EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") made as of this ___ day
of __________, 2002 by and among NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC., a
New York corporation (the "Company"), and the individuals whose names are set
forth on Schedule I hereto (each, a "Noteholder" and, collectively, the
"Noteholders").
W I T N E S S E T H:
WHEREAS, the Company is proposing to issue and sell up to $11,600.000
aggregate principal amount of its 12% Convertible Promissory Notes (the "Notes")
pursuant to a private placement; and
WHEREAS, the Notes are convertible into shares of Common Stock (defined
below) in accordance with the terms of the Notes; and
WHEREAS, the parties hereto desire to promote the interests of the Company
and the interests of the Noteholders by establishing herein certain terms and
conditions upon which the Company will register certain of the shares of Common
Stock issuable upon conversion of the Notes; and
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Certain Definitions. As used herein, the following terms shall have the
following respective meanings:
"Business Day" shall have the meaning ascribed thereto in the 12%
Convertible Note.
"Changing Event shall have the meaning ascribed thereto in Section 3.4(d)
hereof.
"Closing Date" shall have the meaning ascribed thereto in the Recitals.
"Common Stock" means the common stock, par value $.01 per share, of the
Company.
"Commission" shall mean the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Correction Event" shall have the meaning ascribed thereto in Section
3.4(d) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Holder" shall mean any holder of Registrable Securities.
"Register", "registered" and "registration" shall refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act and applicable rules and regulations thereunder and the
declaration or ordering of the effectiveness of such registration statement.
"Registrable Securities" shall mean the shares of (i) Common Stock issued
or issuable to the Holders upon conversion of the Notes (the "Conversion
Shares") and (ii) Common Stock issuable or issued to the Holders, in respect of
the Conversion Shares, upon any stock split, stock dividend, merger,
consolidation, recapitalization or similar event, excluding all such shares
which (x) have been registered under the Securities Act, (y) have been publicly
sold pursuant to Rule 144, or (z) are eligible for sale without restriction
under Rule 144(k).
"Registration Expenses" shall mean all expenses incurred in compliance by
the Company with Section 3 hereof, including, without limitation, all
registration, qualification and filing fees, exchange listing fees, expenses
incurred in connection with the preparation, printing and distribution of the
registration statement and prospectus, fees and disbursements of counsel for the
Company and independent public accountants of the Company, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Rule 144" shall mean Rule 144, or any successor rule, under the Securities
Act.
"Rule 144(k)" shall mean Rule 144(k), or any successor rule, under the
Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for any Holder.
2. Notice of Transfers. Promptly following a transfer of any Registrable
Securities (except under circumstances described in Section 3 hereof), each
Holder agrees to give written notice to the Company of such transfer, including
the number of Registrable Securities, the date of transfer and to whom such
Registrable Securities were transferred.
3. Registration Rights.
3.1. Request for Registration. (a) At any time following the 18 month
anniversary of the date hereof, pursuant to this Section 3.1(a), Holders shall
be entitled to present to the Company a written request (a "Request") that the
Company effect a registration of Registrable Securities held by the Holder. If
the Company shall receive from a Holder or Holders a Request that the Company
effect a registration with respect to such Holder's Registrable Securities
having a market value of not less than $1,000,000 as of the date of a Request,
the Company will use its reasonable best efforts to effect a registration (a
"Demand Registration") as soon as practicable after receipt of the Request to
permit or facilitate the sale and distribution of all such Registrable
Securities as are specified in such Request.
(b) If all or any portion of the Registrable Securities covered by a
Request are, at the request of the Holder, to be distributed by means of an
underwriting, the Holder shall so advise the Company as a part of the Request.
If the Holder disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company and the
underwriter. The securities so withdrawn shall also be withdrawn from
registration.
(c) The Company shall not be required to effect more than one (1) Demand
Registration in any twelve month period, or more than two (2) Demand
Registrations in total.
(d) The Company shall have the right to defer its obligation to effect a
registration for up to one hundred and twenty (120) calendar days if, in the
Company's good faith judgment, effecting a registration would be materially
detrimental to the Company and an executive officer of the Company so notifies
the Holders in writing.
(e) The registration statement filed pursuant to Section 3.1(a) may include
other securities of the Company which are held by officers or directors of the
Company or which are held by persons who, by virtue of agreements with the
Company are entitled to include their securities in any such registration
(collectively, "Other Stockholders"). The Company shall promptly give notice of
any registration proposed under this Section 3.1 to such Other Stockholders.
(f) Suspension of Sales. Notwithstanding anything to the contrary contained
herein, the Company shall have the right to suspend further open market sales of
Registrable Securities (the "Suspension Right") whenever, in the reasonable
judgment of the Company after consultation with counsel, there is or may be in
existence (i) material undisclosed information or events with respect to the
Company or (ii) a Changing Event. Such suspension shall continue for the period
of time reasonably necessary for (x) disclosure to occur at a time that is not
detrimental to the Company or its stockholders or until such time as the
information or event is no longer material, or (y) a Correction Event as the
case may be, each as determined in good faith after consultation with counsel.
The Company will use reasonable efforts to give the Holders two days' written
notice of any such suspension and will use all reasonable efforts to minimize
the length of such suspension.
3.2. Company Registration. (a) If the Company shall determine to register
any of its securities either for its own account or the account of a security
holder or holders exercising demand registration rights (other than a
registration relating solely to employee benefit plans, a registration relating
solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales), the Company will (i)
within ten (10) days after such determination give to each Holder written notice
thereof; and (ii) include in such registration and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder within twenty (20) days after receipt of the
written notice from the Company described in clause (i) above, except as set
forth in Section 3.2(b) below. Such written request may specify all or a part of
a Holder's Registrable Securities.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders by written notice. All Holders proposing to distribute their
Registrable Securities through such underwriting shall (together with the
Company distributing its securities for its own account through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected by the Company. Notwithstanding any other
provision of this Section 3.2, if the representative of the underwriters advises
the Company in writing that, in its opinion, marketing factors require a
limitation on the number of shares to be underwritten, the Company shall so
advise all Holders requesting registration, and the number of shares that may be
included in the registration and underwriting shall be allocated first to the
Company for securities being sold for its account or to the security holder or
holders exercising demand registration rights for securities being sold for
their account, as the case may be, and then in the following manner: (i) the
securities requested to be registered by officers or directors of the Company
(other than officers or directors who are also Holders) shall be excluded from
such registration and underwriting to the extent required by such limitation in
proportion, as nearly as practicable, to the respective amounts of securities
requested to be registered by such officers and directors, and (ii) if a
limitation on the number of shares is still required, the securities being sold
for the account of the Holders shall be excluded from such registration and
underwriting to the extent required by such limitation in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities which they
had requested to be included in such registration. If any Holder who has
requested inclusion in such registration as provided above disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company and the underwriter.
3.3. Expenses of Registration. The Company shall bear all Registration
Expenses and the selling Holders shall bear all Selling Expenses (in proportion,
as nearly as practicable, to the Registrable Securities of each Holder being
registered) incurred in connection with any registration, qualification or
compliance pursuant to the provisions of Sections 3.1 and 3.2.
3.4. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep each participating
Holder advised in writing as to the initiation of such registration and as to
the completion thereof. At its expense, the Company will:
(a) Keep such registration statement effective until the earlier of (x) 12
months from the effective date of such registration statement or (y) the date on
which all of the Holders have completed the distributions described in the
registration statement relating thereto;
(b) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to keep such registration statement
effective and free of material misstatements or omissions and to comply with the
provisions of the Securities Act with respect to the disposition of securities
covered by such registration statement and respond as promptly as practicable to
any comments received with respect thereto;
(c) Furnish to each Holder such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a selling Holder from time to time may reasonably request in order to facilitate
the disposition of Registrable Securities covered by them;
(d) Notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which, the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits a fact necessary to make the statements therein not misleading in light
of the circumstances under which they were made (a "Changing Event"), and, the
Company will as soon as possible prepare and furnish to such seller (a
"Correction Event") a reasonable number of copies of a supplement to or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement or omit to state any fact necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
(e) Cause all Registrable Securities included in such registration to be
listed on each, if any, securities exchange or system on which similar
securities issued by the Company are then listed; and
(f) Register or qualify for offer and sale the Registrable Securities by
the time the registration is declared effective by the Commission under all
applicable state securities or "blue sky" laws of the 50 states of the United
States or obtain appropriate exemptions therefrom, to keep each such
registration or qualification effective during the period the registration
statement is required to be kept effective, and to do any and all other acts and
things which may be reasonably necessary or advisable to enable each Holder to
consummate the disposition in each such jurisdiction of the Registrable
Securities owned by such Holder; provided, however, that the Company shall not
be required to submit to the general service of process in any such jurisdiction
unless the Company is already subject to such service in such jurisdiction;
(g) During the period that the Company is required to keep the registration
statement effective, the Company will advise the Holders within a reasonable
time (i) when the prospectus or any prospectus supplement or post-effective
amendment thereto has been filed, and when the same has become effective, (ii)
of any request by the Commission for any amendments to, or issuance by the
Commission of any stop order with respect to the registration statement or any
prospectus or amendment thereto, or (iii) of the issuance by any state
securities commission or other regulatory authority of any order suspending the
registration or qualification or exemption from registration or qualification or
any proceedings for that purpose;
(h) If reasonably requested by Holders' counsel or any Holder, incorporate
as promptly as practicable in a prospectus supplement or post-effective
amendment such information as such Holder or Holders' counsel requests to be
included therein, including, without limitation, with respect to the Registrable
Securities being sold by such Holder to any underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters and any
other terms of any underwritten offering of the Registrable Securities to be
sold in such offering, and the Company shall promptly make all required filings
of such prospectus supplement or post-effective amendment;
(i) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates (which shall not bear any restrictive legends unless
required under applicable law) representing Registrable Securities sold under a
registration statement to the purchasers thereof, and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or such Holders may request and
keep available and make available to the Company's transfer agent prior to the
effectiveness of such registration statement a supply of such certificates;
(j) Enter into such customary agreements (including, if applicable, an
underwriting agreement in customary form) and take such other actions as the
Holders or the underwriters retained by the Holders participating in an
underwritten public offering, if any, may reasonably request in order to
expedite or facilitate the disposition of Registrable Securities; provided,
however, that such underwriters are reasonably acceptable to the Company;
(k) Furnish to each Holder of Registrable Securities included in such
offering and to each underwriter, if any, if requested by such Holder or
underwriter, a signed counterpart, addressed to such Holder or underwriter, of
(i) an opinion or opinions of counsel to the Company and (ii) a comfort letter
or comfort letters from the Company's independent public accountants, each in
customary form and covering matters of the type customarily covered by opinions
or comfort letters, as the case may be.
4. Indemnification. (a) The Company will indemnify and hold harmless each
Holder, its partners, officers, directors, trustees, employees and agents, and
each person, if any, who controls any Holder within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, together with the
partners, officers, directors, trustees, employees and agents of such
controlling person, each Holder and each underwriter, if any, and each person
who controls such underwriter within the meaning of the Securities Act or the
Exchange Act, against all claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus or other document (including any related registration statement,
any amendments thereto and all documents incorporated by reference therein)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each such person, for any legal and other expenses as are
reasonably incurred in connection by them with investigating and defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such Holder
or underwriter and stated to be specifically for use therein or to the extent
due to the failure of such Holder or underwriter to provide an updated
prospectus or other document to a purchaser at a time when the Company has
informed such Holder or underwriter of a material misstatement or omission in a
prospectus or other document and has provided updated prospectuses or other
documents correcting such misstatement or omission.
(b) Each Holder (on a several and not joint basis) will indemnify the
Company, its officers, directors, employees and agents, and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, together with the officers, directors,
employees and agents of such controlling person, and each underwriter, if any,
and each person who controls such underwriter within the meaning of the
Securities Act, and each other Holder, against all claims, losses, damages and
liabilities (or actions, proceedings or settlements in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such person for any legal and other expenses
as are reasonably incurred by them in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use therein; provided, that in no event shall any indemnity
under this Section 4(b) exceed the net proceeds from the offering received by
such Holder, and no Holder shall be liable under this Section 4(b) for any
statements or omissions of any other Holder.
(c) Each party entitled to indemnification under this Section 4 (the
"Indemnified Party") shall give notice in writing to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such Indemnified Party's expense; provided,
however, that the Indemnifying Party shall pay the expense of one counsel for
all similarly situated Indemnified Parties if representation of such Indemnified
Parties by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between the Indemnified Parties
and any other party represented by such counsel in such proceeding, and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 4, unless such failure materially prejudices the ability of the
Indemnifying Party to defend against the claims asserted against the Indemnified
Party. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 4 is unavailable to
an Indemnified Party in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect the relative fault of the Company,
on the one hand, and such Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company, on the one hand, and Holder, on the other hand,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or by such
Holder and the parties' relevant intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contribution pursuant to this
Section 4(d) were based solely upon the number of entities from whom
contribution was requested or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
4(d). The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages and liabilities referred to above in this Section 4(d)
shall be deemed to include any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim, subject to the provisions of Section 4(d) hereof. No person
guilty of fraudulent misrepresentation (within the meaning of the Securities
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The obligations of each Holder under this
Section 4(d) are several and not joint, and are subject to the limitation set
forth in the proviso to Section 4(b) above.
5. Information by Holders. Each Holder shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.
6. "Lock-Up" Agreement. Each Holder, if requested by the Company and the
managing underwriter of an offering by the Company of Common Stock or other
securities of the Company pursuant to a registration statement, shall agree in
writing (the "Lock-Up Agreement") not to sell publicly or otherwise transfer or
dispose of any shares of Common Stock or other securities of the Company held by
such Holder (other than those included in the registration, if applicable) for a
specified period of time (not to exceed 180 days) following the effective date
of such registration statement.
7. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
restricted securities to the public without registration, the Company agrees to:
(a) use its reasonable best efforts to make and keep current public
information available as those terms are understood and defined in Rule 144
under the Securities Act at all times;
(b) use its reasonable best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to the Holders forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of Rule 144,
and of the Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed as the Holders may reasonably request in availing themselves of any rule
or regulation of the Commission allowing the Holders to sell any such securities
without registration.
8. No Transfer or Assignment of Registration Rights. The rights to cause
the Company to register securities granted to the Holders by the Company under
Section 3 may not be transferred or assigned without the prior written consent
of the Company.
9. Amendment; Waiver. No amendment, alteration or modification of this
Agreement shall be valid unless in each instance such amendment, alteration or
modification is expressed in a written instrument executed by Holders who own at
least a majority of the Registrable Securities. No waiver of any provision of
this Agreement shall be valid unless it is expressed in a written instrument
duly executed by the party or parties making such waiver; it being agreed and
understood that execution by Holders who own a majority of the Registrable
Securities shall constitute a waiver by all the Holders. The failure of any
party to insist, in any one or more instances, on performance of any of the
terms and conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term, covenant or condition but the obligation of any party with
respect thereto shall continue in full force and effect.
10. Specific Performance, Remedies. The parties hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
by reason of a failure to perform any of the obligations under this Agreement.
Therefore, all parties hereto shall have the right to specific performance of
the obligations of the other parties under this Agreement, and if any party
hereto shall institute an action or proceeding to enforce the provisions hereof,
any person (including the Company) against whom such action or proceeding is
brought hereby waives the claim or defense therein that such party has an
adequate remedy at law, and such person shall not urge in any such action or
proceeding the claim or defense that such remedy at law exists.
11. Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first-class, certified or
registered mail, postage prepaid, return receipt requested, or transmitted by
facsimile or delivered either by hand, by messenger or by nationally recognized
overnight courier, addressed:
(a) if to the Holders, at the addresses set forth on Schedule I attached
hereto or at such other address as they shall have furnished to the Company in
writing.
(b) if to the Company, at the following address, or at such other address
as the Company shall have furnished to the Holders,
National Medical Health Card Systems, Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxx Xxxxxxxxxx, Xxx Xxxx 00000
Attn: Chief Financial Officer
with a copy to:
National Medical Health Card Systems, Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxx Xxxxxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxxx Xxxxxxxx, Esq.
Alternatively, to such other address as a party hereto supplies to each
other party in writing.
12. Successors and Assigns. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective permitted transferees, successors and assigns of the parties hereto,
whether so expressed or not.
13. Governing Law. This Agreement is to be governed by and interpreted
under the laws of the State of New York without giving effect to the principles
of conflicts of laws thereof.
14. Titles and Subtitles. The titles of the sections of this Agreement are
for the convenience of reference only and are not to be considered in construing
this Agreement.
15. Severability. The invalidity or unenforceability of any provisions of
this Agreement shall not be deemed to affect the validity or enforceability of
any other provision of this Agreement.
16. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes all previous agreements, arrangements and
understandings, whether written or oral, with respect to the subject matter
hereof.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
18. Termination. This Agreement shall terminate and be of no further force
or effect upon the fourth anniversary of the date of this Agreement.
[This space intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first above written.
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
By:-----------------------------------------
HOLDERS:
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SCHEDULE I
