RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT (the "Agreement") is entered into as of
April 1, 1997, by and between BONE, MUSCLE AND JOINT, INC., a Delaware
corporation (the "Company"), and each of the individuals identified on the
signature page hereof (each, a "Stockholder," and collectively, the
"Stockholders"), with reference to the following facts.
A. This Agreement is entered into in connection with that certain
Management Services Agreement effective as of the date hereof (the "Management
Services Agreement") by and among the Company, Tri-City Orthopaedic Surgery
Medical Group, Inc. (the "Medical Group"), and the Indemnifying Persons thereto.
B. Certain capitalized terms used herein are defined in paragraph 5 below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the Company
and each Stockholder agree as follows:
1. Purchase and Sale of Restricted Stock. (a) The Company shall issue to
each Stockholder the number of shares specified opposite the Stockholder's name
in Schedule A attached hereto (the "Restricted Stock") of the common stock of
the Company, par value $0.001 per share (the "Common Stock"), pursuant to
Section 4 and Schedule III of the Management Services Agreement.
(b) In connection with the issuance of the Restricted Stock hereunder, each
Stockholder severally represents and warrants to the Company that:
(i) the Restricted Stock to be issued to the Stockholder pursuant to
this Agreement shall be acquired for the Stockholder's own account, for
investment only and not with a view to, or intention of, distribution
thereof in violation of the 1933 Act, or any applicable state securities
laws, and the Restricted Stock will not be disposed of in contravention of
the 1933 Act or any applicable state securities laws;
(ii) the Stockholder has generally such knowledge and experience in
business and financial matters and with respect to investments in
securities of privately held companies so as to enable the Stockholder to
understand and evaluate the risks and benefits of his or her investment in
the Restricted Stock;
(iii) the Stockholder has no need for liquidity in his or her
investment in the Restricted Stock and is able to bear the economic risk of
his or her investment in the Restricted Stock for an indefinite period of
time and understands that the Restricted
1
Stock has not been registered or qualified under the 1933 Act or any
applicable state securities laws, by reason of the issuance of the
Restricted Stock in a transaction exempt from the registration and
qualification requirements of the 1933 Act or such state securities laws
and, therefore, cannot be sold unless subsequently registered or qualified
under the 1933 Act or such state securities laws or an exemption from such
registration or qualification is available;
(iv) the Stockholder understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to the Stockholder)
promulgated under the 1933 Act, depends on satisfaction of various
conditions and that, if applicable, Rule 144 may only afford the basis for
sales under certain circumstances and only in limited amounts;
(v) the Stockholder is an individual (A) whose individual net worth,
or joint net worth with his or her spouse, presently exceeds $1,000,000 or
(B) who had an income in excess of $200,000 in each of the two most recent
years, or joint income with his or her spouse in excess of $300,000 in each
of those years (in each case including foreign income, tax exempt income
and the full amount of capital gains and losses but excluding any income of
other family members and any unrealized capital appreciation) and has a
reasonable expectation of reaching the same income level in the current
year; or the Stockholder otherwise meets the requirements to be considered
an accredited investor, as defined under the 1933 Act; and
(vi) the Stockholder has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of the
Restricted Stock and has had full access to or been provided with such
other information concerning the Company as he or she has requested.
(c) This Agreement constitutes the legal, valid and binding obligation of
the Stockholder, enforceable in accordance with its terms, and the execution,
delivery and performance of this Agreement by the Stockholder does not and will
not conflict with, violate or cause a breach of any agreement, contract or
instrument to which the Stockholder is a party or any judgment, order or decree
to which the Stockholder is subject.
(d) As an inducement to the Company to issue the Restricted Stock to the
Stockholder and as a condition thereto, each Stockholder acknowledges and agrees
that:
(i) neither the issuance of the Restricted Stock to the Stockholder
nor any provision contained herein shall affect the right of the Company to
terminate the Management Services Agreement; and
(ii) the Company shall provide the Stockholder with substantially the
same information regarding the Company that the Company regularly discloses
to its other stockholders.
-2-
2. Vesting of the Restricted Stock. (a) Except as otherwise provided in
paragraphs 2(b) and 2(c) hereof, the Restricted Stock shall become vested in
accordance with the following schedule, if, as of each such date, (i) the
Management Services Agreement has not been terminated, (ii) there has not been a
Cessation of Active Practice (as defined in paragraph 2(d) below) by the
Stockholder, or (iii) the Stockholder has not died or become permanently
disabled:
Anniversary of the Date Cumulative Percentage of
of this Agreement Restricted Stock Vested
----------------------- ------------------------
First 25%
Second 50%
Third 75%
Fourth 100%
Shares of the Restricted Stock which have become vested are referred to herein
as "Vested Shares" and all other shares of the Restricted Stock are referred to
herein as "Unvested Shares."
(b) (i) The provisions of paragraph (ii) below shall be applicable only in
the event that the Company has not amended that certain Restricted Stock
Agreement entered into by and between the Company and Lehigh Valley Bone, Muscle
and Joint Group, L.L.C., a Pennsylvania limited liability company ("Lehigh
Valley"), in or about July, 1996, to delete that provision in such agreement
which is substantially similar to paragraph (ii) below. If such agreement is so
amended, paragraph (ii) below shall become null and void upon the Company's
provision of notice thereof to the Medical Group, and the Restricted Stock shall
become vested only in annual increments as provided in paragraph 2(a) above.
(ii) If the Management Services Agreement is terminated or there is a
Cessation of Active Practice by the Stockholder, or if the Stockholder dies or
becomes permanently disabled, on any date other than an anniversary date of the
issuance of the Restricted Stock, the cumulative percentage of the Restricted
Stock to become vested shall be determined on a pro rata basis according to the
number of days elapsed since the prior anniversary date or the date of this
Agreement (should such termination occur prior to the first anniversary date).
(c) Notwithstanding the foregoing, in the event of the death of the
Stockholder, in addition to any shares that have vested in accordance with
paragraphs 2(a) and 2(b) above, the number of Unvested Shares scheduled to
become Vested Shares pursuant to paragraph 2(a) above during the eighteen-month
period immediately following the date of death shall immediately become Vested
Shares.
(d) For purposes of this Agreement, "Cessation of Active Practice" means a
physician Stockholder's failure (other than by reason of death or permanent
disability), throughout any twelve-month period ending on the day before any of
the vesting dates described
-3-
in paragraph 2(a) hereof, to engage in the practice of medicine with the Medical
Group on a regular basis, including the performance of orthopedic surgical
procedures on a regular basis (except in the case of any Stockholder who did not
practice surgery on a regular basis immediately prior to the date hereof), such
that (i) the Stockholder was engaged in patient care activities with the Medical
Group for less than seventy-five percent (75%) of the time that the Stockholder
had been engaged in such activities during the twelve-month period immediately
preceding the date hereof, and (ii) the Stockholder generated xxxxxxxx with the
Medical Group that were less than seventy-five percent (75%) of the amount of
such xxxxxxxx generated by the Stockholder during the twelve-month period
immediately preceding the date hereof; provided, however, that if a Stockholder
satisfies all of the foregoing criteria except that the Stockholder has ceased
to conduct his medical practice with the Medical Group, there shall not have
been a Cessation of Active Practice within the meaning of this provision if (A)
the Stockholder enters into a Management Services Agreement with the Company
substantially in the form of the Management Services Agreement entered into by
and between the Medical Group and the Company and (B) the Stockholder enters
into a new Stockholder Non-Competition Agreement with the Company substantially
in the form of the Stockholder Non-Competition Agreement executed by the
Stockholder in connection with the Management Services Agreement entered into by
and between the Medical Group and the Company.
(e) Notwithstanding paragraph 2(d) above, in the case of Xxxxx Xxxxx, M.D.,
the Stockholder shall be deemed to have failed to engage in the practice of
medicine with the Medical Group on a regular basis, as stated in paragraph 2(d)
above, only if the Stockholder ceases entirely to practice medicine with the
Medical Group; provided, further, that in the event of a Cessation of Active
Practice by Xx. Xxxxx, and provided that Xx. Xxxxx does not breach the
Stockholder Non-Competition Agreement entered into concurrently herewith, all
Unvested Shares held by Xx. Xxxxx shall be allocated among and transferred to
the other Stockholders identified in Exhibit A attached hereto (other than
Xxxxxxx X. Xxxx, M.D.) in proportion to the number of shares allocated to each
such Stockholder as specified in Exhibit A, and such reallocated shares shall
become Vested Shares of each such Stockholder in accordance with the remaining
portion of the vesting schedule specified in paragraph 2(a) and subject to all
other terms and conditions set forth in this Agreement.
(f) If the Stockholder is insured under a disability insurance policy, the
determination under such policy as to whether the Stockholder's condition
constitutes a permanent disability shall be binding on the parties hereto for
purposes of this Agreement. If the Stockholder is not insured under a policy of
disability insurance, such determination shall be made by an independent
qualified physician proposed by the Medical Group, subject to the approval of
the Company, which approval shall not be unreasonably withheld.
(g) Notwithstanding anything to the contrary set forth in this Agreement,
including without limitation the provisions of paragraph 2(a) hereof relating to
vesting, if as of the date or dates on which any of the Restricted Stock is
scheduled to vest, Phase II under the Management Services Agreement has not yet
commenced and the Medical Group has not waived the Medical Group's right to
terminate the Management Services Agreement pursuant to Section 13.1(e) of the
Management Services Agreement (providing the Medical Group the right under
-4-
certain circumstances to terminate the Management Services Agreement prior to
the commencement of Phase II), such vesting shall be deferred until (i) the date
on which Phase II under the Management Services Agreement commences or (ii) the
date on which the Medical Group gives written notice to the Management Company
waiving its right to terminate the Management Services Agreement under Section
13.1(e), whichever first occurs. If the Management Services Agreement is
terminated by the Medical Group pursuant to Section 13.1(e) thereof, none of the
Restricted Stock shall be deemed to Vested Shares hereunder.
3. Repurchase of Restricted Stock. (a) Except as provided in paragraph
3(g), in the event of a Repurchase Event, as defined in paragraph 3(b) below,
the Company may elect to repurchase the Restricted Stock (whether vested or
unvested and whether held by the Stockholder or one or more of the Stockholder's
permitted transferees) pursuant to the terms and conditions set forth in this
paragraph 3 (the "Repurchase Option").
(b) Each of the following shall constitute a "Repurchase Event":
(i) Termination of the Management Services Agreement for any reason
whatsoever on or before the fourth anniversary of the date of this
Agreement;
(ii) Termination of the Management Services Agreement by the Medical
Group pursuant to Section 13.1(d) thereof (based on failure of the Company
to consummate an initial public offering of its Common Stock within
forty-eight (48) months after the Commencement Date under the Management
Services Agreement); or
(iii) The Stockholder's Cessation of Active Practice.
(c) The repurchase price for each Unvested Share shall be equal to the
Original Value of such share.
(d) The repurchase price for each Vested Share shall be the Fair Market
Value for such share.
(e) The Company may elect to repurchase all or a portion of the Restricted
Stock by delivering written notice (the "Repurchase Notice") to the Stockholder
within ninety (90) days after the Repurchase Event; provided, however, that if
the Company elects to repurchase less than all of the Restricted Stock, the
Company shall repurchase all of the Unvested Shares and may purchase that number
of Vested Shares as the Company may, in its discretion, determine. The
Repurchase Notice shall set forth the number of Unvested Shares and Vested
Shares to be acquired, the aggregate consideration to be paid for such shares,
and the time and place for the closing of the transaction. If the Repurchase
Event giving rise to the Company's election to repurchase consists of the
termination of the Management Services Agreement, and if the number of shares of
Restricted Stock that the Company has elected to repurchase is less than the
total number of shares of Restricted Stock held by all of the Stockholders, the
Company shall purchase the shares of Restricted Stock pro rata according to
-5-
the number of shares of Restricted Stock held by all of the Stockholders at the
time of delivery of such Repurchase Notice (determined as nearly as practicable
to the nearest share).
(f) The closing of the repurchase of Restricted Stock pursuant to the
Repurchase Option shall take place on the date designated by the Company in the
Repurchase Notice, which date shall not be more than sixty (60) days nor less
than five (5) days after the delivery of the Repurchase Notice. The Company
shall pay for Restricted Stock to be purchased pursuant to the Repurchase Option
by delivery of (i) the Company's check or wire transfer of funds, (ii) a
subordinated note or notes payable in up to five equal annual installments
beginning on the first anniversary of the closing of such purchase and bearing
interest (payable quarterly) at a rate per annum equal to the greater of either
the prime rate announced from time to time by The Chase Manhattan Bank (National
Association) plus 1/2% or the "applicable Federal rate" (as defined in Section
1274(d) of the Internal Revenue Code) in effect from time to time, or (iii) both
(i) and (ii), in the aggregate amount of the repurchase price for such shares;
provided, however, that in the event that the Medical Group is obligated to pay
to the Company any sums in connection with the repurchase of assets by the
Medical Group pursuant to the Management Services Agreement, the total of such
sums may be offset by the Company against any amounts owed by the Company to the
Stockholder pursuant to the Restricted Stock Agreement, such offset amount to be
allocated pro rata among all of the Stockholders. Any notes issued by the
Company pursuant to this paragraph 3(f) shall be subject to the restrictive
covenants, if any, to which the Company is subject at the time of such
repurchase. The Company shall be entitled to require the signature of the
Stockholder to be guaranteed and to receive representations and warranties from
the Stockholder regarding (A) the Stockholder's power, authority and legal
capacity to enter into such sale and transfer valid right, title and interest in
such Restricted Stock, (B) the Stockholder's ownership of such Restricted Stock
and the absence of any liens, pledges, and other encumbrances on such Restricted
Stock and (C) the absence of any violation, default, or acceleration of any
agreement or instrument pursuant to which the Stockholder or the Stockholder's
assets are bound resulting from such sale.
(g) Notwithstanding anything to the contrary set forth in this paragraph 3,
in the event of a Repurchase Event consisting of the termination of the
Management Services Agreement by the Medical Group pursuant to Section 13.1 of
the Management Services Agreement, or in the event of termination of the
Management Services Agreement by either party in accordance with Section 27
thereof (pursuant to Section 13.3), the Company shall have the obligation
(rather than the option) to purchase all of the Restricted Stock acquired by the
Stockholder pursuant to this Agreement, and the repurchase price shall be paid
in full in cash not later than sixty (60) days after the date of termination of
the Management Services Agreement; provided, however, that in the event that the
Medical Group is obligated to pay to the Company any sums in connection with the
repurchase of assets by the Medical Group pursuant to the Management Services
Agreement, the total of such sums may be offset by the Company against any
amounts owed by the Company to the Stockholders pursuant to the Restricted Stock
Agreement, such offset amount to be allocated pro rata among all of the
Stockholders.
-6-
(h) In the event of the death or permanent disability of the Stockholder,
the Company shall repurchase all of the Unvested Shares (but not the Vested
Shares) of the Stockholder. The repurchase price for each Unvested Share shall
be equal to the Original Value of such share, and such repurchase price shall be
paid in full in cash not later than sixty (60) days after the date of death or
the date on which such disability is determined to be permanent.
(i) In the event that the Stockholder is required, prior to the
consummation of an initial public offering of the Company's Common Stock
pursuant to the 1933 Act or prior to the second anniversary of the date hereof,
whichever is later, to pay any state or federal taxes in connection with the
receipt of the Restricted Stock hereunder, the Stockholder shall have the right
to sell to the Company, and the Company shall be obligated to purchase from the
Stockholder, for the purchase price determined in accordance with this paragraph
3, such number of shares of Vested Stock as the Stockholder may tender to the
Company, provided that the purchase price therefor shall not exceed the total
amount of the Stockholder's tax liability incurred in connection with the
receipt of such stock. In the event that the Stockholder desires to exercise the
right conferred under this paragraph 3(i), the Stockholder shall give notice to
the Company not earlier than forty-five (45) days prior to, nor later than
forty-five (45) days after, the date on which such taxes are due and payable,
and the Stockholder shall furnish to the Company reasonable documentation
prepared by the Stockholder's certified public accountant establishing the
amount of such tax liability.
(j) Notwithstanding anything to the contrary contained in this Agreement,
all repurchases of Restricted Stock by the Company shall be subject to
applicable restrictions, if any, contained in Federal law or in the Delaware
General Corporation Law. Notwithstanding anything to the contrary contained in
this Agreement, if any such restrictions prohibit or otherwise delay the
repurchase of Restricted Stock hereunder which the Company is otherwise entitled
or required to make, the Company may make such repurchases as soon as it is
permitted to do so under such restrictions.
(k) In the event that Restricted Stock is repurchased pursuant to this
paragraph 3, the Stockholder and his or her successors and assigns shall take
all reasonable steps to obtain all required third-party, governmental and
regulatory consents and approvals and take all other reasonable actions
necessary to facilitate consummation of such repurchase in a timely manner.
4. Transfer Restriction; Legend. (a) Except as otherwise expressly provided
in paragraph 3, the Stockholder shall sell or transfer or agree to sell or
transfer ("Sale" or "Sell") Restricted Stock only in accordance with the
following procedures; provided, however, that with respect to this paragraph
4(a), Restricted Stock, at any point in time, shall be limited to Vested Shares
and at no time shall the Stockholder have the right to sell Unvested Shares;
provided, further, that the restrictions on transfers of Vested Shares set forth
in this paragraph 4 shall expire, and shall be of no further force or effect,
upon the consummation of initial public offering of the Company's Common Stock
pursuant to the 1933 Act:
(b) In the event that the Stockholder receives a bona fide offer from
a third party (the "Prospective Stockholder") to purchase all or any
portion of the Restricted Stock
-7-
owned by the Stockholder, the Stockholder shall deliver to the Company a
written notice (the "Offer Notice"), which shall be irrevocable for a
period of fifteen (15) business days after delivery thereof (the "Offer
Period"), offering (the "Offer") all of the Restricted Stock proposed to be
Sold by the Stockholder to the Prospective Stockholder at the purchase
price and on the terms of the proposed Sale to the Prospective Stockholder
(such Offer Notice shall include the foregoing information, a copy of the
Prospective Stockholder's bona fide offer and all other relevant terms of
the proposed Sale, including the identification of the Prospective
Stockholder). The Company shall have the right and option, for a period of
fifteen (15) business days after delivery of the Offer Notice, to
repurchase all of the Restricted Stock so offered at the purchase price and
on the terms stated in the Offer Notice. Such acceptance shall be made by
delivering a written notice to the Stockholder within said fifteen (15)
business-day period.
(c) Sales of Restricted Stock under the terms of paragraph 4(b) above
shall be made on a mutually satisfactory business day within fifteen (15)
business days after the expiration of the Offer Period. Delivery of
certificates or other instruments evidencing such Restricted Stock duly
endorsed for transfer shall be made on such date against payment of the
purchase price therefor.
(d) If the Company fails to purchase the Restricted Stock offered for
Sale pursuant to the Offer Notice, then at any time within sixty (60)
business days after the expiration of the Offer Period the Stockholder may
Sell all or any part of the Restricted Stock so offered for Sale on terms
no more favorable than the terms stated in the Offer Notice; provided,
however, that the Stockholder shall not, under any circumstances, Sell any
Restricted Stock to the Prospective Stockholder if the Board of Directors
of the Company, in its sole discretion, determines in good faith that the
Prospective Stockholder is a competitor, or an Affiliate of a competitor,
of the Company or that such Prospective Stockholder's ownership of
Restricted Stock would be contrary to the best interests of the Company. In
the event that the Restricted Stock is not Sold by the Stockholder to the
Prospective Stockholder during such period, the right of the Stockholder to
Sell such remaining Restricted Stock to the Prospective Stockholder shall
expire and the obligations of the Stockholder pursuant to this paragraph 4
shall be reinstated.
(e) Any transferee of Restricted Stock (other than the Company) shall,
as a condition to such transfer, agree to be bound by all of the provisions
of this Agreement applicable to the Stockholder.
(f) The certificates representing the Restricted Stock will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A RESTRICTED
STOCK AGREEMENT EFFECTIVE AS OF APRIL 1, 1997, BETWEEN THE STOCKHOLDER AND
BONE, MUSCLE AND JOINT, INC. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY
THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
-8-
(g) Xxxxxx Xxxxxx, M.D. and any venture capital firm providing funds
to the Company ("Selling Shareholders") shall give to the Stockholder the
right to participate on a pro rata basis (based on the number of shares
owned, whether preferred or common, held by the Stockholders and by any
other shareholders who hold the same rights that are conferred by this
paragraph 4(g), including members of other physician groups), in any
proposed sale of stock (whether preferred or common) in the Company from
any of the Selling Shareholders to any unaffiliated third party, and the
Company shall require the Selling Shareholders to comply with the
obligations set forth in this paragraph 4(g); provided, however, that the
obligation under this paragraph 4(g) shall become null and void upon the
consummation of an initial public offering of the Company's Common Stock
pursuant to the 0000 Xxx.
(h) The Stockholder hereby agrees to the provisions of Section 9.12 of
the Management Services Agreement (relating to the right of Xxxxxx Xxxxxx,
M.D. and any venture capital firm providing funds to the Company to
participate in certain sales of stock by the Stockholder).
5. Definitions. (a) "Affiliate" means, with respect to any Person, any of
(a) a director, officer or partner of such Person and (b) any other Person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, another Person. The term
"control" includes, without limitation, the possession, directly or indirectly,
of the power to direct the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
(b) "Fair Market Value" of each share of Restricted Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any given day, the average of the last bid
and asked prices on all such exchanges at the end of such day, or, if on any
given day the Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the Nasdaq Stock Market National Market System
("Nasdaq") as of 4:00 P.M., New York time, or, if on any given day the Common
Stock is not quoted in Nasdaq, the average of the bid and asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau Incorporated, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
the Fair Market Value is being determined and the 20 consecutive trading days
prior to such day. If at any time the Common Stock is not listed on any
securities exchange or quoted in Nasdaq or the over-the-counter market, the Fair
Market Value shall be that value jointly determined by the Stockholder and the
Company, provided that if they cannot so agree, such value shall be determined
by a mutually acceptable investment banking or other qualified firm of national
or regional reputation, retained jointly by the Company and the Medical Group,
and all fees, expenses and other charges of such firm incurred in connection
with such determination of Fair Market Value shall be borne and shared equally
by the Company and the Medical Group. In the event that the parties are unable
to agree upon such an investment banking or other qualified firm within ten (10)
days after the date on which either party may initially propose such a firm, a
qualified firm shall be selected in the following manner:
-9-
First, the Stockholder shall send a list of names of four such firms,
arranged in order of the Stockholder's preference, by written notice to the
Company within seven (7) days after the expiration of the above referenced
10-day period. If the Stockholder does not furnish such a list to the
Company within such time period, the Company may, within the next seven (7)
days following expiration of such earlier seven-day period, submit a list
of names of four such firms to the Stockholder.
Second, the Company (or the Stockholder, as applicable) shall select,
within seven (7) days after receipt of the above-referenced list, one of
the firms identified on such list and shall give written notice thereof to
the other party. If the recipient of such list does not make any such
selection, the firm identified as the first choice on such list shall be
deemed agreed to by the parties.
(c) "Internal Revenue Code" means the Internal Revenue of Code of 1986, as
the same may be amended or supplemented from time to time, or any successor
statute, and the rules and regulations thereunder, as the same are from time to
time in effect.
(d) "Original Value" of each share of Restricted Stock purchased hereunder
will be equal to Ten Cents $0.10 (as proportionately adjusted for all subsequent
stock splits, stock dividends and other recapitalizations).
(e) "Person" shall be construed broadly and shall include, without
limitation, an individual, a partnership, an investment fund, a limited
liability corporation or partnership, a corporation, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.
(f) "Public Sale" means any sale of Restricted Stock to the public pursuant
to an offering registered under the 1933 Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 adopted under the
1933 Act.
(g) "Restricted Stock" has the meaning set forth in paragraph 1(a). The
Restricted Stock will continue to be Restricted Stock in the hands of any holder
other than the Stockholder (except for the Company and except for transferees in
a Public Sale), and except as otherwise provided herein, each such other holder
of the Restricted Stock will succeed to all rights and obligations attributable
to the Stockholder as the holder of the Restricted Stock hereunder. The
Restricted Stock will also include shares of the Company's capital stock issued
with respect to the Restricted Stock by way of a stock split, stock dividend or
other recapitalization.
(h) "1933 Act" means the Securities Act of 1933, as the same may be amended
or supplemented from time to time, or any successor statute, and the rules and
regulations thereunder, as the same are from time to time in effect.
-10-
6. Indemnification. (a) The Company shall indemnify, defend and hold
harmless each Stockholder against all liability, loss or damage, together with
all reasonable costs and expenses related thereto (including reasonable legal
fees and expenses), relating to or arising from the untruth, inaccuracy or
breach of any of the representations, warranties or agreements of the Company
contained in this Agreement.
(b) Each Stockholder, severally, shall indemnify and hold harmless the
Company against all liability, loss or damage, together with all reasonable
costs and expenses related thereto (including reasonable legal fees and
expenses), relating to or arising from the untruth, inaccuracy or breach of any
of the representations, warranties or agreements of such Stockholder contained
in this Agreement.
7. General Provisions.
(a) Transfers in Violation of Agreement. Any sale, transfer, assignment or
other disposition (whether with or without consideration and whether voluntarily
or involuntarily or by operation of law) (a "Transfer") or attempted Transfer of
any Restricted Stock in violation of any provision of this Agreement shall be
void, and the Company shall not record such Transfer on its books or treat any
purported transferee of such Restricted Stock as the owner of such stock for any
purpose.
(b) Severability. It is the desire and intent of the parties hereto that
the provisions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
(c) Entire Agreement. This Agreement, those documents expressly referred to
herein and other documents of even date herewith embody the complete agreement
and understanding among the parties hereto with respect to the subject matter
hereof and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
(d) Relationship Among Stockholders. No Stockholder shall have any
responsibility for any breach of this Agreement by any other Stockholder or for
any representations, warranties, acts or omissions of any other Stockholder.
Each Stockholder is entering into this Agreement for and on behalf of such
Stockholder only, and no partnership, joint venture, unincorporated association,
or any other legal entity is intended to be formed by
-11-
or among the Stockholders as a result of or in connection with this Agreement.
The parties have chosen to execute a single instrument for convenience only, and
this Agreement shall be construed as separate and several agreements between the
Company and each of the respective Stockholders for all purposes. This Agreement
may be executed in separate counterparts.
(e) Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Stockholder, the Company and their respective successors, assigns, heirs,
representatives and estate, as the case may be (including subsequent holders of
Restricted Stock); provided that the rights and obligations of the Stockholder
under this Agreement shall not be assignable except in connection with a
permitted transfer of Restricted Stock hereunder.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
any choice of law or conflicting provision or rule (whether of the State of
California, or any other jurisdiction), that would cause the laws of any
jurisdiction other than the State of California to be applied. In furtherance of
the foregoing, the internal law of the State of California will control the
interpretation and construction of this agreement, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
(g) Jurisdiction. (i) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any California state court or Federal court of the United States
of America sitting in the State of California, and any appellate court thereof,
in any action or proceeding arising out of or relating to this Agreement or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such California
state court or, to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement in the courts of any other jurisdiction.
(ii) Each of the parties hereto irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any California state
or Federal court. Each of the parties hereto irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(h) Remedies. Each of the parties to this Agreement shall be entitled to
enforce its rights under this Agreement specifically to recover damages and
costs (including reasonable attorneys' fees) for any breach of any provision of
this Agreement and to exercise all other rights existing in its favor. The
parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and
-12-
that any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or other injunctive relief
(without posting any bond or deposit) in order to enforce or prevent any
violations of the provisions of this Agreement.
(i) Amendment and Waiver. The provisions of this Agreement may be amended
and waived only with the prior written consent of the Company and the
Stockholder and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall be construed as a waiver of such provisions
or affect the validity, binding effect or enforceability of this Agreement or
any provision hereof.
(j) Notices. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, transmitted via telecopier, mailed by
first class mail (postage prepaid and return receipt requested) or sent by
reputable overnight courier service (charges prepaid) to the recipient at the
address below indicated or at such other address or to the attention of such
other person as the recipient party has specified by prior written notice to the
sending party. Notices will be deemed to have been given hereunder and received
when delivered personally, when received if transmitted via telecopier, five
days after deposit in the U.S. mail and one business day after deposit with a
reputable overnight courier service.
If to the Company, to:
Bone, Muscle and Joint, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxx, M.D., President
Facsimile: (000) 000-0000
with a copy to:
Bone, Muscle and Joint, Inc.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx, Vice President, Western Region
Facsimile: (000) 000-0000
and to:
Xxxxxxx and Xxxxxx Law Corporation
1900 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
-13-
If to the Stockholder, to:
[Name of Stockholder]
Tri-City Orthopaedic Surgery
Medical Group, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Tri-City Orthopaedic Surgery
Medical Group, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
(k) Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or holiday in the State
of California, the time period for giving notice or taking action shall be
automatically extended to the business day immediately following such Saturday,
Sunday or holiday.
(l) Attorneys' Fees. In the event of any dispute or controversy arising out
of or relating to this Agreement, the prevailing party shall be entitled to
recover from the losing party all costs and expenses, including attorneys' fees
and accountants' fees, incurred in connection with such dispute or controversy.
(m) Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(n) Construction. Where specific language is used to clarify by example a
general statement contained herein, such specific language shall not be deemed
to modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
(o) Nouns and Pronouns. Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns and pronouns shall include the plural and vice-versa.
* * *
-14-
IN WITNESS WHEREOF, the parties hereto have executed this Restricted Stock
Agreement effective as of the date first written above.
COMPANY
BONE, MUSCLE AND JOINT, INC.
By: /s/ X. Xxxxxx
---------------------------------
Xxxxxx Xxxxxx, M.D., President
and Chief Executive Officer
STOCKHOLDERS
/s/ Xxxxxxx Xxxxxxx, M.D. /s/ Xxxxxxx X. Xxxx
----------------------------- -----------------------------
Xxxxxxx Xxxxxxx, M.D. Xxxxxxx X. Xxxx, M.D.
/s/ Xxxxx X. Xxxx /s/ Xxxxxxx X. Xxxxxxx
----------------------------- -----------------------------
Xxxxx X. Xxxx, M.D. Xxxxxxx X. Xxxxxxx, M.D.
/s/ Xxxxx X. Xxxxxxxx, M.D. /s/ Xxxxx Xxxxx
----------------------------- -----------------------------
Xxxxx X. Xxxxxxxx, M.D. Xxxxx Xxxxx, M.D.
/s/ Xxxxxx Xxxx
-----------------------------
Xxxxxx Xxxx, M.D.
MEDICAL GROUP
ACCEPTED AND AGREED
AS TO PARAGRAPH 5(b)
TRI-CITY ORTHOPAEDIC SURGERY
MEDICAL GROUP, INC.
By: /s/ Xxxxx X. Xxxx
-----------------------------------
Xxxxx X. Xxxx, M.D., President
[Signatures Continued]
-15-
ACCEPTED AND AGREED
AS TO SECTION 4(g)
/s/ X. Xxxxxx
----------------------------------------
XXXXXX XXXXXX, M.D.
DELPHI VENTURES III, L.P.
By: DELPHI MANAGEMENT PARTNERS
III, L.L.C., its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxx, Managing Member
DELPHI BIOINVESTMENTS III, L.P.
By: DELPHI MANAGEMENT PARTNERS
III, L.L.C., its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxx, Managing Member
OAK INVESTMENT PARTNERS VI, LIMITED
PARTNERSHIP
By: OAK ASSOCIATES VI, LIMITED
PARTNERSHIP, its General Partner
By:
-------------------------------------
Xxx X. Xxxxxx, Managing Partner
OAK VI AFFILIATES FUND,
LIMITED PARTNERSHIP
By: OAK VI AFFILIATES, LLC,
its General Partner
By:
-------------------------------------
Xxx X. Xxxxxx, Managing Member
-16-
AMENDMENT NO. 1 TO RESTRICTED STOCK AGREEMENT
THIS AMENDMENT NO. 1 TO RESTRICTED STOCK AGREEMENT (the "Amendment") is
entered into as of April 1, 1997, by and between BONE, MUSCLE AND JOINT, INC., a
Delaware corporation (the "Company"), and each of the individuals identified on
the signature page hereof (each, a "Stockholder," and collectively, the
"Stockholders"), with reference to the following facts.
A. The parties entered into that certain Restricted Stock Agreement
effective as of April 1, 1997 (the "Agreement").
B. The parties desire to amend the Agreement as set forth below.
NOW, THEREFORE, the Company and each Stockholder hereby agree as follows:
1. Paragraph 2(d) of the Agreement is deleted, and the following new
Paragraph 2(d) in inserted in lieu thereof:
"(d) For purposes of this Agreement, "Cessation of Active Practice"
means a physician Stockholder's failure (other than by reason of death
or permanent disability) to engage in the practice of medicine with
the Medical Group on a regular basis, including the performance of
orthopedic surgical procedures on a regular basis (except in the case
of any Stockholder who did not practice surgery on a regular basis
immediately prior to the date hereof); provided, however, that if a
Stockholder has ceased to conduct his medical practice with the
Medical Group, there shall not have been a Cessation of Active
Practice within the meaning of this provision if (A) the Stockholder
enters into a Management Services Agreement with the Company
substantially in the form of the Management Services Agreement entered
into by and between the Medical Group and the Company and (B) the
Stockholder enters into a new Stockholder Non-Competition Agreement
with the Company substantially in the form of the Stockholder
Non-Competition Agreement executed by the Stockholder in connection
with the Management Services Agreement entered into by and between the
Medical Group and the Company."
1
2. Paragraph 2(e) of the Agreement is deleted, and the following new
Paragraph 2(e) is inserted in lieu thereof:
"(e) Notwithstanding paragraph 2(d) above, in the case of Xxxxx Xxxxx,
M.D., the Stockholder shall be deemed to have failed to engage in the
practice of medicine with the Medical Group on a regular basis, as
stated in paragraph 2(d) above, only if the Stockholder ceases
entirely to practice medicine with the Medical Group."
3. A new Paragraph 2(h) is added to the Agreement to read as follows:
"(h) Transfer of Restricted Stock to the Medical Group.
(i) For purposes of this paragraph 2(h), each of the following shall
constitute a "Stockholder Termination Event":
(A) Cessation of Active Practice by the Stockholder;
(B) Death of the Stockholder; or
(C) Permanent disability of the Stockholder.
(ii) In the event of a Stockholder Termination Event, the Stockholder
shall transfer (or cause to be transferred) to the Medical Group all of the
Unvested Shares of Restricted Stock held by the Stockholder (or by the
Stockholder's permitted transferee(s)), pursuant to the terms and
conditions set forth in this paragraph 2(h).
(iii) The Medical Group shall accept such Unvested Shares and shall
pay to the Stockholder (or to the Stockholder's permitted transferee(s)) an
amount determined by multiplying the number of such Unvested Shares by the
Original Value (as defined in this Agreement). Such shares shall be
delivered and such sum shall be paid in full in cash not later than sixty
(60) days after the date of the Stockholder Termination Event.
(iv) A portion of the shares received by the Medical Group pursuant to
this paragraph 2(h) shall be held by the Medical Group as Vested Shares,
and a portion shall be held as Unvested Shares. The number of such shares
to be held as Vested Shares shall be determined by dividing the amount paid
by the Medical Group pursuant to paragraph 2(h)(iii) by the Fair Market
Value (as hereinafter defined) per share. The remainder of such shares
shall be Unvested Shares. Any such Vested Shares may be held, transferred,
or sold at the discretion of the Medical
2
Group. Any Unvested Shares may be transferred only in accordance with
paragraph 2(h)(v), and such shares may become Vested Shares only as
provided in paragraph 2(h)(v).
(v) The Medical Group shall not sell or otherwise transfer any
Unvested Shares to any person or entity, except to one or more physician
employees, independent contractors, or partners in the Medical Group who
prior to the receipt of such shares from the Medical Group had not acquired
any shares of the Company. As a condition to any such sale or transfer,
such physician(s) shall enter into a Restricted Stock Agreement with the
Company substantially in the form of this Agreement, effective as of the
date of transfer of such shares. Any such sale or transfer to any such
physician(s) shall be subject to such additional terms and conditions as
may be agreed upon by the Medical Group and such physician(s).
(vi) Notwithstanding paragraph 2(h)(iv) above, in the case of transfer
of Unvested Shares from Xxxxx Xxxxx, M.D. to the Medical Group pursuant to
this paragraph 2(h), such shares shall become Vested Shares on the date or
dates determined in accordance with paragraph 2(a), except as provided in
this Agreement in the event of termination of the Management Services
Agreement. Any Vested Shares may be held, transferred, or sold at the
discretion of the Medical Group. Any Unvested Shares may be transferred
only in accordance with paragraph 2(h)(v)."
4. Paragraph 3(b) of the Agreement is deleted, and the following new
Paragraph 3(b) is inserted in lieu thereof:
"(b) Each of the following shall constitute a "Repurchase Event":
(i) Termination of the Management Services Agreement for any
reason whatsoever on or before the fourth anniversary of the date of
this Agreement; or
(ii) Termination of the Management Services Agreement by the
Medical Group pursuant to Section 13.1(d) thereof (based on failure of
the Company to consummate an initial public offering of its Common
Stock within forty-eight (48) months after the Commencement Date under
the Management Services Agreement)."
5. Paragraph 3(h) of the Agreement is deleted in its entirety.
6. All other terms and conditions set forth in the Agreement remain in full
force and effect.
3
* * *
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first written above.
COMPANY
BONE, MUSCLE AND JOINT, INC.
By:_____________________________
Xxxxxx Xxxxxx, M.D., President
STOCKHOLDERS
/s/ Xxxxxxx Xxxxxxx, M.D. /s/ Xxxxxxx X. Xxxx
----------------------------- -----------------------------
Xxxxxxx Xxxxxxx, M.D. Xxxxxxx X. Xxxx, M.D.
/s/ Xxxxx X. Xxxx /s/ Xxxxxxx X. Xxxxxxx
----------------------------- -----------------------------
Xxxxx X. Xxxx, M.D. Xxxxxxx X. Xxxxxxx, M.D.
/s/ Xxxxx X. Xxxxxxxx, M.D. /s/ Xxxxx Xxxxx
----------------------------- -----------------------------
Xxxxx X. Xxxxxxxx, M.D. Xxxxx Xxxxx, M.D.
/s/ Xxxxxx Xxxx
-----------------------------
Xxxxxx Xxxx, M.D.
MEDICAL GROUP
ACCEPTED AND AGREED
AS TO PARAGRAPHS 2(h) and 5(b)
TRI-CITY ORTHOPAEDIC SURGERY
MEDICAL GROUP, INC.
By: /s/ Xxxxx X. Xxxx
-----------------------------------
Xxxxx X. Xxxx, M.D., President
4
