Exhibit 4(af)
FIRST AMENDMENT TO
STOCKHOLDERS' AGREEMENT
THIS FIRST AMENDMENT TO STOCKHOLDERS' AGREEMENT (this "Amendment"), dated
this 28th day of February, 1997, is made and entered into by and among Green
Spring Health Services, Inc., a Delaware corporation (the "Corporation"),
Blue Cross and Blue Shield of New Jersey, Inc., a New Jersey health service
corporation ("BCBSNJ"), Health Care Service Corporation, an Illinois mutual
legal reserve company doing business as Blue Cross and Blue Shield of
Illinois ("BCILL"), Independence Blue Cross, a Pennsylvania non-profit
hospital plan corporation ("IBC"), Xxxxxx County Medical Bureau, Inc., a
Washington non-profit corporation ("PCMB"), and Magellan Health Services,
Inc., a Delaware corporation, f/k/a Charter Medical Corporation ("Magellan",
and together with BCBSNJ, BCILL, IBC and PCMB, the "Stockholders").
WHEREAS, BCBSNJ, BCILL, IBC and PCMB (individually, a "Minority
Stockholder" and collectively, the "Minority Stockholders") and Magellan own
100% of the issued and outstanding shares of common stock, $.01 par value per
share ("Common Stock"), of the Corporation;
WHEREAS, the Stockholders and the Corporation are parties to that
certain Stockholders' Agreement dated December 13, 1995 (the "Stockholders'
Agreement");
WHEREAS, Magellan is a party to that certain Indenture, dated as of May
2, 1994, and as supplemented, between Magellan and Marine Midland Bank, as
Trustee, relating to Magellan's Senior Subordinated Notes due April 15, 2004
(the "Indenture");
WHEREAS, the Corporation is designated as a "Permitted Minority
Investment" and an "Unrestricted Subsidiary" of Magellan under the Indenture;
WHEREAS, the Stockholders believe that the redesignation of the
Corporation as a "Permitted Joint Venture" and a "Restricted Subsidiary" of
Magellan under the Indenture would be beneficial to the Corporation and is
thus in the best interests of the Corporation;
WHEREAS, in order to effect such redesignation, the Stockholders must
amend the Stockholders' Agreement to permit Magellan to elect all of the
directors of the Corporation; and
WHEREAS, the Minority Stockholders have agreed to such an amendment
provided that the Stockholders' Agreement is further amended to protect the
interests of the Minority Stockholders to substantially the same extent as
such interests are currently protected;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto,
subject to the terms and conditions set forth below, hereby agree as follows:
1. Amendment. The Stockholders' Agreement is hereby amended as follows:
(a) Section 1.3 of the Stockholders' Agreement is hereby deleted in its
entirety and the following Section 1.3 shall be inserted in lieu thereof:
Section 1.3 "Annual Capital Plan" shall mean the annual and
three-year rolling capital plan and budget of the Corporation and the
Subsidiaries prepared annually by the President and approved by the
Stockholders in accordance with Section 2.9 hereof.
(b) Section 1.4 of the Stockholders' Agreement is hereby deleted in its
entirety and the following Section 1.4 shall be inserted in lieu thereof:
Section 1.4 "Annual Operating Plan" shall mean the annual and
three-year rolling operating plan and budget of the Corporation and
the Subsidiaries prepared annually by the President and approved by
the Stockholders in accordance with Section 2.9 hereof.
(c) A Section 1.84 shall be inserted at the end of Article I, which
Section 1.84 shall read as follows:
Section 1.84 "Representative" shall have the meaning ascribed to
such term in Section 2.2(b) hereof.
(d) Article II of the Stockholders' Agreement is hereby deleted in its
entirety and the following Article II shall be inserted in lieu thereof:
ARTICLE II.
MANAGEMENT OF THE CORPORATION
Section 2.1 Certificate and Bylaws. In addition to the
provisions of this Agreement and the Exchange Agreement, the rights
of the Stockholders and the business and affairs of the Corporation
shall be conducted in accordance with the Certificate and the
Bylaws. To the fullest extent permitted by applicable law, the
Certificate and the Bylaws shall be subject in their entirety to the
terms and restrictions set forth in this Agreement. Each
Stockholder hereby ratifies and approves the adoption of the
Certificate and the Bylaws as set forth on Exhibits B and A,
respectively. In the event of a conflict between this Agreement and
the Certificate or the Bylaws, each Stockholder shall, if permitted
by the DGCL, cause
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the Voting Securities owned beneficially or of record by such
Stockholder to be voted in favor of an amendment to the Certificate or
the Bylaws, as appropriate, to conform the terms thereof to the terms
of this Agreement.
Section 2.2 Board of Directors; Representatives. (a) Subject to
the terms of this Agreement, the Certificate and the Bylaws, the
business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors, which shall consist of nine
Directors (unless changed by amendment of the Bylaws). Each
Director shall serve until (a) the designation, election,
qualification and acceptance of his or her successor or (b) his or
her earlier death, resignation or removal. Directors need not be
residents of Delaware or Stockholders of the Corporation. Directors
shall serve on the Board of Directors, any committee of the Board of
Directors and the board of directors of any Subsidiary without
compensation from the Corporation or any Subsidiary for such
service. The Corporation shall be responsible for reimbursing all
Directors for any out-of-pocket expenses incurred in connection with
such service.
(b) Each Minority Stockholder shall be entitled to designate one
representative (a "Representative") to attend all meetings of the Board of
Directors and to participate in all discussions at such meetings; provided,
however, that nothing herein shall be construed as entitling any
Representative to vote on matters before the Board of Directors. Each
Representative shall be entitled to notice of meetings of the Board of the
Directors as if he were a Director, and the Corporation shall be responsible
for reimbursing all Representatives for any out-of-pocket expenses incurred in
connection with such Representatives' attendance at meetings of the Board of
Directors.
Section 2.3 Election of Directors. Directors shall be elected
by plurality vote at each annual meeting of the Stockholders and
each special meeting called for the purpose of electing Directors.
Section 2.4 Removal and Replacement. The Stockholders may, upon
the favorable vote of the holders of a majority of the issued and
outstanding Voting Securities, from time to time, without the
approval or consent of any other party hereto, without cause and
without any condition or restriction whatsoever remove any or all of
the Directors. Upon any removal or the occurrence of a vacancy on
the Board of Directors for any reason whatsoever, such vacancy shall
be filled by the Stockholders in the manner provided in Section 2.3
and not by the remaining Directors.
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Section 2.5 Composition of the Board of Directors of
Subsidiaries. The Stockholders acknowledge and agree that the
composition of the boards of directors of each Subsidiary of the
Corporation shall consist of nine directors and such boards of
directors shall be established and maintained on a basis consistent
with the procedure described in this Article II; provided, however,
that the Subsidiary board composition provided by this Section 2.5
may be changed with respect to any Subsidiary or all Subsidiaries
without amending this Agreement if and for so long as the
Stockholders unanimously agree in writing or at a Stockholders'
meeting to such change. Each Minority Stockholder shall be entitled
to designate a representative (a "Subsidiary Representative") to
attend all meetings of the Board of Directors of each Subsidiary and
to participate in all discussions at such meetings; provided,
however, that nothing herein shall be construed as entitling any
Subsidiary Representative to vote on matters before the Board of
Directors of the Subsidiary. Each Subsidiary Representative shall be
entitled to notice of meetings of the Board of the Directors as if
he were a Director, and the Corporation shall be responsible for
reimbursing all Subsidiary Representatives for any out-of-pocket
expenses incurred in connection with such Subsidiary
Representatives' attendance at meetings of the Board of Directors of
Subsidiaries.
Section 2.6 Board Action; Quorum Requirement. Except as
expressly provided in Section 2.9 hereof, in any action taken by the
Directors at a meeting of the Board of Directors, the act of a
majority of the Directors present at a meeting at which a quorum is
present shall constitute action by the Board of Directors. The
presence of a majority of the members of the Board of Directors
fixed by this Agreement shall constitute a quorum for the
transaction of business. Any action by the Board of Directors by
written consent, in lieu of a meeting, shall be unanimous to be
effective.
Section 2.7 Designation of Chairman. In connection with each
annual meeting of the Board of Directors occurring prior to the
third anniversary date of this Agreement, the Chairman of the Board
of Directors shall be elected in the same manner as required for the
determination of the Fundamental Issues set forth in clauses (iv)
through (vii) of Section 2.9. Notwithstanding anything in this
Agreement to the contrary, the term of a Chairman elected hereunder
shall not extend past the third anniversary date of this Agreement.
Upon the occurrence of a vacancy in the office of Chairman for any
reason, the Stockholders shall call, notice and commence a special
meeting of the Stockholders within ten Business Days of the
occurrence of such vacancy for the purpose of filling such vacancy.
At such meeting, a new Chairman of the Board of Directors shall be
elected in the same manner as provided in this Section 2.7 for
election at an annual meeting. Following three years
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after the date of this Agreement, the Chairman of the Board of
Directors shall be elected as provided in the Bylaws.
Section 2.8 Stockholder Action. Except as otherwise provided in
Section 2.9 hereof, in the case of any action proposed to be taken
by the Stockholders at a meeting of the Stockholders, or at any time
Stockholders shall have the right to, or shall vote, the act of the
Stockholders holding a majority of the voting power of the
outstanding shares of Voting Securities entitled to vote and present
at a meeting, in person or by proxy, at which a quorum is present,
shall constitute action by the Stockholders of the Corporation.
Each Stockholder shall be entitled to a number of votes equal to the
number of shares of Voting Securities that are issued and
outstanding and held of record by such Stockholder and entitled to
be voted at the meeting. The presence, in person or by proxy, of a
majority of the outstanding shares of each class of Voting
Securities shall constitute a quorum for the transaction of business
at any annual or special meeting of the Stockholders. Stockholders
may participate in a meeting of the Stockholders by means of
conference telephone or similar communications equipment by means of
which all participants in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at
the meeting.
Section 2.9 Fundamental Issues. Notwithstanding the majority
vote requirements set forth in Sections 2.6 and 2.8 hereof, each of
the following actions or transactions (the "Fundamental Issues")
shall require, and shall not be taken or consummated without: (a) in
the case of clauses (i) through (iii) the favorable vote of the
holders of not less than two-thirds (2/3) of the issued and
outstanding Voting Securities; and (b) in the case of clauses (iv)
through (vii), the favorable vote of the holders of a majority of
the issued and outstanding Voting Securities and the favorable vote
of Minority Stockholders holding a majority of the aggregate shares
of Voting Securities held by the Minority Stockholders at the time
such action is to be taken (calculated, for purposes of this
Section 2.9, as if the Minority Stockholders hold all shares of
Common Stock previously exchanged for Charter Common Stock that is,
as the date of determination, Exchange Common Stock):
(i) approval or modification of the Annual Operating
Plan;
(ii) approval or modification of the Annual Capital Plan;
(iii) exercise by the Corporation of (A) the Right of First
Refusal or approval of any Transfer to a Third Party Purchaser
pursuant to the Right of First
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Refusal, (B) the Charter Right of First Refusal and (C) the
Corporation's rights pursuant to Section 4.4;
(iv) issuance of any Equity Securities of the
Corporationor GPA, except for issuances to Charter pursuant to
Section 6.1 and issuances pursuant to Section 7.1, if such issuances
are in accordance with an Annual Capital Plan;
(v) approval of any Fundamental Corporate Transaction;
(vi) incurrence of indebtedness for borrowed money by the
Corporation or any consolidated subsidiary in excess of
$250,000 during any Fiscal Year, which indebtedness is not
contemplated by the Annual Operating Plan or Annual Capital
Plan; or
(vii) amendment, modification or restatement of the
Certificate or the Bylaws.
In the event that all of the Voting Securities of the Corporation
are beneficially owned by Charter and one other Stockholder, the approval
requirements of this Section 2.9 shall terminate and be of no further
force or effect, and in such case the provisions of Section 2.2 with
respect to designation of Representatives shall terminate; provided,
however, that in the event that (i) a majority in interest of the Voting
Securities of the Corporation are beneficially owned in the aggregate by
Minority Stockholders and any Permitted Transferees (other than Charter)
of any Minority Stockholder under Section 1.62(f) of this Agreement, or
(ii) Charter (including for this purpose only Charter Medical Corporation
and its Permitted Transferees under Section 1.62(f) of the Agreement) has
the right to vote or direct the voting of less than a majority of the
Voting Securities of the Corporation, then in either such case, the
Minority Stockholders (and their Permitted Transferees under
Section 1.62(f) of this Agreement) shall have the option to maintain in
effect or to terminate either or both of (x) the provisions of
Section 2.2 with respect to designation of Representatives or (y) the
approval requirements of Section 2.9.
Section 2.10 Deadlock. (a) A deadlock of the Stockholders or
Board of Directors (a "Deadlock") shall be deemed to exist (i) if the
Stockholders or the Board of Directors shall be unable to reach agreement
by the required vote on any significant issue that has been submitted for
consideration at two successive meetings, or (ii) if the Stockholders or
Board of Directors shall be unable to achieve a quorum for the conduct of
business at two successive meetings.
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(b) If a Deadlock exists, the Stockholders or Board of Directors,
as appropriate, shall negotiate in good faith and use their respective
best efforts to resolve such Deadlock. If, however, after 20 Business
Days such Deadlock remains, Charter or any Minority Stockholder, by
giving notice to the other Stockholders, may request that such Deadlock
be referred for resolution to the chief executive officer of Charter and
the chief executive officers of two of the Minority Stockholders
(designated by the consent of a majority of the aggregate shares of
Voting Securities held by the Minority Stockholders at the time such
action is to be taken, assuming, for purposes of this Section 2.10, that
the Minority Stockholders hold all shares of Common Stock previously
exchanged for Charter Common Stock that is, as of any date of
determination, Exchange Common Stock) (the "Chief Executive Officers").
The Chief Executive Officers shall meet within 20 Business Days
thereafter and shall attempt in good faith to resolve such Deadlock. Any
resolution agreed to in writing by the Chief Executive Officers shall be
final and binding on the Corporation and the Stockholders, so long as the
resolution is not inconsistent with any provision of this Agreement.
Notwithstanding anything herein to the contrary, at any time during the
pendency of a Deadlock, Charter shall be entitled to make an offer to
purchase all of the Equity Securities held by the Stockholders (other
than Charter) pursuant to the Charter Option.
(c) During the pendency of any Deadlock relating to the approval of
any Annual Operating Plan or Annual Capital Plan for an ensuing Fiscal
Year, the Board of Directors and the President shall conduct the Business
of the Corporation in accordance with the Annual Operating Plan and
Annual Capital Plan for the immediately preceding Fiscal Year.
(e) Section 3.1 of the Stockholders' Agreement is hereby deleted in its
entirety and the following Section 3.1 shall be inserted in lieu thereof:
Section 3.1 Annual Operating Plan; Annual Capital Plan. At least
60 calendar days prior to the beginning of each Fiscal Year, the
President shall prepare, distribute to the Stockholders not less
than 5 Business Days prior to the meeting at which such matter is to
be considered and presented to the Stockholders for their
consideration in accordance with Section 2.9 hereof the Annual
Operating Plan and Annual Capital Plan for the Corporation for the
ensuing Fiscal Year and rolling three-year period. The Annual
Operating Plan shall set forth in reasonable detail, among other
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things, estimates by calendar month of anticipated revenues,
expenditures, and cash requirements of the Business for such Fiscal
Year and rolling three-year period and the anticipated marketing,
product development and system or other operational or
organizational enhancements to be implemented during such period.
The Annual Capital Plan shall set forth in reasonable detail, among
other things, the anticipated capital requirements of the Business
for such Fiscal Year and rolling three-year period, the anticipated
return on such investments, the anticipated source of funding such
investments, and the anticipated Capital Contributions and Equity
Securities to be issued with respect thereto pursuant to Section
7.1. The President shall make such changes to the Annual Operating
Plan and Annual Capital Plan as the Stockholders shall request and,
upon approval by the Stockholders in accordance with Section 2.9
hereof, shall conduct the day-to-day Business of the Corporation
substantially in accordance therewith.
(f) Subsection (e) of Section 5.1 of the Stockholders' Agreement is
hereby deleted in its entirety and the following subsection (e) of Section 5.1
shall be inserted in lieu thereof:
(e) If the Non-Selling Stockholders, Charter and the
Corporation (either individually or collectively) do not elect to
purchase all of the Equity Securities subject to the Proposed
Transfer, the Selling Stockholder may, upon approval by the
Stockholders in their sole discretion pursuant to Section 2.9(iii)
hereof, Transfer to the purchaser named in the Offer Notice (the
"Third Party Purchaser") all (but not less than all) of the Equity
Securities subject to the Proposed Transfer in accordance with the
terms and conditions set forth in the Offer Notice; provided,
however, that if the Selling Stockholder has not consummated the
Transfer of such Equity Securities within the 45 Business Day period
following the approval of such Transfer by the Stockholders, all of
the restrictions on Transfer contained in this Agreement shall again
be in effect with respect to such Equity Securities. Upon a
Transfer of Equity Securities to a Third Party Purchaser, the
Corporation shall not be obligated to transfer ownership of such
Equity Securities on the records of the Corporation unless such
Third Party Purchaser has complied with the proviso to Section 1.62.
(g) Section 6.6 of the Stockholders' Agreement is hereby deleted in its
entirety and the following Section 6.6 shall be inserted in lieu thereof:
Section 6.6 Charter Board Representation. During the term
of this Agreement and subject to Charter's Certificate of
Incorporation and Bylaws, Charter (but not any assignee of Charter)
shall, from time to time, nominate and use its best efforts to cause
the election to the Board of Directors of Charter, of a
representative of the Minority Stockholders. Such representative
shall be chosen, in Charter's discretion, from the chief executive
officers of the Minority Stockholders and the Representatives.
(h) Subsection (a) of Section 7.3 of the Stockholders' Agreement is
hereby deleted in its entirety and the following subsection (a) of Section 7.3
shall be inserted in lieu thereof:
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Determination of Fair Market Value. (a) In the event that
a determination of the fair market value of Non-Cash Consideration
is required pursuant to the Right of First Refusal or the Charter
Right of First Refusal, the Selling Stockholder or Charter, as
appropriate, shall specify in the applicable Offer Notice its good
faith estimate of the fair market value of any Non-Cash
Consideration to be paid in connection with the proposed transfer.
If a majority of the disinterested Stockholders agrees with the
estimated fair market value of such Non-Cash Consideration, the
estimate shall be deemed to be the Fair Market Value thereof for
purposes of this Agreement. If a majority of disinterested
Stockholders does not agree with the estimated fair market value,
the disinterested Stockholders shall, within 10 Business Days of
receipt of the Offer Notice, deliver to the Selling Stockholder or
Charter, as appropriate, written notice of its disagreement and
shall, for a period of 10 Business Days after delivering such
notice, negotiate with the Selling Stockholder or Charter, as
appropriate, for the purpose of determining the fair market value of
the Non-Cash Consideration that is acceptable to a majority of
disinterested Stockholders and the Selling Stockholder or Charter,
as appropriate. If the disinterested Stockholders and the Selling
Stockholder or Charter, as appropriate, are unable to agree on a
fair market value during the aforementioned negotiation period, the
disinterested Stockholders and the Selling Stockholder or Charter,
as appropriate, shall appoint a mutually agreeable appraiser of
recognized standing with respect to the nature of the property
constituting the Non-Cash Consideration to complete an appraisal of
the property constituting the Non-Cash Consideration. Such
appraiser shall render a binding and non-appealable appraisal of the
Fair Market Value of the property constituting the Non-Cash
Consideration within 10 Business Days of such appraiser's
appointment or, if it is not reasonably possible to complete such
appraisal in such time period, such longer period as shall be
reasonably necessary to complete such appraisal (not to exceed
30 Business Days). The Corporation and the Selling Stockholder or
Charter, as appropriate, each shall bear one-half of the costs of
such appraisal.
2. Amendment to Bylaws. The Second Amended and Restated Bylaws of Green
Spring Health Services, Inc. (the "Bylaws") are hereby amended to conform to
the Stockholders' Agreement, as amended by this Amendment, and the Board of
Directors of the Corporation is hereby directed to restate the Bylaws to
incorporate the changes effected hereby.
3. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
4. Effect. Except as modified hereby, the terms and provisions of the
Stockholders' Agreement shall remain in full force and effect and shall be
binding upon, and shall inure to the benefit of, the
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parties hereto, their respective heirs, successors, assigns and anyone
claiming by, through or under any of them.
5. Expiration. Notwithstanding any provision herein to the contrary, the
changes to the Stockholders' Agreement effectuated by this Amendment shall
terminate and have no further force and effect upon the first to occur of (a)
the expiration of the Indenture, or (b) the modification of the Indenture such
that the changes to the Stockholders' Agreement effected by this Amendment are
no longer necessary because either (i) the Corporation would qualify as a
Permitted Joint Venture and Restricted Subsidiary of Magellan without the
foregoing amendments, or (ii) the Indenture no longer distinguishes among the
terms "Unrestricted Subsidiary," "Restricted Subsidiary," "Permitted Minority
Investment," and "Permitted Joint Venture."
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized on the day and year first written above.
GREEN SPRING HEALTH SERVICES, INC.
By: Xxxxx Xxxxxx
-------------------------------
Name: Xxxxx Xxxxxx
Title: President/CEO
HEALTH CARE SERVICE CORPORATION
By: Xxxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Senior Vice President
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
By: Xxxxxx X. Pures
-------------------------------
Name: Xxxxxx X. Pures
Title: S.V.P. - Administration, Chief
Financial Officer and Treasurer
INDEPENDENCE BLUE CROSS
By: Xxxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
XXXXXX COUNTY MEDICAL BUREAU, INC.
By: Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Ex. V.P. - The Benchmark Group
MAGELLAN HEALTH SERVICES, INC.
By: X. X. Xxxxxxxx
-------------------------------
Name: X. X. Xxxxxxxx
Title: CEO
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