EXHIBIT 10.4
AMENDED AND RESTATED RESTRICTED STOCK PURCHASE AGREEMENT
THIS AMENDED AND RESTATED RESTRICTED STOCK PURCHASE AGREEMENT (this
"Agreement") is made as of January ___, 2006, by and between HealthSpring, Inc.,
a Delaware corporation (formerly known as NewQuest Holdings, Inc.) (the
"Company"), and ____________ ("Executive").
The Company and Executive desire to enter into this Agreement which amends
and restates in its entirety that certain Restricted Stock Purchase Agreement
between the Company and Executive dated _______________, 2005 (the "Original
Agreement") pursuant to which Executive purchased from the Company, and the
Company sold to Executive, ________ shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock"). All shares of Common Stock acquired
by Executive pursuant to the Original Agreement are referred to herein as
"Executive Securities." The issuance of Executive Securities to Executive
pursuant to the Original Agreement was intended to be exempt from registration
under the Securities Act pursuant to Rule 701 thereunder. Certain definitions
are set forth in Section 9 of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby amend and restate
the Original Agreement in its entirety as follows:
1. Certain Acknowledgments.
(a) In connection with the purchase and sale of the Executive Securities,
Executive agrees that the representations and warranties made to the Company in
Section 1 of the Original Agreement shall remain in full force and effect
notwithstanding the amendment and restatement of the Original Agreement as set
forth herein.
(b) Executive acknowledges and agrees that neither the issuance of the
Executive Securities to Executive nor any provision contained herein or in the
Original Agreement has entitled or shall entitle Executive to remain in the
employment of the Company or any of its Subsidiaries or affect the right of the
Company or any of its Subsidiaries to terminate Executive's employment at any
time for any reason.
(c) The Company and Executive acknowledge and agree that this Agreement has
been executed and delivered, and the Executive Securities have been issued
pursuant to the Original Agreement, in connection with and as a part of the
compensation and incentive arrangements between the Company and Executive.
2. Vesting of Executive Securities.
(a) Except as otherwise provided herein, fifty percent (50%) of the
Executive Securities shall vest as described in Section 2(b) below (the "Time
Shares") and fifty percent (50%) of the Executive Securities shall vest as
described in Section 2(c) below (the "Performance Shares").
(b) Except as otherwise provided in this Section 2, the Time Shares shall
become vested on the first anniversary of the Closing Date with respect to 20%
of the Time Shares if and only if Executive has been continuously employed by
the Company or any of its Subsidiaries from the date of this Agreement through
and including such date. On the last day of each calendar month thereafter
(commencing on the first calendar month after the first anniversary of the
Closing Date), an additional 1.666666667% of the Time Shares shall become vested
if and only if Executive has been continuously employed by the Company or any of
its Subsidiaries from the date of this Agreement through and including such
date.
(c) Except as otherwise provided in this Section 2, the Performance Shares
shall become fully vested on the seventh anniversary of the date hereof if and
only if Executive is, and has been, continuously employed by the Company from
the date of this Agreement through the seventh anniversary of the date of the
Original Agreement. Notwithstanding the foregoing and except as otherwise
provided herein, the Performance Shares shall become vested, as of the date you
receive notice of such vesting from the Company (which shall be on or before
March 31 of each year), with respect to twenty percent (20%) of the Performance
Shares following the end of each of the five fiscal years commencing with the
fiscal year ending December 31, 2005, if the Company has met the EBITDA Goal (as
defined below) for such year. In addition, to the extent EBITDA in any of the
Company's fiscal years ending December 31, 2006 through 2009 exceeds the EBITDA
Goal for such fiscal year, such excess amount may be carried backward (but not
forward) to the earliest prior year in which the EBITDA Goal was not met, and
the amount of Performance Shares which shall become vested for such earlier year
shall be recalculated taking into account such excess amount. Set forth on Annex
A attached hereto are certain performance goals, expressed in terms of EBITDA,
which are referred to herein as the Company's "EBITDA Goals." Notwithstanding
anything to the contrary in this Agreement, the EBITDA Goal for any fiscal year
of the Company may be adjusted by the Board, in consultation with management,
upon the occurrence of any mergers, acquisitions, divestitures or other
significant events (including, without limitation, any adjustments to reflect
anticipated contributions resulting from the entry into new markets), or
otherwise in the discretion of the Board. The foregoing notwithstanding, upon
consummation of a Public Offering, all unvested Performance Shares shall
automatically be redesignated as Time Shares and shall vest as if such unvested
Performance Shares had been designated Time Shares as of the Closing Date.
(d) Notwithstanding Section 2(b) above, if Executive has been continuously
employed by the Company or a Subsidiary from the date of this Agreement until
the consummation of a Sale of the Company, the portion of the Executive
Securities which has not become vested as of the date of such event shall
immediately become vested with respect to 100% of the Time Shares immediately
prior to the consummation of such Sale of the Company.
(e) Notwithstanding Section 2(c) above, if Executive has been continuously
employed by the Company or a Subsidiary from the date of this Agreement until
the consummation of a Sale of the Company prior to the fifth anniversary of the
Closing Date, the portion the Executive Securities which has not become eligible
for vesting at the date of such event shall immediately become vested with
respect to the number of the Performance Shares equal to (a) the number of
Performance Shares which would have been subject to vesting after the date of
the consummation of such Sale of the Company multiplied by (b) the Current
Vested Performance Percentage as of the date of the consummation of such Sale of
the Company. For
-2-
example, if (x) the Company has met the EBITDA Goal for the Company's fiscal
years ending December 31, 2005 and December 31, 2006, (y) the Company has not
met the EBITDA Goal for the Company's fiscal year ending December 31, 2007, and
(z) a Sale of the Company is consummated on July 5, 2008, then the Executive
Securities shall become vested with respect to the number of Performance Shares
equal to approximately 27% of the total number of Performance Shares issued to
the Executive pursuant to this Agreement (which, together with the portion of
the Performance Shares which had already become vested pursuant to Section 2(c)
above, shall equal the number of Performance Shares equal to approximately 67%
of the total number of Performance Shares issued to the Executive pursuant to
this Agreement).1 Such Performance Shares shall become vested immediately prior
to the consummation of such Sale of the Company.
(f) Notwithstanding Section 2(e) above, if Executive has been continuously
employed by the Company or a Subsidiary from the date of this Agreement until
the consummation of a Sale of the Company prior to the fifth anniversary of the
Closing Date and pursuant to which the GTCR Investors receive Cash Inflows in an
aggregate amount which, when combined with other GTCR Investors Cash Inflows,
are in excess of three (3.0) times the GTCR Investors' aggregate Cash Outflows
with respect to the GTCR Investors' Preferred Shares and Common Shares (assuming
vesting of all Common Shares and all options to acquire Common Shares to be
vested in connection with such Sale of the Company), the portion of the
Executive Securities which has not become vested at the date of such event
(whether due to a failure to meet EBITDA Goals or otherwise) shall immediately
become vested with respect to 100% of the Performance Shares. Such Performance
Shares shall become vested immediately prior to the consummation of such Sale of
the Company.
(g) Notwithstanding any provision to the contrary in this Agreement, if
Executive has been continuously employed by the Company or a Subsidiary from the
date of this Agreement until the consummation of a Sale of the Company, in the
event of a Sale of the Company, the Board may provide, in its sole discretion,
that all of the Performance Shares (or a portion thereof) shall become vested in
connection with such Sale of the Company.
(h) The Executive Securities that have become vested are referred to herein
as "Vested Stock." All Executive Securities that have not become vested are
referred to herein as "Unvested Stock."
(i) Notwithstanding anything in Section 2(b) or (c) to the contrary, in no
event shall more twenty percent (20%) of the Executive Securities in the
aggregate become Vested Stock in any twelve month period during the term of this
Agreement pursuant to Sections 2(b) and 2(c) hereof.
----------------------
1 Note: The 27% would equal (a) 40% (i.e. the portion of Performance Shares
which would have been subject to vesting after the date of the consummation
of such Sale of the Company) multiplied by (b) 66.67% (i.e. the Current
Vested Performance Percentage as of the date of the consummation of such
Sale of the Company).
-3-
3. Repurchase Options.
(a) In the event Executive ceases to be employed by the Company or any of
its Subsidiaries for any reason (a "Separation"), the Executive Securities will
be subject to repurchase, in each case by the Company and the Eligible
Stockholders pursuant to the terms and conditions set forth in this Section 3.
(b) In the event of a Separation, (i) the purchase price for each share of
Unvested Stock will be the lesser of (A) the Fair Market Value of such share as
of the date of such Separation, (B) the Fair Market Value of such share as of
the date of the Repurchase Notice (as defined below), and (C) Executive's
Original Cost for such share, and (ii) the purchase price for each share of
Vested Stock will be the Fair Market Value of such share as of the date of the
Repurchase Notice; provided, however, that if Executive's employment is
terminated with Cause, the purchase price for each share of Vested Stock will be
the lesser of (A) Executive's Original Cost for such share and (B) the Fair
Market Value of such share as of the date of the Repurchase Notice.
(c) The Company may elect to repurchase all or any portion of the Executive
Securities (the "Available Shares") if Executive's employment with the Company
or any of its Subsidiaries has terminated (the "Repurchase Option") by delivery
of written notice (a "Repurchase Notice") to Executive within 180 days after
Executive's Date of Termination for any Executive Securities issued 181 days or
more prior to the Date of Termination (or in the case of Executive Securities
issued 180 days or less prior to the Date of Termination, no earlier than 181
days and no later than 271 days after the date of the issuance of such Executive
Securities) (the "Repurchase Notice Period"). The Repurchase Notice shall set
forth the amount of Executive Securities to be acquired, the aggregate
consideration to be paid for such Executive Securities, and the time and place
for the closing of the transaction. The number of Executive Securities to be
repurchased by the Company shall first be satisfied to the extent possible from
the Executive Securities held by Executive at the time of delivery of the
Repurchase Notice. If the number of Common Shares then held by Executive is less
than the total number of Common Shares the Company has elected to purchase, the
Company shall purchase the remaining shares elected to be purchased from the
other holder(s) of Common Shares under this Agreement, pro rata according to the
number of Common Shares held by such other holder(s) at the time of delivery of
such Repurchase Notice (determined as close as practicable to the nearest whole
shares). The number of Common Shares to be repurchased hereunder shall be
allocated among Executive and the other holders of Common Shares (if any) pro
rata according to the number of Common Shares to be purchased from such persons.
(d) If for any reason the Company does not elect to purchase all of the
Available Shares, then the Board may (but shall not be required to) permit the
Eligible Stockholders to exercise the Repurchase Option for all or any portion
of the Available Shares that were not repurchased by the Company pursuant to
Section 3(c) above (the "Remaining Shares"). In the event the Board permits the
Eligible Stockholders to exercise the Repurchase Option, then within 60 days
after the beginning of the Repurchase Notice Period corresponding to such
Available Shares, the Company shall give written notice (the "Option Notice") to
each Eligible Stockholder setting forth the number of Remaining Shares and the
purchase price for the Remaining Shares. The Eligible Stockholders may elect to
purchase all or any portion of the
-4-
Remaining Shares by giving written notice to the Company within 20 days after
the Option Notice has been delivered to the Eligible Stockholders by the
Company. If the Eligible Stockholders elect to purchase an aggregate amount of
Remaining Shares in excess of the amount of Remaining Shares specified in the
Option Notice, then the Remaining Shares shall be allocated among the Eligible
Stockholders based on the number of Preferred Shares owned by each Eligible
Stockholder on the date of the Option Notice. Any Eligible Stockholder may
condition its election to purchase such Remaining Shares on the election of one
or more other Eligible Stockholder to purchase Remaining Shares. As soon as
practicable, and in any event within 10 days after the expiration of the 20-day
period set forth in the immediately preceding sentence, the Company shall
deliver a Repurchase Notice to the holders of such Remaining Shares setting
forth the aggregate consideration to be paid by the respective Eligible
Stockholder for such Remaining Shares and the time and place for the closing of
the transaction. At the time the Company delivers such Repurchase Notice to the
holders of such Remaining Shares, the Company shall also deliver written notice
to each Eligible Stockholder setting forth the amount of securities such
Eligible Stockholder is entitled to purchase, the aggregate purchase price, and
the time and place of the closing of the transaction.
(e) If the Company elects to purchase all or any portion of such Executive
Securities, including Executive Securities held by one or more of Executive's
transferees, then, within 180 days of the first date of the Repurchase Notice
Period, the Company shall pay for such Executive Securities (i) by offsetting
obligations owed by Executive or Executive's transferee(s) to the Company, (ii)
with a subordinated promissory note of the Company, which subordinated
promissory note shall (x) bear interest at a rate equal to the interest rate of
the Company and its Subsidiaries with respect to its indebtedness for borrowed
money as of the date of the Repurchase Notice (which shall be payable annually
in cash unless otherwise prohibited), (y) have all principal payment due no
later than on the earlier of the third anniversary of the date of issuance and
the date of a Sale of the Company; and (z) be subordinated on terms and
conditions satisfactory to the holders of the Company's indebtedness for
borrowed money or (iii) at the Company's option, by certified check or wire
transfer of funds. If an Eligible Stockholder elects to purchase all or any
portion of the Remaining Shares, such Eligible Stockholder shall pay for such
Common Shares by certified check or wire transfer of funds on a date to be
determined by the Board within 180 days of the first date of the Repurchase
Notice Period. The Board shall determine whether the purchasers of Common Shares
hereunder shall be entitled to receive customary representations and warranties
form the sellers regarding such sale of shares (including representations and
warranties regarding good title to such shares, free and clear of any liens or
encumbrances).
(f) In the event of a Sale of the Company, the Executive Securities which
(A) were issued 181 days or more prior to the Sale of the Company and (B) would
be Unvested Stock after giving effect to any vesting of such Executive
Securities pursuant to Section 2 in connection with such Sale of the Company
(such stock shall be deemed "Sale of the Company Unvested Stock") will be
subject to repurchase by the Company pursuant to the terms and conditions set
forth in this Section 3(f). In the event of a Sale of the Company, the purchase
price for each share of Sale of the Company Unvested Stock will be the lesser of
(A) the Fair Market Value of such share as of the date of such Sale of the
Company, and (B) Executive's Original Cost for such share. The Company may elect
to repurchase all of the Sale of the Company Unvested Stock in the event of a
Sale of the Company by delivery of written notice (a
-5-
"Sale of the Company Repurchase Notice") to Executive at least two (2) business
days prior to such Sale of the Company. The Sale of the Company Unvested Stock
shall be repurchased from the Sale of the Company Unvested Stock held by
Executive and any other holder(s) of Sale of the Company Unvested Stock under
this Agreement. If the Company elects to purchase the Sale of the Company
Unvested Stock, including Sale of the Company Unvested Stock held by one or more
of Executive's transferees, then, immediately prior to, at or in connection with
the Sale of the Company, the Company shall pay for the Sale of the Company
Unvested Stock (i) by offsetting obligations owed by Executive or Executive's
transferee(s) to the Company, or (ii) at the Company's option, by certified
check or wire transfer of funds. The Board shall determine whether the
purchasers of Sale of the Company Unvested Stock hereunder shall be entitled to
receive customary representations and warranties form the sellers regarding such
sale of shares (including representations and warranties regarding good title to
such shares, free and clear of any liens or encumbrances).
(g) Notwithstanding anything to the contrary contained in this Agreement,
all repurchases of Executive Securities by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Common Shares hereunder which the
Company is otherwise entitled or required to make, the time periods provided in
this Section 3 shall be suspended, and the Company will make such repurchases as
soon as it is permitted to do so under such restrictions.
(h) The right of the Company and the Eligible Stockholders to repurchase
Vested Stock shall terminate upon the first to occur of a Sale of the Company
and a Public Offering. The rights of the Eligible Stockholders to repurchase
Unvested Stock shall terminate upon a Sale of the Company.
4. Stockholders Agreement. As a condition to the issuance of Executive
Securities under the Original Agreement, Executive has previously executed and
delivered a copy of the Stockholders Agreement to the Company.
5. Restrictions on Transfer of Executive Securities.
(a) Transfer of Executive Securities. The holders of Executive Securities
shall not Transfer any interest in any shares of Executive Securities, except
pursuant to (i) the provisions of Section 3 hereof, (ii) a Public Sale, (ii) a
Sale of the Company, or (iii) the provisions of Section 5(b) hereof.
(b) Certain Permitted Transfers. The restrictions set forth in this Section
5 shall not apply with respect to any Transfer of Executive Securities made by
will or pursuant to applicable laws of descent and distribution or to such
Person's legal guardian in case of any mental incapacity or among such Person's
Family Group; provided that the restrictions contained in this Section 5 will
continue to be applicable to the Executive Securities after any Transfer of the
type referred to in this Section 5(b) and the transferees of such Executive
Securities will agree in writing to be bound by the provisions of this
Agreement. Any transferee of Executive Securities pursuant to a transfer in
accordance with the provisions of this Section 5(b) is herein referred to as a
"Permitted Transferee." Upon the transfer of Executive Securities pursuant to
this
-6-
Section 5(b), Executive will deliver a written notice (a "Transfer Notice") to
the Company. The Transfer Notice will disclose in reasonable detail the identity
of the Permitted Transferee(s).
(c) Termination of Restrictions. The restrictions set forth in this Section
5 will continue with respect to each Common Share until the earlier of (i) the
date on which such Common Share has been transferred in a Public Sale in
compliance with the terms hereof or (ii) the consummation of a Sale of the
Company.
6. Additional Restrictions on Transfer of Executive Securities.
(a) Legend. The certificates representing the Executive Securities will
bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF _______ __, 200_, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET
FORTH IN A RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE COMPANY AND
AN EXECUTIVE OF THE COMPANY, DATED AS OF _______ __, 200. A COPY OF
SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, A FULL STATEMENT OF ALL OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREON AUTHORIZED TO BE ISSUED
BY THE COMPANY AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF
SUCH PREFERENCES AND/OR RIGHTS."
(b) Opinion of Counsel. Executive shall not sell, transfer, or dispose of
any Common Shares (except pursuant to an effective registration statement under
the Securities Act) without first delivering to the Company an opinion of
counsel reasonably acceptable in form and substance to the Company that
registration under the Securities Act or any applicable state securities law is
not required in connection with such transfer (unless waived by the Company).
(c) Holdback. Executive shall not effect any public sale or distribution of
any equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the 180 days after the effectiveness of any underwritten offering of the
Company's equity securities except as part of such underwritten registration if
otherwise permitted.
7. Confidentiality; Noncompetition and Nonsolicitation.
-7-
(a) Obligation to Maintain Confidentiality. Executive hereby acknowledges
that the information, observations and data (including trade secrets) obtained
by Executive during the course of Executive's employment with the Company and
its Subsidiaries concerning the business or affairs of the Company and its
respective Subsidiaries and Affiliates ("Confidential Information") are the
property of the Company or such Subsidiaries and Affiliates, including
information concerning acquisition opportunities in or reasonably related to the
Company's business or industry of which Executive becomes aware. Therefore,
Executive hereby agrees that Executive will not disclose to any unauthorized
Person or use for Executive's own account any Confidential Information without
the Board's written consent, unless and to the extent that the Confidential
Information, (i) becomes generally known to and available for use by the public
other than as a result of Executive's acts or omissions to act, (ii) was known
to Executive prior to Executive's employment with the Company or any of its
Subsidiaries and Affiliates, or (iii) is required to be disclosed pursuant to
any applicable law or court order. Executive hereby agrees to deliver to the
Company at the Date of Termination, or at any other time the Company may
request, all memoranda, notes, plans, records, reports, computer tapes,
printouts and software and other documents and data (and copies thereof)
relating to the Confidential Information, Work Product (as defined below) or the
business of the Company and its respective Subsidiaries and Affiliates
(including, without limitation, all acquisition prospects, lists and contact
information) which Executive may then possess or have under Executive's control.
(b) Ownership of Property. Executive hereby acknowledges that all
discoveries, concepts, ideas, inventions, innovations, improvements,
developments, methods, processes, programs, designs, analyses, drawings,
reports, patent applications, copyrightable work and mask work (whether or not
including any confidential information) and all registrations or applications
related thereto, all other proprietary information and all similar or related
information (whether or not patentable) that relate to the Company's or any of
its Subsidiaries' or Affiliates' actual or anticipated business, research and
development, or existing or future products or services and that are conceived,
developed, contributed to, made, or reduced to practice by Executive (either
solely or jointly with others) while employed by the Company or any of its
Subsidiaries or Affiliates (including any of the foregoing that constitutes any
proprietary information or records) ("Work Product") belong to the Company or
such Subsidiary or Affiliate and Executive hereby assigns, and agrees to assign,
all of the above Work Product to the Company or to such Subsidiary or Affiliate.
Any copyrightable work prepared in whole or in part by Executive in the course
of Executive's work for any of the foregoing entities shall be deemed a "work
made for hire" under the copyright laws, and the Company or such Subsidiary or
Affiliate shall own all rights therein. To the extent that any such
copyrightable work is not a "work made for hire," Executive hereby assigns and
agrees to assign to the Company or such Subsidiary or Affiliate all right,
title, and interest, including without limitation, copyright in and to such
copyrightable work. Executive shall promptly disclose such Work Product and
copyrightable work to the Board and perform all actions reasonably requested by
the Board (whether before or after the Date of Termination) to establish and
confirm the Company's or such Subsidiary's or Affiliate's ownership (including,
without limitation, assignments, consents, powers of attorney, and other
instruments).
-8-
(c) Third Party Information. Executive understands that the Company and its
Subsidiaries and Affiliates will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's and its Subsidiaries and Affiliates' part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. During Executive's employment and thereafter, and without in any way
limiting the provisions of Section 7(a) above, Executive hereby agrees to hold
Third Party Information in the strictest confidence and will not disclose to
anyone (other than personnel and consultants of the Company or its Subsidiaries
and Affiliates who need to know such information in connection with their work
for the Company or its Subsidiaries and Affiliates) or use anywhere in the
United States, except in connection with Executive's work for the Company or its
Subsidiaries and Affiliates, Third Party Information unless expressly authorized
by the Board in writing.
(d) Use of Information of Prior Employers. During Executive's employment,
Executive will not improperly use or disclose any confidential information or
trade secrets, if any, of any former employers or any other Person to whom
Executive has an obligation of confidentiality, and will not bring onto the
premises of the Company or any of its Subsidiaries or Affiliates any unpublished
documents or any property belonging to any former employer or any other Person
to whom Executive has an obligation of confidentiality unless consented to in
writing by the former employer or Person. Executive will use in the performance
of Executive's duties only information which is (i) generally known and used by
persons with training and experience comparable to Executive's and which is (x)
common knowledge in the industry or (y) is otherwise legally in the public
domain, (ii) is otherwise provided or developed by the Company or any of its
Subsidiaries or Affiliates or (iii) in the case of materials, property or
information belonging to any former employer or other Person to whom Executive
has an obligation of confidentiality, approved for such use in writing by such
former employer or Person.
(e) Noncompetition. In further consideration of the issuance of Executive
Securities to Executive hereunder, Executive hereby acknowledges that during the
course of Executive's employment with the Company or any of its Subsidiaries
Executive shall become familiar, and/or during Executive's employment with
NewQuest, LLC, a Texas limited liability company ("NQLLC"), or any of its
Subsidiaries Executive has become familiar with the Company's, and its
Subsidiaries' trade secrets and with other Confidential Information concerning
the Company and its predecessors and Subsidiaries and that Executive's services
have been and shall continue to be of special, unique and extraordinary value to
the Company and its Subsidiaries, including NQLLC, and therefore Executive
hereby agrees that, while employed by the Company or any of its Subsidiaries,
and for a period of eighteen months after Executive's of Termination (the
"Noncompete Period"), Executive shall not directly or indirectly own any
interest in, manage, control, participate in, consult with, render services for,
be employed in an executive, managerial or administrative capacity by, or in any
manner engage in any business competing with the businesses of the Company or
its Subsidiaries, as such businesses exist prior to Executive's Date of
Termination, or, as of Executive's Date of Termination, are contemplated to
exist during the twelve-month period following Executive's Date of Termination
(the "Restricted Business"), within any geographical area in which the Company
or any of its Subsidiaries engage or plan to engage in such businesses. Nothing
herein shall prohibit Executive from (i) being a passive owner of not more than
2% of the outstanding
-9-
stock of any class of a corporation which is publicly traded, so long as
Executive has no active participation in the business of such corporation or
(ii) becoming employed, engaged, associated or otherwise participating with a
separately managed division or Subsidiary of a competitive business that does
not engage in the Restricted Business (provided that services are provided only
to such division or Subsidiary).
(f) Nonsolicitation. Executive hereby agrees that, during the Noncompete
Period, Executive shall not directly or indirectly through another entity (i)
induce or attempt to induce any employee of the Company or any of its
Subsidiaries to leave the employ of the Company or such Subsidiary, or in any
way interfere with the relationship between the Company and any of its
Subsidiaries and any employee thereof, (ii) hire any person who was an employee
of the Company or any of its Subsidiaries within the twelve-month period
immediately prior to the Date of Termination, or (iii) induce or attempt to
induce any customer, supplier, licensee, licensor, franchisee or other business
relation of the Company or any of its Subsidiaries to cease doing business, or
reduce the amount of business done, with the Company or such Subsidiary or in
any adverse way interfere with the business relationship between any such
customer, supplier, licensee or business relation and the Company and any
Subsidiary. Notwithstanding the foregoing, nothing in this Agreement shall
prohibit Executive from employing an individual (i) with the consent of the
Company or (ii) who responded to general solicitations in publications or on
websites, or through the use of search firms, so long as such general
solicitations or search firm activities are not targeted specifically at an
employee of the Company or any of its Subsidiaries.
(g) Enforcement. Because Executive's services are unique and because
Executive has access to Trade Secrets and other Confidential Information, the
parties hereto agree that money damages would be an inadequate remedy for any
breach of this Agreement, including, without limitation, any breach of this
Section 7. Therefore, in the event a breach or threatened breach of this
Agreement, the Company and its Subsidiaries or their successors or assigns may,
in addition to other rights and remedies existing in their favor, apply to any
court of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce, or prevent any violations of, the provisions
hereof (without posting a bond or other security).
(h) Acknowledgments. Executive hereby acknowledges that the provisions of
this Section 7 are (i) in addition to, and not in limitation of, any obligation
of Executive's under the terms of any employment agreement with the Company or a
Subsidiary, and (ii) in consideration of employment with the Company or its
Subsidiaries, the issuance of the Executive Securities by the Company and
additional good and valuable consideration as set forth in this Agreement. In
addition, Executive hereby agrees and acknowledges that the restrictions
contained in this Section 7 do not preclude Executive from earning a livelihood,
nor do they unreasonably impose limitations on Executive's ability to earn a
living. Executive hereby agrees and acknowledges that the potential harm to the
Company and its Subsidiaries of the non-enforcement of this Section 7 outweighs
any potential harm to Executive of its enforcement by injunction or otherwise.
Executive hereby acknowledges that Executive has carefully read this Agreement
and have given careful consideration to the restraints imposed upon Executive by
this Agreement, and are in full accord as to their necessity for the reasonable
and proper protection of confidential and proprietary information of the
Company, its Subsidiaries and Affiliates now existing or to be developed in the
future. Executive hereby expressly acknowledges and agrees
-10-
that each and every restraint imposed by this Agreement is reasonable with
respect to subject matter, time period and geographical area.
8. Remedies. The parties hereto (and the Eligible Stockholders as
third-party beneficiaries hereof) shall be entitled to enforce their respective
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 acknowledge and agree that money
damages would not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto (and the Eligible Stockholders as
third-party beneficiaries hereof) may, in their sole discretion, apply to any
court of law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting bond or other security) in order to enforce
or prevent any violation of the provisions of this Agreement.
9. Definitions.
"Affiliate" shall mean, with respect to any Person, any other Person which,
directly or indirectly, controls, is controlled by or under common control with
such Person.
"Board" means the Company's board of directors.
"Cash Inflows" with respect to any Preferred Shares or Common Shares shall
include the following received in connection with a Sale of the Company, a
Public Sale or otherwise:
(i) all cash payments distributed to the holder of such Preferred Shares or
Common Shares with respect to, or as consideration or in exchange for such
Preferred Shares or Common Shares (whether such payments are received from
the Company or any other Person), including, without duplication, all cash
payments received by such holder with respect to or in exchange for the
property described in the proviso in (ii) below and all cash dividends and
distributions received with respect to such Preferred Shares or Common
Shares; and
(ii) the Fair Market Value of all securities and other property received by
such holder with respect to, or as consideration or in exchange for such
Preferred Shares or Common Shares (whether such payments are received from
the Company or any other Person), including, without duplication, the Fair
Market Value of property received by such holder with respect to or in
exchange for the property described in the proviso below; provided that in
the event that Preferred Shares or Common Shares or other property is
received subject to contingencies or restrictions that are reasonably
likely to affect its Fair Market Value (e.g., non-publicly traded
securities or publicly traded securities subject to material restrictions
or limitations, other than customary underwriter lockups or other
restrictions or limitations that constitute customary limitations arising
by virtue of the relative priority of such securities with respect to the
issuer thereof or the short-swing profit recovery rules under the
Securities Exchange Act of 1934, as amended, or a right to receive future
consideration pursuant to an earn-out), the Fair Market Value of such
property shall reflect appropriate discounts.
-11-
"Cash Outflows" with respect to any Preferred Shares or Common Shares,
shall include the sum of all cash payments by such holder to the Company to
purchase the Preferred Shares and Common Shares.
"Cause" shall have the meaning assigned to such term in Executive's written
employment agreement or, in the absence of any written employment agreement, (i)
the commission of a felony or a crime involving moral turpitude or the
commission of any other act or omission involving material dishonesty, material
disloyalty, or fraud with respect to the Company or any of its Subsidiaries or
any of their customers or suppliers, (ii) conduct tending to bring the Company
or any of its Subsidiaries into public disgrace or disrepute, (iii) Executive's
failure (other than by reason of Disability) to carry out effectively his or her
duties and obligations to the Company or to participate effectively and actively
in the management of the Company, as determined in the reasonable judgment of
senior management of the Company or the Board, (iv) gross negligence or willful
misconduct with respect to the Company or any Subsidiary, or (v) any material
breach of this Agreement.
"Closing Date" means March 1, 2005.
"Common Shares" shall mean shares of Common Stock and any other shares into
which such stock may be changed or converted by reason of a recapitalization,
reorganization, merger, consolidation, or any other change in the corporate
structure or capital stock of the Company.
"Current Vested Performance Percentage" means, as of any date, an amount
equal to (A) the aggregate number of vested Performance Shares as of such date
divided by (B) the aggregate number of Performance Shares which would have been
vested as of such date pursuant to Section 2(c) above if the Company had met the
EBITDA Goal for each of the Company's fiscal years ending prior to such date.
"Date of Termination" shall mean (i) if Executive's employment is
terminated by the Company or any Subsidiary, the effective date of termination
as specified in the written notice from the Company or such Subsidiary to
Executive terminating Executive's employment, (ii) if Executive terminates his
or her employment, the last day of Executive's employment or (iii) if
Executive's employment is terminated other than pursuant to (i) or (ii), then
the date determined in good faith by the Board.
"Disability" shall have the meaning assigned to such term in Executive's
written employment agreement or, in the absence of any written employment
agreement, shall mean the inability, due to illness, accident, injury, physical
or mental incapacity or other disability, of Executive to carry out effectively
such Executive's duties and obligations to the Company or any of its
Subsidiaries or to participate effectively and actively in the management of the
Company or any of its Subsidiaries for a period of at least 90 consecutive days
or for shorter periods aggregating at least 120 days (whether or not
consecutive) during any twelve-month period, as determined in the reasonable
judgment of the Board.
"EBITDA" shall mean earnings before interest, taxes, depreciation and
amortization, excluding any non-recurring or extraordinary items, as determined
in accordance
-12-
with generally accepted accounting principles, applied on a basis consistent
with the Company's past practices; provided that, the calculation of EBITDA
shall exclude (i) the management fee payable to GTCR pursuant to that certain
Professional Services Agreement between GTCR and the Company, (ii) non-recurring
extraordinary items (as determined by the Board in its discretion), and (iii)
all start-up costs to the extent related to expansion into new markets.
"Eligible Stockholders" shall mean the Stockholders as defined in the
Stockholders Agreement.
"Executive Securities" means (i) all Common Shares issued pursuant to this
Agreement and (ii) all Common Shares issued with respect to the Common Shares
referred to in clause (i) above by way of stock dividend or stock split or in
connection with any conversion, merger, consolidation or recapitalization or
other reorganization affecting the Common Shares. Executive Securities shall
continue to be Executive Securities in the hands of any holder other than
Executive (except for (x) the Company, (y) to the extent acquired pursuant to
Section 3, by any Eligible Stockholder, and (z) to the extent that Executive is
permitted to transfer Executive Securities pursuant to Sections 5 or 6 hereof,
purchasers pursuant to a Public Offering under the Securities Act), and each
such transferee thereof shall succeed to the rights and obligations of a holder
of Executive Securities hereunder. Notwithstanding the foregoing, all shares of
Unvested Stock shall remain Unvested Stock after any Transfer thereof.
"Fair Market Value" of any property shall be determined in good faith by
the Board.
"Family Group" shall mean, with respect to a Person who is an individual,
such Person's spouse and descendants (whether natural or adopted), and any
trust, family limited partnership, limited liability company or other entity
wholly owned, directly or indirectly, by such Person or such Person's spouse
and/or descendants that is and remains solely for the benefit of such Person
and/or such Person's spouse and/or descendants and any retirement plan for such
Person.
"GTCR" means GTCR Xxxxxx Xxxxxx XX L.L.C., a Delaware limited liability
company.
"GTCR Investors" means GTCR Fund VIII, L.P., a Delaware limited
partnership, GTCR Fund VIII/B, L.P., a Delaware limited partnership, GTCR
Co-Invest II, L.P., a Delaware limited partnership, and any investment fund
managed by GTCR or any of its Affiliates that at any time executes a counterpart
to the Stockholders Agreement.
"Independent Third Party" means any Person who, immediately prior to the
contemplated transaction, does not own in excess of 5% of the Company's Common
Stock on a fully-diluted basis (a "5% Owner"), who is not controlling,
controlled by or under common control with any such 5% Owner and who is not the
spouse or descendant (by birth or adoption) of any such 5% Owner or a trust for
the benefit of such 5% Owner and/or such other Persons.
-13-
"Original Cost" means, with respect to each share of Common Stock purchased
pursuant to the Original Agreement, $0.10 per share (as proportionately adjusted
for all subsequent stock splits, stock dividends and other recapitalizations).
"Person" means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, investment fund, any other business entity and a
governmental entity or any department, agency or political subdivision thereof.
"Preferred Shares" shall mean shares of the Company's Preferred Stock, par
value $0.01 per share, and any other shares into which such stock may be changed
or converted by reason of a recapitalization, reorganization, merger,
consolidation, or any other change in the corporate structure or capital stock
of the Company.
"Public Offering" shall mean an initial public offering and sale,
registered under the Securities Act, of equity securities of the Company, as
approved by the Board.
"Public Sale" shall mean any sale of Common Shares to the public pursuant
to which such Common Shares have been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering such Common Shares or to the public through a broker, dealer, or market
maker pursuant to the provisions of Rule 144 (or any similar provision then in
force) under the Securities Act, other than Rule 144(k) prior to a Public
Offering.
"Sale of the Company" means the sale of the Company to an Independent Third
Party or group of Independent Third Parties pursuant to which such party or
parties acquire (i) 50% or more of the Common Shares outstanding at the time of
such transaction or series of transactions or (ii) all or substantially all of
the Company's assets determined on a consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Stockholders Agreement" means that certain Stockholders Agreement, dated
as of March 1, 2005, by and among the Company, the GTCR Investors, and the other
parties thereto, as amended from time to time pursuant to its terms.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association, or business entity of which (i) if
a corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation), a
majority of partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association, or other business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association, or other
business entity gains or losses or shall be or control any managing director or
general partner of such limited liability company,
-14-
partnership, association, or other business entity. For purposes hereof,
references to a "Subsidiary" of any Person shall be given effect only at such
times that such Person has one or more Subsidiaries, and, unless otherwise
indicated, the term "Subsidiary" refers to a Subsidiary of the Company.
"Transfer" means to sell, transfer, assign, pledge or otherwise dispose of
(whether with or without consideration and whether voluntarily or involuntarily
or by operation of law).
10. Notices. All notices, demands, or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands, and other communications shall
be sent to Executive and the Company at the addresses indicated on the Notices
Schedule attached hereto or to such other address or to the attention of such
other person as the recipient party has specified by prior written notice to the
sending party. Any notices required to be sent to any Eligible Stockholders
shall be sent to such Eligible Stockholders at such address as set forth in the
Stockholders Agreement or at such other address or to the attention of such
other person as such Person has specified by prior written notice to the
Company.
11. General Provisions.
(a) Transfers in Violation of Agreement. Any Transfer or attempted Transfer
of any Executive Securities 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 Executive Securities as the owner of such
equity for any purpose.
(b) Severability. Whenever possible, each provision of this Agreement will
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 will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) Complete Agreement. Except as expressly set forth herein, this
Agreement constitutes the entire understanding between Executive and the
Company, and supersedes all other agreements, whether written or oral, with
respect to the subject matter hereof.
(d) No Strict Construction. 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.
(e) Counterparts. This Agreement may be executed in separate counterparts
(including by means of facsimile), each of which is deemed to be an original and
all of which taken together constitute one and the same agreement.
-15-
(f) Successors and Assigns. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto shall bind and inure to the benefit of the respective
successors and permitted assigns of the parties hereto whether so expressed or
not.
(g) Adjustments of Numbers. All numbers set forth herein which refer to
share prices or amounts will be appropriately adjusted to reflect stock splits,
stock dividends, combinations of shares and other recapitalizations affecting
the subject class of stock.
(h) Choice of Law. The corporate law of the State of Delaware shall govern
all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and not
the law of conflicts, of the State of Delaware.
(i) MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE BETWEEN
OR AMONG ANY OF THE PARTIES HERETO, WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY AND/OR THE RELATIONSHIP
ESTABLISHED AMONG THE PARTIES HEREUNDER.
(j) Amendment and Waiver. The provisions of this Agreement may be amended
and waived only with the prior written consent of the Company, Executive and, so
long as any Preferred Shares remain issued and outstanding, the Eligible
Stockholders who hold a majority of all Preferred Shares held by the Eligible
Stockholders.
(k) Right to Employment. Nothing in this Agreement shall interfere with or
limit in any way the right of the Company or any of its Subsidiaries to
terminate Executive's employment at any time (with or without Cause), nor confer
upon Executive any right to continue in the employ of or provide services to the
Company or any of its Subsidiaries for any period of time or to continue
Executive's present (or any other) rate of compensation.
(l) Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or holiday in the state
in which the Company's chief executive office is located, the time period shall
be automatically extended to the business day immediately following such
Saturday, Sunday or holiday.
(m) Deemed Transfer of Executive Securities. If the Company (and/or the
Eligible Stockholders and/or any other Person acquiring securities) shall make
available, at the
-16-
time and place and in the amount and form provided in this Agreement, the
consideration for the Executive Securities to be repurchased in accordance with
the provisions of this Agreement, then from and after such time, the Person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement), and such shares shall be
deemed purchased in accordance with the applicable provisions hereof and the
Company (and/or the Eligible Stockholders and/or any other Person acquiring
securities) shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
(n) Third-Party Beneficiaries. The Company and Executive each acknowledge
that each of the Eligible Stockholders (so long as such Person is an Eligible
Stockholder) is a third-party beneficiary under this Agreement.(o) Exemptions.
The Company and Executive each acknowledge and agree that this Agreement has
been executed and delivered, and the Executive Securities have been granted
pursuant to the Original Agreement, in connection with and as a part of the
compensation and incentive arrangements between the Company and Executive. The
Executive Securities granted pursuant to the Original Agreementare intended to
qualify for an exemption (the "Exemption") from the registration requirements
under the Securities Act pursuant to Rule 701 thereof, and under applicable
state securities laws. In the event that any provision of this Agreement would
cause the Executive Securities issued pursuant to the Original Agreement to not
qualify for the Exemption, each of Executive and the Company agrees that this
Agreement shall be deemed automatically amended to the extent necessary to cause
the Executive Securities to qualify for the Exemption.
* * * * *
-17-
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Restricted Stock Purchase Agreement on the date first written above.
HEALTHSPRING, INC.
By:
-------------------------------------
Name:
-------------------------------------
Its:
-------------------------------------
------------------------------------------
Name:
Address:
NOTICES SCHEDULE
If to the Executive: To the address set forth on the signature
page hereto.
If to the Company: HealthSpring, Inc.
00 Xxxxxxx Xxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Corporate Secretary
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy (which will not constitute
notice to the Company) to:
GTCR Fund VIII, L.P.
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and:
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, P.C.
Xxxxxxx X. Fine, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
-2-
