EXHIBIT 10.36
EMPOWER HEALTH CORPORATION
0000 XXXXXXXX XXXX XXXXX, XXXXX 000
XXXXXX, XXXXX
00000
February 25, 1999
Superior Consultant Holdings Corporation
0000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
We make reference to (i) the Agreement For Issuance And Sale of Stock (the
"Stock Purchase Agreement"), dated as of April 28,1998, by and between Superior
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Consultant Holdings Corporation ("Superior") and Empower Health Corporation
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("Empower"), (ii) the Option and Put Agreement (the "Option Agreement"), dated
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April 28,1998, between Superior and Empower and (iii) the Service Agreement (the
"Service Agreement"), dated April 29, 1998, between Superior and Empower.
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Capitalized but undefined terms used in this letter agreement shall have the
meaning provided in the Purchase Agreement or the Option Agreement, as the case
may be.
The purpose of this letter agreement is to confirm our agreements reached
on certain specific provisions of the agreements identified above, as follows:
1. Definition of Public Equity Offering. For purposes of the Option
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Agreement, the definition of a Public Equity Offering shall be deleted and shall
be replaced with the following:
"PUBLIC EQUITY OFFERING" means a firm commitment underwritten sale of
Empower common stock to the public pursuant to an effective registration
statement under the 1933 Act (a) with an aggregate offering price (before
payment of underwriting discounts and commissions and the expenses of the
offering) of not less than $20 million and (b) after which the common
stock of Empower is listed on a national securities exchange or admitted
for quotation on the Nasdaq National Market (or any successor exchange or
automatic quotation system).
2. Automatic Conversion of Series B Non-Voting Preferred Stock.
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(a) General. Contemporaneous with the closing of a Public Equity
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Offering (as defined in paragraph 1 of this letter agreement), each outstanding
share of Series B Non-Voting Preferred Stock ("Preferred Stock") of Empower
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shall automatically be converted into shares of Common Stock in accordance with
the terms of such shares of Preferred Stock and the
related Certificate of Designation, Preferences and Rights of Preferred Stock
(the "Certificate of Designations"), In order mechanically to implement this
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agreement, Superior, as the sole holder of all outstanding shares of Preferred
Stock, hereby agrees that Empower may treat this paragraph 2 as an express,
irrevocable election by it to voluntarily convert all outstanding shares of
Preferred Stock in accordance with Section 6.1 of the Certificate of
Designations contemporaneous with the closing of such a Public Equity Offering.
(b) Equal Treatment of all Convertible Preferred Stock Required. The
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agreement made by Superior in paragraph 2(a) is conditioned on the same
treatment being imposed on all other classes and series of convertible preferred
stock of Empower, it being expressly understood that the Preferred Stock may not
be automatically converted in reliance on the consent granted in paragraph
2(a) unless all other classes and series of convertible preferred stock are
similarly converted at or prior to the closing of the Public Equity Offering.
(c) Binding on Superior and Successors. Superior will legend all
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share certificates representing shares of Preferred Stock to evidence the
agreements reached in this letter agreement and will not, directly or
indirectly, transfer in any manner any interest of any sort whatsoever in such
shares without first obtaining the written undertaking (in form and substance
reasonably satisfactory to Empower) of the transferee to be bound by this letter
agreement and providing an executed copy of such undertaking to Empower. Empower
will not be required to give effect to any transfer which does not comply with
this paragraph 2(c) and may, without limitation, enforce this requirement with
stop transfer instructions.
3. Revenue Commitment Satisfied. We agree that the period during which
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Empower has agreed to purchase "Superior Services" resulting in not less than
$3,000,000 in recognized revenue to Superior as set forth in Section 1 (c) of
the Services Agreement shall be extended from April 29, 1999 to September 30,
1999. This extension of time shall also apply to Section 2(c) of the Services
Agreement and Section 2.3(b) of the Purchase Agreement, In the event that we
have not purchased Superior Services resulting in at least $3,000,000 in
recognized revenue to Superior by September 30, 1999, then Superior shall be
entitled only to a cash payment in an amount equal to the difference between
$3,000,000 and the resulting recognized revenue. In no event shall we be
required to issue additional securities to Superior.
4. Empower Voting Agreement: Board Composition. Contemporaneous with the
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closing of a Public Equity Offering (as defined in paragraph 1 of this letter
agreement), Section 2.3(c) of the Purchase Agreement will be deleted and
replaced with the following:
"(i) On the Closing Date and thereafter, the Buyer
shall be shall be entitled to appoint or have appointed, to Empower's
Advisory Council, one nominee designated by the Buyer.
(ii) For so long as Superior shall own not less than
10% of the outstanding Common Stock of Empower, there shall be included on
management's slate for the election of directors one designee of Buyer. If
the designee is other than Xxxxxxx X. Heippic, Jr., such nominee shall be
subject to the approval of Empower's Board, which shall not be unreasonably
withheld."
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5. Xxxxxxx Voting Agreement. Contemporaneous with the closing of a Public
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Equity Offering (as defined in paragraph 1 of this letter agreement), the letter
agreement dated April 28, 1998 between Xxxxxx X. Xxxxxxx and Superior (the
"Voting Agreement") shall be amended by (i) deleting the first sentence of the
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letter and (ii) deleting the numbered paragraphs one, and three through six,
contained in such Voting Agreement. A new paragraph one shall be added as
follows:
"1. The undersigned shall vote all voting securities of Empower owned
by him in favor of the designee of Superior, if any, duly nominated in
accordance with Section 2.3(c) of the Agreement For Issuance And Sale of
Stock dated April 28, 1998, as the same shall have been amended by the
letter agreement among the parties dated February 17, 1999."
6. Termination of Certain Covenants.
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(a) Section 2.3(d). The first clause of Section 2.3(d) of the
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Purchase Agreement is hereby deleted and replaced with the following;
"Prior to completing a Public Equity Offering (as defined in the
Option and Put Agreement), Employment shall be prohibited from taking any
of the following actions without the consent of Buyer, which shall not be
unreasonably withheld:"
(b) Section 1(e). The following shall be appended to the end of
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Section 1(d) of the Purchase Agreement:
"This obligation shall terminate at any time that Buyer does not have
the right to appoint or nominate a designee to the Board of Directors of
Empower pursuant to Section 1(c), above. Notwithstanding the foregoing,
Empower shall cease to deliver such materials at any time that it shall be
so directed by Buyer."
7. No Violation of Contractual Preemptive Rights. Superior hereby
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confirms that the issuance of convertible promissory notes and related warrants
consistent with the board approval adopted at [each of] the December 30, 1998
meeting and February 24, 1999 meeting has been consented to by them and does not
violate Sections 1(d)(iii) and (v) of the Purchase Agreement, and the Superior
has waived ant right to purchase any of such securities that may have been
available to it pursuant to Section 6 of the Option Agreement.
8. Termination of Purchase Option.
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(a) General. Contemporaneous with the closing of a Public Equity
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Offering (as defined in paragraph 1 of this letter agreement), the Purchase
Option contained in Section 3 of the Option Agreement shall be terminated. Upon
such termination, the sole obligation of Empower shall be promptly to issue to
Superior 158,491 shares of its Common Stock (the "Settlement Shares") without
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the payment of further consideration by Superior. The parties acknowledge and
agree that the Settlement Shares are intended to represent thirty percent (30%)
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of the number of shares issuable to Superior if it had exercised the Purchase
Option and, accordingly, the number of Settlement Shares shall be
proportionately adjusted for any stock split, stock dividend, merger,
reclassification or similar structural change in Empower effected from the date
of this letter agreement through the date of the closing of a Public Equity
Offering.
(b) "Make-Whole" Issuances. The parties acknowledge that the issuance
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of the Settlement will impose upon Empower the requirement to issue additional
shares to each of Superior and Adventist Health System Sunbelt Healthcare
Corporation ("Adventist") in accordance with the letter agreement dated January
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25, 1999 (the "Make-Whole Agreement"). Assuming that 158,491 shares are issued
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to Superior as Settlement Shares, then Empower would be obligated to issue an
additional 2,931 shares of Common Stock to Superior and 17,936 shares of Common
Stock to Adventist in accordance with the Make-Whole Agreement. As is the case
with the share amounts described in paragraph 8(b), above, such share amounts
are subject to proportionate adjustment for any stock split, stock dividend,
merger, reclassification or similar structural change in Empower effected from
the date of this letter agreement through the date of the closing of a Public
Equity Offering.
(c) Legal Matters. Upon issuance, Empower represents and warrants
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that such shares of Common Stock will be (i) duly authorized, validly issued,
fully paid and nonassessable (ii) and subject to no legal restrictions except
those, if any, imposed by the federal and state securities laws due to the fact
that such shares will be issued without registration or qualification under such
laws. Superior conforms the representations made by it in Section 5.4 of the
Stock Purchase Agreement. Prior to issuance of the Settlement Shares, Superior
will, upon request, confirm in writing the matters set forth in Section
3(d)(iii) of the Option Agreement.
(d) Covenants. Upon issuance of the Settlement Shares to Superior in
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accordance with this letter agreement, Section 5 of the Option Agreement shall
be terminated.
(c) No Exercise. From the date hereof through the first to occur of
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(i) June 30, 1999 or (ii) the filing by Empower with the Securities and Exchange
Commission of a request to withdraw a previously filed registration statement
for an initial public offering before any shares were sold under such
registration statement, Superior shall not exercise the Purchase Option without
the prior written consent of Empower.
9. Effectiveness of this Letter Agreement. The agreements is paragraphs
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4,5 and 8 shall only be effective in the case of a Public Equity Offering (as
defined in paragraph 1) that is completed on or prior to June 30, 1999.
10. Miscellaneous.
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(a) Incorporation From Stock Purchase Agreement. The miscellaneous
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provisions contained in Sections 10.1, 10.2 and 10.4 through 10.8 of the Stock
Purchase Agreement are incorporated into this letter agreement as if fully set
forth herein.
(b) Entire Agreement. This letter agreement, along with the written
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agreement expressly referred to herein, the Arbitration Agreement dated April
28, 1998, and the
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agreements entered into among the parties in January 1999 in connection with the
transaction with Adventist Health System Sunbelt Healthcare Corporation
(including, without limitation, the amended and restated registration rights
agreement and the letter agreement relating to future share issuances under
certain call options), constitute the entire agreement of the parties, and
supersede any prior agreements or understandings, written or oral.
(c) Choice of Law. The corporate law of the state of organization of
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Empower (or its successor, as appropriate) will govern all issues concerning
the internal governance of Empower and the relative rights of Empower and its
shareholders in connection therewith. All other matters concerning the
construction, validity and interpretation of this letter agreement shall be
governed by and construed in accordance with the laws of the State of Michigan,
without regard to choice of law principles which would require the application
of the law of any other jurisdiction.
(d) Specific Performance. The agreements made herein are unique and
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material to Empower. Accordingly, the parties agree that Empower shall be
entitled to specific performance of the agreements reached herein, in addition
to any other remedies at law or in equity. The parties agree that money damages
may not be an adequate remedy and that Empower may, in its sole discretion,
apply to any court of law or equity of competent jurisdiction (without the
requirement that any bond or other security be posted) for specific performance
or other injunctive or equitable relief in order to enforce or prevent violation
of the provisions of this letter agreement.
(e) Application to Successors. The parties acknowledge that Empower
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has also recently obtained approval to reincorporate from Texas to Delaware.
This letter agreement shall remain in full force and effect after such
reincorporation merger.
(f) Further Assurances. Each party shall, upon request, take such
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additional actions as shall reasonably requested to implement fully this letter
agreement.
(g) Rule of Construction. This letter agreement is the joint work
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product of the parties, each of whom was represented by counsel of its choice.
Any rule of construction interpreting this letter agreement in favor of or
against one party or another based on the alleged drafter or other similar rules
of legal construction are hereby waived, it being the intention of the parties
that this letter agreement be interpreted in a reasonable manner with the
objective of implementing the intentions of the parties.
(Signature page follows)
If this letter agreement accurately reflects the agreement of the parties,
please so indicate by executing a counterpart to this letter agreement.
Very truly yours,
Empower Health Corporation
By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
Chief Executive Officer
ACCEPTED AND AGREED:
Superior Consultant Holdings Corporation
By /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title:
AS TO PARAGRAPH 5 ONLY:
/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
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