EXHIBIT 99.6
MANAGEMENT RIGHTS LETTER
March 19, 2004
New Mountain Partners, L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
This letter will confirm our agreement that, in connection with your
investment in National Medical Health Card Systems, Inc., a Delaware
corporation (the "Company"), pursuant to the Amended and Restated Preferred
Stock Purchase Agreement, dated as of November 26, 2003, by and among New
Mountain Partners, L.P., a Delaware limited partnership ("Investor"), the
Company, and such other parties who may be signatories thereto from time to
time (as such agreement may be amended from time to time, the "Preferred
Stock Purchase Agreement"), the Investor will be entitled to the following
contractual management rights relating to the Company (collectively, the
"Management Rights"). Any capitalized terms used herein but not defined
herein shall have the meanings assigned to such terms in the Preferred
Stock Purchase Agreement.
1. Investor shall be entitled to routinely consult with and advise
management of the Company with respect to operations of the Company
and its direct and indirect subsidiaries, including all the Company's
business and financial matters and management's proposed annual
operating plans, and management will, upon Investor's request, meet
with representatives of Investor (the "Representatives") at reasonable
intervals at the Company's facilities at mutually agreeable times for
such consultation and advice, including to review progress in
achieving said plans. The Company shall give Investor reasonable
advance written notice of any significant new initiatives or material
changes to existing operating plans of the Company and its direct and
indirect subsidiaries and shall afford Investor adequate time to meet
with management to consult on such initiatives or changes prior to
implementation. The Company agrees to give due consideration to the
advice given and any proposals made by Investor.
2. Investor may, upon notice during normal business hours, inspect all
documents, contracts, books, records, personnel, offices and other
facilities and properties of the Company and its direct and indirect
subsidiaries and, to the extent available to the Company after the
Company uses reasonable efforts to obtain them, the records of its
legal advisors and accountants, including the accountants' work
papers, and Investor may make such copies and inspections thereof as
Investor may reasonably request. The Company shall furnish Investor
with such financial and operating data and other information with
respect to the business and properties of the Company and its direct
and indirect subsidiaries as the Investor may reasonably request. The
Company shall permit the Representatives to discuss the affairs,
finances and accounts of the Company and its direct and indirect
subsidiaries with the principal officers of the Company and to make
proposals and furnish advice with respect thereto to such persons.
3. At any time during which Investor does not have a right pursuant to
the certificate of designations setting forth the designation, powers
and preferences of the Company's Series A Convertible Preferred Stock
to designate at least one member to the Company's board of directors
(the "Board"), the Company shall, after receiving notice from Investor
as to the identity of such person (a "Board Observer"), (i) permit a
Board Observer to attend all meetings of the Board and all committees
thereof as a non-voting observer; (ii) provide the Board Observer
advance notice of each such meeting, including such meeting's time and
place, at the same time and in the same manner as such notice is
provided to the members of the Board (or such committee thereof);
(iii) provide the Board Observer with copies of all materials,
including notices, minutes and consents, distributed to the members of
the Board (or such committee thereof) at the same time as such
materials are distributed to such Board (or such committee thereof)
and permit the Board Observer to have the same access to information
concerning the business and operations of the Company and its direct
and indirect subsidiaries as is provided to the members of the Board;
and (iv) permit the Board Observer to discuss the affairs, finances
and accounts of the Company and its direct and indirect subsidiaries
with, and to make proposals and furnish advice with respect thereto
to, the Board, without voting, and the Board and the Company's
officers shall give due consideration to such proposals or advice;
provided, however that the Board Observer may be excluded from access
to any materials or attendance at any meeting or portion thereof or
upon advice of counsel (which may be the Company's general counsel)
that such exclusion is reasonably necessary to preserve the
attorney-client privilege or to comply with applicable law. Reasonable
documented costs and expenses incurred by the Board Observer for the
purposes of attending Board (or committee) meetings and conducting
other Company business will be paid by the Company.
4. The Company shall deliver to Investor:
(a) for so long as the Company or any direct or indirect subsidiary
is required by law or pursuant to the terms of any outstanding
indebtedness of the Company or any direct or indirect subsidiary
to prepare such reports, any annual reports, quarterly reports
and other periodic reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, prepared by the
Company or any direct or indirect subsidiary as soon as
available; and
(b) in the event that the Company is no longer required by law or
pursuant to the terms of any outstanding indebtedness to prepare
annual reports, quarterly reports or other periodic reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended:
(i) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal
year of the Company, consolidated balance sheets of the
Company and its direct and indirect subsidiaries as of the
end of such period then ended, and consolidated statements
of income and cash flows of the Company and its direct and
indirect subsidiaries for the period then ended, in each
case prepared in conformity with generally accepted
accounting principles in the United States applied on a
consistent basis, except as otherwise noted therein and
subject to the absence of footnotes and to year-end
adjustments; and
(ii) as soon as available and in any event within 120 days after
the end of each fiscal year of the Company, a consolidated
balance sheet of the Company and its direct and indirect
subsidiaries as of the end of such year, and consolidated
statements of income and cash flows of the Company and its
direct and indirect subsidiaries for the year then ended, in
each case prepared in conformity with generally accepted
accounting principles in the United States applied on a
consistent basis, except as otherwise noted therein,
together with an auditor's report thereon of a firm of
established national reputation.
The Investor's rights described herein shall terminate and be of no
further force or effect upon the Investor ceasing to be the holder of at
least one percent (1%) of shares of Common Stock (as defined in the
Purchase Agreement) issued and/or issuable upon the conversion of the
Preferred Stock (as defined in the Purchase Agreement); provided, however,
that the Investor's rights shall not terminate by reason of this paragraph
in the event that the Investor notifies the Company, in writing, that it
has made a good faith determination that it is necessary for the Investor
to continue to have the rights described herein in order to maintain
Investor's status as a "venture capital operating company" for purposes of
the Department of Labor's "plan assets" regulations (but without regard for
whether there are other actions that could be taken to maintain such
status).
Investor hereby agrees, and any Representative that Investors may
appoint will agree, to hold in confidence and trust and not use or disclose
any non-public information ("Confidential Information"), in whatever form
or format and however it may be embodied, concerning the Company that is
furnished, made available, or otherwise disclosed to Investor by or on
behalf of the Company, orally or in writing, in connection with any of
Investor's rights under this letter agreement, unless otherwise required by
law or unless such confidential information otherwise becomes publicly
available or available to it other than through this letter agreement. Any
Representative or other officer, partner, employee or agent of Investor
that will have access to the Company's information shall be advised of
these confidentiality restrictions before receiving any Confidential
Information concerning the Company.
The rights set forth in this letter agreement are intended to satisfy
the requirement of contractual management rights for purposes of qualifying
Investor's interests in the Company as venture capital investments for
purposes of the Department of Labor's "plan assets" regulations, and in the
event that, after the date hereof, as a result of any change in applicable
law or regulation or a judicial or administrative interpretation of
applicable law or regulation, it is determined that such rights are not
satisfactory for such purpose, Investor and the Company shall reasonably
cooperate in good faith to agree upon mutually satisfactory management
rights which satisfy such regulations.
Very truly yours,
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Xxxxx X. Xxxx
Chief Executive Officer
AGREED AND ACCEPTED THIS
19th day of March, 2004
NEW MOUNTAIN PARTNERS, L.P.
By: New Mountain Investments, L.P.,
its general partner
By: New Mountain GP, LLC,
its general partner
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxx
Chief Executive Officer
