EXHIBIT 99.5
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement"), made as of this 18th
day of June, 2002, by and among PRACTICEWORKS, INC., a Delaware corporation
("PracticeWorks"), XXXXXXX X. XXXXX ("Xxxxx"), XXXXX DENTAL OF KENTUCKY D/B/A/
ZILA DENTAL SUPPLY, a Kentucky corporation (together with any successor in
interest, "Zila") (Xxxxx, PracticeWorks and Zila being referred to hereinafter
collectively as the "Stockholders" and singularly as a "Stockholder") and
PRACTICEWARES, INC., a Delaware corporation (the "Company").
W I T N E S S E T H :
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WHEREAS, PracticeWorks currently owns in the aggregate two million four
hundred ninety-eight thousand four hundred thirty-seven (2,498,437) shares of
the Company's common stock, $.001 par value per share (the "Common Stock");
WHEREAS, Company, PracticeWorks, Zila and Xxxxx have entered into that
certain Fourth Extension and Modification Agreement dated as of June 6, 2002
(the "Modification Agreement");
WHEREAS, Zila currently owns two million four hundred ninety-eight
thousand four hundred thirty-seven (2,498,437) shares of Common Stock (the
shares of Common Stock and any other Securities owned by Zila or Zila's
successor in ownership thereof are hereinafter referred to as "Zila
Securities");
WHEREAS, Xxxxx currently owns seven million five hundred one thousand
six hundred sixty (7,501,660) shares of Common Stock; and
WHEREAS, the parties believe it to be in the best interests of the
Stockholders and of the Company to insure continuity of harmonious management of
the Company, and the good performance thereof, by addressing certain matters
relating to the governance of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, to induce the Company to enter into the Modification
Agreement and issue shares of Common Stock to Zila, and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged conclusively, the Company and the Stockholders, intending to be
legally bound, hereby agree as follows:
1. OBSERVATION RIGHTS.
PracticeWorks and Zila shall each have the right to receive notice of
all meetings of the Board of Directors and to attend any such meeting as a
nonvoting observer for so long as each continues to hold shares of Common Stock
representing at least five percent (5%) of the issued and outstanding shares of
Common Stock.
2. GENERAL RESTRICTIONS.
2.1 Restrictions on Transfers. Except as set forth in (i) the
Stock Redemption Agreement, dated as of June 18, 2002, between the Company and
Xxxxx and (ii) the Pledge and Irrevocable Proxy Security Agreement, dated June
18, 2002, between PracticeWorks and Xxxxx, the Stockholders shall not make any
transfer of any Securities (as defined in Section 5), except as provided in
Sections 2 through 7 of this Agreement.
2.2 Permitted Transfers. Any transfer of Securities by a
Stockholder (i) which is (1) a partnership to its partners or former partners in
accordance with partnership interests; (2) a corporation to its stockholders in
accordance with their interest in the corporation; (3) a limited liability
company to its members or former members in accordance with their interest in
the limited liability company; (ii) to an individual Stockholder's family member
or trust for the benefit of an individual Stockholder or such Stockholder's
family member; (iii) to any person pursuant to a will or the laws of descent and
distribution; or (iv) to any other person by a bona fide gift or bequest is
permitted hereunder; provided that in each case such disposition complies with
the terms of this Agreement and each transferee agrees in writing at the time of
such disposition, in a form satisfactory to the Company, to be bound by the
terms of this Agreement as to the same extent as if he, she or it were an
original Stockholder hereunder (a "Permitted Transfer"). Subject to the
restrictions set forth above, a Permitted Transfer shall not require consent
hereunder.
2.3 Compliance With Laws. Anything in this Agreement to the
contrary notwithstanding, no transfer of any Securities otherwise permitted or
required by this Agreement shall be made unless such transfer is in compliance
with federal and state securities laws, including, without limitation, the
Securities Act of 1933, as amended (the "Securities Act"). In connection with
any transfer or proposed transfer of Securities, if requested by the Company
before such transfer, the Stockholder proposing to effect such transfer shall
provide to the Company a written opinion of legal counsel which shall be
reasonably satisfactory to the Company to the effect that the proposed transfer
of the Securities may be effected without registration under the Securities Act
and applicable state securities laws.
2.4 Other Transfers. Anything in this Agreement to the contrary
notwithstanding, unless otherwise agreed to in writing by the Company,
PracticeWorks and Zila, no transfer of Securities otherwise permitted or
required by this Agreement shall be effective unless and until the transferee
shall execute and deliver to the Company an agreement in a form satisfactory to
the Company in which such transferee agrees in writing to be bound by this
Agreement and to observe and comply with this Agreement and with all obligations
and restrictions imposed on the Stockholders hereby. Each person to whom a
transfer of Securities is permitted by this Agreement who receives a transfer of
Securities during the period when this Agreement is in effect, and who so agrees
in writing to be bound by the provisions hereof, shall thereafter become a
"Stockholder" for all purposes of this Agreement.
2.5 Void Transfers. Transfers of the Securities may only be made
in strict compliance with all applicable provisions of this Agreement. Any
purported transfer of the Securities that does not comply with all applicable
provisions of this Agreement shall be null and void and of no force or effect,
and the Company shall not recognize nor will the Company be bound by any such
purported transfer and the Company shall not effect any such purported transfer
on its stock transfer books.
2.6 Definition of Transfer. For purposes of this Agreement, the
term "transfer" shall include any sale, assignment, encumbrance, hypothecation,
pledge, conveyance in trust, gift, transfer by bequest, devise or descent, or
other transfer or disposition of any kind, including, but not limited to,
transfers to receivers, levying creditors, trustees or receivers in bankruptcy
proceedings or general assignees for the benefit of creditors, whether voluntary
or by operation of law, directly or indirectly, of any of the Common Stock.
3. RIGHT OF FIRST REFUSAL.
3.1 Company Right of First Refusal. If at any time any Stockholder
(the "Seller"), desires (or is required) to transfer any Securities (the
"Offered Securities") in any manner to any person (the "Buyer") other than the
Company, the Seller shall give written notice to the Company and the
Stockholders, describing fully and accurately the proposed sale or transfer, the
proposed transferee and
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the proposed transfer price and shall provide a copy of the bona fide offer from
the Buyer (the "Transfer Notice"). At any time within the ten (10) day period
immediately following receipt of the Transfer Notice, the Company may elect by
written notice (the "Company Notice") to the Seller, to acquire all or any
portion of the Offered Securities at the same price per share and on the same
terms and conditions as involved in such sale or disposition.
3.2 Stockholder Right of First Refusal.
(i) In the event the Company does not elect to purchase
all of the Offered Securities available pursuant to its rights under Section 3.1
within the period set forth therein, the Company shall promptly give written
notice (the "Second Notice") on or before the expiration of ten (10) days from
its receipt of the Transfer Notice to each of the Stockholders (other than the
Seller), which notice shall set forth the number of Offered Securities not
purchased by the Company and the terms of the Transfer Notice. Each Stockholder
shall then have the right, exercisable upon written notice to the Company and
the Seller (the "Stockholder Notice") within ten (10) days after receipt of the
Second Notice, to purchase its pro rata share of the Offered Securities subject
to the Second Notice and on the same terms and conditions as set forth therein.
Except as set forth in Section 3.2(iii), the Stockholders who so exercise their
rights (the "Participating Stockholders") shall effect the purchase of the
Offered Securities, including payment of the purchase price, not more than
fifteen (15) days after delivery of the Stockholder Notice, and at such time the
Seller shall deliver to the Company, which will in turn promptly deliver to the
Participating Stockholders, the certificate(s) representing the Offered
Securities to be purchased by the Participating Stockholders, each certificate
to be properly endorsed for transfer.
(ii) Each Stockholder's pro rata share shall be equal to
the product obtained by multiplying (1) the aggregate number of shares of or
underlying Offered Securities covered by the Second Notice; and (2) a fraction,
the numerator of which is the number of shares of Common Stock, or shares of
Common Stock then issuable upon conversion of convertible securities ("Common
Stock Equivalents"), owned by the Participating Stockholder at the time of the
Transfer and the denominator of which is the total number of shares of Common
Stock or Common Stock Equivalents owned by all of the Stockholders at the time
of the Transfer.
(iii) In the event that not all of the Stockholders elect
to purchase their pro rata share of the Offered Securities available pursuant to
their rights under Section 3.2(i) within the time period set forth therein, then
the Company shall promptly give written notice to each of the Participating
Stockholders, which notice shall set forth the number of shares of Offered
Securities not purchased by the other Stockholders, and shall offer such
Participating Stockholders the right to acquire such unsubscribed Securities
from the Seller (the "Overallotment Notice"). Each Participating Stockholder
shall have five (5) days after receipt of the Overallotment Notice to deliver a
written notice to the Company (the "Participating Stockholders Overallotment
Notice") of its election to purchase its pro rata share of the unsubscribed
Securities on the same terms and conditions as set forth in the Transfer Notice.
For purposes of this Section 3.2(iii) the denominator described in clause (2) of
Section 3.2(ii) above shall be the total number of shares of Common Stock and
Common Stock Equivalents owned by all Participating Stockholders at the time of
Transfer. The Participating Stockholders shall then effect the purchase of the
Offered Securities, including payment of the purchase price, not more than
fifteen (15) days after delivery of the Participating Stockholders Overallotment
Notice, and at such time, the Seller shall deliver to the Company, which will in
turn promptly deliver to the Stockholders, the certificates representing the
Offered Securities to be purchased by the Participating Stockholders, each
certificate to be properly endorsed for transfer.
3.3 Stockholder Right to Sell. In the event that the Company
and/or the other Stockholders do not elect to purchase all of the Offered
Securities, then the Seller may sell to Buyer, subject to
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compliance with Section 6 hereof, the Offered Securities not purchased pursuant
to this Section 3 (but not at a lower price or upon more favorable terms than
the price and terms offered pursuant to this Section 3) within a one hundred
twenty (120) day period beginning from the date the Transfer Notice is delivered
to the Company, provided that at the end of such one hundred twenty (120) day
period, the Offered Securities, if not sooner sold to the Buyer, shall again be
subject to the restrictions of this Section 3; and provided further, that no
sale may be made to any buyer that is, or is affiliated with, any competitor of
the Company without the prior written consent of the Company except that no
consent shall be required in connection with the sale of substantially all of
the assets or capital stock of PracticeWorks.
3.4 Closing of Purchase. The Company shall effect the purchase of
the Offered Securities, including payment of the purchase price, not more than
ten (10) days after delivery of the Company's Notice, and at such time as the
Seller shall deliver to the Company the certificate(s) representing the Offered
Securities, each certificate to be properly endorsed for transfer. The
certificate(s) representing the Offered Securities to be purchased by the
Company and/or the Participating Stockholders shall, prior to the closing of
such purchase, be delivered to the Company by the Seller properly endorsed for
transfer, free and clear of all claims, liens, security interests, charges,
pledges and encumbrances (other than this Agreement), and the Seller shall
provide representations and warranties with respect to the title and transfer of
such shares as shall be reasonably requested by the Company.
3.5 Appraisal of Non-Cash Consideration. If the purchase price to
be paid by the Buyer includes consideration other than cash, the Company or the
other Stockholders shall have the option of electing to have the cash equivalent
value of the non-cash consideration determined by the Board in good faith or by
a third party appraiser. If the Company or the other Stockholders elects to have
the Board make such determination, such determination shall be made by a
majority vote of disinterested directors of the Board pursuant to Delaware law.
In the event the directors are unable to make such determination or the Company
or the other Stockholders has elected to have the cash equivalent value of the
non-cash consideration determined by a third party appraiser, the appraiser
shall be mutually agreed upon by the Seller and the Company or the other
Stockholders (the "Independent Appraiser"). In the event the Company or the
other Stockholders, and the Seller are unable to so agree upon the selection of
the Independent Appraiser, then the Company or the other Stockholders, and the
Seller, shall each, within ten (10) days of the Company or the other
Stockholders providing Seller with written notice that each shall select an
appraiser, select an appraiser (the "Other Appraiser" and "Seller's Appraiser",
respectively) who shall each be a qualified and impartial person with at least
five (5) years of experience in appraising the type of matters which they are
called on to appraise hereunder. The Other Appraiser and Seller's Appraiser
shall jointly name a third appraiser (also referred to as the "Independent
Appraiser") similarly qualified, within ten (10) days after their appointment.
If the Other Appraiser and the Seller's Appraiser do not agree on the third
appraiser within such ten (10) day period, the Company and the other
Stockholders shall select the appraiser (also referred to as the "Independent
Appraiser") within five (5) days of the expiration of said period, and said
Independent Appraiser shall meet the qualification requirements described above.
The Independent Appraiser shall within thirty (30) days after his or
her selection, determine the cash equivalent value of the non-cash consideration
described in the Transfer Notice, and shall determine such value as of the date
the Transfer Notice was provided to the Company or the other Stockholders and
shall forthwith give written notice of his or her determination to the
applicable parties. The determination of such value shall be based upon the
price that a willing seller would accept and a willing buyer would pay, at
arm's-length for the applicable non-cash consideration. Notwithstanding anything
to the contrary contained herein, the Company or the other Stockholders and the
Seller may at any time agree in writing on the amount of the value of the
non-cash consideration without utilizing the services of any appraisers or the
Board.
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Seller shall pay all of the costs, expenses and fees of all of the
appraisers in connection with any determination of the Appraised Value
hereunder.
4. RIGHT OF FIRST REFUSAL UPON CHANGE OF CONTROL.
4.1 Grant of Right. During the term of this Agreement, in the
event that (i) the Board authorizes the liquidation, dissolution or winding up
of the Company (a "Liquidation"); (ii) the Company proposes to enter into any
bona fide merger, consolidation or reorganization in which the Company is not
the surviving company or in which the stockholders of the Company immediately
prior to such proposed merger, consolidation or reorganization would own less
than fifty percent (50%) of the then-outstanding shares of the Company's capital
stock immediately after such proposed merger, consolidation or reorganization
(all of the foregoing, collectively referred to as a "Business Combination");
(iii) the Company proposes to enter into any bona fide sale, lease or other
disposition of all or substantially all of the Company's assets in one (1) or
more related transactions (an "Asset Sale"); or (iv) the holders of a majority
of the issued and outstanding Securities, on an as-converted basis propose to
sell Securities in any manner pursuant to a bona fide offer from a bona fide
third party other than the Company (a "Stock Sale", hereinafter, a Stock Sale, a
Business Combination, a Liquidation and an Asset Sale, each referred to as a
"Change of Control Event"), the Company shall first give written notice to
PracticeWorks, describing fully and accurately the proposed Change of Control
Event, the proposed transferee(s) and the proposed transfer price (unless the
event shall be a Liquidation) and shall provide a copy of the bona fide offer
(unless the event shall be a Liquidation) of the Change of Control Event (the
"Change of Control Notice"). At any time within the thirty (30) day period
immediately following receipt of the Change of Control Notice, PracticeWorks may
elect by written notice to the Stockholders and the Company, to acquire either
all of the issued and outstanding Securities held by all Stockholders of the
Company, other than PracticeWorks, or all of the assets of the Company.
4.2 Right to Consummate Change of Control Event. In the event that
PracticeWorks does not elect either to purchase all of the Offered Securities
pursuant to Section 3.1 or to purchase all of the Securities or substantially
all of the assets of the Company (the "Assets") pursuant to Section 4.1, then
the Seller(s) or the Company, as the case may be, may consummate the Change of
Control Event (but not at a lower price or upon more favorable terms than the
price and terms set forth in the Change of Control Notice) within a sixty (60)
day period beginning from the date the Change of Control Notice is provided to
PracticeWorks, provided that at the end of such sixty (60) day period, the
Securities and Assets, if not sooner sold to the proposed acquirer, shall again
be subject to the restrictions of this Agreement.
4.3 Closing of Purchase. The closing of the sale and purchase of
the Securities or the Assets elected to be purchased by PracticeWorks pursuant
to Section 4.1 above, shall be held at the offices of the Company on a date and
at a time chosen by PracticeWorks, no later than sixty (60) days from the date
of delivery of the Change of Control Notice to PracticeWorks. The certificate(s)
representing the Securities to be purchased by PracticeWorks shall, prior to the
close of business on the date specified for the purchase by PracticeWorks, be
delivered to PracticeWorks by all of the stockholders of the Company, other than
PracticeWorks (the "Selling Stockholders"), properly endorsed for transfer, and
the Selling Stockholders shall provide representations, warranties,
indemnifications and an escrow for indemnification claims with respect to the
transfer of the shares as shall be customary in a transaction of this type, as
reasonably requested by PracticeWorks. In the event of a purchase of the Assets
by PracticeWorks, the Company shall provide representations, warranties,
indemnifications and an escrow for indemnification claims as shall be customary
in a transaction of this type, as reasonably requested by PracticeWorks.
PracticeWorks shall, concurrently with the receipt of such certificate(s), pay
to the Selling Stockholders the purchase price for the Securities being
purchased. PracticeWorks shall have the right to structure any purchase of
Securities or Assets by PracticeWorks pursuant to this Section 4, as a merger,
consolidation, reorganization or other business combination; provided, however,
if the Change of
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Control Event described in the Change of Control Notice is a tax-free
transaction to the Selling Stockholders, the structure proposed by PracticeWorks
may not be taxable unless consented to by a majority of the Selling
Stockholders. In any sale of the Assets to PracticeWorks or in the event any
sale of the Securities to PracticeWorks under this Section 4 shall be structured
as a merger, consolidation, reorganization or other business combination, each
Stockholder agrees to approve, vote in favor of, and raise no objections to,
such transaction, and each Stockholder agrees to waive any dissenter's rights,
appraisal rights or similar rights in connection with such transaction.
4.4 Purchase Price. The purchase price for the Securities
purchased by PracticeWorks in connection with a Business Combination or a Stock
Sale, shall on a per share basis, be equal to one hundred percent (100%) of the
price per share offered by the proposed acquirer; provided that PracticeWorks
shall be required to pay an additional amount equal to up to five percent (5%)
of the aggregate purchase price to the proposed acquirer, if necessary. The
purchase price for the Assets purchased by PracticeWorks in connection with a
Business Combination, a Stock Sale or an Asset Sale shall be the same price as
the aggregate price offered by the acquirer in connection with such transaction.
The purchase price for the Securities in connection with an Asset Sale shall on
a per share basis, is the aggregate purchase price offered for the assets of the
Company divided by the number of issued and outstanding Securities. The purchase
price for the Securities or the Assets in connection with Liquidation shall be
the Appraised Value (as defined in Section 4.5 below).
4.5 Liquidation Appraisal. In the event of a Liquidation in which
PracticeWorks elects to purchase the Securities or the Assets, PracticeWorks and
the Company shall have a period of ten (10) days to agree upon the purchase
price therefore. In the event PracticeWorks and the Company are unable to reach
an agreement thereto, PracticeWorks and the Company shall have five (5) days to
reach an agreement upon the selection of an independent appraiser (the
"Liquidation Appraiser"). If PracticeWorks and the Company are unable to so
agree upon the selection of the Liquidation Appraiser, within such five (5) day
period, then PracticeWorks and the Company, shall each, within ten (10) days of
the expiration of the aforesaid five (5) day period, select an appraiser
("PracticeWorks' Appraiser" and "Company's Appraiser", respectively) who shall
each be a qualified and impartial person with at least five (5) years of
experience in appraising the type of matters which they are called on to
appraise hereunder. PracticeWorks' Appraiser and Company's Appraiser shall
jointly name a third (3rd) appraiser (also referred to as the "Liquidation
Appraiser") similarly qualified, within ten (10) days after their appointment.
If the PracticeWorks' Appraiser and the Company's Appraiser do not agree on the
third (3rd) appraiser within such ten (10) day period, the Company and
PracticeWorks shall select the appraiser (also referred to as the "Liquidation
Appraiser") within five (5) days of the expiration of said period, and said
Liquidation Appraiser shall meet the qualification requirements described above.
The Liquidation Appraiser shall within thirty (30) days after his or
her selection, determine the fair market value of the Assets, and shall
determine such value as of the date the Change of Control Notice was provided to
PracticeWorks and shall forthwith give written notice of his or her
determination to the applicable parties. The determination of the fair market
value of the Assets shall be based upon the price that a willing seller would
accept and a willing buyer(s) would pay, at arm's-length for the Assets in
connection with a liquidation of a company. Notwithstanding anything to the
contrary contained herein, PracticeWorks and the Company may at any time agree
in writing on the amount of the purchase price to be paid pursuant to
Liquidation.
In the event of a Liquidation in which PracticeWorks has elected a
purchase of the Securities under this Section 4.5, the Selling Stockholders and
PracticeWorks shall each pay one-half (1/2) of all of the costs, expenses and
fees of all of the appraisers in connection with any determination of the fair
market value hereunder. In the event of a Liquidation in which PracticeWorks has
elected a purchase of the Assets under this Section 4.5, the Company and
PracticeWorks shall each pay one-half (1/2) of all of
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the costs, expenses and fees of all of the appraisers in connection with any
determination of the fair market value hereunder.
4.6 Appraisal of Non-Cash Consideration. If the purchase price to
be paid by a third party in connection with any Change of Control Event includes
consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by a third party appraiser. The appraiser
shall be mutually agreed upon by the Company and PracticeWorks (the
"Appraiser"). In the event PracticeWorks and the Company are unable to so agree
upon the selection of the Appraiser, then PracticeWorks and the Company, shall
each, within ten (10) days of PracticeWorks providing the Company with written
notice that each shall select an appraiser, select an appraiser ("PW's
Appraiser" and "Company's Appraiser," respectively) who shall each be a
qualified and impartial person with at least five (5) years of experience in
appraising the type of matters which they are called on to appraise hereunder.
PW's Appraiser and the Company's Appraiser shall jointly name a third (3rd)
appraiser (also referred to as the "Appraiser") similarly qualified, within ten
(10) days after their appointment. If PW's Appraiser and the Company's Appraiser
do not agree on the third (3rd) appraiser within such ten (10) day period, the
Company and PracticeWorks shall select the appraiser (also referred to as the
"Appraiser") within five (5) days of the expiration of said period, and said
Appraiser shall meet the qualification requirements described above.
The Appraiser shall within thirty (30) days after his or her selection,
determine the cash equivalent value of the non-cash consideration proposed to be
paid by a third party in connection with a Change of Control Event, and shall
determine such value as of the date the Change of Control Notice was provided to
PracticeWorks and shall forthwith give written notice of his or her
determination to the applicable parties. The determination of such value shall
be based upon the price that a willing seller would accept and a willing buyer
would pay, at arm's-length for the applicable non-cash consideration.
Notwithstanding anything to the contrary contained herein, PracticeWorks and the
Company may at any time agree in writing on the amount of the value of the
non-cash consideration without utilizing the services of any appraisers.
In the event PracticeWorks has elected a sale of the Securities under
this Section 4 in which an appraisal shall be conducted pursuant to this Section
4.6, the Selling Stockholders and PracticeWorks shall each pay one-half (1/2) of
all of the costs, expenses and fees of all of the appraisers in connection with
any determination of the value of the non-cash consideration. In the event
PracticeWorks has elected a sale of the Assets under this Section 4 in which an
appraisal shall be conducted pursuant to this Section 4.6, the Company and
PracticeWorks shall each pay one-half (1/2) of all of the costs, expenses and
fees of all of the appraisers in connection with any determination of the value
of the non-cash consideration.
5. CALL RIGHT.
5.1 Grant of Right. For the period beginning on the date hereof
and ending on June 18, 2007 (the "Call Option Period"), PracticeWorks shall have
the right to acquire all of the Securities of the Company (the "Call Option").
Subject to the inclusion of the liquidation preferences that may be granted
pursuant to Section 5.7 hereof, the purchase price for the Call Option (a) if
exercised on or before June 18, 2005 (the "Initial Call Option Period"), shall
be an amount equal to the greater of: (i) the Call Option Appraised Value (as
defined below); and (ii) the sum of (A) the Xxxxx Liquidation Preference (as
defined below); plus (B) the Zila Liquidation Preference (as defined below);
plus (C) the Option Pool Liquidation Preference (as defined below); and (b) if
exercised on or after June 19, 2005 (the "Second Call Option Period"), shall be
an amount equal to the Call Option Appraised Value. PracticeWorks' rights under
this Call Option may be assigned to an entity (the "PracticeWorks Successor")
that acquires substantially all of the capital stock or substantially all of the
assets of PracticeWorks. PracticeWorks shall have the right to structure any
purchase of Securities pursuant to this Section 5 as a merger, consolidation,
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reorganization or similar business combination, or such other form as may be
reasonably agreed to by the parties hereto.
5.2 Payment of the Purchase Price. Upon PracticeWorks' exercise of
the Call Option during the Initial Option Period, (a) Xxxxx, or his successor,
shall receive the greater of the Xxxxx Liquidation Preference, and his pro rata
share of the Call Option Appraised Value; (b) Zila, or its successor, shall
receive the greater of the Zila Liquidation Preference, and its pro rata share
of the Call Option Appraised Value; (c) each holder of vested options granted
pursuant to the PracticeWares, Inc. 2002 Stock Incentive Plan (the "Plan") shall
receive his or her pro rata share of (i) the Option Pool Liquidation Preference
based on a total of one million eight hundred seventy-four thousand seven
hundred seventy-nine (1,874,779) shares available for issuance pursuant to the
exercise of option under the Plan (minus the exercise price of the option); or
(ii) the Call Option Appraised Value (minus the exercise price of the option);
and (d) each holder of shares of Common Stock issued pursuant to the exercise of
options granted pursuant to the Plan shall receive his or her pro rata share of
(i) the Option Pool Liquidation Preference based on a total of one million eight
hundred seventy-four thousand seven hundred seventy-nine (1,874,779) shares
available for issuance pursuant to the exercise of options under the Plan; or
(ii) the Call Option Appraised Value. Upon PracticeWorks' exercise of the Call
Option during the Second Option Period, (a) Xxxxx shall receive his pro rata
share of the Call Option Appraised Value; (b) Zila shall receive its pro rata
share of the Call Option Appraised Value; (c) each holder of vested options
granted pursuant to the Plan shall receive his or her his pro rata share of the
Call Option Appraised Value (minus the exercise price of the option); and (d)
each holder of shares of Common Stock issued pursuant to the exercise of options
granted pursuant to the Plan shall receive his or her pro rata share of the Call
Option Appraised Value.
5.3 Definitions. For purposes of this Agreement, the terms listed
below shall have the following meanings:
(a) "Xxxxx Liquidation Preference" means an amount equal
to (i) $2,500,000.00; plus (ii) $63,000.00 for each month that passes from the
date hereof and ending on the earlier to occur of (A) the date that the Call
Option is exercised; or (B) June 18, 2005 (a new month shall pass on the 1st day
of each succeeding month).
(b) "Zila Liquidation Preference" means an amount equal
to $1,000,000.00.
(c) "Option Pool Liquidation Preference" means an amount
equal to (i) $747,000.00; plus (ii) $19,000.00 for each month that passes from
the date hereof and ending on the earlier to occur of (A) the date that the Call
Option is exercised; or (B) June 18, 2005 (a new month shall pass on the 1st day
of each succeeding month).
(d) "Call Option Appraised Value" means the (i) appraised
value as determined by the Independent Investment Bank (as defined below); or
(ii) if PracticeWorks selects an investment bank as set forth below, mean
between the value of the Company as determined by (A) the Independent Investment
Bank; and (B) the PracticeWorks Investment Bank. An independent investment bank
shall be selected by the mutual agreement of Zila and the Company, and
reasonably approved by PracticeWorks (the "Independent Investment Bank"). In the
event that PracticeWorks does not agree with the selection of the Independent
Investment Bank, then PracticeWorks may select a different investment bank to
conduct a second appraisal, which shall be reasonably approved by the Company
(the "PracticeWorks Investment Bank"). The Independent Investment Bank and the
PracticeWorks Investment Bank shall within thirty (30) days after their
selection, determine the cash value of the Company and shall forthwith give
written notice of their determinations to the applicable parties. The cost for
the Independent Investment Bank shall be shared evenly between PracticeWorks and
the
Page 8
Company, and the cost of the PracticeWorks Investment Bank, if necessary, shall
be borne by PracticeWorks.
(e) "Securities" means all of the Company's now and
hereafter existing capital and voting stock, options, warrants and other rights
to acquire capital or voting stock or other securities of the Company and all
securities convertible into any of the foregoing, including, without limitation,
Common Stock and any capital stock issued pursuant to Section 5.7. It is the
intention of the parties that "Securities" is defined broadly enough that a
person who owns all of the Securities owns all possible equity, voting and any
other ownership interests in the Company.
5.4 Notice. At anytime during the Call Option Period,
PracticeWorks, or its successor if such right has been assigned pursuant to
Section 4.1 hereof, may elect, by written notice to the Company and the
Stockholders, to exercise the Call Option (the "Call Option Notice"). The Call
Option Notice shall contain the terms and conditions of the proposed
acquisition, including the applicable purchase price as determined pursuant to
Section 4.1 above.
5.5 Closing of Purchase. The closing of the sale and purchase of
the Securities pursuant to the exercise of the Call Option shall be held at the
offices of the Company on a date and at a time chosen by PracticeWorks, no later
than ninety (90) days from the date of delivery of the Call Option Notice.
5.6 Approval of Transaction. If PracticeWorks exercises the Call
Option, each Stockholder shall approve, vote for, and raise no objections to,
the sale of all of the Securities (whether by merger, consolidation,
reorganization, combination or otherwise) (an "Approved Sale"). If the Approved
Sale is structured as (i) a merger, consolidation, reorganization or similar
business combination, each Stockholder will waive any dissenter's rights,
appraisal rights or similar rights in connection with such transaction; or (ii)
a sale of stock, each Stockholder will agree to sell all of his or its
Securities in accordance with the terms and conditions set forth herein. Each
Stockholder will take all necessary or desirable actions in connection with the
consummation of the Approved Sale as requested by the Company.
5.7 New Investors. In the event that the Company sells shares of
capital stock to any venture capital fund, strategic investor or other
independent third-party investor on or after the date hereof, the Stockholders
hereby agree to provide such investor a liquidation preference up to an amount
(a) equal to two (2) times the per share investment amount during the first
twenty-four (24) months after the investment; and (b) equal to two and 1/2
(2-1/2) times the per share investment amount during the period beginning on the
twenty-fifth (25th) month and ending on the thirty-sixth (36th) month.
6. RIGHT OF CO-SALE.
6.1 Grant of Right of Co-Sale. In the event that a Stockholder
proposes to transfer any shares of Common Stock held by such Stockholder (for
purposes of this Section 6, the "Selling Stockholder"), other than in a
Permitted Transfer or pursuant to Section 7, to any person or entity, the
remaining Stockholders shall have a right of co-sale with respect to any such
sale, as further set forth in this Section 6 (the "Right of Co-Sale").
6.2 Exercise of the Right of Co-Sale. The Selling Stockholder
shall give the remaining Stockholders a notice (for purposes of this Section 6,
the "Co-Sale Notice") describing fully the proposed transfer, including the
number of Securities, proposed to be transferred, the proposed transferee and
the proposed transfer price, and each remaining Stockholder shall have the Right
of Co-Sale with respect to the Securities proposed to be transferred by the
Selling Stockholder, exercisable within the ten (10) day period immediately
following the delivery of the Co-Sale Notice to the remaining Stockholders (for
Page 9
purposes of this Section 6, the "Co-Sale Period"). The Right of Co-Sale shall
entitle each remaining Stockholder to sell a portion of the shares of Common
Stock held by it to the proposed transferee named in the Co-Sale Notice at the
price per share set forth in the Co-Sale Notice by delivering to the Selling
Stockholder and the Company notice of such election within the Co-Sale Period
(the "Election Notice"). Each remaining Stockholder shall have the Right of
Co-Sale provided herein with respect to a percentage of the aggregate number of
Shares held by the Selling Stockholder proposed to be sold equal to the ratio of
(i) the number of shares of Common Stock actually held by each remaining
Stockholder to (ii) the total number of issued and outstanding shares of Common
Stock (such stock that may be sold by such remaining Stockholder hereafter
referred to as the "Co-Sale Stock").
6.3 Closing of Sales. Any sale of Co-Sale Stock shall be
consummated pursuant to Section 3.3 hereof along with the closing of the sale of
Offered Securities thereunder.
7. PURCHASE OPTION.
PracticeWorks and, if PracticeWorks chooses not to exercise its rights
hereunder in whole or in part, then the Company, to the extent PracticeWorks has
not exercised its rights, each shall have the right to purchase the Zila
Securities in accordance with the following terms:
7.1 Price. The price for the Zila Securities shall be as follows:
(i) for any sale for which notice is delivered to the holder of the Zila
Securities on or prior to the third anniversary date of this Agreement, the
price shall be the greater of $1,000,000.00 and the Fair Market Value (as
defined below) of the Zila Securities; and (ii) for any sale for which notice is
delivered to the holder of the Zila Securities after the third anniversary date
of this Agreement, the price shall be the Fair Market Value. The fair market
value (the "Fair Market Value") of the Zila Securities at any time shall be
determined as follows: if the Common Stock is traded in a public market, the
Fair Market Value of the Zila Securities shall be the closing price of the
Common Stock reported for the business day immediately before PracticeWorks or
the Company delivers its notice of exercise to the holder of the Zila
Securities. If the Zila Securities or other shares of Common Stock are not
traded in a public market, the Board of Directors of the Company shall determine
Fair Market Value in its reasonable, good faith judgment. The foregoing
notwithstanding, if Zila or PracticeWorks, as the case may be, advises the Board
of Directors of the Company in writing that Zila or PracticeWorks, as the case
may be, disagrees with such determination, then PracticeWorks or the Company, as
their interests appear, and Zila shall endeavor to agree upon the Fair Market
Value within ten (10) days, provided that if they fail to do so, they shall
promptly thereafter agree upon a reputable investment-banking firm to undertake
such valuation. The decision of the investment-banking firm as to the Fair
Market Value shall be binding upon the parties. PracticeWorks or the Company, as
the case may be, shall pay all fees and expenses of such investment-banking
firm.
7.2 Notice. To exercise its purchase rights hereunder,
PracticeWorks and the Company shall provide written notice to Zila of its intent
to purchase the Zila Securities within ten (10) days after delivery of said
notice. If for any reason PracticeWorks or the Company fails to consummate the
sale of the Zila Securities within the required ten (10) day period, then
PracticeWorks or the Company, as the case may be, shall immediately reimburse
Zila for all out-of-pocket costs reasonably incurred by Zila in connection with
its efforts to consummate such sale.
Page 10
7.3 Payment Terms. PracticeWorks or the Company, as the case may
be, shall pay the entire purchase price in immediately available funds pursuant
to a wire transfer, by cashier's check or money order concurrently with the
transfer of the Zila Securities. Payment of the purchase price shall be made
directly to Zila.
8. NEGATIVE COVENANTS.
The Company and the Stockholders agree that the following actions shall
not be taken by the Company or any subsidiary of the Company without the prior
written approval of PracticeWorks and Zila, which may be granted, denied or
conditioned, in its sole discretion: (a) the issuance of any security senior to
the Common Stock or the alteration of any of the rights, preferences or
privileges of the Common Stock; (b) the declaration or payment of any dividend
or other distribution; (c) the repurchase of any Company securities other than
from (i) employees, consultants and directors of the Company or any of its
subsidiaries at cost in connection with the termination of such person's service
to the Company; (ii) Xxxxx pursuant to the Stock Transfer Agreement dated as of
the date hereof between the Company and Xxxxx, (iii) Xxxxx pursuant to the Stock
Redemption Agreement dated as of the date hereof between the Company and Xxxxx,
or (iv) Zila pursuant to the Subscription Agreement dated as of the date hereof
between the Company and Zila; (d) any amendment to the Certificate of
Incorporation or Bylaws of the Company or any subsidiary; or (e) acquisitions or
dispositions by the Company of assets with an aggregate fair market value
greater than 20% of the fair market value of the total assets of the Company
(before giving effect to such acquisition or disposition).
9. COVENANTS.
9.1 Issuance of Stock. The Company agrees that the Company shall
not issue any shares of the Company's capital stock unless, as a condition
thereto, the recipient thereof, is or becomes a party to this Agreement at such
time of issuance. The Company agrees that the Company shall not grant any
options, warrants, convertible securities or similar rights for the purchase of
shares of the Company's capital stock hereafter to any person or entity unless,
as a condition to exercise or conversion thereof, and prior to issuing any
shares of capital stock to any such recipient thereof, such recipient is or
becomes a party to this Agreement at the time of issuance of any such shares of
capital stock of the Company.
9.2 Capital Stock Equivalents Termination. The Company agrees that
it will not issue any stock options, warrants, convertible debentures, rights to
acquire capital stock of the Company, or any other agreement or instrument that
allows any person or entity to exercise a right to acquire shares of capital
stock of the Company or to convert into shares of capital stock of the Company,
without such agreement, document or instrument providing that all rights
thereunder will terminate, within fifteen (15) days of PracticeWorks electing to
exercise its rights under Sections 4 or 5 hereunder.
10. INFORMATION RIGHTS.
10.1 Delivery of Financial Statements. As long as PracticeWorks or
Zila shall own any shares of Common Stock, the Company shall deliver to
PracticeWorks or Zila, as the case may be:
(i) As soon as practicable, but in any event within one
hundred twenty (120) days after the end of each fiscal year of the Company
beginning with fiscal year ending September 30, 2002, an income statement for
such fiscal year, a balance sheet of the Company and statement of stockholder's
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with GAAP, and audited and certified by a reputable national
accounting firm selected by the Board;
Page 11
(ii) As soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss statement, a
statement of cash flows and summary of bookings for such fiscal quarter and an
unaudited balance sheet as of the end of such fiscal quarter;
(iii) As soon as practicable, but in any event within
thirty (30) days after the end of each month of each fiscal year of the Company,
an unaudited profit or loss statement, a statement of cash flows and summary of
bookings for such fiscal month and an unaudited balance sheet as of the end of
such month;
(iv) As soon as practicable, but in any event thirty (30)
days prior to the end of each fiscal year, a budget and business plan for the
next fiscal year prepared on a monthly basis, including balance sheets and
sources of applications of funds statements for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company;
(v) With respect to the financial statements called for
in subsections (ii) and (iii) of this Section 10.1, an instrument executed by
the Chief Financial Officer or President or Chief Executive Officer of the
Company certifying that such financials were prepared in accordance with GAAP
consistently applied with prior practice for earlier periods (with the exception
of footnotes that may be required by GAAP) and fairly present the financial
condition of the Company and its results of operation for the period specified
in all material respects, subject to year-end audit adjustment, provided that
the foregoing shall not restrict the right of the Company to change its
accounting principles consistent with GAAP, if the Board determines that it is
in the best interest of the Company to do so; and
(vi) Such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as may, from
time to time, reasonably request, including, without limitation, any information
(or consent) that PracticeWorks may need to fulfill its respective obligations
under applicable federal and state securities laws.
10.2 Inspection. As long as PracticeWorks or Zila shall own any
shares of Common Stock, the Company shall permit PracticeWorks or Zila, at their
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by
PracticeWorks or Zila upon reasonable prior notice.
11. MISCELLANEOUS.
11.1 Legends. All certificates representing any shares of capital
stock of the Company subject to the provisions of this Agreement shall have
endorsed thereon legends substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS OF A CERTAIN STOCKHOLDERS' AGREEMENT DATED JUNE ___,
2002, TO WHICH THE REGISTERED HOLDER, OR HIS OR ITS
PREDECESSOR IN INTEREST, IS A PARTY, WHICH AGREEMENT PROVIDES
FOR CERTAIN VOTING RIGHTS AND OBLIGATIONS OF SALE AND
PURCHASE. SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS COMPANY AND AFFECTS THE TRANSFERABILITY OF THE SHARES
REPRESENTED BY THIS CERTIFICATE.
Page 12
11.2 Further Assurances. The parties agree to execute such further
instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement. Each Stockholder agrees, upon the
written request of the Company or any Stockholder, to issue promptly an estoppel
certificate to the Company, any entity or person designated by the Company, or
the requesting Stockholder as to facts reasonably required by any such entity or
person pertaining to the rights and obligations of the respective parties under
this Agreement.
11.3 Amendment of Existing Agreements. By executing this Agreement,
each Stockholder hereby consents to all of the provisions of this Agreement and
the granting of all rights hereunder, and each Stockholder and the Company
hereby agree that any warrant, option, "stockholders agreement," "voting
agreement," proxy or similar agreement or arrangement relating to the Company or
the securities of the Company to which such Stockholder or the Company is a
party or by which such Stockholder or the Company may be bound, to the extent
that the terms of any such agreement or arrangement are inconsistent with the
terms of this Agreement, are hereby amended to the extent necessary to give full
effect to the terms of this Agreement.
11.4 Entire Agreement; Amendment. This Agreement constitutes the
full and entire understanding and agreement among the parties with regard to the
subjects hereof. Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated orally, except by a written instrument signed
by the Company, PracticeWorks, Zila and the holders of a majority of the then
outstanding Securities, with all classes of capital stock voting as a single
class, on an as-converted basis.
11.5 Termination. Unless provisions of this Agreement are earlier
terminated pursuant to their terms, this Agreement shall terminate and shall be
of no further force or effect upon the earliest to occur of (i) the passage of
twenty (20) years; (ii) the written consent of PracticeWorks, Zila, the Company
and the holders of a majority of the then outstanding Securities voting as a
single class, on an as-converted basis; and (iii) the occurrence of a Qualified
Initial Public Offering (as defined below).
11.6 Power of Attorney. In the event a Stockholder (a "Defaulting
Stockholder") fails or refuses to execute, acknowledge and deliver such
instruments, or cause the same to be done, as shall be required to effectuate
the closing of the sale of such Defaulting Stockholder's Securities in
accordance with the provisions of this Agreement, any officer of the Company or
the Stockholders entitled to purchase such Securities (the "Purchasing
Stockholders"), as the case may be, may execute, acknowledge and deliver such
documents for, on behalf of and in the stead of such Defaulting Stockholder, and
such execution, acknowledgment and delivery by an officer of the Company or the
Purchasing Stockholders, as the case may be, shall be for all purposes effective
against and binding upon such Defaulting Stockholder as though such execution,
acknowledgment and delivery had been by such Defaulting Stockholder. Such
Defaulting Stockholder does hereby irrevocably constitute and appoint each
officer of the Company or the Purchasing Stockholders, as the case may be, as
the true and lawful attorney in fact of such Defaulting Stockholder and his
successors and assigns, in the name, place and stead of such Defaulting
Stockholder or his successors or assigns, as the case may be, to execute,
acknowledge and deliver such transfers and other documents contemplated herein.
It is expressly understood, intended and agreed by such Defaulting Stockholder,
for such Defaulting Stockholder and his successors and assigns, that the grant
of the power of attorney to the officers of the Company or the Purchasing
Stockholders, as the case may be, pursuant to this Section 11.6 is coupled with
an interest, is irrevocable and shall survive the death, termination or legal
incompetence of such Defaulting Stockholder, as the case may be, or the
assignment of the interest of such Defaulting Stockholder in the Company, or the
dissolution of the Company.
11.7 Subsequent Issuances, Purchases and Parties. All Securities
that are issued to or purchased by any Stockholder after the date hereof,
including, without limitation, any obtained by exercise of any warrant or stock
option granted hereafter, shall become immediately subject to the terms
Page 13
of this Agreement without further action by the parties to this Agreement. Any
subsequent transferee or acquirer of Securities may become a party to this
Agreement by entering into a written joinder agreement with the Company, in form
acceptable to the Company, providing for such transferee or acquirer to be
subject to the terms and conditions of this Agreement and to be bound by all of
the provisions hereof.
11.8 Stock Dividends. If, from time to time, during the term of
this Agreement there is any stock dividend, stock split or similar other change
in the character or amount of any of the outstanding Securities, then in such
event any and all such new, substituted or additional securities to which the
Stockholders are entitled by reason of their ownership of Securities shall be
immediately subject to the terms of this Agreement as "Securities" with the same
force and effect as the shares of capital stock presently subject to this
Agreement.
11.9 Lock-Up Agreements. In the event the Company initiates a
Qualified Initial Public Offering, each Stockholder agrees to use commercially
reasonable efforts and to cooperate with the underwriter selected by the Company
to complete such offering, including executing a customary underwriting
agreement and customary lock-up provisions for an offering in the Company's
industry. "Qualified Initial Public Offering" shall mean the underwritten offer
and sale of Common Stock to the public yielding net proceeds to the Company of
at least $20,000,000.00; and at a per share price equal to or greater than $2.40
per share, as adjusted for stock dividends, stock splits or similar changes in
the character or amount of any of the outstanding Securities.
11.10 Notices. Any notice, demand, election or request required or
permitted to be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed effectively given upon personal delivery (including
by nationally-recognized overnight carrier) or upon confirmed delivery by
facsimile or telecopy, or on the third (3rd) day following mailing by registered
or certified mail, return receipt requested, postage prepaid, and addressed to
the parties at the addresses set forth below their signatures at the end of this
Agreement or such other address as a party may request by notifying the other
parties in writing.
11.11 Severability. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law that renders any such provision prohibited or unenforceable in
any respect.
11.12 Gender. Any pronoun used herein shall be deemed to cover all
genders.
11.13 Titles. The titles of the sections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
11.14 Governing Law. This Agreement shall be governed by the
provisions of the law of the State of Delaware.
11.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
Page 14
IN WITNESS WHEREOF, the Company, PracticeWorks and Zila have executed
and delivered this Agreement as of the day and year first above written.
COMPANY:
PracticeWares, Inc.
By: /s/ Xxxxxxx Xxxxx
--------------------------------------
Name: Xxxxxxx Xxxxx
------------------------------------
Its: President
-------------------------------------
Address: c/o ProLog Logistics, Inc.
0000 Xxxxxxx Xxxxx Xxxx, Xxxxx X
Xxx Xxxxx, Xxxxxxxxxx 00000
PRACTICEWORKS:
PracticeWorks, Inc.
By: s/s Xxxxx X. Xxxxx
--------------------------------------
Name: Xxxxx X. Xxxxx
------------------------------------
Its: Executive Vice-President
-------------------------------------
Address: 0000 Xxx Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
ZILA:
Xxxxx Dental of Kentucky, Inc.
By: s/s Xxxxxxx Xxxxxxxx
--------------------------------------
Name: Xxxxxxx Xxxxxxxx
------------------------------------
Its: Treasurer
-------------------------------------
Address: c/o Zila, Inc.
0000 Xxxxx 0xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Page 15
