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STOCK PURCHASE AND LOAN AGREEMENT
THIS STOCK PURCHASE AND LOAN AGREEMENT (the "Agreement"), made as of
this 9th day of October, 1998, by and between THE MIIX GROUP,
INCORPORATED, a Delaware corporation (the "Company"), and XXXXXX XXXXXX (the
"Executive").
BACKGROUND
WHEREAS, pursuant to the Plan of Reorganization approved by the
Commissioner of the New Jersey Department of Banking and Insurance on March 5,
1998 (the "Reorganization"), the Company owns all of the issued and outstanding
stock of MIIX Insurance Company; and
WHEREAS, as part of the Reorganization, certain policyholders of the
Medical Inter-Insurance Exchange of New Jersey will become stockholders of the
Company; and
WHEREAS, concurrently with the consummation of the Reorganization, the
Company intends to sell shares of its common stock through an underwritten
public offering (the "IPO"); and
WHEREAS, the Company desires to ensure that key members of its senior
management share with its stockholders the common goal of achieving long-term
growth in the market value of the Company which equals or exceeds the growth of
competitive companies in the insurance industry; and
WHEREAS, to achieve this objective, the Company requires that upon the
consummation of the IPO the Executive purchase that number of shares of common
stock of the Company (the "Purchased Shares") having an aggregate purchase price
of $500,000.00 based on the price per share of the common stock offered in the
IPO (the "Purchase Price"); and
WHEREAS, the Company intends to make a loan to the Executive in an
amount equal to the Purchase Price, and Executive intends to secure such loan
with a pledge of the Purchased Shares;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein and other good and valuable consideration, the parties hereto
agree as follows:
TERMS
1. Loan.
1.1. Loan. Subject to the terms and conditions hereof, upon
the consummation of the IPO, the Company shall lend to the Executive the
aggregate principal amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) (the
"Loan").
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1.2. Purpose of Loan. The Executive shall use the proceeds of
the Loan solely for the purpose of purchasing the Purchased Shares pursuant to
Section 2 hereof.
1.3. Promissory Note. The obligation of the Executive to repay
the Loan shall be evidenced by the Executive's promissory note, substantially in
the form attached hereto as Exhibit I (the "Note"), in the original principal
amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00). The Note shall be dated
the date of the purchase of the Purchased Shares, shall mature and become due
and payable on the Maturity Date (hereinafter defined) and shall bear interest
as set forth in Section 1.4(b).
1.4. Principal Payments; Maturity; Interest Rate.
(a) Principal Payments. Unless sooner accelerated as
provided herein, the principal amount of the Loan shall be due and payable in
full on the fifth anniversary date of the Note (the "Maturity Date").
Notwithstanding the collateral pledged to the Company pursuant to Section 3
hereof, Executive shall have personal liability for the full payment of the
Loan, together with accrued interest thereon.
(b) Interest Rate and Payment. The principal amount
of the Loan shall bear interest from the date of the Note until the Maturity
Date (unless otherwise accelerated as provided herein) at a rate per annum equal
to the minimum interest rate necessary to avoid income imputation under the
Internal Revenue Code as of the date of the Note. Interest shall be due and
payable on the Maturity Date.
1.5. Voluntary Prepayments. The Executive shall have the right
to prepay the Loan in whole or in part from time to time, without penalty or
premium.
1.6. Mandatory Prepayments. In the event that Executive sells
any of the Purchased Shares during the term of the Loan, the Executive shall,
within five (5) days of such sale, make a mandatory prepayment of the Loan in an
amount equal to the product of the number of Purchased Shares sold and the
Purchase Price. In the event that such sale is made on an installment basis,
Executive shall make a mandatory prepayment as and when proceeds of the sale are
received by the Executive.
1.7. Events of Default. Each of the following shall constitute
an event of default (each, an "Event of Default") under this Agreement:
(a) the failure of the Executive to pay when due any
principal or interest or other amount due hereunder or under the Note.
(b) any warranty or representation made by the
Executive in this Agreement shall prove to have been false or incorrect on the
date as of which made.
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(c) the termination of Executive's employment with
the Company for any reason.
(d) the occurrence of any of the following with
respect to the Executive:
(i) he shall apply for or consent to the
appointment of a receiver, custodian,
trustee or liquidator of all or a
substantial part of his property;
(ii) he shall make a general assignment for the
benefit of his creditors;
(iii) he shall commence a voluntary case under the
Federal Bankruptcy Code; or
(iv) he shall file a petition to take advantage
of any other law providing for the relief of
debtors.
1.8. Remedies Upon Default. Upon the occurrence and during the
continuance of an Event of Default, all indebtedness, obligations and
liabilities of the Executive arising hereunder shall, at the option of the
Company, become immediately due and payable. The Company may exercise a right of
setoff against the Pledged Collateral (as defined below).
1.9. Extension of Payment Date. Notwithstanding anything in
Section 1.7(c) hereof to the contrary, in the event that Executive's employment
with the Company is terminated and such termination arises from the death,
disability or retirement of the Executive or is without Cause, then, at the
option of the Executive and upon delivery of written notice to that effect, the
obligation to repay the Loan in full, together with accrued interest thereon,
may be extended to the second anniversary date of such termination or retirement
or the Maturity Date, whichever is longer. For purposes of this Section, the
term "Cause" shall have the meaning assigned to it in that certain Employment
Agreement dated of even date herewith among the Executive, the Company and New
Jersey State Medical Underwriters, Inc.
2. Purchase and Sale of Common Stock.
2.1. Sale and Purchase. The Company shall, upon the
consummation of the IPO, issue and sell to the Executive, subject to and in
reliance upon the representations, warranties, terms and conditions of this
Agreement, and Executive shall purchase, the Purchased Shares for the Purchase
Price.
2.2. Payment of Purchase Price. Upon payment in full of the
Purchase Price, receipt of which shall be deemed acknowledged by the Company at
the consummation of
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the IPO, the Company shall deliver to Executive a stock certificate, registered
in the name of Executive, representing the Purchased Shares.
2.3. Lock-up. The Executive agrees that, for a one (1) year
period following the date of the issuance of the Purchased Shares, the Executive
shall not sell, transfer or otherwise dispose of any of the Purchased Shares
without the consent of the Company.
3. Collateral.
3.1. Pledged Collateral. As security for the performance of
this Agreement and for the prompt and complete payment of the Loan, together
with accrued interest thereon, when due (whether at the Maturity Date, by
acceleration or otherwise), the Executive hereby grants to the Company the
following property (collectively, the "Pledged Collateral"):
(a) the Purchased Shares and the certificates or
instruments representing such stock and all dividends, interest, cash,
instruments, and other property from time to time received, receivable, or
otherwise distributed or distributable in respect of or in exchange for any or
all of such stock;
(b) all proceeds of the foregoing.
3.2. Delivery of Purchased Shares. Promptly after his receipt
of stock certificates representing the Purchased Shares, the Executive shall
deliver to the Company such stock certificates, together with stock powers duly
executed in blank by the Executive.
3.3. Voting Rights: Dividends: Etc.
(a) The Executive shall be entitled to exercise any
and all of Executive's voting and other consensual rights pertaining to the
Pledged Collateral or any part thereof for any purpose not inconsistent with the
terms of this Agreement; and notwithstanding Section 3.1 but subject to Section
3.3(c) shall be entitled to receive and retain free and clear of the security
interest of Company hereunder, any and all of such dividends, interest and other
distributions permitted to all other holders of the Company's Common Stock.
(b) The Company shall execute and deliver (or cause
to be executed and delivered) to the Executive all such proxies and other
instruments as Executive may reasonably request for the purpose of enabling the
Executive to exercise the voting and other rights that he is entitled to
exercise pursuant to paragraph (a) above and to receive the dividends, interest
and other distributions that he is authorized to receive and retain pursuant to
paragraph (a) above.
(c) Upon the occurrence and during the continuance of
an Event of Default (i) all rights of the Executive to exercise the voting and
other consensual rights that he would otherwise be entitled to exercise pursuant
to Section 3.3(a) hereof and to receive
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the dividends, interest and other distributions that he would otherwise be
authorized to receive and retain pursuant to Section 3.3(a) hereof shall cease,
and all such rights shall thereupon become vested in Company which shall
thereupon have the sole right to exercise such voting and other consensual
rights and to receive such dividends, interest, and other distributions; and all
dividends, interest and other distributions which are received by Executive
contrary to the provisions of this paragraph shall be received in trust for the
benefit of Company, shall be segregated from other funds of Executive, and shall
be forthwith paid over to Company in the same form as so received (with any
necessary endorsement).
3.4. Further Assurances. Executive agrees that at any time and
from time to time, at the expense of Executive, Executive will promptly execute
and deliver all further instruments and documents, and take all further action
that may be necessary, or that Company may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable Company to exercise and enforce the rights and remedies
hereunder with respect to any of the Pledged Collateral.
3.5. Transfers and Liens. Executive will not (i) grant any
option with respect to any of the Pledged Collateral, or (ii) create or permit
to exist any lien, security interest, or other charge or encumbrance upon or
with respect to any of the Pledged Collateral.
3.6. Company Appointed Attorney-in-Fact. Executive hereby
appoints Company as Executive's attorney-in-fact, with full authority in the
place and stead of Executive and in the name of Executive, from time to time in
Company's discretion to take any action and to execute any instrument which
Company may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, upon the occurrence and during the
continuance of an Event of Default to receive, endorse, and collect all
instruments made payable to Executive representing any dividend, interest, or
other distribution in respect of the Pledged Collateral or any part thereof and
to give full discharge for the same. Company shall not, in its capacity as such
attorney-in-fact, be liable for any acts or omissions, nor for any error of
judgment or mistake of fact or law, but only for bad faith, willful misconduct
or gross negligence. This power, being coupled with an interest, is irrevocable
until all obligations under the Note have been fully satisfied.
3.7. Company's Duties. The powers conferred on the Company
hereunder are solely to protect its interests in the Pledged Collateral and
shall not impose any duty to exercise any such powers. Except for the safe
custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, Company shall not have any duty as to
any Pledged Collateral or as to the taking of any necessary steps to preserve
rights against any parties or any other rights pertaining to any Pledged
Collateral. Without limiting the generality of the foregoing, Company shall not
have any responsibility for ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders, or other matters relating to any
Pledged Collateral, whether or not Company has or is deemed to have knowledge of
such matters.
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3.8. Prepayments. In the event of any prepayment, whether
voluntary or mandatory, the Company shall release from the Pledged Collateral,
and deliver to the Executive, stock certificates evidencing that number of
Purchased Shares which have an aggregate fair market value equal to the amount
of the prepayment. In no event, however, shall the remaining Pledged Collateral
have a fair market value less than the unpaid principal balance of the Loan and
accrued interest thereon.
3.9. Transfer of Title. After the occurrence and during the
continuance of an Event of Default, Company shall have the right, at any time in
its discretion without further notice to Executive, to transfer to or to
register in the name of Company or its nominees, any or all of the Pledged
Collateral. In addition, upon the occurrence and during the continuance of an
Event of Default, Company shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
3.10. Termination. The provisions of this Section 3 shall
terminate upon payment in full of the Loan, together with accrued interest
thereon, at which time the Company shall promptly deliver to Executive stock
certificates evidencing the Purchased Shares remaining in its possession.
4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Executive as follows:
4.1. Organization. The Company (a) is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and (b) has all requisite corporate power and authority to execute,
deliver and perform this Agreement.
4.2. Authorization of Agreement.
(a) The execution, delivery and performance by the
Company of this Agreement has been duly authorized by all requisite corporate
action by the Company, and this Agreement constitutes the valid and binding
obligation of the Company.
(b) The issuance, sale and delivery of the Purchased
Shares have been duly authorized by all requisite corporate action of the
Company, and when issued, sold and delivered in accordance with this Agreement,
the Purchased Shares will be validly issued and outstanding, fully paid and
nonassessable, and not subject to preemptive or any other similar rights of the
stockholders of the Company or others.
4.3. SEC Registration Statement. The Company has made
available to the Executive, in the form filed with the SEC and as amended prior
to the date hereof, the Form S-1 Registration Statement (Registration No.
333-59371) (the "Registration Statement"). The Registration Statement complies
as to form in all material respects with the requirements of the Securities Act
of 1933 (the "Securities Act") and the rules and regulations thereunder, and did
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not, on the date when it was declared effective, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein in light of the
circumstances under which they were made not misleading.
5. Representations of the Executive. The Executive represents,
warrants and covenants to the Company that:
(a) Executive has the full power and authority and
has full legal right to execute and deliver this Agreement and the Note, to
perform, observe and comply with all of his agreements and obligations under
each of this Agreement and the Note and to obtain the proceeds of the Loan
contemplated by this Agreement;
(b) Executive has duly executed and delivered this
Agreement and this Agreement constitutes the valid and binding obligation of
Executive, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, moratorium or similar laws
affecting creditors' rights or by general principles of equity;
(c) Executive is acquiring the Purchased Shares for
his own account, for investment and not with a view to the distribution thereof
within the meaning of the Securities Act;
(d) Executive understands that the Purchased Shares
have not been and shall not be registered under the Securities Act, by reason of
their issuance by the Company in a transaction exempt from the registration
requirements of the Securities Act; and any subsequent disposition thereof must
be registered under the Securities Act or must be exempt from registration;
(e) Executive understands that: (i) the exemption
from registration afforded by Rule 144 (the provisions of which are known to
him) promulgated under the Securities Act depends on the satisfaction of various
conditions, and that, if and when applicable, Rule 144 may only afford the basis
for sales in limited amounts; and (ii) the Company is under no obligation to
register the Purchased Shares on behalf of the Executive or to assist the
Executive in complying with any exemption from registration;
(f) he is an accredited investor as defined in Rule
501(a) promulgated under the Securities Act.
6. Certain Restrictions.
6.1. Legend. The certificate for the Purchased Shares shall
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
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HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR ANY APPLICABLE STATE SECURITIES
LAW. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION EXCEPT UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL,
WHICH OPINION SHALL BE REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT AND
APPLICABLE STATE SECURITIES LAWS IS AVAILABLE. THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN
THAT CERTAIN STOCK PURCHASE AND LOAN AGREEMENT BY AND
BETWEEN THE COMPANY AND XXXXXX XXXXXX."
6.2. Opinion. Company agrees to reimburse Executive for the
cost of obtaining any opinion required by the above legend.
7. Miscellaneous.
7.1. Amendments, Indulgences, Etc. No amendment or waiver of
any provision of this Agreement nor consent to any departure by Executive
herefrom shall in any event be effective unless the same shall be in writing and
signed by Company, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No failure
or delay on the part of Company in the exercise of any right, power, or remedy
under this Agreement shall constitute a waiver thereof, or prevent the exercise
thereof in that or any other instance.
7.2. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and, if to Executive,
mailed or telefaxed or delivered to them at the addresses therefor shown at the
time in Company's records, and, if to Company, mailed or delivered to it at Xxx
Xxxxxxxx Xxxx, Xxxxxxxxxxxxx, Xxx Xxxxxx 00000.
7.3. Continuing Security Interest. This Agreement creates a
continuing security interest in the Pledged Collateral and shall be binding upon
Executive, and his heirs, executors, administrators, successors, and assigns and
inure to the benefit of Company and its successors, transferees and assigns. The
execution and delivery of this Agreement shall in no manner impair or affect any
other security (by endorsement or otherwise) for the payment or performance of
the Note and no security taken hereafter as security for payment or performance
of the Note shall impair in any manner or affect this Agreement or the security
interest granted hereby, all such present and future additional security to be
considered as cumulative security. Any of the Pledged Collateral may be released
from this Agreement without altering, varying, or diminishing in any way this
Agreement or the security interest granted hereby as to the Pledged
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Collateral not expressly released, and this Agreement and such security interest
shall continue in full force and effect as to all of the Pledged Collateral not
expressly released.
7.4. Governing Law; Consent to Jurisdiction; Etc. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New Jersey applicable to contracts made and wholly performed within New
Jersey. Executive consents to the jurisdiction of the courts of New Jersey and
of the courts of the United States sitting in New Jersey in any litigation
concerning this Agreement, and Executive waives any objection based on venue or
inconvenient forum. Unless otherwise defined herein, terms defined in the
Uniform Commercial Code as in effect on the date hereof are used herein as
therein defined as of such date.
7.5. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
7.6. Severability. The provisions of this Agreement are
independent of and separable from each other, and no such provision, shall be
altered or rendered invalid or unenforceable by virtue of the fact that for any
reason any other such provision may be invalid or unenforceable in whole or in
part.
7.7. Headings. The section headings of this Agreement are for
convenience only, form no part of this Agreement and shall not affect its
interpretation.
7.8. Entire Agreement. This Agreement sets forth all of the
promises, covenants, agreements, conditions and undertakings between the parties
hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written.
8. Closing Certificates.
(a) It shall be a condition to the obligations of the
Executive hereunder that, simultaneously with the execution of the Note, the
Company shall deliver to the Executive a certificate stating that (i) at and as
if made on the date thereof, the representations made by the Company in Section
4 are true and complete and (ii) since the effective date of the Registration
Statement, the Company's financial condition, operations and business have not
experienced a material adverse change.
(b) It shall be a condition to the obligations of the Company
hereunder that, simultaneously with the execution of the Note, the Executive
shall deliver to the Company a certificate stating that (i) at and as if made on
the date thereof, the representations made by the Executive in Section 5 are
true and complete, and (ii) the Note has been duly executed and delivered by the
Executive, and the Note constitutes a valid and binding obligation of the
Executive enforceable in accordance with its terms, except as such
enforceability may be
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limited by bankruptcy, moratorium or similar laws affecting creditors' rights or
by general principles of equity.
IN WITNESS WHEREOF, the undersigned intending to be legally
bound, have executed this Agreement as of the date first above written.
/s/ Xxxxxx Xxxxxx
------------------(L.S.)
Xxxxxx Xxxxxx
THE MIIX GROUP INCORPORATED
By: /s/ Xxxxxx Xxxxxxxx
--------------------
Name: Xxxxxx Xxxxxxxx
Title: President and Chief
Executive Officer
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EXHIBIT I
PROMISSORY NOTE
$500,000.00 Princeton, New Jersey
___________, 1998
The Undersigned, for value received and intending to be legally bound,
promises to pay to the order of THE MIIX GROUP, INCORPORATED (the "Lender"), as
and when due as set forth in the Stock Purchase and Loan Agreement dated the
date hereof between the Undersigned and Lender (as such agreement may be
amended, restated, modified or supplemented from time to time, the "Loan
Agreement"), the principal sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00).
Capitalized terms used herein and not otherwise defined shall have the meanings
given such terms in the Loan Agreement.
The undersigned further promises to pay to the order of Lender interest
on the unpaid principal amount of the Loan from the date hereof until such
amounts have been repaid in full. Interest shall be at the annual rate of __
percent (__%) and shall be due and payable on the Maturity Date (unless
accelerated sooner under the terms of the Loan Agreement).
This is the Note mentioned in, and is entitled to the benefits of, the
Loan Agreement.
This Note may be prepaid at any time, in whole or in part, without
premium or penalty. All payments in respect of this Note shall be applied first
to accrued interest and then to principal outstanding hereunder. Mandatory
prepayments shall be required from time to time pursuant to Section 1.6 of the
Loan Agreement.
This Note shall be deemed to be a contract made under the laws of the
State of New Jersey and shall be construed in accordance with the laws of said
state without giving effect to principals of conflicts of law.
This Note shall be binding upon the undersigned and his heirs,
executors, administrators, transferees and assigns and the terms hereof shall
inure to the benefit of lender and its successors and assigns, including
subsequent holders hereof.
The undersigned hereby waives presentment, demand for payment, notice
of dishonor or acceleration, protest and notice of protest, and any and all
other notices or demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note except any notice expressly
required in the Loan Agreement.
IN WITNESS WHEREOF, the undersigned executes this Note on the day and
year first above written.
By:____________________________(L.S.)
Xxxxxx Xxxxxx
