AGREEMENT made as of the 30th day of October, 1996, by and among
Lexington Healthcare Group, Inc. a Delaware corporation with a business address
of 35 Park Place, New Britain, Connecticut 06052 (the "Corporation"), Jack
Friedler, an individual residing at 1041 Church Hill Road, Fairfield, CT
06432("Friedler"), and Harry Dermer, an individual residing at 725 Town Hill
Road, New Hartford, CT 06057 ("Dermer"). Friedler and Dermer are sometimes
hereinafter referred to collectively as "Stockholders" and individually as
R E C I T A L S
WHEREAS, the authorized capital stock of the Corporation consists of
16,000,000 shares of common stock, par value $______ per share (the "Common
WHEREAS, Friedler owns 1,846,500 shares of Common Stock and Dermer
owns 615,500 shares of Common Stock (collectively referred to as the "Shares");
WHEREAS, the Stockholders desire to promote their joint interests
and the interests of the Corporation by imposing certain restrictions and
obligations on themselves and on the Corporation and on the Shares held by each
WHEREAS, the Stockholders believe it to be in their best interests
and in the best interests of the Corporation that the Shares owned by the
Stockholders be transferrable only upon compliance with the provisions of this
WHEREAS, the Stockholders and the Corporation anticipate that the
Corporation will soon be consummating an initial public offering of its
NOW, THEREFORE, in consideration of the mutual obligations contained
herein and other good and valuable consideration, the Stockholders hereby agree
(a). The word "Affiliate" shall mean any Person controlling, or controlled
by, another Person and for purposes hereof shall include all relatives by blood,
marriage or adoption.
(b). The word "Agreement" shall mean this Stockholders Agreement, as it
may be amended from time to time pursuant to the terms hereof.
(c). The term "Bona Fide Offer" shall mean any offer made by a Person not
a party to this Agreement or an Affiliate thereof to any Stockholder to purchase
Shares; provided, however, that said offer must include an agreement by the
Transferee to purchase Shares owned by the non-selling Stockholder to the extent
the "come along" provisions of Section 3 hereof are exercised by such
non-selling Stockholder. In the event a Bona Fide Offer shall provide for the
exchange of assets other than cash or cash equivalents, either the Bona Fide
Offer shall include the fair market value of said assets if such fair market
value is publicly available and readily ascertainable or the Transferor shall
submit with the Offer to Sell relating to such Bona Fide Offer an appraisal
prepared by a qualified independent third party evidencing the fair market value
of the assets to be exchanged as of the date of the Bona Fide Offer.
(d). The word "Person" shall mean (and include) an individual, trust,
fiduciary, partnership, corporation, associa tion or any other legal entity.
(e). The term "Offer to Sell" shall refer to an offer made pursuant to,
and as defined in, Section 2(b).
(f). The term "Offered Shares" shall mean the shares of Common Stock of
the Corporation included in an Offer to Sell.
(g). The term "owned by," referring to the owner of Shares, shall refer to
the Person recorded on the stock record books regularly maintained by the
Corporation as the owner of such Shares.
(h). The word "transfer" shall include the sale, assignment, gift, devise,
pledge, encumbrance or other disposition of any Shares, whether absolute or
conditional, temporary or permanent, outright or in trust, voluntary or
(i). The word "Transferee" shall refer to any holder of Shares transferred
to him by a Stockholder.
(j). The words "Transferor" or "Selling Stockholder" shall refer to any
Stockholder desiring to make a transfer of his Shares.
2. Restrictions on Transferability of Shares Held by the
Stockholders and Permitted Transfers.
(a). Each of the Stockholders hereby agrees not to transfer, sell,
distribute or otherwise dispose of the Shares, now owned or hereafter acquired.
Notwithstanding the foregoing, either Stockholder may: (i) sell all or any part
of his Shares publicly in a public offering or ordinary brokerage transactions
in accordance with Rule 144 promulgated pursuant to the Securities Act of 1933,
as amended ("Act"); (ii) transfer all or any part of his Shares, without
consideration, to a spouse, lineal descendent, parent or to a trust for the
benefit of the Stockholder and/or any of the foregoing ("Family Members")
subject to compliance with the provisions of Section 5 hereof; (iii) make a
private sale of any Shares owned by him only pursuant to a Bona Fide Offer and
after compliance with the terms and conditions of Section 2 of this Agreement;
or (iv) transfer his Shares upon his death subject to the provisions of Section
4 hereof. Any purported transfer of any Shares by any Stockholder or any
successor to any Stockholder which violates any provision of this Agreement will
be invalid, and the Corporation will not transfer any of such Shares on its
books, nor will any of such Shares be entitled to vote or receive dividends
thereon, during the period of any such violation. Such disqualification will be
in addition to, and not in substitution of, any other legal or equitable
remedies to enforce such provisions. The Corporation and its officers, directors
and employees shall not be liable to any person for any action or refusal to act
taken under the provisions of this Section 2(a).
(b). (i) If either Stockholder desires to transfer his or her Shares (a
"Selling Stockholder"), in a private sale in connection with a Bona Fide Offer,
the Selling Stockholder must give the remaining Stockholder thirty (30) days
written notice of his intention to sell ("Offer to Sell") at the address as set
forth on the books of the Corporation. An Offer to Sell shall be in writing and
shall include the number of Shares which the Transferor intends to transfer, the
name and address of the prospective Transferee, the terms of such transfer and a
copy of any written agreement or other document setting forth the
information herein required. A copy of the Bona Fide Offer shall be delivered
with the written Offer to Sell. The Offer to Sell shall constitute an offer to
sell the Offered Shares to the other Stockholder at the price and upon the terms
and conditions as are set forth in the Bona Fide Offer. If the Bona Fide Offer
provides for the exchange of assets other than cash or cash equivalents, the
Offer to Sell to the Stockholder shall be deemed to be an Offer to Sell the
Offered Shares at the fair market value of the assets to be exchanged,
determined as of the date of the Bona Fide Offer.
(ii) The remaining Stockholder will thereupon have the option, to be
exercised in writing, within thirty (30) days from the giving of the Offer to
Sell ("Exercise Period") to purchase all or any portion of the Offered Shares.
The Selling Stockholder shall not be obligated to sell any of the Offered Shares
to the non-selling Stockholder unless all of the Offered Shares are purchased by
the non-selling Stockholder.
(c). If an Offer to Sell is not accepted by the other Stockholder, the
Transferor may transfer the Shares to the prospective Transferee named in the
Offer to Sell in strict accordance with the terms therein stated, at a price not
less than, and on terms and conditions not more favorable to such Transferee
than, are set forth in the Offer to Sell, free and clear of the terms and
conditions of this Agreement. A transfer to a Transferee after an Offer to Sell
is not accepted shall be consummated and the Shares transferred to the
Transferee within thirty (30) days after the expiration of the Exercise Period.
If the Transferor shall fail to make such transfer within such thirty (30) day
period, or if he shall propose to sell the Offered Shares at a lower price or on
more favorable terms to the purchaser, the Offered Shares shall again become
subject to all the restrictions contained in this Agreement, and the Selling
Stockholder shall again make the Offered Shares available to the remaining
Stockholder for purchase in the manner set forth herein.
3. Come Along. In the event the non-selling Stockholder determines not to
exercise the right of first refusal granted pursuant to Section 2, the
non-selling Stockholder shall have the
right to cause the Transferee to purchase from the non-selling Stockholder the
same percentage of the Shares owned by the non-selling Stockholder as is equal
to the fraction, expressed as a percentage, the numerator of which is the number
of Offered Shares and the denominator of which is the total number of Shares
owned by the Selling Stockholder prior to such sale; subject to the adjustment
specified in this Section 3 ("Come Along"). The non-selling Stockholder shall
exercise the Come Along by giving the Selling Stockholder and the proposed
Transferee notice of such exercise within the Exercise Period, but not later
than the date upon which the non-selling Stockholder gives notice of his
non-exercise of the right of first refusal if notice of non-exercise is given.
Upon receipt of the notice of exercise of the Come Along, the Transferee shall
have the option to purchase the aggregate number of Shares specified in the Bona
Fide Offer to be purchased from the Selling Stockholder and the other
Stockholder, pro rata or to increase the number of Shares purchased by such
amount (with a concomitant increase in the purchase price, but otherwise on the
same terms and conditions contained in the Bona Fide Offer) so that the other
Stockholder is selling the same percentage of his Shares as the percentage sold
by the Selling Stockholder. The Transferee's election shall be made within
fifteen days of the receipt by the Transferee of the other Stockholder's
exercise of the Come Along.
4. Death of a Stockholder. The transfer of Shares upon the death of a
Stockholder to such Stockholder's estate and from the estate to the beneficiary
of such estate or to the distributee under law, shall be permitted, provided
however, the Shares so transferred shall remain subject to the terms and
conditions of this Agreement and such Shares shall be voted as provided in
Section 5 hereof as if, and to the same extent, that the transfer were a
transfer to a Family Member.
5. Transfer To Family Members. A transfer, without consideration, may be
made to a Family Member, as provided in Section 2, provided that the Family
Member to whom such transfer is made agrees in writing for the benefit of the
Stockholder other than the Transferor that such Family Member will vote the
Shares owned by him/her/it on all matters upon which the Shares of the
Corporation are voted in the same proportion as the Shares owned by
Friedler and Dermer are voted. If either Friedler or Dermer own no Shares, the
Shares owned by the Family Member shall be voted in the same manner as the
Shares owned by the Stockholder owning Shares are voted. As used in this
Section, the term "voted" shall include action taken by written consent, in
addition to a vote in person or by proxy.
6. Rights to Serve as or Designate Directors. For as long as either
Friedler or Dermer remains a Stockholder of the Corporation, each agrees to vote
the Shares owned by him for the election of the other as a Director of the
Corporation or for the person designated a Director in his stead. To the extent
not inconsistent with law, each will take all action reasonably necessary
(including to vote as a director for a management slate of directors which
includes the other Stockholder or such other Stockholder's designee) to carry
out the intention that each of the Stockholders (or their respective designee)
be elected as a director of the Corporation.
7. Endorsement on Certificates. Upon execution of this Agreement, the
certificates of stock subject thereto shall be surrendered to the Corporation
and the stock certificates repre senting the Shares shall bear the following
"The shares represented by this certificate
have not been registered under the
Securities Act of 1933, as amended, or
under state securities laws and may not be
sold or transferred unless registered under
said act and applicable state securities
laws or unless, in the opinion of counsel
satisfactory to the Corporation, the
transfer qualifies for an exemption from
the registration provisions thereof. In
addition, this certificate of stock and the
shares represented hereby are held subject
to the terms and conditions contained in an
agreement by and among the Stockholders of
the Corporation and the Corporation dated
as of __________, 1996, and all amendments
thereto, and may not be transferred except
in accordance with the
terms and provisions thereof. A copy of
such agreement will be furnished by the
Corporation upon request."
Upon endorsement, the certificates shall be delivered to the
Stockholders, who shall be entitled to exercise all rights of ownership of such
stock, subject to the terms of this Agreement. All capital stock of the
Corporation hereinafter issued to the Stockholders shall bear the same
8. Termination of Agreement. This Agreement shall terminate upon the
occurrence of any of the following events:
(a). The cessation of the Corporation's business;
(b). Adjudication of the Corporation as a bankrupt, the execution by it of
an assignment for the benefit of creditors, or the appointment of a receiver for
(c). Voluntary, involuntary or judicial dissolution of the Corporation; or
(d) Only Friedler or Dermer owns Shares and no Shares are owned by a
Family Member or a deemed Family Member.
Upon the termination of this Agreement, each Stockholder shall
surrender to the Corporation the certificates for his shares, and the
Corporation shall issue to him in lieu thereof new certificates for an equal
number of shares without the endorsement set forth in Section 7.
9. Equitable Remedy. The parties hereby declare that it is impossible to
measure in monetary terms the damages which shall accrue to a party hereto by
reason of another party's failure to perform any of the obligations under this
Agreement. Therefore, if any party hereto shall institute any action or
proceeding to enforce the provisions hereof, any person (including the
Corporation) against whom such action or proceeding is brought hereby waives the
claim or defense therein that there is an adequate remedy at law, and such
not urge in any such action or proceeding the claim or defense that such remedy
at law exists.
(a). Any notice or other communication required or permitted to be given
to any party hereunder shall be deemed given when delivered personally or by
overnight courier or other delivery service providing documentary evidence of
delivery, or five (5) days after mailing by certified mail, return receipt
requested, to the parties at the addresses as set forth above, or to such other
address as the respective parties may designate by notice given pursuant to this
(b). This Agreement shall be binding upon the parties hereto and their
heirs, executors, administrators, successors and assigns. Each Stockholder in
furtherance thereof shall execute a will directing his executor to perform this
Agreement and to execute all documents necessary to effectuate its purposes, but
the failure to execute such will shall not affect the rights of any Stockholders
or the obligations of any estate, as provided in this Agreement.
(c). This Agreement contains the entire agreement of the parties and
supersedes all prior agreements, written or oral. No change in or modification
of this Agreement shall be binding unless the same shall be in writing and
signed by the parties hereto.
(d). This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut.
(e). Any controversy or claim arising out of or relating to this contract
shall be determined by arbitration in accordance with the International
Arbitration Rules of the American Arbitration Association. The place of
arbitration shall be New York City.
(f). Whenever from the context it appears appropriate, each item stated in
either the singular or the plural shall include the singular and the plural, and
pronouns stated in either the
masculine, feminine or neuter genders shall include the masculine, feminine and
(g). This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together constitute one and
the same instrument.
11. Severability. It is agreed that in the event any provision of this
Agreement or the application thereof to any person or circumstance shall be
adjudged to be invalid or unenforceable according to any applicable laws, the
remaining provisions of this Agreement and the application thereof to any person
or circumstances shall not be affected thereby and shall be enforced to the
fullest extent permitted by law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
LEXINGTON HEALTHCARE GROUP, INC.
/s/ Harry Dermer
By: Harry Dermer
/s/ Jack Friedler
/s/ Harry Dermer