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EXHIBIT 10.2
EXECUTION COPY
CHARTONE, INC.
STOCKHOLDERS AGREEMENT
Stockholders Agreement, dated as of this seventh day of June,
2000, by and among the institutional investors listed on Schedule I hereto (the
"Institutional Investors"), QuadraMed Operating Corporation, a Delaware
corporation ("QM"), the individuals whose names and addresses appear from time
to time on Schedule II hereto (the "Management Investors", and, together with
the Institutional Investors and QM, the "Investors"), and ChartOne, Inc., a
Delaware corporation (the "Company").
R E C I T A L S
WHEREAS, the Institutional Investors have, pursuant to the terms
of a Securities Purchase Agreement, dated as of May 5, 2000, with the Company
(the "Purchase Agreement") agreed to purchase shares of Series A Convertible
Preferred Stock, par value $0.01 per share, of the Company (the "Series A
Preferred Stock");
WHEREAS, QM beneficially owns shares of Series B Convertible
Preferred Stock, par value $0.01 per share, of the Company (the "Series B
Preferred Stock") and Series C Preferred Stock, par value $0.01 per share, of
the Company (the "Series C Preferred Stock and together with the Series A
Preferred Stock and the Series B Preferred Stock, the "Preferred Stock");
WHEREAS, the Management Investors have, pursuant to the terms of
certain subscription agreements (collectively, the "Other Subscription
Agreements" and, together with the Purchase Agreement, the "Subscription
Agreements") agreed to purchase shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock" and, together with the Preferred
Stock, the "Shares"); 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 and the disposition and voting of Shares.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. COVENANTS OF THE PARTIES
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(a) Legends. The certificates evidencing the Shares acquired by
the Investors pursuant to the Subscription Agreements will bear the following
legend reflecting the restrictions on the transfer of such securities contained
in this Agreement:
"THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO THE TERMS OF
THAT CERTAIN STOCKHOLDERS AGREEMENT, DATED AS OF JUNE __, 2000,
BY AND AMONG THE COMPANY AND CERTAIN INVESTORS IDENTIFIED
THEREIN, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER. A COPY OF
THIS AGREEMENT HAS BEEN FILED WITH THE SECRETARY OF THE COMPANY
AND IS AVAILABLE UPON REQUEST."
As promptly as practicable after the date hereof, the Investors
shall deliver all certificates representing any Shares to the Company to enable
the Company to place the foregoing legend on such certificates.
(b) Additional Investors. The parties hereto acknowledge that
certain employees of the Company may become stockholders of the Company after
the date hereof. As a condition to the issuance of shares of capital stock of
the Company to them, the Company shall require such employees to execute and
deliver an agreement containing restrictions substantially similar to those set
forth in Sections 3(a), (b), (c) and (d) hereof.
(c) Financial Reporting. From and after the date hereof, the
Company shall deliver to each of the Investors so long as such Investor Owns any
Shares:
(1) As soon as practicable, and in any event within 30 days
after the close of each month of each fiscal year of the Company in the case of
monthly statements and 45 days after the close of each of the first three fiscal
quarters of each fiscal year of the Company in the case of quarterly statements,
a consolidated balance sheet, statement of income and statement of cash flows of
the Company and any subsidiaries as at the close of such month or quarter and
covering operations for such month or quarter, as the case may be, and the
portion of the Company's fiscal year ending on the last day of such month or
quarter, all in reasonable detail and prepared in accordance with GAAP, subject
to audit and year-end adjustments, setting forth in each case in comparative
form the figures for the comparable period of the previous fiscal year. The
Company shall also provide comparisons of each pertinent item to the business
plan referred to in subsection (3) below.
(2) As soon as practicable after the end of each fiscal year of
the Company, and in any event within 90 days thereafter, duplicate copies of:
(i) consolidated and consolidating balance sheets of the
Company and any subsidiaries at the end of such year;
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and
(ii) consolidated and consolidating statements of
income, stockholders' equity and cash flows of the Company and any
subsidiaries for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail
and accompanied by an opinion thereon of independent certified public
accountants of recognized national standing selected by the Company,
which opinion shall state that such financial statements fairly present
the financial position of the Company and any subsidiaries on a
consolidated basis and have been prepared in accordance with GAAP
(except for changes in application in which such accountants concur) and
that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards, and accordingly included such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances, and the Company shall also provide
comparisons of each pertinent item to the budget referred to below.
(3) No later than 30 days prior to the commencement of each
fiscal year of the Company, an annual business plan of the Company and
projections of operating results, prepared on a monthly basis, and a three year
business plan of the Company and projections of operating results. Within 45
days of the close of each semi-annual fiscal period of the Company, the Company
shall provide the Investors with an update of such monthly projections. Such
business plans, projections and updates shall contain such substance and detail
and shall be in such form as will be reasonably acceptable to the Investors.
(4) Promptly upon receipt thereof, one copy of each other
financial report and internal control letter submitted to the Company by
independent accountants in connection with any annual, interim or special audit
made by them of the books of the Company.
(5) Promptly upon their becoming available, one copy of each
financial statement, report, notice or proxy statement sent by the Company to
stockholders generally, of each financial statement, report, notice or proxy
statement sent by the Company or any of its subsidiaries to the Securities and
Exchange Commission (the "SEC") or any successor agency, if applicable, of each
regular or periodic report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof filed by the
Company or any subsidiary with, or received by such Person in connection
therewith from, any domestic or foreign securities exchange, the SEC or any
successor agency or any foreign regulatory authority performing functions
similar to the SEC, of any press release issued by the Company or any
subsidiary, and of any material of
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any nature whatsoever prepared by the SEC or any successor agency thereto or any
state blue sky or securities law commission which relates to or affects in any
way the Company or any subsidiary.
(6) Prior to each regularly scheduled meeting of the Board of
Directors of the Company, a narrative report shall be delivered to each of the
Investors describing the Company's activities since the date of the last such
report, including a description of business development, operating results and
marketing efforts.
(7) With reasonable promptness, the Company shall furnish each
of the Investors with such other data and information as from time to time may
be reasonably requested.
(d) As long as an Investor Owns Shares comprising at least five
percent (5%) of the outstanding Common Stock (assuming conversion of all
Preferred Stock), the Company shall permit such Investor, its nominee, assignee,
and its representative to visit and inspect any of the properties of the Company
and its subsidiaries, to examine all its books of account, records, reports and
other papers not contractually required of the Company to be confidential or
secret, to make copies and extracts therefrom, and to discuss its affairs,
finances and accounts with its officers, directors, key employees and
independent public accountants or any of them (and by this provision the Company
authorizes said accountants to discuss with such Investor, its nominees,
assignees and representatives the finances and affairs of the Company and any
subsidiaries), all at such reasonable times and as often as may be reasonably
requested.
(e) The Company and its subsidiaries will comply in all material
respects with all applicable laws, rules, regulations and orders except where
the failure to comply would not have a material adverse effect on the business,
properties, operations, prospects or financial condition of the Company.
(f) The Company will maintain insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is usually carried by companies of similar size and credit standing
engaged in similar business and owning similar properties, provided that such
insurance is and remains available to the Company at commercially reasonable
rates.
(g) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any
certificate evidencing any Shares owned by one of the Investors, and (in the
case of loss, theft or destruction) of an unsecured indemnity satisfactory to
it, and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of such certificate, if mutilated,
the Company will make and deliver in lieu of such certificate a new certificate
of like tenor and for the number of
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shares evidenced by such certificate which remain outstanding. Such Investor's
agreement of indemnity shall constitute indemnity satisfactory to the Company
for purposes of this Section. Upon surrender of any certificate representing any
Shares for exchange at the office of the Company, the Company at its expense
will cause to be issued in exchange therefor new certificates in such
denomination or denominations as may be requested for the same aggregate number
of Shares represented by the certificate so surrendered and registered as such
holder may request. The Company will also pay the cost of all deliveries of
certificates for such Shares to the office of such Investor (including the cost
of insurance against loss or theft in an amount satisfactory to the holders)
upon any exchange provided for in this Section.
2. BOARD OF DIRECTORS.
(a) Election of Directors.
(i) As of the date hereof, the Board of Directors of the Company
(the "Board") will consist of Xxxx Xxxxxxxx, Xxxxxxxx X. Xxxxx, Xxxxx X.
Xxxxxxxxxx and Xxxxx X. Xxxxxx. 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 of capital stock of the Company
Owned by them, required to cause the Board to consist of up to five (5) members
or such other number as the Board may from time to time establish, and at all
times throughout the term of this Agreement to include (i) as long as Warburg,
Xxxxxx Equity Partners, L.P., a Delaware limited partnership ("Warburg"), and
its Affiliates Own Shares comprising at least fifteen percent (15%) of the
outstanding Common Stock (assuming conversion of all Preferred Stock), two
representatives designated by Warburg (each, a "Warburg Director"), provided,
however, that in the event Warburg and its Affiliates Own Shares comprising at
least five percent (5%) but less than fifteen (15%) of the outstanding Common
Stock (assuming conversion of all Preferred Stock), one Warburg Director, and
provided further, that in the event Warburg and its Affiliates Own Shares
comprising less than five percent (5%) of the outstanding Common Stock (assuming
conversion of all Preferred Stock) the Board shall not include any Warburg
Directors, (ii) as long as Prudential Securities Group, Inc., a Delaware
corporation ("Prudential"), and its Affiliates and Transferees Own Shares
comprising, in the aggregate, at least five percent (5%) of the outstanding
Common Stock (assuming conversion of all Preferred Stock), one representative
designated by Prudential, its Affiliate or Transferee, as the case may be (the
"Prudential Director"), provided, however, that in the event Prudential and its
Affiliates and Transferees Own Shares comprising, in the aggregate, less than
five percent (5%) of the outstanding Common Stock (assuming conversion of all
Preferred Stock) the Board shall not include a Prudential Director; for purposes
of this Subsection 2(a)(i)(ii), "Transferees" shall mean the transferees of
Series A Preferred Stock pursuant to
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Section 6.9 of the Purchase Agreement,(iii) as long as QM Owns shares comprising
at least five percent (5%) of the outstanding Common Stock (assuming conversion
of all Preferred Stock), one representative designated by QM (the "Quadramed
Director"), and (iv) the Chief Executive Officer of the Company, who shall be
entitled to be a member of the Board until termination of his employment in
accordance with the terms of the Employment Agreement, dated as of the date
hereof, between him and the Company.
(ii) From the date on which the Company completes an
underwritten public offering for shares of Common Stock (the "Initial Public
Offering") pursuant to a registration under the Securities Act of 1933, as
amended (the "Securities Act"), and for as long as any Investor Owns at least
twenty percent (20%) of the Common Stock, the Company will nominate and use its
best efforts to have two individuals designated by such Investor and reasonably
acceptable to the Company elected to the Board. From the date on which the
Company completes its Initial Public Offering and for as long as any Investor
Owns at least ten percent (10%) of the outstanding shares of Common Stock, the
Company will nominate and use its best efforts to have one individual designated
by such Investor and reasonably acceptable to the Company elected to the Board.
(b) Replacement Directors. In the event that any Warburg
Director, the Prudential Director or the Quadramed Director (a "Withdrawing
Director") designated in the manner set forth in Section 2(a) 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 Warburg, Prudential or Quadramed, as the case may be. The
Investors and the Company agree to take all action within their respective
power, including but not limited to, the voting of capital stock of the Company
Owned by them (i) to cause the election of such Substitute Director promptly
following his or her nomination pursuant to this Section 2(b) or (ii) upon the
written request of Warburg or Quadramed, to remove, with or without cause, the
Warburg Director, the Prudential Director or the Quadramed Director, as the case
may be.
3. TRANSFER OF STOCK
(a) Resale of Securities. No Investor shall Transfer any Shares
other than in accordance with the provisions of this Section 3; provided,
however, that any Investor may Transfer Shares to an Affiliate thereof. Any
Transfer or purported Transfer made in violation of this Section 3 shall be null
and void and of no effect.
(b) Rights of First Refusal.
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(i) No Investor shall Transfer any of the Shares Owned by him or
it unless the Investor desiring to make the Transfer (hereinafter referred to as
the "Transferor") shall have first made the offers to sell to the Company and
then to the other Investors (except for the Management Investors)(the
"Non-Selling Investors") as contemplated by this Section 3(b), and such offers
shall not have been accepted.
(ii) Offer by Transferor. Copies of the Transferor's offer shall
be given to the Company and the Non-Selling Investors and shall consist of an
offer to sell to the Company or, failing its election to purchase, then to the
Non-Selling Investors, all of the Shares then proposed to be transferred by the
Transferor (the "Subject Shares") pursuant to a bona fide offer of a third
party, to which copies shall be attached a statement of intention to Transfer to
such third party, the name and address of the prospective third party
transferee, the number of Subject Shares involved in the proposed Transfer, and
terms of such Transfer.
(iii) Acceptance of Offer. (A) Within twenty (20) days after the
receipt of the offer described in Section 3(b)(ii), the Company may, at its
option, elect to purchase all, but not less than all, of the Subject Shares. The
Company shall exercise such option by giving notice thereof to the Transferor
and to each Non-Selling Investor within such 20-day period.
(B) In the event that the Company does not exercise its option
to purchase the Subject Shares within such 20-day period, the Non-Selling
Investors may purchase all, but not less than all, of the Subject Shares by
giving notice thereof to the Transferor and to the Company within twenty (20)
days after receipt of notice from the Transferor in accordance with Section 3(b)
to the effect that the Company did not exercise its option to purchase. The
Non-Selling Investors shall purchase the Subject Shares pro rata among
themselves (based on the number of Shares Owned by each Non-Selling Investor as
of the closing of the transactions under the Purchase Agreement) or as they
shall otherwise agree upon among themselves.
(C) In either event, the notice required to be given by the
purchasing party (the "Purchaser") shall specify a date for the closing of the
purchase which shall not be more than thirty (30) days after the date of the
giving of such notice.
(iv) Purchase Price. The purchase price per share for the
Subject Shares shall be the price per share offered to be paid by the
prospective transferee described in the offer, which price shall be paid in cash
or, if so provided in the offer of the prospective transferee, cash plus
deferred payments of cash in the same proportions, and with the same terms of
deferred payment as therein set forth.
(v) Consideration Other Than Cash. If the offer of Subject
Shares under this Section 3(b) is for consideration other
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than cash or cash plus deferred payments of cash, the Purchaser shall pay the
cash equivalent of such other consideration. If the Transferor and the Purchaser
cannot agree on the amount of such cash equivalent within ten (10) days after
the beginning of the 20-day period under Section 3(b)(iii)(A), any of such
parties may, by three (3) days' written notice to the other, initiate appraisal
proceedings under Section 3(b)(vi) for determination of the cash equivalent. The
Purchaser may give written notice to the Transferor revoking an election to
purchase the Subject Shares within ten (10) days after determination of the
appraised value, if it chooses not to purchase the Subject Shares.
(vi) Appraisal Procedure. If any party shall initiate an
appraisal procedure to determine the amount of the cash equivalent of any
consideration for Subject Shares under Section 3(b)(v), then the Transferor, on
the one hand, and the Purchaser, on the other hand, shall each promptly appoint
as an appraiser an individual who shall be a member of a nationally-recognized
investment banking firm. Each appraiser shall, within thirty (30) days of
appointment, separately investigate the value of the consideration for the
Subject Shares as of the proposed transfer date and shall submit a notice of an
appraisal of that value to each party. Each appraiser shall be instructed to
determine such value without regard to income tax consequences to the Transferor
as a result of receiving cash rather than other consideration. If the appraised
values of such consideration (the "Earlier Appraisals") vary by less than ten
percent (10%), the average of the two appraisals on a per share basis shall be
controlling as the amount of the cash equivalent. If the appraised values vary
by more than ten percent (10%), the appraisers, within ten (10) days of the
submission of the last appraisal, shall appoint a third appraiser who shall be
member of a nationally recognized investment banking firm. The third appraiser
shall, within thirty (30) days of his appointment, appraise the value of the
consideration for the Subject Shares (without regard to the income tax
consequences to the Transferor as a result of receiving cash rather than other
consideration) as of the proposed transfer date and submit notice of his
appraisal to each party. The value determined by the third appraiser shall be
controlling as the amount of the cash equivalent unless the value is greater
than the two Earlier Appraisals, in which case the higher of the two Earlier
Appraisals will control, and unless that value is lower than the two Earlier
Appraisals, in which case the lower of the two Earlier Appraisals will control.
If any party fails to appoint an appraiser or if one of the two initial
appraisers fails after appointment to submit his appraisal within the required
period, the appraisal submitted by the remaining appraiser shall be controlling.
The Transferor and the Purchaser shall each bear the cost of its respective
appointed appraiser. The cost of the third appraisal shall be shared one-half by
the Transferor and one-half by the Purchaser.
(vii) Closing of Purchase. The closing of the purchase shall
take place at the office of the Company or such
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other location as shall be mutually agreeable 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 pursuant to Section
3(b)(iv) above shall be delivered at the closing. At the closing, the Transferor
shall deliver to the Purchaser the certificates evidencing the Subject Shares to
be conveyed, duly endorsed and in negotiable form with all the requisite
documentary stamps affixed thereto.
(viii) Release from Restriction; Termination of Rights. If the
offer to sell is neither accepted by the Company nor by the Non-Selling
Investors, the Transferor may make a bona fide Transfer to the prospective
transferee named in the statement attached to the offer in accordance with the
agreed upon terms of such Transfer, provided that (A) such Transfer shall be
made only in strict accordance with the terms therein stated and (B) the
transferee agrees, in writing, to be bound by the provisions of this Agreement.
If the Transferor shall fail to make such Transfer within sixty (60) days
following the expiration of the time hereinabove provided for the election by
the Non-Selling Investors or, in the event the Purchaser revokes an election to
purchase the Subject Shares pursuant to Section 3(b)(v), within sixty (60) days
of the date of such notice of revocation, such Shares shall again become subject
to all the restrictions of this Section 3.
(ix) Limitations. The provisions of this Section 3 shall not
apply to (i) sales by Tag-Along Investors (as defined below) pursuant to Section
3(c) hereof or (ii) sales by Investors (other than the Majority Holders (as
defined below)) pursuant to Section 3(d) hereof or (iii) Transfers to Permitted
Transferees or to the Company.
(c) Tag-Along Rights.
(i) In the event any Investor intends to Transfer any of its
Shares (other than Transfers to any Permitted Transferee or to the Company),
such Investor (the "Selling Investor") shall notify the other Investors (the
"Tag-Along Investors"), in writing, of such proposed Transfer and its terms and
conditions. Within ten (10) business days of the date of such notice, each other
Tag-Along Investor shall notify the Selling Investor if it elects to participate
in such Transfer. Any Tag-Along Investor that fails to notify the Selling
Investor within such ten (10) business day period be deemed to have waived its
rights hereunder. Each Tag-Along Investor that so notifies the Selling Investor
shall have the right to sell, at the same price and on the same terms and
conditions as the Selling Investor, an amount of Shares equal to the Shares the
third party actually proposes to purchase multiplied by a fraction, the
numerator of which shall be the number of Shares Owned by such Tag-Along
Investor and the denominator of which shall be the aggregate number of Shares
Owned by the Selling Investor and each Tag-Along Investor
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exercising its rights under this Section 3(c) (assuming, in the case of sales of
Common Stock, full conversion of all shares of Preferred Stock Owned by the
Selling Investor and each Tag-Along Investor exercising its rights under this
Section 3(c)). 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 3(c).
(ii) Notwithstanding anything contained in this Section 3(c), in
the event that all or a portion of the purchase price consists of securities and
the sale of such securities to the Tag-Along Investors would 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 the Tag-Along Investors may
receive, in lieu of such securities, the fair market value of such securities in
cash, as determined in good faith by a unanimous vote of the Board. In the event
the Board is unable to arrive at a unanimous vote regarding the valuation of
such securities, the securities shall be valued pursuant to the appraisal
procedure set forth in Section 3(b)(vi) above, with the Selling Investor, on the
one hand, and the Tag-Along Investors, on the other hand, each appointing an
appraiser as provided therein.
(d) Drag Along Right.
(i) If at any time and from time to time after the date of this
Agreement, the holders of a majority of the Series A Preferred Stock (the
"Majority Holders") wish to Transfer in a bona fide arms' length sale all of
their Shares to any Person or Persons who are not Affiliates of the Majority
Holders (for purposes of this Section 3(d), the "Proposed Transferee"), the
Majority Holders shall have the right (for purposes of Section 3(d), the
"Drag-Along Right") to require each Investor to sell to the Proposed Transferee
all of his Shares (including any warrants or options to acquire Shares) for the
same per share consideration as proposed to be received by the Majority Holders
(less, in the case of options or warrants, the exercise price for such options
or warrants) then Owned by such Investor. Each Investor agrees to take all steps
necessary to enable him or it to comply with the provisions of this Section 3(d)
to facilitate the Majority Holder's exercise of a Drag-Along Right.
(ii) To exercise a Drag-Along Right, the Majority Holders shall
give each Investor a written notice (for purposes of this Section 3(d), a
"Drag-Along Notice") containing (1) the name and address of the Proposed
Transferee and (2) the proposed purchase price, terms of payment and other
material terms and conditions of the Proposed Transferee's offer. Each Investor
shall thereafter be obligated to sell its Shares (including any warrants or
options Owned by such Investor), provided that the
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sale to the Proposed Transferee is consummated within ninety (90) days of
delivery of the Drag-Along Notice. If the sale is not consummated within such
90-day period, then each Investor shall no longer be obligated to sell such
Investor's Shares pursuant to that specific Drag-Along Right but shall remain
subject to the provisions of this Section 3(d).
(iii) Notwithstanding anything contained in this Section 3(d),
in the event that all or a portion of the purchase price consists of securities
and the sale of such securities to the Investors would 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 Majority Holders, the Investors may receive, in lieu of such
securities, the fair market value of such securities in cash, as determined in
good faith by a unanimous vote of the Board. In the event the Board is unable to
arrive at a unanimous vote regarding the valuation of such securities, the
securities shall be valued pursuant to the appraisal procedure set forth in
Section 3(b)(vi) above, with the Majority Holders, on the one hand, and the
other Investors, on the other hand, each appointing an appraiser as provided
therein.
(e) Subscription Right.
(i) If at any time after the date hereof, the Company proposes
to issue equity securities of any kind (the term "equity securities" shall
include for these purposes any warrants, options or other rights to acquire
equity securities and debt securities convertible into equity securities) of the
Company (other than the issuance of securities (A) upon conversion of the
Preferred Stock pursuant to the Company's Certificate of Incorporation, (B) to
the public in a firm commitment underwriting pursuant to a registration
statement filed under the Securities Act, (C) pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially all of
the assets or other form of reorganization, (D) pursuant to an employee stock
option plan, stock bonus plan, stock purchase plan or other management equity
program or (E) to vendors, customers and consultants to the Company), then, as
to each Investor (with the exception of Management Investors) who then Owns
Shares comprising in excess of two percent (2%) of the then outstanding shares
of Common Stock (assuming conversion of all Preferred Stock), the Company shall:
(1) give written notice setting forth in reasonable detail (x)
the designation and all of the terms and provisions of the 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; (y) the price and other terms of the proposed
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sale of such securities; (z) the amount of such securities proposed to be
issued; and (w) such other information as the Investors may reasonably request
in order to evaluate the proposed issuance; and
(2) offer to issue to each such Investor a portion of the
Proposed Securities equal to a percentage determined by dividing (x) the number
of shares of Common Stock Owned by such Investor, by (y) the total number of
shares of Common Stock then outstanding, including for purposes of this
calculation all shares of Common Stock issuable upon conversion in full of any
then outstanding convertible securities.
(ii) Each such Investor must exercise its purchase rights
hereunder within ten (10) days after receipt of such notice from the Company. If
all of the Proposed Securities offered to such Investors are not fully
subscribed by such Investors, the remaining Proposed Securities will be
reoffered to the Investors purchasing their full allotment upon the terms set
forth in this Section 3(e), until all such Proposed Securities are fully
subscribed for or until all such Investors have subscribed for all such Proposed
Securities which they desire to purchase, except that such Investors must
exercise their purchase rights within five days after receipt of all such
reoffers. To the extent that the Company offers two or more securities in units,
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.
(iii) Upon the expiration of the offering periods described
above, the Company will be free to sell such Proposed Securities that the
Investors have not elected to purchase during the ninety (90) days following
such expiration on terms and conditions no more favorable to the purchasers
thereof than those offered to such holders. Any Proposed Securities offered or
sold by the Company after such 90 day period must be reoffered to the Investors
pursuant to this Section 3(e)
(iv) The election by an Investor not to exercise its
subscription rights under this Section 3(e) 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. Any sale of such securities by the Company
without first giving the Investors the rights described in this Section 3(e)
shall be void and of no force and effect.
(f) Injunctive Relief. The Company and the Investors hereby
declare that it is impossible to measure in money the damages which will accrue
to the parties hereto by reason of the failure of any Investor to perform any of
its obligations set forth in this Section 3. Therefore, the Company and the
Investors shall have the right to specific performance of such obligations, and
if any party hereto shall institute any action or proceeding to enforce the
provisions hereof, each of the
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Company and the Investors hereby waives the claim or defense that the party
instituting such action or proceeding has an adequate remedy at law.
4. TERMINATION. The Agreement shall terminate:
(a) upon the closing of a Qualified Public Offering (as defined
in the Certificate of Designations for the Preferred Stock), except for the
provisions of Section 2(a)(ii) which shall remain in full force and effect
following the closing of the Initial Public Offering; or
(b) on the date on which the each Institutional Investor shall
have agreed in writing to terminate this Agreement.
0 5. INTERPRETATION OF THIS AGREEMENT
(a) Terms Defined. As used in this Agreement, the following
terms have the respective meaning set forth below:
Affiliate: shall mean any Person or entity, directly or
indirectly controlling, controlled by or under common control with such Person
or entity.
Common Stock: shall mean the Common Stock, par value $0.01 per
share, of the Company.
Exchange Act: shall mean the Securities Exchange Act of 1934, as
amended.
GAAP: shall mean generally accepted accounting principles,
consistently applied.
Owns, Own or Owned: shall mean beneficial ownership, within the
meaning of Rule 13d-3 under the Exchange Act.
Permitted Transferee: shall mean, in the case of any Management
Investor, a trust for the benefit of such Management Investor's family members,
and in the case of QM or any Institutional Investor, any Affiliate of such
Investor; provided in each instance that such transferee agrees to be bound by
the provisions of this Agreement as if such transferee were an original
signatory hereto.
Person: shall mean an individual, partnership, joint-stock
company, corporation, limited liability company, trust or unincorporated
organization, and a government or agency or political subdivision thereof.
Security, Securities: shall have the meaning set forth in
Section 2(1) of the Securities Act.
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Securities Act: shall mean the Securities Act of 1933, as
amended.
Shares: shall mean shares of Preferred Stock or Common Stock.
Transfer: shall mean any sale, assignment, pledge,
hypothecation, or other disposition or encumbrance.
(b) Accounting Principles. Where the character or amount of any
asset or amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, this shall be done in
accordance with U.S. generally accepted accounting principles at the time in
effect, to the extent applicable, except where such principles are inconsistent
with the requirements of this Agreement.
(c) Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed entirely within such State.
(e) Section Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof.
6. MISCELLANEOUS
(a) Notices.
(i) All communications under this Agreement shall be in writing
and shall be delivered by hand or facsimile or mailed by overnight courier or by
registered or certified mail, postage prepaid:
(A) if to any of the Investors, at the address or
facsimile number of such Investor shown on Schedule I or at such other address
as the Investor may have furnished the Company and the other Investors in
writing; and
(B) if to the Company, at 000 Xxxxxxx Xxxxxxx, Xxxxx
000, Xxx Xxxx, Xxxxxxxxxx 00000 (facsimile: (000) 000-0000), marked for
attention of President, or at such other address as it may have furnished in
writing to each of the Investors.
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(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile, on the date of such delivery; if mailed by
courier, on the first business day following the date of such mailing; and if
mailed by registered or certified mail, on the third business day after the date
of such mailing.
(b) Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, (i) consents, waivers and
modifications which may hereafter be executed, (ii) documents received by each
Investors pursuant hereto and (iii) financial statements, certificates and other
information previously or hereafter furnished to each Investor, may be
reproduced by each Investor by an photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and each Investor may
destroy any original document so reproduced. All parties hereto agree and
stipulate that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by each
Investor in the regular course of business) and that any enlargement, facsimile
or further reproduction of such reproduction shall likewise be admissible in
evidence.
(c) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties.
(d) Entire Agreement; Amendment and Waiver. This Agreement, the
Registration Rights Agreement and the Purchase Agreement constitute the entire
understanding of the parties hereto relating to the subject matter hereof and
supersede all prior understandings among such parties. This Agreement may be
amended, and the observance of any term of this Agreement may be waived, with
(and only with) the written consent of the Institutional Investors.
(e) Severability. In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not affect the
remaining provisions of this Agreement which shall remain in full force and
effect.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement as of the date first above written.
CHARTONE, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------------
Name: Xxxx Xxxxxx
Title: President and
Chief Operating Officer
QUADRAMED OPERATING CORPORATION
By: /s/ Xxxx X. Xxxxxxxxxx
-------------------------------------
Name: Xxxx x. Xxxxxxxxxx
Title: Treasurer
WARBURG, XXXXXX EQUITY PARTNERS, L.P.
By: Warburg, Xxxxxx & Co.,
General Partner
By: /s/ Xxxx Xxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxx
Title: Managing Director
WARBURG, XXXXXX NETHERLANDS EQUITY
PARTNERS I, C.V.
By: Warburg, Xxxxxx & Co.,
General Partner
By: /s/ Xxxx Xxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxx
Title: Managing Director
WARBURG, XXXXXX NETHERLANDS EQUITY
PARTNERS II, C.V.
By: Warburg, Xxxxxx & Co.,
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General Partner
By: /s/ Xxxx Xxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxx
Title: Managing Director
WARBURG, XXXXXX NETHERLANDS EQUITY
PARTNERS III, C.V.
By: Warburg, Xxxxxx & Co.,
General Partner
By: /s/ Xxxx Xxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxx
Title: Managing Director
PRUDENTIAL SECURITIES GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President and CFO
MANAGEMENT INVESTORS:
/s/ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
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SCHEDULE I
INSTITUTIONAL INVESTORS
Warburg, Xxxxxx Equity Partners, L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx Xxxxxxxx
Facsimile: (000) 000-0000
Warburg, Xxxxxx Netherlands Equity Partners I, C.V.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx Xxxxxxxx
Facsimile: (000) 000-0000
Warburg, Xxxxxx Netherlands Equity Partners II, C.V.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx Xxxxxxxx
Facsimile: (000) 000-0000
Warburg, Xxxxxx Netherlands Equity Partners III, C.V.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx Xxxxxxxx
Facsimile: (000) 000-0000
Prudential Securities Group, Inc.
One Seaport Plaza
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
19
SCHEDULE II
MANAGEMENT INVESTORS
Xxxxx X. Xxxxxx
c/o Quadramed Corporation
00 Xxxxxxx Xxx
Xxx Xxxxxx, XX 00000
Xxxxx X. Xxxxxx and Xxxxxx X. Xxxxxx
c/o Quadramed Corporation
00 Xxxxxxx Xxx
Xxx Xxxxxx, XX 00000
