Exhibit 6
EXECUTION COPY
EXCHANGE AGREEMENT
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EXCHANGE AGREEMENT (this "Agreement"), dated as of June 11,
1999, by and between The Wellcare Management Group, Inc., a New York corporation
(the "Company"), and The 1818 Fund II, L.P., a Delaware limited partnership (the
"Fund").
W I T N E S S E T H:
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WHEREAS, pursuant to the Note Purchase Agreement (the "Note
Purchase Agreement"), dated January 19, 1996, by and between the Company and the
Fund, as amended, the Company issued and delivered to the Fund, and the Fund
purchased from the Company, 8.0% Subordinated Convertible Notes (the "Notes") in
the aggregate principal amount of $15,000,000 (the "Principal Amount"), due
December 31, 2002;
WHEREAS, the Company and the Fund have determined that it is
in each of their best interest to convert the Principal Amount and all interest
accrued and unpaid thereon (together, the "Note Indebtedness") into 100,000
shares of Series B Preferred Stock, par value $0.01, of the Company.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and promises herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Exchange of Notes for Series B Preferred Stock.
1.1 Exchange. The Fund shall acquire from the
Company, and the Company shall issue to the Fund, at the Closing 100,000 shares
of Series B Preferred Stock, par value $0.01 per share, of the Company (the
"Series B Preferred Stock"), and in exchange therefor the Company shall acquire
from the Fund the Notes and all Note Indebtedness shall be canceled.
1.2 Powers, Preferences and Rights of the Series A
Preferred Stock and Series B Preferred Stock. Shares of Series B Preferred Stock
shall be pari passu, except as set forth in the Certificate of Designations
attached hereto as Exhibits A and B, with shares of Series A Preferred Stock,
par value $0.01 per share, of the Company (the "Series A Preferred Stock") to be
received by Xx. Xxxxx X. Xxxxx on the date hereof. The shares of Series A
Preferred Stock and Series B Preferred Stock shall have the powers, preferences,
rights, qualifications and limitations set forth in the Certificate of
Designations attached hereto as Exhibits A and B, respectively.
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2. The Closing. The closing of the sale and purchase of the
Series B Preferred Stock contemplated hereby (the "Closing") shall take place at
the offices of Xxxxxxx, Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, at 10:00 a.m. local time on June 11, 1999 (the "Closing Date"). At the
Closing, the Fund shall deliver to the Company the Notes with the appropriate
notation that such Notes have been canceled, and simultaneously at the Closing,
the Company shall deliver to the Fund certificates, in the name of the Fund or
its successors, assigns or designees, evidencing the acquisition by the Fund of
the Series B Preferred Stock. Upon the exchange of the Series B Preferred Stock
for the Notes, the Fund shall release, fully acquit and forever discharge the
Company, its subsidiaries, stockholders, officers, directors, successors and
assigns from any and all debt, late fees, penalties, interest and causes of
action with respect to the Notes.
3. Representations and Warranties of the Company. The Company
represents and warrants to the Fund as follows:
3.1 Due Incorporation and Qualification. Each of the
Company and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has the corporate power and lawful authority to own, lease and
operate its assets, properties and business and to carry on its business as now
conducted. Each of the Company and each of its subsidiaries is qualified to
transact business and is in good standing as a foreign corporation in each of
the jurisdictions in which it is required to be so qualified, except for such
jurisdictions in which the failure to be so qualified is not reasonably likely
to have, individually or in the aggregate, a material adverse effect on the
financial condition of the Company or such subsidiary.
3.2 Corporate Authorization; No Contravention. Except
as set forth on Schedule 3.2, the execution, delivery and performance by the
Company of this Agreement and the transactions contemplated hereby, including
without limitation the issuance of the shares of Series B Preferred Stock and
the Common Stock issuable upon the conversion of the shares of Series B
Preferred Stock:
(a) is within the Company's corporate power and
authority and has been duly authorized by all necessary corporate action;
(b) will not violate, conflict with or result in any
breach or contravention of or the creation of any lien under, any contractual
obligation of the Company or any of its subsidiaries, or any order or decree
directly relating to the Company or any of its subsidiaries; and
(c) has been duly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company or its stockholders are necessary to authorize or approve the Agreement
or the transactions contemplated hereby.
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3.3 Governmental Authorization; Third Party Consents.
Except as set forth on Schedule 3.3, no approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
governmental authority or any other person, is necessary or required in
connection with the execution, delivery or performance by the Company or
enforcement against the Company of this Agreement, the Series B Preferred Stock
or the transactions contemplated hereby or thereby.
3.4 Binding Effect. This Agreement, upon execution
and delivery by the Company, will be duly executed and delivered by the Company
and (assuming due execution and delivery hereof by the other party hereto) will
be valid and binding obligations of the Company enforceable against the Company
in accordance with its respective terms.
3.5 Capitalization.
(a) Schedule 3.5 sets forth the authorized,
issued and outstanding capital stock of the Company as of the date hereof.
Except as set forth on Schedule 3.5, as of the date hereof, there are no shares
of common stock or other equity securities of the Company issued, reserved for
issuance or outstanding and no warrants, convertible or exchangeable securities,
subscriptions, rights (including any preemptive rights), stock appreciation
rights, calls or commitments of any character whatsoever to which the Company is
a party or may be bound requiring the issuance or sale of shares of any capital
stock of the Company.
(b) All of the issued and outstanding shares
of capital stock of the Company have been duly authorized and are validly
issued, fully paid and non-assessable, and free of any preemptive rights in
respect thereto. The shares of Series B Preferred Stock, when issued to the
Fund, and the shares of Common Stock, par value $0.01 of the Company ("Common
Stock"), when issued upon conversion of the Series B Preferred Stock (assuming
conversion after the amendment to the Company's certificate of incorporation
referred to in Section 4.1), will be duly authorized and, in each case, validly
issued, fully paid and non-assessable, and free of any preemptive rights in
respect thereto.
3.6 Financial Condition. The Company has delivered to
the Fund true and correct copies of the unaudited financial statements of the
Company and its subsidiaries dated as of April 30, 1999 (the "Financials"),
showing the financial position at April 30, 1999 and the pro forma financial
position adjusted for the transactions contemplated hereby, for the transactions
contemplated by the Stock Purchase Agreement, dated May 19, 1999, between Xx.
Xxxxx X. Xxxxx and the Company and for the sale by the Company's subsidiary,
Wellcare of New York, Inc., of its commercial business to Group Health
Incorporated. The Financials have been prepared in accordance with generally
accepted accounting principles in the United States ("GAAP") applied
consistently throughout the periods covered thereby, with only such deviations
from GAAP as are identified in the footnotes of the Financials,
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and present fairly the consolidated financial condition of the Company as of the
date thereof, and the consolidated results of operations of the Company for the
period, or portion thereof, then ended.
4. Post-Closing Covenants of the Company.
4.1 Increase in Number of Authorized Shares. The
Company shall as soon as possible, but in no event later than 150 days of the
Closing Date, amend the Company's certificate of incorporation to increase the
total number of authorized shares of Common Stock by 55,000,000 shares.
4.2 Issue Taxes. The Company shall pay, or cause to
be paid, all documentary and similar taxes levied under the laws of any
applicable jurisdiction in connection with the issuance of the shares of Series
B Preferred Stock, the issuance of the Common Stock upon conversion of the
shares of Series B Preferred Stock and the cancellation of the Notes.
4.3 Registration and Listing. If any shares of Common
Stock required to be reserved for purposes of conversion of the shares of Series
B Preferred Stock as provided in the Certificate of Designation of the Series B
Preferred Stock require registration with or approval of any governmental
authority under any Federal or state or other applicable law before such Common
Stock may be issued or delivered upon conversion, the Company will in good faith
and as expeditiously as possible endeavor to cause such Common Stock to be duly
registered or approved, as the case may be. So long as the Common Stock is
quoted or listed on any national securities exchange, the Company will, if
permitted by the rules of such system or exchange, quote or list and keep quoted
or listed on such exchange, upon official notice of issuance, all shares of
Common Stock issuable or deliverable upon conver sion of the Series B Preferred
Stock.
4.4 Balance Sheet. The Company shall as soon as
possible, but in any event not later than 15 days of the Closing Date, deliver
to the Fund a true and correct copy of the unaudited balance sheet of the
Company and its subsidiaries dated as of April 30, 1999, showing the pro forma
financial position (i) adjusted for the transactions contemplated hereby, for
the transactions contemplated by the Stock Purchase Agreement, dated May 19,
1999, between Xx. Xxxxx X. Xxxxx and the Company and for the sale by the
Company's subsidiary, Wellcare of New York, Inc., of its commercial business to
Group Health Incorporated, (ii) adjusted for the three adjustments (the
"Adjustments") noted on Schedule 3.6 (the "Adjusted Balance Sheet"), and (iii)
fully reflecting actual claim reductions to date. The Adjusted Balance Sheet
shall be prepared in accordance with GAAP applied consistently throughout the
periods covered thereby, with only such deviations from GAAP as are identified
in the footnotes of the Adjusted Balance Sheet, and shall present fairly the
consolidated financial condition of the Company as of the date thereof.
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4.5 Income Statement. The Company shall as soon as
possible, but in any event not later than 15 days of the Closing Date, deliver
to the Fund a true and correct copy of the unaudited statement of income of the
Company and its subsidiaries for the period ended April 30, 1999, showing the
financial position at April 30, 1999 and the pro forma financial position
adjusted for the transactions contemplated hereby, for the transactions
contemplated by the Stock Purchase Agreement, dated May 19, 1999, between Xx.
Xxxxx X. Xxxxx and the Company and for the sale by the Company's subsidiary,
Wellcare of New York, Inc., of its commercial business to Group Health
Incorporated, assuming that all transactions reflected by the adjustments
occurred prior to January 1, 1999 (the "Income Statement"). The Income Statement
shall be prepared in accordance with GAAP applied consistently throughout the
periods covered thereby, with only such deviations from GAAP as are identified
in the footnotes of the Income Statement, and shall present fairly the
consolidated results of operations of the Company for the period, or portion
thereof, then ended.
4.6 Financial Statements. The Company shall deliver
to the Fund, in form and substance satisfactory to the Fund:
(a) as soon as available, but not later than
100 days after the end of each fiscal year of the Company, a copy of the audited
consolidated balance sheet of the Company and its subsidiaries as of the end of
such year and the related consolidated statements of income and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for
the previous year, all in reasonable detail and accompanied by a management
summary and analysis of the operations of the Company and its subsidiaries for
such fiscal year and by the opinion of Deloitte & Touche LLP (or any successor
thereto) or another nationally recognized independent public accounting firm,
which report shall state that such consolidated financial statements present
fairly the financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years; provided, however, that the
delivery of a copy of the Company's Annual Report on Form 10-K shall satisfy the
requirements of this Section 4.6(a);
(b) as soon as available, but in any event
not later than 50 days after the end of each of the first three fiscal quarters
of each year, the unaudited consolidated balance sheet of the Company and its
subsidiaries, and the related consolidated statements of income and cash flow
for such quarter and for the period commencing on the first day of the fiscal
year and ending on the last day of such quarter, all certified by the Company's
Chief Financial Officer; provided, however, that the delivery of a copy of the
Company's Quarterly Report on Form 10- Q shall satisfy the requirements of this
Section 4.6(b);
(c) budgets and projections of the Company
and its subsidiaries commencing within 60 days of the Closing Date, and then
thereafter, annually according to the Company's planning cycle; and
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(d) at any time when it is not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, upon
request, to the Fund and prospective purchasers of the Series B Preferred Stock,
information of the type that would satisfy the requirement of subsection
(d)(4)(i) of Rule 144A of the Securities Act of 1933, as amended (the
"Securities Act").
4.7 Additional Information. The Company shall deliver
to the Fund, as soon as available but no later than the 15th day of each month,
a notice specifying or attaching the following information as to the Company,
all certified by the Company's Chief Financial Officer:
(a) statement of cash receipts and
disbursements for the preceding
month;
(b) statement of cash balances at
preceding month end for the Company
and each of its subsidiaries; and
(c) enrollment changes by category and
region for the preceding month.
5. Other Provisions.
5.1 Notices. Any notice or other communication
required or permitted hereunder shall be in writing and shall be delivered
personally, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid or by overnight delivery service. Any such notice
shall be deemed given when so delivered personally, or sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mail, or, if sent by any other means, when delivered at the address
specified herein, in each such case, as follows:
(i) if to Company, to:
The Wellcare Management Group, Inc.
Park West/Xxxxxx Avenue Extension
X.X. Xxx 0000
Xxxxxxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx, Esq.
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Facsimile: 000-000-0000
with a copy to:
0000 X. Xxxx Xxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx, M.D.
Facsimile: (000) 000-0000
with a copy to:
Xxxxx, Xxxxx & X'Xxxxxx, P.A.
0000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
(ii) if to the Fund:
The 1818 Fund II, L.P.
c/o Brown Brothers Xxxxxxxx & Co.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx &
Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
Any party may change its address for notice hereunder by
notice to the other parties hereto.
5.2 Entire Agreement. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, with respect thereto,
including the Note Purchase Agreement; provided that the Registration Rights
Agreement (the "Registration Rights Agreement"), dated January 19, 1996, between
the Company and the Fund, remains in full force and effect and not affected by
this Agreement or the transactions contemplated hereby except to the extent set
forth in Section 5.3.
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Notwithstanding the foregoing, the definitions set
forth in the Note Purchase Agreement shall remain in full force and effect and
is not affected by this Agreement or the transactions contemplated hereby solely
to the extent such definitions are used in the Registration Rights Agreement.
5.3 Amendment of Registration Rights Agreement. The
Company and the Fund hereby amend the Registration Rights Agreement to replace
the term "Notes" with "Series B Preferred Stock, par value $0.01 per share, of
the Company," and to replace the existing definition of Conversion Shares with
the following definition:
"Conversion Shares" mean the shares of common stock,
par value $0.01 per share, of the Company issued or issuable
upon the conversion of the Series B Preferred Stock, par value
$0.01 per share, of the Company.
5.4 Waivers and Amendments. This Agreement may be
amended or modified, and the terms and conditions hereof may be waived, only by
a written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right, power or privilege hereunder,
nor any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.
5.5 Fund Representation. The Fund represents and
warrants to the Company that the shares of Series B Preferred Stock (including,
for purposes of this Section 5.5, the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock) to be acquired by such Fund pursuant
to this Agreement are being acquired for its own account and with no intention
of distributing or reselling such securities or any part thereof in any
transaction that would be in violation of the securities laws of the United
States of America, or any state, without prejudice, however, to the rights of
such Fund at all times to sell or otherwise dispose of all or any part of the
shares of Series B Preferred Stock under an effective registration statement
under the Securities Act, or under an exemption from such registration available
under the Securities Act, and subject, nevertheless, to the disposition of such
Fund's property being at all times within its control.
5.6 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Florida applicable to
agreements made and to be performed entirely within such State.
5.7 Counterparts. This Agreement may be executed in
two counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
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5.8 Headings. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
5.9 Successors and Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties named herein and their
respective successors and permitted assigns. The Company may not assign its
rights or obligations hereunder without the prior written consent of the Fund.
5.10 Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
5.11 Expenses. Each of the parties will bear its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
5.12 Variations in Pronouns. All pronouns and any
variations thereof refer to the masculine, feminine or neuter, singular or
plural, as the identity of the person or persons may require.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company and the Fund have executed
this Agreement as of the date first written above.
THE WELLCARE MANAGEMENT GROUP, INC.
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Acting President and Chief
Executive Officer
THE 1818 FUND II, L.P.
By: Xxxxx Brothers Xxxxxxxx & Co.,
general partner
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: Senior Manager
