EXHIBIT 10.2
EXECUTION COPY
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SPHERIS HOLDING III, INC.
STOCKHOLDERS' AGREEMENT
Dated as of November 5, 2004
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TABLE OF CONTENTS
Page
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1. Additional Offerings................................................. 1
1.1. Additional Offerings; Generally............................ 1
1.2. Exercise of Purchase Rights................................ 2
1.3. Sale of Unpurchased Securities............................. 2
1.4. Future Additional Offerings................................ 2
2. Restrictions on Transfers and Sales to Third Parties................. 3
2.1. General.................................................... 3
2.2. Tag-Along Rights........................................... 3
2.3. Company Sale............................................... 3
3. Election of Directors; Committees.................................... 5
3.1. Board Make-up.............................................. 5
3.2. Replacement Directors...................................... 6
3.3. Committees................................................. 6
3.4. Directors of Subsidiaries.................................. 7
4. Legends.............................................................. 7
5. Covenants, Representations and Warranties............................ 8
5.1. Actions by the Board....................................... 8
5.2. Transactions With Investors................................ 9
5.3. Information Rights......................................... 9
5.4. Healthscribe Acquisition................................... 10
6. Amendment, Modification, Supplement and Waiver....................... 10
7. Termination of Rights and Obligations Under Certain Sections......... 10
8. Parties.............................................................. 10
8.1. Assignment Generally....................................... 10
8.2. Termination................................................ 11
8.3. Agreements to Be Bound..................................... 11
9. Recapitalizations, Exchanges, etc. Affecting the Shares.............. 11
10. Further Assurances................................................... 11
11. Governing Law........................................................ 11
12. Invalidity of Provision.............................................. 11
13. Notices.............................................................. 12
14. Headings; Execution in Counterparts.................................. 13
15. Entire Agreement..................................................... 14
16. Injunctive Relief.................................................... 14
17. Defined Terms........................................................ 14
17.1. Affiliate.................................................. 14
17.2. Closing Date............................................... 14
17.3. Common Stock............................................... 14
17.4. Company Sale............................................... 14
17.5. Convertible Securities..................................... 14
17.6. Equity Securities.......................................... 15
17.7. Exchange Act............................................... 15
17.8. Healthscribe Acquisition................................... 15
17.9. Healthscribe Acquisition Agreement......................... 15
17.10. Investors.................................................. 15
17.11. Mandatory Conversion....................................... 15
17.12. Majority Xxxxx Investors................................... 15
17.13. Majority Warburg Investors................................. 15
17.14. Owns, Own or Owned......................................... 15
17.15. Permitted Assignee......................................... 15
17.16. Person..................................................... 16
17.17. Qualified Public Offering.................................. 16
17.18. Restricted Stock Plan...................................... 16
17.19. Securities Act............................................. 16
17.20. Shares..................................................... 16
17.21. Xxxxx Investors............................................ 16
17.22. Spheris Investment......................................... 16
17.23. Spheris Investment LLC Agreement........................... 16
17.24. Transfer................................................... 16
17.25. Warburg Investors.......................................... 16
17.26. Warburg Pincus............................................. 16
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STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT (this "Agreement") is dated as of November 5,
2004 and is entered into by and among Spheris Holding III, Inc., a Delaware
corporation (the "Company") and the Warburg Investors, the Xxxxx Investors and
Spheris Investment. Capitalized terms used herein without definition elsewhere
in this Agreement are defined in Section 17 hereof.
RECITALS
WHEREAS, on October 12, 2004, Spheris Holding, Inc., a Delaware corporation
and, as of the date hereof, an indirect wholly owned subsidiary of the Company
("Spheris Holding"), entered into a Securities Purchase Agreement (the "Purchase
Agreement") with Spheris Holdings LLC, a Delaware limited liability company,
pursuant to which Spheris Holding shall purchase all of the outstanding stock of
Spheris Inc., a wholly owned subsidiary of Spheris Holdings LLC ("Spheris"); and
WHEREAS, in connection with the consummation of the transactions
contemplated by the Purchase Agreement, the Investors have entered into a
Securities Purchase Agreement with the Company (the "Securities Purchase
Agreement"), pursuant to which the Company has issued and sold to each Investor
and each Investor has purchased from the Company shares of Series A Convertible
Preferred Stock of the Company (the "Preferred Stock"); and
WHEREAS, the powers, rights and preferences, restrictions and other matters
relating to the Common Stock and Preferred Stock are set forth in the Amended
and Restated Certificate of Incorporation of the Company (the "Restated
Certificate"); and
WHEREAS, the Investors and the Company desire to promote their mutual
interests by agreeing to certain matters relating to the operations of the
Company, the disposition and voting of the capital stock of the Company and
certain other matters set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth in this Agreement, and to implement the foregoing, the parties hereto
agree as follows:
1. Additional Offerings.
1.1. Additional Offerings; Generally. If at any time after the date hereof,
the Company or any direct or indirect subsidiary of the Company (each a
"Subsidiary") proposes to issue any Equity Securities (other than the issuance
of any Equity Securities (i) pursuant to the public in a firm commitment
underwriting pursuant to a registration statement filed under the Securities
Act, (ii) pursuant to the acquisition of another Person by the Company or any
Subsidiary (as consideration for the acquisition and not for the purpose of
financing an acquisition), whether by purchase of stock, merger, consolidation,
purchase of all or substantially all of the assets of such Person or otherwise,
(iii) pursuant to an employee stock option plan, stock bonus plan, stock
purchase plan or other management equity program, including without limitation
the Restricted Stock Plan, approved by a majority of the members of the Board
(iv) by a Subsidiary to the Company or any other Subsidiary of the Company or
(v) in the form of warrants to purchase Common Stock issued to lessors of
property and/or equipment or to
financial institutions or related entities in connection with commercial credit
or debt financing or other similar arrangements which are approved by a majority
of the members of the Board), then, as to each Investor who Owns at least 5% of
the Common Stock (each such Person is hereinafter referred to, for purposes of
this Section 1, as a "Participating Investor" and collectively, such Persons are
referred to in this Section 1 as the "Participating Investors"), the Company
shall:
(a) give written notice (the "Subscription Right Notice") setting
forth in reasonable detail (i) the designation and all of the terms and
provisions of the Equity Securities proposed to be issued (the "Proposed
Securities"), including, where applicable, the voting powers, preferences
and relative participating, optional or other special rights, and the
qualification, limitations or restrictions thereof and interest rate and
maturity; (ii) the price and other terms of the proposed sale of such
Proposed Securities; and (iii) the amount of such Proposed Securities
proposed to be issued; and
(b) offer to issue to each Participating Investor that number of
Proposed Securities equal to the number of Proposed Securities multiplied
by such Participating Investor's Percentage Interest. For purposes hereof,
"Percentage Interest" shall mean, in respect of any Participating Investor,
the percentage determined by dividing (x) the number of shares of Common
Stock Owned by such Participating Investor, by (y) the total number of
shares of Common Stock Owned by the Investors.
1.2. Exercise of Purchase Rights. Each Participating Investor may exercise
its purchase rights hereunder within twenty (20) business days after receipt of
the Subscription Right Notice. If all of the Proposed Securities offered to the
Participating Investors are not fully subscribed by such Participating
Investors, the remaining Proposed Securities will be reoffered to the
Participating Investors upon the terms set forth in this Section 1, until all
such Proposed Securities are fully subscribed for or until all such
Participating Investors have subscribed for all such Proposed Securities which
they desire to purchase, except that such Participating Investors must exercise
their purchase rights within ten (10) business days after receipt of all such
reoffers. To the extent that the Company or its Subsidiary, as the case may be,
offers two or more securities in units, the Participating Investors must
purchase such units as a whole and will not be given the opportunity to purchase
only one of the securities making up such unit.
1.3. Sale of Unpurchased Securities. Upon the expiration of the offering
periods described above, the Company or its Subsidiary, as the case may be, will
be free to sell such Proposed Securities that the Participating Investors have
not elected to purchase during the ninety (90) calendar day period immediately
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to the Participating Investors. Any
Proposed Securities offered or sold by the Company or its Subsidiary, as the
case may be, after such ninety (90) calendar day period must be reoffered to the
Participating Investors pursuant to this Section 1.
1.4. Future Additional Offerings. The election by a Participating Investor
not to exercise its subscription rights under this Section 1 in any one instance
shall not affect its right (other than in respect of a reduction in its
percentage holdings) as to any subsequent proposed issuance.
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2. Restrictions on Transfers and Sales to Third Parties.
2.1. General. No Shares owned by any Investor nor any interest therein nor
any rights related thereto may be Transferred by such Investor unless such
Investor complies with the provisions of this Section 2 and Section 8.3 hereof.
2.2. Tag-Along Rights.
(a) Subject to the other terms of this Section 2.2, and except as
required by Section 5.4, no Investor shall be permitted to Transfer any Shares
to one or more third parties unless each other Investor is offered a right to
participate in such Transfer for a purchase price per Share equal to the
purchase price to be received by such Investor then proposing to sell the Shares
(the "Selling Investor") and on other terms and conditions not less favorable to
such other Investor than those applicable to the Selling Investor. Any Investor
who, in accordance with the terms of Section 2.2(b) below, notifies the Selling
Investor that it desires to participate in any sale of Shares shall have the
right to include in such sale an amount of Shares equal to the amount of Shares
the third party actually proposes to purchase multiplied by the percentage
obtained by dividing the number of Shares owned by such participating Investor
by the aggregate number of Shares owned by the Selling Investor and each other
Investor exercising its right to participate in such sale pursuant hereto. For
the purposes of this Section 2.2(a), a sale to a "third party" shall not include
a sale to any Permitted Assignee or a sale pursuant to a Qualified Public
Offering. Notwithstanding the foregoing, in the event the Selling Investor is
selling only shares of Preferred Stock, holders of Common Stock shall not have
the right to sell shares of Common Stock pursuant to this Section 2.2(a).
(b) In the event a Selling Investor is proposing to sell any Shares
and, pursuant to this Section 2.2, the Investors are entitled to participate in
such sale, such Selling Investor shall notify each Investor entitled to
participate therein in writing of such proposed sale and its terms and
conditions (and shall provide any other information regarding the proposed
transfer that such other Investor may reasonably request). Within fifteen (15)
business days of the date of such notice, each Investor entitled to participate
therein shall notify such Selling Investor if it elects to participate in such
sale. Any Investor that fails to notify the Selling Investor within such fifteen
(15) business day period shall be deemed to have waived its rights hereunder
with respect to such sale. Notwithstanding anything contained in this Section
2.2 to the contrary, in the event that all or a portion of the purchase price
for the Shares being purchased consists of securities and the sale of such
securities to any Investor entitled to participate therein would, by virtue of
the fact that such Investor is not an "accredited investor" (within the meaning
of Rule 501(a) under the Securities Act), require either a registration under
the Securities Act or the preparation of a disclosure document pursuant to
Regulation D under the Securities Act (or any successor regulation) or a similar
provision of any state securities law, then, at the option of the Selling
Investor, any one or more of such Investors may receive, in lieu of such
securities, the fair market value of such securities in cash, as determined in
good faith by the Board.
2.3. Company Sale.
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(a) In the event that the Warburg Investors are proposing to
consummate a Company Sale to any Person or Persons that are not Affiliates of
any of the Warburg Investors, the Warburg Investors shall have the right (the
"Drag-along Right"), but not the obligation, to require each other Investor to
sell all Shares owned by such Investor in accordance with the terms of such
Company Sale, or in the case of a merger, consolidation or sale of assets, to
vote all shares of capital stock owned by such Investor in favor of, and waive
any dissenter or appraisal right it may have in respect of, such Company Sale;
provided, however, that, in the event that the Xxxxx Investors Own at least 5%
of the Common Stock at the time of such proposal, the Warburg Investors shall
not be permitted to exercise the Drag-along Right unless the Warburg Investors
first comply with Section 2.3(b) below.
(b) The Warburg Investors shall, as a condition precedent to
exercising any Drag-along Right, deliver to the Xxxxx Investors an offer notice
(the "Notice of Offer") that shall include (A) an offer (the "Xxxxx Offer") to
effect such Company Sale with the Xxxxx Investors and (B) the terms of such
proposed Company Sale, including the purchase price in respect thereof, terms of
payment and any other material terms and conditions for such sale. Within ten
(10) business days after receipt of the Xxxxx Offer (the "Xxxxx Offer Period"),
the Xxxxx Investors may, at their option, accept the Xxxxx Offer. The Xxxxx
Investors shall give written notice to the Warburg Investors of their
acceptance, or their rejection, of the Xxxxx Offer within the Xxxxx Offer
Period. Failure by the Xxxxx Investors to give notice of their acceptance of the
Xxxxx Offer hereunder within the Xxxxx Offer Period shall be deemed rejection of
the Xxxxx Offer. If the Xxxxx Investors accept the Xxxxx Offer, such notice
shall specify the date for the closing of the Company Sale which shall not be
more than forty-five (45) days after such notice and each Investor shall take
such action as may be necessary to consummate the Company Sale as required by
this Section 2.3. The closing of any such Company Sale to the Xxxxx Investors
shall take place at such location as shall be mutually agreeable between the
Warburg Investors and the Xxxxx Investors and the purchase price, to the extent
comprised of cash, shall be paid at the closing, and cash equivalents and
documents evidencing any deferred payments of cash permitted shall be delivered
at the closing.
(c) If the Xxxxx Investors reject (or are deemed to reject) the Xxxxx
Offer, the Warburg Investors may exercise the Drag-along Right on terms no less
favorable to the Warburg Investor than the terms set forth in the applicable
Xxxxx Offer; provided, however, that if the Warburg Investors fail to consummate
such Company Sale within one-hundred and eighty (180) days after the expiration
or termination of the Xxxxx Offer Period, the Drag-along Right shall again be
subject to the restrictions of this Section 2.3. To exercise the Drag-along
Right, the Warburg Investors shall give each other Investor a written notice
containing (i) the name and address of the proposed transferee(s) and (ii) the
proposed purchase price, terms of payment and any other material terms and
conditions of the Company Sale.
(d) Upon exercise of the Drag-along Right or acceptance of the Xxxxx
Offer (if such Xxxxx Offer is required hereby), each Investor shall be obligated
to sell all Shares owned by it to the proposed transferee, or, in the case of a
merger or sale of assets or other transaction that requires the vote of the
Company's stockholders, to vote all Shares owned by such Investor in favor of,
and waive any dissenter or appraisal right it may have in respect of, such
Company Sale and shall otherwise take all steps necessary (including delivery of
certificates or other instruments evidencing the shares to be conveyed, duly
endorsed and in negotiable form with all
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the requisite documentary stamps affixed thereto) to enable him, her or it to
facilitate such Company Sale and to comply with the provisions of this Section
2.3.
(e) Each Investor required to sell all its Shares pursuant to a
Company Sale shall be entitled to receive in exchange therefor an amount per
share equal to the purchase price received per share of Common Stock Owned by
the Warburg Investors in connection with such Company Sale (it being understood
that, solely for purposes of this Section 2.3, "Owned" shall mean beneficial
ownership, assuming Mandatory Conversion of all outstanding Preferred Stock
(whether or not then convertible) pursuant to Section 5(a)(i) of the Restated
Certificate (giving full effect to, Section 5 of the Restated Certificate)).
Such Investors shall otherwise participate in such Company Sale on other terms
and conditions not less favorable to such Investors than those applicable to the
Warburg Investors and, subject to Section 2.3(f) below, shall receive the same
type of consideration received by the Warburg Investors in such Company Sale.
(f) Notwithstanding anything contained in this Section 2.3 to the
contrary, in the event that all or a portion of the purchase price for the
shares being purchased consists of securities and the sale of such securities to
an Investor entitled to participate therein would, by virtue of the fact that
such Investor is not an "accredited investor" (within the meaning of Rule 501(a)
under the Securities Act), require either a registration under the Securities
Act or the preparation of a disclosure document pursuant to Regulation D under
the Securities Act (or any successor regulation) or a similar provision of any
state securities law, then, at the option of the Warburg Investors, any one or
more of such Investors may receive, in lieu of such securities, the fair market
value of such securities in cash, as determined in good faith by the Board.
3. Election of Directors; Committees.
3.1. Board Make-up. As of the date hereof (after giving effect to the
transactions contemplated by the Purchase Agreement), the Board of Directors of
the Company (the "Board") shall consist of Xxxx Xxxxxxxx, Xxxxxxxx Xxxxxx, Xxxxx
Xxxxxx, Xxxx Xxxxxxxxxx, Xxxxxx Xxxxxxx and Xxxxx Xxxxxxxx. From and after the
date hereof, the Investors and the Company shall take all action within their
respective power, including but not limited to, the voting of all Shares Owned
by them, required to cause the Board to consist of up to six (6) members, and,
if the Healthscribe Acquisition has occurred, at the request of the Majority
Warburg Investors and the Majority Xxxxx Investors, to consist of up to seven
(7) members, and at all times throughout the term of this Agreement, to include:
(a) for as long as the Warburg Investors Own at least twenty percent
(20%) of the Common Stock Owned by Investors, two (2) members designated by
Warburg Pincus and, for as long as the Warburg Investors Own at least five
percent (5%) but less than twenty percent (20%) of the Common Stock Owned
by Investors, one (1) member designated by Warburg Pincus (such members
referred to herein as "Warburg Directors" and each a "Warburg Director");
(b) for as long as the Xxxxx Investors Own at least twenty percent
(20%) of the Common Stock Owned by Investors, two (2) members designated by
the Xxxxx Investors and, for as long as the Xxxxx Investors Own at least
five percent (5%) but less than twenty percent (20%) of the Common Stock
Owned by Investors, one (1) member designated by
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the Xxxxx Directors (such members referred to herein as "Xxxxx Directors"
and each a "Xxxxx Director");
(c) one member of management who shall be the Chief Executive Officer
of the Company then in office (the "Management Director");
(d) one independent member reasonably acceptable to the Majority Xxxxx
Investors and the Majority Warburg Investors (the "Independent Director");
and
In addition, if the Healthscribe Acquisition shall have been consummated, at the
request of the Majority Warbug Investors and the Majority Xxxxx Investors, the
Investors and the Company shall take all action within their power, including
but not limited to the voting of all Shares Owned by them, to cause the Board to
consist of one (1) additional member, in addition to those designated pursuant
to (a) through (d) above, reasonably acceptable to the Warburg Investors and the
Xxxxx Investors (the "Additional Director").
The parties hereto acknowledge that the four representatives to be
designated by the Warburg Investors and Xxxxx Investors are initially the
directors that the holders of Preferred Stock are entitled to elect under the
Restated Certificate. The parties hereto further acknowledge that the initial
Warburg Directors shall be Xxxx Xxxxxxxx and Xxxxx Xxxxxxxx, the initial Xxxxx
Directors shall be Xxxxxxxx Xxxxxx and Xxxx Xxxxxxxxxx, the initial Management
Director shall be Xxxxxx Xxxxxxx, the initial Independent Director shall be
Xxxxx Xxxxxx, and, if the Healthscribe Acquisition shall have been consummated
and the Majority Warburg Investors and the Majority Xxxxx Investors shall have
requested an Additional Director, the Additional Director shall be Xxxxxxx Xxxx,
or such other person reasonably acceptable to the Warburg Investors and the
Xxxxx Investors. In addition, subject to the ownership requirements set forth in
paragraphs (a) and (b) of this Section 3.1, the Warburg Investors, on the one
hand and the Xxxxx Investors, on the other hand shall be entitled to designate
an equal number of directors.
3.2. Replacement Directors. In the event that any Soros Director or any
Warburg Director (each, a "Withdrawing Director") designated in the manner set
forth in Section 3.1 hereof is unable to serve, or once having commenced to
serve, is removed or withdraws from the Board, such Withdrawing Director's
replacement (the "Substitute Director") will be designated by the Investors of
the Company that have the right to designate such director in accordance with
Section 3.1 above. The Investors and the Company agree to take all action within
their respective power, including, but not limited to, the voting of all Shares
Owned by them (i) to cause the election of such Substitute Director promptly
following his or her nomination pursuant to this Section 3.2 and (ii) upon the
written request of the Investors that have the right to designate such director
to the Board in accordance with Section 3.1 above, to remove, with or without
cause, any of the the Warburg Directors or the Xxxxx Directors, as the case may
be.
3.3. Committees. Subject to applicable law and any rules or regulations of
any stock exchange or automated dealer quotation system on which the Common
Stock is listed, in the event the Board shall at any time create a committee of
the Board, any such committee shall have at least one Warburg Director so long
as the Warburg Investors are entitled to elect at least one member of the Board
and at least one Xxxxx Director so long as the Xxxxx Investors are entitled to
elect at least one member of the Board; provided, however, that in respect of
any such Investor,
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the foregoing shall not apply to any committee formed to consider a transaction
between the Company and such Investor or its Affiliates.
3.4. Directors of Subsidiaries.
(a) For so long as the Xxxxx Investors are entitled to elect at least
one member of the Board, the Xxxxx Investors shall be entitled to designate
one director (which director shall be one of the Xxxxx Directors) to the
board of directors of each Subsidiary. In the event that the Xxxxx
Investors exercise their right pursuant to this Section 3.4, the Company
shall take all action within its power to cause such designee to be
appointed to such boards.
(b) For so long as Warburg Pincus is entitled to elect at least one
member of the Board, Warburg Pincus shall be entitled to designate one
director (which director shall be one of the Warburg Directors) to the
board of directors of each Subsidiary. In the event that Warburg Pincus
exercises its right pursuant to this Section 3.4, the Company shall take
all action within its power to cause such designee to be appointed to such
boards.
4. Legends. A copy of this Agreement shall be filed with the Secretary of the
Company and kept with the records of the Company. Each certificate or other
instrument representing Shares owned by any Investor shall bear upon its face
the following legends, as appropriate:
(i) THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS UNLESS, IN THE OPINION OF COUNSEL TO THE HOLDER OF SUCH
SECURITIES, WHICH COUNSEL MUST BE, AND THE FORM AND SUBSTANCE OF WHICH
OPINION ARE, REASONABLY SATISFACTORY TO SPHERIS HOLDING III, INC. (THE
"COMPANY"), SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER
OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT, SUCH LAWS AND THE STOCKHOLDERS' AGREEMENT DATED AS
OF NOVEMBER 5, 2004, BY AND AMONG THE COMPANY, WARBURG PINCUS PRIVATE
EQUITY VIII, L.P., XXXXX PRIVATE EQUITY INVESTORS LP AND THOSE OTHER
PARTIES NAMED THEREIN (THE "STOCKHOLDERS' AGREEMENT").
(ii) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND OTHER CONDITIONS, AS SPECIFIED IN THE
STOCKHOLDERS' AGREEMENT, COPIES OF WHICH ARE ON FILE AT THE OFFICE OF THE
COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF SUCH
SECURITIES UPON WRITTEN REQUEST.
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In addition, certificates representing Shares shall bear any legends required by
the applicable laws of any states.
5. Covenants, Representations and Warranties.
5.1. Actions by the Board; Actions Requiring the Approval of the Majority
Xxxxx Investors.
(a) Without the approval of the Board, which approval must include the
affirmative vote of at least one Warburg Director, the Company will not,
and will not permit any Subsidiary to:
(i) sell, lease, or dispose of assets in excess of $5,000,000 outside
of the ordinary course of business;
(ii) incur indebtedness for borrowed money in excess of $2,000,000 in
any fiscal year;
(iii) make capital expenditures in any fiscal year in excess of an
amount equal to 110% of the capital expenditures described in the operating
plan of the Company approved by the Board (the "Operating Plan") for such
fiscal year;
(iv) engage in any material business or activity other than that
described in the Operating Plan;
(v) materially change its accounting methods or policies or change its
auditors;
(vi) increase the compensation of its senior executives other than as
described in the Operating Plan;
(vii) approve the Operating Plan; or
(viii) take, agree to take or resolve to take any actions in
furtherance of any of the foregoing.
(b) Without the written approval of the Majority Xxxxx Investors, the
Company will not:
(i) amend, alter or repeal the preferences, special rights or other
powers of the Preferred Stock in a manner that (a) would adversely affect
the rights of one holder of Preferred Stock, in its capacity as a holder of
Preferred Stock, without similarly affecting the rights of all other
holders of Preferred Stock or (b) changes the economic terms of the
Preferred Stock other than the issuance of Equity Securities of which the
Soros Investors have or had been granted purchase rights pursuant to
Section 1 hereof;
(ii) authorize or effect any merger or consolidation or other
reorganization of the Company with or into another corporation or other
entity other than in connection
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with a Company Sale to any Person or Persons that are not Affiliates of any
of the Warburg Investors; or
(iii) amend, alter or repeal the Restated Certificate or bylaws of the
Company in a manner that (a) would adversely affect the rights of one
holder of Preferred Stock, in its capacity as a holder of Preferred Stock,
without similarly affecting the rights of all other holders of Preferred
Stock or (b) changes the economic terms of the Preferred Stock other than
the issuance of Equity Securities of which the Soros Investors have or had
been granted purchase rights pursuant to Section 1 hereof.
5.2. Transactions With Investors. So long as Xxxxx Private Equity Investors
LP Owns at least 5% of the Common Stock Owned by Investors, the Company will not
enter, and will cause its subsidiaries not to enter, into any Warburg Affiliated
Transaction without the approval of the Investors that Own a majority of the
Common Stock Owned by Investors other than the Warburg Investors and, for so
long as Spheris Investment is an Affiliate of Warburg Pincus, Spheris
Investment. For the purposes hereof, "Warburg Affiliated Transaction" shall
mean, at any time that Warburg Pincus and Affiliates of Warburg Pincus Own
twenty percent (20%) or more of the aggregate Common Stock Owned by Investors,
any transaction outside the ordinary course of business of the Company and its
Subsidiaries (other than the issuance of Equity Securities of which the Xxxxx
Investors have or had been granted purchase rights pursuant to Section 1 hereof)
with Warburg Pincus or any Affiliate of Warburg Pincus.
5.3. Information Rights. At any time that the Company is not required to
file periodic reports pursuant to the Exchange Act, or, if required and the
Company fails to file such required periodic reports with the Securities and
Exchange Commission (the "SEC") for any reason whatsoever, the Company shall
provide to each Investor, by electronic means or otherwise, essentially the same
financial statements that would be contained in Annual Reports on Form 10-K and
in Quarterly Reports on Form 10-Q, if the Company were required to file, or did
not fail to file, such periodic reports, it being understood and agreed that
such information shall (a) be provided to the Investors no later than the date
on which the Company would have been required to file such report with the SEC
and (b) include, without limitation, annual audited financial statements and
unaudited quarterly financial statements, each prepared in accordance with
generally accepted accounting principles. Notwithstanding the foregoing, for the
financial periods ending before December 31, 2005, the Company may provide each
Investor, in lieu of the information required pursuant to this Section 5.3, the
equivalent information that one or more of the Company's Subsidiaries is
required to provide to the Lenders (as defined in the Credit Agreement) pursuant
to Section 5.4 of the Credit Agreement. Without limiting the foregoing, from and
after the date hereof, on reasonable prior written notice, the Company and its
subsidiaries shall make their respective representatives reasonably available to
each Investor that Owns at least 10% of the Common Stock Owned by all Investors
to discuss the business, results of operations and other matters pertaining to
the Company and its subsidiaries. Any and all information provided to any
Investor pursuant to the terms of this Agreement (other than any information
that is generally available to the public through no breach of the terms of this
Agreement) shall be treated as confidential information by such Investor and
such Investor shall use its reasonable best efforts to ensure that such
information is not disclosed or otherwise divulged to any third party (other
than such Investor's counsel, accountants and other professional advisors in
connection with services being performed by any such professional for
9
such Investor and to the members, partners and limited partners of the Warburg
Investors and the Xxxxx Investors).
5.4. Healthscribe Acquisition. In the event that the Healthscribe
Acquisition shall have not been consummated on or prior to the Termination Date
(as defined in the Healthscribe Acquisition Agreement), the Xxxxx Investors
shall sell to the Warburg Investors, and the Warburg Investors shall purchase
from the Xxxxx Investors (such sale and purchase, the "Xxxxx Sale"), an
aggregate of 12,865,465 shares (the "Xxxxx Sale Shares") of Preferred Stock (as
such shares are constituted as of the date hereof) as set forth in this Section
5.4. The price per Xxxxx Sale Share shall be in cash and shall be equal to the
price per share of Preferred Stock paid by the Xxxxx Investors pursuant to the
Securities Purchase Agreement, and each such Xxxxx Sale Share shall be sold to
the Warburg Investors free and clear of any mortgage, pledge, lien, security
interest, restriction on transfer (other than pursuant to applicable securities
laws), option, charge or other encumbrance. The closing of the Xxxxx Sale shall
take place no later than 5 business days after the Termination Date at such
location and at such time as shall be mutually agreeble between the Warburg
Investors and the Xxxxx Investors. At the closing, the purchase price for the
Xxxxx Sale Shares shall be paid by the Warburg Investors by wire transfer of
immediately available funds against delivery of the certificates evidencing the
Xxxxx Sale Shares, duly endorsed and in negotiable form with all requisite
documentary stamps affixed thereto. The parties hereto acknowledge and agree
that the intent of any Xxxxx Sale is that the shares of Preferred Sock owned by
the Warburg Investors (it being understood that, for purposes of this 5.4,
shares of Preferred Stock owned by the Warburg Investors shall include shares of
Preferred Stock equal to the product of the number of shares of Preferred Stock
owned by Spheris Investment and the percentage of outstanding membership units
of Spheris Investment owned by the Warburg Investors) and the Xxxxx Investors as
of the date hereof (collectively, the "Initial Warburg and Xxxxx Preferred
Shares") will be reallotted so that, as a result of the Xxxxx Sale, the Warburg
Investors will own 80% and the Xxxxx Investors will own 20%, in each case, of
the Initial Warburg and Xxxxx Preferred Shares.
6. Amendment, Modification, Supplement and Waiver. This Agreement may be
amended, modified or supplemented, and the enforcement of any provision hereof
may be waived, with, and only with, the prior written consent of the Company,
the Majority Warburg Investors and the Majority Xxxxx Investors.
7. Termination of Rights and Obligations Under Certain Sections. All rights and
obligations pursuant to Sections 1, 2, 5, 8, 9, and 10 of this Agreement shall
terminate upon the closing of a Qualified Public Offering. Without limiting the
foregoing, this Agreement or any portion hereof shall terminate upon the written
consent of the Majority Warburg Investors and the Majority Xxxxx Investors.
8. Parties.
8.1. Assignment Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns; provided, that no Investor
shall be permitted to assign any of his, her or its obligations pursuant to this
Agreement without the prior written consent of the Company, the Majority Warburg
Investors and the Majority Xxxxx Investors, unless such assignment is in
10
connection with a Transfer explicitly permitted by this Agreement and, prior to
such assignment, such assignee complies with the requirements of Section 8.3;
provided, further, that the parties hereto acknowledge and agree that, subject
to compliance with Section 8.3 hereof, Spheris Investment shall be permitted to
assign its rights and obligations under this Agreement from time to time in
accordance with the terms of Section 13 of the Spheris Investment LLC Agreement.
Notwithstanding the foregoing, the rights and obligations set forth in Section
2.3 and Section 3, and Sections 5.2 and 5.4 may not be assigned.
8.2. Termination. Any party to, or Person who is subject to, this Agreement
that ceases to Own any Shares shall cease to be a party to, or Person who is
subject to, this Agreement and thereafter shall have no rights or obligations
hereunder; provided, however, that a Transfer of Shares not explicitly permitted
under this Agreement shall not relieve any Investor of any of his, her or its
obligations hereunder.
8.3. Agreements to Be Bound. Notwithstanding anything to the contrary
contained in this Agreement, as a condition precedent to the effectiveness of
any Transfer of Shares the transferee thereof shall be required to agree in
writing to be bound by the terms and conditions of this Agreement pursuant to an
instrument of assumption reasonably satisfactory in substance and form to the
Company (a "Joinder").
9. Recapitalizations, Exchanges, etc. Affecting the Shares. Except as otherwise
provided herein, the provisions of this Agreement shall apply to the fullest
extent set forth herein with respect to (a) the Shares and (b) any and all
Equity Securities of the Company or any successor or assign of the Company
(whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for, or in substitution for the Shares, by
reason of any stock dividend, split, reverse split, combination,
recapitalization, reclassification, merger, consolidation or otherwise. Except
as otherwise expressly provided herein, this Agreement is not intended to
confer, and does not confer, upon any Person, except for the parties hereto, any
rights or remedies hereunder.
10. Further Assurances. Each party hereto or Person subject hereto shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as any other party hereto or Person subject hereto may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
11. Governing Law. This Agreement and the rights and obligations of the parties
hereunder and the Persons subject hereto shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Delaware, without
giving effect to the choice of law principles thereof.
12. Invalidity of Provision. The invalidity or unenforceability of any provision
of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.
11
13. Notices. All notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if (a) delivered personally, (b) mailed,
certified or registered mail with postage prepaid, (c) sent by next-day or
overnight mail or delivery or (d) sent by telecopy (including facsimile) or
telegram, as follows:
(i) If to the Company, to it at:
c/o Warburg Pincus LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx
Xxxxx Xxxxxxxx
with a copy to:
Warburg Pincus Private Equity VIII, L.P.
c/o Warburg Pincus LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx
Xxxxx Xxxxxxxx
(ii) If to Warburg Pincus, to it at:
Warburg Pincus Private Equity VIII, L.P.
c/o Warburg Pincus LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx
Xxxxx Xxxxxxxx
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(iii) If to Xxxxx, to it at:
Xxxxx Private Equity Investors LP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
12
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attention: General Counsel and Xxxxxxxx Xxxxxx
with a copy to:
Xxxxxxxx & Xxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Attention: W. Xxxxx Xxxxxxx, Esq.
(iv) If to Spheris Investment LLC, to it at
c/o Warburg Pincus LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx
Xxxxx Xxxxxxxx
with a copy to:
Spheris Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn:Xxxxxxx X. Xxxxxxx, Esq.
(v) If to any other Investor, to such Investor at the address or
facsimile number listed on the signature page hereto or the Joinder
Agreement executed by such Investor or as such Investor shall designate to
the Company in writing in accordance with the terms hereof, with a copy to
the Company and Investors at their respective addresses indicated herein;
or, in each case, to such other Person or address as any party shall
specify by notice in writing to the Company and Investors. Any notice so
addressed shall be deemed to be given: if delivered personally or by telecopy
(including facsimile) or telegram, on the date of such delivery, if a business
day, otherwise on the first business day thereafter; if mailed by certified or
registered mail with postage prepaid, on the third business day after the date
of such mailing; and if sent by next-day or overnight mail or delivery, on the
first business day following the date of such mailing or delivery.
14. Headings; Execution in Counterparts. The headings and captions contained
herein are for convenience only and shall not control or affect the meaning or
construction of any provision hereof. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and
which together shall constitute one and the same instrument.
13
15. Entire Agreement. This Agreement, together with Registration Rights
Agreement and the other agreements and documents referenced herein, including in
the recitals hereto (collectively, the "Other Agreements"), embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants or undertakings relating to the Shares, other than those
expressly set forth or referred to herein and other than those set forth in the
Other Agreements. This Agreement and the Other Agreements supersede all prior
agreements and understandings among the parties with respect to such subject
matter, and it is the understanding of all parties hereto that any such prior
agreement is hereby terminated, null and void as of the Closing Date.
16. Injunctive Relief. The Shares cannot readily be purchased or sold in the
open market, and for that reason, among others, the Company and the Investors
will be irreparably damaged in the event this Agreement is not specifically
enforced. Each of the parties therefore agrees that in the event of a breach of
any provision of this Agreement, the aggrieved party may elect to institute and
prosecute proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of this Agreement. Such remedies
shall, however, be cumulative and not exclusive, and shall be in addition to any
other remedy which the Company or the Investors may have. Each party hereto
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts in New York, New York for the purposes of any suit, action or
other proceeding arising out of or based upon this Agreement or the subject
matter hereof. Each party hereto hereby consents to service of process by mail
made in accordance with Section 13 hereof.
17. Defined Terms. As used in this Agreement, the following terms shall have the
meanings ascribed to them below:
17.1. Affiliate. "Affiliate" shall mean, with respect to any Person, a
Person directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with, such Person.
17.2. Closing Date. The "Closing Date" shall mean the date on which the
transactions contemplated by the Purchase Agreement close.
17.3. Common Stock. "Common Stock" shall mean common stock, par value $0.01
per share, of the Company.
17.4. Company Sale. "Company Sale" shall mean any sale (including by merger
or consolidation) of all of the Shares owned by the Warburg Investors or any
sale of all or substantially all of the assets of the Company and its
Subsidiaries, on a consolidated basis, in either case, to any Person.
17.5. Convertible Securities. "Convertible Securities" shall mean any
warrants, options or other rights to acquire, and any equity and debt securities
convertible into, capital stock of the Company or any Subsidiary.
14
17.6. Credit Agreement. "Credit Agreement" shall mean that certain Credti
Agreement, dated as of the date hereof, by and among Spheris Holding II, Inc.
and Spheris Inc., as Borrower, the several Lenders from time to time party
thereto, UBS Securities LLC, as Syndication Agent, and JPMorgan Chase Bank, as
Administrative Agent.
17.7. Equity Securities. "Equity Securities" shall mean any equity
securities of any kind of the Company or any Subsidiary, including any
Convertible Securities.
17.8. Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
17.9. Healthscribe Acquisition. "Healthscribe Acquisition" shall mean the
Merger (as such term is defined in the Healthscribe Acquisition Agreement).
17.10. Healthscribe Acquisition Agreement. "Healthscribe Acquisition
Agreement" shall mean the Agreement and Plan of Merger, dated as of September
20, 2004, by and among Healthscribe, Inc., MTS Group Holdings, Inc. and HSI
Merger Sub, Inc.
17.11. Investors. "Investors" shall mean the Warburg Investors, the Xxxxx
Investors, Spheris Investment and their respectice transferees and assigns that
become parties to this Agreement pursuant to Section 8.3 hereof.
17.12. Mandatory Conversion. "Mandatory Conversion" shall have the meaning
ascribed to such term in the Restated Certificate.
17.13. Majority Xxxxx Investors. "Majority Xxxxx Investors" shall mean the
Xxxxx Investors that Own the majority of the aggregate Common Stock Owned by the
Xxxxx Investors.
17.14. Majority Warburg Investors. "Majority Warburg Investors" shall mean
the Warburg Investors that Own the majority of the aggregate Common Stock Owned
by the Warburg Investors.
17.15. Owns, Own or Owned. "Owns," "Own," or "Owned" shall mean beneficial
ownership within the meaning of Rule 13d-3 under the Exchange Act, assuming the
conversion (whether or not then convertible) of all outstanding Preferred Stock
(which for purposes hereof shall mean assuming the conversion (whether or not
then convertible) of all outstanding Preferred Stock into the number of shares
of Common Stock into which such Preferred Stock is convertible at the then
applicable Conversion Rate in accordance with, and as adjusted from time to time
by, the Restated Certificate without giving effect to subclauses 5(a)(x) and
5(a)(z) of the Restated Certificate).
17.16. Permitted Assignee. A "Permitted Assignee" shall mean, with respect
to each Investor, any Affiliate of such Investor and any member, general partner
or limited partner of such Investor (or any Person holding an equity interest in
any such member, general partner or limited partner); provided, that in each
instance, any such transferee agrees to be bound by the provisions of this
Agreement in accordance with the terms of Section 8.3 hereof.
15
17.17. Person. "Person" shall mean an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority or other
entity of whatever nature.
17.18. Qualified Public Offering. "Qualified Public Offering" shall have
the meaning ascribed to such term in the Restated Certificate.
17.19. Registration Rights Agreement. "Registration Rights Agreement" shall
mean that certain Registration Rights Agreement, dated as of the date hereof, by
and among the Company and the investors ascribed thereto.
17.20. Restricted Stock Plan. "Restricted Stock Plan" shall mean the
Spheris Holding III, Inc. Stock Incentive Plan.
17.21. Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended.
17.22. Shares. "Shares" shall mean shares of Common Stock and Convertible
Securities (including Preferred Stock) convertible into Common Stock.
17.23. Xxxxx Investors. "Xxxxx Investors" shall mean Xxxxx Private Equity
Investors LP.
17.24. Spheris Investment. "Spheris Investment" shall mean Spheris
Investment LLC and its transferees and assigns.
17.25. Spheris Investment LLC Agreement. "Spheris Investment LLC Agreement"
shall mean the Amended and Restated Limited Liability Company Agreement of
Spheris Investment LLC.
17.26. Transfer. "Transfer" (or any variation thereof used herein) shall
mean any direct or indirect sale, assignment, mortgage, transfer, pledge,
hypothecation or other disposal.
17.27. Warburg Investors. "Warburg Investors" shall mean Warburg Pincus,
Warburg Pincus Netherlands Private Equity VIII C.V. I, Warburg Pincus
Netherlands Private Equity VIII C.V. II and Warburg Pincus Germany Private
Equity VIII KG.
17.28. Warburg Pincus. "Warburg Pincus" shall mean Warburg Pincus Private
Equity VIII, L.P.
[signature pages follow]
16
IN WITNESS WHEREOF, the undersigned has executed this Stockholders'
Agreement as of the date first above written.
SPHERIS HOLDING III, INC.
By: /s/ Tenno Tsai
------------------------------------
Name: Tenno Tsai
----------------------------------
Title: President
---------------------------------
[Stockholders Agreement Signature Page]
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders'
Agreement as of the date first above written.
WARBURG PINCUS PRIVATE EQUITY VIII, L.P.
By: Warburg Pincus & Co.,
its General Partner
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------------------
Title: General Partner
---------------------------------
WARBURG PINCUS NETHERLANDS
PRIVATE EQUITY VIII C.V. I
By: Warburg Pincus & Co.,
its General Partner
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------------------
Title: General Partner
---------------------------------
WARBURG PINCUS NETHERLANDS
PRIVATE EQUITY VIII C.V. II
By: Warburg Pincus & Co.,
its General Partner
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------------------
Title: General Partner
---------------------------------
WARBURG PINCUS GERMANY PRIVATE
EQUITY VIII KG
By: Warburg Pincus & Co.,
its General Partner
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------------------
Title: General Partner
---------------------------------
[Stockholders Agreement Signature Page]
IN WITNESS WHEREOF, the undersigned has executed this Stockholders'
Agreement as of the date first set forth above.
XXXXX PRIVATE EQUITY INVESTORS LP
By: /s/ Xxxxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxxxx Xxxxxxxx
----------------------------------
Title: CFO
---------------------------------
[Stockholders Agreement Signature Page]
IN WITNESS WHEREOF, the undersigned has executed this Stockholders'
Agreement as of the date first above written.
SPHERIS INVESTMENT LLC
By: Warburg Pincus Private Equity VIII,
L.P., Warburg Pincus Netherlands
Private Equity VIII C.V. I, Warburg
Pincus Netherlands Private Equity
VIII C.V. II and Warburg Pincus
Germany Private Equity VIII KG,
together, its Managing Members
By: Warburg Pincus & Co.,
their General Partner
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------------------
Title: General Partner
---------------------------------
[Stockholders Agreement Signature Page]
