) review with the independent auditors the scope and
results of the audit engagement, (iii) monitor the Company's financial policies,
activities of the Company's internal audit department and control procedures and
(iv) review and monitor the provision of non-audit services by the Company's
auditors.
(d) The term "AVAILABLE INCOME" shall mean the net income (after
the deduction of operating expenses, interest, applicable taxes and all other
expenses, including extraordinary expenses) of the Company for such fiscal year
determined in accordance with generally accepted accounting principles,
consistently applied, less the dividends paid or payable (including dividends in
arrears) with respect to the shares of the Company's Preferred Stock outstanding
at the end of such fiscal year.
(e) The term "BOARD OF DIRECTORS" shall mean the Board of
Directors of the Company.
(f) The term "BY-LAWS" shall mean the By-laws of the Company as
amended or restated from time to time.
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(g) The term "CERTIFICATE OF INCORPORATION" shall mean the
Certificate of Incorporation of the Company as amended or restated from time to
time.
(h) The term "CHANGE-IN-CONTROL TRANSACTION" shall mean any
transaction or series of related transactions occurring after the Effective
Date, whether involving the Company or the holders of any class or series of its
Stock, resulting in any Person together with its Affiliates, or group of Persons
together with their Affiliates acting in concert, who were not as of the date
hereof the holder or holders of Voting Stock acquiring the power, or record
ownership of sufficient shares of Voting Stock, to cast more than a majority of
the votes which may be cast for the election of members of the Board of
Directors. For the purpose of this definition, Voting Stock shall include
instruments or Securities issued in such transaction which are convertible into
or exchangeable or exercisable for Voting Stock as being so converted, exchanged
or exercised upon issuance, regardless of the terms thereof.
(i) The term "CLE" shall have the meaning provided in the Recitals
to this Agreement.
(j) The term "CLE DESIGNEES" shall have the meaning provided in
Section 7(b).
(k) The term "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
(l) The term "COMMON STOCK" shall mean all the shares of each
series of common stock, $.01 par value, of the Company issued and outstanding at
any time during the term of this Agreement, and, insofar as it applies to a
Stockholder, shall also include the community interest in such stock, if any, of
the Stockholder's Spouse.
(m) The term "COMPANY" shall have the meaning provided in the
Recitals to this Agreement.
(n) The term "COMPANY PURCHASE PERIOD" shall have the meaning
provided in Section 3(c).
(o) The term "COMPENSATION COMMITTEE" shall mean the Compensation
Committee of the Board of Directors. The Compensation Committee is empowered to
recommend to the Board of Directors compensation for the officers and executives
(including salary and other benefits) of the Company.
(p) The term "CONTRACTS" shall mean all instruments, contracts,
agreements, arrangements and understandings which are necessary for the
operation of the business of the Company.
(q) The term "CONTROLLING PERSON" shall have the meaning provided
in Section 11(a).
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(r) The term "CONVERSION STOCK" shall mean shares of common stock of
the Company into which Preferred Stock held by a Stockholder is convertible.
(s) The term "CONVERTIBLE SECURITIES" shall mean evidences of
Indebtedness, shares of Stock or other Securities which are or may at any time
be convertible into, or exchangeable for, additional shares of Common Stock or
other Securities which are convertible into or exchangeable for additional
shares of Common Stock. The term "Convertible Security" shall mean one of the
Convertible Securities.
(t) The term "CURRENT ENROLLEES" shall mean the then current number of
enrollees in the prepaid healthcare service plans operated by the Company's
Subsidiaries determined by reference to the Company's most recent operating
reports to regulatory authorities.
(u) The term "DISPOSITION" shall mean any sale, assignment, gift,
transfer, pledge, mortgage or other encumbrance, or any other disposition of
shares of Common Stock whatsoever, whether voluntary or involuntary.
(v) The term "DUFF & XXXXXX" shall mean Duff & Xxxxxx Financial
Consulting Co., or any successor entity which performs corporate valuation
services.
(w) The term "XXXXXX" shall have the meaning provided in the
Recitals to this Agreement.
(x) The term "XXXXXX DESIGNEE" shall have the meaning provided
in Section 7(b)(iv).
(y) The term "EFFECTIVE DATE" shall mean the date of execution
of this Agreement.
(z) The term "EXCHANGE ACT" shall mean the Securities and Exchange
Act of 1934, as amended.
(aa) The term "EXECUTIVE COMMITTEE" shall mean the Executive
Committee of the Board of Directors. The Executive Committee has and may
exercise all the authority of the Board of Directors as permitted by law.
(ab) The term "EXISTING STOCKHOLDERS'" shall mean CLE, Welters,
Rios, Sweely, Duggin, Lomax, Xxxxxxxx Xxxxxxx, the AW Family Limited
Partnership, Xxxxx Xxxx as Trustee for Xxxxxx X. Xxxxxxx, Xxxxx Xxxx as Trustee
for Xxxxxx X. Xxxxxxx, the EGR Family Limited Partnership, Xxxxxx Holdings,
L.L.C., Xxxxxx Xxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxx Xxxxxx and Xxxx Xxxxx Xxxxx.
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(ac) The term "EXISTING STOCKHOLDERS' AGREEMENT" shall mean the
Stockholders' Agreement, dated December 30, 1994, by and among the Existing
Stockholders and the Company.
(ad) The term "FAIR MARKET VALUE" shall mean the purchase price per
share equal to the quotient obtained by dividing the Formula Price by the number
of shares of Fully-Diluted Common Stock then existing.
(ae) The term "FAMILY DONEE" with respect to a Stockholder shall
mean:
(i) any parent, child, descendant, or sibling of the
Stockholder, the spouse of any of the foregoing, or the Stockholder's
Spouse;
(ii) any trust established by the Stockholder, or any
trustee, custodian, fiduciary, or foundation which will hold the shares
of Common Stock for charitable purposes or for the benefit of the
Stockholder or any of the Persons included within the definition of
Family Donee; and
(iii) any committees, guardians, or other legal
representatives of the Stockholders (whether alive or deceased) or of
any of the Persons included within the definition of Family Donee.
(af) The term "FIRST PLAZA" shall have the meaning provided in the
Recitals hereto.
(ag) The term "FORMULA PRICE" shall mean the Per Enrollee Value
multiplied by the number of Current Enrollees, subject to adjustment as provided
in Section 4(b) hereof.
(ah) The term "FULLY-DILUTED COMMON STOCK" shall mean, as of any
date of determination, all of the then issued and outstanding shares of Common
Stock assuming the exercise of all issued and outstanding options exercisable
for Common Stock, and the conversion into shares of Common Stock of all
outstanding Convertible Securities; provided, however, that the number of shares
of Fully-Diluted Common Stock at any time shall not include any shares of Common
Stock then owned by the Company, and provided, further, that the number of
shares of Fully-Diluted Common Stock for purposes of Section 5 hereof shall not
include any shares of Common Stock issuable upon the exercise, conversion or
exchange of any Conversion Stock or Convertible Securities which is not at such
time then exercisable, convertible or exchangeable.
(ai) The term "INITIAL PUBLIC OFFERING" shall mean the first
Registration Statement filed by the Company covering a public offering of Common
Stock by the Company under the Securities Act.
(aj) The term "INDEBTEDNESS" shall mean the principal of (and
premium, if any) and unpaid interest on:
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(i) indebtedness resulting from money borrowed from
Persons other than Stockholders and their Affiliates;
(ii) indebtedness guaranteed, directly or indirectly, in
any manner by such corporation, or in effect guaranteed, directly or
indirectly, by the Company through an agreement, contingent or
otherwise, to supply funds to or in any manner invest in the debtor or
to purchase indebtedness, or to purchase Property or services primarily
for the purpose of enabling the debtor to make payment of the
indebtedness or of assuring the owner of the indebtedness against loss;
(iii) all indebtedness secured by any mortgage, lien,
pledge, charge or other encumbrance upon Property owned by such
obligor, even if such obligor has not in any manner become liable for
the payment of such indebtedness;
(iv) all indebtedness of such obligor created or arising
under any conditional sale, lease or other title retention agreement
with respect to Property acquired by such obligor even though the
rights and remedies of the seller, lessor or lender under such
agreement or lease in the event of default are limited to repossession
or sale of such Property and provided that obligations for the payment
of rent under a lease of premises from which the business of such
corporation will be conducted shall not constitute indebtedness; and
(v) renewals, extensions and refundings of any such
indebtedness.
(ak) The term "INDEMNIFIED INVESTOR" shall have the meaning
provided in Section 11(a).
(al) The term "XXXXX" shall have the meaning provided in the
Recitals hereto.
(am) The term "XXXXX DESIGNEES" shall have the meaning provided in
Section 7(b)(ii).
(an) The term "NEW INVESTORS" shall have the meaning provided in
the Recitals.
(ao) The term "NEW INVESTORS DESIGNEE" shall have the meaning
provided in Section 7(b)(iii).
(ap) "NEW INVESTORS NEW STOCK" shall have the meaning provided in
Section 9(a).
(aq) The term "NEW STOCK" shall mean any equity securities of the
Company, any warrants, options or rights to purchase equity securities of the
Company and any securities of any type that are convertible or exchangeable,
directly or indirectly, for equity securities of the Company, in each case
issued after the Effective Date.
(ar) The term "OFFER" shall have the meaning provided in Section
3(a).
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(as) The term "OFFER NoTice" shall have the meaning provided in
Section 3(a).
(at) The term "OFFERED SHARES" shall have the meaning provided in
Section 3(a).
(au) The term "PER ENROLLEE VALUE" shall mean $1,000, subject to
adjustment as provided in Section 4(b).
(av) The term "PERMITTED TRANSFEREE" shall mean a Disposition of a
Stockholder's Common Stock or Preferred Stock, to any one or more of the
Stockholder Affiliates or Family Donees, including without limitation, trusts,
partnerships and limited liability companies; provided that such transferee
remains subject to the terms of this Agreement.
(aw) The term "PERSON" shall mean any individual, corporation,
partnership, limited partnership, association, business trust, limited liability
company, limited liability partnership, joint venture, joint stock company,
trust, unincorporated association or other entity of whatever nature.
(ax) The term "PREFERRED STOCK" shall mean all the shares of
preferred stock, $.01 per share, of the Company issued and outstanding at any
time during the term of this Agreement, and, insofar as it applies to a
Stockholder, shall also include the community interest in such stock, if any, of
the Stockholder's Spouse.
(ay) The term "PROPERTY" shall mean any kind of property or assets,
whether real, personal or mixed, or tangible or intangible.
(az) The term "PROSPECTUS" shall mean any prospectus which is a
part of a Registration Statement, together with all amendments or supplements
thereto.
(ba) The term "PROTECTED NUMBER" shall mean for each Stockholder a
number of units of New Stock equal to (i) the total number of units of New Stock
to be issued by the Company multiplied by (ii) the ratio, as of the date of any
written notice pursuant to the first sentence of Section 9, of (A) the total
number of shares of Common Stock outstanding or issuable upon conversion of
Convertible Securities or upon exercise of any warrants, vested options or
subscription rights then owned by such Stockholder to (B) the total number of
shares of all classes of Common Stock then outstanding or then issuable upon
conversion of any Convertible Securities or upon exercise of any warrants,
vested options or subscription rights then outstanding.
(bb) The term "REGISTRABLE STOCK" shall mean at any time, the
shares of the then outstanding Common Stock or Conversion Stock of the Company
owned by the Stockholders or the Persons to which Registration Rights may be
transferred pursuant to Section 6(j) of this Agreement; provided, however, that
Registrable Stock shall not be deemed to include any shares of Stock have been
registered under the Securities Act and
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sold pursuant to such registration or any shares sold without registration under
the Securities Act in compliance with Rule 144.
(bc) The term "REGISTRATION RIGHTS" shall mean the rights of the
Stockholders to require the Company to register the Common Stock pursuant to
Section 6.
(bd) The term "REGISTRATION STATEMENT" shall mean a registration
statement relating to the applicable registration on any appropriate form under
the Securities Act which form shall be available for the sale of Registrable
Stock in accordance with the intended method or methods of distribution.
(be) The term "REMAINING SHARES" shall have the meaning specified
in Section 3(d).
(bf) The term "REMAINING STOCKHOLDER" shall mean any Stockholder
who received notice from a Selling Stockholder of such Selling Stockholder's
intention to transfer shares of Stock and has determined not to exercise such
Stockholder's Take-Along Right.
(bg) The term "REORGANIZATION AGREEMENT" shall mean the Agreement
and Plan of Reorganization, dated as of December 30, 1994, by and among the
Company, the Existing Stockholders and the other parties thereto.
(bh) The term "XXXX" shall have the meaning provided in the
Recitals to this Agreement.
(bi) The term "XXXX DesIGnee" shall have the meaning provided in
Section 7(b)(v).
(bj) The term "SECURITIES" shall mean any debt or equity securities
of the Company or a Subsidiary, whether now or hereafter authorized, and any
instrument convertible into or exchangeable for Securities or a Security. The
term "Security" shall mean any one of the Securities.
(bk) The term "SECURITIES ACT" shall mean the Securities Act of
1933, as amended.
(bl) The term "SECURITIES AND EXCHANGE COMMISSION" shall mean the
United States Securities and Exchange Commission or any successor to the
functions of such agency.
(bm) The term "SELLING STOCKHOLDER" shall mean any Stockholder who
is a party to a Disposition of Stock whether intentional or involuntary.
(bn) The term "STOCK" shall mean the Common Stock and the Preferred
Stock.
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(bo) The term "STOCK PURCHASE AGREEMENT" shall have the meaning
provided in the Recitals.
(bp) The term "STOCKHOLDER" shall mean each party other than the
Company executing this Agreement and such Person's Permitted Transferee, during
such time as such party or Person owns Stock.
(bq) The term "STOCKHOLDER PURCHASE PERIOD" shall have the meaning
provided in Section 3(d).
(br) The term "STOCKHOLDER'S SPOUSE" shall mean any Person who, at
any time during the term of this Agreement is the spouse of any Person who is a
Stockholder; provided however, that if such Person ceases to be the spouse of a
Stockholder because of death, divorce or otherwise, such person shall no longer
be a Stockholder's Spouse hereunder.
(bs) The term "SUBSIDIARY" shall mean any corporation more than 50%
of whose outstanding stock shall at the time be owned directly or indirectly by
the Company or by one or more Subsidiaries of the Company or by the Company and
one or more Subsidiaries.
(bt) The term "XXXXXX" shall have the meaning provided in the
Recitals to this Agreement.
(bu) The term "XXXXXX DESIGNEE" shall have the meaning provided in
Section 7(b)(vi).
(bv) The term "TA INVESTORS" shall have the meaning provided in the
Recitals hereto.
(bw) The term "TAKE-ALONG RIGHT" shall have the meaning provided in
Section 5(a).
(bx) The term "TAKE-ALONG SHARES" shall have the meaning provided
in Section 3(c).
(by) The term "VOTING STOCK" shall mean Stock of any class or
classes having ordinary voting power for the election of the members of the
Board of Directors of the Company.
(bz) The term "WELTERS" shall have the meaning provided in the
Recitals to this Agreement.
SECTION 2. RESTRICTIONS ON TRANSFER
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(a) GENERAL RESTRICTED TRANSFERS. No Stockholder shall participate
in any Disposition of any shares of Stock except as expressly permitted pursuant
to the provisions of this Agreement. Any purported or attempted Disposition of
any shares of Stock made in violation of the provisions of this Agreement shall
be void and of no force and effect.
(b) RESTRICTIVE LEGENDS
(i) Unless and until otherwise permitted by this
Agreement, each certificate for Stock issued to any Stockholder or its
nominee, shall in addition to any other legend on such certificates be
stamped or otherwise imprinted with a legend in substantially the
following form:
"The transfer of the shares represented by this
certificate is restricted pursuant to a Stockholders'
Agreement, dated as of May 2, 1995, a copy of which Agreement
is on file and may be inspected at the principal office of the
Company. A copy of such Agreement will be furnished by the
Company to the holder hereof upon request and without charge."
(ii) In addition, each certificate for Preferred Stock
shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"A statement of the relative rights and preferences
of the Company's Common Stock and its classes of Preferred
Stock will be furnished by the Company to the holder hereof
upon request and without charge."
(iii) The Company may order its transfer agents for Stock
to stop the transfer of any such shares bearing the legend set forth in
Section 2(b)(i) hereof, as applicable, until the conditions of this
Section 2 with respect to the transfer of such shares have been
satisfied.
(c) NOTICE OF PROPOSED TRANSFER. Prior to any transfer or sale of
any Stock, the Stockholder desiring to effect such transfer or sale shall
deliver a written notice to the Company describing briefly the manner of such
transfer or sale and shall also deliver a written opinion of counsel for such
Stockholder (who may be inside counsel in the case of any institutional
Stockholder) to the effect that such transfer or sale may be effected without
the registration of such Securities under the Securities Act. Upon compliance
with the provisions of Section 3 of this Agreement, the Company shall permit or
cause its transfer agent (if any) to permit such transfer or sale to be
effected; provided, however, that if in such written notice the transferring
Stockholder represents and warrants to the Company that the transfer or sale is
to a purchaser or transferee whom the transferring Stockholder knows or
reasonably believes to be a "QUALIFIED INSTITUTIONAL BUYER," as that term is
defined in Rule 144A promulgated by the Securities and Exchange Commission under
the Securities Act ("Rule 144A"), no opinion shall be required.
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(d) NON-APPLICABILITY OF RESTRICTIONS ON TRANSFER. Notwithstanding
the provisions of this Agreement, any record owner of Stock may from time to
time transfer all or part of such record owner's Stock to a Permitted
Transferee. Each such Permitted Transferee shall execute a counterpart of this
Agreement prior to becoming the Stockholder of such Stock. Any such party
executing this Agreement shall thereafter be a party to this Agreement as fully
and to the same extent as if such party had been an original party hereto and
shall thereafter be deemed to be a "STOCKHOLDER" for the purposes hereof; and
provided, that the Stockholder transferring such Stock shall not be released
from any obligation under this Agreement.
(e) PROHIBITED TRANSFERS. In the case of a purported transfer in
violation of any provision of this Agreement, the purported transferee or
successor by operation of law shall not be deemed to be a shareholder of the
Company for any purpose and shall not be entitled to any of the rights of a
shareholder, including without limitation the right to receive a certificate for
shares of Stock or any dividends or other distributions with respect to such
shares; and, the last shareholder of record who acquired such shares in a manner
not contrary to the provisions of this Agreement shall be recognized as the
holder of such shares of Stock for all purposes.
(f) TERMINATION OF RESTRICTIONS.
(i) The restrictions on transfer set forth in this
Section 2 and in Section 3 of this Agreement, shall not apply to any
Disposition of Stock pursuant to an effective Registration Statement
filed under the Securities Act or the Disposition of Stock pursuant to
Section 5 of this Agreement. In addition, the restrictions imposed by
this Agreement upon the transferability of Stock shall terminate as to
any particular share of Stock (A) when such Stock shall have been
effectively registered under the Securities Act and sold by the
Stockholder thereof in accordance with such registration, (B) when such
Stock is transferred in a Disposition pursuant to Sections 3 and 5 of
this Agreement, or (C) upon termination of this Agreement in accordance
with Section 10.
(ii) Whenever the restrictions imposed by this Agreement
shall terminate, the holder of any particular share of Stock then
outstanding as to which such restrictions shall have terminated shall
be entitled to receive from the Company, without expense to such
holder, one or more new certificates for Stock not bearing the
applicable restrictive legends set forth in Section 2(b) hereof.
SECTION 3. RIGHT OF FIRST REFUSAL.
(a) OFFER OF STOCK. If a Selling Stockholder is not otherwise
prohibited from making a Disposition of shares of Stock pursuant to this
Agreement and such Selling Stockholder receives a written offer from any
unaffiliated bona fide third party purchaser(s) to acquire some or all of the
Stock of the Selling Stockholder, and the Selling Stockholder intends to accept
such offer, such Selling Stockholder shall first provide a notice to the
12
Company and the Remaining Stockholders (the "OFFER NOTICE") which shall provide
notice of the proposed transaction and constitute an offer (the "OFFER") first
to sell that portion of its Stock that would be acquired by such third party
purchaser(s) (the "OFFERED SHARES") to the Company, and second if such Offer is
not accepted in whole by the Company within the time period provided hereunder,
to the Remaining Stockholders to the extent that such Offer is not accepted by
the Company. The Offer Notice shall also constitute notice of the Remaining
Stockholders' right to exercise its Take-Along Right, as provided in Section 5
hereof.
(b) TERMS OF OFFER. The Offer Notice shall be written and shall
include the name and address of the proposed transferee, the number of shares of
Stock proposed to be acquired by the proposed transferee and the terms of the
proposed Disposition and the terms of the proposed offer. If the proposed
Disposition is for other than cash, then the price per share shall be deemed to
be the fair market value per share of the consideration offered, as determined
in good faith by the Board of Directors. The Offer may be withdrawn by the
Selling Stockholder prior to the exercise by the Company or the Remaining
Stockholders, as the case may be, of the option granted pursuant to this Section
3 in the event that the offer from the third party purchaser(s) is withdrawn or
in the event that the Selling Stockholder determines not to sell its shares of
Stock. If the consideration or any term of the proposed offer shall change, such
change shall be deemed to constitute a new offer to the Selling Stockholder
subject to this Section 3.
(c) PURCHASE BY COMPANY. The date of the Offer Notice shall be the
date on which such Offer Notice has been sent by messenger, express mail or
telecopier, return receipt requested, to all parties entitled to receive it (the
"NOTICE DATE"). Thirty (30) days after the Notice Date the Company shall notify
the Selling Stockholder (and any Stockholder exercising a Take-Along Right by
delivering a Take-Along Notice pursuant to Section 5) and the Remaining
Stockholders of its acceptance of the Offer (including any Shares held by
Stockholders exercising a Take-Along Right ("TAKE-ALONG SHARES")) and the
portion of Offered Shares and Take-Along Shares the Company intends to purchase
(the "COMPANY PURCHASE PERIOD").
(d) PURCHASE BY STOCKHOLDERS. In the event the Company shall fail
to accept the Offer (including Take-Along Shares) within the Company Purchase
Period or the Company has agreed to purchase a portion of Offered Shares and
Take-Along Shares which is less than the total number of Offered Shares and
Take-Along Shares, the Remaining Stockholders shall have an additional twenty
(20) days in which to accept the Offer (including the Take-Along Shares) to the
extent the Shares are not to be purchased by the Company (the "REMAINING
SHARES") (the "STOCKHOLDER PURCHASE PERIOD"). Each Remaining Stockholder shall
be entitled to purchase up to that number of Remaining Shares in the same
proportion as the ratio, as of such date of (i) the total number of shares of
Common Stock outstanding or issuable upon conversion of Convertible Securities
or upon exercise of any warrants, vested options or subscription rights then
owned by such Stockholder to (ii) the total number of shares of all classes of
Common Stock then outstanding or then issuable upon conversion of any
Convertible Securities or upon exercise of any warrants, vested options or
subscription rights then held by all Remaining
13
Stockholders exercising their right to purchase Remaining Shares. Prior to the
end of the Stockholder Purchase Period, each Remaining Stockholder wishing to
purchase the Remaining Shares shall indicate in writing to the other Remaining
Stockholders his agreement to purchase his said percentage of the Remaining
Shares. Any Remaining Stockholder failing to indicate his decision to purchase
the Remaining Shares within the Stockholder Purchase Period will be deemed to
have elected not to purchase any of the Remaining Shares.
(e) CLOSING. If the Offer (including Take-Along Shares) of the
Selling Stockholder is accepted by the Company pursuant to Section 3(c), or by
any of the Remaining Stockholders pursuant to Section 3(d), as the case may be,
the closing of the purchase, by the Company or the Remaining Stockholders, of
the shares being sold by a Selling Stockholder or Selling Stockholders shall be
held, within thirty (30) days after the end of the later of the Company Purchase
Period or Stockholder Purchase Period, as the case may be, at the main office of
the Company, or such other location as the parties may agree. At the closing,
the Company or Remaining Stockholder(s), as the case may be, shall pay to the
Selling Stockholder or Selling Stockholders, as the case may be, the full
purchase price payable for the Offered Shares and Take-Along Shares by means of
a wire transfer or certified or official bank check or checks, and the Selling
Stockholder or Selling Stockholders, as the case may be, shall deliver to the
purchasing party certificates representing all of the Offered Shares or
Take-Along Shares, duly endorsed in blank for transfer or with duly executed
blank stock powers attached, together with such other documents as may be
reasonably necessary or desirable, in the opinion of counsel for the purchaser,
to effectuate the transfer to the purchaser of the shares being purchased.
(f) REJECTION OF RIGHT OF FIRST REFUSAL. If the Offer (including
Take-Along Shares) is not accepted in its entirety by either the Company or the
Company and one or more Remaining Stockholders in accordance with this Section
3, the Selling Stockholder, or Selling Stockholders, as the case may be, shall
be free to dispose of all, but not less than all, of the Offered Shares and
Take-Along Shares in accordance with applicable law and Section 2 of this
Agreement, provided, however, (i) that such Disposition by the Selling
Stockholder or Selling Stockholders, as the case may be, pursuant to this
Section 3 shall be made in strict accordance with the terms of the proposed
Disposition described in the Offer Notice, (ii) that such Disposition shall be
consummated within ninety (90) days after the Notice Date and (iii) that the
purchaser in such Disposition execute a counterpart of this Agreement prior to
becoming the owner of the Stock so transferred. Any such party executing this
Agreement shall thereafter be a party to this Agreement as fully and to the same
extent as if such party had been an original party hereto and shall thereafter
be deemed to be a "Stockholder" for the purposes hereof.
(g) CONTINUED EFFECT OF RESTRICTIONS. After the expiration of the
ninety (90) day period described in Section 3(f), all shares offered pursuant to
this Section 3 will remain subject to the provisions of this Agreement.
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SECTION 4. CHANGE OF CONTROL.
(a) PURCHASE OF STOCK. If, during the term of this Agreement,
there occurs any of (i) the consolidation or merger of the Company into or with
any corporation or corporations (other than a merger with another corporation
(A) in which the Company is the surviving corporation and which does not result
in any reclassification or change -- other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination -- of outstanding shares of the Stock of any class
or series, whether now or hereafter authorized or (B) in which the Company is
not the surviving corporation and the holders receive Common Stock of such
surviving corporation), (ii) the sale or transfer by the Company of all or
substantially all of its assets or all or substantially all of the assets of any
significant Subsidiary or (iii) a Change-in-Control Transaction, the Company
shall send within 5 business days of the effective date of any such transaction
written notice of such occurrence by messenger, express mail or telecopier
return receipt requested to each Stockholder. Within thirty (30) days of
delivery of such notice each Stockholder may deliver to the Company a demand
that the Company purchase any or all of the shares of Common Stock owned by such
Stockholder at the Fair Market Value and Preferred Stock owned by such
Stockholder at a price per share equal to the Fair Market Value of the
Conversion Stock which could be received upon conversion of such Preferred
Stock. The Closing of the purchase by the Company pursuant to this Section 4(a)
shall occur on the later of (i) the date forty-five (45) days after delivery of
the notice to the Stockholders and (ii) the date fifteen (15) days after the
determination of Fair Market Value pursuant to Section 4(b). The Company shall
pay such purchase price to such Stockholder by certified or official bank check
or wire transfer of funds and the Stockholder shall deliver to the Company share
certificates representing all of the shares of Stock being purchased, duly
endorsed in blank for transfer or with duly executed blank stock powers
attached, together with such other documents as may be reasonably necessary, in
the opinion of counsel for the Company, to effectuate the transfer to the
Company of the shares being purchased.
(b) ADJUSTMENT TO FAIR MARKET VALUE. In the event that
Stockholders holding a majority of the Stock to be purchased by the Company
pursuant to Section 4(a) believe that the then existing Formula Price
understates the Fair Market Value by more than ten percent (10%), then such
Persons may request in writing that one representative selected by such
Stockholders and one representative selected by the Board of Directors negotiate
in good faith and use reasonable efforts to agree on a revised Per Enrollee
Value which, in the opinion of such representatives, results in a Formula Price
which accurately reflects the then current aggregate Fair Market Value of the
Company's Fully-Diluted Common Stock. In the event that such representatives do
not agree to a revised valuation within 30 days following delivery of the
written request for such negotiation, the Company shall retain Duff & Xxxxxx to
determine, in its sole judgment, the valuation which accurately reflects the
then current Fair Market Value of the Company's Fully-Diluted Common Stock. If
the Duff & Xxxxxx valuation is greater than the then current Formula Price by
more than ten percent (10%), then the quotient obtained by dividing the Duff &
Xxxxxx valuation by the number of Current Enrollees shall become the Per
Enrollee Value for the purpose of this Section 4(b). If the Duff & Xxxxxx
valuation is not 10% greater than the then existing
15
Formula Price, then the Per Enrollee Value shall not be adjusted as a result of
such valuation. The Company shall pay all fees and expenses of Duff & Xxxxxx in
completing such valuation. In the event that Duff & Xxxxxx is no longer in the
business of performing such corporate valuations, then the Company shall retain
an investment banking firm of nationally recognized standing acceptable to the
holders of a majority of the Stock to perform such valuation.
SECTION 5. TAKE-ALONG RIGHTS.
(a) RIGHT TO SELL. If upon receiving an Offer Notice any Selling
Stockholder or Selling Stockholders determine that rather than exercising any
right to purchase stock pursuant to Section 3 such Stockholder elects to
transfer all or part of its or their shares of Stock to the proposed transferee,
each other Stockholder and their respective successors and assigns shall have
the right (the "TAKE-ALONG RIGHT") to sell to the proposed transferee, on the
same terms and conditions as were offered to the Selling Stockholder (including
the price per share of Common Stock), up to the number of shares of Stock then
owned by each other Stockholder equal to the ratio, as of such date of (i) the
total number of shares of Common Stock outstanding or issuable upon conversion
of Convertible Securities or upon exercise of any warrants, vested options or
subscription rights then held by such other Stockholder to (ii) the total number
of shares of all classes of Common Stock then outstanding or then issuable upon
conversion of any Convertible Securities or exercise of any warrants, vested
options or subscription rights then held by the Selling Stockholder and all
other Stockholders exercising their Take-Along Rights. If any of the
Stockholders exercise their Take-Along Rights, the Selling Stockholder shall be
entitled to sell a portion of its shares of Stock equal to the difference
between (y) the number of shares of Stock the Stockholder proposed to transfer
and (z) the number of shares of Stock the other Stockholders elect to sell
pursuant to their Take-Along Rights.
(b) TAKE-ALONG NOTICE. If any Selling Stockholder determines to
exercise its Take-Along Right, such Selling Stockholder shall send written
notice by messenger, express mail or telecopier, return receipt requested,
registered to each of the other Stockholders (the "TAKE-ALONG NOTICE"). Each
other Stockholder shall have twenty (20) days after receipt of the Take-Along
Notice to notify the Selling Stockholder and the Company in writing of its
intention to exercise such Stockholder's Take-Along Right.
(c) CLOSING. In the event that Take-Along Shares are to be
purchased by either the Company, or the Remaining Stockholders, in accordance
with Section 3, the closing of the purchase of such Take-Along Shares shall
occur in accordance with Section 3(a). In all other instances the closing of the
purchase of such Take-Along Shares shall occur concurrently with the purchase of
all other Stock and Take-Along Shares by the proposed transferee.
(d) WAIVER OF TAKE-ALONG RIGHT. In the event that any Stockholder
determines to waive its Take-Along Right for a transaction described in an Offer
Notice, the Selling Stockholder or Selling Stockholders (in the event that such
Stockholders have
16
asserted their Take-Along Right), as the case may be, shall be free to dispose
of all, but not less than all, of the Offered Shares and Take-Along Shares in
accordance with applicable law and Section 2 of this Agreement; provided,
however, that such Disposition by the Selling Stockholder or Selling
Stockholders, as the case may be, shall occur in accordance with Section 3(f).
SECTION 6. REGISTRATION RIGHTS
(a) REQUIRED REGISTRATIONS.
1. REGISTRATION STATEMENTS OTHER THAN ON FORM S-3.
(i) One or more Stockholders holding in the aggregate
more than one-third of the then existing shares of Registrable Stock
may upon written request require that the Company use commercially
reasonable best efforts to effect registration of such Stockholder or
Stockholders' Registrable Stock under the Securities Act and under all
applicable state securities or blue sky laws, but only to the extent
provided for in the following provisions of this Agreement. A request
pursuant to this Section 6(a)(1)(i) shall state the intended method of
Disposition of the Registrable Stock sought to be registered. Whenever
the Company shall, pursuant to this Section 6(a)(1)(i), be requested to
effect the registration of any Registrable Stock under the Securities
Act, the Company shall promptly give written notice of such proposed
registration to all Stockholders, stating that such Persons have the
right to request that any or all of the Registrable Stock owned by them
be included in such registration. The Company shall include in such
registration all Registrable Stock with respect to which the Company
receives timely written requests from the holders thereof for inclusion
therein (stating the intended method of Disposition of such Stock); and
thereupon the Company will, as expeditiously as possible, use
commercially reasonable best efforts to effect the registration of such
Registrable Stock which the Company has been requested to register for
Disposition by such Stockholders in accordance with the intended method
of Disposition described in the requests of such Persons, all to the
extent requisite to permit such sale or other Disposition by such
Persons of the Stock so registered.
(ii) The foregoing registration rights shall be deemed
satisfied by the Company when two Registration Statements shall have
been filed by the Company with and made effective by the Securities and
Exchange Commission under the Securities Act pursuant to requests made
pursuant to Section 6(a)(1) (except as provided pursuant to Section
6(a)(1)(iii) hereof) and the offerings contemplated by each such
Registration Statement shall have been fully consummated; provided that
if the holders of a majority of Stockholders requesting registration
determine to abandon such registration, and the Company is reimbursed
for all of its expenses relating to such abandoned registration, and
the Stockholders requesting such registration satisfy all costs of the
Stockholders
17
relating to such registration, such abandoned registration shall not be
deemed a required registration for the purpose of this clause (ii).
(iii) The holders of a majority of the Registrable Stock to
be included in a Registration Statement filed pursuant to this Section
6(a)(1) shall have the right to select one or more nationally
recognized investment bankers who shall serve as the manager and/or
co-managers for the offering of such Registrable Stock.
(iv) The Company may, if the Board of Directors determines
that it is not at the time of such request in the best interests of
the Company to effect a registration requested by Stockholders
pursuant to Section 6(a)(1)(i) hereof, delay such registration for a
single period not to exceed one hundred and eighty (180) days after
delivery of such request. If the Company elects not to effect a
required registration pursuant to this Section 6(a)(1)(iii), no
registration shall be deemed to have occurred for the purposes of
Section 6(a)(1)(i) until such deferred registration shall have been
consummated.
2. REGISTRATION STATEMENTS ON FORM S-3.
(i) After the Company has qualified for the registration
of Common Stock on Form S-3 (or any successor form of similar tenor and
effect), the Company will, upon the written request of one or more
Stockholders holding in the aggregate more than one-tenth of the then
existing shares of Registrable Stock, use commercially reasonable best
efforts to effect registration of such Stockholder or Stockholders'
Registrable Stock under the Securities Act on Form S-3 (or any
successor form of similar tenor and effect). A request pursuant to this
Section 6(a)(2)(i) shall state the intended method of Disposition of
the Registrable Stock sought to be registered. Whenever the Company
shall, pursuant to this Section 6(a)(2)(i), be requested to effect the
registration of any Registrable Stock under the Securities Act, the
Company shall promptly give written notice of such proposed
registration to all Stockholders, stating that such Persons have the
right to request that any or all of the Registrable Stock owned by them
be included in such registration. The Company shall include in such
registration all Registrable Stock with respect to which the Company
receives timely written requests from the holders thereof for inclusion
therein (stating the intended method of Disposition of such Stock); and
thereupon the Company will, as expeditiously as possible, use
commercially reasonable best efforts to effect the registration of such
Registrable Stock which the Company has been requested to register for
Disposition by such Stockholders in accordance with the intended method
of Disposition described in the requests of such Persons, all to the
extent requisite to permit such sale or other Disposition by such
Persons of the Stock so registered.
(ii) The foregoing registration right shall be unlimited
in number. Each request pursuant to this clause (ii) shall be satisfied
by the Company when a Registration Statement has been filed by the
Company with and made effective by
18
the Securities and Exchange Commission under the Securities Act and
remains effective for a period of thirty (30) days.
(iii) The Company may, if the Board of Directors determines
that it is not at the time of such request in the best interests of the
Company to effect a registration requested by Stockholders pursuant to
Section 6(a)(2)(i) hereof, delay such registration for a single period
not to exceed ninety (90) days after delivery of such request. If the
Company elects not to effect a required registration pursuant to this
Section 6(a)(2)(iii), no registration shall be deemed to have occurred
for the purposes of Section 6(a)(2)(i) until such deferred registration
shall have been consummated.
(b) INCIDENTAL REGISTRATION. If the Company at any time proposes
or is required to register any Registrable Stock under the Securities Act or any
applicable state securities or blue sky laws on a form which permits inclusion
of the Registrable Stock, it will provide written notice to all Stockholders of
its intention so to do. Upon the written request of any such Stockholder given
within twenty (20) days after receipt of any such notice, the Company will use
commercially reasonable efforts to cause all Registrable Stock, which such
Stockholders shall have requested to be registered, to be registered under the
Securities Act and any applicable state securities or blue sky laws, all to the
extent requisite to permit the sale or other disposition by such Persons of the
Registrable Stock so registered. No registrations of Registrable Stock under
this Section 6(b) shall relieve the Company of its obligation to effect
registrations under Section 6(a), or shall constitute a registration request by
any such Stockholder under Section 6(a). The Company shall have the right to
select one or more nationally recognized investment bankers who shall serve as
the manager and/or co-managers for all registrations of offerings of Securities
under this Section 6(b).
(c) REGISTRATION PROCEDURES. Whenever the Company is required by
the provisions of this Agreement to use commercially reasonable efforts to
effect the registration of any Registrable Stock under the Securities Act, the
Company will, as expeditiously as possible:
(i) prepare and file with the Securities and Exchange
Commission a Registration Statement with respect to such Registrable
Stock and use commercially reasonable best efforts to cause such
Registration Statement to become and remain effective for the period of
distribution contemplated thereby, determined as provided hereafter;
(ii) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such Registration
Statement and the Prospectus used in connection therewith as may be
necessary to keep such Registration Statement effective for the period
of distribution contemplated thereby, determined as provided hereafter,
and to comply with the provisions of the Securities Act with respect to
the sale or other disposition of all Securities covered by such
Registration Statement during such period in accordance with the
19
intended method or methods of disposition by the Company and Selling
Stockholders thereof set forth in such Registration Statement and make
generally available to its security holders, in each case as soon as
practicable, but not later than 45 days after the close of the period
covered thereby (90 days in case the period covered thereby corresponds
to a fiscal year of the Company) an earnings statement of the Company
which will satisfy the provisions of Section 10(a) of the Securities
Act and Rule 158 thereunder (or any comparable successor provisions);
(iii) furnish to each Selling Stockholders such number of
copies of such Registration Statement, each amendment and supplement
thereto, the Prospectus included in the Registration Statement
(including each Preliminary Prospectus), and such other documents, as
such Person may reasonably request in order to facilitate the public
sale or other disposition of such Person's Securities;
(iv) use every reasonable effort to register or qualify
all the Securities covered by such Registration Statement under such
other securities or blue sky laws of such jurisdictions as each Selling
Stockholder shall reasonably request, and do any and all other acts and
things which may be necessary under such securities or blue sky laws to
enable such Person to consummate the public sale or other disposition
in such jurisdiction of the Securities owned by such Person covered by
such Registration Statement; provided, however, that the Company shall
not be required to (A) qualify to do business as a foreign corporation
in any jurisdiction wherein it would not otherwise be required to
qualify but for this subparagraph, (B) subject itself to taxation in
any such jurisdiction, or (C) consent to general service of process in
any such jurisdiction;
(v) promptly notify each Selling Stockholder at any time
when a Prospectus relating to the Registrable Securities covered by
such Registration Statement is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
Prospectus included in such Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and at the request of any such
Person, prepare a supplement or amendment to such Prospectus so that,
as thereafter delivered to the purchasers of the securities covered by
such Registration Statement, such Prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(vi) cause all such securities covered by such
Registration Statement to be listed on each securities exchange or
quoted in such quotation system on which securities of the same class
are then listed or quoted (or, in the case of the Initial Public
Offering, such exchange or quotation system as the Company may
determine);
20
(vii) provide a transfer agent and registrar for the
securities not later than the effective date of such Registration
Statement;
(viii) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other
actions as the holders of at least a majority of the Registrable Stock
included in such Registration Statement or underwriters, if any,
reasonably request in order to expedite or facilitate the disposition
of such securities (including, without limitation, effecting a stock
split or a combination of shares);
(ix) make available for inspection by any Selling
Stockholder, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney, accountant or other
agent retained by an underwriter or any Selling Stockholder and its
Affiliates who are the holders of at least 5% of the Registrable Stock
included in such registration, all financial and other records,
pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all
information reasonably requested by any such Selling Stockholder,
underwriter, attorney, accountant or agent in connection with such
Registration Statement; and
(x) obtain and furnish to each Stockholder immediately
prior to the effectiveness of the Registration Statement (and, in the
case of an underwritten offering, at the time of delivery of any
Registrable Securities sold pursuant thereto) a cold comfort letter
from the Company's independent public accountants and an opinion of
counsel for the Company, both in customary form and covering such
matters of the type customarily covered by cold comfort letters and
opinions of counsel.
For purposes of paragraphs (i) and (ii), the period of distribution of
Registrable Stock in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Registrable Stock
in any other registration shall be deemed to extend until the earlier of the
sale of all Registrable Stock covered thereby and six (6) months after the
effective date thereof.
(d) Expenses. All expenses incurred in effecting all of the
registrations provided for in Sections 6(a) and (b) hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and disbursements of one law firm
serving as counsel for the Selling Stockholders (who shall be selected by
Persons holding at least a majority of the Registrable Stock being offered) in
the case of a registration pursuant to Section 6(a), underwriting expenses other
than underwriting discounts and commissions, expenses of any audits incident to
or required by any such registration and expenses of complying with the
securities or blue sky laws of any jurisdictions pursuant to Section 6(c)(iv)
hereof, shall be borne and paid by the Company. Subject to Section 6(a)(ii), the
Company shall pay all expenses in connection with any registration initiated
pursuant to this Section 6 which is withdrawn, delayed or
21
abandoned, unless such registration is withdrawn, delayed or abandoned at the
request of the Stockholders seeking such registration.
(e) INDEMNIFICATION.
(i) In the event of any registration of any of its
securities under the Securities Act pursuant to this Agreement, the
Company, to the extent permitted by law, shall indemnify and hold
harmless the seller of such securities, each underwriter (as defined in
the Securities Act), each other Person who participates in the offering
of such securities, each other Person, if any, who controls (within the
meaning of the Securities Act) such Selling Stockholder, underwriter or
participating Person and each director, officer, partner, employee or
agent of any such parties, against any losses, claims, damages or
liabilities, joint or several, to which any such party may become
subject under the Securities Act or any other statute or regulation or
at common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon (A) any alleged untrue statement of any material fact contained,
on the effective date thereof, in any Registration Statement under
which such securities were registered under the Securities Act, any
preliminary Prospectus or final Prospectus contained therein, or any
summary Prospectus issued in connection with any securities being
registered, or any amendment or supplement thereto, (B) any alleged
omission to state in any such document a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or (C) any violation by the Company of the Securities Act,
the Exchange Act, any state securities laws or any rule or regulation
thereunder in connection with such registration and shall reimburse
each party for any legal or other expenses reasonably incurred by such
Selling Stockholder, underwriter, participating Person or controlling
Person in connection with investigating or defending any such loss,
damage, liability or action; provided, however, that the Company shall
not be liable to any such party in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon
any alleged untrue statement or alleged omission made in such
Registration Statement, preliminary Prospectus, summary Prospectus,
Prospectus, or amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder, specifically for use therein.
(ii) Each Selling Stockholder, by acceptance thereof,
severally and not jointly, indemnifies and holds harmless each other
Selling Stockholder, the Company, its directors and officers, each
underwriter (as defined in the Securities Act), and each other Person,
if any, who controls (within the meaning of the Securities Act) the
Company, any underwriter or any Selling Stockholder, against any
losses, claims, damages, or liabilities, joint or several, to which any
such other Selling Stockholder, the Company, any such director or
officer, any such underwriter, or any such Person may become subject
under the Securities Act or any other statute or at common law, in so
far as such losses, claims, damages or
22
liabilities (or actions in respect thereof) arise out of or are based
upon (A) any alleged untrue statement of any material fact contained,
on the effective date thereof, in any Registration Statement under
which Registrable Stock is registered under the Securities Act at the
request of such Selling Stockholder, any preliminary Prospectus or
final Prospectus contained therein, or any summary Prospectus issued in
connection with any such Securities being registered, or any amendment
or supplement thereto, or (B) any alleged omission to state in any such
document a material fact required to be stated therein or necessary to
make the statements therein not misleading, in either case of clauses
(A) and (B) above to the extent, and only to the extent, that such
alleged untrue statement or alleged omission was made in such
Registration Statement, preliminary Prospectus, summary Prospectus,
Prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such Selling
Stockholder specifically for use therein, and then only to the extent
that such alleged untrue statements or alleged omissions by such holder
were not based on the authority of an expert as to which such holder
had no reasonable ground to believe, and did not believe, that the
statements made on the authority of such expert were untrue or that
there was an omission to state a material fact. Notwithstanding the
foregoing provisions of this Section 6(e)(ii), no Selling Stockholder
shall be required to pay under such provisions an amount in excess of
the proceeds received by such Selling Stockholder in payment for the
Securities sold by such Selling Stockholder pursuant to the
Registration Statement.
(iii) Indemnification similar to that specified in Sections
6(e)(i) and 6(e)(ii) hereof shall be given by the Company and each
Selling Stockholder (with such modifications as shall be appropriate)
covered by any registration or other qualification of securities under
any federal or state securities law or regulation other than the
Securities Act with respect to any such registration or other
qualification effected pursuant to this Agreement.
(iv) Any Person which proposes to assert the right to be
indemnified under Sections 6(e)(i), (e)(ii) or (e)(iii) hereof shall,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such Person in respect of which a claim is to be
made against an indemnifying Person under such Sections 6(e)(i),
(e)(ii) or (e)(iii), notify each such indemnifying Person of the
commencement of such action, suit or proceeding, enclosing a copy of
all papers served. The indemnifying Person shall have the right to
investigate and defend any such loss, claim, damage, liability or
action and to employ separate counsel in any such action and to control
the defense thereof. The Person claiming indemnification shall have the
right to employ separate counsel in any such action and to control the
defense thereof, but the fees and expenses of such counsel shall not be
at the expense of the Person against whom indemnification is sought;
provided, however, that notwithstanding the foregoing, in any case when
indemnification is sought against the Company and (A) the Person
seeking indemnification has been advised by counsel that its defenses
may be different from those of the Company, or (B) the Company has not
proceeded in a timely
23
manner to effect such defense, then the reasonable fees and expenses of
counsel for such Person shall be paid by the Company and the
indemnified Person shall have the right to control the defense of such
action, suit or proceeding. In no event shall a Person against whom
indemnification is sought be obligated to indemnify any Person for any
settlement of any claim or action effected without the indemnifying
Person's consent.
(v) The indemnification provided for under this Section
6(e) will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party and
will survive the transfer of securities.
(vi) If the indemnification provided for in this Section
6(e) for any reason is held by a court of competent jurisdiction to be
unavailable to an indemnified party in respect of any losses, claims,
damages, expenses or liabilities referred to therein, then each
indemnifying party under this Section 6(e), in lieu of indemnifying
such indemnified party thereunder, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses,
claims, damages, expenses or liabilities in such proportion as is
appropriate to reflect the relative fault of the Company on the one
hand and the Stockholder on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and of the
Stockholder on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company on the one hand or
the Stockholder on the other hand, and each party's relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(vii) The Company, the Stockholders, and the underwriters
agree that it would not be just and equitable if contribution pursuant
to this Section 6(e) were determined by pro rata or per capita
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. In no event, however, shall a Stockholder be
required to contribute any amount under this Section 6(e) in excess of
the proceeds received by such Stockholder from its sale of Stock under
such Registration Statement. No person found guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the
Securities Act) shall be entitled to contribution from any person who
was not found guilty of such fraudulent misrepresentation.
(viii) The amount paid by an indemnifying party or payable
to an indemnified party as a result of the losses, claims, damages and
liabilities referred to in this Section 6(e) shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified
24
party in connection with investigating or defending any such action or
claim. The indemnification and contribution provided for in this
Section 6(e) will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified parties or any
officer, director, employee, agent or controlling person of the
indemnified parties.
(f) PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Stockholder
may participate in any underwritten registration hereunder unless such Selling
Stockholder (i) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
(g) MARKETING RESTRICTIONS.
(i) If:
(A) any Stockholder is entitled and
wishes to register any Registrable Stock in a registration
made pursuant to Section 6(a) hereof;
(B) the offering proposed to be made by
the Selling Stockholder(s) for whom such registration is to
be made is to be an underwritten public offering;
(C) the Company or one or more Selling
Stockholders wishes to include Registrable Stock in such
registration; and
(D) the managing underwriters of such
underwritten offering furnish a written opinion that the
total amount of Registrable Stock to be included in such
offering would exceed the maximum amount of Registrable
Stock (as specified in such opinion) which can be marketed
at a price reasonably related to the then current market
value of such securities and without otherwise materially
and adversely affecting such offering,
then the relative rights to participate in such offering of the Selling
Stockholders of Registrable Stock, the holders of other securities
having the right to include such securities in such registration, and
the Company shall be in the following order of priority:
First: The Selling Stockholders shall be entitled to
participate in accordance with the number of shares of Registrable
Stock which each such Person shall request to be registered, such
participation to be pro rata in accordance with the number of shares
which each such Selling Stockholder shall request be registered if,
pursuant to clause D of this Section 6(g)(i), the total amount of
securities to be
25
included in the offering will be less than the number of shares of
Registrable Stock that all of such Selling Stockholders shall request
be registered; and then
Second: To the extent possible, the Company shall be entitled
to participate in accordance with the number of Securities to be sold
by the Company; and then
Third: To the extent possible, all holders of other Securities
having the right to include such Securities in such registration shall
be entitled to participate in accordance with relative priorities, if
any, as shall exist among them;
and no Securities (issued or unissued) other than those registered and
included in the underwritten offering shall be offered for sale or
other disposition by the Company or any Selling Stockholder in a
transaction which would require registration under the Securities Act
until the expiration of one hundred and eighty (180) days after the
effective date of the Registration Statement filed pursuant to Section
6(a) hereof, or such earlier time consented to by the managing
underwriters.
(ii) If:
(A) any Stockholder of Registrable
Stock entitled to do so requests registration of Registrable
Stock under Section 6(b) hereof;
(B) the offering proposed to be made is
to be an underwritten public offering; and
(C) the managing underwriters of such
underwritten offering furnish a written opinion that the
total amount of securities to be included in such offering
would exceed the maximum amount of securities (as specified
in such opinion) which can be marketed at a price reasonably
related to the then current market value of such securities
and without otherwise materially and adversely affecting
such offering,
then the relative rights to participate in such offering of the Selling
Stockholders, the holders of other securities having the right to
include such securities in such registration, and the Company shall be
in the following order of priority:
First: The Selling Stockholder(s) or Person(s) (including
the Company in the case of an offering initiated by the Company)
requesting such registration; and then
Second: The Company (if the registration does not relate to
an offering initiated by the Company), Selling Stockholders and all
other holders of securities having the right to include such securities
in such registration shall be entitled to participate pro rata among
themselves in accordance with the number of shares of Registrable Stock
which the Company (if the registration does not relate to an
26
offering initiated by the Company) and each such Person shall have
requested be registered; and then
Third: All holders of other securities having the right to
include such securities in such registration shall be entitled to
participate with relative priorities, if any, as shall exist among
them;
and no securities (issued or unissued) other than those registered
and included in the underwritten offering or pursuant to an
acquisition, merger or exchange offer, shall be offered for sale or
other disposition by the Company or any Stockholder until the
expiration of one hundred and eighty (180) days after the effective
date of the Registration Statement in which Registrable Stock was
included pursuant to Sections 6(a) or (b) hereof, or such earlier
time consented to by the managing underwriters.
(iii) Notwithstanding, Sections 6(g)(i) and (g)(ii), if:
(A) any Stockholder entitled to do so
requests registration of Registrable Stock under Section
6(b) hereof; and
(B) the offering proposed to be made is
to be an underwritten public offering; and
(C) the offering proposed to be made
would be the Initial Public Offering; and
(D) the Company wishes to register
Securities in such registration; and
(E) the managing underwriters of such
underwritten public offering furnish a written opinion that
the total amount of Securities to be included in such
offering would exceed the maximum amount of Securities (as
specified in such opinion) which can be marketed at a price
reasonably related to the then current market value of such
Securities and without otherwise materially and adversely
affecting such offering,
then the relative rights to participate in such offering of the Selling
Stockholders, the holders of other Securities having the right to
include such Securities in such registration, and the Company shall be
in the following order of priority:
First: The Company shall be entitled to participate to the
extent of the number of Securities to be sold by the Company; and then
Second: The Selling Stockholders shall be entitled to
participate in accordance with the number of shares of Registrable
Stock which each such Person shall request to be registered, such
participation to be pro rata in
27
accordance with the number of shares which each such Selling
Stockholder shall request be registered if, pursuant to clause E of
this Section 6(g)(iii), the total amount of securities to be included
in the offering less the total amount of securities to be offered by
the Company will be less than the number of shares of Registrable Stock
that all of such Stockholders shall request be registered; and then
Third: All holders of other securities having the right to
include such Securities in such registration shall be entitled to
participate in with relative priorities, if any, as shall exist among
them;
and no Securities (issued or unissued) other than those registered and
included in the underwritten offering or pursuant to an acquisition,
merger or exchange offer shall be offered for sale or other disposition
by the Company or any holder of Registrable Stock until the expiration
of one hundred and eighty (180) days after the effective date of the
Registration Statement filed pursuant to Sections 6(a) or (b) hereof,
or such earlier time consented to by the managing underwriters.
(h) SALE OF PREFERRED STOCK TO UNDERWRITER. Notwithstanding
anything in this Agreement to the contrary, in lieu of converting any shares of
Preferred Stock prior to or simultaneously with the filing or the effectiveness
of any Registration Statement filed pursuant to this Agreement, the Stockholder
of such Preferred Stock may sell such Preferred Stock to the underwriter of the
offering being registered if such underwriter consents thereto and if such
underwriter undertakes to convert such Preferred Stock to Conversion Stock
before making any distribution pursuant to such Registration Statement and to
include the Common Stock received by such Stockholder upon such conversion among
the securities being offered pursuant to such Registration Statement. The
Company agrees to cause such Common Stock to be issued within such time as will
permit the underwriter to make and complete the distribution contemplated by the
underwriting.
(i) GRANT OF SUBSEQUENT REGISTRATION RIGHTS. The Company may grant
incidental registration rights under the Securities Act to any Person at any
time which rights may be equivalent to the incidental registration rights of
Stockholders hereunder. Nothing in this Agreement shall be construed to prohibit
the Company from granting such registration rights.
(j) TRANSFER OF REGISTRATION RIGHTS. The registration rights and
related obligations under this Section 6 shall be transferable to any transferee
of Registrable Stock so long as the transfer to the transferee of the
Registrable Stock is accomplished pursuant to the terms of this Agreement. Upon
any transfer in accordance with the preceding sentence, for all purposes under
this Section 6 unless expressly indicated to the contrary, the transferee shall
be deemed to be a "STOCKHOLDER," but only to the extent that the transferor was
included within each such definition. At the time of any transfer in accordance
with this Section 6, the transferor shall provide notice to the Company
specifying the name and address of the transferee, the effective date of the
transfer, the number of Registrable Stock so transferred, a statement that such
transfer satisfies all of the provisions of this Agreement
28
and a statement that registration rights are being transferred in accordance
with this Section 6; provided that the transferee agrees in writing for the
benefit of the Company and the other Stockholders to be bound by all provisions
of this Section 6 to the same extent as was the transferor prior to such
transfer.
SECTION 7. VOTING AGREEMENT
(a) THE VOTING AGREEMENT. Pursuant to Section 218(c) of the
Delaware General Corporation Law, each Stockholder hereby agrees to vote the
shares of Voting Stock registered in its name or the names of their nominees in
the manner set forth herein.
(b) BOARD OF DIRECTORS DESIGNEES.
(i) CLE DESIGNEES. Until CLE or any of its Permitted
Transferees ceases to be a Stockholder (or ceases to have beneficial
ownership of at least a majority of the shares of Stock held by it on
the Effective Date, unless the reduction of such beneficial ownership
below such amount results from an event which has a proportionate
effect on the beneficial ownership of all other Stockholders), CLE
shall have the right to designate in writing up to two nominees for
election to the Board of Directors as Class A Directors at each of the
Company's annual or special meetings of stockholders at which directors
are to be elected ("CLE DESIGNEES"), such that after giving effect to
such election the number of Class A Directors being CLE Designees shall
be not more than two.
(ii) XXXXX DESIGNEES. Until Xxxxx or any of his Permitted
Transferees ceases to be a Stockholder (or ceases to have beneficial
ownership of at least a majority of the shares of Stock held by him on
the Effective Date, unless the reduction of such beneficial ownership
below such amount results from an event which has a proportionate
effect on the beneficial ownership of all other Stockholders), Xxxxx
shall have the right to designate in writing up to two nominees for
election to the Board of Directors as Class A Directors at each of the
Company's annual or special meetings of stockholders at which directors
are to be elected ("XXXXX DESIGNEES"), such that after giving effect to
such election the number of Class A Directors being Xxxxx Designees
shall be not more than two.
(iii) NEW INVESTOR DESIGNEE. Until the New Investors or any
of their Permitted Transferees ceases to be a Stockholder (or ceases to
have beneficial ownership of at least a majority of the shares of Stock
held by it on the Effective Date, unless the reduction of such
beneficial ownership below such amount results from an event which has
a proportionate effect on the beneficial ownership of all other
Stockholders), the New Investors, in such manner as they may determine
among themselves, shall have the right to designate in writing up to
one nominee for election to the Board of Directors as a Class A
Director at each of the Company's annual or special meetings of
stockholders at which directors are to be elected ("NEW INVESTORS
DESIGNEE"), such that after giving effect to such
29
election the number of Class A Directors being a New Investors Designee
shall be not more than one.
(iv) XXXXXX DESIGNEE. Until Xxxxxx or any of his Permitted
Transferees ceases to be a Stockholder (or ceases to have beneficial
ownership of at least a majority of the shares of Stock held by him on
the Effective Date, unless the reduction of such beneficial ownership
below such amount results from an event which has a proportionate
effect on the beneficial ownership of all other Stockholders), Xxxxxx
shall have the right to designate in writing up to one nominee for
election to the Board of Directors as a Class A Director at each of the
Company's annual or special meetings of stockholders at which directors
are to be elected ("XXXXXX DESIGNEE"), such that after giving effect to
such election the number of Class A Directors being a Xxxxxx Designee
shall be not more than one.
(v) XXXX DESIGNEE. Until Xxxx or any of his Permitted
Transferees ceases to be a Stockholder (or ceases to have beneficial
ownership of at least a majority of the shares of Stock held by him on
the Effective Date, unless the reduction of such beneficial ownership
below such amount results from an event which has a proportionate
effect on the beneficial ownership of all other Stockholders), Xxxx
shall have the right to designate in writing up to one nominee for
election to the Board of Directors as a Class A Director at each of the
Company's annual or special meetings of stockholders at which directors
are to be elected ("XXXX DESIGNEE"), such that after giving effect to
such election the number of Class A Directors being a Xxxx Designee
shall be not more than one.
(vi) XXXXXX DESIGNEE. Until Xxxxxx or any of his Permitted
Transferees ceases to be a Stockholder (or ceases to have beneficial
ownership of at least a majority of the shares of Stock held by him on
the Effective Date, unless the reduction of such beneficial ownership
below such amount results from an event which has a proportionate
effect on the beneficial ownership of all other Stockholders), Xxxxxx
shall have the right to designate in writing up to one nominee for
election to the Board of Directors as a Class A Director at each of the
Company's annual or special meetings of stockholders at which directors
are to be elected ("XXXXXX DESIGNEE") such that after giving effect to
such election the number of Class A Directors being a Xxxxxx Designee
shall be not more than one.
(c) BEST EFFORTS TO ELECT BOARD OF DIRECTORS DESIGNEES. In the
event that any nominee or nominees are designated pursuant to Section 7(b)
hereof, the Stockholders shall use their best efforts to elect as directors the
individuals designated in accordance with this Section. The voting agreements
herein are coupled with an interest and may not be revoked and amended except as
set forth in this Agreement; provided that the benefits and obligations of such
voting agreement are not transferable other than to a Permitted Transferee.
30
(d) REMOVAL OF DESIGNEES. If any director shall be removed from
the Board of Directors, each party hereto shall use their best efforts to elect
as a substitute director an individual (other than the individual so removed)
designated by the Stockholder who designated the director so removed.
(e) BOARD OF DIRECTORS VACANCIES. If a vacancy on the Board of
Directors arises for any reason other than any increase in the size of the Board
of Directors, each party hereto shall use their best efforts to fill such
vacancy with an individual designated by the Stockholder who designated the
director whose absence created the vacancy.
(f) COMMITTEE DESIGNEES.
(i) AUDIT COMMITTEE. Until the New Investors or any of
their Permitted Transferees ceases to be a Stockholder (or ceases to
have beneficial ownership of at least a majority of the shares of Stock
held by it on the Effective Date, unless the reduction of such
beneficial ownership below such amount results from an event which has
proportionate effect on the beneficial ownership of all other
Stockholders), the New Investors and their Permitted Transferees shall
have the right to have the New Investors Designee who has been elected
to the Board of Directors in accordance with Section 7(b)(iii) serve as
a member of the Audit Committee. Until CLE or any of its Permitted
Transferees ceases to be a Stockholder (or ceases to have beneficial
ownership of at least a majority of the shares of Stock held by it on
the Effective Date, unless the reduction of such beneficial ownership
below such amount results from an event which has proportionate effect
on the beneficial ownership of all other Stockholders), CLE shall have
the right to have one CLE Designee who has been elected to the Board of
Directors serve as a member of the Audit Committee. Until Xxxxx or any
of his Permitted Transferees ceases to be a Stockholder (or ceases to
have beneficial ownership of at least a majority of the shares of Stock
held by him on the Effective Date, unless the reduction of such
beneficial ownership below such amount results from an event which has
proportionate effect on the beneficial ownership of all other
Stockholders), Xxxxx shall have the right to have one Xxxxx Designee
who has been elected to the Board of Directors serve as a member of the
Audit Committee.
(ii) COMPENSATION COMMITTEE. Until the New Investors or
any of their Permitted Transferees cease to be a Stockholder (or ceases
to have beneficial ownership of at least a majority of the shares of
Stock held by it on the Effective Date, unless the reduction of such
beneficial ownership below such amount results from an event which has
proportionate effect on the beneficial ownership of all other
Stockholders), the New Investors and their Permitted Transferees shall
have the right to have the New Investors Designee who has been elected
in accordance with Section 7(b)(iii) to the Board of Directors serve as
a member of the Compensation Committee. Until CLE or any of its
Permitted Transferees ceases to be a Stockholder (or ceases to have
beneficial ownership of at least a majority of the shares of Stock held
by it on the Effective Date, unless the
31
reduction of such beneficial ownership below such amount results from an
event which has proportionate effect on the beneficial ownership of all
other Stockholders), CLE shall have the right to have one CLE Designee
who has been elected to the Board of Directors serve as a member of the
Compensation Committee. Until Xxxxx or any of his Permitted Transferees
ceases to be a Stockholder (or ceases to have beneficial ownership of at
least a majority of the shares of stock held by him on the Effective
Date, unless the reduction of such beneficial ownership below such
amount results from an event which has proportionate effect on the
beneficial ownership of all other Stockholders), Xxxxx shall have the
right to have one Xxxxx Designee who has been elected to the Board of
Directors serve as a member of the Compensation Committee.
(iii) EXECUTIVE COMMITTEE. Until Xxxxx or any of his Permitted
Transferees ceases to be a Stockholder (or ceases to have beneficial
ownership of at least a majority of the shares of Stock held by him on
the Effective Date), Xxxxx shall have the right to designate one Xxxxx
Designee who has been elected to serve on the Board of Directors to
serve as a member of the Executive Committee of the Board of Directors.
(g) BEST EFFORTS TO APPOINT COMMITTEE DESIGNEES. In the event that
any nominee or nominees are designated pursuant to Sections 7(f)(i), 7(f)(ii) or
7(f)(iii) hereof, each party hereto shall use its best efforts to cause such
nominees to be appointed to the Audit Committee, Compensation Committee or
Executive Committee, as applicable, of the Board of Directors. If at any time a
designee designated by the New Investors, CLE or Xxxxx pursuant to Sections
7(f)(i), 7(f)(ii) or 7(f)(iii) hereof is unable or unwilling to continue his
service on the Audit Committee, the Compensation Committee, or the Executive
Committee, as applicable, the New Investors, CLE or Xxxxx, as applicable, shall
designate a successor designee to serve on the Audit Committee, the Compensation
Committee or the Executive Committee, as applicable, and each party hereto shall
use its best efforts to cause such designee to be appointed to the Audit
Committee, Compensation Committee, or the Executive Committee, as applicable, of
the Board of Directors.
(h) MANAGEMENT COMPANY DESIGNEES. Until the New Investors or any of
their Permitted Transferees cease to be a Stockholder (or ceases to have
beneficial ownership of at least a majority of the shares of Stock held by it on
the Effective Date, unless the reduction of such beneficial ownership below such
amount results from an event which has proportionate effect on the beneficial
ownership of all other Stockholders), the New Investors and their Permitted
Transferees shall have the right to have the New Investors Designee elected in
accordance with Section 7(b)(iii) to serve on the Board of Directors of any
Subsidiary of the Company which provides management services to the Company or
any other Subsidiary of the Company. Until CLE or any of its Permitted
Transferees ceases to be a Stockholder (or ceases to have beneficial ownership
of at least a majority of the shares of Stock held by it on the Effective Date,
unless the reduction of such beneficial ownership below such amount results from
an event which has proportionate effect on the beneficial ownership of all other
Stockholders), CLE shall have the right to have one CLE Designee serve on the
Board of Directors of any Subsidiary of the Company
32
which provides management services to the Company or any other Subsidiary of the
Company. Until Xxxxx or any of his Permitted Transferees ceases to be a
Stockholder (or ceases to have beneficial ownership of at least a majority of
the shares of Stock held by it on the Effective Date, unless the reduction of
such beneficial ownership below such amount results from an event which has
proportionate effect on the beneficial ownership of all other Stockholders),
Xxxxx shall have the right to have two Designees serve on the Board of Directors
of any Subsidiary of the Company which provides management services to the
Company or any other Subsidiary of the Company.
SECTION 8. COVENANTS OF THE COMPANY
(a) CORPORATE EXISTENCE AND LICENSES. The Company shall do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence, and all licenses, permits, authorizations, approvals
and consents and other corporate rights, franchises and permits which are
required to properly operate the Company's businesses, provided, however, that
nothing in this Section 8(a) shall (i) prevent the abandonment or termination of
the Company's or any Subsidiary's authorization to do business in any foreign
state or jurisdiction, if, in the opinion of the Board of Directors, such
abandonment or termination is in the best interest of the Company or such
Subsidiary or (ii) require compliance with any law so long as the validity or
applicability thereof shall be disputed or contested in good prevent the Company
from effecting a merger, consolidation or voluntary dissolution upon obtaining
the required approval, if any, of the Board of Directors and/or the
Stockholders. The Company shall do or cause to be done all things necessary to
obtain and maintain any other license, permit, authorization, approval and
consent necessary to operate its businesses.
(b) INDEPENDENT PUBLIC ACCOUNTANTS. During the term of this
Agreement, the Company shall retain as its independent public accountants an
independent public accounting firm of nationally recognized standing which is
generally acknowledged by the business community to be one of the "BIG SIX"
national public accounting firms.
(c) PAYMENT OF TAXES; MAINTENANCE OF PROPERTIES. The Company shall
and shall cause each Subsidiary to:
(i) (A) pay and discharge promptly, or cause to be paid and
discharged promptly, when due and payable, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
upon any of its Property or upon any part thereof, as well as all claims
of any kind (including claims for labor, materials and supplies); (B)
withhold all monies required to be withheld by the Company from
employees for income taxes, Social Security and unemployment insurance
taxes; and (C) complete and file, on a timely basis, all tax returns and
reports required to be filed by it; provided, however, that the Company
shall not be required to pay, or to cause any Subsidiary to pay, any
tax, assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by
appropriate proceedings and if the
33
Company or such Subsidiary shall have set aside on its books reserves
(segregated to the extent required by generally accepted accounting
principles) deemed by the Company adequate with respect thereto; and
(ii) maintain and keep, or cause to be maintained and kept,
its Property in good repair, working order and condition, and from time
to time make, or cause to be made, all repairs, renewals and
replacements which, in the opinion of the Board of Directors, are
necessary and proper so that the business carried on in connection
therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 8(c)(ii) shall prevent
the Company or any Subsidiary from selling or otherwise disposing of any
Property either (y) having a value at the time of sale or disposal of
less than $100,000 or (z) whenever in the good faith judgment of the
Company's management such Property is obsolete, worn out, without
economic value, or unnecessary for the conduct of the business of the
Company or such Subsidiary.
(d) INSURANCE. To the extent required by the activities undertaken
by such entity the Company shall and shall cause each Subsidiary to:
(i) Maintain in effect at all times insurance in such types
and for such risks, casualties and contingencies customarily insured
against by enterprises in operations similar to the business of the
Person, including, without limitation, coverage for liability associated
with (A) credentialling by such Person and its utilization review and
quality assurance programs, (B) damage to insurable Property due to loss
or damage by fire and other risks and (C) claims for personal injury,
death or property damage suffered by others upon or in or about any
premises occupied by such Person or arising from equipment owned by it
and leased to and located upon or in or about any premises occupied by
any other person; and
(ii) Maintain all such workers' compensation or similar
insurance as may be required under the laws of any state or jurisdiction
in which it may be engaged in business.
All insurance for which provision has been made in this Subsection 8(d) shall be
maintained against such risks and in at least such amounts as such insurance is
usually carried by Persons engaged in the same or similar businesses, and all
insurance herein provided for shall be effected and maintained in force under a
policy or policies issued by insurers of recognized responsibility who have
maintain a rating of A or better from A.M. Best Company, Inc., except that the
Company or a Subsidiary may effect workers' compensation or similar insurance in
respect of operations in any state or other jurisdiction either through an
insurance fund operated by such state or other jurisdiction or by causing to be
maintained a system or systems of self-insurance which is in accord with
applicable laws.
34
(e) PAYMENT OF INDEBTEDNESS, ETC. The Company shall and shall cause
each Subsidiary to:
(i) Pay or cause to be paid the principal of, and the
interest and premium, if any, on, all Indebtedness heretofore or
hereafter incurred or assumed by the Company or such Subsidiary, as the
case may be, when and as the same shall become due and payable, unless
such Indebtedness shall be renewed or extended, in which case such
payments shall be made in accordance with the terms of such renewal or
extension;
(ii) Faithfully observe, perform and discharge in all
material respects all the material covenants, conditions and obligations
which are imposed on it by any and all material indentures, agreements
or instruments securing or evidencing Indebtedness or pursuant to which
Indebtedness is issued, and not permit the occurrence or continuance of
any act or omission which is or under the provisions thereof may be
declared to be a material default thereunder, unless such default (other
than a default in payment of principal or interest) or the right to
declare a default on account of such act or omission is waived pursuant
to the provisions thereof; provided, however, that neither the Company
nor any Subsidiary shall be required to make any payment or to take any
other action by reason of this Subsection (ii) at any time while it
shall be currently contesting in good faith by appropriate proceedings
its obligations to make such payment or to take such action, if the
Company shall have set aside on its books reserves (segregated or
classified to the extent required by generally accepted accounting
principles) deemed by it adequate with respect thereto;
(iii) Not violate any provision of its Certificate of
Incorporation or By-laws, as amended from time to time, or any material
provision of any judgment, writ, decree, order, statute, rule or
governmental regulation or approval applicable to the Company or such
Subsidiary, or any material provision of any material contract,
agreement, indenture, mortgage, lien, lease, sublease or arbitration
award to which the Company or such Subsidiary is a party, by which it is
bound or to which any of its Property is subject; and
(iv) Not redeem, retire, purchase or acquire, directly or
indirectly through Subsidiaries or otherwise, any shares of any class or
series of Stock of the Company except as provided in or contemplated by
this Agreement or the Certificate of Incorporation.
(f) FINANCIAL STATEMENTS AND INFORMATION. Until such time as there
has been a closing of an Initial Public Offering, the Company shall furnish to
each Stockholder upon request (on a consolidated basis at such times as
subsidiaries shall exist):
(i) ANNUAL BUDGET. Not less than 30 days prior to the
commencement of each fiscal year of the Company, a copy of the Annual
Budget.
35
(ii) MONTHLY FINANCIAL STATEMENTS AND REPORTS. Within 30 days
after the end of each calendar month, a balance sheet of the Company as
of the end of such quarter, together with related statements of
operations and a comparison to the Annual Budget.
(iii) QUARTERLY FINANCIAL STATEMENTS AND REPORTS. Within 30
days after the end of each fiscal quarter, a balance sheet of the
Company as of the end of such quarter, together with related statements
of operations, changes in shareholders' equity and cash flows for such
quarter and year-to-date, prepared in accordance with generally accepted
accounting principles consistently applied (except that such statements
need not contain footnotes) and certified by the principal accounting
officer or controller, or their equivalent, of the Company, subject to
usual year-end audit adjustments.
(iv) ANNUAL FINANCIAL STATEMENTS AND REPORTS. Within 120 days
after the last day of each fiscal year of the Company, a copy of its
audit report containing a balance sheet of the Company at the end of the
fiscal year, together with related statements of operations, changes in
shareholders' equity and cash flows for such fiscal year, prepared in
accordance with generally accepted accounting principles consistently
applied, all examined by and accompanied by a certificate of opinion of
the Company's independent public accountants, and together, if one or
more Subsidiaries exist, with consolidating statements, which need not
be certified, which set forth the eliminations of intercorporate items.
At such times as the statements referred to in paragraphs (iii) and (iv)
of this Section 8(f) are furnished, the Company, will also furnish
corresponding statements with respect to each Subsidiary, if any, not
consolidated in the consolidated statements, and a comparison to the
Annual Budget for such period.
(v) REPORTS OF AUDITORS. Promptly upon receipt thereof, a
copy of each report or management letter, if any, submitted to the
Company or any of its Subsidiaries by independent public accountants in
connection with each annual audit (and any other audit which may be
performed) of the books of the Company or any Subsidiary made by such
accountants.
(vi) ADDITIONAL INFORMATION. The Company will also provide
prompt notice of (i) any investigation by any federal or state
governmental or regulatory agency in connection with which the Company
or any Subsidiary or any of their directors or executive officers is
identified as an object of such investigation, (ii) any complaint or
proceeding instituted against the Company or any Subsidiary or any of
their directors or executive officers by any federal or state
governmental or regulatory agency and (iii) any other action at law or
suit in equity involving a claim or claims against the Company or any
Subsidiary or any of their directors or executive officers which, if
concluded adversely to the Company or such Subsidiary, could give rise
to damages in excess of $100,000 in the aggregate or
36
could otherwise materially adversely affect the business or Property of
the Company or of such Subsidiary.
(vii) CERTIFICATE OF INDEPENDENT PUBLIC ACCOUNTANTS. At such
times as the statements referred to in Section 8(f)(iv) are furnished,
the Company shall also furnish a certificate of the independent public
accountant whose certificate or opinion accompanies such statements
stating that nothing has come to his attention which would cause him to
believe that any condition, event or fact exists which would constitute
or which, with notice or passage of time or both would constitute, a
violation which has not previously been disclosed by a prior certificate
of the principal financial officer or controller, or their equivalent,
of any of the then applicable covenants of the Company contained herein;
provided, however, that if any such violation exists, such certificate
shall specify the nature and period of existence of such violation; and
provided, further, that such certificate may state that tests of the
accounting records and other auditing procedures conducted with respect
to the Company and its Subsidiaries might, but would not necessarily,
reveal that such violations exist or that no violations exist. The
Company covenants that, upon obtaining knowledge of any such violation,
it will promptly deliver a certificate of its principal financial
officer or controller, or their equivalent, specifying the nature
thereof, the period of existence thereof, and what action the Company
proposes to take with respect thereto.
(g) DISCUSSION AND INSPECTION RIGHTS. The Company shall permit any
Stockholder who, alone or when aggregated with the holdings of its Affiliates,
owns not less than 5% of the then existing Stock and any Person designated from
time to time by any such Stockholder, at such Stockholder's expense, to discuss
the affairs, finances and accounts of the Company and its Subsidiaries with the
Company's directors, officers, other principal executives and independent
accountants, and those of its Subsidiaries, all at such reasonable times and as
often as such Stockholder may reasonably request; all books, documents,
financial records and vouchers relating to the business and affairs of the
Company and its Subsidiaries shall at all reasonable times be open to inspection
either by such Stockholder or such accountant or other Person as shall from time
to time be designated by such Stockholder, who may make such copies thereof or
extracts therefrom as such Stockholder reasonably deems appropriate; and all
facilities of the Company and its Subsidiaries shall at all reasonable times be
open to inspection by such Stockholder or such Person as shall from time to time
be designated by such Stockholder.
(h) TAX TREATMENT OF DIVIDENDS. So long as any Preferred Stock or
Common Stock acquired pursuant to the Reorganization Agreement is outstanding,
the Company shall:
(i) Treat the shares of Preferred Stock and Common Stock as
stock and not as Indebtedness, and treat the dividends paid (or accrued)
with respect to the shares of Preferred Stock or Common Stock as
distributions with respect to stock, and not as interest;
37
(ii) Not take any action which could reasonably be expected
by it (A) to require or permit the Company to treat the dividends paid
with respect to the Preferred Stock or Common Stock as interest for any
purpose, (B) to cause the Preferred Stock or Common Stock to be treated
as indebtedness for purposes of Section 385 of the Code or any successor
provision of the Code and the regulations promulgated thereunder or (C)
to cause the dividends received deduction under section 243 of the Code
(the "DIVIDENDS RECEIVED DEDUCTION") to cease to be available, in whole
or in part, with respect to dividends on the Preferred or Common
received by any corporate Stockholder;
(iii) Without limiting the generality of Section 8(h)(ii), (A)
not claim a deduction for dividends paid on the Preferred Stock or
Common Stock whether as interest or otherwise, in any federal income tax
return, claim for refund of federal income tax or other submission to
the Internal Revenue Service and (B) unless required to do so by
generally accepted accounting principles, not treat the Preferred Stock
or Common Stock other than as equity capital or the dividends paid
thereon other than as dividends paid on capital in any report to
shareholders or any governmental body having jurisdiction over the
Company or otherwise;
(iv) Not exercise any option or election that may at any time
be available under the Code or otherwise to deduct all or part of any
dividend paid with respect to the shares of Preferred Stock if so doing
would increase the amount of such dividend includible for federal, state
or local income tax purposes in the income of any corporate Stockholder
of shares of Preferred Stock or Common Stock; and
(v) At the request of any corporate Stockholder, join with
such Stockholder in the submission to the Internal Revenue Service of a
request for a ruling that dividends paid on the Preferred Stock will be
eligible for the Dividends Received Deduction for federal income tax
purposes; in addition, the Company shall cooperate with and support any
corporate Stockholder in any litigation, appeal or other proceeding
challenging or contesting any ruling, technical advice, finding or
determination of the Internal Revenue Service that dividends paid on the
Preferred Stock are to be treated as Indebtedness for purposes of the
Code or are not eligible for the Dividends Received Deduction. The
cooperation and support required of the Company by the preceding
sentence shall be at the expense of such corporate Stockholder, except
that the Company will pay all fees and expenses (whether incurred by it
or a corporate Stockholder) in connection with any such submission,
litigation, appeal or other proceeding necessitated or caused by a
breach by the Company of its covenants contained in this Section 8(h).
(i) NOTICE OF CLAIMED DEFAULT OR DEFICIENCY. Until such time as
there shall have been a closing of an Initial Public Offering, the Company,
within ten days after receiving notice of a default or deficiency in excess of
$100,000 from, or being served with a complaint in law or in equity by, the
holder of any Indebtedness or other Security of the
38
Company or any Subsidiary, or a party to any agreement to which the Company or
any Subsidiary is a party or otherwise bound which calls for payments by or to
the Company or such Subsidiary in an aggregate amount in excess of $100,000,
with respect to a claimed default or event of default or claimed deficiency
thereunder, shall furnish to each Stockholder a written notice specifying the
notice given or action taken by such Person, as the case may be, and the nature
of the claimed default or event of default or claimed deficiency and what action
the Company is taking or proposes to take with respect thereto.
(j) ATTENDANCE AT BOARD OF DIRECTORS MEETINGS. Until such time as
there shall have been a closing of an Initial Public Offering, the Company shall
furnish each Stockholder who, alone or when aggregated with the holdings of its
Affiliates, owns not less than 5% of the then existing Stock with notice of each
meeting of the Board of Directors and of each meeting of the Board of Directors
of each Subsidiary at the same time as such notice is given by the Company or
such Subsidiary, as the case may be, to the members of the Board of Directors of
such Subsidiary, and each such Stockholder or a Person designated by any such
Stockholder may attend any such meeting as an observer. Until such time as there
shall have been a closing of an Initial Public Offering, the Company shall also
furnish each such Stockholder with copies of all actions of the Board of
Directors of each Subsidiary taken without a meeting, whether by written consent
or otherwise, and of all written communications from the Company or its
management to the Board of Directors or from the Company or the management of
any Subsidiary to the Board of Directors of such Subsidiary and all written
documents distributed at or in connection with any meeting of the Board of
Directors of any Subsidiary concurrently with the distribution of such materials
to the directors.
(k) BLUE SKY. If, at any time any Stockholder converts any share of
Preferred Stock and the issuance of Conversion Stock upon such conversion may
not be lawfully made without the registration or qualification of such
Conversion Stock under the securities or blue sky laws of any jurisdiction, the
Company shall promptly use its best efforts to effect such registration or
qualification and such action shall not count as a registration under Section 6.
The Company shall make any and all filings necessary (whether before or after
the Effective Date) in connection with the offer, issuance and sale and/or
transfer of the Preferred Stock and Common Stock to be purchased pursuant to
this Agreement under the securities or blue sky laws of the State of Delaware
and any other jurisdiction in which such filing is required by law.
(l) COMPLIANCE WITH LAWS. The Company shall and shall cause its
Subsidiaries to comply in all material respects with all laws of any
jurisdiction or rules or regulations of any federal, state or local government
or government department, agency, board, commission, bureau or instrumentality
which are applicable to the Property, business or operations of the Company and
its Subsidiaries.
(m) FILING OF COMMISSION REPORTS; RULE 144 REQUIREMENTS. If the
Company becomes subject to the reporting requirements of either Section 13 or
15(d) of the Exchange Act, the Company will use its best efforts thereafter to
file with the Securities and Exchange Commission such information as is
specified under either of said Sections
39
for so long as there are holders of Registrable Stock; and in such event, the
Company shall use its best efforts to take all action as may be required as a
condition to the availability of Rule 144 under the Securities Act (or any
comparable successor rules). The Company shall furnish to any holder of
Registrable Stock upon request a written statement executed by the Company as to
the steps it has taken to comply with the current public information requirement
of Rule 144 (or such comparable successor rules). After the occurrence of the
first underwritten public offering of Common Stock of the Company pursuant to an
offering registered under the Securities Act on Form S-1 or Form SB-1 (or any
comparable successor forms), subject to the limitations on transfers imposed by
this Agreement, the Company shall use its commercially reasonable best efforts
to facilitate and expedite transfers of Registrable Stock pursuant to Rule 144
under the Securities Act, which efforts shall include timely notice to its
transfer agent to expedite such transfers of Registrable Securities.
(n) TRANSACTIONS WITH AFFILIATES. The Company shall not, nor shall
it permit any Subsidiary to, engage in any transaction or otherwise deal with
any director, officer or shareholder of the Company or any Subsidiary, or any of
their respective Affiliates, except in transactions comparable to those which
the majority of disinterested directors determines (such determination to be
evidenced by a duly adopted resolution) would be available to the Company on an
arm's length basis. For purposes of this paragraph, in addition to any
interpretation of the requirements for a "DISINTERESTED DIRECTOR" under Delaware
law, reference shall be made to the type of transaction contemplated and the
effect or likelihood of similar transactions involving one or more otherwise
disinterested directors in the foreseeable future.
(o) SUBSIDIARIES. Obligations set forth in this Section 8 with
respect to Subsidiaries shall be applicable only at such times, if any, that one
or more Subsidiaries shall be in existence.
(p) EXPENDITURES. Until such time as there shall have been a closing
of an Initial Public Offering, the Company shall not, and shall not permit any
subsidiary to, make or commit to make expenditures other than in the ordinary
course of business without the prior approval of the majority of the Board of
Directors, evidenced by a duly adopted resolution.
(q) MAINTENANCE OF CONTRACTS. Until such time as there has been a
closing of an Initial Public Offering or the Company shall use commercially
reasonable efforts to do or cause to be done all things necessary to preserve
and keep in full force and effect the Contracts. The Company shall at all times
act in accordance with the terms of the Contracts and shall not breach or fail
to fulfill its obligations under the Contracts.
(r) DISPOSAL OF ASSETS. No Subsidiary of the Company shall sell,
transfer, assign or encumber all or substantially all of its assets without the
prior approval of a majority vote of the Stockholders, voting as one class.
40
SECTION 9. OPTIONS
(a) Prior to issuing any additional shares of New Stock other than
upon conversion of any outstanding shares of Stock into another class or series
of Stock in accordance with the Company's Certificate of Incorporation), the
Company shall provide written notice to the New Investors and CLE specifying the
number and the price per share to be paid for such Stock (the "PROPOSED
ISSUANCE"). The New Investors and CLE shall each have the option, exercisable
within thirty (30) days after receipt by each of them of such notice, to acquire
from the Company an amount of the New Stock equal to the greater of (i) the
Protected Number of New Stock for such Stockholder or (ii) an amount of New
Stock in an aggregate amount such that after giving effect to such purchase each
New Investor and its Permitted Transferees will own the percentage of capital
stock set forth on Schedule 9 hereto and CLE and its Permitted Transferees will
own twenty percent (20%), respectively, of the then existing capital stock of
the Company (calculated on a fully diluted, as converted basis). The per share
price to be paid by the New Investors and CLE for such additional Series A
Common Stock shall equal the per share price to be paid in connection with the
Proposed Issuance. To the extent one or more of the New Investors or CLE elect
not to purchase the full amount of New Stock that they are entitled to purchase
pursuant to this Section 9 such Stockholder must provide written notice to the
other Stockholders entitled to purchase New Stock pursuant to this Section 9
within thirty (30) days after receipt of the Proposed Issuance. Within ten (10)
days of receipt of such additional notice, the other Stockholders who have
elected to purchase New Stock pursuant to the Proposed Issuance (the
"PARTICIPATING STOCKHOLDERS") shall be entitled to purchase more New Stock as
set forth in a written notice to the Company by such Participating Stockholders
(the total aggregate additional amount of New Stock subscribed for by the
Participating Stockholders is hereinafter referred to as the "AGGREGATE
ADDITIONAL AMOUNT"); provided, however, that to the extent the Aggregate
Additional Amount exceeds the amount of New Stock then available for purchase by
the New Investors and CLE ("NEW INVESTORS NEW STOCK") pursuant to this Section 9
each of such Stockholders shall be entitled to purchase up to that number of New
Investors New Stock in the same proportion as the ratio, as of such date of (i)
the total number of shares of Common Stock outstanding or issuable upon
conversion of Convertible Securities or upon exercise of any warrants, vested
options or subscription rights then owned by such New Investor or CLE, as the
case may be, to (ii) the number of shares of all classes of Common Stock then
outstanding or then issuable upon conversion of any Convertible Securities or
upon exercise of any warrants, vested options or subscription rights then held
by all New Investors or CLE, as the case may be, exercising their right to
purchase New Investors New Stock.
(b) Any New Stock purchased by the New Investors or CLE pursuant to
this Section 9, shall have the same economic terms as the New Stock concurrently
being issued by the Company, including, without limitation, similar terms for
conversion or exercise. The New Investors and CLE acknowledge and agree that
each of them shall not have the right to exercise any right of conversion or
exercise of any New Stock until such time as a proportionate amount of New Stock
held by individuals other than the New Investors and CLE exercise such right.
41
(c) Upon the exercise of such option by the New Investors or CLE, a
closing of such transaction shall occur on the tenth (10th) business day after
such notice has been given by the New Investors or CLE, as the case may be, at
the main offices of the Company. At such closing, the New Investors or CLE, as
the case may be, shall pay the appropriate price to the Company by wire transfer
of immediately available funds to an account designated by the Company, against
delivery by the Company of certificates representing the appropriate number of
shares of Stock.
(d) Notwithstanding anything herein to the contrary, if the New
Investors or CLE fail to exercise any option available within the period
provided in Section 9(e), such Person shall have no further rights relating to
such Proposed Issuance.
(e) Each of the Stockholders having a right to purchase New Stock
pursuant to this Section 9 may transfer its rights and obligations under this
Section 9 to any transferee of Securities held by such Stockholder so long as
the transfer to the transferee is accomplished pursuant to the terms of this
Agreement. Upon any transfer in accordance with the preceding sentence, for all
purposes under this Section 9 unless expressly indicated to the contrary, the
transferee shall be deemed to be a "STOCKHOLDER," but only to the extent that
the transferor was included within each such definition. At the time of any
transfer in accordance with this Section 9, the transferor shall provide notice
to the Company specifying the name and address of the transferee, the effective
date of the transfer, the number of Securities so transferred, a statement that
such transfer satisfies all of the provisions of this agreement and a statement
that rights are being transferred in accordance with this Section 9, provided
that the transferee agrees in writing for the benefit of the Company and the
other Stockholders to be bound by all provisions of this Section 9 to the same
extent as was the transferor prior to such transfer.
SECTION 10. AMENDMENT AND TERMINATION (a) This Agreement may be altered,
amended, modified, terminated or extended, in whole or in part, at any time and
from time to time, but only by a writing approved and executed by the Company
and Stockholders then owning:
(I) two-thirds of the then issued and outstanding shares of
each of (A) the Series A Common Stock (other than the New Investors) and
the Preferred Stock voting as a single class (B) the Series B Common
Stock and (C) the New Investors; or
(II) a majority of the then issued and outstanding shares of
each of the (A) the Series A Common Stock (other than the New Investors)
and the Preferred Stock voting as a single class (B) the Series B Common
Stock and (C) the New Investors, if such alteration, amendment,
modification or termination is effected in conjunction with a private
placement of more than ten percent (10%) of the then existing capital
stock of the Company (calculated on a fully diluted, as converted basis)
or a Change-in-Control Transaction.
42
In addition, except for the provisions of Section 6, this Agreement shall
automatically terminate upon the first to occur of the following events:
(i) the effective date of the Initial Public Offering;
(ii) the consummation of the sale of substantially all of the
assets of the Company or of the consolidation or merger of the Company
in which the Company is not the surviving entity;
(iii) the date on which any one (1) Stockholder acquires all
of the Common Stock; or
(iv) the tenth anniversary of the date hereof; provided, that
the term of this Agreement may be extended for an additional 10 year
term if such extension is in compliance with Section 218 of the Delaware
General Corporation Law.
(b) Notwithstanding the foregoing subsection (a), the provisions
regarding the rights of Stockholders to register Stock set forth in Section 6
hereto shall continue in full force and effect until the earlier to occur of the
fifth anniversary date of (i) the date of the effectiveness of the Initial
Public Offering and (ii) the date the Company became subject to the reporting
requirements of the Exchange Act pursuant to Sections 13(a) or 15(d) of such
law.
SECTION 11. INDEMNIFICATION; CONTRIBUTION
In each and every circumstance in which the provisions of section 6(e)
are inapplicable, the following provisions of this Section shall apply:
(a) The Company shall, to the fullest extent permitted by law, and
in addition to any such rights which any Indemnified Investor (as defined below)
may have pursuant to statute, the Certificate of Incorporation, or the By-laws
of the Company, or otherwise, indemnify and hold harmless each New Investor
(including its respective directors, officers, partners, employees and agents,
each an "INDEMNIFIED INVESTOR") and each person (a "Controlling Person" and
collectively with Indemnified Investors, the "Indemnified Parties") who controls
any of them within the meaning of Section 15 of the Securities Act, or Section
20 of the Exchange Act, from and against any and all losses, claims, damages,
expenses and liabilities, joint or several (including any investigation, legal
and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted), to which
they, or any of them, may become subject by reason of their representation on
the Board of Directors of the Company by the New Investors Designee; provided,
however, that the Company will not be obligated to provide indemnification to
the New Investors hereunder to the extent that such loss, claim, damage, expense
or liability which gives rise to claim for indemnification hereunder arises from
the gross negligence or willful neglect of the New Investors Designee.
43
(b) If the indemnification provided for in Section 11(a) above for
any reason (other than with respect to a claim for indemnification arising from
the act or omission of the New Investor Designee) is held by a court of
competent jurisdiction to be unavailable to an Indemnified Investor in respect
of any losses, claims, damages, expenses or liabilities referred to therein,
then the Company, in lieu of indemnifying such Indemnified Investor thereunder,
shall contribute to the amount paid or payable by such Indemnified Investor as a
result of such losses, claims, damages, expenses or liabilities in such
proportion as is appropriate to reflect the relative fault of the Company and
the New Investors in connection with the action or inaction which resulted in
such losses, claims, damages, expenses or liabilities, as well as any other
relevant equitable considerations. The Company and the New Investors agree that
it would not be just and equitable if contribution pursuant to this Section
11(b) were determined by pro rata or per capita allocation or by any other
method of allocation which does not take into account of the equitable
considerations referred to in the immediately preceding paragraph.
(c) The indemnification and contribution provided for in this
Section 11 will remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Investors or any officer, director,
employee, agent or Controlling Person of the Indemnified Investors.
(d) Any Indemnified Investor that proposes to assert the right to be
indemnified under this Section 11 will, promptly after receipt of notice of
commencement of any claim or action against such party in respect of which a
claim is to be made against the Company under this Section 11, notify the
Company of the commencement of such action, enclosing a copy of all papers
served, but the omission so to notify the Company will not relieve the Company
from any liability that the Company may have to any Indemnified Investor under
the foregoing provisions of this Section 11 unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
Company. The Indemnified Investor will have the right to retain its own counsel
in any such action and all fees, disbursements and other charges incurred in the
investigation, defense and/or settlement of such action shall be advanced and
reimbursed by the Company promptly as they are incurred; provided, however, that
the Indemnified Investor shall agree to repay any expenses so advanced hereunder
if it is ultimately determined by a court of competent jurisdiction that the
Indemnified Investor to whom such expenses are advanced is not entitled to be
indemnified as a matter of law. The Company shall not settle any action or claim
for which indemnification is sought under this Section 11 without the prior
written consent of the Indemnified Investor.
SECTION 12. MISCELLANEOUS PROVISIONS
(a) BINDING EFFECT. All terms and conditions of this Agreement shall
be conclusive and binding on the Stockholders and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns and on the Company and its successors and assigns.
44
(b) ADDITIONAL SHARES. The Company shall not issue Stock, or any
right convertible into Stock to any officer, director, employee, agent of, or
consultant to, the Company unless such securities are subject to the
restrictions set forth in this Agreement and such person becomes a party to this
Agreement by executing a counterpart of this Agreement on or before the date of
receipt of such securities.
(c) NOTICES. All notices required herein shall be in writing and
shall be deemed to have been given when delivered personally or when deposited
in the mail, prepaid, return receipt requested, addressed as follows, to wit:
If to the Company at:
AMERICHOICE CORPORATION
0000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Chairman of the Board of Directors
with a copy to:
King & Spalding
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: E. Xxxxxxx Xxxxx, II
if to the Existing Stockholders:
0000 Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
with a copy to:
King & Spalding
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: E. Xxxxxxx Xxxxx, II
if to the New Investors:
TA Associates, Inc.
High Street Tower
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx
Xxxxxxx X. Xxxxxx
45
Mellon Bank, N.A., Trustee for
First Plaza Group Trust
Xxx Xxxxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxxxxxx Xxxx,
Legal Department
with a copy to:
Xxxxxxx, Procter & Xxxx
Exchange Place
Boston, MA 02109
Attention: Xxxxx X. Xxxxxx, Esq.
and to:
General Motors Investment Management
Corporation
000 Xxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxx Xxxxxx
with a copy to:
Xxxxxx Xxxxxxxx, Esq.
General Motors Investment
Management Corporation
000 Xxxxx Xxxxxx - 0xx Xxxxx
Xxx Xxxx, XX 00000
if to the Stockholders, addressed to such Stockholders at their addresses as
shown on the books of the Company or its transfer agent, or at such other
addresses as may, from time to time, be given in accordance with the provisions
of this Section.
(d) Governing Law. This Agreement shall be governed by, and
interpreted under, the laws of the State of Delaware.
(e) Entire Agreement. This Agreement constitutes the entire
agreement and understanding among the parties hereto, and supersedes all prior
agreements and understandings, including the Existing Stockholders' Agreement,
relating to the subject matter hereof.
(f) Headings. The descriptive headings set forth in this Agreement
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
46
(g) Severability. In the event any of the provisions, or portions
thereof, of this Agreement are held to be unenforceable or invalid by any court
of competent jurisdiction, the validity and enforceability of the remaining
provisions, or portions thereof, shall not be affected thereby. Any provisions
so held unenforceable or invalid shall be reformed by such court to reflect the
construction most nearly approximating the intent of such provision which shall
be valid and enforceable, and the parties hereto hereby agree to such provision
as reformed.
(h) Execution of Counterparts. This Agreement and any amendment
hereto may be executed in one or more counterparts, each of which shall
constitute an original but all of which together shall constitute but a single
document.
(i) Waiver. The terms of this Agreement may be waived by a written
instrument signed by the party waiving compliance. No delay in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver of any such right, power or privilege, or partial exercise thereof,
preclude any further exercise thereof on the exercise of any other such right,
power or privilege.
[The remainder of this page is intentionally blank.]
IN WITNESS WHEREOF, the Stockholders have hereunto set their respective
hands, and the Company has caused this Agreement to be executed by its duly
authorized officers, all on the day and year first above written.
AMERICHOICE CORPORATION
By:
-----------------------------------
Name:
Title:
CLE, INC.
By:
-----------------------------------
Its President
AW FAMILY LIMITED PARTNERSHIP
By:
-----------------------------------
Its General Partner
TRUST FOR XXXXXX X. XXXXXXX
By:
-----------------------------------
TRUSTEE
TRUST FOR XXXXXX X. XXXXXXX
By:
-----------------------------------
TRUSTEE
EGR FAMILY LIMITED PARTNERSHIP
By:
-----------------------------------
Its General Partner
XXXXXXX XXXXXXX AND XXXXXXXX XXXXXXX
as Tenants- in Common
----------------------------------
Xxxxxxx Xxxxxxx
----------------------------------
Xxxxxxxx Xxxxxxx, by Xxxxxxx Xxxxxxx as
Attorney-in-fact
--------------------------------------
Xxxxx Xxxx
--------------------------------------
Xxxx X. Xxxxxx
--------------------------------------
Xxxxxx X. Xxxxx, Xx.
--------------------------------------
Xxxxx Xxxxxx
TRUST FOR XXXXXXX XXXXXX
By:
---------------------------------------
Xxxxx X. Xxxx
Trustee
TRUST FOR XXXXXX X. XXXXXX
By:
---------------------------------------
Xxxxx X. Xxxx
Trustee
-----------------------------------------
Xxxxxx X. Xxxxx, Xx., as Guardian
under the Uniform Gift to Minors Act
f/b/x Xxxxxxx Xxxxx
XXXXXX XXXXXX XXXXX
By:
---------------------------------------------
Xxxxxx X. Xxxxx, Xx., Attorney-In-Fact
XXXXXXX XXXXX
By:
---------------------------------------------
Xxxxxx X. Xxxxx, Xx., Attorney-In-Fact
XXXXX XXXXXX
By:
---------------------------------------------
Xxxxxx X. Xxxxx, Xx., Attorney-In-Fact
XXXX XXXXX XXXXX
By:
---------------------------------------------
Xxxxxx X. Xxxxx, Xx., Attorney-In-Fact
XXXX XXXXXX XXXXX
By:
---------------------------------------------
Xxxxxx X. Xxxxx, Xx., Attorney-In-Fact
XXXXXX HOLDINGS, L.L.C.
By:
-----------------------------------
Its Manager
PURCHASERS:
ADVENT VII L.P.
By: TA Associates VII L.P., its General Partner
By: TA Associates, Inc., its General Partner
----------------------------------------
Title:
ADVENT INDUSTRIAL II L.P.
By: TA Associates VI L.P., its General Partner
By: TA Associates, Inc., its General Partner
----------------------------------------
Title:
ADVENT NEW YORK L.P.
By: TA Associates VI L.P., its General Partner
By: TA Associates, Inc., its General Partner
----------------------------------------
Title:
ADVENT ATLANTIC AND PACIFIC II L.P.
By: TA Associates AAP II Partners, its General
Partner
By: TA Associates, Inc., its General Partner
----------------------------------------
Title:
TA VENTURE INVESTORS LIMITED PARTNERSHIP
----------------------------------------
General Partner
FIRST PLAZA GROUP TRUST
By: Mellon Bank, N.A., Trustee
(as directed by General Motors Investment
Management Corporation)
---------------------------------------
Title:
CHESTNUT CAPITAL INTERNATIONAL III LIMITED PARTNERSHIP
By: TA Associates VI L.P., its Attorney-in-Fact
By: TA Associates, Inc., its General Partner
----------------------------------------
Title:
ADVENT VI L.P.
By: TA Associates VII L.P., its General Partner
By: TA Associates, Inc., its General Partner
----------------------------------------
Title:
SCHEDULE 9
OWNERSHIP PERCENTAGE
Original Percentage Ownership
New Investor Number of Shares of Outstanding Shares
Mellon Bank, N.A., Trustee for First Plaza
Group Trust 7,742 7.500
Advent VII L.P. 4,032 3.9060
Advent Atlantic and Pacific II L.P. 1,543 1.4950
Chestnut Capital International III Limited
Partnership 195 .1890
Advent New York L.P. 504 .4880
Advent Industrial II L.P. 557 .540
TA Venture Investors Limited Partnership 104 .101
Advent VI L.P. 807 .782
