STOCKHOLDERS' AGREEMENT
among
GREEN SPRING HEALTH
SERVICES, INC.
and
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
HEALTH CARE SERVICE CORPORATION
INDEPENDENCE BLUE CROSS
XXXXXX COUNTY MEDICAL BUREAU, INC.
and
CHARTER MEDICAL CORPORATION
dated
December 13, 1995
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS..............................................................................................1
Section 1.1 "Affiliate"................................................................................1
Section 1.2 "Agreement"................................................................................1
Section 1.3 "Annual Capital Plan"......................................................................1
Section 1.4 "Annual Operating Plan"....................................................................2
Section 1.5 "Base Amount"..............................................................................2
Section 1.6 "BCBSNJ"...................................................................................2
Section 1.7 "BCILL"....................................................................................2
Section 1.8 "Board of Directors".......................................................................2
Section 1.9 "Business".................................................................................2
Section 1.10 "Business Day".............................................................................2
Section 1.11 "Bylaws"...................................................................................2
Section 1.12 "Capital Contribution......................................................................2
Section 1.13 "Capital Contribution Notice"..............................................................2
Section 1.14 "Certificate"..............................................................................3
Section 1.15 "Chairman".................................................................................3
Section 1.16 "Charter"..................................................................................3
Section 1.17 "Charter Change of Control"................................................................3
Section 1.18 "Charter Common Stock".....................................................................3
Section 1.19 "Charter Mandatory Call"...................................................................3
Section 1.20 "Charter Proposed Transfer"................................................................3
Section 1.21 "Charter Option"...........................................................................3
Section 1.22 "Chief Executive Officers".................................................................3
Section 1.23 "Closing"..................................................................................4
Section 1.24 "Closing Date".............................................................................4
Section 1.25 "Common Stock".............................................................................4
Section 1.26 "Confidential Information".................................................................4
Section 1.27 "Contributing Stockholder" or "Contributing Stockholders"..................................4
Section 1.28 "Corporation"..............................................................................4
Section 1.29 "Credit Agreement".........................................................................4
Section 1.30 "Deadlock".................................................................................4
Section 1.31 "Declining Stockholder" or "Declining Stockholders"........................................4
Section 1.32 "Deemed Conversion Premium"................................................................4
Section 1.33 "DGCL".....................................................................................5
Section 1.34 "Directors"................................................................................5
Section 1.35 "Election Notice"..........................................................................5
Section 1.36 "Equity Ownership Interest"................................................................5
Section 1.37 "Equity Securities"........................................................................5
Section 1.38 "Exchange Act".............................................................................5
Section 1.39 "Exchange Agreement".......................................................................5
Section 1.40 "Exchange Common Stock"....................................................................5
Section 1.41 "Fair Market Value"........................................................................5
Section 1.42 "First Offer Period".......................................................................5
Section 1.43 "Fiscal Year"..............................................................................6
Section 1.44 "Fundamental Corporate Transaction"........................................................6
Section 1.45 "Fundamental Issues".......................................................................6
Section 1.46 "GAAP".....................................................................................6
Section 1.47 "Governmental Authority"...................................................................6
Section 1.48 "GPA"......................................................................................6
Section 1.49 "GSHS Common Stock"........................................................................6
Section 1.50 "Issuance".................................................................................6
Section 1.51 "Mandatory Call Notice" ...................................................................6
Section 1.52 "Minority Stockholder" and "Minority Stockholders".........................................7
Section 1.53 "Non-Cash Consideration"...................................................................7
Section 1.54 "Non-Selling Stockholders".................................................................7
Section 1.55 "Offer Notice".............................................................................7
Section 1.56 "Offer Percentage".........................................................................7
Section 1.57 "Offer Period".............................................................................7
Section 1.58 "Operating Agreement"......................................................................7
Section 1.59 "Option Notice" ...........................................................................7
Section 1.60 "Option Period" ...........................................................................7
Section 1.61 "PCMB" ....................................................................................7
Section 1.62 "Permitted Transfer".......................................................................8
Section 1.63 "Permitted Transferee".....................................................................9
Section 1.64 "Person"...................................................................................9
Section 1.65 "Preemptive Notice"........................................................................9
Section 1.66 "Preemptive Right".........................................................................9
Section 1.67 "Preemptive Right Offer Period"............................................................9
Section 1.68 "Preemptive Right Securities"..............................................................9
Section 1.69 "President"................................................................................9
Section 1.70 "Proposed Transfer"........................................................................9
Section 1.71 "Right of First Refusal"...................................................................9
Section 1.72 "SEC"......................................................................................9
Section 1.73 "Second Offer Period"......................................................................9
Section 1.74 "Securities Act"...........................................................................9
Section 1.75 "Selling Stockholder"......................................................................9
Section 1.76 "Stockholder" and "Stockholders"..........................................................10
Section 1.77 "Stock Purchase Agreement"................................................................10
Section 1.78 "Subsidiary"..............................................................................10
Section 1.79 "Third Offer Period"......................................................................10
Section 1.80 "Third Party Purchaser"...................................................................10
Section 1.81 "Transfer"................................................................................10
Section 1.82 "Voting Ownership Interest"...............................................................10
Section 1.83 "Voting Securities".......................................................................10
ARTICLE II.
MANAGEMENT OF THE CORPORATION...........................................................................10
Section 2.1 Certificate and Bylaws................................................................10
Section 2.2 Board of Directors....................................................................11
Section 2.3 Voting; Designation of Directors......................................................11
Section 2.4 Removal and Replacement...............................................................12
Section 2.5 Composition of the Board of Directors of Subsidiaries.................................12
Section 2.6 Board Action; Quorum Requirement......................................................12
Section 2.7 Designation of Chairman...............................................................12
Section 2.8 Stockholder Action....................................................................13
Section 2.9 Fundamental Issues....................................................................13
Section 2.10 Deadlock..............................................................................14
ARTICLE III.
PLANS AND REPORTS.......................................................................................15
Section 3.1 Annual Operating Plan; Annual Capital Plan............................................15
Section 3.2 Books and Records.....................................................................16
Section 3.3 Accounts and Reports..................................................................16
Section 3.4 Consolidated Basis....................................................................17
ARTICLE IV.
RESTRICTIONS ON TRANSFER................................................................................17
Section 4.1 Restrictions on Transfer..............................................................17
Section 4.2 Scope of Restrictions on Transfer.....................................................17
Section 4.3 Permitted Transfers...................................................................17
Section 4.4 Involuntary Transfers.................................................................17
Section 4.5 Noncomplying Transfers Void...........................................................18
Section 4.6 Legend................................................................................19
ARTICLE V.
RIGHTS OF FIRST REFUSAL.................................................................................19
Section 5.1 Non-Charter Right of First Refusal....................................................19
Section 5.2 Charter Right of First Refusal........................................................22
ARTICLE VI.
CERTAIN RIGHTS..........................................................................................23
Section 6.1 Charter Preemptive Right..............................................................23
Section 6.2 Charter Option........................................................................24
Section 6.3 Charter Mandatory Call................................................................26
Section 6.4 Charter Change of Control Put.........................................................27
Section 6.4 Certain Purchase Price Adjustments; Separate Agreements...............................28
Section 6.6 Charter Board Representation..........................................................29
ARTICLE VII.
CERTAIN COVENANTS.......................................................................................29
Section 7.1 Capital Contributions.................................................................29
Section 7.2 Confidential Information..............................................................30
Section 7.3 Determination of Fair Market Value....................................................31
Section 7.4 No Inconsistent Agreements............................................................33
Section 7.5 Minority Stockholders' Agreement......................................................33
Section 7.6 No Event of Default...................................................................34
Section 7.7 Change of Control.....................................................................34
ARTICLE VIII.
REPRESENTATIONS AND WARRANTIES..........................................................................34
Section 8.1 Representations and Warranties of the Corporation.....................................34
Section 8.2 Representations and Warranties of the Stockholders....................................35
ARTICLE IX.
MISCELLANEOUS...........................................................................................37
Section 9.1 Termination...........................................................................37
Section 9.2 Simultaneous Transaction..............................................................37
Section 9.3 No Waiver.............................................................................37
Section 9.4 Assignability.........................................................................37
Section 9.5 Notices...............................................................................37
Section 9.6 Third Party Rights....................................................................41
Section 9.7 Choice of Law.........................................................................41
Section 9.8 Severability..........................................................................41
Section 9.9 Enforcement of Agreement..............................................................41
Section 9.10 References to Money...................................................................42
Section 9.11 Construction..........................................................................42
Section 9.12 Entire Agreement......................................................................42
Section 9.13 Headings, etc.........................................................................42
Section 9.14 Counterparts..........................................................................42
Section 9.15 Survival..............................................................................42
Section 9.16 Amendments............................................................................42
Section 9.18 Exchanges.............................................................................43
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT, dated this 13th day of December, 1995, is
made and entered into by and among Green Spring Health Services, Inc., a
Delaware corporation (the "Corporation"), Blue Cross and Blue Shield of New
Jersey, Inc., a New Jersey health service corporation ("BCBSNJ"), Health Care
Service Corporation, an Illinois mutual legal reserve company doing business as
Blue Cross and Blue Shield of Illinois ("BCILL"), Independence Blue Cross, a
Pennsylvania non-profit hospital plan corporation ("IBC"), Xxxxxx County Medical
Bureau, Inc., a Washington non-profit corporation ("PCMB"),and Charter Medical
Corporation, a Delaware corporation ("Charter").
WHEREAS, BCBSNJ, BCILL, IBC and PCMB (individually, a "Minority
Stockholder" and collectively, the "Minority Stockholders") and Charter own 100%
of the issued and outstanding shares of common stock, $.01 par value per share
("Common Stock"), of the Corporation; and
WHEREAS, Charter and the Minority Stockholders believe that it would be
in the best interests of the Corporation that provision be made for the
continuity of ownership and stability of management of the Corporation, and
desire to enter into this Agreement to set forth the terms and conditions
pursuant to which the Corporation will be organized and the business and affairs
of the Corporation will be conducted;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto,
subject to the terms and conditions set forth below, hereby agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
Section 1.1 "Affiliate" shall mean any Person that, directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, the Person specified. As used in this definition,
"control" shall mean the power through the ownership of voting securities,
contract, or otherwise to direct the affairs of another Person.
Section 1.2 "Agreement" shall mean this Stockholders' Agreement as
originally executed or, as the context or subject matter otherwise requires, as
amended, modified, supplemented or restated from time to time.
Section 1.3 "Annual Capital Plan" shall mean the annual and three-year
rolling capital plan and budget of the Corporation and the Subsidiaries prepared
annually by the President and approved by the Board of Directors in accordance
with Section 2.9 hereof.
-1-
Section 1.4 "Annual Operating Plan" shall mean the annual and
three-year rolling operating plan and budget of the Corporation and the
Subsidiaries prepared annually by the President and approved by the Board of
Directors in accordance with Section 2.9 hereof.
Section 1.5 "Base Amount" shall have the meaning ascribed to such
term in Section 6.3 hereof.
Section 1.6 "BCBSNJ" shall have the meaning ascribed to such term
in the Preamble to this Agreement.
Section 1.7 "BCILL" shall have the meaning ascribed to such term
in the Preamble to this Agreement.
Section 1.8 "Board of Directors" shall mean the Board of Directors of
the Corporation.
Section 1.9 "Business" shall mean the business of the Corporation and
the Subsidiaries, as conducted from time to time, including the business of
providing managed behavioral health care services, including managed alcohol and
other substance abuse services, employee assistance plan services, management of
behavioral group practices and MSO services; and the components of such services
may include for a particular client or customer one or more of the following:
case or care management, administrative services for self-insured or partly
self-insured customers, utilization review, certification or pre-admission or
pre-treatment certification, assessment and referral, triage, stop-loss
insurance, single purpose or limited purpose health maintenance organization or
insurance services, services priced on a capitated, non-capitated or
partly-capitated basis, staff clinical services, provider network services and
preferred provider organization services.
Section 1.10 "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New York are
authorized or required by law to close.
Section 1.11 "Bylaws" shall mean the Bylaws of the Corporation in
accordance with Section 2.1 and in the form attached as Exhibit A, as amended,
modified or restated from time to time by the Stockholders in accordance with
Section 2.9 hereof.
Section 1.12 "Capital Contribution" shall have the meaning ascribed to
such term in Section 7.1 hereof.
Section 1.13 "Capital Contribution Notice" shall have the meaning
ascribed to such term in Section 7.1 hereof.
-2-
Section 1.14 "Certificate" shall mean the amended and restated
Certificate of Incorporation of the Corporation in accordance with Section 2.1
and in the form attached as Exhibit B, as amended, modified or restated from
time to time by the Stockholders in accordance with Section 2.9 hereof.
Section 1.15 "Chairman" shall mean the Chairman of the Board of
Directors from time to time elected by the Directors in accordance with Section
2.7 hereof.
Section 1.16 "Charter" shall have the meaning ascribed to such term in
the Preamble to this Agreement and shall include successors and Permitted
Transferees.
Section 1.17 "Charter Change of Control" shall mean any of the
following events: (a) the acquisition after the date of this Agreement, in one
or more transactions, of beneficial ownership (within the meaning of Rule
13d-3(a)(1) under the Exchange Act by any Person or any group of Persons (other
than directors of Charter) who constitute a group (within the meaning of Section
13(d)(3) under the Exchange Act) of any securities of Charter such that as a
result of such acquisition such Person or group beneficially owns (within the
meaning of Rule 13d-3(a)(1) under the Exchange Act) more than 50% of Charter's
then outstanding voting securities entitled to vote on a regular basis for a
majority of the board of directors of Charter; or (b) the sale of all or
substantially all of the assets of Charter (including, without limitation, by
way of merger, consolidation, share exchange, lease, transfer or similar
transaction) in a transaction in which Charter or the holders of Charter Common
Stock do not receive (i) voting securities representing a majority of the voting
power entitled to vote on a regular basis for the board of directors of the
acquiring or surviving entity or of an Affiliate which controls the acquiring or
surviving entity, if a corporation or (ii) securities representing a majority of
the equity interests of the acquiring or surviving entity or of an Affiliate
that controls the acquiring or surviving entity, if other than a corporation.
Section 1.18 "Charter Common Stock" shall mean the Common Stock, par
value $.25 per share, of Charter.
Section 1.19 "Charter Mandatory Call" shall have the meaning ascribed
to such term in Section 6.3 hereof.
Section 1.20 "Charter Proposed Transfer" shall have the meaning
ascribed to such term in Section 5.2 hereof.
Section 1.21 "Charter Option" shall have the meaning ascribed to such
term in Section 6.2 hereof.
Section 1.22 "Chief Executive Officers" shall have the meaning ascribed
to such term in Section 2.10 hereof.
-3-
Section 1.23 "Closing" shall mean the consummation of the transactions
contemplated by the Stock Purchase Agreement.
Section 1.24 "Closing Date" shall mean the date and effective time at
which the Closing occurs.
Section 1.25 "Common Stock" shall have the meaning ascribed to such
term in the First Recital to this Agreement.
Section 1.26 "Confidential Information" shall mean any financial,
operational, technical and other information relating to the present and future
business and affairs of the Corporation and the Subsidiaries, whether (a)
provided in written, graphic, pictorial or recorded form or stored on computer
discs, hard drives, magnetic tape or digital or any other electronic medium or
(b) orally disclosed by representatives of the Corporation. Confidential
Information shall not include any information that: (i) is or subsequently
becomes publicly available without the disclosing or receiving party's breach of
any obligation owed to the Corporation, (ii) became known to the receiving party
from a third party prior to the Corporation's disclosure of such information to
the receiving party other than as a result of the breach of an obligation of
confidentiality owed to the Corporation by such third party or (iii) is
independently developed by the receiving party.
Section 1.27 "Contributing Stockholder" or "Contributing Stockholders"
shall have the meanings ascribed to such terms in Section 7.1(c) hereof.
Section 1.28 "Corporation" shall have the meaning set forth in the
Preamble to this Agreement.
Section 1.29 "Credit Agreement" shall mean the Second Amended and
Restated Credit Agreement, dated as of May 2, 1994, among Buyer, Bankers Trust
Company, as Agent, First Union National Bank of North Carolina, as Co-Agent, and
the Lenders from time to time named as a party to such Credit Agreement, as
amended through the date of this Agreement and as from time to time hereafter
amended, restated, supplemented or otherwise modified.
Section 1.30 "Deadlock" shall have the meaning ascribed to such term
in Section 2.10 hereof.
Section 1.31 "Declining Stockholder" or "Declining Stockholders" shall
have the meanings ascribed to such terms in Section 7.1 hereof.
Section 1.32 "Deemed Conversion Premium" shall have the meaning
ascribed to such term in Section 6.3 hereof.
-4-
Section 1.33 "DGCL" shall mean the Delaware General Corporation Law, as
amended.
Section 1.34 "Directors" shall mean the individuals elected to the
Board of Directors in accordance with Article II hereof.
Section 1.35 "Election Notice" shall have the meaning ascribed to such
term in Section 5.1(b) hereof.
Section 1.36 "Equity Ownership Interest" shall, with respect to any
Stockholder, mean the fraction (a) having as its numerator the number of shares
of Common Stock, whether voting or non-voting (calculated on a fully-diluted
basis) held beneficially by such Stockholder on the date of determination and
(b) having as its denominator the aggregate number of shares of Common Stock,
whether voting or non-voting (calculated on a fully-diluted basis) issued and
outstanding on such date.
Section 1.37 "Equity Securities" shall mean any capital stock of the
Corporation, whether voting or non-voting, and any securities directly or
indirectly convertible into, or exercisable or exchangeable for any capital
stock of the Corporation, or any right, option, warrant or other security which,
with the payment of additional consideration, the expiration of time or the
occurrence of any event shall give the holder thereof the right to acquire any
capital stock of the Corporation or any security convertible into or exercisable
or exchangeable for, any capital stock of the Corporation.
Section 1.38 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Section 1.39 "Exchange Agreement" shall mean the Exchange Agreement,
dated December 13, 1995, as amended, modified, supplemented or restated from
time to time by and among Charter and the Minority Stockholders.
Section 1.40 "Exchange Common Stock" shall mean shares of Charter
Common Stock that have been exchanged for shares of Common Stock pursuant to the
Exchange Agreement, which shares of Charter Common Stock are held beneficially
by the Stockholder making such exchange.
Section 1.41 "Fair Market Value" shall have the meaning ascribed to
such term in Section 7.3 hereof.
Section 1.42 "First Offer Period" shall mean a period commencing upon
delivery of an Offer Notice and expiring at 5:00 p.m., New York time, on the
15th Business Day following delivery of such Offer Notice; provided, however, if
the Proposed Transfer involves Non-Cash Consideration, the First Offer Period
shall not expire until the 10th Business Day after a binding determination of
the Fair Market Value of such Non-Cash Consideration has been made in accordance
with Section 7.3(a) hereof.
-5-
Section 1.43 "Fiscal Year" shall mean the fiscal year of the
Corporation as determined from time to time by the Board of Directors and,
initially, shall be the twelve-month (or, in the case of the first Fiscal Year
the period from Closing until September 30, 1996) period ending each September
30.
Section 1.44 "Fundamental Corporate Transaction" shall mean: (a) any
merger, consolidation, share exchange or other business combination of the
Corporation or GPA with any other Person other than a merger, consolidation,
share exchange or business combination that would result in the Voting
Securities or the voting securities, as applicable, of the Corporation or GPA
outstanding immediately prior to the consummation of such transaction continuing
to represent (either by remaining outstanding or being converted into voting
securities of the surviving entity in such merger, consolidation, share exchange
or business combination) 100% of the total voting power of the Voting Securities
or the voting securities, as applicable, of the Corporation or GPA or of the
voting securities of such surviving entity having the right to vote on a regular
basis for the election of directors in each case outstanding immediately after
such merger, consolidation, share exchange or business combination, (b) any sale
by the Corporation or GPA of all or substantially all of its assets or
properties or (c) any recapitalization or liquidation of, or filing of a
voluntary bankruptcy petition by, the Corporation or GPA.
Section 1.45 "Fundamental Issues" shall have the meaning ascribed to
such term in Section 2.9 hereof.
Section 1.46 "GAAP" shall mean generally accepted accounting principles
(as such term is used in the American Institute of Certified Public Accountants'
Professional Standards) from time to time in effect.
Section 1.47 "Governmental Authority" shall mean any foreign, federal,
state or local governmental entity or municipality or subdivision thereof or any
authority, department, commission, board, bureau, agency, court or
instrumentality thereof.
Section 1.48 "GPA" shall mean Group Practice Affiliates, Inc., a
Delaware corporation and a wholly-owned Subsidiary of the Corporation.
Section 1.49 "GSHS Common Stock" shall mean the common stock, par
value $.01 per share, of GSHS.
Section 1.50 "Issuance" shall have the meaning ascribed to such term
in Section 6.1 hereof.
Section 1.51 "Mandatory Call Notice" shall have the meaning ascribed to
such term in Section 6.3 hereof.
-6-
Section 1.52 "Minority Stockholder" and "Minority Stockholders" shall
have the meanings ascribed to such terms in the First Recital to this Agreement
(a) for so long as such Person or a Permitted Transferee of such Person pursuant
to Section 1.62(f) holds Equity Securities or (b) for purposes of Article II,
for so long as such Person or a Permitted Transferee of such Person pursuant to
Section 1.62(f) holds any Exchange Common Stock or is a party to an Operating
Agreement.
Section 1.53 "Non-Cash Consideration" shall have the meaning ascribed
to such term in Section 5.1(f) hereof.
Section 1.54 "Non-Selling Stockholders" shall have the meaning ascribed
to such term in Section 5.1 hereof.
Section 1.55 "Offer Notice" shall have the meaning ascribed to such
term in Section 5.1 hereof.
Section 1.56 "Offer Percentage" shall have the meaning ascribed to such
term in Section 5.1(b) hereof.
Section 1.57 "Offer Period" shall mean a period commencing upon
delivery of an Offer Notice and expiring upon the earlier of (a) in the case of
the Right of First Refusal, the expiration of the Third Offer Period or, in the
case of the Charter Right of First Refusal, the expiration of the Second Offer
Period and (b) the delivery of one or more Election Notices for the purchase of
all of the Equity Securities covered by such Offer Notice.
Section 1.58 "Operating Agreement" shall mean an agreement between the
Corporation or a Subsidiary and a Stockholder (other than Charter) or an
Affiliate for the provision by the Corporation or a Subsidiary of one or more of
the services offered by the Corporation and its Subsidiaries in the conduct of
the Business.
Section 1.59 "Option Notice" shall have the meaning ascribed to such
term in Section 6.2 hereof.
Section 1.60 "Option Period" shall mean a period commencing upon
delivery of an Option Notice and expiring at 5:00 p.m., New York time, on the
20th Business Day following delivery of such Option Notice.
Section 1.61 "PCMB" shall have the meaning ascribed to such term in the
Preamble to this Agreement.
-7-
Section 1.62 "Permitted Transfer" shall mean a Transfer of Equity
Securities by: (a) a Stockholder to Charter pursuant to the Exchange Agreement;
(b) a Stockholder to another Stockholder, Charter, the Corporation or a Third
Party Purchaser pursuant to the Right of First Refusal or by Charter to a
Stockholder, the Corporation or a Third Party Purchaser pursuant to the Charter
Right of First Refusal; (c) a Stockholder to Charter pursuant to the Charter
Option; (d) a Stockholder to Charter pursuant to the Charter Mandatory Call; (e)
the Corporation to a Stockholder or other Person in a manner not inconsistent
with the restrictions set forth in this Agreement; (f) a Stockholder to a
corporation that owns 100% of such Stockholder's voting equity securities, a
corporation the voting equity securities of which are owned 100% by the
corporation that owns 100% of such Stockholder's voting equity securities, or a
corporation the voting equity securities of which are 100% owned by such
Stockholder and any subsequent Transfer to such Stockholder required by Section
7.7 of this Agreement provided, that as to any Stockholder which is a non-profit
membership corporation without any authorized or outstanding class of voting
equity securities, a Permitted Transfer under this subsection 1.62(f) shall also
include a Transfer of Equity Securities by such Stockholder to a corporation
which is its sole voting member having the right to vote in the election of such
Stockholder's directors (the "Sole Voting Member"), to a corporation the voting
equity securities of which are owned 100% by such Sole Voting Member, or to a
corporation as to which such Sole Voting Member has the exclusive right to vote
in the election of such corporation's directors; or (g) a Stockholder in the
form of a pledge of Equity Securities to a bona fide financial institution,
which, immediately prior to the creation of such Pledge, is not an Affiliate of
such Stockholder, to secure bona fide arms' length recourse indebtedness of such
Stockholder and/or its subsidiaries if the pledgee thereof agrees (i) to provide
the Corporation with all notices of foreclosure by such pledgee and (ii) in the
event of such a default and enforcement by the pledgee of its rights to become
the record holder of the Equity Securities pledged to secure such indebtedness,
to be bound by the provisions hereof applicable to its transferor, it being
understood that both (x) the making of such pledge and (y) such financial
institution's becoming the owner of the Equity Securities subject to such pledge
in satisfaction of all or any part of the indebtedness secured thereby or
otherwise as a result of the exercise by it of its rights and remedies with
respect thereto shall each constitute a Permitted Transfer under this clause
(g); provided, however, that, in all such events, no such Transfer described in
clauses (a) through (g) (except for a pledge pursuant to clause (g)) shall be a
Permitted Transfer unless, prior to such Transfer, the transferee shall either
be a party to this Agreement or shall execute and deliver to the Corporation a
writing, in form and substance reasonably satisfactory to the Corporation,
agreeing that such transferee shall join in this Agreement as a Stockholder and
become bound by all of the terms and restrictions of this Agreement applicable
to its transferor; and provided further that each Stockholder that is a
Permitted Transferee pursuant to clause (g)(ii) above shall during the term of
this Agreement (and notwithstanding any other provisions of this Agreement) vote
all shares of Voting Securities acquired by it pursuant to clause (g) above at
each meeting of Stockholders and on each action or proposal voted upon by
Stockholders in the same proportion as all other Stockholders (other than
Stockholders that also hold Voting Securities pursuant to a clause (g)(ii)
Transfer) vote their shares of Voting Securities on each such action or
proposal.
-8-
Section 1.63 "Permitted Transferee" shall mean any transferee of Equity
Securities in a Permitted Transfer.
Section 1.64 "Person" shall mean an individual, firm, trust,
association, corporation, partnership, limited liability company, Governmental
Authority or other entity.
Section 1.65 "Preemptive Notice" shall have the meaning ascribed to
such term in Section 6.1 hereof.
Section 1.66 "Preemptive Right" shall have the meaning ascribed to such
term in Section 6.1 hereof.
Section 1.67 "Preemptive Right Offer Period" shall have the meaning
ascribed to such term in Section 6.1 hereof.
Section 1.68 "Preemptive Right Securities" shall have the meaning
ascribed to such term in Section 6.1 hereof.
Section 1.69 "President" shall mean the President of the Corporation,
who shall be the Chief Executive Officer of the Corporation, from time to time
appointed by the Board of Directors in accordance with the Bylaws.
Section 1.70 "Proposed Transfer" shall have the meaning ascribed to
such term in Section 5.1 hereof.
Section 1.71 "Right of First Refusal" shall have the meaning ascribed
to such term in Section 5.1 hereof.
Section 1.72 "SEC" shall mean the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act or the Exchange Act.
Section 1.73 "Second Offer Period" shall mean a period commencing on
the first Business Day following the First Offer Period and expiring at 5:00
p.m., New York time on the 10th Business Day thereafter.
Section 1.74 "Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.75 "Selling Stockholder" shall have the meaning ascribed to
such term in Section 5.1 hereof.
-9-
Section 1.76 "Stockholder" and "Stockholders" shall mean Charter, the
Minority Stockholders and any Permitted Transferee, for so long as such Person
holds any Equity Securities.
Section 1.77 "Stock Purchase Agreement" shall have the meaning ascribed
to such term in the Exchange Agreement.
Section 1.78 "Subsidiary" shall mean a corporation, partnership,
limited liability company, or other entity of which the Corporation (a) has the
power to elect more than 50% of the board of directors or other governing
authority either directly or indirectly or (b) owns or controls more than 50% of
the outstanding equity securities or equity interests either directly or
indirectly through an unbroken chain of entities as to each of which 50% or more
of the outstanding equity securities or equity interests is owned directly or
indirectly by its parent.
Section 1.79 "Third Offer Period" shall mean a period commencing on the
first Business Day following the Second Offer Period and expiring at 5:00 p.m.,
New York time, on the 5th Business Day thereafter.
Section 1.80 "Third Party Purchaser" shall have the meaning ascribed to
such term in Section 5.1(e) hereof.
Section 1.81 "Transfer" shall mean any transfer, sale, exchange,
assignment, mortgage, pledge, grant of lien on or security interest in, gift or
other disposition of any legal or beneficial interest or encumbrance of any
nature, voluntary, involuntary or by operation of law.
Section 1.82 "Voting Ownership Interest" shall, with respect to any
Stockholder, mean the fraction (a) having as its numerator the number of shares
of voting Common Stock (calculated on a fully-diluted basis) beneficially owned
by such Stockholder on the date of determination and (b) having as its
denominator the aggregate number of shares of voting Common Stock (calculated on
a fully-diluted basis) issued and outstanding on such date.
Section 1.83 "Voting Securities" shall mean any Equity Securities,
including Common Stock, having voting rights generally with respect to matters
submitted to a vote of the stockholders of the Corporation.
ARTICLE II.
MANAGEMENT OF THE CORPORATION
Section 2.1 Certificate and Bylaws. In addition to the provisions of
this Agreement and the Exchange Agreement, the rights of the Stockholders and
the business and affairs of the Corporation shall be conducted in accordance
with the Certificate and the Bylaws. To the fullest extent permitted by
applicable law, the Certificate and the Bylaws shall be subject in their
entirety to the terms and restrictions set forth in this Agreement. Each
Stockholder hereby ratifies and
-10-
approves the adoption of the Certificate and the Bylaws as set forth on Exhibits
B and A, respectively. In the event of a conflict between this Agreement and the
Certificate or the Bylaws, each Stockholder shall, if permitted by the DGCL,
cause the Voting Securities owned beneficially or of record by such Stockholder
to be voted in favor of an amendment to the Certificate or the Bylaws, as
appropriate, to conform the terms thereof to the terms of this Agreement.
Section 2.2 Board of Directors. Subject to the terms of this Agreement,
the Certificate and the Bylaws, the business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors, which
shall consist of nine Directors (unless changed by amendment of the Bylaws).
Each Director shall serve until (a) the designation, election, qualification and
acceptance of his or her successor or (b) his or her earlier death, resignation
or removal. Directors need not be residents of Delaware or Stockholders of the
Corporation. Directors shall serve on the Board of Directors, any committee of
the Board of Directors and the board of directors of any Subsidiary without
compensation from the Corporation or any Subsidiary for such service. Each
Stockholder shall be responsible for compensating any Director designated by
such Stockholder for service on the Board of Directors, any such committee or
the board of directors of any Subsidiary; and the Corporation shall be
responsible for reimbursing any Director designated by such Stockholder for any
expenses incurred in connection with such service.
Section 2.3 Voting; Designation of Directors. (a) At each annual
meeting of the Stockholders and each special meeting called for the purpose of
electing Directors, and at any time at which Stockholders shall have the right
to, or shall, vote for Directors, each Stockholder shall cause all Voting
Securities beneficially owned by such Stockholder to be voted in favor of the
election of the representatives of Charter and the Minority Stockholders as
provided in subsections (b) and (c) of this Section 2.3 and shall otherwise take
such action as may be necessary to ensure that each of Charter and the Minority
Stockholders shall be afforded such representation on the Board of Directors as
is contemplated by this Agreement.
(b) Charter shall be entitled to designate a number of
Directors equal to (i) the number of Directors constituting the Board of
Directors minus (ii) the number of Directors the Minority Stockholders are
entitled to designate pursuant to subsection (c) of this Section 2.3.
(c) For so long as (i) a Minority Stockholder or a Permitted
Transferee of such Minority Stockholder pursuant to Section 1.62(f) holds
beneficially any shares of Common Stock or (ii) a Minority Stockholder is a
party to an Operating Agreement (which has not been breached by such Minority
Stockholder in any material respect), such Minority Stockholder shall be
entitled to designate one Director.
(d) The voting obligations created hereby shall survive and
continue with respect to each Stockholder notwithstanding the fact that any such
Stockholder may not be entitled to designate or to participate in the
designation of a member of the Board of Directors.
-11-
Section 2.4 Removal and Replacement. Charter or any Minority
Stockholder may, from time to time, without the approval or consent of any other
party hereto, without cause and without any condition or restriction whatsoever
remove any or all of its designees that have been elected to the Board of
Directors in accordance with this Article II. In the event that a Minority
Stockholder shall not have the right hereunder to designate a Director, such
Minority Stockholder shall immediately remove its designee from the Board of
Directors. Upon any removal or the occurrence of a vacancy on the Board of
Directors for any reason whatsoever, such vacancy shall be filled by the
Stockholders in the manner provided in Section 2.3 and not by the remaining
Directors. In such a case, the Chairman or Stockholders shall call, notice and
convene a special meeting of the Stockholders within ten Business Days of the
occurrence of such vacancy for the purpose of filling such vacancy. At such
meeting, each Stockholder shall cause the Voting Securities beneficially owned
by such Stockholder to be voted in favor of the election of a new Director to
fill such vacancy in a manner consistent with Section 2.3 hereof. During the
pendency of any vacancy and until the vacancy is filled in the manner
contemplated by this Section 2.4, no meeting of the Board of Directors shall be
held and no action by written consent shall be taken without the prior consent
of the Stockholder or Stockholders having the right to designate the Director
who will fill such vacancy.
Section 2.5 Composition of the Board of Directors of Subsidiaries. The
Stockholders acknowledge and agree that the composition of the boards of
directors of each Subsidiary of the Corporation shall consist of nine directors
and such boards of directors shall be established and maintained on a basis
consistent with the procedure described in this Article II, so that Charter and
the Minority Stockholders shall at all times have the same number of designees
on each such board of directors as they have on the Board of Directors;
provided, however, that the Subsidiary board composition provided by this
Section 2.5 may be changed with respect to any Subsidiary or all Subsidiaries
without amending this Agreement if and for so long as the Directors unanimously
agree in writing or at a Board of Directors meeting to such change.
Section 2.6 Board Action; Quorum Requirement. Except as expressly
provided in Section 2.9 hereof, in any action taken by the Directors at a
meeting of the Board of Directors, the act of a majority of the Directors
present at a meeting at which a quorum is present shall constitute action by the
Board of Directors. The presence of a majority of the members of the Board of
Directors fixed by this Agreement shall constitute a quorum for the transaction
of business. Any action by the Board of Directors by written consent, in lieu of
a meeting, shall be unanimous to be effective.
Section 2.7 Designation of Chairman. The Minority Stockholders shall
have the right to designate the Chairman of the Board of Directors as provided
in this Section 2.7. In connection with each annual meeting of the Board of
Directors occurring prior to the third anniversary date of this Agreement, each
Minority Stockholder shall be entitled to nominate one Director as a candidate
for Chairman of the Board of Directors. Each Stockholder shall cause such
Stockholder's respective designee or designees on the Board of Directors to vote
so as to elect one of such nominees as
-12-
Chairman. Notwithstanding anything in this Agreement to the contrary, the term
of a Chairman elected hereunder shall not extend past the third anniversary date
of this Agreement. Election of the Chairman shall be by a plurality vote. Upon
the occurrence of a vacancy in the office of Chairman for any reason, such
vacancy shall be filled by the remaining Directors. In such a case, the
Directors shall call, notice and commence a special meeting of the Board of
Directors within ten Business Days of the occurrence of such vacancy for the
purpose of filling such vacancy. At such meeting, a new Chairman of the Board of
Directors shall be elected in the same manner as provided in this Section 2.7
for election at an annual meeting. Following three years after the date of this
Agreement, the Chairman of the Board of Directors shall be elected as provided
in the Bylaws.
Section 2.8 Stockholder Action. Except as otherwise provided in Section
2.9 hereof, in the case of any action proposed to be taken by the Stockholders
at a meeting of the Stockholders, or at any time Stockholders shall have the
right to, or shall vote, the act of the Stockholders holding a majority of the
voting power of the outstanding shares of Voting Securities entitled to vote and
present at a meeting, in person or by proxy, at which a quorum is present, shall
constitute action by the Stockholders of the Corporation. Each Stockholder shall
be entitled to a number of votes equal to the number of shares of Voting
Securities that are issued and outstanding and held of record by such
Stockholder and entitled to be voted at the meeting. The presence, in person or
by proxy, of a majority of the outstanding shares of each class of Voting
Securities shall constitute a quorum for the transaction of business at any
annual or special meeting of the Stockholders. Stockholders may participate in a
meeting of the Stockholders by means of conference telephone or similar
communications equipment by means of which all participants in the meeting can
hear each other, and such participation in a meeting shall constitute presence
in person at the meeting.
Section 2.9 Fundamental Issues. Notwithstanding the majority vote
requirements set forth in Sections 2.6 and 2.8 hereof, each of the following
actions or transactions (the "Fundamental Issues") shall require, and shall not
be taken or consummated without: (a) in the case of clauses (i) through (iii)
the favorable vote of not less than two-thirds of the number of Directors
constituting the Board of Directors (provided, that any Director that is
designated by a Minority Stockholder that does not hold, and as to which a
Permitted Transferee of such Minority Stockholder pursuant to Section 1.62(f)
does not hold, at the time such action is to be taken, any shares of Common
Stock or Exchange Common Stock, shall abstain from any vote under clauses (ii)
and (iii) hereof); and (b) in the case of clauses (iv) through (vii), the
favorable vote of the holders of a majority of the issued and outstanding Voting
Securities and the favorable vote of Minority Stockholders holding a majority of
the aggregate shares of Voting Securities held by the Minority Stockholders at
the time such action is to be taken (calculated, for purposes of this Section
2.9, as if the Minority Stockholders hold all shares of Common Stock previously
exchanged for Charter Common Stock that is, as the date of determination,
Exchange Common Stock):
(i) approval or modification of the Annual Operating Plan;
(ii) approval or modification of the Annual Capital Plan;
-13-
(iii)exercise by the Corporation of (A) the Right of First
Refusal or approval of any Transfer to a Third Party Purchaser pursuant to the
Right of First Refusal, (B) the Charter Right of First Refusal and (C) the
Corporation's rights pursuant to Section 4.4;
(iv) issuance of any Equity Securities of the Corporation or GPA,
except for issuances to Charter pursuant to Section 6.1 and issuances pursuant
to Section 7.1, if such issuances are in accordance with an Annual Capital Plan;
(v) approval of any Fundamental Corporate Transaction;
(vi) incurrence of indebtedness by the Corporation or any
consolidated subsidiary in excess of $250,000 during any Fiscal Year, which
indebtedness is not contemplated by the Annual Operating Plan or Annual Capital
Plan; or
(vii)amendment, modification or restatement of the Certificate or the
Bylaws.
In the event that all of the Voting Securities of the Corporation are
beneficially owned by Charter and one other Stockholder, the approval
requirements of this Section 2.9 shall terminate and be of no further force or
effect, and in such case the designation provisions of Section 2.3 shall
terminate; provided, however, that in the event that (i) a majority in interest
of the Voting Securities of the Corporation are beneficially owned in the
aggregate by Minority Stockholders and any Permitted Transferees (other than
Charter) of any Minority Stockholder under Section 1.62(f) of this Agreement, or
(ii) Charter (including for this purpose only Charter Medical Corporation and
its Permitted Transferees under Section 1.62(f) of the Agreement) has the right
to vote or direct the voting of less than a majority of the Voting Securities of
the Corporation, then in either such case, the Minority Stockholders (and their
Permitted Transferees under Section 1.62(f) of this Agreement) shall have the
option to maintain in effect or to terminate either or both of (x) the
designation provisions of Section 2.3 or (y) the approval requirements of
Section 2.9.
Section 2.10 Deadlock. (a) A deadlock of the Stockholders or Board of
Directors (a "Deadlock") shall be deemed to exist (i) if the Stockholders or the
Board of Directors shall be unable to reach agreement by the required vote on
any significant issue that has been submitted for consideration at two
successive meetings, (ii) if the Stockholders or Board of Directors shall be
unable to achieve a quorum for the conduct of business at two successive
meetings, or (iii) if the Board of Directors shall be unable to convene a
meeting for a period of 20 Business Days following the occurrence of a vacancy
that is not filled in the manner set forth in Section 2.4.
(b) If a Deadlock exists, the Stockholders or Board of
Directors, as appropriate, shall negotiate in good faith and use their
respective best efforts to resolve such Deadlock. If, however, after 20 Business
Days such Deadlock remains, Charter or any Minority Stockholder, by giving
notice to the other Stockholders, may request that such Deadlock be referred for
resolution to the chief executive officer of Charter and the chief executive
officers of two of the Minority
-14-
Stockholders (designated by the consent of a majority of the aggregate shares of
Voting Securities held by the Minority Stockholders at the time such action is
to be taken, assuming, for purposes of this Section 2.10, that the Minority
Stockholders hold all shares of Common Stock previously exchanged for Charter
Common Stock that is, as of any date of determination, Exchange Common Stock)
(the "Chief Executive Officers"). The Chief Executive Officers shall meet within
20 Business Days thereafter and shall attempt in good faith to resolve such
Deadlock. Any resolution agreed to in writing by the Chief Executive Officers
shall be final and binding on the Corporation and the Stockholders, so long as
the resolution is not inconsistent with any provision of this Agreement.
Notwithstanding anything herein to the contrary, at any time during the pendency
of a Deadlock, Charter shall be entitled to make an offer to purchase all of the
Equity Securities held by the Stockholders (other than Charter) pursuant to the
Charter Option.
(c) During the pendency of any Deadlock relating to the
approval of any Annual Operating Plan or Annual Capital Plan for an ensuing
Fiscal Year, the Board of Directors and the President shall conduct the Business
of the Corporation in accordance with the Annual Operating Plan and Annual
Capital Plan for the immediately preceding Fiscal Year.
ARTICLE III.
PLANS AND REPORTS
Section 3.1 Annual Operating Plan; Annual Capital Plan. At least 60
calendar days prior to the beginning of each Fiscal Year, the President shall
prepare, distribute to Directors not less than 5 Business Days prior to the
meeting at which such matter is to be considered and present to the Board of
Directors for its consideration in accordance with Section 2.9 hereof the Annual
Operating Plan and Annual Capital Plan for the Corporation for the ensuing
Fiscal Year and rolling three-year period. The Annual Operating Plan shall set
forth in reasonable detail, among other things, estimates by calendar month of
anticipated revenues, expenditures, and cash requirements of the Business for
such Fiscal Year and rolling three-year period and the anticipated marketing,
product development and system or other operational or organizational
enhancements to be implemented during such period. The Annual Capital Plan shall
set forth in reasonable detail, among other things, the anticipated capital
requirements of the Business for such Fiscal Year and rolling three-year period,
the anticipated return on such investments, the anticipated source of funding
such investments, and the anticipated Capital Contributions and Equity
Securities to be issued with respect thereto pursuant to Section 7.1. The
President shall make such changes to the Annual Operating Plan and Annual
Capital Plan as the Board of Directors shall request and, upon approval by the
Board of Directors in accordance with Section 2.9 hereof, shall conduct the
day-to-day Business of the Corporation substantially in accordance therewith.
-15-
Section 3.2 Books and Records. Copies of the books and records of the
Corporation shall be maintained at the Corporation's principal place of
business. All of the books and records of the Corporation shall be maintained in
U.S. dollars. The Board of Directors shall cause the Corporation to maintain the
following: (a) a current list of the full name and last known business or
residence address of each Stockholder set forth in alphabetical order together
with the Equity Securities of the Corporation held of record by such
Stockholder, (b) copies of the Corporation's federal, state and local income tax
returns and reports, if any, for all taxable years for which the respective
statute of limitations remains open, (c) copies of this Agreement and all
amendments hereto and (d) the consolidated financial statements of the
Corporation for the three most recent Fiscal Years. Each Stockholder who owns at
least 5% of the Common Stock, or its duly authorized representative, shall have
access to the books and records of the Corporation, upon reasonable notice,
during the normal business hours of the Corporation.
Section 3.3 Accounts and Reports. The Corporation shall maintain a
proper system of accounts in accordance with GAAP consistently applied, shall
keep full and complete financial records in which entries shall be made in
accordance with GAAP, reflecting financial transactions of the Corporation and
in which proper reserves for depreciation, obsolescence, amortization, taxes,
bad debts and other purposes shall be made, and shall, except as hereinafter set
forth, furnish to each Stockholder, so long as such Stockholder shall own at
least 5% of the Common Stock, the following reports:
(a) within 25 (or in the case of the last month of any fiscal
quarter of the Corporation's Fiscal Year, 40) days after the close of each of
the first eleven months of each Fiscal Year and within 55 days of the close of
the last month of each Fiscal Year, copies of (i) the balance sheet of the
Corporation as of the end of such month, (ii) statements of operations and cash
flows of the Corporation for such month and (iii) a report of the aging of
receivables and classification thereof by age and type;
(b) within 55 days after the close of each of the first three
fiscal quarters of each Fiscal Year and within 70 days after the close of the
fourth fiscal quarter of each Fiscal Year, copies of (i) the balance sheet of
the Corporation as of the end of such quarter and (ii) statements of the
operations and cash flows of the Corporation for such quarter and the elapsed
portion of the Fiscal Year ended with the last day of such quarter, in each case
setting forth comparative figures for the preceding Fiscal Year (except that
balance sheet comparisons may be made to the prior Fiscal Year end), prepared in
accordance with GAAP (subject to normal year-end and quarterly adjustments) and
certified by the Chief Financial Officer of the Corporation; and
(c) within 90 days after the close of each Fiscal Year, the
balance sheet of the Corporation as of the end of such Fiscal Year and the
related statements of operations, changes in stockholders' equity and cash flows
for such Fiscal Year, prepared in accordance with GAAP and audited by Xxxxxx
Xxxxxxxx LLP or such other independent certified public accountants of
recognized national standing selected by the Board of Directors.
-16-
Section 3.4 Consolidated Basis. The Annual Operating Plan, Annual
Capital Plan and all financial information provided pursuant to this Article III
shall include the Corporation and its Subsidiaries.
ARTICLE IV.
RESTRICTIONS ON TRANSFER
Section 4.1 Restrictions on Transfer. No Stockholder shall make or
permit to be made, any Transfer of any Equity Securities now held or hereafter
acquired by such Stockholder except in a Permitted Transfer in compliance with
the terms and conditions of this Agreement and with then applicable laws, rules
and regulations.
Section 4.2 Scope of Restrictions on Transfer. Each Stockholder
acknowledges that the restrictions on Transfer of Equity Securities set forth
herein are imposed to accomplish legitimate purposes of the parties hereto, and
that such restrictions are not more restrictive than necessary to accomplish
such purposes. Each Stockholder acknowledges that no Equity Securities of the
Corporation, whether now owned or hereafter acquired by such Stockholder, nor
any right, title or interest therein, shall be subject to any Transfer except
for a Permitted Transfer in compliance with the terms and conditions of this
Agreement.
Section 4.3 Permitted Transfers. Notwithstanding the foregoing, any
Stockholder may Transfer all or any portion of any Equity Securities owned by
such Stockholder pursuant to a Permitted Transfer as long as the other
requirements, if any, for an effective Transfer, as set forth in this Agreement,
are fulfilled in connection with such Permitted Transfer.
Section 4.4 Involuntary Transfers. In the event that the Equity
Securities owned by any Stockholder shall be subject to Transfer by reason of
(a) bankruptcy or insolvency proceedings, whether voluntary or involuntary, or
(b) distraint, levy, execution or other involuntary Transfer (unless, in the
case of clause (b) the transferee releases such Equity Securities within 5
Business Days of the occurrence of such involuntary Transfer), then, unless such
Transfer constitutes a Permitted Transfer, such Stockholder shall give the
Corporation written notice thereof promptly upon the occurrence of such event
stating the terms of such proposed Transfer, the identity of the proposed
transferee and the price or other consideration, if readily determinable, for
which the subject Equity Securities are to be transferred. After receipt of such
notice, or failing such receipt, after the Corporation otherwise obtains actual
knowledge of such a proposed Transfer, the Corporation shall have the right to
purchase (or to assign to the other Stockholders, pro rata, the right to
purchase; and if any such Stockholder other than Charter declines to exercise
its right to purchase, such right shall be reassigned by the Corporation and
such Stockholder to Charter) all, but not less
-17-
than all of the Equity Securities subject to such involuntary Transfer at the
price and on the terms applicable to such proposed Transfer, which right shall
be exercised by written notice given by the Corporation or the other
Stockholders to the Stockholder subject to such involuntary Transfer within 60
days following the Corporation's receipt of such notice or, failing such
receipt, the Corporation's obtaining actual knowledge of such involuntary
Transfer. The closing of the purchase and sale of such Equity Securities shall
be held at the principal office of the Corporation on a date to be established
by the Corporation, which date shall in no event shall be less than 10 nor more
than 20 Business Days from the date on which the Corporation gives notice of its
election to purchase the subject Equity Securities. If the nature of the event
giving rise to such involuntary Transfer is such that no readily determinable
consideration is to be paid for the Transfer of such Equity Securities, the
price to be paid by the Corporation (or its assignees) shall be the then current
Fair Market Value thereof as determined in accordance with Section 7.3(a)
hereof.
Section 4.5 Noncomplying Transfers Void. Any purported Transfer of
Equity Securities other than in compliance with the terms and conditions of this
Agreement shall be void and of no force and effect, and the Corporation shall be
entitled to recognize the last Stockholder of record who acquired such Equity
Securities in a manner not contrary to this Agreement as the holder of such
Equity Securities for all purposes.
-18-
Section 4.6 Legend. Each Stockholder acknowledges and agrees that each
certificate representing Equity Securities shall bear a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE
CORPORATION OF AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO
THE CORPORATION THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SALE,
ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF ARE SUBJECT
TO CERTAIN RESTRICTIONS AND AGREEMENTS CONTAINED IN A STOCKHOLDERS'
AGREEMENT DATED DECEMBER 13, 1995, AMONG THE CORPORATION AND ITS
STOCKHOLDERS, A COPY OF WHICH IS ON FILE AND MAY BE EXAMINED AT THE
PRINCIPAL OFFICE OF THE CORPORATION BY ANY REGISTERED HOLDER OF EQUITY
SECURITIES. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IN CONTRAVENTION OF SUCH AGREEMENT SHALL BE VOID AND OF NO
EFFECT.
ARTICLE V.
RIGHTS OF FIRST REFUSAL
Section 5.1 Non-Charter Right of First Refusal.
(a) In the event that any Stockholder other than Charter has a
binding, written offer for the Transfer of, and desires to accept such offer to
purchase, any Equity Securities other than pursuant to a Permitted Transfer
described in clauses (a), (c), (d), (e), (f) or (g) of Section 1.62 hereof (a
"Proposed Transfer"), such Stockholder (the "Selling Stockholder") shall deliver
to the Corporation and the remaining Minority Stockholders (the "Non-Selling
Stockholders") and to Charter written notice of the material terms of such
offer, including the proposed purchaser thereof, the amount and nature of the
consideration to be received, the conditions, if any, associated therewith and
any other material terms of such offer (an "Offer Notice"). The Offer Notice
shall constitute an irrevocable offer by the Selling Stockholder to sell all
(but not less than all) of the Equity Securities subject to the Proposed
Transfer (i) first, to the Non-Selling Stockholders; (ii) second, to Charter and
(iii) third, to the Corporation on terms and conditions of the Proposed
Transfer, except that a
-19-
purchaser under this Section 5.1 shall have the right to pay cash in an amount
equal to the Fair Market Value of any Non-Cash Consideration (the "Right of
First Refusal").
(b) During the First Offer Period, each Non-Selling
Stockholder may elect to purchase all or any portion of such Non-Selling
Stockholder's "Offer Percentage" of the Equity Securities subject to the
Proposed Transfer by delivering written notice of such election stating the
number of shares of Equity Securities to be purchased (an "Election Notice") to
the Corporation, Charter and the Selling Stockholder prior to the expiration of
the First Offer Period. As used herein, a Stockholder's "Offer Percentage" shall
be equal to the fraction (expressed as a percentage) the numerator of which is
the number of shares of Common Stock held by such Stockholder on the date of the
Offer Notice and the denominator of which is the number of shares of Common
Stock held on such date by all Non-Selling Stockholders; provided that a
Stockholder shall have the right in an Election Notice to agree to purchase all
or any portion of the shares of Equity Securities that could be purchased by
other Stockholders; and, if one or more Stockholders do not deliver an Election
Notice or elect to purchase less than their respective Offer Percentages, then
the shares of Equity Securities that could have been purchased by such
Stockholders shall be purchased by Stockholders that, in an Election Notice,
agreed to purchase such shares, and each such Stockholder shall purchase the
number of such shares indicated in an Election Notice, unless the sum of such
numbers of shares exceeds the number of shares so available for purchase, in
which case such shares shall be purchased pro rata on the basis of the
proportionate amount of the Offer Percentage of such Stockholders that deliver
an Election Notice. The failure by any Non-Selling Stockholder to deliver an
Election Notice during the First Offer Period shall be deemed to be an election
by such Stockholder not to purchase any of the Equity Securities subject to the
Proposed Transfer.
(c) If the Non-Selling Stockholders do not elect during the
First Offer Period to purchase all of the Equity Securities subject to the
Proposed Transfer, during the Second Offer Period, Charter may elect to purchase
all or any portion of such Equity Securities that the Non-Selling Stockholders
did not elect to purchase during the First Offer Period by delivering an
Election Notice to the Corporation and the Selling Stockholder prior to the
expiration of the Second Offer Period. The failure by Charter to deliver an
Election Notice during the Second Offer Period shall be deemed to be an election
by Charter not to purchase any of the Equity Securities subject to the Proposed
Transfer.
(d) If the Non-Selling Stockholders and Charter do not elect
during the First and Second Offer Periods to purchase all of the Equity
Securities subject to the Proposed Transfer, during the Third Offer Period, the
Corporation may elect to purchase all (but not less than all) of the Equity
Securities that the Non-Selling Stockholders and Charter did not elect to
purchase during the First and Second Offer Periods by delivering an Election
Notice to Charter and the Selling Stockholder prior to the expiration of the
Third Offer Period. The failure by the Corporation to deliver an Election Notice
during the Third Offer Period shall be deemed to be an election by the
Corporation not to purchase any of the Equity Securities subject to the Proposed
Transfer.
-20-
(e) If the Non-Selling Stockholders, Charter and the
Corporation (either individually or collectively) do not elect to purchase all
of the Equity Securities subject to the Proposed Transfer, the Selling
Stockholder may, upon approval by the Board of Directors in its sole discretion
pursuant to Section 2.9(iii) hereof, Transfer to the purchaser named in the
Offer Notice (the "Third Party Purchaser") all (but not less than all) of the
Equity Securities subject to the Proposed Transfer in accordance with the terms
and conditions set forth in the Offer Notice; provided, however, that if the
Selling Stockholder has not consummated the Transfer of such Equity Securities
within the 45 Business Day period following the approval of such Transfer by the
Board of Directors, all of the restrictions on Transfer contained in this
Agreement shall again be in effect with respect to such Equity Securities. Upon
a Transfer of Equity Securities to a Third Party Purchaser, the Corporation
shall not be obligated to transfer ownership of such Equity Securities on the
records of the Corporation unless such Third Party Purchaser has complied with
the proviso to Section 1.62.
(f) If the consideration for the sale of Equity Securities
pursuant to the Proposed Transfer is cash consideration, the purchase price to
be paid by each of the Non-Selling Stockholders, Charter and the Corporation, as
applicable, shall be equal to the total consideration set forth in the Offer
Notice multiplied by the fraction (a) the numerator of which is the number of
shares or other units of Equity Securities being purchased by such Non-Selling
Stockholder, Charter or the Corporation, as applicable, and (b) the denominator
of which is the total number of shares or other units of Equity Securities
subject to such Offer Notice. If the consideration for the Proposed Transfer
consists of consideration that is other than cash consideration payable in
immediately available funds at the closing thereunder ("Non-Cash Consideration")
or consists of a combination of cash consideration and Non-Cash Consideration,
the purchase price shall be cash in an amount equal to the total of the cash
consideration, if any, and the Fair Market Value of the Non-Cash Consideration
as determined in accordance with Section 7.3(a) hereof.
(g) The purchase and sale of Equity Securities pursuant to
this Right of First Refusal shall be consummated at a closing that shall occur
at the principal business office of the Corporation within 20 Business Days
following the expiration of the relevant Offer Period, or at such other place or
time as may be mutually acceptable to the parties. At such closing, the Selling
Stockholder shall deliver a certificate or other instrument representing the
Equity Securities being purchased, free and clear of all liens, claims,
encumbrances (other than as a result of this Agreement) and defects in title and
duly endorsed for Transfer to the appropriate purchaser and, in exchange
therefor, the purchaser of such Equity Securities shall pay the purchase price
provided in Section 5.1(f) hereof at such closing by bank wire transfer of
immediately available funds to a bank account designated in writing by the
Selling Stockholder at least three Business Days prior to such closing.
-21-
Section 5.2 Charter Right of First Refusal.
(a) In the event that Charter has a binding, written offer for
the Transfer of any Equity Securities other than pursuant to a Permitted
Transfer described in clause (f) or (g) of Section 1.62 hereof (a "Charter
Proposed Transfer"), Charter shall deliver to the Corporation and the remaining
Stockholders an Offer Notice (meeting the requirements of Section 5.1(a)
relating to an Offer Notice) relating to such written offer. The Offer Notice
shall constitute an irrevocable offer by Charter to sell all (but not less than
all) of the Equity Securities subject to the Charter Proposed Transfer (i)
first, to the other Stockholders; and (ii) second, to the Corporation on terms
and conditions no less favorable to the purchaser than the terms and conditions
of the Charter Proposed Transfer (the "Charter Right of First Refusal").
(b) During the First Offer Period, each Stockholder (other
than Charter) may elect to purchase all or any portion of such Stockholder's
Offer Percentage of the Equity Securities subject to the Charter Proposed
Transfer by delivering an Election Notice (meeting the requirements of Section
5.1(b) relating to an Election Notice) stating the number of shares of Equity
Securities to be purchased to the Corporation and Charter prior to the
expiration of the First Offer Period. The failure by any Stockholder (other than
Charter) to deliver an Election Notice during the First Offer Period shall be
deemed to be an election by such Stockholder not to purchase any of the Equity
Securities subject to the Charter Proposed Transfer.
(c) If the Stockholders (other than Charter) do not elect
during the First Offer Period to purchase all of the Equity Securities subject
to the Charter Proposed Transfer, during the Second Offer Period, the
Corporation may elect to purchase all or any portion of such Equity Securities
that the Stockholders (other than Charter) did not elect to purchase during the
First Offer Period by delivering an Election Notice to the Corporation and
Charter prior to the expiration of the Second Offer Period. The failure by the
Corporation to deliver an Election Notice during the Second Offer Period shall
be deemed to be an election by the Corporation not to purchase any of the Equity
Securities subject to the Charter Proposed Transfer.
(d) If the Stockholders (other than Charter) and the
Corporation do not elect to purchase all of the Equity Securities subject to the
Charter Proposed Transfer, Charter may Transfer to the Third Party Purchaser
named in the Offer Notice all (but not less than all) of the Equity Securities
subject to the Charter Proposed Transfer in accordance with the terms and
conditions set forth in the Offer Notice; provided, however, that if Charter has
not consummated the Transfer of such Equity Securities within the 30 Business
Day period following the end of the Second Offer Period, all of the restrictions
on Transfer contained in this Agreement shall again be in effect with respect to
such Equity Securities. Upon a Transfer of Equity Securities to a Third Party
Purchaser, the Corporation shall not be obligated to transfer ownership of such
Equity Securities on the records of the Corporation unless such Third Party
Purchaser has complied with the proviso to Section 1.62.
-22-
(e) If the consideration for the Charter Proposed Transfer is
cash consideration, the purchase price to be paid by each of the Stockholders
(other than Charter) and the Corporation, as applicable, shall be equal to the
total consideration set forth in the Offer Notice multiplied by the fraction (a)
the numerator of which is the number of shares or other units of Equity
Securities being purchased by such Stockholder or the Corporation, as
applicable, and (b) the denominator of which is the total number of shares or
other units of Equity Securities subject to such Offer Notice. If the
consideration for the Charter Proposed Transfer consists of Non-Cash
Consideration or consists of a combination of cash consideration and Non-Cash
Consideration, the purchase price shall be cash in an amount equal to the total
of the cash consideration, if any, and the Fair Market Value of the Non-Cash
Consideration as determined in accordance with Section 7.3(a) hereof.
(f) The purchase and sale of Equity Securities pursuant to the
Charter Right of First Refusal shall be consummated at a closing that shall
occur at the principal business office of the Corporation within 20 Business
Days following the expiration of the relevant Offer Period, or at such other
place or time as may be mutually acceptable to the parties. At such closing,
Charter shall deliver a certificate or other instrument representing the Equity
Securities being purchased, free and clear of all liens, claims, encumbrances
(other than as a result of this Agreement) and defects in title and duly
endorsed for Transfer to the appropriate purchaser and, in exchange therefor,
the purchaser of such Equity Securities shall pay the purchase price provided in
Section 5.2(e) at such closing by bank wire transfer of immediately available
funds to a bank account designated in writing by Charter at least two Business
Days prior to such closing.
ARTICLE VI.
CERTAIN RIGHTS
Section 6.1 Charter Preemptive Right. (a) In the event that the
Corporation desires to issue any Equity Securities other than to a Contributing
Stockholder pursuant to Section 7.1 hereof (an "Issuance"), the Corporation
shall, prior to such Issuance, provide written notice to each Stockholder
describing in detail the Equity Securities to be issued, the reasons for such
Issuance, the potential purchasers thereof, if specifically known, and the
consideration to be received therefrom (a "Preemptive Notice"). Charter shall
have the right, during the 20 Business Days following receipt of the Preemptive
Notice (the "Preemptive Right Offer Period"), to elect to subscribe for and
purchase (the "Preemptive Right") at the same price, and on such other terms and
conditions as are set forth in the Preemptive Notice, such number of shares of
Equity Securities (in addition to the Equity Securities covered by the
Preemptive Notice) as may be required to cause (i) Charter's Equity Ownership
Interest or Voting Ownership Interest, whichever is greater, immediately
following such Issuance to be equal to (ii) Charter's Equity Ownership Interest
or Voting Ownership Interest, as appropriate, on the date of the Preemptive
Notice (the "Preemptive Right Securities").
(b) Charter shall be entitled to exercise the Preemptive Right
by delivering written notice to the Corporation during the Preemptive Right
Offer Period, designating that Charter elects to purchase all, or any portion
of, the Preemptive Right Securities.
-23-
(c) The Corporation may, during the 60 Business Days following
the earlier to occur of (i) the Corporation's receipt of a Section 6.1(b) notice
from Charter or (ii) expiration of the Preemptive Right Offer Period, offer and
sell the Equity Securities covered by the Preemptive Notice provided that such
Issuance is effected in accordance with the terms described in the Preemptive
Notice. Any Equity Securities not so issued by the Corporation during such 60
Business Day period shall again be subject to the Preemptive Right set forth in
this Section 6.1.
(d) If the consideration for the Issuance is cash
consideration, the purchase price to be paid by Charter shall be equal to the
total consideration set forth in the Preemptive Notice multiplied by the
fraction (i) the numerator of which is the number of shares of Preemptive Right
Securities being purchased by Charter, as applicable, and (ii) the denominator
of which is the total number of shares of Equity Securities subject to such
Preemptive Notice. If the consideration for the Issuance consists of Non-Cash
Consideration or consists of a combination of cash consideration and Non-Cash
Consideration, the consideration set forth in the Preemptive Notice shall be
deemed to be cash consideration in an amount equal to the total of the cash
consideration, if any, and the Fair Market Value of the Non-Cash Consideration
as determined in accordance with Section 7.3(b) hereof. Charter shall have the
right, in its sole discretion, to revoke its Section 6.1(b) notice within 5
Business Days after the final determination of Fair Market Value under Section
7.3(b) hereof.
(e) The issuance of the Preemptive Right Securities to Charter
pursuant to the Preemptive Right shall be consummated simultaneously with the
issuance of Equity Securities pursuant to the Preemptive Notice, or at such
other place or time as may be mutually acceptable to the parties. At such
closing, the Corporation shall deliver a certificate or other instrument
registered in the name of Charter representing the Preemptive Right Securities
being purchased, free and clear of all liens, claims, encumbrances and defects
in title (other than restrictions on the Transfer thereof as may be described in
the Preemptive Notice) and, in exchange therefor, Charter shall pay the purchase
price provided in subsection (d) of this Section 6.1 by bank wire transfer of
immediately available funds to a bank account designated in writing by the
Corporation at least three Business Days prior to such closing.
(f) In the event of an Issuance, in lieu of an exercise of the
Preemptive Right, Charter may, upon written notice to the Corporation, require
that all Equity Securities to be issued in connection with such Issuance consist
of Equity Securities that do not have voting rights with respect to any matter
submitted to a vote of the stockholders of the Corporation or, in Charter's sole
discretion, with respect to certain specified matters.
Section 6.2 Charter Option. (a) At any time during the term of this
Agreement, Charter shall have the right and option to offer to purchase from the
Stockholders (other than Charter) all, but not less than all, of the issued and
outstanding Common Stock and all of any portion of the Equity Securities (other
than Common Stock), held by such Stockholders at the time of such offer (the
"Charter Option"). In the event that Charter desires to exercise the Charter
Option, Charter shall deliver to the Corporation and the Stockholders (other
than Charter) written notice of such offer,
-24-
including the Equity Securities subject to such offer, the amount and nature of
the consideration to be received (which consideration shall be separately stated
by class of Equity Securities), the conditions, if any, associated therewith,
and any other material terms of such offer (an "Option Notice"). If any portion
of such consideration consists of shares of Charter Common Stock, such shares
shall be registered under the Securities Act at the time of the purchase and
sale pursuant to Section 6.2(e). The Option Notice shall constitute an
irrevocable offer by Charter to purchase the Equity Securities subject to the
Charter Option if Stockholders holding more than 50% of each class of Equity
Securities subject to the Charter Option deliver notices pursuant to the first
sentence of Section 6.2(c).
(b) During the Option Period, each Stockholder (other than
Charter) may elect to sell all, but not less than all, of such Stockholder's
Equity Securities subject to the Charter Option by delivering written notice of
such election to the Corporation and Charter prior to the expiration of the
Option Period. The failure by any such Stockholder to deliver a notice of
election during the Option Period shall be deemed to be an election by such
Stockholder not to sell any of the Equity Securities subject to the Charter
Option.
(c) If Stockholders holding more than 50% of each class of
Equity Securities subject to the Charter Option deliver notices of election
prior to the expiration of the Option Period, Charter shall be obligated to
purchase, and the Stockholders shall be obligated to sell, all of the Equity
Securities subject to the Charter Option, regardless of whether any such
Stockholder delivered an election notice prior to the expiration of the Option
Period. If Stockholders holding exactly 50% of each class of Equity Securities
subject to the Charter Option deliver notices of election prior to the
expiration of the Option Period, Charter shall have the right (but not the
obligation) on ten Business Days' notice to such electing Stockholders to
purchase, and in such event such electing Stockholders shall be obligated to
sell, all of the Equity Securities subject to the Charter Option and held by
such electing Stockholders. If Stockholders holding less than 50% of each class
of Equity Securities subject to the Charter Option deliver notices of election
prior to the expiration of the Option Period, Charter shall not be entitled to
purchase and the Stockholders shall not be obligated to sell any of the Equity
Securities subject to the Charter Option; provided, that nothing set forth in
this Section 6.2 shall prohibit Charter from purchasing such Equity Securities
in a manner that is otherwise in accordance with this Agreement. If Stockholders
holding exactly 50% of each class of Equity Securities subject to the Charter
Option deliver notices of election prior to the expiration of the Option Period
and if, pursuant to the second sentence of this Section 6.2(c), Charter elects
to purchase such shares from such Stockholders, then Charter shall have the
right, by a Mandatory Call Notice given not more than 20 Business Days after
expiration of the Option Period, to purchase from the Stockholders who did not
deliver notices of election prior to expiration of the Option Period all of the
Equity Securities of such non-electing Stockholders subject to the Charter
Option; and any such purchase shall be by means of a Charter Mandatory Call
pursuant to Section 6.3.
-25-
(d) The aggregate purchase price to be paid by Charter in
connection with the Charter Option in which Stockholders holding more than 50%
of each class of Equity Securities subject to the Charter Option deliver notices
of election prior to the expiration of the Option Period shall be the
consideration set forth in the Option Notice. The aggregate purchase price to be
paid by Charter in connection with the Charter Option in which Stockholders
holding exactly 50% of each class of Equity Securities subject to the Charter
Option deliver notices of election prior to the expiration of the Option Period
shall be, for the Stockholders delivering such notices of election, the purchase
price set forth in the Option Notice.
(e) The purchase and sale of Equity Securities pursuant to the
Charter Option shall be consummated at a closing that shall occur at the
principal business office of the Corporation not later than the 10th Business
Day after the expiration of the Option Period, or at such other place or time as
may be mutually acceptable to the parties. At such closing, the Stockholders
(other than Charter) shall deliver a certificate or other instrument
representing the Equity Securities being purchased, free and clear of all liens,
claims, encumbrances and defects in title (other than as a result of this
Agreement) and duly endorsed for Transfer to Charter and, in exchange therefor,
Charter shall pay the purchase price provided in subsection (b) of this Section
6.2 hereof by bank wire transfer of immediately available funds to a bank
account designated by each such Stockholder in writing at least three Business
Days prior to such closing. The portion of the aggregate purchase price with
respect to each class of Equity Securities payable to each Stockholder shall be
equal to the total purchase price multiplied by the fraction (A) the numerator
of which is the number of shares or other amount of that class of Equity
Securities being sold by such Stockholder and (B) the denominator of which is
the total number of shares or other amount of that class of Equity Securities
subject to such Option Notice.
Section 6.3 Charter Mandatory Call. (a) At any time and from time to
time during the term of this Agreement that Charter's Voting Ownership Interest
(expressed as a percentage) is at least 75%, Charter shall have the right and
option to elect to purchase from the Stockholders (other than Charter), and to
require the Stockholders (other than Charter) to sell to Charter, all, but not
less than all, of the issued and outstanding Common Stock held by such
Stockholders at the time of such election (a "Charter Mandatory Call"). In the
event that Charter desires to exercise Charter Mandatory Call, Charter shall
deliver to the Corporation and the Stockholders (other than Charter) written
notice of such election, including the number of shares of Common Stock subject
to such election and Charter's calculation of the purchase price for such Common
Stock in accordance with subsection (b) of this Section 6.3 (a "Mandatory Call
Notice"). The Mandatory Call Notice shall constitute an irrevocable election by
Charter to purchase the Common Stock subject to Charter Mandatory Call, except
that Charter shall have the right, upon notice to the Corporation and the
Stockholders (other than Charter) given not more than 5 Business Days after the
final determination of Fair Market Value pursuant to Section 7.3(c), to revoke
such Mandatory Call Notice.
(b) Subject to Section 6.5, the aggregate purchase price to be
paid by Charter in connection with the Charter Mandatory Call shall be cash in
an amount equal to the greatest of:
-26-
(a) 1.2 multiplied by the Base Amount, (b) the Base Amount plus the Deemed
Conversion Premium and (c) the Fair Market Value of the Common Stock subject to
Charter Mandatory Call as determined in accordance with Section 7.3 hereof. As
used in this Agreement, the term "Base Amount" shall mean an amount equal to the
product (i) $81.83 million and (ii) the fraction (A) having as its numerator the
number of shares of Common Stock issued to all Stockholders (other than Charter)
pursuant to the Subscription Agreement, which shares continue to be held by such
Stockholders as of the date of the Mandatory Call Notice and (B) having as its
denominator the aggregate number of shares of Common Stock issued to all
Stockholders (other than Charter) pursuant to the Subscription Agreement, in
each case subject to adjustment as provided in Section Three of the Exchange
Agreement. As used in this Agreement, the term "Deemed Conversion Premium" shall
mean an amount equal to the product of (1) the Base Amount divided by $20, (2)
the arithmetic average of the closing prices of Charter Common Stock on the
American Stock Exchange (or the principal trading market on which Charter Common
Stock is then listed or quoted) for the 10 trading day period prior to the date
of the Mandatory Call Notice less $20 and (3) 70%.
(c) The purchase and sale of Common Stock pursuant to Charter
Mandatory Option shall be consummated at a closing that shall occur at the
principal business office of the Corporation not later than the 10th Business
Day after a binding determination of the Fair Market Value of such Common Stock
has been determined in accordance with Section 7.3(c) hereof, or at such other
place or time as may be mutually acceptable to the parties. At such closing, the
Stockholders shall deliver a certificate or other instrument representing the
Common Stock being purchased pursuant to such Charter Mandatory Call, free and
clear of all liens, claims, encumbrances and defects in title and duly endorsed
for Transfer to Charter and, in exchange therefor, Charter shall pay the
purchase price provided in subsection (b) of this Section 6.3 hereof by bank
wire transfer of immediately available funds to a bank account designated in
writing by each such Stockholder at least three Business Days prior to such
closing. The portion of the aggregate purchase price payable to each Stockholder
(other than Charter) shall be equal to the total purchase price multiplied by
the fraction (i) the numerator of which is the number of shares of Common Stock
being sold by such Stockholder and (ii) the denominator of which is the total
number of shares of Common Stock subject to such Mandatory Call Notice.
Section 6.4 Charter Change of Control Put. (a) Upon a Charter Change of
Control, each Minority Stockholder shall have the right to require Charter to
purchase all (but not less than all) the shares of Common Stock owned by each
such Minority Stockholder (including shares owned by a Permitted Transferee of
such Minority Stockholder pursuant to Section 1.62(f)). The aggregate purchase
price for shares of Common Stock purchased by Charter upon exercise of such
right and the purchase price per share of Common Stock shall be as provided in
Section 6.3(b) and the last sentence of Section 6.3(c), respectively, except
that the aggregate purchase price shall be the Section 6.3(b) amount plus an
amount equal to 10% of the Section 6.3(b) amount multiplied by the fraction, the
denominator of which is 100 and the numerator of which is the excess, if any, of
the percentage (expressed as a whole number) of outstanding shares of Common
Stock owned by the Minority
-27-
Stockholders on the date of Charter Change of Control over 25. A purchase and
sale of Equity Securities under this Section 6.4 shall be consummated in the
manner provided in Section 6.3(c).
(b) Within 5 Business Days after a Charter Change of Control,
Charter shall give each Minority Stockholder written notice thereof. Each
Minority Stockholder that desires to exercise the right provided by Section
6.4(a) shall do so by giving Charter written notice of such election within 5
Business Days after the date of Charter's notice; and such written notice of
election by a Minority Stockholder shall constitute an irrevocable election to
exercise its Section 6.4(a) right with respect to all (but not less than all) of
the shares of Common Stock owned by such Minority Stockholder or Permitted
Transferee of such Minority Stockholder pursuant to Section 1.62(f) and to sell
such shares to Charter in the manner and for the purchase price provided in this
Section 6.4.
Section 6.5 Certain Purchase Price Adjustments; Separate Agreements.
(a) Charter and the Minority Stockholders mutually acknowledge that the purchase
price provisions of Section 6.3(b), relating to the Charter Mandatory Call, and
Section 6.4(a) relating to the right of Minority Stockholders to require Charter
to purchase all shares of Common Stock owned by a Minority Stockholder upon a
Charter Change of Control, do not provide a purchase price for (i) shares of
Common Stock purchased by a Contributing Stockholder pursuant to Section 7.1,
(ii) shares of Common Stock purchased by a Stockholder pursuant to a Preemptive
Notice under Sections 2.9(iv) and 6.1(a), which Stockholder is not at the time
of such purchase a Minority Stockholder, and (iii) shares of Common Stock that
may be acquired by a Minority Stockholder from Charter by means other than
exercise of rights pursuant to a Charter Right of First Refusal.
(b) In the case of clause (i) of Section 6.5(a), Charter and
the Contributing Stockholders shall, as a condition to the funding of a Capital
Contribution that involves the issuance of Common Stock by the Corporation,
either enter into a separate agreement providing the terms and conditions
relating to the purchase of such shares of Common Stock by Charter upon a
Charter Mandatory Call or a put of Minority Stockholders' other shares of Common
Stock pursuant to Section 6.4(a) or agree in writing that neither Section 6.3
nor Section 6.4 shall apply to the shares of Common Stock so acquired upon a
Capital Contribution.
(c) In the case of clauses (ii) and (iii) of Section 6.5(a),
Charter and the applicable Stockholder or Minority Stockholder may, in the sole
discretion of each party, enter into a separate agreement relating to the
purchase by Charter of the shares of Common Stock covered by such clauses (ii)
and (iii) upon a Charter Mandatory Call or a put of other shares of Common Stock
pursuant to Section 6.4(a), but shall not be obligated to do so.
-28-
Section 6.6 Charter Board Representation. During the term of this
Agreement and subject to Charter's Certificate of Incorporation and Bylaws,
Charter (but not any assignee of Charter) shall, from time to time, nominate and
use its best efforts to cause the election to the Board of Directors of Charter,
of a representative of the Minority Stockholders. Such representative shall be
chosen, in Charter's discretion, from the chief executive officers of the
Minority Stockholders and the members of the Corporation's Board of Directors
designated by the Minority Stockholders.
ARTICLE VII.
CERTAIN COVENANTS
Section 7.1 Capital Contributions. (a) Except as provided in
this Section 7.1 or contemplated by the Subscription Agreement, no Stockholder
shall be required to make any capital contribution to the Corporation.
(b) In the event that the Board of Directors determines that
additional equity capital is reasonably necessary or reasonably desirable to
enable the Corporation to carry out its business objectives as contemplated by
the Annual Operating Plan or Annual Capital Plan (a "Capital Contribution"), the
Board of Directors shall provide written notice of such Capital Contribution to
each Stockholder (a "Capital Contribution Notice"), including in such notice (i)
the total amount of cash that would be required to fund such Capital
Contribution, (ii) each Stockholder's proportionate share (based on such
Stockholder's respective Ownership Interest) of such Capital Contribution, (iii)
a detailed description of the intended use or uses of such Capital Contribution,
(iv) the proposed schedule for funding such Capital Contribution, (v) the Equity
Securities, if any, to be issued at not less than fair market value in
connection with such Capital Contribution, (vi) the method of reducing the
Equity Interest of any Declining Stockholders, (vii) the Equity Securities, if
any, to be issued at not less than fair market value to any Contributing
Stockholder making an additional Capital Contribution on behalf of any Declining
Stockholder, and (viii) if such Equity Securities are Common Stock and if the
Exchange Period (as defined in the Exchange Agreement) shall not have expired at
the time such Common Stock is issued, the terms of an amendment to the Exchange
Agreement whereby such shares of Common Stock shall be exchangeable into shares
of Charter Common Stock at a per share exchange price equal to the arithmetic
average of the closing sale prices for a share of such Charter Common Stock as
reported by the American Stock Exchange for the ten trading days immediately
preceding the third Business Day prior to the date of a Capital Contribution
Notice. Charter agrees that any such shares of Charter Common Stock shall be
registered under the Securities Act or exempt from registration pursuant to an
exemption that permits resale of such shares of Charter Common Stock in the
public market promptly after issuance, subject only to the provisions of Rule
144 under the Securities Act except for the provisions applicable to "restricted
securities" (as such term is defined in Rule 144).
(c) Upon receipt of a Capital Contribution Notice, each
Stockholder (other than Charter) shall have the right to (i) consent to make
such Capital Contribution (Charter and each such Stockholder referred to
individually as a "Contributing Stockholder" or collectively as the
-29-
"Contributing Stockholders") or (ii) decline to make such Capital Contribution
(individually, the "Declining Stockholder" or collectively, the "Declining
Stockholders"). Each Contributing Stockholder shall contribute its proportionate
share of such Capital Contribution (based on its Equity Ownership Interest) in
accordance with the funding schedule set forth in the Capital Contribution
Notice, subject, if applicable, to the provisions of Section 6.5(b). Each
Stockholder, within 15 Business Days after the date of a Capital Contribution
Notice, shall give notice to the Corporation of its election to be a
Contributing Stockholder or a Declining Stockholder with respect to such Capital
Contribution Notice.
(d) The Contributing Stockholder or the Contributing
Stockholders, as the case may be, may elect to contribute all or any part of the
Declining Stockholder's Capital Contribution due to be made to the Corporation,
and the Stockholders hereby consent to the issuance of additional Equity
Securities to the Contributing Stockholders in the manner set forth in the
applicable Capital Contribution Notice.
(e) In addition to, or in lieu of, the Capital Contributions
contemplated pursuant to this Section 7.1, the Corporation may fund its capital
requirements through cash on hand, cash flow or borrowings from any Stockholder
or from third parties on an arms' length basis and may grant a security interest
in the assets of the Corporation to secure any such indebtedness in proportion
to the debt borrowed; provided, that any such security interest is non-recourse
to the Stockholders.
Section 7.2 Confidential Information. (a) The Stockholders acknowledge
that the Corporation derives and will continue to derive significant economic
and competitive value from the Confidential Information that has been developed
in connection with the operation of the Business and that the Confidential
Information is not generally known to and is not readily available to or
ascertainable by others. The Stockholders shall maintain as secret and
confidential the Confidential Information and shall take all reasonable
precautions against the disclosure of the Confidential Information to third
parties. The Stockholders shall not circulate or otherwise disclose the
Confidential Information within their own organizations except to personnel
(including, without limitation, such Stockholder's employees, officers,
directors, representatives, agents, Affiliates, lenders or advisors) directly
involved in the Business on a need-to-know basis and, prior to any such
circulation or disclosure of the Confidential Information, shall require such
personnel to have executed a non-disclosure agreement which covers the
Confidential Information (e.g., a Stockholder's standard employee non-disclosure
agreement which by its terms covers third party confidential information) or be
otherwise bound to hold the Confidential Information in confidence (e.g.,
pursuant to professional rules of conduct). The Stockholders acknowledge that a
breach of the confidentiality provisions of this Agreement would cause
irreparable injury to the Corporation for which no remedy at law would be
adequate. It is the understanding of the Stockholders that the obligations
relating to Confidential Information may be enforced to the fullest extent
permissible under the laws and public policies of the State of Delaware. If
there is a breach or threatened breach of the confidentiality provisions of this
Agreement, the Corporation shall be entitled to injunctive
-30-
relief or the equivalent mandatory relief under the laws of the State of
Delaware restraining any Stockholder from such breach or threatened breach. The
Stockholders acknowledge and agree that the prohibition against disclosure of
Confidential Information is in addition to, and not in lieu of, any other or
additional rights or remedies which may be available to the Corporation pursuant
to the laws of the State of Delaware and that the enforcement by the Corporation
of its rights and remedies pursuant to this Agreement shall not be construed as
a waiver of any rights or remedies which it may possess in law or at equity
absent this Agreement.
(b) Upon the written request of the Corporation, the
Stockholders shall return to the Corporation or destroy (subject to the right to
retain, for archival purposes only, a single copy, which single copy may be used
solely by attorneys representing such Stockholders for reference purposes only
and may not be used for any commercial or competitive purposes whatsoever) all
copies of Confidential Information held by the Stockholders or any personnel
within each Stockholder's organization, regardless of the form of such
Confidential Information. The foregoing provision shall not apply to
Confidential Information which is rightfully held by a Stockholder in connection
with its performance under an agreement or agreements between such Stockholder
and the Corporation which has not expired or been properly terminated.
(c) No Stockholder shall be subject to the provisions
contained in Section 7.2(a) hereof to the extent that the Stockholder or any of
its Affiliates is, based on the advice of its counsel, required by law
(including, without limitation, any requirement under the Securities Act or
Exchange Act or any regulations promulgated thereunder) to make disclosure of
any Confidential Information relating to the Corporation.
Section 7.3 Determination of Fair Market Value. (a) In the event that a
determination of the fair market value of Non-Cash Consideration is required
pursuant to the Right of First Refusal or the Charter Right of First Refusal,
the Selling Stockholder or Charter, as appropriate, shall specify in the
applicable Offer Notice its good faith estimate of the fair market value of any
Non-Cash Consideration to be paid in connection with the proposed transfer. If a
majority of the disinterested members of Board of Directors agrees with the
estimated fair market value of such Non-Cash Consideration, the estimate shall
be deemed to be the Fair Market Value thereof for purposes of this Agreement. If
the Board of Directors does not agree with the estimated fair market value, the
Board of Directors shall, within 10 Business Days of receipt of the Offer
Notice, deliver to the Selling Stockholder or Charter, as appropriate, written
notice of its disagreement and shall, for a period of 10 Business Days after
delivering such notice, negotiate with the Selling Stockholder or Charter, as
appropriate, for the purpose of determining the fair market value of the
Non-Cash Consideration that is acceptable to the Board of Directors and the
Selling Stockholder or Charter, as appropriate. If the Board of Directors and
the Selling Stockholder or Charter, as appropriate, are unable to agree on a
fair market value during the aforementioned negotiation period, the Corporation
and the Selling Stockholder or Charter, as appropriate, shall appoint a mutually
agreeable appraiser of recognized standing with respect to the nature of the
property constituting the Non-Cash Consideration to complete an appraisal of the
property constituting the Non-Cash Consideration. Such appraiser shall
-31-
render a binding and non-appealable appraisal of the Fair Market Value of the
property constituting the Non-Cash Consideration within 10 Business Days of such
appraiser's appointment or, if it is not reasonably possible to complete such
appraisal in such time period, such longer period as shall be reasonably
necessary to complete such appraisal (not to exceed 30 Business Days). The
Corporation and the Selling Stockholder or Charter, as appropriate, each shall
bear one-half of the costs of such appraisal.
(b) In the event that a determination of the fair market value
of Non-Cash Consideration is required pursuant to the Preemptive Right, the
Corporation shall specify in the applicable Preemptive Notice its good faith
estimate of the fair market value of any Non-Cash Consideration to be paid in
connection with the applicable Preemptive Notice. If Charter agrees with the
estimated fair market value of such Non-Cash Consideration, the estimate shall
be deemed to be the Fair Market Value thereof for purposes of this Agreement. If
Charter does not agree with the estimated fair market value, Charter shall,
within 10 Business Days of receipt of the Preemptive Notice, deliver to the
Corporation written notice of its disagreement and shall, for a period of 10
Business Days after delivering such notice, negotiate with the Corporation for
the purpose of determining the fair market value of the Non-Cash Consideration
that is acceptable to Charter and the Corporation. If Charter and the
Corporation are unable to agree on a fair market value during the aforementioned
negotiation period, Charter and the Corporation shall appoint a mutually
agreeable appraiser of recognized standing with respect to the nature of the
property constituting the Non-Cash Consideration to complete an appraisal of the
property constituting the Non-Cash Consideration. Such appraiser shall render a
binding and non-appealable appraisal of the Fair Market Value of the property
constituting the Non-Cash Consideration within 10 Business Days of such
appraiser's appointment or, if it is not reasonably possible to complete such
appraisal in such time period, such longer period as shall be reasonably
necessary to complete such appraisal (not to exceed 30 Business Days). Charter
and the Corporation each shall bear one-half of the costs of such appraisal,
except that Charter shall pay all the costs of such appraisal if Charter
exercises its revocation right provided by the last sentence of Section 6.3(a).
(c) In the event that a determination of the fair market value
of shares of Common Stock is required in connection with an exercise by Charter
of the Charter Mandatory Call, Charter shall specify in the applicable Mandatory
Call Notice its good faith estimate of the fair market value of the Common Stock
subject to the Charter Mandatory Call. If the Stockholders (other than Charter)
agree with the estimated fair market value of such Common Stock, the estimate
shall be deemed to be the Fair Market Value thereof for purposes of this
Agreement. If the Stockholders (other than Charter) do not agree with the
estimated fair market value, such Stockholders shall, within 10 Business Days of
receipt of the Mandatory Call Notice, deliver to Charter written notice of their
disagreement and shall, for a period of 10 Business Days after delivering such
notice, negotiate with Charter for the purpose of determining the fair market
value of such Common Stock that is acceptable to Charter and such Stockholders.
If Charter and such Stockholders are unable to agree on a fair market value
during the aforementioned negotiation period, Charter and such Stockholders
shall appoint a mutually agreeable appraiser of recognized standing with respect
to the
-32-
valuation of equity interests of companies engaged in a business similar to the
Business to complete an appraisal of the Common Stock subject to the Charter
Mandatory Call (assuming, for purposes of such valuation, a change in control of
100% of the Corporation). Such appraiser shall render a binding and
non-appealable appraisal of the Fair Market Value of the Common Stock subject to
the Charter Mandatory Call within 20 Business Days of such appraiser's
appointment or, if it is not reasonably possible to complete such appraisal in
such time period, such longer period as shall be reasonably necessary to
complete such appraisal (not to exceed 40 Business Days). Charter and such
Stockholders (acting as a group on the basis of the number of shares of Common
Stock owned by each such Stockholder and subject to the Charter Mandatory Call)
each shall bear one-half of the costs of such appraisal. The provisions of this
subsection (c) of Section 7.3 shall also apply in the event that such an
appraisal is required in connection with the Charter Option. Determinations by
Stockholders under this Section 7.3(c) shall be made by the affirmative vote of
Stockholders holding shares of Common Stock subject to the Charter Mandatory
Call.
Section 7.4 No Inconsistent Agreements. No Stockholder shall grant any
proxy or agree to be bound by any voting trust with respect to any Equity
Securities, nor shall any Stockholder enter into any agreement or arrangement
with any Person (whether or not a party to this Agreement) with respect to the
voting or transfer of Equity Securities or the designation or conduct of
Directors, containing any provision that is inconsistent with this Agreement.
Section 7.5 Minority Stockholders' Agreement. Those provisions of any
written agreement among any Minority Stockholders or among one or more Minority
Stockholders and any other Stockholder or Stockholders (i) generally governing
voting as Stockholders or as Directors, whether by voting trust, voting
agreement, irrevocable proxy or similar agreement, (ii) generally governing the
conduct of such parties with respect to Transfers, proposed Transfers, or
restrictions on Transfers of Equity Securities, or (iii) generally governing
issuances by the Corporation of New Equity Securities, shall be subject to the
prior written approval of Charter in its sole discretion. This Section 7.5 shall
not apply to communications and discussions among Stockholders or Directors
concerning matters upon which they may deliberate, vote or act in a manner
consistent with this Agreement, or to agreements among them with respect to any
particular vote or other action on specific maters arising from time to time as
contemplated by this Agreement (which agreements are made at or about the time
of any such particular vote or other action on specific matters) such as
periodic designations of Directors, exercise of rights of first refusal, and
other specific elections or actions provided for in this Agreement. Charter's
rights of approval under this Section 7.5 shall expire at such time as Charter
shall no longer own beneficially at least 50% of the Voting Securities of the
Corporation, and for this purpose, the term "Charter" shall include only Charter
Medical Corporation and its Permitted Transferee or Permitted Transferees under
Section 1.62(f).
Section 7.6 No Event of Default. (a) The Stockholders acknowledge that
the Credit Agreement restricts Charter's ability to issue indebtedness, purchase
or otherwise acquire Equity Securities of the Corporation or make additional
capital contributions to the Corporation (each, an "Action") if (a) any Default
or Event of Default (each as defined in the Credit Agreement) has
-33-
occurred and is continuing or (b) if such Action would result in a Default or an
Event of Default. In the event that the Credit Agreement would preclude the
taking of any such Action (whether pursuant to this Agreement, the Stock
Purchase Agreement, the Exchange Agreement or any document or instrument
contemplated hereby or thereby), or the taking of such Action would result in a
Default or Event of Default, Charter shall use its best efforts to cure such
Default or Event of Default or obtain an appropriate waiver or amendment to the
Credit Agreement and notwithstanding anything to the contrary contained in this
Agreement, the Exchange Agreement or any document or instrument contemplated
hereby or thereby, Charter shall not (and shall not be required to) take such
Action unless and until such a cure has been effected or waiver or amendment has
been obtained. In the event of the consummation of any such Action in violation
of the covenants set forth in the preceding sentence, the Stockholders shall
promptly rescind such Action upon written notice from the Agent under the Credit
Agreement requesting such recision.
(b) For so long as the Credit Agreement is in effect, Charter
shall, upon the request of any Minority Stockholder, send to such Minority
Stockholder, within ten Business Days after sending the same to its lenders
under the Credit Agreement, a copy of the quarterly and annual Officer's
Certificate pursuant to Section 7.1(e) of the Credit Agreement, together with
the calculations and statements of amounts required by such Section 7.1(e).
Section 7.7 Change of Control. Prior to a change in control of any
Person (including, without limitation, any sale of all or substantially all of
such Person's assets, or a merger, consolidation, share exchange, lease,
transfer or similar transaction involving such Person) which is a Permitted
Transferee pursuant to Section 1.62(f), such Person shall be obligated to
Transfer all Equity Securities owned by it to the transferor as the result of
which such Person became a Permitted Transferee pursuant to Section 1.62(f).
ARTICLE VIII.
REPRESENTATIONS AND WARRANTIES
Section 8.1 Representations and Warranties of the Corporation. The
Corporation hereby represents and warrants to the Stockholders as follows:
(a) Organization and Good Standing. The Corporation is a
corporation duly formed, validly existing and in good standing under the laws of
the State of Delaware and has the full corporate power and authority to own and
operate its assets and properties and carry on its businesses as presently
conducted and is duly qualified without material exception to do business and is
in good standing in all jurisdictions in which the ownership of its properties
or the operation of its business presently makes such qualification necessary.
(b) Authority. The Board of Directors has duly authorized the
execution and delivery of this Agreement and the transactions contemplated
hereby. The Corporation has the full power and authority to execute and deliver,
and to perform its obligations under, this Agreement.
-34-
This Agreement constitutes a valid and binding obligation of the Corporation,
enforceable against the Corporation in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the rights of creditors generally.
(c) Consents and Approvals. All authorizations, approvals and
consents, if any, required to be obtained from, and all registrations,
declarations and filings, if any, required to be made with, all Governmental
Authorities to permit the Corporation to execute and deliver, and to perform its
obligations under, this Agreement have been obtained or made, as the case may
be, and all such authorizations, approvals, consents, registrations,
declarations and filings are in full force and effect. All terms and conditions
contained in, or existing in respect of, such authorizations, approvals,
consents, registrations, declarations and filings have been, to the extent
necessary prior to the date of execution and delivery hereof, duly satisfied and
performed.
(d) No Violations. Neither the execution or delivery by the
Corporation of this Agreement, nor the consummation by the Corporation of the
transactions herein contemplated, nor the fulfillment by the Corporation of the
terms and provisions hereof (i) will conflict with, violate or result in a
breach of, any of the terms, conditions or provisions of any law, regulation,
order, writ, injunction, decree, determination or award of any Governmental
Authority applicable to the Corporation, (ii) will conflict with, violate or
result in a breach of, or constitute a default under, any of the terms,
conditions or provisions of the Corporation's constituent documents, (iii) will
conflict with, violate or result in a breach of, or constitute a default under,
any of the terms, conditions or provisions of any loan agreement, indenture,
trust, deed or other agreement or instrument to which the Corporation is a party
or by which it is bound or (iv) except as provided herein or otherwise permitted
hereby, result in the creation or imposition of any lien, charge, security
interest or encumbrance of any nature whatsoever upon any of the Corporation's
property or assets (including, without limitation, the Common Stock held by the
Corporation). The Corporation is not in default under any agreement to which it
is a party which default could impair its ability to perform its obligations
under this Agreement.
Section 8.2 Representations and Warranties of the Stockholders. Each
Stockholder hereby represents and warrants to the Corporation and the other
Stockholders as follows:
(a) Organization. Such Stockholder is a corporation or mutual
legal company duly formed, validly existing and in good standing under the laws
of its state of incorporation or formation and has full corporate or
organizational power and authority to own and operate its assets and properties
and carry on its businesses as presently conducted and is duly qualified without
material exception to do business and is in good standing in all jurisdictions
in which the ownership or occupancy of its properties or conduct of its business
presently makes such qualification necessary.
-35-
(b) Authority. The board of directors or governing body of
such Stockholder has duly authorized the execution and delivery of this
Agreement and the transactions contemplated hereby. Such Stockholder has the
full power and authority to execute and deliver, and to perform its obligations
under, this Agreement. Such Stockholder has reviewed the terms of this
Agreement, understands the intentions of the parties in entering into this
Agreement and the scope and nature of their respective obligations hereunder and
has had the opportunity to review the terms of this Agreement and any other
agreements, documents and instruments to be executed and delivered in connection
herewith with its attorneys, accountants and investment advisors to the extent
deemed appropriate. This Agreement constitutes a valid and binding obligation of
such Stockholder, enforceable against such Stockholder in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the rights of
creditors generally.
(c) Consents and Approvals. All authorizations, approvals and
consents, if any, required to be obtained from, and all registrations,
declarations and filings, if any, required to be made with, all governmental
authorities and regulatory bodies to permit such Stockholder to execute and
deliver, and to perform its obligations under, this Agreement have been obtained
or made, as the case may be, and all such authorizations, approvals, consents,
registrations, declarations and filings are in full force and effect. All terms
and conditions contained in, or existing in respect of, such authorization,
approvals, consents, registrations, declarations and filings have been, to the
extent necessary prior to the date of execution and delivery hereof, duly
satisfied and performed.
(d) No Violations. Neither the execution or delivery by such
Stockholder of this Agreement, nor the consummation by such Stockholder of the
transactions herein contemplated, nor the fulfillment by such Stockholder of the
terms and provisions hereof (i) will conflict with, violate or result in a
breach of, any of the terms, conditions or provisions of any law, regulation,
order, writ, injunction, decree, determination or award of any court,
Governmental Authority, applicable to such Stockholder, (ii) will conflict with,
violate or result in a breach of, or constitute a default under, any of the
terms, conditions or provisions of such Stockholder's constituent documents,
(iii) will conflict with, violate or result in a breach of, or constitute a
default under, any of the terms, conditions or provisions of any loan agreement,
indenture, trust, deed or other agreement or instrument to which such
Stockholder is a party or by which it is bound or (iv) except as provided herein
or otherwise permitted hereby, result in the creation or imposition of any lien,
charge, security interest or encumbrance of any nature whatsoever upon any of
such Stockholder's property or assets (including, without limitation, the Common
Stock held by such Stockholder). Such Stockholder is not in default under any
agreement to which it is a party which default could impair its ability to
perform its obligations under this Agreement.
-36-
ARTICLE IX.
MISCELLANEOUS
Section 9.1 Termination. This Agreement shall terminate: (a) upon the
written agreement of all Stockholders, (b) as to any Stockholder who neither
owns any Equity Securities or is a party to an Operating Agreement or (c) upon
the acquisition by a single Person of all of the issued and outstanding Equity
Securities.
Section 9.2 Simultaneous Transaction. The execution of this Agreement
shall occur simultaneously with the Closing of the transactions contemplated by
the Stock Purchase Agreement, and neither the consummation of the transactions
contemplated hereby or by the Stock Purchase Agreement shall be deemed to have
occurred unless and until the transactions contemplated by all such agreements
shall have been completed.
Section 9.3 No Waiver. No failure on the part of any party hereto to
exercise, no delay in exercising, and no course of dealing with respect to, any
right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
Section 9.4 Assignability. Except as specifically provided herein to
the contrary, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and Permitted Transferees. Charter shall
have the right to grant to the lenders under the Credit Agreement a security
interest in its rights under this Agreement but no such assignment shall impact
or diminish its obligations under this Agreement.
Section 9.5 Notices. In any case where any notice or other
communication is required or permitted to be given hereunder (including, without
limitation, any change in the information set forth in this Section 9.5) such
notice or communication shall be in writing and (a) personally delivered, (b)
sent by registered United States mail, postage prepaid, return receipt
requested, (c) transmitted by telecopy or (d) sent by way of a recognized
overnight courier service, charges prepaid, return receipt requested with
instructions to deliver on the next business day, in each case as follows:
(a) If to the Corporation, to:
Green Spring Health Services, Inc.
Xxxxx Xxxxxxxx, Xxxxx 000
0000 Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
-37-
with a copy to:
Charter Medical Corporation
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
(b) If to Charter, to:
Charter Medical Corporation
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
with a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
(c) If to BCILL, to:
-38-
Health Care Service Corporation
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
(d) If to BCBSNJ to:
Blue Cross and Blue Shield of New Jersey, Inc.
0 Xxxx Xxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxx X. Pures
Telecopy: (000) 000-0000
with a copy to:
Blue Cross and Blue Shield of New Jersey, Inc.
0 Xxxx Xxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
(e) If to IBC, to:
Independence Blue Cross
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
-39-
with copies to:
Independence Blue Cross
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
and
Dilworth, Paxson, Xxxxxx & Xxxxxxxx
3200 Mellon Bank Center
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
(f) If to PCMB, to:
Xxxxxx County Medical Bureau, Inc.
0000 Xxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxx, Xxxxxx & Xxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxx, Esq.
Telecopy: (000) 000-0000
All such notices or other communications shall be deemed to
have been given or received (i) upon receipt if personally delivered, (ii) on
the fifth day following posting if by registered United States mail, (iii) when
sent if by confirmed telecopy or (iv) on the next business day following deposit
with an overnight courier.
-40-
Section 9.6 Third Party Rights. Nothing in this Agreement, whether
express or implied, is intended or shall be construed to confer, directly or
indirectly, upon or give to any Person other than the Corporation, the
Stockholders and their respective Affiliates or Permitted Transferees, any legal
or equitable right, remedy or claim under or in respect of this Agreement or any
covenant, condition or other provision contained herein. Notwithstanding the
foregoing, the agent and the lenders, pursuant to the Credit Agreement, shall be
third party beneficiaries of the covenants and other provisions set forth in
Article IV and Section 7.6 hereof.
Section 9.7 Choice of Law. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Delaware
without giving effect to the principles of conflict of laws thereof.
Section 9.8 Severability. If any provision of this Agreement shall be
held invalid or unenforceable in whole or in part in any jurisdiction, such
provisions shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability with out in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the validity or
enforceability of the remaining provisions hereof. If any provision of this
Agreement shall be or become ineffective because of changes in applicable laws
or interpretations thereof or should this Agreement fail to include a provision
that is required as a matter of law, the parties hereto shall negotiate in good
faith appropriate amendment or modifications to this Agreement so as to comply
with applicable law.
Section 9.9 Enforcement of Agreement. Any legal action or proceeding
with respect to this Agreement or any document related to this Agreement may be
brought in the courts of the State of Delaware or of the United States of
America for the District of Delaware, and, by execution and delivery of this
Agreement, each party to this Agreement consents, for itself and in respect of
its property, to the jurisdiction of the aforesaid courts solely for the purpose
of adjudicating its rights with respect to this Agreement or any document
related to this Agreement. Each party, at or prior to Closing, shall designate
an agent as the designee, appointee and agent of such party to receive, for and
on behalf of such party, service of process in such jurisdictions in any legal
action or proceeding with respect to this Agreement or any document related to
this Agreement and such service shall, to the extent permitted by applicable
law, be deemed completed ten days after delivery thereof to said agent. It is
understood that a copy of such process served on such agent will be promptly
forwarded by mail to such party at its address set forth in Section 9.5, but the
failure of such party to receive such copy shall not, to the extent permitted by
applicable law, affect in any way the service of such process. Each party to
this Agreement irrevocably waives, to the extent permitted by applicable law,
any objection, including, without limitation, any objection to the laying of
venue or based on the grounds of forum non conveniens, which it may now or
hereafter have to the bringing of any action or proceeding in such respective
jurisdictions in respect of this Agreement or any document related to this
Agreement. Nothing in this Agreement shall affect the right of any party to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any other party in any other
jurisdiction.
-41-
Section 9.10 References to Money. References to "cash," "$," "Dollars"
or other money amounts refer to currency of the United States.
Section 9.11 Construction. Any reference herein to this Agreement shall
be deemed to be a reference to such Agreement as the same may be modified,
varied, amended or supplemented from time to time by the parties hereto in
accordance with the provisions hereof. Unless the context otherwise expressly
requires, the words "herein," "hereof" and "hereunder" and other words of
similar importance refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
Section 9.12 Entire Agreement. This Agreement, the Stock Purchase
Agreement and the other agreements and documents contemplated hereby and thereby
constitute the entire agreement between the parties hereto and supersede any
prior agreement or understanding between the parties hereto whether oral or
written, with respect to the matters contemplated hereby.
Section 9.13 Headings, etc. The Article and Section headings in this
Agreement, and the table of contents included herein, are inserted for
convenience of reference only and shall not affect the interpretation of this
Agreement. Whenever the context shall require, each term stated in either the
singular or plural shall include the singular and the plural. References herein
to masculine, feminine or neuter pronouns shall be construed to refer to another
gender when the context may require.
Section 9.14 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
Section 9.15 Survival. The provisions of Sections 7.2 and all
representations and warranties made herein shall survive the execution and
delivery of this Agreement and any termination of this Agreement for a period of
two years following the effective date of any such termination.
Section 9.16 Amendments. This Agreement may be amended or modified only
by a written instrument executed by all of the Stockholders, or by their
respective successors and Permitted Transferees.
Section 9.17 Certain Capital Contributions. The Minority Stockholders
covenant and agree that any Minority Stockholder that exercises any right to
exchange shares of Common Stock pursuant to the Exchange Agreement prior to the
time that all payments to be made to participants under the GSHS Long-Term
Compensation Plan (as defined in the Stock Purchase Agreement) in connection
with the termination or amendment of such plan pursuant to Section 6.12 of the
Stock Purchase Agreement have been made shall pay to the Corporation prior to
such exchange an amount in cash equal to $163,333 times a fraction, the
numerator of which is the number of shares of
-42-
Common Stock so to be exchanged and the denominator of which is the number of
shares of Common Stock beneficially owned by such Minority Stockholder on the
date of this Agreement.
Section 9.18 Exchanges. Notwithstanding anything to the contrary in
this Agreement (except for Section 7.6(a), any Stockholder (other than Charter)
shall have the right and the option to Exchange (as defined in the Exchange
Agreement) its shares of Common Stock during the Exchange Period (as defined in
the Exchange Agreement), provided that upon becoming obligated to sell its
shares of Common Stock to another Stockholder (other than Charter) pursuant to
the Right of First Refusal or to Charter pursuant to the Right of First Refusal,
the Charter Option or the Charter Mandatory Call, such Stockholder shall not
have the right and option to Exchange, except that such Stockholder shall have
the right and option to Exchange its shares of Common Stock within ten Business
Days after its receipt of a Mandatory Call Notice.
IN WITNESS WHEREOF, the parties hereto have caused this Stockholders'
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized on the day and year first written above.
GREEN SPRING HEALTH SERVICES, INC.
By:
---------------------------------
Name:
Title:
HEALTH CARE SERVICE CORPORATION
By:
---------------------------------
Name:
Title:
-00-
XXXX XXXXX XXX XXXX XXXXXX XX XXX
XXXXXX, INC.
By:
---------------------------------
Name:
Title:
INDEPENDENCE BLUE CROSS
By:
---------------------------------
Name:
Title:
XXXXXX COUNTY MEDICAL BUREAU, INC.
By:
---------------------------------
Name:
Title:
CHARTER MEDICAL CORPORATION
By:
--------------------------------
Name:
Title:
-44-
