EXHIBIT 10.38
HEALTHMAGIC, INC.
ADVENTIST HEALTH SYSTEM SUNBELT HEALTHCARE CORPORATION
EMPOWER HEALTH CORPORATION
________________________________________
HEALTHMAGIC, INC. STOCK RESTRICTION AGREEMENT
________________________________________
January 29, 1999
HEALTHMAGIC, INC. STOCK RESTRICTION AGREEMENT
This HEALTHMAGIC, INC. STOCK RESTRICTION AGREEMENT (the "Agreement") is
made as of January 29, 1999, by and among HealthMagic, Inc., a Delaware
Corporation (the "Corporation" or "HMI"), Adventist Health System Sunbelt
Healthcare Corporation, a Florida not-for-profit corporation ("Adventist"), and
Empower Health Corporation, a Texas Corporation ("Empower").
RECITALS
WHEREAS, the execution, delivery and effectiveness of the Investment
Agreement of even date herewith (the "Investment Agreement") among the
Corporation, Adventist, and Empower is contingent upon the simultaneous
execution and delivery of this Agreement;
WHEREAS, pursuant to the Investment Agreement, Empower acquired 10% of the
common stock of the Corporation, par value $0.01 per share (the "Common Stock"),
calculated on a Fully Diluted Basis, and Adventist presently owns a majority of
the issued and outstanding shares of the Common Stock; and
WHEREAS, Adventist and Empower (each, a "Stockholder" and collectively, the
"Stockholders") wish to make agreements regarding the voting and ability to
dispose of their respective shares of Common Stock all in accordance with the
provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein, and for other good, valid and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE 1. DEFINITIONS
The following terms have the following meanings:
Affiliate means any (i) corporation or other entity in which the subject
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person or entity owns, directly or indirectly, shares of capital stock or other
equity interests representing the right to elect a majority of the board of
directors or other governing body and (ii) any person or entity that through one
or more intermediaries controls, is controlled by, or is under common control
with the subject person or entity.
Bona Fide Offer means a legally enforceable offer in writing, setting forth
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the name, address and business or other occupation of each offeror as well as
the price proposed to be paid for the Offered Shares, the form of the
consideration proposed by the offeror, and all other material terms and
conditions of purchase and payment, made and signed by an offeror which the
offeree desires to accept.
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Change of Control means (i) any consolidation or merger of the Corporation,
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other than a merger or consolidation resulting in the holders of the capital
stock of the Corporation entitled to vote for the election of directors
immediately prior to the transaction holding a majority of the capital stock of
the surviving or resulting entity entitled to vote for the election of
directors, (ii) any person or entity (including any Affiliates thereof), other
than a person or entity (or the Affiliates of the person or entity) who holds a
majority of the capital stock of the Corporation entitled to vote for the
election of directors immediately prior to the transaction, becoming the holder
of a majority of the capital stock of the Corporation entitled to vote for the
election of directors, or (iii) any sale or other disposition by the Corporation
of all or substantially all of its assets to a person or entity who is not an
Affiliate.
Fully Diluted Basis means taking into account at the time of the
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calculation (1) the number of shares of Common Stock currently outstanding; (2)
the number of shares of Common Stock issuable on the exercise of all outstanding
options to purchase Common Stock under the HMI 1998 Omnibus Stock Option and
Incentive Plan or otherwise; (3) the 18,595 shares of Common Stock issuable upon
exercise of the Warrant granted to Xxxxxxx Financing Corporation on May 29,
1998, so long as outstanding; and (4) the number of shares of Common Stock
issuable upon exercise, exchange or conversion of all other outstanding options,
warrants and convertible securities; provided the 448,507 shares of Common Stock
issuable upon exercise of the Stock Purchase Warrant and Agreement between the
Corporation and Sabratek Corporation dated November 18, 1998 (the "Sabratek
Warrant") shall not be taken into account unless and until, and to the extent,
the Sabratek Warrant is exercised.
Qualified Public Offering means the first firm commitment underwritten
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public offering pursuant to an effective registration statement under the
Securities Act of 1933 covering the offer and sale of Common Stock to the public
in which the gross proceeds to be received by the issuer equals or exceeds
Thirty Million Dollars ($30,000,000).
Registered Notice shall mean notice sent in accordance with Section 5.1
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below, which shall contain a true and complete copy of the Bona Fide Offer.
Transfer means to directly or indirectly sell, transfer, assign or
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otherwise dispose of, or to grant any option or other right to acquire, either
voluntarily or involuntarily, and with or without consideration.
ARTICLE 2. BOARD REPRESENTATION
2.1. Board Nominations and Removal.
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(i) For so long as Empower or any Affiliate shall own not less than
fifty percent (50%) of the shares of Common Stock (or any successor security)
acquired pursuant to the Investment Agreement, Empower shall be entitled (i) to
nominate one individual for election to the Corporation's Board of Directors
("Board") to serve as a director until his or her successor is elected and
qualifies, (ii) to nominate such successor, and (iii) in its sole discretion, to
propose the removal from the Board of such director nominated under the
foregoing clauses. Except for removal for cause, as between the Stockholders, no
Stockholder other than Empower may propose the removal of a director nominated
by Empower.
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(ii) The parties acknowledge that Adventist presently owns a
majority of the issued and outstanding Common Stock of the Corporation and that,
Adventist, as such, presently has the ability, subject to subsection 2.1(i)
above, (a) to nominate as many individuals for election to the Corporation's
Board as it in its sole discretion deems appropriate, to serve as directors
until their successors are elected and qualify, (b) to nominate such successors,
and (c) in its sole discretion, to propose the removal from the Board of the
directors nominated under the foregoing clauses (a) and (b). Except for removal
for cause, as between the Stockholders, no Stockholder other than Adventist may
propose the removal of a director nominated by Adventist.
2.2. Procedure for Nomination. Each nomination of any director, or any
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proposal to remove any director from the Board, shall be made by delivering to
the Corporation a notice signed by the party or parties entitled to such
nomination or proposal. As promptly as practicable after delivery of such
notice, the Corporation shall take or cause to be taken such corporate actions
as reasonably may be required to cause the election or removal proposed in such
notice. From and after delivery of such notice, no Board action shall be taken
unless and until the nominee is elected to the Board.
2.3. Voting. Each Stockholder shall vote all Common Stock held by such
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Stockholder for the election to the Board of the individuals nominated in
accordance with Section 2.1 hereof. Each Stockholder shall use all reasonable
efforts to cause each director nominated by such Stockholder to vote for the
election to the Board of each individual nominated as a replacement director in
accordance with Section 2.1 hereof.
ARTICLE 3. RIGHT TO PURCHASE
3.1. Empower's Right to Participate in Certain Sales of Additional
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Securities. The Corporation agrees that it will not sell or issue for cash any
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shares of Common Stock, or other securities convertible into or exchangeable for
Common Stock, or options, warrants or rights carrying any rights to purchase
Common Stock unless the Corporation first submits a written offer to Empower
identifying the terms of the proposed sale (including cash price, number or
aggregate principal amount of securities and all other material terms), and
offers to Empower the opportunity to purchase its Pro Rata Share (as hereinafter
defined) of the securities on terms and conditions, including price, no less
favorable to Empower than those on which the Corporation proposes to sell any
such securities to a third party. For purposes of this Section 3.1, Empower's
"Pro Rata Share" of such securities shall be based on the ratio which all of the
shares of Common Stock owned by Empower bears to all the issued and outstanding
shares of Common Stock, each calculated on a Fully Diluted Basis. The
Corporation's offer to Empower shall remain open and irrevocable for a period of
thirty (30) days. Any securities which Empower does not elect to purchase
pursuant to such offer may be sold by the Corporation but only on the terms and
conditions set forth in the initial offer to Empower, at any time within one
hundred and twenty (120) days following the termination of the above-referenced
thirty (30) day period, but may not be sold to any other person or entity or on
terms and conditions, including price, that are more favorable to the purchaser
than those set forth in such offer or after such one hundred and twenty (120)
day period without renewed compliance with this Section 3.1.
3.2. Exceptions to Empower's Right to Participate. Notwithstanding
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Section 3.1, the Corporation may without providing any right to Empower to
participate (i) issue shares of its
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Common Stock in connection with the acquisition of another company; (ii) issue
shares in any underwritten public offering registered under the Securities Act
of 1933; and (iii) issue options, warrants, or rights to subscribe for shares of
Common Stock to officers, employees and directors of and consultants to the
Corporation pursuant to the terms of any stock option or stock incentive plan
approved by the Board, and issue shares of its Common Stock upon the exercise of
any such stock options, or upon exercise of warrants outstanding as of the day
and year first above written or thereafter issued in compliance with this
Article 3.
ARTICLE 4. PROHIBITED TRANSFERS
Empower may not Transfer any shares of capital stock of the Corporation
held by Empower other than in accordance with Articles 5 and 6 below, and
Adventist may not Transfer any shares of capital stock of the Corporation held
by Adventist other than in accordance with Article 6 below. Any Transfer of
shares in violation of this Agreement shall be null and void and shall not be
recognized in the transfer books of the Corporation.
ARTICLE 5. RIGHT OF FIRST REFUSAL
5.1. Receipt of Bona Fide Offer; Registered Notice. In the event that
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Empower receives a Bona Fide Offer to purchase all or a portion of Empower's
Common Stock ("Offered Shares"), Empower shall promptly send Registered Notice
to Adventist and the Corporation, offering to sell the Offered Shares to the
Corporation and, upon the failure of the Corporation to purchase the Offered
Shares, to Adventist on the terms and conditions equal to the terms and
conditions contained in the Bona Fide Offer. All other terms and conditions
contained in Registered Notice shall conform to the terms and conditions of the
Bona Fide Offer. If all or any part of the offered consideration is other than
cash or payment of the purchase price in one or more installments of cash, then
the Corporation and Adventist may purchase all the Offered Shares, in accordance
with Sections 5.2 and 5.3 below, by paying on the same terms an amount of cash
equal to the fair market value of the consideration offered.
5.2. Corporation's Option. The Corporation shall have the right, for a
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period of thirty (30) days from its receipt of such Registered Notice, to
purchase all, but not less than all, of the Offered Shares. The Corporation may
exercise the right to purchase the Offered Shares by delivering a written notice
to Empower within thirty (30) days after receipt of the Registered Notice (which
shall constitute an unconditional obligation to buy the shares). Upon delivery
of such notice, the purchase of the Offered Shares shall be consummated on a
business day designated by Empower within forty-five (45) days after the date of
the Registered Notice (the "Consummation Period").
5.3. Adventist's Option. In the event that the Corporation does not
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accept the offer or fails to purchase all of the Offered Shares within the
Consummation Period, then Adventist shall have the right, for a period of
fifteen (15) days after the expiration of Consummation Period, to exercise its
right to purchase all but not less than all of the Offered Shares by delivering
a written notice ("the Purchase Notice") to Empower. If Adventist delivers a
Purchase Notice, the purchase of the Offered Shares shall be consummated on a
business day designated by Empower within forty-five (45) days after the
expiration of the Consummation Period. If Adventist wishes
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to purchase some, but not all, of the Offered Shares, the Corporation and
Adventist together may purchase all, but not less than all, of the Offered
Shares in accordance with this Section 5.3.
5.4. Acceptance of Bona Fide Offer. In the event that: (i) the
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Corporation and Adventist do not purchase (for reasons other than the Empower's
default hereunder) all of the Offered Shares within the periods set forth above;
and (ii) Empower still desires to sell all (but not less than all) of the
Offered Shares pursuant to such Bona Fide Offer, then such sale by Empower must
be fully consummated within ninety (90) days after the expiration of the
Consummation Period; and, in the event that such sale is not fully consummated
within such period, the restrictions provided for in this Article shall again
become effective.
5.5. Limitation on Restriction. The restrictions contained in this
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Article 5 shall not apply to a Transfer between Empower and an Affiliate of
Empower; provided, that prior to the Transfer of any Common Stock to an
Affiliate, such Affiliate must agree in writing to be bound by the terms of this
Agreement in the same manner as Empower and deliver a copy of such undertaking
to each party to this Agreement.
ARTICLE 6. CO-SALE RIGHTS
6.1. Take-Along Right. If Adventist proposes to Transfer any Common
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Stock, Adventist shall deliver the Registered Notice to the Corporation and to
Empower as provided in Article 5 hereof. Empower may elect to participate in the
proposed Transfer by delivering to Adventist a notice (the "Participation
Notice") specifying the extent to which Empower exercises its rights under this
Article 6. Empower shall be entitled to Transfer, at the price and on the terms
and conditions applicable to the Transfer by Adventist, up to a number of shares
of Common stock equal to its Pro Rata Amount of the shares of Common Stock
subject to the proposed Transfer. For Purposes of this Section 6.1, "Pro Rata
Amount" shall mean the number of shares of Common Stock that Adventist proposes
to Transfer multiplied by the ratio which all of the shares of Common Stock
owned by Empower bears to the sum of the shares of Common Stock owned by Empower
and Adventist.
6.2. Limitation on Take-Along Right. The right set forth in this Article
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6 shall not apply to a Transfer between Adventist and an Affiliate of Adventist;
provided, that prior to the Transfer of any Common Stock to an Affiliate, such
Affiliate must agree in writing to be bound by the terms of this Agreement in
the same manner as Adventist and deliver a copy of such undertaking to each
party to this Agreement.
6.3. Drag-Along Right. If Adventist proposes to Transfer all of its
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shares of Common Stock to a person or entity that is not an Affiliate of
Adventist, Adventist may require Empower to Transfer to the same transferee, at
the same time, at the same price and on the same terms and conditions applicable
to the proposed Transfer by Adventist, all of its shares of Common Stock;
provided, however, that any related indemnification obligation shall be several
and not joint and limited to the consideration received.
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ARTICLE 7. GENERAL
7.1. Termination of Restriction. The agreements and restrictions set
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forth in this Agreement shall terminate upon the earlier of (i) the consummation
of a Qualified Public Offering or (ii) a Change of Control, except that
Empower's Take-Along right provided in Section 6.1 above shall survive unless
the surviving entity in a Change of Control is a reporting entity under the
Securities Exchange Act of 1934, as amended.
7.2. Legend. Each certificate representing shares of Common Stock that
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are subject to this Agreement shall bear a legend substantially in the
following:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE
SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY
LAWS. THESE SECURITIES ARE ALSO SUBJECT TO THE PROVISIONS OF A STOCK RESTRICTION
AGREEMENT DATED AS OF JANUARY 29, 1999 AND A COMPLETE AND CORRECT COPY OF THIS
AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE CORPORATION
AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
7.3. Amendments, Waivers and Consents. The parties to this Agreement may,
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by written agreement, (a) amend this Agreement, (b) extend the time for
performance of any of the obligations or other acts of the parties, or (c) waive
compliance with or modify any of the agreements contained in this Agreement and
waive or modify performance of any of the obligations of any of the parties to
this Agreement; provided, no failure or delay on the part of any party to this
Agreement in exercising any of its respective rights under this Agreement upon
any failure by any other party to perform or observe any condition, covenant or
provision shall operate as a waiver thereof, nor shall any single or partial
exercise of any such rights preclude any other exercise thereof or the exercise
of any other right.
7.4. Governing Law. This Agreement shall be deemed to be a contract made
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under, and shall be construed in accordance with, the laws of the State of
Delaware, without giving effect to conflict of laws principles thereof.
7.5. Section Headings and Gender. The descriptive headings in this
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Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision thereof or hereof.
The use in this Agreement of the masculine pronoun in reference to a party
hereto shall be deemed to include the feminine or neuter, as the context may
require.
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7.6. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute but one and the
same document.
7.7. Notices and Demands. Any notices, claims or demand or other
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communications hereunder shall be in writing and shall be deemed to be duly
given if personally given or if sent by telecopier, nationally-recognized
overnight courier or by registered or certified mail, return receipt required
and postage prepaid, addressed to such party in accordance herewith or as
otherwise stated in any notice given in accordance herewith. Any such notice
shall be deemed to have been received (a) in the case or personal delivery or
delivery by telecopier, on the date of such delivery, (b) in the case of a
nationally-recognized overnight courier, on the next business day after the date
sent and (c) in the case of mailing, on the third business day following that on
which the piece of mail containing such communication is posted.
If to HMI or Adventist:
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxx 00000-0000
Attention: Xxxxxx Xxxxx
407.975.1458 (facsimile)
With a copy to:
Xxxxxx X. Xxxxxxx, Esquire
Xxxx Xxxxxxx Xxxxx & Xxxxxxxxxx
0000 Xxxx Xxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000-0000
000.000.0000 (facsimile)
If to Empower:
Empower Health Corporation
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, President
512.726.5130 (facsimile)
With a copy to:
Xxxxxxx X. Xxxxxxxx, Esquire
Xxxxxx X. XxXxxxx, Esquire
Xxxxxx & Xxxxxxx
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
650.463.2600 (facsimile)
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7.8. Severability. Whenever possible, each provision of this Agreement
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shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
7.9. Integration. This Agreement constitutes the entire agreement, and
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supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
HEALTHMAGIC, INC.:
By: /s/ Xxxxxx X. Xxxxx
_______________________________
Name: Xxxxxx X. Xxxxx
________________________
Title: ________________________
ADVENTIST HEALTH SYSTEM SUNBELT HEALTHCARE
CORPORATION:
By: /s/ Xxxxxx X. Xxxxx
_______________________________
Name: Xxxxxx X. Xxxxx
________________________
Title: ________________________
EMPOWER HEALTH CORPORATION:
By: /s/ Xxxxxx X. Xxxxxxx
_______________________________
Name: Xxxxxx X. Xxxxxxx
________________________
Title: ________________________
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