Exhibit 10.4
SHAREHOLDERS' AND VOTING AGREEMENT
by and among
DOCTORS HEALTH, INC.,
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
and
THE OTHER SHAREHOLDERS
THAT ARE SIGNATORIES HERETO
Dated as of July 15, 1997
TABLE OF CONTENTS
Page
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Section 1. Definitions........................................................1
Section 2. Methodology for Calculations.......................................7
Section 3. Corporate Governance...............................................7
3.1. Composition of the Board.................................7
3.2. Executive Committee; Other Committees; Subsidiaries......8
3.3. Vacancies; Removal.......................................9
3.4. Non-Voting Observer......................................10
3.5. Representative...........................................10
3.6. Board and Committee Meetings.............................10
3.7. Directors' Indemnification...............................11
3.8. Irrevocable Proxy........................................11
3.9. Contractual Management Rights............................12
3.10. Expenses................................................12
3.11. Cooperation.............................................12
3.12. Reincorporation.........................................12
Section 4. Restrictions on Transfers of Stock.................................12
Section 5. Management Shareholders............................................13
Section 6. Rights of First Offer..............................................21
Section 7. Tag-Along Rights...................................................23
Section 8. Drag-Along Rights..................................................24
Section 9. Issuance Rights....................................................25
Section 10. Holdback Agreement; Adjustments...................................26
Section 11. Certain Covenants.................................................26
11.1. Financial Statements and Other Information..............26
11.2. Restrictions............................................27
11.4. Public Disclosures......................................29
11.5. Additional Shareholders.................................30
Section 12. Conflicting Agreements............................................30
Section 13. Legend............................................................30
Section 14. Representations and Warranties....................................31
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Section 15. Duration of Agreement.............................................32
Section 16. Further Assurances................................................32
Section 17. Amendment and Waiver..............................................32
Section 18. Severability......................................................33
Section 19. Entire Agreement..................................................33
Section 20. Successors and Assigns............................................33
Section 21. Counterparts......................................................33
Section 22. Remedies..........................................................33
Section 23. Notices...........................................................33
Section 24. Governing Law.....................................................34
Section 25. Miscellaneous.....................................................34
Section 26. Old Shareholders Agreement........................................34
Section 27. Construction......................................................34
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SHAREHOLDERS' AND VOTING AGREEMENT
THIS SHAREHOLDERS' AND VOTING AGREEMENT is made as of July 15,
1997 by and among DOCTORS HEALTH, INC., a Maryland corporation (the "Company"),
THE BEACON GROUP III - FOCUS VALUE FUND, L.P., a Delaware limited partnership
("Beacon") and each of the shareholders of the Company executing one of the
signature pages attached hereto.
W I T N E S S E T H :
WHEREAS, as of the date hereof, Beacon is purchasing 2,000,000
shares of Series D Preferred Stock, par value $10.00 per share ("Series D
Preferred"), of the Company pursuant to that certain Preferred Stock Purchase
Agreement of even date herewith (the "Purchase Agreement");
WHEREAS, the Company and certain shareholders are all of the
parties to that certain Amended and Restated Stockholders Agreement dated as of
January 31, 1997 (the "Old Shareholders Agreement"), and each of them and Beacon
has determined that it is in their best interests that the Old Shareholders
Agreement be terminated and canceled and replaced in its entirety by this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and obligations hereinafter set forth, the parties hereto
hereby agree as follows:
Section 1. Definitions. As used herein, the following terms
shall have the following meanings :
"Affiliate" means (i) with respect to any Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person and (ii) with respect to any
individual, shall also mean the spouse, parent, sibling, child, step-child,
grandchild, niece or nephew of such Person, or the spouse thereof.
"Agreement" means this Shareholders' and Voting Agreement as
it may be amended, restated or modified from time to time.
"Beacon" has the meaning assigned to it in the Preamble.
"Beacon Designee" has the meaning assigned to it in Section
3.1(b).
"Beacon Director" has the meaning assigned to it in Section
3.1(a).
"Beacon Registration Agreement" means the Registration Rights
Agreement, dated as of the date hereof, between the Company and Beacon as it may
be amended from time to time.
"Board" has the meaning assigned to it in Section 3.1(a).
"By-laws" means the By-laws of the Company as in effect on the
date hereof, as they may be amended from time to time hereafter.
"Change in Control" shall mean, with respect to the Company,
the earlier to occur of the following: (i) a liquidating distribution to the
Company' shareholders (or similar event); (ii) a contribution, consolidation or
merger where the Company is not the survivor; and (iii) any sale, exchange or
other disposition of all, or substantially all, of the Company's assets.
"Class A Common Stock" means the Class A Common Stock, par
value $.01 per share, of the Company and any equity securities issued or
issuable with respect to the Class A Common Stock in connection with a
reclassification, split or combination of shares.
"Class B Common Stock" means the Class B Common Stock, par
value $.01 per share, of the Company and any equity securities issued or
issuable with respect to the Class B Common Stock in connection with a
reclassification, split or combination of shares.
"Class B Directors" has the meaning assigned to it in Section
3.1(a).
"Class C Common Stock" means the Class C Common Stock, par
value $.01 per share, of the Company and any equity securities issued or
issuable with respect to the Class C Common Stock in connection with a
reclassification, split or combination of shares.
"Closing" has the meaning assigned to it in Section 5(e).
"Closing Date" has the meaning assigned to it in Section 5(e).
"Code" has the meaning assigned to it in Section 5(b).
"Common Stock" means the shares of Common Stock of the
Company, including Class A Common Stock, Class B Common Stock and Class C Common
Stock.
"Common Stock Equivalents" means securities convertible into,
or exchangeable or exercisable for, shares of Common Stock.
"Company" has the meaning assigned to it in the Preamble.
"Company Acceptance Period" has the meaning assigned to it in
Section 6(c).
"Disability" (with respect to a Management Shareholder) shall
have the meaning set forth in such Management Shareholder's employment agreement
with the
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Company, and if no such agreement exists, as determined by the Board in the
exercise of its reasonable discretion.
"Disabled Shareholder" has the meaning assigned to it in
Section 5(c).
"Drag-Along Initiator" has the meaning assigned to it in
Section 8(a).
"Drag-Along Transaction" has the meaning assigned to it in
Section 8(a).
"Drag-Along Value" has the meaning assigned to it in Section
8(a).
"Executive Committee" has the meaning assigned to it in
Section 3.2.
"Excluded Securities" means (i) options issued by the Company
to employees or consultants pursuant to the Company's Amended and Restated
Omnibus Stock Plan or similar plan (and any shares of Common Stock issuable
thereunder) approved by the Board and (ii) shares of Common Stock issuable upon
conversion, exchange or exercise of any Common Stock Equivalents outstanding as
of the date hereof.
"Fair Market Value" means fair market value as determined
(unless expressly otherwise provided herein) by mutual agreement between the
Company and the holders of not less than 50% of the issued and outstanding
shares of Stock with respect to which such determination is made hereunder or,
if the parties are unable to agree, as determined by a nationally recognized
independent investment banking firm selected by mutual agreement between the
Company and the holders of not less than 50% of the issued and outstanding
shares of such Stock.
"First Offer Percentage" means, as to each Offered
Shareholder, the quotient obtained (expressed as a percentage) by dividing (i)
the number of shares of Common Stock owned by such Offered Shareholder on the
first day of the Shareholder Acceptance Period by (ii) the aggregate number of
shares of Common Stock owned on the first day of the Shareholder Acceptance
Period by all Offered Shareholders who exercise their option to purchase Subject
Stock.
"First Offer Shares" has the meaning assigned to it in Section
6(b).
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time.
"GHV" means Genesis Health Ventures, Inc., a Delaware
corporation.
"GHV Registration Agreement" means the Amended Registration
Rights Agreement, dated as of January 31, 1997 and amended as of the date
hereof, between the Company and GHV, as it may be amended from time to time.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
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"Involuntary Transfer" means the occurrence of any of the
following: (i) the attachment or taking in execution of any portion of a
Management Shareholder's Stock, (ii) the application by a Management Shareholder
for the benefit of, or filing by a Management Shareholder of an action under,
any provision of the federal or state bankruptcy laws or any other law relating
to insolvency or relief of debtors, (iii) if a case or proceeding is brought
against a Management Shareholder under any provision of the federal or state
bankruptcy laws or any other law relating to insolvency or relief of debtors,
and such case or proceeding is not dismissed within 60 days after the
commencement thereof, (iv) a Management Shareholder makes an assignment of Stock
for the benefit of creditors, (v) a Management Shareholder's Stock is made
subject to a charging order or (vi) a Management Shareholder's Stock is
Transferred pursuant to a divorce decree.
"Involuntary Transfer Shareholder" has the meaning assigned to
it in Section 5(a).
"IPO" means the initial underwritten offering pursuant to
which Common Stock becomes registered under Section 12 of the Securities
Exchange Act of 1934, as amended.
"Issuance" has the meaning assigned to it in Section 9.
"Issuance Acceptance Period" has the meaning assigned to it in
Section 9(a).
"Issuance Notice" has the meaning assigned to it in Section
9(a).
"Issuance Offer" has the meaning assigned to it in Section
9(a).
"Issuance Period" has the meaning assigned to it in Section
9(b).
"Issuance Stock" has the meaning assigned to it in Section
9(a).
"Issue" has the meaning assigned to it in Section 9.
"Major Shareholder" means any of the Senior Management
Shareholders or any other Shareholder who owns, directly or indirectly, at least
5% of the outstanding Common Stock at the time of determination.
"Management Shareholder" means each Senior Management
Shareholder, person holding the office of Vice President and above, and each
other individual who has been identified by the Executive Committee as a member
of the Company's executive management team and to whom Stock has been issued by
the Company.
"Non-Involuntary Transfer Management Shareholders" has the
meaning assigned to it in Section 5(a).
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"Non-Voting Observer" has the meaning assigned to it in
Section 3.4.
"Note" has the meaning assigned to it in Section 5(e).
"Offer" has the meaning assigned to it in Section 6(a).
"Offer Notice" has the meaning assigned to it in Section 6(a).
"Offered Shareholders" has the meaning assigned to it in
Section 6(a).
"Old Shareholders Agreement" has the meaning assigned to it in
the Recitals.
"Oversubscribed Shareholder" has the meaning assigned to it in
Section 6(b).
"Person" means any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivisions thereof.
"Post-IPO Threshold" has the meaning assigned to it in Section
3.1(b).
"Preferred Stock" means any of, and any combination of, Series
A Preferred, Series B Preferred, Series C Preferred and Series D Preferred.
"Pre-IPO Threshold" has the meaning assigned to it in Section
3.1(a).
"Public Sale" means a Transfer pursuant to a bona fide
underwritten public offering pursuant to an effective registration statement
filed under the Securities Act.
"Purchase Agreement" has the meaning assigned to it in the
Recitals.
"Qualified IPO" means a bona fide, firm commitment,
underwritten public offering of Common Stock pursuant to an effective
registration statement under the Securities Act (i) resulting in at least
$35,000,000 of net proceeds to the Company after deducting underwriting
discounts and commissions and offering expenses and (ii) reflecting an aggregate
market valuation for the Company of at least $150,000,000.
"Remaining Shares" has the meaning assigned to it in Section
6(b).
"Reserved Matters" has the meaning assigned to it in Section
3.2.
"Restated Articles" means the Company's Second Articles of
Amendment and Restatement as filed with the Department of Assessment and
Taxation of the State of Maryland, as they may be amended or restated from time
to time.
"Sale Period" has the meaning assigned to it in Section 6(d).
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"Securities Act" means the Securities Act of 1933, as amended.
"Senior Management Shareholder" means any of Xxxxxxx Gold,
Xxxxx Xxxxxx and Xxxx Xxxxxx.
"Series A Preferred" means Series A Preferred Stock, par value
$5.00 per share, of the Company.
"Series B Preferred" means Series B Preferred Stock, par value
$11.25 per share, of the Company.
"Series C Preferred" means Series C Preferred Stock, par value
$17.50 per share, of the Company.
"Series D Preferred" has the meaning assigned to it in the
Recitals.
"Shareholder Acceptance Period" has the meaning assigned to it
in Section 6(b).
"Shareholders" means the parties to this Agreement (other than
the Company) and any other subsequent holder of Stock who agrees to be bound by
the terms of this Agreement.
"Stock" means (i) any shares of Common Stock and (ii) any
Common Stock Equivalents (including, without limitation, the Preferred Stock and
the Common Stock issuable upon conversion thereof), in each case, whether owned
on the date hereof or acquired hereafter.
"Subject Stock" has the meaning assigned to it in Section
6(a).
"Subsidiary" means with respect to any Person, (i) any
corporation, partnership or other entity of which shares of capital stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other similar managing body of such corporation,
partnership or other entity are at the time owned by such Person, or (ii) the
management of which is otherwise controlled, directly or indirectly, through one
or more intermediaries by such Person.
"Tag-Along Initiator" has the meaning assigned to it in
Section 7(b).
"Tag-Along Notice" has the meaning assigned to it in Section
7(b).
"Tag-Along Offeree" has the meaning assigned to it in Section
7(b).
"Tag-Along Shares" has the meaning assigned to it in Section
7(b).
"Terminated Manager's Stock" has the meaning assigned to it in
Section 5(b).
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"Terminated Senior Manager" has the meaning assigned to it in
Section 5(c).
"Transfer" as to any Stock, means to sell, or in any other way
directly or indirectly transfer, assign, distribute, pledge, encumber or
otherwise dispose of, either voluntarily or involuntarily.
"Voting Shares" means any securities of the Company the
holders of which are entitled to vote for one or more members of the Board
(including, without limitation, all outstanding shares of Common Stock and
Preferred Stock).
Section 2. Methodology for Calculations. For purposes of this
Agreement, the Transfer of a Common Stock Equivalent shall be treated as the
Transfer of the shares of Common Stock into which such Common Stock Equivalent
can be converted, exchanged or exercised. Except as otherwise provided in this
Agreement, for purposes of calculating (i) the amount of outstanding Stock or
Common Stock as of any date, (ii) the amount of Stock or Common Stock owned by a
Person hereunder and (iii) related percentages, all shares of Preferred Stock
(but no other Common Stock Equivalents) shall be treated as having been
converted, exchanged or exercised.
Section 3. Corporate Governance.
3.1. Composition of the Board.
(a) Pre-IPO. The Board of Directors of the Company (the
"Board") shall, in accordance with the provisions of the Restated Articles, be
comprised of no more than twenty members. Prior to an IPO:
(i) So long as Beacon holds (x) 51% or more of the
number of shares of Series D Preferred purchased by Beacon pursuant to
the Purchase Agreement or (y) 5% or more of the Common Stock (the
"Pre-IPO Threshold"), Beacon shall have the right to designate two
persons to serve as members of the Board, and in all other cases, the
holders of a majority of the outstanding shares of Series D Preferred,
including, for the purposes of this clause (i) holders of shares of
Class C Common Stock into which shares of Series D Preferred have been
converted, shall have the right to designate two persons to serve as
members of the Board (each, a "Beacon Director");
(ii) the holders of a majority of the outstanding
shares of Class A Common Stock shall have the right to designate six
persons to serve as members of the Board; provided, however, that the
holders of the outstanding shares of Class A Common Stock hereby agree
to designate each of the Senior Management Shareholders as three of the
six members of the Board to be elected by the holders of a majority of
the outstanding Class A Common Stock for as long as, in each such
Senior Management Shareholder's case, his employment agreement with the
Company is in full force and effect. Each Senior Management Shareholder
shall offer to resign as a member of the Board
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immediately upon termination of his employment with the Company, and
the holders of the Class A Common Stock agree to remove from the Board
any Senior Management Shareholder who is no longer employed by the
Company;
(iii) the holders of a majority of the outstanding
shares of Class B Common Stock shall have the right to designate eight
persons to serve as members of the Board (the "Class B Directors");
(iv) the holders of a majority of the outstanding
shares of Series A Preferred, including, for the purposes of this
clause (iv) shares of Class C Common Stock into which shares of Series
A Preferred have been converted, shall have the right to designate one
person to serve as a member of the Board;
(v) the holders of a majority of the outstanding
shares of Series B Preferred, including, for the purposes of this
clause (v) shares of Class C Common Stock into which shares of Series B
Preferred have been converted, shall have the right to designate one
person to serve as a member of the Board; and
(vi) the holders of a majority of the outstanding
shares of Series C Preferred, including, for the purposes of this
clause (vi) shares of Class C Common Stock into which shares of Series
C Preferred have been converted, shall have the right to designate two
persons to serve as members of the Board.
(b) Post-IPO. From and after an IPO and for so long as Beacon
holds 5% or more of the Common Stock then outstanding (the "Post-IPO
Threshold"), in connection with any election for members of the Board, the
Company shall, at the request of Beacon, include one representative designated
by Beacon in the slate of directors recommended by the Board to shareholders for
election as directors (such representative designated by Beacon being referred
to herein as the "Beacon Designee"). The Company and the Shareholders shall each
use their best efforts to cause the Beacon Designee to be elected to, and to be
maintained as a member of, the Board (including (i) in the case of the Company,
recommending to the shareholders of the Company the election of the Beacon
Designee to the Board and opposing any proposal to remove the Beacon Designee at
each meeting of the shareholders of the Company at which the election or removal
of members of the Board is on the agenda and (ii) in the case of the
Shareholders, voting all of their Voting Shares in favor of the Beacon Designee,
and voting such shares against any person opposing the Beacon Designee), and
shall take no action that would diminish the prospects of the Beacon Designee
being elected to the Board or increase the prospects of the Beacon Designee
being removed from the Board.
3.2. Executive Committee; Other Committees; Subsidiaries.
(a) Executive Committee. Except with respect to matters
requiring approval by the full Board and which may not be delegated to a
committee of the Board under the Maryland General Corporation Law ("Reserved
Matters"), the authority of the
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Board shall be vested in and exercised by an executive committee of the Board
(the "Executive Committee"). The Shareholders agree to vote all of their Voting
Shares for directors who agree to vote to cause the management of the Company by
its Board to be conducted in accordance with the provisions of this Section
3.2(a) and agree to vote all of their Voting Shares to promptly remove any
director designated by such Shareholder who fails to vote to cause the
management of the Company by its Board to be conducted in accordance with the
provisions of this Section 3.2(a). With respect to Reserved Matters, the Board
shall only act after receiving the recommendation of the Executive Committee in
connection therewith and, subject to the exercise of applicable fidicuary
duties, shall act in a manner consistent with such recommendation. The Executive
Committee shall have seven members and shall be comprised of:
(i) the two directors designated by the holders
of Series D Preferred pursuant to Section 3.1(a)(i);
(ii) the Chief Executive Officer of the Company;
(iii) two of the eight directors designated by the
holders of Class B Common Stock pursuant to Section 3.1(a)(iii), which
two directors shall be selected by majority vote of all such directors
and both of whom shall be physicians;
(iv) one of the two directors designated by the
holders of Series C Preferred pursuant to Section 3.1(a)(vi), which one
director shall be selected by agreement of both such directors; and
(v) one physician nominated by the Chief Executive
Officer of the Company and approved by a majority of the Class B
Directors then in office.
(b) Other Committees; Subsidiaries; Certain Opportunities.
Without limiting the provisions of Section 3.1(a) or 3.2(a), the Company shall,
to the extent requested by Beacon, so long as Beacon meets or exceeds the
Pre-IPO Threshold or Post-IPO Threshold, as applicable, take all actions
necessary to cause at least one Beacon Director or Beacon Designee to be
appointed to each committee of the Board and to each of the boards of directors
or other similar managing bodies (and any committee thereof) of each of the
Subsidiaries of the Company. The Company shall, to the extent requested by
Beacon, elect as the board of directors of each Subsidiary those persons who are
at the time directors of the Company as provided in Section 3.1. Neither
Beacon's ownership of Stock nor its designation of members of the Board shall
require Beacon to present to the Company any opportunities of which Beacon or
its Affiliates become aware through means other than Beacon's membership on the
Board or as a shareholder of the Company.
3.3. Vacancies; Removal.
(a) Vacancies. If any director or Beacon Designee designated
as such pursuant to the provisions of Section 3.1 or Section 3.2(b) shall cease
to serve as a director of the Company or any Subsidiary for any reason, the
vacancy resulting
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thereby shall be filled by another person designated in accordance with the
provisions of Section 3.1 or Section 3.2(b), as applicable and the Restated
Articles.
(b) Removal. No director or Beacon Designee shall be removed
from office without the consent of the Shareholders entitled to designate such
director or, in the case of a Beacon Designee, Beacon, so long as such
Shareholder, or in the case of a Beacon Designee, Beacon, is entitled to
designate such director or Beacon Designee, as applicable.
3.4. Non-Voting Observer. The Company agrees that so long as
Beacon holds 5% or more of the outstanding Common Stock, Beacon shall be
entitled to have up to two observers (each, a "Non-Voting Observer") selected by
Beacon present at all meetings of the Board, and each committee thereof
(including, without limitation, the Executive Committee), and such observer
shall have the same access to information concerning the business and operations
of the Company at the same time as directors of the Company and shall be
entitled to participate in discussions and consult with, and make proposals and
furnish advice to, the Board or committee, as the case may be, without voting;
provided, however, that the Board or committee, as the case may be, shall be
under no obligation to take any action with respect to any proposals made or
advice furnished by any Non-Voting Observer, other than to give due
consideration thereto. The Company shall notify each Non-Voting Observer of
every meeting (or action by written consent) of the Board, or committee, as the
case may be, in the same manner that notice is required to be provided to
members of the Board pursuant to the By-Laws or, if such notice under the
circumstances is not practicable, as soon before the meeting (or distribution)
as is practicable, provided that nothing in this Section 3.4 shall be construed
in any way to authorize or allow a party hereto not to comply with its
obligations hereunder or release it from liability and equitable remedy in the
case of a breach. Each such Non-Voting Observer shall execute a confidentiality
agreement in such form as prescribed by the Company.
3.5. Representative. In the event that, after receiving proper
notice of a meeting of the Board, or any committee thereof, or a meeting of any
board of directors or similar managing body of any of the Company's Subsidiaries
in accordance with such entity's by-laws, any Beacon Director, Beacon Designee
or Non-Voting Observer determines that he or she is unable to attend such
meeting, Beacon shall have the right to designate a representative to attend and
observe such meeting on behalf of such Beacon Director, Beacon Designee or
Non-Voting Observer, as the case may be, who shall be entitled to fully
participate in such meeting to the full extent he or she could participate if he
or she were a Non-Voting Observer.
3.6. Board and Committee Meetings. The Company shall cause the
Board to hold regular meetings of its Board and the Executive Committee on at
least a quarterly basis. The Company agrees, and shall cause the By-laws to be
amended to the extent necessary to provide that, so long as Beacon meets or
exceeds the Pre-IPO Threshold or the Post-IPO Threshold, as applicable, each
Beacon Designee and each Beacon Director shall have the right, upon reasonable
notice, to call meetings of the Board and of each committee of the Board on
which he or she is a member. The
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Company agrees that any Non-Voting Observer shall have the right to request that
the Chairman of the Board or the Chief Executive Officer of the Company call a
meeting of the Board and of each committee of the Board.
3.7. Directors' Indemnification.
(a) The Company shall obtain and cause to be maintained in
effect, with financially sound insurers, a policy of directors' and officers'
liability insurance covering each member of the Board, each Beacon Designee and
each Non-Voting Observer in an amount of at least $3 million per occurance and
$5 million in the aggregate.
(b) The Restated Articles, By-laws and other organizational
documents of the Company and each of its Subsidiaries shall at all times, to the
fullest extent permitted by law, provide for indemnification of, advancement of
expenses to, and limitation of the personal liability of, the members of the
Board and each committee thereof, and the members of the boards of directors or
other similar managing bodies of each of the Company's Subsidiaries and such
other persons, if any, who, pursuant to a provision of such Restated Articles,
By-laws or other organizational documents, exercise or perform any of the powers
or duties otherwise conferred or imposed upon members of the Board and each
committee thereof, or the boards of directors or other similar managing bodies
of each of the Company's Subsidiaries. Any Non-Voting Observer shall be entitled
to indemnification from the Company to the maximum extent permitted by law as
though he or she were an officer or agent of the Company or any of its
Subsidiaries. Such provisions may not be amended, repealed or otherwise modified
in any manner adverse to any member of the Board or any committee thereof, or
any member of the boards of directors or other similar managing bodies of any of
the Company's Subsidiaries, until at least six years following the date that
Beacon is no longer entitled to designate or nominate any Beacon Director,
Beacon Designee or Non-Voting Observer.
(c) Each member of the Board, Beacon Designee and Non-Voting
Observer is intended to be a third-party beneficiary of the obligations of the
Company pursuant to this Section 3.7, and the obligations of the Company
pursuant to this Section 3.7 shall be enforceable by each member of the Board,
Beacon Designee and Non-Voting Observer.
3.8. Irrevocable Proxy. In order to secure each Shareholder's
obligation to vote his Voting Shares in accordance with the provisions of this
Section 3 pursuant to which Beacon has rights hereunder, each Shareholder hereby
irrevocably appoints Beacon as his, her or its true and lawful proxy and
attorney-in-fact, with full power of substitution, to vote all of his Voting
Shares of the Company for the election of each Beacon Director and each Beacon
Designee as a member of the Board and to take all such other actions as are
necessary to enforce the rights of Beacon under this Section 3. Such irrevocable
proxy shall become effective and Beacon may exercise the irrevocable proxy
granted to it hereunder at any time any Shareholder fails to comply with any
provision of this Agreement granting Beacon rights under this Section 3. The
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proxies and powers granted by each Shareholder pursuant to this Section 3.8 are
coupled with an interest and are given to secure the performance of the
Shareholders' obligations to Beacon under this Section 3. Such proxies and
powers shall survive the death, incompetence and disability of each Shareholder.
Such proxies and powers will be effective until Beacon no longer owns at least
the Post-IPO Threshold, at which time such proxies and powers shall terminate.
3.9. Contractual Management Rights. The Company and each of
the Shareholders acknowledge that the provisions of this Agreement, including,
without limitation, this Section 3, are intended, among other things, to provide
Beacon with "contractual management rights" within the meaning of the Employee
Retirement Income Security Act of 1974, as amended, and the regulations
promulgated thereunder.
3.10. Expenses. The Company shall pay the reasonable
out-of-pocket expenses incurred by each Beacon Director, Beacon Designee and
Non-Voting Observer, and any representative of the foregoing, in connection with
performing his or her duties, including without limitation the reasonable
out-of-pocket expenses incurred by such person attending meetings of the Board
or any committee thereof or meetings of any board of directors or other similar
managing body (and any committee thereof) of any Subsidiary of the Company.
3.11. Cooperation. Each Shareholder shall vote all of its
Voting Shares and shall take all other necessary or desirable actions within its
control (including, without limitation, attending all meetings in person or by
proxy for purposes of obtaining a quorum, executing all written consents in lieu
of meetings and voting to remove members of the Board, as applicable), and the
Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special Board and shareholder meetings
and voting to remove members of the Board, as applicable), to effectuate the
provisions of this Section 3.
3.12. Reincorporation. The Company and each Shareholder agree
that if the Company's state of incorporation has not been moved to Delaware by
the initial closing under the Purchase Agreement, then, if Beacon requests, the
Company and each Shareholder shall use their best efforts to so reincorporate
the Company within 60 days after such closing. If such reincorporation is not
effected within such 60 day period, the Company and the Shareholders agree to
take all such action as may be necessary or appropriate to promptly amend the
Restated Articles and this Agreement to increase the size of the Board to a size
sufficient to permit Beacon to appoint additional directors if the events
described in Article V.3 of the Restated Articles occur such that Beacon's
directors will, in such circumstances, represent more than 50% of the members of
the Board.
Section 4. Restrictions on Transfers of Stock.
(a) No Shareholder shall Transfer any Stock, whether owned on
the date hereof or acquired hereafter, without first, if applicable, complying
with the
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provisions of Section 6 hereof and then, in each case as applicable, complying
with the provisions of Section 7 hereof; provided that Beacon may Transfer up to
500,000 of its shares of Stock to any Affiliate or business associate of Beacon
or its Affiliates without the need to comply with the provisions of Sections 6
or 7 (but, subject to the provisions of Section 4(b)). Notwithstanding any other
provision hereof, no Management Shareholder may Transfer any Stock if, after
giving effect to such Transfer, such Management Shareholder shall have
Transferred in the aggregate an amount of Stock in excess of 5% of the
outstanding Stock held by such Management Shareholder as of the date hereof,
except that (i) from and after a Qualified IPO a Management Shareholder may
Transfer Stock, (ii) a Management Shareholder may Transfer Stock in connection
with the bona fide merger of the Company or bona fide sale of all or
substantially all of the assets or equity securities of the Company, and (iii) a
Management Shareholder may Transfer Stock as set forth in Section 5. Except with
respect to Transfers of Stock by Management Shareholders described in Section 5,
each Management Shareholder shall, prior to any Transfer of Stock permitted by
this Section 4, comply with the provisions of Sections 6 and 7 hereof, in each
case as applicable.
(b) Except in connection with a Public Sale, any Transferee of
Stock (including any Transferee that is an Affiliate of a Transferor) who is not
a Shareholder shall upon consummation of, and as a condition to, such Transfer
execute and deliver to the Company (which the Company shall then deliver to all
other Shareholders) an agreement in form and substance satisfactory to Beacon
pursuant to which it agrees to be bound by the terms of this Agreement for the
benefit of the parties hereto and such Transferee shall thereafter be deemed to
be a Shareholder for all purposes of this Agreement.
(c) Any Transfer or attempted Transfer of Stock in violation
of any provision of this Agreement shall be void, and the Company shall not
record such Transfer on its books or treat any purported Transferee of such
Stock as the owner of such Stock for any purpose.
Section 5. Management Shareholders.
(a) Involuntary Transfers. Upon the occurrence of an
Involuntary Transfer of the Stock of any Management Shareholder (the
"Involuntary Transfer Shareholder"), the Company shall have the option (but not
the obligation), for a period of 30 days from the date of such occurrence, to
purchase such Stock by providing written notice to such effect to such
Involuntary Transfer Shareholder and to any court that has then exercised
jurisdiction over such Involuntary Transfer Shareholder with respect to its
Stock, or to any assignee, trustee in bankruptcy or successor in interest, as
the case may be, and such Involuntary Transfer Shareholder shall be obligated,
if the Company elects to exercise its right to purchase such Stock, to sell all
but not less than all of the Stock then registered in such Involuntary Transfer
Shareholder's name at the price provided in Section 5(d) hereof and upon the
terms provided in Section 5(e) hereof. If the Company elects not to exercise its
option pursuant to this Section 5(a) within such 30-day period, it shall
immediately provide written notice to that effect to all
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of the other Management Shareholders (the "Non-Involuntary Transfer Management
Shareholders") who shall have the option to purchase, and such Involuntary
Transfer Shareholder shall be obligated to sell to the extent such option is
exercised, all of the shares of such Stock at the price provided in Section 5(d)
hereof and upon the terms provided in Section 5(e) hereof. If more than one
Non-Involuntary Transfer Management Shareholder desires to so purchase, then
they shall purchase in such proportions as they may agree. In the absence of
agreement, each of the Non-Involuntary Transfer Management Shareholders desiring
to purchase such stock shall be entitled to purchase up to that number of shares
of such Stock that is equal to the product of such Management Shareholder's
percentage share of the outstanding Common Stock then held by such
Non-Involuntary Transfer Management Shareholders desiring to purchase such stock
multiplied by the number of shares of Stock available for purchase from the
Involuntary Transfer Shareholder hereunder. The Non-Involuntary Transfer
Management Shareholders shall have the right to exercise their respective
options hereunder for a period of 30 days following their receipt of notice from
the Company that it has elected not to purchase such Stock.
(b) Termination of Employment of Management Shareholders
other than Xxxxxx or Xxxxxx.
(i) Termination Without Cause; Death;
Disability. If the employment of a Management Shareholder
other than Xxxxx Xxxxxx or Xxxx Xxxxxx with the Company is
terminated (A) without "cause" as contemplated in such
Management Shareholder's employment agreement, or (B) by the
Management Shareholder for any reason constituting
"constructive termination" as defined in such Management
Shareholder's employment agreement, then the remaining
Management Shareholders shall have the option for a period of
60 days from the date of such termination to purchase (in such
proportions as they shall agree or, if they cannot agree, in
proportion to their ownership of outstanding Common Stock
other than the Stock of the terminated Management
Shareholder), and if such option is exercised, the terminated
Management Shareholder may, but shall not be obligated to,
sell all of the Stock held by such terminated Management
Shareholder (the "Terminated Manager's Stock") on terms
substantially identical to those set forth in Section 5(e)
(other than subsections (iii) and (iv) thereof) and at the
price set forth in Section 5(d). If the employment of a
Management Shareholder other than Xxxxx Xxxxxx or Xxxx Xxxxxx
with the Company is terminated due to death or Disability (as
such terms are defined in such Management Shareholder's
employment agreement, then such Management Shareholder's or
such Management Shareholder's personal representative may, for
a period of sixty (60) days from the date of appointment of
such personal representative or disability, as the case maybe,
offer to the remaining Management Shareholder's the option to
purchase (in such proportions as they shall agree or, if they
cannot agree, in proportion to their ownership of outstanding
Common Stock other than the Stock of the deceased or disabled
Management Shareholder) and if
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such option is exercised, the decreased or disabled Management
Shareholder may, but shall not be obligated to, sell all of
such Terminated Manager's Stock on terms substantially
identical to those set forth in Section 5(e) (other than
subsections (iii) and (iv) thereof) and at the price set forth
in Section 5(d) If all of the Terminated Manager's Stock is
not purchased by the other Management Shareholders, the
Company shall, upon such Management Shareholder's request,
purchase, within 90 days after the date of said termination,
and such terminated Management Shareholder shall sell, all of
the Terminated Manager's Stock at the price set forth in
Section 5(d), and upon the terms set forth in Section 5(e)
hereof.
(ii) Termination Under other Circumstances.
If the employment of a Management Shareholder other than Xxxxx
Xxxxxx or Xxxx Xxxxxx with the Company is terminated (A) by
the Company for "cause" as contemplated by his employment
agreement, or, if no such agreement is in effect, for "good
cause" under applicable law, or (B) by the Management
Shareholder for reasons not constituting "constructive
termination" under his employment agreement, then the Company
shall have the option (but not the obligation) to purchase,
within 90 days after the date of such termination, and, if
such option is exercised, such Management Shareholder shall
sell, all of the shares of Stock held by such Management
Shareholder at a price equal to the lesser of such Management
Shareholder's acquisition cost for his stock or $1.00 per
share, and upon the terms set forth in Section 5(e) hereof. If
the employment of a Management Shareholder other than Xxxxx
Xxxxxx or Xxxx Xxxxxx is terminated due to expiration of the
term of his employment agreement, then the Company shall have
the option (but not the obligation) to purchase, within 90
days after the date of such termination, and, if such option
is exercised, such Management Shareholder shall sell, all of
the shares of Stock held by such Management Shareholder at a
price determined pursuant to Section 5(d) and upon the terms
set forth in Section 5(e).
(iii) Change in Control. If the employment
of a Management Shareholder other than Xxxxx Xxxxxx or Xxxx
Xxxxxx with the Company is terminated by the Company without
"cause" as contemplated in such Management Shareholder's
employment agreement or by such Management Shareholder for
reasons constituting "constructive termination" under such
Management Shareholder's employment agreement, and there
occurs a Change in Control within the first twelve months
following the date of such termination, the Company agrees to
pay or cause to be paid to such terminated Management
Shareholder (or to his heirs, legatees and/or guardians), in
addition to the purchase price for such terminated Management
Shareholder's Stock, the value of such terminated Management
Shareholder's share of any consideration that would have been
payable to such terminated Management Shareholder
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(less any such consideration actually received by such
Management Shareholder as a result of a sale of his Stock,
whether to another Management Shareholder, the Company or
another person) upon, and as a result of, such a Change in
Control of the Company within such twelve-month period. Such
payment shall be made by the Company when and as the Company
or the other the Company's remaining Shareholders receive
consideration as a result of such a Change in Control, and
shall be paid by the Company based upon such terminated
Management Shareholder's pro-rata equity interest in the
Company at the time of termination. Any payment by the Company
pursuant to this Section as a result of a Change in Control
may, at the Company's option, be made by delivery of any
combination of cash, promissory notes with a term of not more
than ten years and interest at a rate calculated pursuant to
Section 1274(d) of the Internal Revenue Code of 1986, as
amended (the "Code"), or an appropriate in-kind distribution
of any consideration received by the Company or its
Shareholders as a result of such Change in Control.
(c) Termination of Employment of Xxxxxx and Kimmel.
(i) Termination of Employment For Good
Cause. If the employment of either Xxxxx Xxxxxx or Xxxx Xxxxxx
(as the case may be, a "Terminated Senior Manager") with the
Company is terminated (A) by the Company for any of the
specific reasons enumerated in Section 4.3(a) of their
respective employment agreements (or, if no such agreement is
then in effect, for "good cause" under applicable law) or (B)
by the Terminated Senior Manager for any reason not
constituting "constructive termination" as defined in Section
4.4(b) of such Terminated Senior Manager's employment
agreement, then the Company shall have the option (but not the
obligation) to purchase, within 90 days after the date of
termination, and, if such option is exercised, such Terminated
Senior Manager shall sell, all of the Stock then registered in
such Terminated Senior Manager's name or held, in trust or
otherwise, for his benefit at a price equal to the lesser of
such Terminated Senior Manager's acquisition cost for such
Stock or $1.00 per share, and upon the terms provided in
Section 5(e) hereof; provided, however, that the provisions of
this Section 5(c)(i) shall not apply to any shares of capital
stock of the Company held by such Terminated Senior Manager on
January 31, 1997 (or received as a distribution on or in
respect of such shares after January 31, 1997 as the result of
any recapitalization, stock split or similar event).
(ii) Death; Disability. Upon each of (A) the
Disability of either Xxxxx Xxxxxx or Xxxx Xxxxxx (as the case
may be, a "Disabled Shareholder"), and (B) such Shareholder's
death, and the appointment and qualification of his personal
representative, for a period of 60 days from the date of such
appointment and qualification or Disability, as the case may
be, such personal representative or such Disabled Shareholder,
as the case may be, may offer to the other Management
Shareholders the
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option to purchase (in such proportions as they shall agree
upon, or if they cannot agree, in proportion to their
respective ownership of outstanding Common Stock), all of the
shares of Stock held by such personal representative, or
Disabled Shareholder, on terms substantially identical to
those set forth in Section 5(e) hereof (other than subsections
(iii) and (iv) thereof) and at a price determined in
accordance with the terms of Section 5(d) hereof. If the
option to purchase all of the shares of Stock so offered is
not exercised or accepted within such 60-day period, then such
Disabled Shareholder or such personal representative, as the
case may be, shall be entitled to sell, by providing written
notice to the Company, and the Company shall be required to
purchase upon receipt of such notice, all or a portion of such
shares of Stock held by the Disabled Shareholder or such
personal representative as such number of shares set forth in
such written notice, at the price and upon the terms provided
in Sections 5(d) and 5(e) hereof.
(iii) Termination of Employment Under Other
Circumstances. If a Terminated Senior Manager's employment is
terminated (A) by the Company without "good cause" as
contemplated by his employment agreement or (B) by such
Terminated Senior Manager for reasons constituting
"constructive termination" under his employment agreement,
then the Company shall purchase, within 90 days after the date
of such termination, and such Terminated Senior Manager shall
sell, Stock acquired by such Terminated Senior Manager after
January 31, 1997 (other than Stock acquired pursuant to a
distribution, made with respect to a recapitalization, stock
split or similar event, on or in respect of Stock held on
January 31, 1997) at the price set forth in Section 5(d) and
subject to the terms set forth in Section 5(e). If the
employment of a Terminated Senior Manager is terminated due to
expiration of the term of his employment agreement, then the
Company shall have the option (but not the obligation) to
purchase, within 90 days after the date of such termination,
and, if such option is exercised, such terminated Senior
Manager shall sell, all of the shares of Stock held by such
terminated Senior Manager or by a trust or otherwise for his
benefit, at a price determined pursuant to Section 5(d) and
upon the terms set forth in Section 5(e).
(d) Purchase Price. With respect to purchases of Stock made
pursuant to Sections 5(a), 5(b)(i), the second sentence of 5(b)(ii), and
5(c)(ii) and (iii), if the purchaser of Stock hereunder, on the one hand, and
the Transferring Shareholder, on the other hand, agree in writing as to the
purchase price for such Stock, such agreed price shall be the purchase price for
such Stock. If the purchase price of such Stock is not agreed upon (x) with
respect to an event described in Sections 5(a) or 5(b)(i), within 30 days from
the date of such event and (y) with respect to an event described in Sections
5(c)(ii) and (iii), within 30 days after the receipt of the notice required to
be determined thereunder or, with respect to the death of a Management
Shareholder other than Xxxxx Xxxxxx or Xxxx Xxxxxx, after the appointment and
qualification of such
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deceased Management Shareholder's personal representative, then, the purchase
price of such Stock shall be its Fair Market Value. The Transferring Shareholder
and the Company shall each pay one-half of all expenses incurred in connection
with the determination of the Fair Market Value of Stock under this Section
5(d).
(e) Payment of Purchase Price. The payment of any purchase
price for Stock Transferred pursuant to this Section 5 hereof may be made on
such terms as are agreed upon by the parties or, absent such agreement, as
follows:
(i) Cash. Subject to the terms of
subparagraph (iv) hereof and, with respect to any Involuntary
Transfer, subject to such other terms and conditions as are
required by any court exercising jurisdiction over any
Involuntary Transfer Shareholder with respect to its Stock or
over any assignee, trustee in bankruptcy or
successor-in-interest with respect to such Involuntary
Transfer Shareholder, as the case may be, (A) in the event of
any Transfer pursuant to this Section 5 (other than as a
result of the death of a Management Shareholder), (1) if the
Company is the purchaser, 10% of the total purchase price of
the Stock shall be paid in cash by bank wire transfer by the
Company on the Closing Date, and (2) if anyone other than the
Company is the purchaser, the entire amount of the purchase
price of the Stock shall be paid in cash by bank wire transfer
by such purchaser(s) on the Closing Date, and (B) in the event
of any Transfer as a result of the death of a Management
Shareholder, the Company shall pay in cash by bank wire
transfer on the Closing Date the greater of (1) the proceeds
of any life insurance policy or policies purchased by the
Company as contemplated by Section 5(f) (but not in excess of
the purchase price to be paid by the Company pursuant to this
Section 5) and (2) 10% of the total purchase price to be paid
by the Company with respect to the Stock formerly held by such
deceased Management Shareholder. Notwithstanding the
foregoing, if the Company is a purchaser of Stock pursuant to
this Section 5 but is prohibited by law and/or the Restated
Articles to make all or any portion of any cash payment
otherwise payable on the Closing Date with respect to the
purchase of such Stock, the Company shall pay the maximum
amount permitted by law and the Restated Articles, if any, and
the balance of such purchase price shall be made in accordance
with Section 5(e)(ii).
(ii) Promissory Note. After payment in cash
of the amount set forth in Sections 5(e)(i), the balance of
the purchase price to be paid by the Company pursuant to this
Section 5 shall be represented by a promissory note of the
Company, payable in seven equal annual installments of
principal and interest, the first of which shall be due and
payable on the first anniversary of delivery of the Note, and
otherwise in form and substance satisfactory to the Company
and the Transferring Shareholder or the representative thereof
(the "Note"). Interest shall accrue on, and be payable with,
the unpaid balance of the Note from the Closing Date at a rate
equal to the applicable federal rate for long-term
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debt instruments under Code Section 1274(d)(1) in effect as of
the Closing Date. As security for payment of the amounts due
under the Note, the Company shall, to the extent provided by
agreements and instruments to which the Company is a party,
pledge to the Transferring Shareholder the Stock being
purchased pursuant to this Section 5 until such time as all
payments due thereunder have been paid in full; provided that
such selling Shareholder shall not be entitled to exercise any
voting or other rights with respect to such shares of Stock so
long as the Company is not in default of any payment due under
such note; provided, further, that the Company's obligations
under the Note shall be expressly subordinated to the rights
and preferences, including, without limitation, with respect
to dividends and liquidation, of the Series D Preferred.
(iii) Debt Due From Shareholder. Any debt
due by a Transferring Shareholder to the Company shall be
payable according to its terms, as shall any debt due by the
Company to the Transferring Shareholder; provided, however,
that, regardless of the terms of any such debt due by the
Shareholder to the Company, any cash payment due under Section
5(e)(i), as well as any insurance proceeds payable under
Section 5(f) with respect to the purchase of the Transferring
Shareholder's Stock, first, shall be applied to offset any
such indebtedness until all such indebtedness is fully
discharged and, second, as payment of the purchase price for
the Transferring Shareholder's Stock. The provisions of this
subparagraph (iii) shall also apply to any purchases of Stock
by the Company pursuant to Section 6 hereof.
(iv) Involuntary Transfers. The Company
shall settle with the assignee, trustee in bankruptcy,
attaching court or officer or successor-in-interest holding
Stock received in an Involuntary Transfer by taking any or all
such Stock in execution and paying to such Persons out of the
purchase price for such Stock, calculated in accordance with
Section 5(d), an amount equal to not more than the sum of the
Shareholder's indebtedness and proper items of expense. The
Company shall pay the balance, if any, of the purchase price
for such Stock to the Transferring Shareholder in accordance
with this Section 5(e).
(v) Closing. The closing of a purchase and
sale of Stock in accordance with this Section 5 (the
"Closing"), unless otherwise provided herein or agreed to in
writing by the purchaser(s) and the Transferring Shareholder,
shall be held at the principal place of business of the
Company (1) 30 days after (x) with respect to any option to
purchase such Stock pursuant to this Section 5, the later of
(i) the date that the last applicable period for exercising an
unexercised option to purchase has lapsed and (ii) the date an
option to purchase is accepted or exercised, (y) in connection
with the Disability of Xxxxx Xxxxxx or Xxxx Xxxxxx, the date
of delivery of the notice required with respect thereto, and
(z) the occurrence of any event set forth in Section 5(a)
(other than
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death of a Management Shareholder), and (2) with respect to
the death of a Management Shareholder, 90 days after the
appointment and qualification of such deceased Management
Shareholder's personal representative (collectively, the
"Closing Date"); provided that, if determination of a purchase
price requires a determination of Fair Market Value, then the
Closing Date shall not be later than 30 days after such
determination. At the Closing, upon payment of the purchase
price (including delivery of the Note), the certificates
representing the Stock to be purchased and sold pursuant to
this Section 5 shall be delivered by the Transferring
Shareholder (or his personal or legal representatives, as the
case may be) to the purchaser(s) appropriately free and clear
of all liens and endorsed in blank for transfer. If the
certificates representing any shares of Stock to be so
transferred have not been surrendered by the selling
Shareholder, all rights of the holder thereof hereunder with
respect to said Stock (including, without limitation, voting
rights) nonetheless shall cease and terminate without any
further action by any Person.
(vi) Certain Limitations. Notwithstanding
any other provision of this Section 5 to the contrary, the
Company shall not purchase, redeem or otherwise acquire any
Stock from any Shareholder at a purchase price equal to the
Fair Market Value thereof unless and until any and all accrued
but unpaid dividends on Preferred Stock, and any interest
having accrued thereon, shall have been paid in full.
(f) Life Insurance. As soon as practicable following the
execution of this Agreement, the Company shall use its commercially reasonable
best efforts to purchase a life insurance policy on the life of each Management
Shareholder in such amounts, if any, as the Board deems reasonable and
appropriate. The Company shall be the owner and beneficiary of each such policy,
and any proceeds received thereunder shall be held by the Company in trust for
the purposes of satisfying the Company's obligations under this Section 5. Each
Management Shareholder agrees to cooperate with the Company in obtaining, and in
keeping in full force and effect, all such policies. The Company shall maintain
all each such insurance policy in full force and effect and shall not, without
the prior written consent of the affected Management Shareholder, cancel any
such policy or take or omit to take any action that might give rise to the
termination or cancellation thereof. The Company shall pay premiums on all such
insurance policies as they become due. The Company may, when it deems
appropriate, apply any dividends declared and paid on such policies to the
payment of premiums. Notwithstanding the foregoing, the Company shall have no
obligations under this Section 5(f) with respect to purchasing a life insurance
policy covering the life of a Management Shareholder to the extent a Management
Shareholder is either uninsurable or may not be insured as herein contemplated
upon commercially reasonable terms. If a Management Shareholder Transfers all of
his Stock during his lifetime pursuant to this Section 5, or if this Agreement
is terminated without being superseded by a similar agreement prior to such
Management Shareholder's death, such Management Shareholder, or any designee of
such Management Shareholder, shall have the right, during the 60-day period
beginning with the date of Transfer or
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termination of this Agreement, to purchase any life insurance policy insuring
the life of such Management Shareholder owned by the Company by paying the
Company an amount equal to the cash surrender value of such insurance policy
(determined after payment of all policy loans incurred to pay premiums due
thereunder and interest thereon) as of the date of purchase, plus the unearned
portion of any premiums that shall have been paid thereon.
(g) Irrevocable Proxy. In order to ensure that the Company may
lawfully effect the transactions contemplated by this Section 5, each Management
Shareholder hereby irrevocably appoints the duly elected Secretary of the
Company as his, her or its true and lawful proxy and attorney-in-fact, with full
power of substitution, to vote all of his Voting Shares of the Company to
approve each aspect the transactions contemplated by this Section 5 and to take
all such other actions as are necessary to enforce the rights of the Company
under this Section 5. The Secretary of the Company may exercise the irrevocable
proxy granted to him hereunder at any time a transaction mandated by this
Section 5 requires approval of a Shareholder. The proxies and powers granted by
each Shareholder pursuant to this Section 5 are coupled with an interest and are
given to secure the performance of the Shareholders' respective obligations
under this Section 5. Such proxies and powers shall survive the death,
incompetence and disability of each Shareholder. Such proxies and powers will be
effective until a Qualified IPO, at which time such proxies and powers shall
terminate.
Section 6. Rights of First Offer. In addition to and not in
limitation of any other restrictions on Transfers of Stock contained in this
Agreement, any Transfers of Stock by a Shareholder shall be consummated only in
accordance with the following procedures:
(a) The Transferring Shareholder shall first deliver to the
Company and each Major Shareholder other than the Transferring Shareholder and,
if the Transferring Shareholder is a Management Shareholder, each other
Management Shareholder (collectively, the "Offered Shareholders") a written
notice (an "Offer Notice") that shall (i) state the Transferring Shareholder's
intention to Transfer Stock to one or more Persons in a bona fide, arm's length
transaction, the amount and type of Stock to be Transferred (the "Subject
Stock"), the purchase price therefor (which shall be payable in cash) and a
summary of the other material terms of the proposed Transfer and (ii) offer the
Company and the Offered Shareholders the option to acquire all or a portion of
such Subject Stock upon the terms and subject to the conditions of the proposed
Transfer as set forth in the Offer Notice (the "Offer). The Offer shall remain
open and irrevocable for the periods set forth below (and, to the extent the
Offer is accepted during such periods, until the consummation of the sale
contemplated by the Offer).
(b) Each Offered Shareholder shall have the right and option,
for a period of 20 days after delivery of the Offer Notice (the "Shareholder
Acceptance Period"), to accept all or any part of the Subject Stock so offered
at the cash purchase price and on the terms stated in the Offer Notice. Such
acceptance shall be made by delivering a written notice to the Company and the
Transferring Shareholder within the
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Shareholder Acceptance Period specifying the maximum number of shares such
Offered Shareholder will purchase (the "First Offer Shares"). If, upon the
expiration of the Shareholder Acceptance Period, the aggregate amount of First
Offer Shares exceeds the amount of Subject Stock, the Subject Stock shall be
allocated among the Offered Shareholders as follows: (i) first, each Offered
Shareholder shall be entitled to purchase no more than its First Offer
Percentage of Subject Stock; (ii) second, if any shares of Subject Stock have
not been allocated for purchase pursuant to (i) above (the "Remaining Shares"),
each Offered Shareholder (an "Oversubscribed Shareholder") that had offered to
purchase a number of shares of Subject Stock in excess of the amount of stock
allocated for purchase to it in accordance with previous allocations of such
shares of Subject Stock, shall be entitled to purchase an amount of Remaining
Shares equal to no more than its First Offer Percentage (treating only
Oversubscribed Shareholders as Offered Shareholders for these purposes) of the
Remaining Shares; and (iii) third, the process set forth in (ii) above shall be
repeated with respect to any shares of Subject Stock not allocated for purchase
until all shares of Subject Stock are allocated for purchase.
(c) If the Offered Shareholders shall fail to accept all of
the Subject Stock offered pursuant to, or shall reject in writing, the Offer,
then, upon the earlier of the expiration of the Shareholder Acceptance Period or
the giving of such written notice of rejection or failure to accept such Offer
by the Offered Shareholders, the Company shall have the right and option, for a
period of 20 days (the "Company Acceptance Period"), to accept all or any part
of the Subject Stock not accepted by the Offered Shareholders at the cash
purchase price and on the terms stated in the Offer Notice. Such acceptance
shall be made by delivering a written notice to the Transferring Shareholder and
each of the Offered Shareholders within the Company Acceptance Period.
(d) If effective acceptance shall not be received pursuant to
Sections 6(b) and/or 6(c) above with respect to all of the Subject Stock offered
for sale pursuant to the Offer Notice, then the Transferring Shareholder may
Transfer all or any portion of the Stock so offered for sale and not so accepted
at a cash price not less than the price, and on terms not more favorable to the
purchaser thereof than the terms, stated in the Offer Notice at any time within
90 days after the expiration of the Shareholder Acceptance Period (the "Sale
Period"). In the event that all of the Stock is not sold by the Transferring
Shareholder during the Sale Period, the right of the Transferring Shareholder to
Transfer such Stock shall expire and the obligations of this Section 6 shall be
reinstated.
(e) All Transfers of Subject Stock to the Company and/or the
Offered Shareholders pursuant to this Section 6 shall be made free and clear of
all liens and shall be consummated contemporaneously at the offices of the
Company on the later of (i) a mutually satisfactory business day within 20 days
after the expiration of the later of the Company Acceptance Period or the
Shareholder Acceptance Period, as applicable, and (ii) the fifth business day
following the expiration or termination of all waiting periods under the HSR Act
applicable to such Transfers, or at such other time and/or place as the parties
may agree. The delivery of certificates or other instruments
-22-
evidencing such Subject Stock duly endorsed for Transfer shall be made on such
date against payment of the purchase price for such Subject Stock.
(f) The requirements of this Section 6 shall not apply to (i)
any Transfer of Stock by a Shareholder to an Affiliate of such Shareholder, (ii)
any Transfer of Stock pursuant to Sections 5 or 8 of this Agreement or (iii) any
Transfer of Stock pursuant to a Public Sale.
Section 7. Tag-Along Rights.
(a) No Shareholder shall Transfer any Stock owned by such
Shareholder without complying with the terms and conditions set forth in this
Section 7 (after having complied with the provisions of Section 6).
(b) Any Shareholder desiring to Transfer any shares of Stock
(the "Tag-Along Initiator") shall, after expiration of all required notice
periods under Section 6, give not less than 20 days prior written notice of such
intended Transfer to the holders of Preferred Stock (each, a "Tag-Along
Offeree") and to the Company. Such notice (the "Tag-Along Notice") shall set
forth the terms and conditions of such proposed Transfer, including the name of
the proposed Transferee, the number of shares proposed to be Transferred by the
Tag-Along Initiator (the "Tag-Along Shares"), the purchase price per share
proposed to be paid therefor and the payment terms and type of Transfer to be
effectuated. Within 10 days after delivery of the Tag-Along Notice, each
Tag-Along Offeree shall, by written notice to the Tag-Along Initiator and the
Company, have the opportunity and right to sell to the Transferee in such
proposed Transfer (upon the same terms and conditions as the Tag-Along
Initiator) up to that number of shares of such Stock owned by such Tag-Along
Offeree as shall equal the product of (x) a fraction, the numerator of which is
the number of shares of Stock owned by such Tag-Along Offeree as of the date of
the Tag-Along Notice and the denominator of which is the aggregate number of
shares of Stock owned as of the date of the Tag-Along Notice by all Tag-Along
Offerees and the Tag-Along Initiator multiplied by (y) the number of Tag-Along
Shares. No Person may Transfer shares in any transaction that is subject to this
Section 7(b) unless the Transferee agrees to be bound by and complies with the
terms of this Agreement.
(c) At the closing of any proposed Transfer in respect of
which a Tag-Along Notice has been delivered, the Tag-Along Initiator together
with the Tag-Along Offeree electing to sell shares, shall deliver, free and
clear of all liens, to the proposed Transferee certificates evidencing the
shares to be sold thereto duly endorsed with Transfer powers and shall receive
in exchange therefore the consideration to be paid or delivered by the proposed
Transferee in respect of such shares as described in the Tag-Along Notice.
(d) The provisions of this Section 7 shall not apply to (i)
any Public Sale, (ii) any Transfer by a Shareholder to Affiliates of such
Shareholder or (iii) any Transfers pursuant to Sections 5, 6 or 8.
-23-
Section 8. Drag-Along Rights.
(a) If Beacon, as long as it holds at least the Pre-IPO
Threshold (the "Drag-Along Initiator"), determines to Transfer or exchange (in a
business combination or otherwise) in one or a series of bona fide arms-length
transactions (collectively, the "Drag-Along Transaction") to an unrelated and
unaffiliated third party all of the shares of Stock held by the Drag-Along
Initiator, then, upon 30 days written notice from the Drag-Along Initiator to
the other Shareholders that shall include reasonable details of the proposed
transaction, including the proposed time and place of closing and the
consideration to be received by the Shareholders, each other Shareholder shall
be obligated to, and shall, sell, Transfer and deliver, or cause to be sold,
Transferred and delivered, to such third party, all of his shares of Stock in
the same transaction at the closing thereof (and will deliver certificates for
all of his shares of Stock at the closing, free and clear of all liens, claims,
or encumbrances) and the consideration paid in such transaction shall first be
applied to pay the liquidation value of all outstanding Preferred Stock in
accordance with the terms thereof and then pro rata among all holders of Stock
on an as converted basis; provided, however, that if within 30 days of receipt
of a notice from the Drag-Along Initiator as provided in this Section 8, the
Company irrevocably commits, in writing, either (i) to use its best efforts to
complete a Qualified IPO or (ii) to purchase all of the shares of Stock of the
Drag-Along Initiator for a cash amount equal to the Drag-Along Value (as defined
below) and the Company demonstrates to the satisfaction of the Drag-Along
Initiator that the Company will be able to complete such purchase, then the
closing of the Drag-Along Transaction shall be suspended until the earlier of
(x) 120 days after the Company so commits or (y) the date the Company determines
that it will be unable to complete the Qualified IPO within such 120-day period.
If the Company fails to either (A) complete the Qualified IPO within 120 days or
(B) purchase the Drag-Along Initiator's shares at the Drag-Along Value, the
Drag-Along Initiator shall have the right to compel the Shareholders to satisfy
the general provisions of this Section 8 in order to consummate the Drag-Along
Transaction without further delay. As used in this Section 8, "Drag-Along Value"
means, with respect to the consideration the Drag-Along Initiator would receive
in connection with the Drag-Along Transaction, the value of such consideration,
which, to the extent other than cash, shall take into account, in addition to
the cash value thereof, the assumptions and reasonable expectations underlying
the Drag-Along Transaction, including, without limitation, any anticipated tax
benefit, synergies or other projected economic benefits, as confirmed by an
independent investment bank reasonably satisfactory to the Drag-Along Initiator
and the Company.
(b) The provisions of this Section 8 shall not apply to (i)
any Transfer prior to the date two years after the date hereof, (ii) any Public
Sale or (iii) any Transfer by the Drag-Along Initiator to an Affiliate of the
Drag-Along Initiator.
-24-
Section 9. Issuance Rights. The Company shall not issue,
sell or exchange, or agree to issue, sell or exchange (collectively, "Issue,"
and any issuance, sale or exchange resulting therefrom, an "Issuance") any
shares of Stock (other than Excluded Securities), except as authorized by the
Board and in accordance with the following procedures:
(a) The Company shall deliver to Beacon a written notice (an
"Issuance Notice") that shall (i) state the Company's intention to Issue Stock
to one or more Persons, the amount and type of Stock to be Issued (the "Issuance
Stock"), the purchase price therefor and a summary of the other material terms
of the proposed Issuance and (ii) offer Beacon the option to acquire all or any
part of the Issuance Stock (the "Issuance Offer"). The Issuance Offer shall
remain open and irrevocable for the periods set forth below (and, to the extent
the Issuance Offer is accepted during such periods, until the consummation of
the Issuance contemplated by the Issuance Offer). Beacon shall have the right
and option, for a period of 30 days after delivery of the Issuance Notice (the
"Issuance Acceptance Period"), to accept all or any part of the Issuance Stock
at the purchase price and on the terms stated in the Issuance Notice. Such
acceptance shall be made by delivering a written notice to the Company by Beacon
within the Issuance Acceptance Period specifying the maximum number of shares of
the Issuance Stock that Beacon will purchase.
(b) If effective acceptance shall not be received pursuant to
Section 9(a) above with respect to all of the Issuance Stock offered for sale
pursuant to the Issuance Notice, then the Company may Issue all or any portion
of such Stock so offered for sale and not so accepted, at a price not less than
the price, and on terms not more favorable to the purchaser thereof than the
terms, stated in the Issuance Notice at any time within 90 days after the
expiration of the Issuance Acceptance Period (the "Issuance Period"). In the
event that all of the Issuance Stock is not Issued by the Company during the
Issuance Period, the right of the Company to Issue such unsold Issuance Stock
shall expire and the obligations of this Section 9 shall be reinstated.
(c) All sales of Issuance Stock to Beacon subject to any
Issuance Notice shall be consummated contemporaneously at the offices of the
Company on the later of (i) a mutually satisfactory business day within 20 days
after the expiration of the Issuance Acceptance Period or (ii) the fifth
business day following the expiration or termination of all waiting periods
under the HSR Act, applicable to such Issuance, or at such other time and/or
place as the Company and Beacon may agree. The delivery of certificates or other
instruments evidencing such Issuance Stock shall be made by the Company on such
date against payment of the purchase price for such Issuance Stock.
(d) The provisions of this Section 9 shall not apply to (i)
any Excluded Securities, (ii) any Issuance by the Company in connection with an
IPO or any subsequent registered public offering of Stock, (iii) any conversion
of Preferred Stock to Common Stock pursuant to the terms of the Restated
Articles or (iv) issuance by the Company to physicians in connection with an
acquisition approved by the Board or Executive Committee.
-25-
Section 10. Holdback Agreement; Adjustments.
(a) Each Shareholder agrees that, to the extent requested in
writing by a managing underwriter of an IPO or any underwritten public offering
effected by the Company within three years after an IPO, it will not Transfer
any Stock or any other equity security of the Company or any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than as part of such underwritten public offering) during the
time period reasonably requested by the managing underwriter.
(b) The Company shall take all reasonable steps necessary to
effect a subdivision of shares if, with respect to any demand registration
request under the Beacon Registration Agreement or the GHV Registration
Agreement, in the reasonable judgment of the managing underwriter for the
offering in respect of such demand registration, such subdivision would enhance
the marketability of the securities proposed to be registered thereunder. Each
Shareholder agrees to vote all of its shares of Stock in a manner, and to take
all other actions necessary, to permit the Company, to carry out the intent of
the preceding sentence including, without limitation, voting in favor of an
amendment to the Restated Articles in order to increase the number of authorized
shares of capital stock of the Company.
Section 11. Certain Covenants.
11.1. Financial Statements and Other Information. (a) Prior
to an IPO, the Company shall deliver to each holder of at least 10% of the
outstanding Common Stock at the time of such delivery:
(i) within 20 days after the end of each of month,
unaudited consolidating and consolidated statements of income and cash
flows of the Company for such month, and unaudited consolidating and
consolidated balance sheets of the Company as of the end of such month,
setting forth in each case comparisons to the same month of the
preceding fiscal year, all prepared in accordance with GAAP,
consistently applied, subject to the absence of footnote disclosures
and to normal year-end adjustments;
(ii) within 45 days after the end of each of the
first three quarterly accounting periods in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of
the Company for such fiscal quarter, and unaudited consolidating and
consolidated balance sheets of the Company as of the end of such fiscal
quarter, setting forth in each case comparisons to the same quarter of
the preceding fiscal year, all prepared in accordance with GAAP,
consistently applied, subject to the absence of footnote disclosures
and to normal year-end adjustments;
(iii) within 105 days after the end of each fiscal
year, audited consolidating and consolidated statements of income and
cash flows of the Company for such fiscal year, and consolidating and
consolidated balance
-26-
sheets of the Company as of the end of such fiscal year, setting forth
in each case comparisons to the preceding fiscal year, all prepared in
accordance with GAAP, consistently applied, and accompanied by, with
respect to the consolidated portions of such statements, an opinion of
a "Big Six" independent accounting firm that is unqualified with
respect to the scope of such firm's examination and the Company's
status as a going concern;
(iv) promptly (but in any event within five business
days) after the end of each month, copies of all reports, financial
statements, or other information provided to the members of the Board
and/or senior management of the Company during such month;
(v) promptly (but in any event within five business
days) after the discovery or receipt of notice of any default under any
material agreement to which the Company and/or any of its Subsidiaries
is a party that could have a material adverse effect on the Company or
any Subsidiary, an Officer's Certificate specifying the nature and
period of existence thereof and what actions the Company has taken and
proposes to take with respect thereto;
(vi) promptly (but in any event within three business
days) after transmission thereof, copies of all financial statements,
proxy statements, reports and any other general written communications
that the Company sends to its shareholders and copies of all
registration statements and all regular, special or periodic reports
that it files, or any of its officers or directors file with respect to
the Company, with the Securities and Exchange Commission or with any
securities exchange on which any of its securities are then listed; and
(vii) with reasonable promptness, such other
information and financial data concerning the Company as any Person
entitled to receive information under this Section 11.1 may reasonably
request.
(b) Each of the financial statements referred to in this
Section 11.1 shall be true and correct in all material respects, and shall
fairly and accurately reflect the financial condition and operating results of
the Company as of the dates and for the periods stated therein, subject in the
case of the unaudited financial statements to changes resulting from normal
year-end adjustments.
11.2. Restrictions. Prior to the consummation of a Qualified
IPO, the Company shall not, directly or indirectly, and shall not permit any of
its Subsidiaries to, take any of the following actions without the prior written
consent of Beacon, as long as Beacon meets or exceeds the Pre-IPO Threshold:
(a) consolidate or merge with or into any Person or any
similar business combination transaction (including a sale of all or
substantially all of its assets) or effect any transaction or series of
transactions in which more than 33-1/3% of the Company's voting securities are
transferred to another Person, except any such
-27-
transaction or series of transactions, as the case may be, involving only
wholly-owned Subsidiaries of the Company;
(b) amend or repeal any provision of, or add any provision to,
the Restated Articles or By-laws or otherwise alter or change the preferences,
rights, privileges or powers of the Series D Preferred;
(c) create or designate, authorize the issuance of, or issue
or sell any new series or class of securities or increase the authorized number
of, authorize the issuance of, or issue (other than in connection with the
exercise of any options or warrants outstanding as of the date hereof to
purchase shares of Common Stock or Preferred Stock, or the conversion of any
Common Stock Equivalents outstanding as of the date hereof and other than as
required by the terms of any of the Preferred Stock and conversion of principal
and accrued interest on the Convertible Subordinated Note issued by the Company
to Genesis Holdings, Inc. and dated January 31, 1997), any additional shares of
Common Stock or Preferred Stock;
(d) increase the number of authorized directors comprising
the Board above twenty;
(e) voluntarily liquidate, dissolve or wind up the
Company or take any action that would result in the liquidation, dissolution or
winding up of the Company;
(f) pay, declare or set aside any sums for the payment of, any
dividends, or make any distributions on, any shares of its capital stock or
other equity securities except as required by the terms of the Preferred Stock
and the Convertible Subordinated Note dated January 31, 1997;
(g) except for (i) redemptions of shares of Common Stock and
Preferred Stock required by the Restated Articles or (ii) redemptions of shares
of Common Stock which the Company is obligated to effect in connection with the
exercise by a physician of resale rights under agreements pursuant to which the
physician's practice was acquired by the Company, redeem, purchase or otherwise
acquire, any of its capital stock or other equity securities (including, without
limitation, warrants, options and other rights to acquire any of its capital
stock or other equity securities directly or indirectly) or redeem, purchase or
make any payments with respect to any stock appreciation rights or phantom stock
plans;
(h) purchase, acquire or obtain any capital stock or other
proprietary interest, directly or indirectly, in any other entity or all or
substantially all of the business or assets of another Person for consideration
(including assumed liabilities) in excess of $750,000;
(i) enter into or commit to enter any joint ventures or any
partnerships or establish any non wholly-owned subsidiaries, in each case, where
the contributions or proposed investments by the Company is in excess of
$750,000 in cash or assets;
-28-
(j) sell, lease, transfer or otherwise dispose of any asset or
group of assets, in one or more transactions, in an aggregate amount (as to the
Company and all of its Subsidiaries), for consideration in excess of $750,000;
(k) create, incur, assume or suffer to exist any indebtedness
of the Company or any of its subsidiaries (which shall include for purposes
hereof capitalized lease obligations and guarantees or other contingent
obligations for indebtedness for borrowed money) in an aggregate amount (as to
the Company and all of its Subsidiaries) in excess of $750,000, excluding
indebtedness that is outstanding as of the date hereof and replacement
indebtedness thereof on terms and conditions approved by Beacon;
(l) mortgage, encumber, create, incur or suffer to exist,
liens on its assets, in an aggregate amount (as to the Company and all of its
Subsidiaries) in excess of $750,000 excluding liens on assets that exist as of
the date hereof;
(m) amend, modify or grant any waiver under any material
provisions of any employment or non-competition agreement to which the Company,
any of its affiliates, or any professional corporations or professional
associations with which the Company has a contractual relationship, is a party
or is bound;
(n) adopt or approve the annual budget or business plan of
the Company; or
(o) agree or otherwise commit to take any actions set forth
in the foregoing paragraphs (a) through (n).
11.3. Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Class C Common Stock, solely for the purpose of issuance upon the conversion of
the Preferred Stock, such number of shares of Class C Common Stock issuable upon
the conversion of all outstanding shares of Preferred Stock. All shares of
Common Stock that are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges.
The Company shall take all such actions as may be necessary to assure that all
such shares of Class C Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Class C Common Stock may be listed
(except for official notice of issuance that shall be immediately transmitted by
the Company upon issuance).
11.4. Public Disclosures. The Company shall not disclose, nor
shall it permit any of its Subsidiaries to disclose, any Major Shareholder's
name or identity as an investor in the Company or any material information
related to this Agreement in any press release or other public announcement or
in any document or material filed with any governmental entity, without the
prior written consent of such Major Shareholder, unless such disclosure is
required by applicable law or governmental regulations or by order of a court of
competent jurisdiction, in which case prior to making such disclosure
-29-
the Company shall give written notice to such Major Shareholder describing in
reasonable detail the proposed content of such disclosure and shall permit such
Major Shareholder to review and comment upon the form and substance of such
disclosure.
11.5. Additional Shareholders. The Company shall not issue any
Common Stock Equivalents to any person or entity that is not a party to this
Agreement without requiring, as a condition precedent to such issuance, that
such person or entity execute a counterpart to this Agreement or the
Shareholders Letter (as defined in the Purchase Agreement); provided that
non-executive employees of the Company to whom Common Stock Equivalents are
issued pursuant to any employment agreement or any employee stock option, stock
purchase or similar plan of the Company shall not be required to execute this
Agreement or a Shareholders Letter so long as the Company, as a condition of
such issuance, retains the right to repurchase such Common Stock Equivalents
subject to substantive terms and conditions consistent with those granted to the
Company herein with respect to the repurchase of Stock by the Company from
Management Shareholders.
Section 12. Conflicting Agreements. Each Shareholder
represents and warrants that such Shareholder has not granted and is not a party
to any proxy, voting trust or other agreement that is inconsistent with or
conflicts with any provision of this Agreement, and no holder of Stock shall
grant any proxy or become party to any voting trust or other agreement that is
inconsistent with or conflicts with any provision of this Agreement.
Section 13. Legend. (a) Each Shareholder and the Company shall
take all such action necessary (including exchanging with the Company
certificates representing shares of Stock issued prior to the date hereof) to
cause each certificate representing outstanding shares of Stock to bear a legend
containing the following words:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE
DISPOSED OF (i) UNLESS (A) REGISTERED UNDER SUCH ACT AND ANY
APPLICABLE STATE SECURITIES AND "BLUE SKY" LAWS OR (B) AN
OPINION OF COUNSEL SATISFACTORY TO DOCTORS HEALTH, INC. (THE
"COMPANY") THAT SUCH REGISTRATION IS NOT NECESSARY HAS BEEN
DELIVERED TO THE COMPANY OR (ii) UNLESS SOLD PURSUANT TO AND
IN COMPLIANCE WITH RULE 144 OF SUCH ACT AND APPLICABLE
SECURITIES OR "BLUE SKY" LAWS."
"IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO THE RESTRICTIONS ON
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TRANSFER AND TO THE VOTING AGREEMENTS SET FORTH IN THE
SHAREHOLDERS' AND VOTING AGREEMENT DATED AS OF JULY 15, 1997
BY THE COMPANY AND THE PARTIES THERETO, A COPY OF WHICH IS ON
FILE IN THE OFFICE OF THE COMPANY."
(b) The requirement that the above securities legend be placed
upon certificates evidencing shares of Stock shall cease and terminate upon the
earliest of the following events: (i) when such shares are Transferred in an IPO
or (ii) when such shares are Transferred pursuant to Rule 144 under the
Securities Act. Upon the consummation of any event requiring the removal of a
legend hereunder, the Company, upon the surrender of certificates containing
such legend, shall, at its own expense, deliver to the holder of any such shares
as to which the requirement for such legend shall have terminated, one or more
new certificates evidencing such shares not bearing such legend.
Section 14. Representations and Warranties.
(a) Each party hereto represents and warrants to the other
parties hereto as follows:
(i) It has full power and authority to execute,
deliver and perform its obligations under this Agreement.
(ii) This Agreement has been duly and validly
authorized, executed and delivered by it, and constitutes a valid and
binding obligation of it, enforceable against it in accordance with its
terms except to the extent that enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors'
rights generally.
(iii) The execution, delivery and performance of this
Agreement by it does not (x) violate, conflict with, or constitute a
breach of or default under its organizational documents, if any, or any
material agreement to which it is a party or by which it is bound or
(y) violate any law, regulation, order, writ, judgment, injunction or
decree applicable to it.
(iv) No consent or approval of, or filing with, any
governmental or regulatory body is required to be obtained or made by
it in connection with the transactions contemplated hereby.
(v) It is not a party to any agreement that is
inconsistent with the rights of any party hereunder or otherwise
conflicts with the provisions hereof.
(b) Each Shareholder represents and warrants to, and
covenants with, Beacon as follows:
(i) Schedule 14(b) hereto sets forth a list of all
securities of the Company (including, without limitation, shares of
capital stock, convertible
-31-
securities, debentures, etc.) held of record or beneficially owned by
each such Shareholder immediately after the date hereof. All such
securities are free and clear of any liens, encumbrances, rights of
first refusal or other rights of third parties of any nature with
respect thereto.
(ii) Except as set forth on Schedule 14(b) hereto and
other than this Agreement, it is not a party to any contract or
agreement, written or oral, (x) with respect to the securities of the
Company (including, without limitation, any voting agreement, voting
trust, shareholder's agreement, registration rights agreement, etc.) or
(y) otherwise with or relating to the Company, except for employment
agreements entered into in the ordinary course of business.
(iii) In the event a Transaction (as defined in the
Restated Articles) is approved by Beacon, the holders of the Preferred
Stock agree that they shall, if requested by Beacon, exercise their
right to convert all of their shares of Preferred Stock to Common Stock
in connection with such Transaction.
Duration of Agreement. The rights and obligations of a
Shareholder under this Agreement shall terminate at such time as such
Shareholder no longer is the beneficial owner of any shares of Stock. This
Agreement shall terminate upon the consummation of a Qualified IPO, except that
the provisions of Sections 3.1(b) through 3.11, 10, 11.3 and 16 through 27 shall
survive until, by their respective terms, they are no longer operative.
Section 16. Further Assurances. At any time or from time to
time after the date hereof, the parties agree to cooperate with each other, and
at the request of any other party, to execute and deliver any further
instruments or documents and to take all such further action as the other party
may reasonably request in order to evidence or effectuate the consummation of
the transactions contemplated hereby and to otherwise carry out the intent of
the parties hereunder. Each Shareholder who is a natural Person hereby agrees
that he and/or his personal representative, and each trustee of any permitted
trust hereunder, shall be bound to take any and all actions consistent with the
intent and purposes of this Agreement.
Section 17. Amendment and Waiver. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this Agreement
shall be effective against the Company or any Shareholder unless such
modification, amendment or waiver is approved in writing by the Company,
Shareholders holding at least a majority of the Shares of Common Stock, and by
Beacon so long as Beacon and its Affiliates, collectively, hold, directly and
indirectly, at least the Pre-IPO Threshold. Notwithstanding the foregoing, any
amendment to Sections 4 or 6 hereof shall require approval in writing by the
Company, Shareholders holding at least 66-2/3% of the outstanding Common Stock,
and Beacon. The failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
-32-
Section 18. Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
Section 19. Entire Agreement. Except as otherwise expressly
set forth herein, this document and the other documents dated the date hereof
embodies the complete agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, that may have related to the subject matter hereof in any way. Without
limiting the generality of the foregoing, to the extent that any of the terms
hereof are inconsistent with the rights or obligations of any Shareholder under
any other agreement with the Company, the terms of this Agreement shall govern.
Section 20. Successors and Assigns. Except as otherwise
provided herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the Company and its successors and assigns and each Shareholder
and their respective successors, assigns, heirs and personal representatives, so
long as they hold Stock. The personal representative of a deceased Shareholder
shall automatically be subject to the terms and conditions of this Agreement.
Each Management Shareholder shall promptly execute a will or codicil to his will
authorizing and directing his personal representatives to perform all of his
obligations under this Agreement, but the failure to execute such a will shall
not affect the rights of the remaining Shareholders or the obligations of their
personal representatives, heirs, descendants, or estates, as provided in this
Agreement.
Section 21. Counterparts. This Agreement may be executed in
separate counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
Section 22. Remedies. Each Shareholder shall be entitled to
enforce its rights under this Agreement specifically to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that each party may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting a bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
Section 23. Notices. Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, or mailed first
class mail (postage
-33-
prepaid) or sent by reputable overnight courier service (charges prepaid) to the
Company at the address set forth below and to any other recipient at the address
and/or to the attention of such other person as the recipient party has
specified by prior written notice to the Company. Notices shall be deemed to
have been given hereunder when delivered personally, three days after deposit in
the U.S. mail and one day after deposit with a reputable overnight courier
service. The Company's address is:
Doctors Health, Inc.
00000 Xxxx Xxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Executive Vice President and Director of Legal Services
Section 24. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Maryland without
giving effect to the principles of conflicts of law.
Section 25. Miscellaneous. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
Section 26. Old Shareholders Agreement. This Agreement
supersedes and replaces the Old Shareholders Agreement in its entirety, and the
Old Shareholders Agreement is hereby terminated, canceled, rescinded and
abrogated.
Section 27. Construction. Where specific language is used to
clarify by example a general statement contained herein, such specific language
shall not be deemed to modify, limit or restrict in any manner the construction
of the general statement to which it relates. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be applied
against any party.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this
Shareholders' and Voting Agreement as of the date first written above.
DOCTORS HEALTH, INC.
By: __________________________________________
Stewart B. Gold, President
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
By: Focus Value Investors, L.L.C.
Its: General Partner
By: Focus Value GP, Inc.
Its: Managing Member
By: _______________________________
Name:
Title:
MEDICAL HOLDINGS LIMITED PARTNERSHIP
(for itself and on behalf of the holders of
393,000 shares of Class B Common Stock)
By: BMGGP, INC., Its General Partner
By: __________________________________________
Xxxxx Xxxxxx, President
__________________________________________
Stewart B. Gold
__________________________________________
Xxxx Xxxxxx, M.D.
__________________________________________
Xxxxx Xxxxxx, M.D.
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NOAH INVESTMENT, LLC
By: __________________________________________
Xxxx Xxxxxx, Designated Member
by: Xxxxx Xxxxxx, attorney-in-fact for Xxxx
Xxxxxx
ST. XXXXXX MEDICAL CENTER, INC.
By: __________________________________________
Xxxx Xxxxx, President
GENESIS HEALTH VENTURES, INC.
By: __________________________________________
UNIVERSITY CARE, LLC
By: __________________________________________
Xxxxxx Xxxxxx, M.D.
Chief Executive Officer
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Schedule 14(b) PM
1. The following is a list of all securities of the Company held of record or
beneficially owned by each Shareholder as of the date hereof.
The Beacon Group III-Focus (i) 2,000,000 shares of Series D
Value Fund, L.P. Preferred Stock
(ii) 1,000,000 shares of Series D
Preferred Stock upon consummation of a
second closing on or before June 30,
1998.
Medical Holdings Limited Partnership 2,200,000 shares of Class B Common
Stock
Stewart B. Gold (i) 600,000 shares of Class A Common
Stock
(ii) Options to purchase 400,000
shares of Class A Common Stock
Xxxxx Xxxxxx (i) 100,000 shares of Class A Common
Stock
(ii) Option to purchase 100,000
shares of Class A Common Stock @
$25.00 aggregate
(iii). Option to purchase 30,000
shares of Class A Common @ $15 per
share
(iv) Options to purchase 70,000
shares of Class A Common @ $10, $20
and $30 per share
(v) Beneficially owns 33,000 shares
of Class B Common Stock through
Medical Holdings Limited Partnership
Xxxx Xxxxxx (i) 100,000 shares of Class A Common
Stock
(ii) Options to purchase 30,000
shares of Class A Common Stock @
$15.00 per share
(iii) Options to purchase 120,000
shares of Class A Common Stock @ $10,
$20 and $25 per share
(iv) Beneficially owns 33,000 shares
of Class B Common Stock through
Medical Holdings Limited Partnership
NOAH INVESTMENT, LLC 10,000 Shares of Class A Common Stock
ST. XXXXXX MEDICAL CENTER, INC. 1,000,000 shares of Series A Preferred
Stock (subject to subscription
receivable)
GENESIS HEALTH VENTURES, INC. (i) 571,428 shares of Series C
Preferred Stock
(ii) Option to purchase 250,000 shares
of Series C Preferred stock @ $20 per
share
(iii) Warrant to purchase 250,000
shares of Class A Common Stock @ $10
per share
GENESIS HOLDINGS, INC. Convertible Subordinated Note,
convertible into 357,143 shares of
Series C Preferred stock and interest
payable in shares of Series C
Preferred Stock
UNIVERSITYCARE, LLC 438,068 shares of Series B Preferred
stock
2. Section 14.(b)(i). Xx. Xxxxx Xxxxxx has granted to two employees in his
medical practice (Xx. Xxxx Xxxx and Xx. Xxxx Xxxxxx) options to purchase 3,000
shares each of his shares of Class A Common Stock.
3. Section 14(b)(ii). Certain holders of Class B Common Stock have granted to
Medical Holdings Limited Partnership an irrevocable 10 year proxy to vote the
393,000 shares of Class B Common Stock held by them in the aggregate.
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