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Exhibit 10.20
STOCK PURCHASE AND LOAN AGREEMENT
BY AND BETWEEN
THE MIIX GROUP INCORPORATED
AND
XXXXXX XXXXXXXX
DATED: October 9, 1998
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STOCK PURCHASE AND LOAN AGREEMENT
THIS STOCK PURCHASE AND LOAN AGREEMENT (the "Agreement"), made
as of this 9th day of October, 1998, by and between THE MIIX GROUP,
INCORPORATED, a Delaware corporation (the "Company"), and XXXXXX XXXXXXXX (the
"Executive").
BACKGROUND
WHEREAS, pursuant to the Plan of Reorganization approved by
the Commissioner of the New Jersey Department of Banking and Insurance on March
5, 1998 (the "Reorganization"), the Company owns all of the issued and
outstanding stock of MIIX Insurance Company; and
WHEREAS, as part of the Reorganization, certain policyholders
of the Medical Inter-Insurance Exchange of New Jersey will become stockholders
of the Company; and
WHEREAS, concurrently with the consummation of the
Reorganization, the Company intends to sell shares of its common stock through
an underwritten public offering (the "IPO"); and
WHEREAS, the Company desires to ensure that key members of its
senior management share with its stockholders the common goal of achieving
long-term growth in the market value of the Company which equals or exceeds the
growth of competitive companies in the insurance industry; and
WHEREAS, to achieve this objective, the Company requires that
upon the consummation of the IPO the Executive purchase that number of shares of
common stock of the Company (the "Purchased Shares") having an aggregate
purchase price of $1,290,000.00 based on the price per share of the common stock
offered in the IPO (the "Purchase Price"); and
WHEREAS, the Company intends to make a loan to the Executive
in an amount equal to the Purchase Price, and Executive intends to secure such
loan with a pledge of the Purchased Shares;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein and other good and valuable consideration, the
parties hereto agree as follows:
TERMS
1. Loan.
1.1. Loan. Subject to the terms and conditions
hereof, upon the consummation of the IPO, the Company shall lend to the
Executive the aggregate principal
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amount of ONE MILLION TWO HUNDRED NINETY THOUSAND DOLLARS ($1,290,000.00) (the
"Loan").
1.2. Purpose of Loan. The Executive shall use the
proceeds of the Loan solely for the purpose of purchasing the Purchased Shares
pursuant to Section 2 hereof.
1.3. Promissory Note. The obligation of the Executive
to repay the Loan shall be evidenced by the Executive's promissory note,
substantially in the form attached hereto as Exhibit I (the "Note"), in the
original principal amount of ONE MILLION TWO HUNDRED NINETY THOUSAND DOLLARS
($1,290,000.00). The Note shall be dated the date of the purchase of the
Purchased Shares, shall mature and become due and payable on the Maturity Date
(hereinafter defined) and shall bear interest as set forth in Section 1.4(b).
1.4. Principal Payments; Maturity; Interest Rate.
(a) Principal Payments. Unless sooner
accelerated as provided herein, the principal amount of the Loan shall be due
and payable in full on the fifth anniversary date of the Note (the "Maturity
Date"). Notwithstanding the collateral pledged to the Company pursuant to
Section 3 hereof, Executive shall have personal liability for the full payment
of the Loan, together with accrued interest thereon.
(b) Interest Rate and Payment. The principal
amount of the Loan shall bear interest from the date of the Note until the
Maturity Date (unless otherwise accelerated as provided herein) at a rate per
annum equal to the minimum interest rate necessary to avoid income imputation
under the Internal Revenue Code as of the date of the Note. Interest shall be
due and payable on the Maturity Date.
1.5. Voluntary Prepayments. The Executive shall have
the right to prepay the Loan in whole or in part from time to time, without
penalty or premium.
1.6. Mandatory Prepayments. In the event that
Executive sells any of the Purchased Shares during the term of the Loan, the
Executive shall, within five (5) days of such sale, make a mandatory prepayment
of the Loan in an amount equal to the product of the number of Purchased Shares
sold and the Purchase Price. In the event that such sale is made on an
installment basis, Executive shall make a mandatory prepayment as and when
proceeds of the sale are received by the Executive.
1.7. Events of Default. Each of the following shall
constitute an event of default (each, an "Event of Default") under this
Agreement:
(a) the failure of the Executive to pay when
due any principal or interest or other amount due hereunder or under the Note.
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(b) any warranty or representation made by
the Executive in this Agreement shall prove to have been false or incorrect on
the date as of which made.
(c) the termination of Executive's
employment with the Company for any reason.
(d) the occurrence of any of the following
with respect to the Executive:
(i) he shall apply for or
consent to the
appointment of a
receiver, custodian,
trustee or liquidator
of all or a
substantial part of
his property;
(ii) he shall make a
general assignment for
the benefit of his
creditors;
(iii) he shall commence a
voluntary case under
the Federal Bankruptcy
Code; or
(iv) he shall file a
petition to take
advantage of any other
law providing for the
relief of debtors.
1.8. Remedies Upon Default. Upon the occurrence and
during the continuance of an Event of Default, all indebtedness, obligations and
liabilities of the Executive arising hereunder shall, at the option of the
Company, become immediately due and payable. The Company may exercise a right of
setoff against the Pledged Collateral (as defined below).
1.9. Extension of Payment Date. Notwithstanding
anything in Section 1.7(c) hereof to the contrary, in the event that Executive's
employment with the Company is terminated and such termination arises from the
death, disability or retirement of the Executive or is without Cause, then, at
the option of the Executive and upon delivery of written notice to that effect,
the obligation to repay the Loan in full, together with accrued interest
thereon, may be extended to the second anniversary date of such termination or
retirement or the Maturity Date, whichever is longer. For purposes of this
Section, the term "Cause" shall have the meaning assigned to it in that certain
Employment Agreement dated of even date herewith among the Executive, the
Company and New Jersey State Medical Underwriters, Inc.
2. Purchase and Sale of Common Stock.
2.1. Sale and Purchase. The Company shall, upon the
consummation of the IPO, issue and sell to the Executive, subject to and in
reliance upon the representations, warranties, terms and conditions of this
Agreement, and Executive shall purchase, the Purchased Shares for the Purchase
Price.
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2.2. Payment of Purchase Price. Upon payment in full
of the Purchase Price, receipt of which shall be deemed acknowledged by the
Company at the consummation of the IPO, the Company shall deliver to Executive a
stock certificate, registered in the name of Executive, representing the
Purchased Shares.
2.3. Lock-up. The Executive agrees that, for a one
(1) year period following the date of the issuance of the Purchased Shares, the
Executive shall not sell, transfer or otherwise dispose of any of the Purchased
Shares without the consent of the Company.
3. Collateral.
3.1. Pledged Collateral. As security for the
performance of this Agreement and for the prompt and complete payment of the
Loan, together with accrued interest thereon, when due (whether at the Maturity
Date, by acceleration or otherwise), the Executive hereby grants to the Company
the following property (collectively, the "Pledged Collateral"):
(a) the Purchased Shares and the
certificates or instruments representing such stock and all dividends, interest,
cash, instruments, and other property from time to time received, receivable, or
otherwise distributed or distributable in respect of or in exchange for any or
all of such stock;
(b) all proceeds of the foregoing.
3.2. Delivery of Purchased Shares. Promptly after his
receipt of stock certificates representing the Purchased Shares, the Executive
shall deliver to the Company such stock certificates, together with stock powers
duly executed in blank by the Executive.
3.3. Voting Rights: Dividends: Etc.
(a) The Executive shall be entitled to
exercise any and all of Executive's voting and other consensual rights
pertaining to the Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement; and notwithstanding Section 3.1
but subject to Section 3.3(c) shall be entitled to receive and retain free and
clear of the security interest of Company hereunder, any and all of such
dividends, interest and other distributions permitted to all other holders of
the Company's Common Stock.
(b) The Company shall execute and deliver
(or cause to be executed and delivered) to the Executive all such proxies and
other instruments as Executive may reasonably request for the purpose of
enabling the Executive to exercise the voting and other rights that he is
entitled to exercise pursuant to paragraph (a) above and to receive the
dividends, interest and other distributions that he is authorized to receive and
retain pursuant to paragraph (a) above.
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(c) Upon the occurrence and during the
continuance of an Event of Default (i) all rights of the Executive to exercise
the voting and other consensual rights that he would otherwise be entitled to
exercise pursuant to Section 3.3(a) hereof and to receive the dividends,
interest and other distributions that he would otherwise be authorized to
receive and retain pursuant to Section 3.3(a) hereof shall cease, and all such
rights shall thereupon become vested in Company which shall thereupon have the
sole right to exercise such voting and other consensual rights and to receive
such dividends, interest, and other distributions; and all dividends, interest
and other distributions which are received by Executive contrary to the
provisions of this paragraph shall be received in trust for the benefit of
Company, shall be segregated from other funds of Executive, and shall be
forthwith paid over to Company in the same form as so received (with any
necessary endorsement).
3.4. Further Assurances. Executive agrees that at any
time and from time to time, at the expense of Executive, Executive will promptly
execute and deliver all further instruments and documents, and take all further
action that may be necessary, or that Company may reasonably request, in order
to perfect and protect any security interest granted or purported to be granted
hereby or to enable Company to exercise and enforce the rights and remedies
hereunder with respect to any of the Pledged Collateral.
3.5. Transfers and Liens. Executive will not (i)
grant any option with respect to any of the Pledged Collateral, or (ii) create
or permit to exist any lien, security interest, or other charge or encumbrance
upon or with respect to any of the Pledged Collateral.
3.6. Company Appointed Attorney-in-Fact. Executive
hereby appoints Company as Executive's attorney-in-fact, with full authority in
the place and stead of Executive and in the name of Executive, from time to time
in Company's discretion to take any action and to execute any instrument which
Company may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, upon the occurrence and during the
continuance of an Event of Default to receive, endorse, and collect all
instruments made payable to Executive representing any dividend, interest, or
other distribution in respect of the Pledged Collateral or any part thereof and
to give full discharge for the same. Company shall not, in its capacity as such
attorney-in-fact, be liable for any acts or omissions, nor for any error of
judgment or mistake of fact or law, but only for bad faith, willful misconduct
or gross negligence. This power, being coupled with an interest, is irrevocable
until all obligations under the Note have been fully satisfied.
3.7. Company's Duties. The powers conferred on the
Company hereunder are solely to protect its interests in the Pledged Collateral
and shall not impose any duty to exercise any such powers. Except for the safe
custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, Company shall not have any duty as to
any Pledged Collateral or as to the taking of any necessary steps to preserve
rights against any parties or any other rights pertaining to any Pledged
Collateral. Without limiting the generality of the foregoing, Company shall not
have any responsibility for ascertaining
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or taking action with respect to calls, conversions, exchanges, maturities,
tenders, or other matters relating to any Pledged Collateral, whether or not
Company has or is deemed to have knowledge of such matters.
3.8. Prepayments. In the event of any prepayment,
whether voluntary or mandatory, the Company shall release from the Pledged
Collateral, and deliver to the Executive, stock certificates evidencing that
number of Purchased Shares which have an aggregate fair market value equal to
the amount of the prepayment. In no event, however, shall the remaining Pledged
Collateral have a fair market value less than the unpaid principal balance of
the Loan and accrued interest thereon.
3.9. Transfer of Title. After the occurrence and
during the continuance of an Event of Default, Company shall have the right, at
any time in its discretion without further notice to Executive, to transfer to
or to register in the name of Company or its nominees, any or all of the Pledged
Collateral. In addition, upon the occurrence and during the continuance of an
Event of Default, Company shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
3.10. Termination. The provisions of this Section 3
shall terminate upon payment in full of the Loan, together with accrued interest
thereon, at which time the Company shall promptly deliver to Executive stock
certificates evidencing the Purchased Shares remaining in its possession.
4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Executive as follows:
4.1. Organization. The Company (a) is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and (b) has all requisite corporate power and authority to
execute, deliver and perform this Agreement.
4.2. Authorization of Agreement.
(a) The execution, delivery and performance
by the Company of this Agreement has been duly authorized by all requisite
corporate action by the Company, and this Agreement constitutes the valid and
binding obligation of the Company.
(b) The issuance, sale and delivery of the
Purchased Shares have been duly authorized by all requisite corporate action of
the Company, and when issued, sold and delivered in accordance with this
Agreement, the Purchased Shares will be validly issued and outstanding, fully
paid and nonassessable, and not subject to preemptive or any other similar
rights of the stockholders of the Company or others.
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4.3. SEC Registration Statement. The Company has made
available to the Executive, in the form filed with the SEC and as amended prior
to the date hereof, the Form S-1 Registration Statement (Registration No.
333-59371) (the "Registration Statement"). The Registration Statement complies
as to form in all material respects with the requirements of the Securities Act
of 1933 (the "Securities Act") and the rules and regulations thereunder, and did
not, on the date when it was declared effective, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein in light of the
circumstances under which they were made not misleading.
5. Representations of the Executive. The Executive represents,
warrants and covenants to the Company that:
(a) Executive has the full power and
authority and has full legal right to execute and deliver this Agreement and the
Note, to perform, observe and comply with all of his agreements and obligations
under each of this Agreement and the Note and to obtain the proceeds of the Loan
contemplated by this Agreement;
(b) Executive has duly executed and
delivered this Agreement and this Agreement constitutes the valid and binding
obligation of Executive, enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, moratorium or similar laws
affecting creditors' rights or by general principles of equity;
(c) Executive is acquiring the Purchased
Shares for his own account, for investment and not with a view to the
distribution thereof within the meaning of the Securities Act;
(d) Executive understands that the Purchased
Shares have not been and shall not be registered under the Securities Act, by
reason of their issuance by the Company in a transaction exempt from the
registration requirements of the Securities Act; and any subsequent disposition
thereof must be registered under the Securities Act must be exempt from
registration;
(e) Executive understands that: (i) the
exemption from registration afforded by Rule 144 (the provisions of which are
known to him) promulgated under the Securities Act depends on the satisfaction
of various conditions, and that, if and when applicable, Rule 144 may only
afford the basis for sales in limited amounts; and (ii) the Company is under no
obligation to register the Purchased Shares on behalf of the Executive or to
assist the Executive in complying with any exemption from registration;
(f) he is an accredited investor as defined
in Rule 501(a) promulgated under the Securities Act.
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6. Certain Restrictions.
6.1. Legend. The certificate for the Purchased Shares
shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR ANY APPLICABLE STATE SECURITIES
LAW. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION EXCEPT UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL,
WHICH OPINION SHALL BE REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT AND
APPLICABLE STATE SECURITIES LAWS IS AVAILABLE. THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN
THAT CERTAIN STOCK PURCHASE AND LOAN AGREEMENT BY AND
BETWEEN THE COMPANY AND XXXXXX XXXXXXXX."
6.2. Opinion. Company agrees to reimburse Executive
for the cost of obtaining any opinion required by the above legend.
7. Miscellaneous.
7.1. Amendments, Indulgences, Etc. No amendment or
waiver of any provision of this Agreement nor consent to any departure by
Executive herefrom shall in any event be effective unless the same shall be in
writing and signed by Company, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure or delay on the part of Company in the exercise of any right,
power, or remedy under this Agreement shall constitute a waiver thereof, or
prevent the exercise thereof in that or any other instance.
7.2. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and, if to Executive,
mailed or telefaxed or delivered to them at the addresses therefor shown at the
time in Company's records, and, if to Company, mailed or delivered to it at Xxx
Xxxxxxxx Xxxx, Xxxxxxxxxxxxx, Xxx Xxxxxx 00000.
7.3. Continuing Security Interest. This Agreement
creates a continuing security interest in the Pledged Collateral and shall be
binding upon Executive, and his heirs, executors, administrators, successors,
and assigns and inure to the benefit of Company and its successors, transferees
and assigns. The execution and delivery of this Agreement shall in no
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manner impair or affect any other security (by endorsement or otherwise) for the
payment or performance of the Note and no security taken hereafter as security
for payment or performance of the Note shall impair in any manner or affect this
Agreement or the security interest granted hereby, all such present and future
additional security to be considered as cumulative security. Any of the Pledged
Collateral may be released from this Agreement without altering, varying, or
diminishing in any way this Agreement or the security interest granted hereby as
to the Pledged Collateral not expressly released, and this Agreement and such
security interest shall continue in full force and effect as to all of the
Pledged Collateral not expressly released.
7.4. Governing Law; Consent to Jurisdiction; Etc.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New Jersey applicable to contracts made and wholly performed within
New Jersey. Executive consents to the jurisdiction of the courts of New Jersey
and of the courts of the United States sitting in New Jersey in any litigation
concerning this Agreement, and Executive waives any objection based on venue or
inconvenient forum. Unless otherwise defined herein, terms defined in the
Uniform Commercial Code as in effect on the date hereof are used herein as
therein defined as of such date.
7.5. Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
7.6. Severability. The provisions of this Agreement
are independent of and separable from each other, and no such provision, shall
be altered or rendered invalid or unenforceable by virtue of the fact that for
any reason any other such provision may be invalid or unenforceable in whole or
in part.
7.7. Headings. The section headings of this Agreement
are for convenience only, form no part of this Agreement and shall not affect
its interpretation.
7.8. Entire Agreement. This Agreement sets forth all
of the promises, covenants, agreements, conditions and undertakings between the
parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written.
8. Closing Certificates.
(a) It shall be a condition to the
obligations of the Executive hereunder that, simultaneously with the execution
of the Note, the Company shall deliver to the Executive a certificate stating
that (i) at and as if made on the date thereof, the representations made by the
Company in Section 4 are true and complete and (ii) since the effective date of
the Registration Statement, the Company's financial condition, operations and
business have not experienced a material adverse change.
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(b) It shall be a condition to the
obligations of the Company hereunder that, simultaneously with the execution of
the Note, the Executive shall deliver to the Company a certificate stating that
(i) at and as if made on the date thereof, the representations made by the
Executive in Section 5 are true and complete, and (ii) the Note has been duly
executed and delivered by the Executive, and the Note constitutes a valid and
binding obligation of the Executive enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, moratorium or
similar laws affecting creditors' rights or by general principles of equity.
IN WITNESS WHEREOF, the undersigned intending to be legally
bound, have executed this Agreement as of the date first above written.
/s/ Xxxxxx Xxxxxxxx
---------------------------------------(L.S.)
Xxxxxx Xxxxxxxx
THE MIIX GROUP INCORPORATED
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Director
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EXHIBIT I
PROMISSORY NOTE
$1,290,000.00 Princeton, New Jersey
__________, 1998
The Undersigned, for value received and intending to be
legally bound, promises to pay to the order of THE MIIX GROUP, INCORPORATED (the
"Lender"), as and when due as set forth in the Stock Purchase and Loan Agreement
dated the date hereof between the Undersigned and Lender (as such agreement may
be amended, restated, modified or supplemented from time to time, the "Loan
Agreement"), the principal sum of ONE MILLION TWO HUNDRED NINETY THOUSAND
DOLLARS ($1,290,000.00). Capitalized terms used herein and not otherwise defined
shall have the meanings given such terms in the Loan Agreement.
The undersigned further promises to pay to the order of Lender
interest on the unpaid principal amount of the Loan from the date hereof until
such amounts have been repaid in full. Interest shall be at the annual rate of
__ percent (__%) and shall be due and payable on the Maturity Date (unless
accelerated sooner under the terms of the Loan Agreement).
This is the Note mentioned in, and is entitled to the benefits
of, the Loan Agreement.
This Note may be prepaid at any time, in whole or in part,
without premium or penalty. All payments in respect of this Note shall be
applied first to accrued interest and then to principal outstanding hereunder.
Mandatory prepayments shall be required from time to time pursuant to Section
1.6 of the Loan Agreement.
This Note shall be deemed to be a contract made under the laws
of the State of New Jersey and shall be construed in accordance with the laws of
said state without giving effect to principals of conflicts of law.
This Note shall be binding upon the undersigned and his heirs,
executors, administrators, transferees and assigns and the terms hereof shall
inure to the benefit of lender and its successors and assigns, including
subsequent holders hereof.
The undersigned hereby waives presentment, demand for payment,
notice of dishonor or acceleration, protest and notice of protest, and any and
all other notices or demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note except any notice expressly
required in the Loan Agreement.
IN WITNESS WHEREOF, the undersigned executes this Note on the
day and year first above written.
By: (L.S.)
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Xxxxxx Xxxxxxxx
