Exhibit 10.41a
EXECUTION COPY
EXCHANGE AGREEMENT
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:
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.
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.
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,
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 conversion 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.
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
(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.
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.
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.
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]
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
-----------------------
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
-----------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Manager
