<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1996.
REGISTRATION NO. 333-06931
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
ADVANCE PARADIGM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8099 75-2493381
(State or other jurisdiction (Primary standard industrial (I.R.S. Employer
of classification code number) Identification
incorporation or organization) No.)
</TABLE>
545 EAST JOHN CARPENTER FREEWAY
SUITE 1900
IRVING, TEXAS 75062
TELEPHONE: (214) 830-6199
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
DAVID D. HALBERT
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
545 EAST JOHN CARPENTER FREEWAY
SUITE 1900
IRVING, TEXAS 75062
TELEPHONE: (214) 830-6199
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
COPIES TO:
<TABLE>
<S> <C>
J. KENNETH MENGES, JR., P.C. CARMELO M. GORDIAN
AKIN, GUMP, STRAUSS, HAUER & FELD, S. MICHAEL DUNN
L.L.P.
SUITE 4100 BROBECK, PHLEGER & HARRISON LLP
1700 PACIFIC AVENUE 301 CONGRESS AVENUE, SUITE 1200
DALLAS, TX 75201-4618 AUSTIN, TX 78701
(214) 969-2800 (512) 477-5495
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution of
the securities being registered, other than underwriting discounts and
commissions, are set forth in the following table. All of such expenses will be
borne by Advance ParadigM, Inc. (the "Company").
<TABLE>
<S> <C>
SEC registration fees................................................... $ 11,897
NASD filing fees........................................................ $ 3,950
Nasdaq National Market System application and listing fees.............. $ *
Printing and engraving expenses......................................... $ *
Legal fees and expenses................................................. $ *
Accounting fees and expenses............................................ $ *
Blue sky fees and expenses.............................................. $ *
Transfer agent and registrar fees and expenses.......................... $ *
Miscellaneous........................................................... $ *
---------
Total................................................................. $ 500,000
---------
---------
</TABLE>
- ------------------------
*To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company, a Delaware corporation, is empowered by Section 145 of the
Delaware General Corporation Law (the "Delaware Act"), subject to the procedures
and limitations stated therein, to indemnify certain parties. Section 145 of the
Delaware Act provides in part that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Similar indemnity is authorized for such persons against
expenses (including attorneys' fees) actually and reasonably incurred in defense
or settlement of any threatened, pending or completed action or suit by or in
the right of the corporation, if such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and provided further that (unless a court of competent jurisdiction
otherwise provides) such person shall not have been adjudged liable to the
corporation. Any such indemnification may be made only as authorized in each
specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct. Where an officer or a director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually or reasonably incurred. Section 145 provides further that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise.
Article 10 of the Company's Certificate of Incorporation, as amended (the
"Certificate") provides that the Company shall indemnify any and all persons
whom it has the power to indemnify under Section 145 of the Delaware Act to the
fullest extent permitted under such section, and such indemnity shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
II-1
<PAGE>
Article 9 of the Company's Certificate eliminates the personal liability of
the Company's directors to the fullest extent permitted under Section 102(b)(7)
of the Delaware Act, as amended. Such section permits a company's certificate of
incorporation to eliminate or limit the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not eliminate or limit
the liability of a director: (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of the Delaware Act (which addresses director
liability for unlawful payment of a dividend or unlawful stock purchase or
redemption) or (iv) for any transaction from which the director derived an
improper personal benefit.
As set forth below, Article 8 of the bylaws of the Company (the "Bylaws")
provides for indemnification of directors and officers, and Section 8.8 of the
Bylaws provides for the authority to purchase insurance with respect to
indemnification of directors and officers.
Article 8 of the Bylaws provides that the Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Company) by reason of the fact that he is or was a director, officer, employee
or agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding to the
fullest extent permitted by Delaware law.
The right to indemnification under Article 8 of the Bylaws is a contract
right which includes, with respect to directors, officers, employees and agents,
the right to be paid by the Company the expenses incurred in defending a civil
or criminal action, suit or proceeding in advance of its disposition; provided,
however, that (i) the payment of such expenses incurred by a director or officer
in advance of the final disposition of such action, suit or proceeding shall be
made only upon delivery to the Company of an undertaking, by or on behalf of
such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under Article 8 of the Bylaws or otherwise and (ii) advances for
expenses incurred by other employees and agents may be paid upon such terms and
conditions that the Board of Directors of the Company deems appropriate.
Section 7 of the Underwriting Agreement among the Company, the Underwriters
and the Selling Stockholders, a copy of which is filed herein as Exhibit 1,
provides for the indemnification by the Company of the Underwriters and each
person, if any, who controls any Underwriter against certain liabilities and
expenses, as stated therein, which may include liabilities under the Securities
Act of 1933, as amended. The Underwriting Agreement also provides that the
Underwriters shall similarly indemnify the Company, its directors, officers and
controlling persons, as set forth therein.
The Company intends to apply for a directors and officers insurance policy.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Company issued 3,125,000 shares of its Common Stock to Advance Health
Care, Inc. ("Advance Health Care") in July 1993 in exchange for all of the
issued and outstanding common stock of and certain debt attributable to Advance
ParadigM Mail Services, Inc. ("Advance Mail") and Advance ParadigM Data
Services, Inc. ("Advance Data").
In a two-step transaction, the Company sold an aggregate of 10,000 shares of
its Series A Preferred Stock in a private financing at an effective price of
$1,000 per share (collectively, the "Canaan/Whitney Capital Investment") as
follows: On August 4, 1993, the Company sold (i) a total of 1,945 shares of
Series A Preferred Stock to Canaan Capital Limited Partnership ("Canaan LP"),
Canaan Capital Offshore Limited Partnership C.V. ("Canaan Offshore") and Quai
Ltd., (ii) a total of 2,000 shares of Series A Preferred Stock to J.H. Whitney &
Co. ("J.H. Whitney") and Whitney 1990 Equity Fund, L.P. ("Whitney Fund"), (iii)
30 shares of Series A Preferred Stock to Jeffrey R. Jay, M.D., and (iv) 25
shares of Series A Preferred Stock to Stephen L. Green; and on December 7, 1993,
in contemplation of the closing of the Advance ParadigM Clinical Services, Inc.
("Advance
II-2
<PAGE>
Clinical") acquisition, the Canaan Investors, the Whitney Investors, Dr. Jay and
Mr. Green purchased an additional 2,918 shares, 3,000 shares, 45 shares and 37
shares, respectively, of the Company's Series A Preferred Stock. Both Dr. Jay
and Mr. Green are members of the Board of Directors. The Canaan and Whitney
Investors have certain registration rights in connection with their shares. For
purposes of this Registration Statement and the descriptions of the Company's
related parties contained herein, (i) Canaan LP, Canaan Offshore, Quai Ltd., Dr.
Jay and Mr. Green are collectively referred to as the "Canaan Investors" and
(ii) J.H. Whitney, the Whitney Fund and the Whitney Debt Fund (as defined below)
are collectively referred to as the "Whitney Investors". All shares of the
Preferred Stock issued in the Canaan/Whitney Capital Investment automatically
convert into shares of Common Stock upon the consummation of this Offering. As
of the date of this registration statement, the conversion rate is one share of
Series A Preferred Stock for 250 shares of Common Stock.
On December 8, 1993, the Company and Whitney Subordinated Debt Fund L.P.
(the "Whitney Debt Fund") entered into a Note and Warrant Purchase Agreement
pursuant to which the Whitney Debt Fund paid the Company $7 million in exchange
for a note payable to the Whitney Debt Fund, in the original principal amount of
$7.0 million (the "Whitney Note") and a warrant to purchase up to 336,500 shares
of common stock of the Company, par value $0.01 (the "Common Stock") (the
"Whitney Warrant"). The Whitney Note bears interest on its original principal
amount of $7 million at the rate of 10.1% per annum, payable quarterly. Although
the Whitney Note has a seven-year term, the Company is obligated to prepay the
indebtedness, without penalty or premium, upon consummation of a public offering
filed with the Commission. The Whitney Warrant grants the Whitney Debt Fund the
right to purchase an aggregate of 336,500 shares of Common Stock at an exercise
price of $4.00 per share until December 8, 2003. The warrant contains certain
demand and piggy-back registration rights relating to the Common Stock
underlying it.
Effective December 8, 1993, in connection with the Advance Clinical
acquisition, the Company sold to Blue Cross and Blue Shield of Maryland ("BCBS
of Maryland") a warrant to purchase 56,250 shares of Common Stock, exercisable
in whole during a four-year term at an aggregate exercise price of $337,500. The
warrant contains certain piggy-back registration rights relating to the Common
Stock underlying it.
In June 1995 an option holder exercised his option and purchased 5,500
shares of Common Stock.
On November 25, 1995, in connection with the Warrant Agreement by and
between the Company and BCBS of Texas, the Company granted to BCBS of Texas the
right to earn up to four warrants, each representing the right to acquire 66,750
shares of Common Stock, in consideration of BCBS of Texas causing additional
lives to be enrolled in the Company's PBM programs, which the Company has
estimated the value to be less than $100,000 (the "BCBS of Texas Warrants").
BCBS of Texas' right to earn the BCBS of Texas Warrants expires November 25,
2000. Each BCBS of Texas Warrant will not be exercisable until the first annual
anniversary of its issuance. At such time, the BCBS of Texas Warrant will be
exercisable in whole during a four-year term at an exercise price of $11.00 per
share.
Immediately prior to the consummation of the Offering, the Company intends
to issue shares of Common Stock to the stockholders of Advance Health Care in a
merger of Advance Health Care with and into the Company (the "Merger"). Prior to
the Merger, and assuming conversion of the Series A Preferred Stock into shares
of Common Stock, Advance Health Care held 3,125,000 shares of Common Stock,
representing 55.5% of the outstanding capital stock of the Company.
On June 25, 1996, the Company sold an aggregate of 2,597 shares of its
Series B Preferred Stock, par value $.01 per share, in a private financing to
BCBS of Texas at an effective price of $3,850 per share. As of the date of this
registration statement, the conversion rate is one share of Series B Preferred
Stock for 250 shares of Common Stock.
Each of the foregoing issuances is exempt from registration under Section
4(2) of the Securities Act of 1933, as amended.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBITS
- ----------- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
1* -- Form of Underwriting Agreement.
3.1**** -- Amended and Restated Certificate of Incorporation of the Company.
3.2**** -- Amended and Restated Bylaws of the Company.
4.1**** -- Specimen Certificate for shares of Common Stock, $.01 par value, of the Company.
4.2* -- Preferred Stock Purchase Agreement dated as of August 4, 1993, among the Company and Canaan LP,
Canaan Offshore, Stephen L. Green, Jeffrey R. Jay, Quai Ltd., J.H. Whitney, and Whitney Fund.
4.3* -- Amendment No. 1 to Preferred Stock Purchase Agreement dated as of December 7, 1993, by and among
Advance Data and the Purchasers.
4.4* -- Amendment No. 2 to Preferred Stock Purchase Agreement dated as of December 8, 1993, by and among
APS, the Purchasers and Whitney Debt Fund.
4.5* -- Voting, Co-Sale and Right of First Refusal Agreement dated as of August 4, 1993, among the Company,
Advance Health Care, David D. Halbert, Jon S. Halbert, Danny Phillips and the Purchasers.
4.6* -- Amendment No. 1 to Voting, Co-Sale and Right of First Refusal Agreement dated as of December 8,
1993, among the Company, Advance Health Care, David D. Halbert, Jon Halbert, Danny Phillips, the
Purchasers and Whitney Debt Fund.
4.7* -- Note and Warrant Purchase Agreement dated December 8, 1993, between the Company and Whitney Debt
Fund.
4.8* -- Promissory Note dated December 8, 1993, made by the Company payable to the order of Whitney Debt
Fund in the original principal amount of $7,000,000.
4.9* -- Common Stock Purchase Warrant dated December 8, 1993, made by the Company in favor of Whitney Debt
Fund.
4.10**** -- Termination Agreement dated as of July ,1996, among the Company, Advance Health Care, David D.
Halbert, Jon S. Halbert, Danny Phillips, the Purchasers and Whitney Debt Fund.
4.11** -- Warrant for Purchase of Shares of Common Stock of the Company dated December 8, 1993, in favor of
BCBS of Maryland.
4.12** -- Stock Purchase Agreement dated as of June 25, 1996, by and between the Company and BCBS of Texas.
4.13*** -- Warrant Agreement dated as of November 25, 1995, by and between the Company and BCBS of Texas.
4.14**** -- Amended and Restated Incentive Stock Option Plan.
4.15**** -- Incentive Stock Option Plan.
5**** -- Opinion and Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.1** -- Managed Pharmaceutical Agreement dated November 1, 1993, by and between Advance Data and the Mega
Life & Health Insurance Company (exhibits excluded).
10.2* -- Nondisclosure/Noncompetition Agreement dated August 4, 1993, between the Company, Advance Data,
Advance Mail and David D. Halbert.
10.3* -- Nondisclosure/Noncompetition Agreement dated August 4, 1993, between the Company, Advance Mail,
Advance Data and Jon S. Halbert.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBITS
- ----------- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
10.4* -- Nondisclosure/Noncompetition Agreement dated August 4, 1993, between the Company, Advance Mail,
Advance Data and Danny Phillips.
10.5* -- Employment Agreement effective as of December 1, 1993 by and between Advance Clinical (formerly
ParadigM) and Joseph J. Filipek, Jr. and, for the limited purposes of Sections 3(d), 3(g) and 3(h)
thereof, the Company.
10.6* -- Employment Agreement effective as of December 1, 1993, by and between Advance Clinical (formerly
ParadigM) and Robert L. Cinquegrana and for the limited purposes of Sections 3(d), 3(g) and 3(h)
thereof, the Company.
10.7* -- Employment Agreement effective as of November 14, 1994, by and between the Company and John H.
Sattler.
10.8* -- Employment Agreement effective as of February 15, 1996, by and between the Company and Alan T.
Wright.
10.9*** -- Form of Health Benefit Management Services Agreement.
10.10* -- Sublease dated May 2, 1996, between Lincoln National Life Insurance Company and Advance Data.
10.11* -- Lease dated March 16, 1994, by and between Hill Management Services, Inc. and Advance Clinical
(formerly ParadigM).
10.12* -- Lease Agreement dated as of February 24, 1989, as amended November 30, 1992, and December , 1992,
by and between TRST Las Colinas, Inc. and Advance Health Care.
10.13* -- Assignment, Assumption, Bill of Sale and Consent Agreement dated as of October 20, 1993, between
Medco Containment Services, Inc., the Company and Trinity Properties, Ltd.
10.14*** -- Managed Pharmacy Benefit Services Agreement dated September 1, 1995, between the Company and BCBS
of Texas (exhibits excluded).
23.1* -- Consent of Arthur Andersen LLP.
23.2**** -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in its opinion filed as Exhibit 5
hereto).
27* -- Financial Data Schedule.
</TABLE>
- ------------------------
*Filed as the exhibit indicated to the Registration Statement on Form S-1
filed with the Commission on June 26, 1996.
** Filed herewith.
*** Filed herewith. Confidential treatment has been requested. The redacted
material has been separately filed with the Commission.
**** To be filed by amendment.
(b) Financial Statement Schedules
The following financial statement schedule is included in Part II of the
registration statement:
Schedule II--Valuation and Qualifying Accounts
All other schedules have been omitted because they are not required, are not
applicable or the information is included in the Consolidated Financial
Statements or Notes thereto.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS
(a) Undertaking related to equity offerings of nonreporting registrants:
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
(b) Undertaking related to acceleration of effectiveness:
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) Undertaking related to Rule 430A:
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of a registration
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective.
(2) For purposes of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the Offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 1 to the Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Dallas, State of Texas, on July 10, 1996.
ADVANCE PARADIGM, INC.
By: /s/ DAVID D. HALBERT
-----------------------------------
David D. Halbert
CHIEF EXECUTIVE OFFICER, CHAIRMAN
OF THE BOARD AND PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-1 has been signed by the following
persons in the capacities indicated on July 10, 1996.
NAME TITLE
- ----------------------------------- -----------------------------------
/s/ DAVID D. HALBERT Chief Executive Officer, Chairman
- ----------------------------------- of the Board and President
David D. Halbert (Principal Executive Officer)
/s/ JON S. HALBERT*
- ----------------------------------- Chief Operating Officer, Executive
Jon S. Halbert Vice President and Director
Chief Financial Officer, Senior
DANNY PHILLIPS* Vice President, Secretary and
- ----------------------------------- Treasurer (Principal Financial and
Danny Phillips Accounting Officer)
PETER M. CASTLEMAN*
- ----------------------------------- Director
Peter M. Castleman
MIKEL D. FAULKNER*
- ----------------------------------- Director
Mikel D. Faulkner
STEPHEN L. GREEN*
- ----------------------------------- Director
Stephen L. Green
JEFFREY R. JAY*
- ----------------------------------- Director
Jeffrey R. Jay
MICHAEL D. WARE*
- ----------------------------------- Director
Michael D. Ware
*By: /s/ DAVID D. HALBERT
--------------------------------
David D. Halbert
ATTORNEY IN FACT
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. EXHIBITS NUMBERED PAGE
- ----------- -------------------------------------------------------------------------------------- -------------------
<S> <C> <C> <C>
1* -- Form of Underwriting Agreement.
3.1**** -- Amended and Restated Certificate of Incorporation of the Company.
3.2**** -- Amended and Restated Bylaws of the Company.
4.1**** -- Specimen Certificate for shares of Common Stock, $.01 par value, of the Company.
4.2* -- Preferred Stock Purchase Agreement dated as of August 4, 1993, among the Company and
Canaan LP, Canaan Offshore, Stephen L. Green, Jeffrey R. Jay, Quai Ltd., J.H. Whitney,
and Whitney Fund.
4.3* -- Amendment No. 1 to Preferred Stock Purchase Agreement dated as of December 7, 1993, by
and among Advance Data and the Purchasers.
4.4* -- Amendment No. 2 to Preferred Stock Purchase Agreement dated as of December 8, 1993, by
and among APS, the Purchasers and Whitney Debt Fund.
4.5* -- Voting, Co-Sale and Right of First Refusal Agreement dated as of August 4, 1993, among
the Company, Advance Health Care, David D. Halbert, Jon S. Halbert, Danny Phillips and
the Purchasers.
4.6* -- Amendment No. 1 to Voting, Co-Sale and Right of First Refusal Agreement dated as of
December 8, 1993, among the Company, Advance Health Care, David D. Halbert, Jon
Halbert, Danny Phillips, the Purchasers and Whitney Debt Fund.
4.7* -- Note and Warrant Purchase Agreement dated December 8, 1993, between the Company and
Whitney Debt Fund.
4.8* -- Promissory Note dated December 8, 1993, made by the Company payable to the order of
Whitney Debt Fund in the original principal amount of $7,000,000.
4.9* -- Common Stock Purchase Warrant dated December 8, 1993, made by the Company in favor of
Whitney Debt Fund.
4.10**** -- Termination Agreement dated as of July ,1996, among the Company, Advance Health Care,
David D. Halbert, Jon S. Halbert, Danny Phillips, the Purchasers and Whitney Debt
Fund.
4.11** -- Warrant for Purchase of Shares of Common Stock of the Company dated December 8, 1993,
in favor of BCBS of Maryland.
4.12** -- Stock Purchase Agreement dated as of June 25, 1996, by and between the Company and
BCBS of Texas.
4.13*** -- Warrant Agreement dated as of November 25, 1995, by and between the Company and BCBS
of Texas.
4.14**** -- Amended and Restated Incentive Stock Option Plan.
4.15**** -- Incentive Stock Option Plan.
5**** -- Opinion and Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.1** -- Managed Pharmaceutical Agreement dated November 1, 1993, by and between Advance Data
and the Mega Life & Health Insurance Company (exhibits excluded).
10.2* -- Nondisclosure/Noncompetition Agreement dated August 4, 1993, between the Company,
Advance Data, Advance Mail and David D. Halbert.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. EXHIBITS NUMBERED PAGE
- ----------- -------------------------------------------------------------------------------------- -------------------
<S> <C> <C> <C>
10.3* -- Nondisclosure/Noncompetition Agreement dated August 4, 1993, between the Company,
Advance Mail, Advance Data and Jon S. Halbert.
10.4* -- Nondisclosure/Noncompetition Agreement dated August 4, 1993, between the Company,
Advance Mail, Advance Data and Danny Phillips.
10.5* -- Employment Agreement effective as of December 1, 1993 by and between Advance Clinical
(formerly ParadigM) and Joseph J. Filipek, Jr. and, for the limited purposes of
Sections 3(d), 3(g) and 3(h) thereof, the Company.
10.6* -- Employment Agreement effective as of December 1, 1993, by and between Advance Clinical
(formerly ParadigM) and Robert L. Cinquegrana and for the limited purposes of Sections
3(d), 3(g) and 3(h) thereof, the Company.
10.7* -- Employment Agreement effective as of November 14, 1994, by and between the Company and
John H. Sattler.
10.8* -- Employment Agreement effective as of February 15, 1996, by and between the Company and
Alan T. Wright.
10.9*** -- Form of Health Benefit Management Services Agreement.
10.10* -- Sublease dated May 2, 1996, between Lincoln National Life Insurance Company and
Advance Data.
10.11* -- Lease dated March 16, 1994, by and between Hill Management Services, Inc. and Advance
Clinical (formerly ParadigM).
10.12* -- Lease Agreement dated as of February 24, 1989, as amended November 30, 1992, and
December , 1992, by and between TRST Las Colinas, Inc. and Advance Health Care.
10.13* -- Assignment, Assumption, Bill of Sale and Consent Agreement dated as of October 20,
1993, between Medco Containment Services, Inc., the Company and Trinity Properties,
Ltd.
10.14*** -- Managed Pharmacy Benefit Services Agreement dated September 1, 1995, between the
Company and BCBS of Texas (exhibits excluded).
23.1* -- Consent of Arthur Andersen LLP.
23.2**** -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in its opinion filed as
Exhibit 5 hereto).
27* -- Financial Data Schedule.
</TABLE>
- ------------------------
*Filed as the exhibit indicated to the Registration Statement on Form S-1
filed with the Commission on June 26, 1996.
** Filed herewith.
*** Filed herewith. Confidential treatment has been requested. The redacted
material has been separately filed with the Commission.
**** To be filed by amendment.
<PAGE>
EXHIBIT 4.11
THIS WARRANT AND THE UNDERLYING SHARES HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES
OR THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE
COMPANY) STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
WARRANT
For Purchase of Shares of Common Stock
of
ADVANCE PHARMACY SERVICES, INC.
December 8, 1993
THIS CERTIFIES THAT Blue Cross and Blue Shield of Maryland, Inc., a
Maryland corporation ("Blue Cross"), or registered transferees or assigns, is
entitled, subject to the terms and conditions hereinafter set forth, to purchase
from Advance Pharmacy Services, Inc., a Delaware corporation (the "Company"),
225 fully paid and nonassessable shares (which number is hereinafter sometimes
referred to as the "Initial Exercise Number") of Common Stock, $.01 par value
per shares of the Company (the "Common Stock") upon presentation and surrender
of this Warrant, together with a completed and executed Election to Purchase in
the form attached hereto as Exhibit I, at any time during the period ending on
the fourth anniversary of the date hereof (the "Exercise Period") at the
principal office of the Company or at such other office as shall have been
theretofore designated by the Company by notice pursuant hereto and upon payment
therefor to the Company for the account of the Company of the purchase price, as
hereinafter set forth. The Initial Exercise Number shall be subject to
adjustment as hereinafter set forth.
This Warrant is subject to the following terms and conditions:
Section 1. EXERCISE OF WARRANT. The purchase rights represented by
this Warrant are exercisable at the option of the holder hereof, in whole at any
time, during the Exercise Period. Shares of Common Stock purchased upon exercise
of the Warrant shall at the time of purchase be paid for in full. To the extent
that the right to purchase shares has accrued hereunder, the Warrant may be
exercised by written notice to the Company, which shall be at
<PAGE>
least fifteen days after the giving of such notice unless an earlier date shall
have been mutually agreed upon, accompanied by full payment for the shares by
(i) certified or official bank check or the equivalent thereof acceptable to
Company or (ii) tendering shares of Common Stock of the Company with a fair
market value at least equal to the aggregate exercise price for the shares to be
acquired. Where the Warrant is exercised by tendering Common Stock of the
Company, the fair market value of such shares as of the date proper written
notice is received by the Company (the "Date of Exercise") shall be established
in good faith by the Board of Directors. In setting the fair market value as of
the Date of Exercise, due regard shall be given to all facts and circumstances.
However, if an active market develops for the Common Stock, the average of the
closing bid and asked prices on the Date of Exercise shall be set by the Board
of Directors as the fair market value. If an active market does not exist at the
Date of Exercise, the holder of the Warrant may condition his exercise on the
Board of Directors establishing a fair market value above an amount specified in
the holder's written notice. Any shares tendered that are not used to satisfy an
exercise price shall be returned to the holder. Finally, the holder of the
Warrant may choose to satisfy the exercise price through some combination of the
two methods described in this paragraph.
At the time of delivery, the Company shall, without stock transfer tax to
the holder, deliver to the holder (or to such other person) at the principal
office of the Company, or such other place as shall be mutually agreed upon, a
certificate or certificates for such shares, provided, however, that the time of
delivery may be postponed by the Company for such period as may be required for
it with reasonable diligence to comply with any requirements of law. If the
Common Stock issuable upon exercise is not registered under the Securities Act
of 1933 (the "Act"), then the Company at the time of exercise will require in
addition that the registered owner deliver an investment representation in form
acceptable to the Company, and the Company will place a legend on the
certificate for such Common Stock restricting the transfer of same. At no time
shall the Company have any obligation or duty to register under the Act the
Common Stock issuable upon exercise of the Warrant.
Section 2. PRICE. The purchase price for the Initial Exercise Number
of shares of Common Stock purchasable pursuant to the exercise of this Warrant
(the "Exercise Price") shall be $337,500. The Exercise Price shall be subject to
adjustment as provided in Section 3 below.
Section 3. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES. The
Exercise Price and number of shares of Common Stock purchasable pursuant to the
exercise of this Warrant shall be subject to adjustment from time to time as
follows:
(a) ADJUSTMENTS TO EXERCISE PRICE UPON DILUTIVE ISSUANCES OF COMMON
STOCK OR CONVERTIBLE SECURITIES. If the Company shall, while the Warrant is
outstanding, issue or sell any shares of its Common Stock or Common Stock
Equivalents (as hereinafter defined) without consideration or at a price
per share equal to LESS THAN the Exercise Price per share in effect at the
time of such issuance or sale, then in each such case the Exercise Price
per share upon each
2
<PAGE>
such issuance or sale, except as hereinafter provided, shall be lowered so
as to be equal to the lowest Net Consideration per Share (as hereinafter
defined) received for each additional share upon such issuance of Common
Stock or Common Stock Equivalents. The provisions of this Section 3(a) may
be waived in any instance upon the written approval of the holders of
fifty-one percent (51%) of the outstanding Warrants.
(i) UPON DILUTIVE ISSUANCES OF WARRANTS. OPTIONS AND PURCHASE
RIGHTS TO COMMON STOCK OR CONVERTIBLE SECURITIES.
(A) COMMON STOCK EQUIVALENTS. For the purposes of this Section
3(a)(i), the issuance of any warrants, options, subscription or
purchase rights with respect to shares of Common Stock and the
issuance of any securities convertible into or exchangeable for shares
of Common Stock, or the issuance of any warrants, options,
subscription or purchase rights with respect to such convertible or
exchangeable securities (collectively, "Common Stock Equivalents" and
individually, a "Common Stock Equivalent"), shall be deemed an
issuance of Common Stock with respect to adjustments in the Exercise
Price if the Net Consideration Per Share (as hereinafter determined)
which may be received by the Company for such Common Stock or Common
Stock Equivalents shall be less than the Exercise Price per share in
effect at the time of such issuance.
Any obligation, agreement or undertaking to issue Common Stock
Equivalents at any time in the future shall be deemed to be an
issuance at the time such obligation, agreement or undertaking is made
or arises. No adjustment of the Exercise Price shall be made under
this Section 3(a)(i) upon the issuance of any shares of Common Stock
which are issued pursuant to the exercise, conversion or exchange of
any Common Stock Equivalents if any adjustment shall previously have
been made upon the original issuance of any such Common Stock
Equivalents as above provided.
(B) DECREASES IN NET CONSIDERATION PER SHARE AND RETROACTIVE
ADJUSTMENT UPON EXPIRATION OF COMMON STOCK EQUIVALENTS. Should the Net
Consideration Per Share of any such Common Stock or Common Stock
Equivalents (even if issued or granted and outstanding as of the date
of issuance of this Warrant or hereafter) be decreased from time to
time, then, upon the effectiveness of each such change, the Exercise
Price will be that which would have been obtained (1) had the
adjustments made upon the issuance of such Common Stock Equivalents
been made upon the basis of the actual Net Consideration Per Share of
such securities, and (2) had the adjustments made to the Exercise
Price since the date of issuance of such Common Stock Equivalents been
made to such Exercise Price as adjusted pursuant to clause (1) above.
Any adjustment of the Exercise Price with respect to this paragraph
which relates to any Common Stock Equivalent shall be disregarded if,
as, and when such
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<PAGE>
Common Stock Equivalent expires or is cancelled without being
exercised, so that the Exercise Price effective immediately upon such
cancellation or expiration shall be equal to the Exercise Price that
would have been in effect had the expired or cancelled Common Stock
Equivalent not been issued.
(C) DEFINITION OF NET CONSIDERATION PER SHARE. For purposes of
this paragraph, the "NET CONSIDERATION PER SHARE" which may be
received by the Company shall be determined as follows:
(1) The "NET CONSIDERATION PER SHARE" shall mean the amount
equal to the total amount of consideration, if any, received by
the Company for the issuance of such Common Stock Equivalents,
plus the minimum amount of consideration, if any, payable to the
Company upon exercise, or conversion or exchange thereof, divided
by the aggregate number of shares of Common Stock that would be
issued if all such Common Stock Equivalents were exercised,
exchanged or converted.
(2) The "NET CONSIDERATION PER SHARE" which may be received
by the Company shall be determined in each instance as of the
date of issuance of Common Stock Equivalents without giving
effect to any possible future upward price adjustments or rate
adjustments which may be applicable with respect to such Common
Stock Equivalents.
(ii) CONSIDERATION OTHER THAN CASH. For purposes of this Section
3(a), if a part or all of the consideration received by the Company in
connection with the issuance of shares of the Common Stock or Common
Stock Equivalents consists of property other than cash, such
consideration shall be deemed to have a fair market value as is
reasonably determined in good faith by the Board of Directors of the
Company. In the event of any dispute between the holders of Warrants
and the Company regarding the determination of fair market value, at
the option of the holders of fifty-one percent (51%) of the
outstanding Warrants, the Company shall engage a consulting firm or
investment banking firm, selected by the Board of Directors and
approved by the holders of fifty-one percent (51%) of the outstanding
Warrants (such approval not to be unreasonably withheld), to prepare
an independent appraisal of the fair market value of such property to
be distributed. The costs of such valuation shall be borne by the
Company.
(iii) EXCEPTIONS TO ANTI-DILUTION ADJUSTMENTS; BASKET FOR
RESERVED EMPLOYEE SHARES. This Section 3(a) shall not apply under any
of the circumstances which would constitute an Extraordinary Common
Stock Event (as described below). Further, the anti-dilution
protection provisions of this Section 3(a) shall not apply with
respect to:
4
<PAGE>
(A) the grant, issuance or sale of Common Stock, or the
grant of options, warrants or other rights exercisable therefor,
issued or issuable after the Original Issue Date to directors,
officers, employees, consultants and others similarly situated
pursuant to any incentive or non-qualified stock option plan or
agreement, stock purchase plan or agreement, stock issuance or
restricted stock agreement, stock ownership plan (ESOP),
consulting agreement, or such other similar options, issuances,
arrangements, agreements or plans approved by a majority of the
members of the Board of Directors of the Company; and
(B) shares of Common Stock (or options or warrants
exercisable therefor) issued solely to employees, consultants or
others in connection with the acquisition (whether by merger or
otherwise) by the Company of all or substantially all of the
capital stock or assets of any other entity or business
organization, provided the issuance of such securities is
approved by two-thirds of the members of the Board of Directors
of the Company and provided that the aggregate number of shares
of Common Stock issued pursuant to this paragraph does not exceed
2,250 shares (the "Acquisition Pool"). Acquisition Pool may be
increased from time to time (i) by a vote of two-thirds of the
members of the Board of Directors of the Company, or (ii) by the
written consent of the holders of at least fifty-one percent
(51%) of the outstanding Warrants. The Acquisition Pool shall be
subject to a proportionate adjustment in the event of any stock
dividend, stock split, combination, reorganization,
recapitalization, reclassification or any other similar event
involving a change in the Common Stock.
(b) ADJUSTMENT FOR COMBINATIONS OR CONSOLIDATIONS OF COMMON STOCK. In
the event the Company, at any time or from time to time after the date
hereof (hereinafter referred to as the "Original Issue Date"), effects a
subdivision or combination of its outstanding Common Stock or a greater or
lesser number of shares, then and in each such event the Initial Exercise
Number and the Exercise Price shall be adjusted proportionately such that
the holder of this Warrant (the "Warrantholder") is entitled to purchase
the same percentage (i.e., 1%) of all shares of the Company's outstanding
capital stock then issued and issuable for the same aggregate consideration
as such Warrantholder was entitled to purchase immediately prior to such
event.
(c) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event
the Company at any time or from time to time after the Original Issue Date
shall pay a dividend payable in any class of the capital stock of the
Company, or otherwise make a distribution of any class of capital stock,
then the Exercise Price shall be adjusted, from and after the record date
of such dividend or the date of such distribution, to that price determined
by multiplying the Exercise Price by a fraction,
5
<PAGE>
(i) the numerator of which shall be the total number of shares of
capital stock issued and outstanding or deemed to be issued and
outstanding immediately prior to the time of such issuance or the
close of business on such record date; and
(ii) the denominator of which shall be the number of shares of
capital stock issued and outstanding or deemed to be issued and
outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of
capital stock to be issued;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Exercise Price shall be recomputed accordingly as
of the close of business on such record date and thereafter the Exercise
Price shall be adjusted pursuant to this Section 3(b) as of the time of
actual payment of such dividend or distribution. The Warrantholder shall
thereafter be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of shares of Common Stock (calculated to the
nearest whole share) obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common
Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(d) NUMBER OF SHARES. Upon any adjustment of the Exercise Price, the
Holder of this Warrant shall thereafter (until another such adjustment) be
entitled to purchase, at the new Exercise Price, the number of shares,
calculated to the nearest full share, obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the new Exercise Price resulting from such
adjustment.
Section 4. RESERVATION AND AUTHORIZATION OF COMMON STOCK. The Company
shall at all times reserve and keep available, free from preemptive rights, out
of its authorized but unissued Common Stock, solely for the purposes of
effecting the exercise of all outstanding Warrants, the full number of shares of
Common Stock issuable upon the exercise of all outstanding Warrants. For the
purpose of this Section 4, the full number of shares of Common Stock issuable
upon the exercise of all outstanding Warrants shall be computed as if at the
time of computation of such number of shares of Common Stock all outstanding
Warrants were held by a single holder. The Company shall from time to time, in
accordance with applicable law, increase the authorized amount of its Common
Stock if at any time the authorized amount of its Common Stock remaining
unissued shall not be sufficient to permit the exercise of all Warrants at the
time outstanding.
6
<PAGE>
Section 5. INCLUSION IN REGISTRATION OF COMMON STOCK OR OTHER
SECURITIES.
(a) In the event the Company shall propose the registration, on an
appropriate form under the Act, of any shares of Common Stock or any other class
of securities of the Company (other than in connection with an offering solely
to the Company's employees on Form S-8 or a successor form of registration
statement under the Act), then the Company shall in each case give written
notice of such proposed filing to the Warrantholders, or if this Warrant has
been exercised, then to the holders of Common Stock purchased upon such exercise
(collectively, the "Security Holders"), at least thirty (30) days before the
anticipated filing date, and such notice shall offer to such Security Holders
the opportunity to include in such registration statement such number of shares
of Common Stock as they may request; provided that the Company shall not be so
obligated on more than one occasion and provided further, that such Security
Holders may participate in the offering to the extent permitted by the managing
underwriter. If the managing underwriter permits the inclusion of only a portion
of the shares such Security Holders propose to register, each Security Holder
will be permitted to have included in the offering its pro rata share of the
total number of shares permitted to be included in the offering by all selling
shareholders in such offering and shall further be permitted to have an
additional opportunity to be included in a subsequent registration statement.
Upon written notice given by such Security Holders to the Company within thirty
days after the giving of such notice by the Company, the Company shall include
in any registration statement relating to such shares of the Company all or such
portion of the shares as the Security Holders may request.
(b) COMPANY'S OTHER AGREEMENTS WITH RESPECT TO REGISTRATION RIGHTS. In
connection with the registration of shares of Common Stock pursuant to Section
5(a) above, the Company agrees to:
(i) Notify the Security Holders as to the filing thereof and of all
amendments or supplements thereto filed prior to the effective date of such
registration statement;
(ii) Notify the Security Holders, promptly after the Company shall
receive notice thereof, of the time when such registration statement became
effective or any amendment or supplement to any prospectus forming a part
of such registration statement has been filed;
(iii) Notify the Security Holders promptly of any request by the
Securities and Exchange Commission ("Commission") for the amending or
supplementing of such registration statement or prospectus or for
additional information;
(iv) Prepare and file with the Commission promptly upon written
request of the Security Holders, any amendments or supplements to such
7
<PAGE>
registration statement or prospectus which may be necessary or advisable to
keep such registration statement effective and to comply with the
provisions of the Act with respect to the offer of the shares of Common
Stock covered by such registration statement during the period required for
the distribution of the Shares, which period shall not be in excess of six
months from the effective date of the registration statement or
post-effective amendment pursuant to which the Shares may be sold;
(v) Prepare and promptly file with the Commission and promptly notify
the Security Holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements therein or omissions therefrom if, at any time when a prospectus
relating to the Shares is required to be delivered under the Act, any event
with respect to the Company shall have occurred as a result of which any
such prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(vi) Advise the Security Holders promptly after the Company shall
receive notice or obtain knowledge of the issuance of any stop order by the
Commission suspending the effectiveness of any such registration statement
or amendment thereto or of the initiation or threatening of any proceeding
for that purpose, and promptly use its best efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such stop order should be
issued;
(vii) Use its best efforts to qualify the Shares for sale under the
securities or blue sky laws of such states within the United States as the
Security Holders may reasonably designate, except that the Company shall
not be required in connection therewith or as a condition thereto to
qualify to do business in any such state;
(viii) Furnish to the Security Holders, as soon as available, copies
of any such registration statement and each preliminary or final
prospectus, or supplement or amendment required to be prepared thereto, all
in such quantities as they may from time to time reasonably request.
(c) AGREEMENTS BY SECURITY HOLDERS. In connection with the filing of a
post-effective amendment or new registration statement pursuant to this Section
5 covering shares of Security Holders, each of the Security Holders covenants
and agrees:
(i) To furnish information to the Company concerning the Security
Holders and their holdings of securities of the Company and the proposed
8
<PAGE>
method of sale or other disposition of the Shares and such other
information and undertakings as shall be required in connection with the
preparation and filing of any post-effective amendment or registration
statement covering all or a part of the Shares and in order to insure full
compliance with the Act and the Securities Exchange Act of 1934, as
amended; and
(ii) To notify the Company promptly, in writing, of the commencement
of any action against the Security Holders which is based upon an alleged
act or omission, which, if proven, would result in the Company having to
indemnify the Security Holders pursuant to Section 5(d) hereof, and, to
permit the Company, if it so desires, to participate in and assume the
defense of such action with counsel satisfactory to the Company. An
omission to notify the Company promptly of the commencement of such action,
if prejudicial to the ability of the Company to defend such action, shall
relieve the Company of any liability to indemnify under Section 5(d) below.
(d) Each of the Security Holders agrees to pay its pro rata share of
all costs and expenses in connection with the registration statement and all
actions which the Company is required to take or effect pursuant to this Section
5 hereof based on the number of shares being registered for the Security Holder
in proportion to the total number of Shares being registered in connection with
the registration statement.
(e) INDEMNIFICATION.
(i) The Company shall indemnify and hold harmless the Security Holders
and any underwriter (as defined in the Act) for the Security Holders, and
each person, if any, who controls the Security Holders or such underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which the Security Holders or such
underwriter or such controlling person becomes subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) are caused by any untrue statement or alleged
untrue statement of any material fact contained in a post-effective
amendment or registration statement covering the Shares, in the prospectus
contained therein or in an amendment or supplement thereto, or arising out
of or based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company shall reimburse the
Security Holders, such underwriter and such controlling person for any
legal or other expenses reasonably incurred by the Security Holders, such
underwriter or such controlling person in connection with investigating and
defending any such loss, claim, damage, liability or
9
<PAGE>
action; provided, however, that the Company shall not be obligated to
indemnify in any such case to the extent and only to the extent that any
such loss, claim, damage, expense or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to the Company by the Security Holders, such underwriter or such
controlling person. The Company agrees that, in the event it receives
notice of the commencement of any action against it which is based upon an
alleged act or omission, which, if proven would result in the Security
Holders having to indemnify the Company pursuant to subsection (ii) below,
the Company will participate in and assume the defense of such action with
counsel satisfactory to the Security Holders. This indemnity will be in
addition to any liability which the Company may otherwise have.
(ii) With respect to the filing of a post-effective amendment or
registration statement pursuant to this Section 5 hereof, each of the
Security Holders agrees to indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the post-effective
amendment or registration statement and each person, if any, who controls
the Company, within the meaning of the Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, or any such
director, officer or controlling person may become subject under the Act or
otherwise insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) are caused by any untrue or alleged untrue
statement of any material fact contained in such post-effective amendment
or registration statement, or in any prospectus thereunder, or any
amendment or supplement thereto, or arising out of or based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with information
furnished by the Security Holders to the Company; and the Security Holders
will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in connection
with investigating and defending any such loss, claim, damage, liability or
action.
Section 6. TRANSFERABILITY
(a) The Warrant and the shares of Common Stock purchase by holders of
the Warrant are not transferable by the Warrantholder except to affiliates of
Blue Cross. Any permitted transfer shall be recorded on the books of the
Company upon receipt by
10
<PAGE>
the Company of a notice of transfer in the form attached hereto as Exhibit II,
at its principal offices and the payment to the Company of all transfer taxes
and other governmental charges imposed on such transfer.
(b) Unless and until otherwise permitted by this Section, each
certificate for Common Stock initially issued upon the exercise of this Warrant
(a "Warrant Certificate"), and each certificate for Common Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND MAY BE REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. "
Prior to any permitted transfer of any Warrant Certificate (other than
pursuant to an effective registration statement under the Securities Act),
the Warrantholder thereof shall furnish, at the expense of such
Warrantholder, to the Company an opinion of counsel, reasonably
satisfactory in form and substance to the Company, to the effect that such
transfer is exempt from registration under the Securities Act. Upon any
exercise of any Warrant for shares of Common Stock to be registered in the
name of a person other than the Warrantholder thereof, such Warrantholder
shall furnish, at the expense of such Warrantholder, to the Company an
opinion of counsel, reasonably satisfactory in form and substance to the
Company, to the effect that the issuance of the shares of Common Stock to
such other person upon exercise of such Warrant Certificate is exempt from
registration under the Securities Act.
Section 7. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional share of stock upon any exercise of any Warrant. As to any
final fraction of a share which the holder of one or more Warrants, the rights
under which are exercised in the same transaction, would otherwise be entitled
to purchase upon such exercise, the Company shall, if it does not issue a
fractional share, pay a cash adjustment in respect of such final fraction in an
amount equal to the same fraction of the Exercise Price per share of Capital
Stock.
Section 8. EXCHANGE AND REPLACEMENT OF WARRANT. This Warrant is
exchangeable, upon the surrender hereof by the Warrantholder at the principal
office of the Company, for new Warrants of like tenor and date representing the
right to purchase the number of shares purchasable hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by said Warrantholder at the time of such surrender.
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<PAGE>
Upon receipt by the Company of (a) evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant and, in case of
loss, theft or destruction, or (b) indemnity or security reasonably satisfactory
to it, and (c) reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will make and deliver a new Warrant of like tenor, in
lieu of this Warrant.
Section 9. RIGHTS PRIOR TO EXERCISE OF WARRANT. Prior to the exercise
of this Warrant, the Warrantholder shall not be entitled to any rights of a
stockholder of the Company with respect to the Common Stock for which this
Warrant may then be exercisable, including without limitation the right to vote,
to receive dividends or other-distributions or to exercise any preemptive rights
and shall not be entitled to receive any notice of any proceedings of the
Company except as provided herein.
Section 10. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered in the manner provided Section 11.12 of the Purchase and
Sale Agreement between the Company Blue Cross dated as of December 8, 1993.
Section 11. AUTHORIZATION AND ISSUANCE. The Company represents and
warrants to Blue Cross and any Warrantholder that it has the corporate power and
authority to issue this Warrant; the Warrant has been duly authorized, executed
and delivered and is duly and validly issued, fully paid and nonassessable; the
issuance of the Warrant, and the shares of Common Stock issuable upon its
exercise, are not prohibited or restricted by the Certificate of Incorporation
or By-laws of the Company or any agreement to which the Company is a party; and
the shares of Common Stock issuable upon exercise of this Warrant, when issued
upon exercise of this Warrant pursuant to the terms hereof, will be duly and
validly issued, fully paid and nonassessable.
Section 12. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered by its duly authorized officer as an instrument under
seal as of the date first above written.
ADVANCE PHARMACY SERVICES, INC.
By: /s/ David D Halbert
Its: Chairman and CEO
<PAGE>
EXHIBIT I
ELECTION TO PURCHASE
TO: Advance Pharmacy Services, Inc.
The undersigned owner of the accompanying Warrant hereby irrevocably
exercises the option to purchase 225 shares of Common Stock in accordance with
the terms of such Warrant, directs that the shares issuable and deliverable upon
such purchase (together with any check for a fractional interest) be issued in
the name of and delivered to the undersigned, and makes payment in full therefor
at the Exercise Price provided in such Warrant.
COMPLETE FOR REGISTRATION OF SHARES OF COMMON STOCK ON THE STOCK TRANSFER
RECORDS MAINTAINED BY THE COMPANY:
- --------------------------------------------------------------------------------
Name of Warrant Holder
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
Federal I.D. Tax Number or Social Security Number
Signature:
------------------------------
Date:
-----------------------------------
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EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED hereby sells, assigns and
transfers all of the rights of the undersigned under the within Warrant, with
respect to the 225 shares of the Common Stock covered thereby set forth herein
below, unto
NAME OF ASSIGNEE ADDRESS
- ---------------- -------
Dated:
----------------------------------
Signature:
------------------------------
Address:
--------------------------------
- ----------------------------------------
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of June 25, 1996 is entered into by and
between Advance ParadigM, Inc., a Delaware corporation (the "Company"), and Blue
Cross and Blue Shield of Texas, Inc., a Texas non-profit group hospital services
organization (the "Investor").
The parties hereto agree as follows:
1. DEFINITIONS. Unless the context otherwise requires, the terms defined in
this SECTION 1 shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
"AFFILIATE" shall mean any Person that directly or indirectly controls, is
controlled by, or is under common control with, the indicated Person.
"AGREEMENT" shall mean this Agreement, including all schedules and exhibits
hereto, as the Agreement may be from time to time amended, modified or
supplemented.
"APPROVED PLAN" shall mean any stock option plan of the Company or any
other plan approved by the Board for the sale, grant, award or issuance to
management, directors or employees of, or consultants to the Company of shares
of Common Stock or options to purchase such shares pursuant to which plan any
such sale, grant or award must be approved by the Board or a committee thereof
duly authorized by the Board prior to such sale, grant, award or issuance.
"AUDITED FINANCIAL STATEMENTS" shall have the meaning assigned to such term
in SECTION 6.5 hereof.
"BCBS-ILL" shall mean Health Care Service Corporation, a Mutual Legal
Reserve Company, d/b/a Blue Cross and Blue Shield of Illinois, Inc.
"BOARD" shall mean the Board of Directors of the Company.
"CERTIFICATE AMENDMENT" shall mean the amendment to the Company's
Certificate of Incorporation that authorizes the terms and preferences of the
Preferred Stock as agreed to by the parties in the Description of Preferred
Stock.
"COMMON STOCK" shall mean the Company's common stock, par value $0.01 per
share.
"COMMISSION" shall mean the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"COMPANY" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"CONVERSION STOCK" shall mean the unissued Common Stock into which the
Preferred Stock is convertible and the Common Stock issued upon such conversion.
"DESCRIPTION OF PREFERRED STOCK" shall mean the Description and Designation
of the Series B Preferred Stock attached hereto as EXHIBIT A.
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"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"HOLDER" of any Security shall mean the record or beneficial owner of such
Security. A Holder of Preferred Stock shall be treated as the Holder of the
Conversion Stock underlying the Preferred Stock.
"INITIAL PUBLIC OFFERING" shall mean the first underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offering and sale of Common Stock for the account of the Company on
a firm commitment basis.
"INVESTOR" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"ISSUANCE DATE" shall mean the date that the Company receives payment for
and issues the certificate evidencing the shares of Preferred Stock purchased by
the Investor.
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction and including any lien or charge arising by
statute or other law.
"ORIGINAL ISSUE PRICE PER SHARE" shall mean the price per share paid by the
Investor for the issuance of the Preferred Stock ($3,850.00), as adjusted from
time to time in accordance with Section 5(b) of the Description of Preferred
Stock.
"PERSON" shall include all natural persons, corporations, business trusts,
associations, companies, partnerships, joint ventures and other entities and
governments and agencies and political subdivisions.
"PREFERRED STOCK" shall mean the Company's Series B Convertible Preferred
Stock, par value $ 0.01 per share.
"REGISTRABLE SECURITIES" shall mean, Conversion Stock and any Common Stock
issued with respect to such Conversion Stock by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"RESTRICTED SECURITIES" shall mean subject to (i) the Preferred Stock
issued hereunder, (ii) the Conversion Stock and (iii) any securities issued with
respect to the securities referred to in clauses (i) or (ii) above by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"SECURITIES" shall mean the Conversion Stock and the Preferred Stock,
collectively.
"SECURITIES ACT" shall mean the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"SUBSIDIARY" shall mean any corporation, partnership, joint venture,
association or other business entity at least 50% of the outstanding voting
stock or voting interests of which is at the time owned or controlled directly
or indirectly by the Company or by one or more of such subsidiary entities or
both.
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2. AUTHORIZATION OF SECURITIES. The Company has authorized the issuance and
sale of 2,597 shares of its Preferred Stock, having the rights, preferences and
privileges set forth in the Description of Preferred Stock, attached hereto as
EXHIBIT A.
3. ISSUANCE OF PREFERRED STOCK.
3.1 SALE AND PURCHASE OF PREFERRED STOCK. Upon the terms and subject to
the conditions herein contained, and in reliance on the representations and
warranties of the Company contained herein, the Investor agrees to purchase from
the Company, and the Company agrees to sell to the Investor, 2,597 shares of
Preferred Stock (the "INITIAL NUMBER OF PREFERRED SHARES") at the purchase price
of Ten Million Dollars ($10,000,000); provided, however, that the Initial Number
of Preferred Shares issued to the Investor shall be subject to adjustment upon
the Initial Public Offering as set forth in SECTION 3.2 hereof. The Company
shall deliver to the Investor a certificate or certificates evidencing the
shares of Preferred Stock being purchased by it, which shall be registered in
the Investor's name, against delivery to the Company of payment by wire transfer
in an amount equal to Ten Million Dollars ($10,000,000).
3.2 ADJUSTMENT IN CERTAIN EVENTS. If the Company consummates an Initial
Public Offering within twelve (12) months of the Issuance Date, the Initial
Number of Preferred Shares shall be adjusted by multiplying (i) the Initial
Number of Preferred Shares by (ii) the fraction, the numerator of which is the
Original Issue Price per Share and the denominator of which is the per share
"Price to Public" reflected on the cover page of the final prospectus in the
Initial Public Offering (the "ADJUSTED NUMBER OF PREFERRED SHARES"). The
Company shall calculate the Adjusted Number of Preferred Shares immediately upon
consummation of an Initial Public Offering within twelve (12) months of the
Issuance Date and, thereupon, shall deliver written notice to the Investor with
respect to its Adjusted Number of Preferred Shares. Upon receipt of such
notice, the Investor shall promptly return to the Company the original
certificate evidencing its Initial Number of Preferred Shares. Upon receipt of
such certificate, the Company shall promptly issue and deliver to the Investor a
replacement certificate evidencing its Adjusted Number of Preferred Shares. The
adjustment in the number of shares of Preferred Stock issued to and registered
in the name of the Investor shall occur automatically as described in this
SECTION 3.2, notwithstanding that the certificate representing the Initial
Number of Preferred Shares has not been returned to the Company or that the
certificate evidencing the Adjusted Number of Preferred Shares has not been
issued, as the case may be.
4. INVESTOR REPRESENTATION.
4.1 RESTRICTIONS ON TRANSFER. The Investor understands and agrees that
the Restricted Securities have not been registered under the Securities Act, and
that accordingly they will not be transferable except as permitted under various
exemptions contained in the Securities Act, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act. The
Investor acknowledges that it must bear the economic risk of its investment in
the Restricted Securities for an indefinite period of time.
4.2 REPRESENTATION. The Investor hereby represents and warrants to the
Company that it is acquiring the Securities for investment purposes only, for
its own account, and not as nominee or agent for any other Person, and not with
a view to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act. The Investor represents and warrants that it has
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of its investment. The Investor or its
representative has received and read or reviewed, and is familiar with, this
Agreement, the Description of the Preferred Stock, and the Audited Financial
Statements, and confirms that all documents, records and books, pertaining to
the Investor's investment in the Company and requested by it or its
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representative have been made available or delivered to the Investor. The
Investor represents that it is an "accredited investor" as such term is defined
in Rule 501 of Regulation D promulgated under the Securities Act. The parties
intend the sale and purchase of the Preferred Stock will qualify with the
provisions of Rule 152 of the Securities Act.
5. RESTRICTIONS ON TRANSFERS.
5.1 RESTRICTIONS ON TRANSFER OF THE PREFERRED STOCK .
(a) GENERAL. Except as otherwise set forth in this SECTION 5.1, the
Investor agrees that it will not sell, pledge or otherwise transfer any interest
in any shares of the Preferred Stock.
(b) TRANSFERS TO AFFILIATES. The provisions of SECTION 5.1(a)
notwithstanding, the Investor shall be entitled to transfer the Preferred Stock
held by it to its Affiliates or BCBS-Ill, provided that BCBS-Ill or any such
Affiliate first deliver to the Company their written acknowledgment of, and
agreement to be bound by, the terms and provisions contained in this Agreement;
and the Investor delivers to the Company an opinion of counsel, reasonably
acceptable in form and substance to the Company and its counsel, that
registration under the Securities Act is not required in connection with such
transfer. The foregoing notwithstanding, the Investor shall, without the prior
written consent of the Company which consent will not be unreasonably withheld,
transfer any shares of Preferred Stock to any Affiliate, nor any officer,
director, employee or holder of debt or equity in any Affiliate that is engaged
in the business, or has an Affiliate engaged in the business of pharmacy benefit
management services, pharmacy network management, pharmacy claims adjudication,
mail service pharmacy, clinical services, disease state management, case
management and/or outcomes management, or the manufacture of drugs, biotech
products or biologicals.
(c) AFFILIATES' PROXY. In the event that an Investor transfers less than
all of its Preferred Stock to an Affiliate pursuant to SECTION 5.1(b), the
Investor shall exercise all of the rights inuring under this Agreement with
respect to such transferred Preferred Stock and the transferees shall grant the
Investor proxies to exercise such rights. In the event that an Investor
transfers all of its Preferred Stock to an Affiliate pursuant to
SECTION 5.1(b), one such transferee reasonably acceptable to the Company shall
be designated by the Investor to exercise all rights inuring under this
Agreement with respect to such Preferred Stock and the other transferees shall
grant such designated transferee proxies to exercise such rights.
5.2 RESTRICTIONS ON TRANSFER OF THE CONVERSION STOCK.
(a) GENERAL. During the first two years following the Issuance Date,
the Investor agrees that it will not sell, pledge or otherwise transfer any
interest in any shares of the Conversion Stock, without the prior written
consent of the Company. At any time after the second anniversary of the
Issuance Date, the Investor may sell, pledge or otherwise transfer shares of the
Conversion Stock to third parties ("THIRD PARTY TRANSFER"); provided that such
transfer is in accordance with this SECTION 5.2, and provided further that the
transferring Investor delivers to the Company an opinion of counsel, reasonably
acceptable in form and substance to the Company and its counsel, that
registration under the Securities Act is not required in connection with such
transfer. The foregoing notwithstanding, the Investor agrees that it shall not
transfer any shares of Conversion Stock to any person or entity, nor any
officer, director, employee or holder of debt or equity in any entity that is
engaged in the business, or has an Affiliate engaged in the business of pharmacy
benefit management services, pharmacy network management, pharmacy claims
adjudication, mail service pharmacy, clinical services, disease state
management, case management and/or outcomes management, or the manufacture of
drugs, biotech products or biologicals.
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(b) SALE NOTICE. At least 60 days prior to making any Third Party
Transfer under SECTION 5.2(b), the transferring Investor will deliver a written
notice (the "SALE NOTICE") to the Company. The Sale Notice will disclose in
reasonable detail the identity of the prospective transferee(s) and the terms
and conditions of the proposed transfer. The Investor agrees not to consummate
any such transfer until 60 days after the Sale Notice has been delivered to the
Company.
(c) FIRST REFUSAL RIGHTS. The Company may elect to purchase some or all
of the Conversion Stock to be transferred upon the same terms and conditions as
those set forth in the Sale Notice by delivering a written notice of such
election to the Investor within 30 days after the receipt of the Sale Notice by
the Company. If the Company elects to purchase any shares of Conversion Stock,
the Company shall consummate such purchase within 30 days of delivery of notice
of intent to purchase. If the Company has not elected to purchase all of the
Conversion Stock specified in the Sale Notice, the Investor may transfer the
Conversion Stock specified in the Sale Notice at a price and on terms no more
favorable to the transferee(s) thereof than specified in the Sale Notice during
the 60-day period immediately following notice of the Company's election not to
purchase such shares. Any shares of Conversion Stock not transferred within
such 60-day period will be subject to the provisions of this SECTION 5.2 upon
subsequent transfer.
(d) NON-CASH CONSIDERATION. In the event the consideration for the
Conversion Stock as disclosed in the Sale Notice is other than cash, a
promissory note or a combination thereof, the price for the Conversion Stock
shall be the value of that consideration as agreed to by the transferring
Investor and the Company, or, if no agreement can be reached as to the valuation
of such consideration, the fair market value of such consideration as determined
by two appraisers (one appointed by the Investor and one appointed by the
Company). In the event the two appraisers are unable to agree on a fair market
value within 20 days after they are appointed, the fair market value of the
consideration shall be the average of the appraised values of the two
appraisers; provided, however, that if the appraised values of the two
appraisers differ by more than ten percent (10%) of the higher of the two
appraised values, the two respective appointed appraisers shall select a third
appraiser who shall independently, within 20 days after this appointment, make a
determination of the value of the consideration and the average of the appraised
values of the three appraisers shall be the purchase price and shall be binding
on the parties hereto. The transferring Investor and the Company shall each
bear the cost of their respective appraisers and shall share the cost equally of
the third appraiser, if any. Notwithstanding anything herein to the contrary,
if an appraisal is used to determine the value of the consideration pursuant to
this SECTION 5.2(d), the time periods provided for in SECTIONS 5.2(b) and 5.2(c)
shall be tolled from the time of the initial appointment of the two appraisers
until a final appraised value is determined pursuant to this SECTION 5.2(d).
(e) PUBLIC SALE. At any time after the second anniversary of the Issuance
Date, if the Company has consummated its Initial Public Offering, the Investor
may sell, pledge or otherwise transfer shares of the Conversion Stock to the
public in a market transaction without complying with the restrictions set forth
in SECTION 5.2(b), (c) and (d).
5.3 LEGEND. The certificates representing the Restricted Securities will
bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY BE REOFFERED AND SOLD ONLY IF SO
REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER,
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CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCK
PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE INVESTOR, DATED AS OF JUNE ____,
1996, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
Any legend endorsed on a certificate pursuant to SECTION 5.3 hereof and the stop
transfer instructions and record notations with respect thereto shall be removed
and the Company shall issue a certificate without such legend to the holder
thereof at such time as the securities evidenced thereby cease to be Restricted
Securities.
5.4 EXTRAORDINARY TRANSACTION. In the event of a merger of the Company
with a third party where the Company is not the surviving entity, sale of a
majority of the capital stock of the Company, or the sale of all or
substantially all of its assets ("EXTRAORDINARY TRANSACTION"), the Restricted
Securities shall be entitled to receive the same benefits as the holders of the
Common Stock will receive in the Extraordinary Transaction. The Investor agrees
to consent to and execute all required documents in connection with the
Extraordinary Transaction. The Investor acknowledges that the Preferred Stock
has no voting rights, including without limitation with respect to any proposed
Extraordinary Transaction.
6. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. In order to induce the
Investor to enter into this Agreement and to purchase the Preferred Stock, the
Company hereby covenants with, and represents and warrants to, the Investor as
follows:
6.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite authority and power (corporate and other),
governmental licenses, authorizations, consents and approvals to carry on its
business as presently conducted and as contemplated to be conducted, to own,
hold and operate its properties and assets as now owned, held and operated by
it, to enter into this Agreement, to issue the Securities and to carry out the
provisions hereof and the terms of the Description of Preferred Stock. The
Company is duly qualified, licensed or domesticated as a foreign corporation in
good standing in each jurisdiction wherein the nature of its respective
activities or the properties owned or leased makes such qualification, licensing
or domestication necessary.
6.2 ISSUANCE OF THE RESTRICTED SECURITIES. The issuance of the Preferred
Stock has been duly authorized and, upon delivery to the Investor of
certificates therefor against payment in accordance with the terms of this
Agreement, the Preferred Stock will have been validly issued and fully paid and
will be nonassessable, have the rights, preferences, and privileges specified in
the Description of Preferred Stock and will be free of preemptive rights, and
will be free and clear of all Liens and restrictions, other than Liens that
might have been created by the Investor and restrictions on transfer imposed by
this Agreement and the Securities Act. The issuance of the Conversion Stock has
been duly authorized and has been reserved for issuance upon conversion of the
Preferred Stock and, when issued upon conversion of the Preferred Stock in
accordance with the terms of the Description of Preferred Stock, the Conversion
Stock will have been validly issued and fully paid and will be nonassessable
Common Stock and will be free of preemptive rights, and will be free and clear
of all Liens and restrictions, other than Liens that might have been created by
the Investor and restrictions imposed by this Agreement and the Securities Act.
6.3 AUTHORIZATION OF THIS AGREEMENT. The execution, delivery and
performance by the Company of this Agreement and the offer, sale, issuance and
delivery of the Securities pursuant hereto, are within the Company's corporate
powers, have been duly authorized by all necessary
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corporate action, and do not require from the Board or stockholders of the
Company any consent or approval that has not been validly and lawfully obtained.
6.4 NO BROKERS OR FINDERS. No Person has, or as a result of the
transactions contemplated herein will have, any right or valid claim against the
Company or the Investor for any commission, fee or other compensation as a
finder or broker, or in any similar capacity, and the Company will indemnify and
hold the Investor harmless against any liability or expense arising out of, or
in connection with, any such claim.
6.5 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 6.5 are the
Company's audited, consolidated balance sheet as of March 31, 1996 and the
audited consolidated statements of income, cash flows and stockholder's equity
for the period then ended (the "AUDITED FINANCIAL STATEMENTS"), together with
the related opinion of Arthur Andersen L.L.P., the Company's independent
certified public accountants. These financial statements (i) are in accordance
with the books and records of the Company, (ii) present fairly the consolidated
financial condition of the Company at March 31, 1996 and other dates therein
specified and the consolidated results of its operations and changes in
financial conditions for the periods therein specified, and (iii) have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with prior accounting periods.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
SCHEDULE 6.6 hereto, neither the Company nor any Subsidiary has any material
debt, obligation or liability (whether accrued, absolute, contingent, liquidated
or otherwise, whether due or to become due, whether or not known to the Company
or any Subsidiary) arising out of any transaction entered into at or prior to
the Issuance Date, or any act or omission at or prior to the Issuance Date, or
any state of facts existing at or prior to the Issuance Date, including taxes
with respect to or based upon the transactions or events occurring at or prior
to the Issuance Date, and including, without limitation, unfunded past service
liabilities under any pension, profit sharing or similar plan, except (a) to the
extent set forth on or reserved against in the Balance Sheet, and (b) current
liabilities incurred and obligations under agreements entered into, in the usual
and ordinary course of business since March 31, 1996, none of which
(individually or in the aggregate) materially and adversely affects the
business, properties, finances or prospects of the Company or any Subsidiary.
7. REGISTRATION OF RESTRICTED SECURITIES; LIMITATIONS ON STOCKHOLDINGS.
7.1 PIGGY-BACK REGISTRATION RIGHTS. If the Company exercises its right
under SECTION 5(i) of the Description of Preferred Stock to convert the
Preferred Stock into Common Stock, and thereafter, the Company shall determine
to register for its own account or the account of others under the Securities
Act any of its equity securities, it shall send to the Investor, written notice
of such determination and, if within fifteen (15) days after receipt of such
notice, any Holder of Restricted Securities shall so request in writing, the
Company shall include in such registration statement all or any part of the
Registrable Securities such holder requests to be registered. The obligations of
the Company under this SECTION 7.1 may be waived at any time upon the written
consent of the Investor.
(a) CUT-BACK. If, in connection with any offering involving an
underwriting of Common Stock to be issued by the Company, the managing
underwriter shall impose a limitation on the number of shares of such Common
Stock which may be included in the registration statement because, in its
judgment, such limitation is necessary to effect an orderly public distribution,
then the Company shall be obligated to include in such registration statement
only such limited portion of the Registrable Securities with respect to which
such holder has requested inclusion hereunder; PROVIDED, HOWEVER, the Investor
agrees that Advance Health Care, Inc. (or the successors to its registration
rights) and the holders of the Series A Preferred Stock
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(or the common stock obtained upon conversion of such Series A Preferred Stock)
shall be entitled to include in such registration statement all registrable
shares held by such Person BEFORE any of the Investor's Registrable Securities
shall be included. Any exclusion of Registrable Securities shall be made pro
rata among the Holders of Registrable Securities (or their assigns) seeking to
include such Securities in proportion to the number of such Securities held by
such holder (or their assigns).
(b) REGISTRATION PROCEDURES. The Company will use good faith efforts to
maintain the effectiveness for up to 90 days of any registration statement
pursuant to which the Registrable Securities are being offered, and from time to
time will amend or supplement such registration statement and the prospectus
contained therein to the extent necessary to comply with the Securities Act and
any applicable State security statute or regulation. The Company will also
provide the Investor with as many copies of the prospectus contained in any such
registration statement as it may reasonably require. After consummation of the
Initial Public Offering, the Company will timely file with the Commission such
information as the Commission requires under the Exchange Act of 1934, as
amended. Beginning after the second anniversary of the Issuance Date and after
consummation of the Initial Public Offering, the Company agrees, upon request
from the Investor, to cooperate in transfers of the Conversion Securities
pursuant to Rule 144 under the Securities Act.
(c) INDEMNIFICATION. The Company and any holders of Registrable
Securities that are included in registration under this SECTION 7.1 agree to
provided standard indemnification to the other relating to the disclosures in
the registration statement made by the Company or the holders of the Registrable
Securities, as the case may be.
(d) EXPENSES. In the event the Investor exercises its rights under this
SECTION 7.1, the Investor shall bear its proportionate share of the cost and
expenses of such registration.
(e) EXPIRATION. The obligations of the Company under this SECTION 7.1
shall expire on the fifth anniversary of the Company's Initial Public Offering.
This SECTION 7.1 shall not apply to a registration of Securities of Common Stock
on Form S-8 or Form S-4 or their then equivalents relating to an offering of
shares of Common Stock to be issued solely in connection with any acquisition of
any entity or business or otherwise issuable in connection with any stock option
or employee benefit plan.
7.2 MARKET STANDSTILL. The Investor agrees that in the event the Company
proposes to offer for sale to the public any of its equity securities in any
public offering (whether for its own account or the account of others), and if
requested in writing by the Company and an underwriter of the proposed offering
of Common Stock or other securities of the Company, then the Investor will agree
to a restriction whereby the Investor and any other Holder of Registrable
Securities will not sell, grant any option or right to buy or sell, or otherwise
transfer or dispose of in any manner, to the public in any open market
transactions, any Common Stock or other securities of the Company held by it for
180 days (the "LOCK-UP PERIOD") following the effective date of the registration
statement of the Company filed under the Securities Act. Such agreements shall
be in writing and in form and substance pursuant to customary and prevailing
terms and conditions for such lock-up agreements. The Company may impose
stop-transfer instructions with respect to the securities subject to the
foregoing restrictions until the end of the Lock-Up Period.
7.3 LIMITATION ON STOCK HOLDINGS. The Investor agrees that in no event,
shall it, either independently or together with its Affiliates, or together with
BCBS-Ill and their respective Affiliates, own Common Stock or rights to acquire
Common Stock, that represent, or if converted to Common Stock would represent,
more than twenty percent (20%) of the Company's issued and outstanding Common
Stock.
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8. MISCELLANEOUS.
8.1 WAIVERS AND AMENDMENTS. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally or by course of
dealing, but only by a statement in writing signed by the Company and the
Investor. Upon the effectuation of each such waiver, consent or agreement of
amendment or modification, the Company shall promptly give written notice
thereof to the Holders of the Restricted Securities who have not previously
consented thereto in writing. The Investor acknowledges that, by operation of
this SECTION 8.1, the Investor have the right and power to diminish or eliminate
certain rights of any Holders of Securities other than the Investor under this
Agreement.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by express overnight
delivery service, cable, telegram, facsimile transmission (confirmed by
telephone conversation with an officer of the Company, or the Investor) to the
parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
(a) if to the Company:
545 E. John Carpenter Freeway
Suite 1900
Irving, TX 75062
Attn: Chief Executive Officer
(b) if to Investor:
901 S. Central Expressway
Richardson, TX 75080
Attn: Michael R. Lewis
Notice so given shall, in the case of notice so given by mail, be deemed to be
given and received on the fourth calendar day after posting, in the case of
notice so given by overnight delivery service, on the date of actual delivery
and, in the case of notice so given by cable, telegram, facsimile transmission,
telex or personal delivery, on the date of actual transmission or, as the case
may be, personal delivery.
8.3 SEVERABILITY. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it legal,
valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties shall be construed and enforced accordingly.
8.4 PARTIES IN INTEREST. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, whether so expressed or
not, and, in particular, shall inure to the benefit of and be enforceable by the
Holder or Holders at the time of any of the Securities. This Agreement shall
not run to the benefit of or be enforceable by any Person other than a party to
this Agreement and its successors and assigns.
8.5 HEADINGS. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
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8.6 CHOICE OF LAW. THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW,
AND NOT THE LAW OF CONFLICTS, OF THE STATE OF TEXAS.
8.7 EXPENSES. Except as otherwise specifically provided herein, each
party shall be responsible for any fees and expenses incurred in the review,
performance and compliance with this Agreement, the Certificate Amendment and
the transactions contemplated hereby and thereby.
8.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
8.9 TERMINATION. This Agreement shall terminate at such time as no
Restricted Securities are outstanding.
8.10 COMPLETE 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 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.
IN WITNESS WHEREOF, the Company and the Investor have caused this Agreement
to be duly executed as of the date first written above.
ADVANCE PARADIGM, INC.
By: /s/ David D. Halbert
------------------------------------
David D. Halbert
Chairman and Chief Executive Officer
BLUE CROSS AND BLUE SHIELD OF TEXAS, INC.
By: /s/ Rogers K. Coleman, M.D.
------------------------------------
Name: Rogers K. Colemena, M.D.
Title: President and Chief Executive Officer
10
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SCHEDULE 6.5
AUDITED FINANCIAL STATEMENTS
ATTACHED
11
<PAGE>
SCHEDULE 6.6
UNDISCLOSED LIABILITIES
Lease effective May 15, 1996 for approximately 23,000 square feet of office
space at One Signature Place (Preston and Beltline) in Dallas, Texas.
Lease of Information Technology Hardware and Software effective June 1996
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<PAGE>
EXHIBIT A
TO
STOCK PURCHASE AGREEMENT
DESCRIPTION AND DESIGNATION OF SERIES B PREFERRED STOCK
1. DESIGNATION. Up to 3,000 shares of the Company's Preferred Stock
shall be designated the "SERIES B PREFERRED STOCK". All numbers relating to the
calculation of cumulative dividends, liquidation preference per share, or
redemption price per share of the Series B Preferred Stock shall be subject to
equitable adjustment in the event of any stock dividend, stock split,
combination, reorganization, recapitalizations, reclassification or other
similar event involving a change in the capital structure of the Series B
Preferred Stock.
2. DIVIDENDS.
(a) CUMULATIVE. The holder of the outstanding shares of Series B
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, cumulative dividends calculated without compounding, at the annual
rate of two percent (2%) of the Original Issue Price per share (as defined in
SECTION 3(a)). Such cumulative dividends shall accrue and accumulate from the
date of original issuance. Such dividends on the Series B Preferred Stock shall
be cumulative so that if such dividends in respect of any previous or current
annual dividend period, at the annual rate specified above, shall not have been
paid or declared, the deficiency shall first be fully paid before any dividend
or other distribution shall be paid or declared and set apart for the Common
Stock.
(b) PAYMENTS OF DIVIDENDS. Cumulative dividends on the Series B
Preferred Stock shall be payable annually on the 31st day of March, commencing
March 31, 1997 and shall be payable, whether or not earned or declared, upon
liquidation or redemption. Upon conversion of the Series B Preferred Stock
pursuant to Section 5 hereof, all such accrued and unpaid cumulative dividends
on the Series B Preferred Stock to and until the date of such conversion shall
not be due and payable and shall be forfeited.
3. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) PREFERENCE. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, or in the event of
its insolvency, before any distribution or other payment is made to any holders
of any shares of any class or series of capital stock of the Company designated
to be junior to the Series B Preferred Stock, including the Common Stock, and
subject to the liquidation rights and preferences of the Company's Series A
Convertible Preferred Stock, par value $0.01 per share (the "SERIES A PREFERRED
STOCK") or any future class or series of preferred stock designated to be senior
to, or on a parity with, the Series A Preferred Stock, the holders of each share
of Series B Preferred Stock shall be entitled to be paid first out of the assets
of the Company available for distribution to holders of the Company's capital
stock of all classes whether such assets are capital, surplus or earnings, an
amount equal to the greater of:
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(i) $3,850 per share of Series B Preferred Stock (as adjusted
from time to time in accordance with SECTION 5 hereof, the "ORIGINAL
ISSUE PRICE"), PLUS all declared or accrued and unpaid dividends
thereon, whether or not earned or declared, up to and including the
date full payment shall be tendered to the holders of the Series B
Preferred Stock with respect to such liquidation, dissolution or
winding up; or
(ii) such amount per share of Series B Preferred Stock as would
have been payable had each such share been converted to Common Stock
immediately prior to such event of liquidation, dissolution or winding
up pursuant to the provisions of Section 5 hereof.
If, upon liquidation, dissolution or winding up of the Company, the assets of
the Company available for distribution to its stockholders shall be insufficient
to pay the holders of the Series B Preferred Stock the full amounts to which
they otherwise would be entitled, the holders of Series B Preferred Stock shall
share ratably in any distribution of available assets according to the
respective amounts which would otherwise be payable with respect to the shares
of Series B Preferred Stock held by them upon such liquidating distribution if
all amounts payable on or with respect to said shares were paid in full, based
upon the aggregate liquidation value of the Series B Preferred Stock.
(b) REMAINING ASSETS. After payment shall have been made in full to
the holders of the Series B Preferred Stock, or funds necessary for such payment
shall have been set aside by the Company in trust for the account of holders of
the Series B Preferred Stock so as to be available for such payment, the
remaining assets available for distribution shall be distributed ratably among
the holders of the Common Stock.
(c) TREATMENT OF REORGANIZATIONS, CONSOLIDATIONS, MERGERS, AND SALES
OF ASSETS. A Reorganization (as defined in SECTION 5(d)) shall be regarded as a
liquidation, dissolution or winding up of the affairs of the Company within the
meaning of this SECTION 3; PROVIDED, HOWEVER, that the holders of more than
fifty percent (50%) of the outstanding shares of Series B Preferred Stock shall
have the right to elect the benefits of the provisions of SECTION 5(d) hereof in
lieu of receiving payment in liquidation, dissolution or winding up of the
Company pursuant to this SECTION 3. The holders of more than fifty percent (50%)
of the outstanding shares of Series B Preferred Stock have the right to bind the
holders of all outstanding shares of Series B Preferred Stock under this
SECTION 3(b) or SECTION 5(d).
The provisions of this SECTION 3(b) and SECTION 5(d) shall not apply
to any reorganization, merger or consolidation involving (1) only a change in
the state of incorporation of the Company, (2) a merger of the Company with or
into a wholly-owned subsidiary of the Company that is incorporated in the United
States of America, or (3) an acquisition by merger, reorganization or
consolidation, of which the Company is substantively the surviving corporation
and operates as a going concern.
4. VOTING RIGHTS. The holders of shares of Series B Preferred Stock
shall not be entitled to vote on any matter.
5. CONVERSION RIGHTS. The holders of the Series B Preferred Stock shall
have the following rights with respect to the conversion of such shares into
shares of Common Stock:
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(a) CONVERSION. Subject to and in compliance with the provisions of
this SECTION 5, all shares of the Series B Preferred Stock may be converted into
fully-paid and non-assessable shares of Common Stock. Each share of Series B
Preferred Stock shall be initially convertible into one share of Common Stock.
(b) UPON EXTRAORDINARY COMMON STOCK EVENTS. Upon the occurrence of
an Extraordinary Common Stock Event (as hereinafter defined), the Series B
Preferred Stock shall automatically become, and thereafter be, convertible into
that number of shares of Common Stock obtained by multiplying (i) the number of
shares of Series B Preferred Stock issued and outstanding as of the closing date
of the Extraordinary Common Stock Event by (ii) a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
after such Extraordinary Common Stock Event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
Extraordinary Common Stock Event. Upon the occurrence of an Extraordinary
Common Stock Event, the Original Issue Price shall automatically become, and
thereafter be, the price per share of issued and outstanding Series B Preferred
Stock obtained by multiplying (i) the Original Issue Price as of the date of the
Extraordinary Common Stock Event by (ii) a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such Extraordinary Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event. An "EXTRAORDINARY COMMON STOCK EVENT" shall
mean (i) the issue of additional shares of Common Stock as a dividend or other
distribution on outstanding shares of Common Stock, (ii) a subdivision of
outstanding shares of Common Stock into a greater number of shares of Common
Stock, or (iii) a combination or reverse stock split of outstanding shares of
Common Stock into a smaller number of shares of the Common Stock.
(c) DIVIDENDS. In the event the Company shall make or issue, or
shall fix a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution (other than a distribution
in liquidation or other distribution otherwise provided for herein) with respect
to the Common Stock payable in (i) securities of the Company other than shares
of Common Stock, or (ii) other assets (excluding cash dividends or
distributions), then, and in each such event, provision shall be made so that
the holders of the Series B Preferred Stock shall receive upon conversion
thereof in addition to the number of shares of Common Stock receivable
thereupon, the number of securities or such other assets of the Company which
they would have received had their Series B Preferred Stock been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the Conversion Date (as that
term is hereafter defined in SECTION 5(f)), retained such securities or such
other assets receivable by them during such period, giving application to all
other adjustments called for during such period under this SECTION 5 with
respect to the rights of the holders of the Series B Preferred Stock.
(d) REORGANIZATION. Subject to the Company's rights under
SECTION 5(i) hereof, if at any time or from time to time there shall be a
capital reorganization of the Common Stock (other than an Extraordinary Common
Stock Event or dividend provided for elsewhere in this SECTION 5) or a merger or
consolidation of the Company with or into another corporation, or the sale of
all or substantially all of the Company's capital stock or assets to any other
person, or any other form of business combination, acquisition or reorganization
in which control of the Company is transferred (a "REORGANIZATION"), then, as a
part of and a condition to such
15
<PAGE>
Reorganization, provision shall be made so that the holders of the Series B
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series B Preferred Stock the same kind and amount of stock or other securities
or property (including cash) of the Company, or the successor corporation
resulting from such Reorganization, to which such holder would have received if
such holder had converted its shares of Series B Preferred Stock into shares of
Common Stock immediately prior to the effective time of such Reorganization. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this SECTION 5 so that the provisions of this SECTION 5 (including
the number of shares of Common Stock or other securities issuable upon
conversion of such shares of Series B Preferred Stock) shall be applicable after
that event in as nearly equivalent a manner as may be practicable. A
"Reorganization" as defined in this SECTION 5(d) shall not include any
reorganization, merger or consolidation involving (1) only a change in the state
of incorporation of the Company, (2) a merger of the Company with or into a
wholly-owned subsidiary of the Company that is incorporated in the United States
of America, or (3) an acquisition by merger, reorganization or consolidation in
which the Company is substantively the surviving corporation and operates as a
going concern.
(e) CERTIFICATE TO ADJUSTMENTS; NOTICE BY COMPANY. In each case of
an adjustment or readjustment of the number of shares into which the Preferred
Stock is convertible, the Company at its expense will furnish each holder of
Series B Preferred Stock with a certificate showing such adjustment or
readjustment, and stating in detail the facts upon which such adjustment or
readjustment is based.
(f) EXERCISE OF CONVERSION PRIVILEGE. To exercise its conversion
privilege, each holder of Series B Preferred Stock shall surrender the
certificate(s) representing all of such holder's shares of the Series B
Preferred Stock to the Company at its principal office, and shall give written
notice to the Company at that office that such holder elects to convert such
shares. The certificates for shares of Series B Preferred Stock surrendered for
conversion shall be accompanied by proper assignment thereof to the Company or
in blank. The date when such written notice is received by the Company, together
with the certificate(s) representing the shares of Series B Preferred Stock
being converted, shall be the "CONVERSION DATE". As promptly as practicable
after the Conversion Date, the Company shall issue and shall deliver to the
holder of the shares of Series B Preferred Stock being converted, or on its
written order, such certificate(s) as it may request for the number of whole
shares of Common Stock issuable upon the conversion of such shares of Series B
Preferred Stock in accordance with the provisions of this SECTION 5. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Series B Preferred Stock shall cease and the
person(s) in whose name(s) any certificate(s) for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
(g) RESERVATION OF COMMON STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Series B Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series B Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series B Preferred Stock,
the Company shall take such action as may
16
<PAGE>
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(h) NO REISSUANCE OF SERIES B PREFERRED STOCK. No share or shares of
Series B Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be cancelled, retired and eliminated from the shares which the Company shall be
authorized to issue. The Company shall from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of Series B Preferred Stock.
(i) COMPANY'S CONVERSION OF PREFERRED STOCK. Subject to and in
compliance with the provisions of this SECTION 5, the Company may, upon written
notice to the holders of the Series B Preferred Stock ("Company's Conversion
Notice"), cause all shares of the Series B Preferred Stock to be converted into
Common Stock:
(i) immediately prior to the consummation of any
Reorganization; and
(ii) at any time after the fifth anniversary of the date of
issuance so long as the fair market value of the Common Stock is equal
to or exceeds the Original Issue Price.
For purposes of this SECTION 5(i), the "fair market value" shall be, if the
Company is publicly traded, the average closing sale price of the Common Stock
for the twenty (20) consecutive trading days immediately preceding the
Conversion Effective Date, and if the Company is not publicly traded, shall be
determined by the Board of Directors of the Company in good faith.
The Company's Conversion Notice shall specify which of the above two events
is precipitating the conversion and shall identify the effective date of the
conversion (the "Conversion Effective Date"). Upon receipt of the Company's
Conversion Notice, the holders of the Series B Preferred Stock shall surrender
the certificates representing such shares at the office of the Company or of its
transfer agent. The certificates for shares of Series B Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Company or in blank. As promptly as practicable after the Conversion
Effective Date, the Company shall issue and shall deliver to the holder of the
shares of Series B Preferred Stock being converted the number of shares of
Common Stock issuable upon the conversion of such shares of Series B Preferred
Stock in accordance with the provisions of this SECTION 5. If the Company's
Conversion Notice is duly given, then notwithstanding that the certificates
evidencing any of the shares of Series B Preferred Stock so called for
conversion have not been surrendered, all rights with respect to such shares
shall forthwith after the Conversion Effective Date cease and terminate, except
only the right of holders to receive the shares of Common Stock in such
conversion.
6. REDEMPTION RIGHTS OF THE COMPANY.
(a) REDEMPTION. Beginning on the second anniversary of the date of
issuance of the Series B Preferred Stock, upon delivery of written notice in
accordance with SECTION 6(c) hereof, the Company may redeem such number of
shares of Series B Preferred Stock then as shall be specified in the Redemption
Notice. If the Company desires to redeem fewer than all of the shares of Series
B Preferred Stock outstanding, then the holders of the shares of Series B
Preferred Stock will tender their proportionate number of shares.
(b) REDEMPTION PRICE. The redemption price for each share of Series B
Preferred Stock redeemed pursuant to this Section 6 shall be the Original Issue
Price per share plus all accrued
17
<PAGE>
and unpaid dividends, whether or not earned or declared, on such shares up to
and including the date fixed for redemption (the "REDEMPTION PRICE").
(c) REDEMPTION NOTICE. At least 30 days prior to the Redemption Date,
written notice (the "REDEMPTION NOTICE") shall be mailed, first class or
certified mail, postage prepaid, or express, overnight courier service by the
Company to each holder of record of Series B Preferred Stock which is to be
redeemed, at its address shown on the records of the Company. The Redemption
Notice shall contain the following information:
(i) the number of shares of Series B Preferred Stock held by the
holder which shall be redeemed by the Company and the total
number of shares of Series B Preferred Stock held by all
holders to be so redeemed;
(ii) the Redemption Price;
(iii) the Redemption Dates; and
(iv) that the holder is to surrender to the Company, at the place
designated therein, its certificate or certificates
representing the shares of Series B Preferred Stock to be
redeemed.
(d) SURRENDER OF CERTIFICATES. Each holder of shares of Series B
Preferred Stock to be redeemed shall surrender the certificate(s) representing
such shares to the Company at the place designated in the Redemption Notice, and
thereupon the Redemption Price for such shares shall be paid to the order of the
person whose name appears on such certificates) and each surrendered certificate
shall be cancelled and retired. In the event some but not all of the shares of
Series B Preferred Stock represented by a certificate(s) surrendered by a holder
are being redeemed, the Company shall execute and deliver to or on the order of
the holder, at the expense of the Company, a new certificate representing the
number of shares of Series B Preferred Stock which were not redeemed.
(e) DIVIDENDS AND CONVERSION AFTER REDEMPTION. No shares of Series B
Preferred Stock subject to redemption shall be entitled to any further dividends
pursuant to SECTION 2 hereof or to the conversion provisions set forth in
SECTION 5 hereof.
7. NOTICES OF RECORD DATE. In the event of
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of capital stock of any class or any
other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company, or any transfer of all or substantially all of the
assets of the Company to any other corporation, or any other entity or person,
or
(c) any voluntary or involuntary dissolution, liquidation or winding up of
the Company, then and in each such event the Company shall mail or cause to be
mailed to each holder of Series B Preferred Stock a notice specifying (i) the
date on which any such record is to be
18
<PAGE>
taken for the purpose of such dividend, distribution or right and a description
of such dividend, distribution or right, (ii) the date on which any such
reorganization reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Sock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding up. Such
notice shall be mailed by first class mail, postage prepaid, or express
overnight courier service, at least twenty (20) days prior to the date specified
in such notice on which such action is to be taken.
19
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EXHIBIT 4.13
PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED WITH THE
LEGEND: "CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION." AND THE APPROPRIATE SECTION HAS
BEEN MARKED AT THE APPROPRIATE PLACE BY BRACKETS.
ADVANCE PARADIGM, INC.
WARRANT AGREEMENT
This Warrant Agreement dated as of November 25, 1995, is entered into by
and between Advance ParadigM, Inc., a Delaware corporation (the "COMPANY"), and
Blue Cross and Blue Shield of Texas, Inc., a Texas non-profit group hospital
service corporation ("BCBS-Tx").
TERMS OF AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and BCBS-Tx hereby agree as follows:
Section 1. GRANT OF THE RIGHT TO PURCHASE COMMON STOCK. Upon
confirmation by the Company that
[....]
(the "[....] THRESHOLDS "), the Company shall grant to BCBS-Tx the right, and
BCBS-Tx shall be entitled, subject to the terms and conditions hereinafter set
forth, to purchase from the Company the number of fully paid and non-assessable
shares of its common stock, par value $0.01 per share (the "COMMON STOCK") set
forth below (which number is referred to herein as the "INITIAL EXERCISE
NUMBER") at an exercise price of $2,750 per share (the "EXERCISE PRICE").
Number of Shares
[ ] Threshold Covered by Warrant
---------------- ------------------
[....] [....]
The right to purchase such shares shall be evidenced by a warrant
certificate in substantially the form of Exhibit A hereto (each a "WARRANT").
The Initial Exercise Number and Exercise Price of such shares are subject to
adjustment as provided in Section 4 hereof.
Section 2. TERM OF THE WARRANT AGREEMENT. BCBS-Tx's right to earn
Warrants as granted herein shall commence on the date hereof (the "EFFECTIVE
DATE") and continue for a period of five (5) years from the date hereof. Except
as otherwise provided for herein, the term of each Warrant and the right to
purchase Common Stock as granted therein shall commence on the first anniversary
of its date of issuance and will end on the fifth anniversary of its date of
issuance (the "EXERCISE PERIOD"). If at any time prior to the first anniversary
of the date of issuance of each Warrant, the [......] falls below the
corresponding [....] Threshold, then the Warrant issued upon achieving such
[......] Threshold will be void, subject to revival (at the same exercise price
and expiring on the same date) in the event the [......] again equals or exceeds
the corresponding [.....] Threshold.
Section 3. EXERCISE OF WARRANT. The purchase rights represented by
each Warrant are exercisable for all shares covered by such Warrant at the
option of the holder thereof at any time during the Exercise Period; provided
that the Warrant holder has executed the Stockholders
<PAGE>
Agreement attached hereto as Exhibit C (the "STOCKHOLDERS AGREEMENT"). Shares
of Common Stock purchased upon exercise of each Warrant shall at the time of
purchase be paid for in full. To the extent that the right to purchase shares
has accrued hereunder, the Warrant may be exercised by written notice to the
Company in the form of Exhibit I to the Warrant, which specifies an exercise
date (the "DATE OF EXERCISE"), accompanied by full payment for the shares by
wire transfer or certified or official bank check or the equivalent thereof
acceptable to Company.
At the time of delivery, the Company shall, without stock transfer tax to
the holder, deliver to holder (or to such other person) at the principal office
of the Company, or such other place as shall be mutually agreed upon, a
certificate or certificates for such shares, provided, however, that the time of
delivery may be postponed by the Company for such period as may be required for
it with reasonable diligence to comply with any requirements of law. The
Company at the time of exercise will require in addition that the registered
owner deliver an investment representation in form acceptable to the Company,
and the Company will place a legend on the certificate for such Common Stock
restricting the transfer of same. At no time shall the Company have any
obligation or duty to register under the Securities Act of 1933 (the "1933
ACT") the Common Stock issuable upon exercise of Warrant.
Section 4. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES. The
Exercise Price and number of shares of Common Stock purchasable pursuant to the
exercise of each Warrant shall be subject to adjustment from time to time as
follows:
(a) ADJUSTMENT FOR COMBINATIONS OR CONSOLIDATIONS OF COMMON STOCK. In the
event the Company, at any time or from time to time after the Effective Date,
effects a subdivision or combination of its outstanding Common Stock for a
greater or lesser number of shares, then and in each such event the Initial
Exercise Number and the Exercise Price shall be adjusted proportionately such
that the holder of the Warrant (the "WARRANTHOLDER") is entitled to purchase the
same percentage of all shares of the Company's outstanding capital stock then
issued and issuable for the same aggregate consideration as such Warrantholder
was entitled to purchase immediately prior to such event.
(b) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event the
Company at any time or from time to time after the Effective Date shall pay a
dividend payable in Common Stock of the Company, or otherwise make a
distribution of Common Stock to its stockholders, then the Exercise Price shall
be adjusted, from and after the record date of such dividend or the date of such
distribution, to that price determined by multiplying the Exercise Price by a
fraction,
(i) the numerator of which shall be the total number of shares of
capital stock issued and outstanding or deemed to be issued and
outstanding immediately prior to the time of such issuance or the
close of business on such record date; and
(ii) the denominator of which shall be the number of shares of capital
stock issued and outstanding or deemed to be issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of capital
stock to be issued;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Exercise Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Exercise Price shall be
adjusted pursuant to this Section 4(b) as of the time of actual payment of such
dividend or distribution. The Warrantholder shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest whole share) obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable upon the exercise hereof
2
<PAGE>
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
(c) NUMBER OF SHARES. Upon any adjustment of the Exercise Price, the
holder of each Warrant shall thereafter (until another such adjustment) be
entitled to purchase, at the new Exercise Price, the number of shares,
calculated to the nearest full share, obtained by multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the new Exercise Price resulting from such adjustment.
Section 5. RESERVATION AND AUTHORIZATION OF COMMON STOCK. The Company
shall at all times reserve and keep available, free from preemptive rights, out
of its authorized but unissued Common Stock, solely for the purposes of
effecting the exercise of all outstanding Warrants, the full number of shares of
Common Stock issuable upon the exercise of all outstanding Warrants. For the
purpose of this Section 5, the full number of shares of Common Stock issuable
upon the exercise of all outstanding Warrants shall be computed as if at the
time of computation of such number of shares of Common Stock all outstanding
Warrants were held by a single holder. The Company shall from time to time, in
accordance with applicable law, increase the authorized amount of its Common
Stock if at any time the authorized amount of its Common Stock remaining
unissued shall not be sufficient to permit the exercise of all Warrants at the
time outstanding.
Section 6. TRANSFERABILITY.
(a) The Warrant is not transferable by the Warrantholder except to the
Company or affiliates of BCBS-Tx. Any permitted transfer of a Warrant shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit B, at its principal offices and
the payment to the Company of all transfer taxes and other governmental charges
imposed on such transfer. The shares of Common Stock purchased by the
Warrantholders are not transferable except as provided in the Stockholders
Agreement.
(b) Unless and until otherwise permitted by this Section and the
Stockholders Agreement, each certificate representing Common Stock initially
issued upon the exercise of each Warrant (a "STOCK CERTIFICATE"), and each
certificate for Common Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY BE
REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A
STOCKHOLDERS AGREEMENT BETWEEN THE COMPANY AND BCBS-TX, DATED AS OF
NOVEMBER 25, 1995, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER
HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
Prior to any permitted transfer of any Stock Certificate, the holder
thereof shall furnish, at the expense of such holder, to the Company an opinion
of counsel, reasonably satisfactory in form and substance to the Company, to the
effect that such transfer is exempt from registration under the Securities Act.
Upon any exercise of any Warrant for shares of Common Stock to be registered in
the name of a person other than the Warrantholder thereof, such
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<PAGE>
Warrantholder shall furnish, at the expense of such Warrantholder, to the
Company an opinion of counsel, reasonably satisfactory in form and substance to
the Company, to the effect that the issuance of the shares of Common Stock to
such other person upon exercise of the Warrant is exempt from registration under
the Securities Act.
Section 7. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional share of stock upon any exercise of any Warrant. As to any
final fraction of a share which the holder of one or more Warrants, the rights
under which are exercised in the same transaction, would otherwise be entitled
to purchase upon such exercise, the Company shall, if it does not issue a
fractional share, pay a cash adjustment in respect of such final fraction in an
amount equal to the same fraction of the Exercise Price per share of Common
Stock.
Section 8. EXCHANGE AND REPLACEMENT OF WARRANT. In the event of loss,
theft or destruction of a Warrant, the Company will make and deliver a new
warrant of like tenor, in lieu of such Warrant, upon receipt by the Company of
evidence reasonably satisfactory to it of such loss, theft, or destruction and
indemnity or security reasonably satisfactory to it, and reimbursement to the
Company of all reasonable expense incidental thereto. In the case of mutilation
of a Warrant and upon surrender and cancellation of such Warrant, the Company
will make and deliver a new Warrant of like tenor, in lieu of such Warrant.
Section 9. RIGHTS PRIOR TO EXERCISE OF WARRANT. Prior to the exercise
of this Warrant, the Warrantholder shall not be entitled to any rights of a
stockholder of the Company with respect to the Common Stock for which such
Warrant may then be exercisable, including without limitation the right to vote,
to receive dividends or other distributions or to exercise any preemptive rights
and shall not be entitled to receive any notice of any proceedings of the
Company except as provided herein.
Section 10. AUTHORIZATION AND ISSUANCE. The Company represents and
warrants to BCBS-Tx and any Warrantholder that it has the corporate power and
authority to issue the Warrants; the Warrants have been duly authorized,
executed and delivered and are duly and validly issued, fully paid and
nonassessable; the issuance of each Warrant, and the shares of Common Stock
issuable upon its exercise, are not prohibited or restricted by the Certificate
of Incorporation or Bylaws of the Company or any material agreement to which the
Company is a party; except for those agreements for which the Company has
received the requisite consents or waivers; and the shares of Common Stock
issuable upon exercise of each Warrant, when issued upon exercise of such
Warrant pursuant to the terms hereof, will be duly and validly issued, fully
paid and nonassessable.
Section 11. REPRESENTATIONS AND COVENANTS OF BCBS-TX. This Warrant
Agreement has been entered into by the Company in reliance upon the following
representations and covenants of the Warrantholder:
(a) INVESTMENT PURPOSE. The right to acquire the Common Stock issuable
upon exercise of BCBS-Tx's rights contained herein will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and BCBS-Tx has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption.
(b) PRIVATE ISSUE. BCBS-Tx understands (i) that the Common Stock issuable
upon exercise of this Warrant is not registered under the 1933 Act or qualified
under applicable state securities laws on the ground that the issuance
contemplated by this Warrant Agreement will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption is predicated on the representations set forth in this Section
11.
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(c) FINANCIAL RISK. BCBS-Tx has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(d) RISK OF NO REGISTRATION. BCBS-Tx understands that if the Company does
not register with the Securities and Exchange Commission pursuant to Section 12
of the 1933 Act, or file reports pursuant to Section 15(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), or if a registration statement covering
the securities under the 1933 Act is not in effect when it desires to sell the
Common Stock issuable upon exercise of the right to purchase, it may be required
to hold such securities for an indefinite period. BCBS-Tx also understands that
any sale of its rights to purchase Common Stock which might be made by it in
reliance upon Rule 144 under the 1933 Act may be made only in accordance with
the terms and conditions of that Rule.
(e) STOCKHOLDERS AGREEMENT. Prior to the exercise of any Warrant, BCBS-Tx
agrees to, and to cause any permitted transferee to, enter into, execute and
perform the Stockholders Agreement.
Section 12. GENERAL.
(a) EXPENSES. Each party shall bear and pay all costs and expenses
incurred by them respecting the transactions contemplated herein and all
investigations and proceedings in connection therewith, including, without
limitation, fees, commissions or expenses of their respective counsel,
accountants and financial advisors.
(b) NOTICE. Any notice required to be given pursuant to the terms and
provisions of this Agreement shall be in writing and shall be sent by certified
mail, return receipt requested, or by overnight delivery service to the parties
at the addresses below or such other address as shall be specified by the
parties by like notice
to the Company at:
Advance ParadigM, Inc.
Attn: Vice President - Legal Affairs
545 E. John Carpenter Freeway, Suite 1900
Irving, Texas 75062
and to BCBS-Tx at:
Blue Cross and Blue Shield of Texas
Attn: General Counsel
P.O. Box 655924
Dallas, TX 75265-5924
(c) BINDING NATURE AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their successors and assigns.
Neither party may assign this Agreement without the prior written consent of the
other; PROVIDED, however, that either party may transfer or assign its rights
and obligations under this Agreement, to any affiliate, and PROVIDED further
that no such assignment shall have the effect of releasing such party from any
of its obligations under this Agreement.
(d) HEADINGS AND INTERPRETATION. The headings of the various sections of
this Agreement are inserted for convenience only and do not, expressly or by
implication, limit, define or extend the specific terms of the section so
designated.
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<PAGE>
(e) GOVERNING LAW. The validity, enforceability, and interpretation of
this Agreement shall be determined and governed by the internal laws of the
State of Texas (and not the law of conflicts).
(f) ENTIRE AGREEMENT. This Agreement contains all the terms and
conditions agreed upon by the parties, and supersedes all prior understandings,
writings, proposals, representations, or communications, oral or written, of the
parties hereto.
(g) AUTHORITY. Company and BCBS-Tx warrant that each has full power and
authority to enter into and perform this Agreement, and the person signing this
Agreement on behalf of each party certifies that such person has been properly
authorized and empowered to enter into this Agreement on behalf of such party.
(h) NON-WAIVER. The failure of either party to insist, in any one or more
instances, upon performance of any of the terms, covenants or conditions of this
Agreement shall not be construed as a waiver or a relinquishment of any right or
claim granted or arising hereunder or of the future performance of any such
term, covenant, or condition, and such failure shall in no way affect the
validity of this Agreement or the rights and obligations of the parties
hereunder.
(i) SURVIVAL. Should any part, term or condition of this Agreement be
declared illegal or unenforceable or in conflict with any other laws, the
remaining provisions shall be valid and not affected thereby.
(j) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument.
(k) FURTHER ASSURANCES. From time to time upon request and without
further consideration, the parties hereto shall, and shall cause their
subsidiaries and affiliates, to execute, deliver or acknowledge such documents
and do such further acts as the other party hereto may reasonably require to
effectuate its obligations contemplated by this Agreement.
(l) NON-AFFILIATION WITH BCBSA. Company understands that this Agreement
constitutes a contract between Company and BCBS-Tx, that BCBS-Tx is an
independent corporation operating under a license from the Blue Cross Blue
Shield Association, an association of independent Blue Cross and Blue Shield
Plans (the "BCBSA"), permitting BCBS-Tx to use the Blue Cross Blue Shield
Service Marks in Texas, and that BCBS-Tx is not contracting as the agent of
BCBSA. Company acknowledges that it has not entered into this Agreement based
upon representations by any person other than BCBS-Tx and that no person, entity
or organization other than BCBS-Tx shall be held accountable or liable to
Company for any of BCBS-Tx's obligations to Company created under this
Agreement. This Section 12(l) shall not create any additional obligations
whatsoever on the part of BCBS-Tx other than those obligations created under
other provisions of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their proper and duly authorized officers on the date first
above written. By executing the Agreement, the undersigned individuals hereby
warrant and represent that they have read this Agreement in its entirety and
agree to all its terms.
ADVANCE PARADIGM, INC.
By: /s/ David D. Halbert
------------------------------------
David D. Halbert
Chairman of the Board and Chief
Executive Officer
BLUE CROSS AND BLUE SHIELD OF TEXAS,
INC.
By: /s/ Rogers K. Coleman, M.D.
------------------------------------
Rogers K. Colemena, M.D.
President and Chief Executive
Officer
7
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EXHIBITS
Exhibit A Warrant Certificate
Exhibit B Assignment
Exhibit C Stockholders Agreement
8
<PAGE>
CONFIDENTIAL TREATMENT
REQUESTED. THE REDACTED
MATERIAL HAS BEEN
SEPARATELY FILED WITH
THE COMMISSION.
EXHIBIT A
THIS WARRANT AND THE UNDERLYING SHARES HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY)
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
WARRANT NO. ___
For Purchase of Shares of Common Stock
of
ADVANCE PARADIGM, INC.
(DATE OF ISSUE)
THIS CERTIFIES THAT Blue Cross and Blue Shield of Texas, Inc., a Texas non-
profit corporation ("BCBS-TX"), or registered transferees or assigns, is
entitled, subject to the terms and conditions set forth in this Warrant, to
purchase from Advance ParadigM, Inc., a Delaware corporation (the "COMPANY"),
[....] (the "Exercise Number") fully paid and nonassessable shares of Common
Stock, $0.01 par value per share, of the Company (the "COMMON STOCK") at any
time during the Exercise Period upon payment in full of the Exercise Price. The
Initial Exercise Number and Exercise Price shall be subject to adjustment as set
forth in the Warrant Agreement referred to below. This Warrant is issued
pursuant to a Warrant Agreement between BCBS-Tx and the Company dated as of
November 25, 1995 (the "WARRANT AGREEMENT"), and is subject to all the terms
thereof, including the limitations on transferability set forth therein.
Capitalized terms used herein as defined terms but not otherwise defined shall
have the meaning assigned to such term in the Warrant Agreement.
This Warrant may be exercised, by the holder hereof, for all shares of
Common Stock covered hereby, by the presentation and surrender of this Warrant
together with the duly executed Election to Purchase in the form attached hereto
as Exhibit I, at the principal office of the Company (or at such other address
as the Company may designate by notice in writing to the holder hereof at the
address of such holder appearing on the books of the Company), and upon payment
to the Company of the Exercise Price as set forth in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and delivered by its duly authorized officer as an instrument under seal as of
the date of first above written.
ADVANCE PARADIGM, INC.
By:
------------------------------------
David D. Halbert
Chairman of the Board and
Chief Executive Officer
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
EXHIBIT I
TO WARRANT CERTIFICATE
ELECTION TO PURCHASE
TO: ADVANCE PARADIGM, INC. (the "Company")
The undersigned, owner of the accompanying Warrant hereby irrevocably
exercises the option to purchase [.......] shares of Common Stock in accordance
with the terms of such Warrant, directs that the shares issuable and deliverable
upon such purchase (together with any check for a fractional interest) be issued
in the name of and delivered to the undersigned, and makes payment in full
therefor at the Exercise Price provided or referenced in such Warrant.
COMPLETE FOR REGISTRATION OF SHARES OF COMMON STOCK ON THE STOCK TRANSFER
RECORDS MAINTAINED BY THE COMPANY:
- --------------------------------------------------------------------------------
Name of Warrant Holder
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
Federal ID Tax Number or Social Security Number
- --------------------------------------------------------------------------------
Date of Exercise (must be at least fifteen days after the date of this Notice)
---------------------------------------
Signature
---------------------------------------
Title
---------------------------------------
Date
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED hereby assigns and
transfers all of the rights of the undersigned under the Warrant Certificate, a
copy of which is attached hereto, with respect to the [.....] shares of Common
Stock covered thereby, unto
Name of Assignee Address
- ---------------- -------
Dated:
--------------
Signature:
-------------------------
Title:
-----------------------------
Address:
---------------------------
- -----------------------------------
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<PAGE>
EXHIBIT C
STOCKHOLDER AGREEMENT
This Stockholder Agreement dated as of ___________, by and among Blue Cross
and Shield of Texas, Inc., a Texas non-profit group hospital service corporation
(the "STOCKHOLDER"), and Advance ParadigM, Inc., a Delaware corporation (the
"COMPANY").
PRELIMINARY STATEMENTS
Pursuant to the terms and conditions of the Warrant Agreement, dated
as of November 25, 1995, by and between the Company and Stockholder, the Company
agreed to issue warrants to acquire shares of the Company's common stock, par
value $.01 per share (the "COMMON STOCK"). Pursuant to the terms of the Warrant
Agreement, the Stockholder agreed to execute and enter into this Agreement prior
to the issuance of any shares of Common Stock thereunder.
NOW THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good, valuable and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
STATEMENT OF AGREEMENT
1. RESTRICTED STOCK. The terms and conditions of this Agreement shall apply
to all shares of Common Stock issued to Stockholder pursuant to the Warrant
Agreement and any shares of Common Stock otherwise acquired by Stockholder
(collectively the "STOCK").
2. RESTRICTIONS ON TRANSFERS.
2.1 TRANSFERS TO AFFILIATE.
(a) TRANSFERS TO AFFILIATES. Stockholder shall be entitled to transfer
the Stock held by it to entities that directly or indirectly control, are
controlled by, or are under common control with Stockholder (each, a
"AFFILIATE"), provided that any such Affiliates first deliver to the Company
their written acknowledgment of, and agreement to be bound by, the terms and
provisions contained in this Agreement; and the Stockholder delivers to the
Company an opinion of counsel, reasonably acceptable in form and substance to
the Company and its counsel, that registration under the Securities Act is not
required in connection with such transfer. The foregoing notwithstanding,
Stockholder shall not, without the prior written consent of the Company which
consent will not be unreasonably withheld, transfer any shares of Stock to any
Affiliate, nor any officer, director, employee or holder of debt or equity in
any Affiliate that is engaged in the business, or has an Affiliate engaged in
the business of pharmacy benefit management services, pharmacy network
management, pharmacy claims adjudication, mail service pharmacy, clinical
services, disease state management, case management and/or outcomes management,
or the manufacture of drugs, biotech products or biologicals.
(b) AFFILIATES' PROXY. In the event that Stockholder transfers less than
all of its Stock pursuant to SECTION 2.1(a), Stockholder shall exercise all of
the rights inuring under this Agreement with respect to such transferred Stock
and the transferees shall grant such Investor proxies to
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<PAGE>
exercise such rights. In the event that Stockholder transfers all of its Stock
pursuant to SECTION 2.1(a), one such transferee reasonably acceptable to the
Company shall be designated by Stockholder to exercise all rights inuring under
this Agreement with respect to such Stock and the other transferees shall grant
such designated transferee proxies to exercise such rights.
2.2 RESTRICTIONS ON THIRD PARTY TRANSFERS OF THE STOCK.
(a) GENERAL. During the first two years following the date the Stock is
issued the ("ISSUANCE DATE"), Stockholder agrees that it will not sell, pledge
or otherwise transfer any interest in any shares of the Stock, without the prior
written consent of the Company. At any time after the second anniversary of the
Issuance Date, the Stockholder may sell, pledge or otherwise transfer shares of
the Stock to third parties ("THIRD PARTY TRANSFER"); provided that such transfer
is in accordance with this SECTION 2.2, and provided further that the
transferring Stockholder delivers to the Company an opinion of counsel,
reasonably acceptable in form and substance to the Company and its counsel, that
registration under the Securities Act is not required in connection with such
transfer. The foregoing notwithstanding, Stockholder agrees that it shall not
transfer any shares of Stock to any person or entity, nor any officer, director,
employee or holder of debt or equity in any entity that is engaged in the
business, or has an affiliate engaged in the business of pharmacy benefit
management services, pharmacy network management, pharmacy claims adjudication,
mail service pharmacy, clinical services, disease state management, case
management and/or outcomes management, or the manufacture of drugs, biotech
products or biologicals.
(b) SALE NOTICE. At least 60 days prior to making any Third Party
Transfer under SECTION 2.2(a), the transferring Stockholder will deliver a
written notice (the "SALE NOTICE") to the Company. The Sale Notice will
disclose in reasonable detail the identity of the prospective transferee(s) and
the terms and conditions of the proposed transfer. Stockholder agrees not to
consummate any such transfer until 60 days after the Sale Notice has been
delivered to the Company.
(c) FIRST REFUSAL RIGHTS. The Company may elect to purchase some or all
of the Stock to be transferred upon the same terms and conditions as those set
forth in the Sale Notice by delivering a written notice of such election to
Stockholder within 30 days after the receipt of the Sale Notice by the Company.
If the Company elects to purchase any shares of Stock, the Company shall
consummate such purchase within 30 days of delivery of notice of intent to
purchase. If the Company has not elected to purchase all of the Stock specified
in the Sale Notice, Stockholder may transfer the Stock specified in the Sale
Notice at a price and on terms no more favorable to the transferee(s) thereof
than specified in the Sale Notice during the 60-day period immediately following
notice of the Company's election not to purchase such shares. Any shares of
Stock not transferred within such 60-day period will be subject to the
provisions of this SECTION 2.2(c) upon subsequent transfer.
(d) NON-CASH CONSIDERATION. In the event the consideration for the Stock
as disclosed in the Sale Notice is other than cash, a promissory note or a
combination thereof, the price for the Stock shall be the value of that
consideration as agreed to by the transferring Stockholder and the Company, or,
if no agreement can be reached as to the valuation of such consideration, the
fair market value of such consideration as determined by two appraisers (one
appointed by the Stockholder and one appointed by the Company). In the event
the two appraisers are unable to agree on a fair market value within 20 days
after they are appointed, the fair market value of the consideration shall be
the average of the appraised values of the two appraisers; provided, however,
that if the appraised values of the two appraisers differ by more than ten
percent (10%) of the higher of the two appraised values, the two respective
appointed appraisers shall select a third appraiser who shall independently,
within 20 days after this appointment, make a determination of the value of the
consideration and the average of the appraised values of the three
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<PAGE>
appraisers shall be the purchase price and shall be binding on the parties
hereto. The transferring Stockholder and the Company shall each bear the cost
of their respective appraisers and shall share the cost equally of the third
appraiser, if any. Notwithstanding anything herein to the contrary, if an
appraisal is used to determine the value of the consideration pursuant to this
SECTION 2.2(d), the time periods provided for in SECTIONS 2.2(b) and 2.2(c)
shall be tolled from the time of the initial appointment of the two appraisers
until a final appraised value is determined pursuant to this SECTION 2.2(d).
(e) PUBLIC SALE. At any time after the second anniversary of the Issuance
Date, if the Company has consummated its first underwritten public offering
pursuant to an effective registration statement covering the offering and sale
of the Common Stock for the account of the Company on a firm commitment basis
(the "INITIAL PUBLIC OFFERING"), the Stockholder may sell, pledge or otherwise
transfer shares of the Stock to the public in a market transaction without
complying with the restrictions set forth in SECTION 2.2(b), (c) and (d).
2.3 LEGEND. The certificates representing the Stock will bear the
following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY BE REOFFERED AND SOLD ONLY IF
SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCKHOLDER AGREEMENT BETWEEN
THE COMPANY AND BLUE CROSS AND BLUE SHIELD OF TEXAS, INC., DATED AS OF
NOVEMBER 25, 1995, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER
HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
Any legend endorsed on a certificate pursuant to SECTION 2.3 hereof and the
stop transfer instructions and record notations with respect thereto shall be
removed and the Company shall issue a certificate without such legend to the
holder thereof at such time as the securities evidenced thereby cease to be
restricted securities
2.4 EXTRAORDINARY TRANSACTION. In the event of a merger of the Company
with a third party where the Company is not the surviving entity, sale of a
majority of the capital stock of the Company, or the sale of all or
substantially all of its assets ("EXTRAORDINARY TRANSACTION"), the Stock shall
be entitled to receive the same benefits as the holders of the Common Stock will
receive in the Extraordinary Transaction. The Stockholder agrees to consent to
and execute all required documents in connection with the Extraordinary
Transaction.
3. REGISTRATION OF STOCK; LIMITATIONS ON STOCKHOLDINGS.
3.1 PIGGY-BACK REGISTRATION RIGHTS. If the Company shall determine to
register for its own account or the account of others under the Securities Act
any of its equity securities, it shall send to the Stockholder, written notice
of such determination and, if within fifteen (15) days after receipt of such
notice, the Stockholder shall so request in writing, the Company shall include
in such registration statement all or any part of the Stock Stockholder requests
to be registered. The obligations of the Company under this SECTION 3.1 may be
waived at any time upon the written consent of the Stockholder.
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<PAGE>
(a) CUT-BACK. If, in connection with any offering involving an
underwriting of Common Stock to be issued by the Company, the managing
underwriter shall impose a limitation on the number of shares of such Common
Stock which may be included in the registration statement because, in its
judgment, such limitation is necessary to effect an orderly public distribution,
then the Company shall be obligated to include in such registration statement
only such limited portion of the Stock with respect to which Stockholder has
requested inclusion hereunder; PROVIDED, HOWEVER, Stockholder agrees that
Advance Health Care, Inc. (or the successors to its registration rights) and the
holders of the Series A Preferred Stock (or the common stock obtained upon
conversion of such Series A Preferred Stock) shall be entitled to include in
such registration statement all registrable shares held by such person BEFORE
any of the Stockholder's Stock shall be included. Any exclusion of Stock shall
be made pro rata among the Stockholder and the holders of the Series B Preferred
Stock (or the common stock obtained upon conversion of such Series B Preferred
Stock) seeking to include such securities in proportion to the number of shares
of common stock held by such holder (or their assigns).
(b) REGISTRATION PROCEDURES. The Company will use good faith efforts to
maintain the effectiveness for up to 90 days of any registration statement
pursuant to which the Stock are being offered, and from time to time will amend
or supplement such registration statement and the prospectus contained therein
to the extent necessary to comply with the Securities Act and any applicable
State security statute or regulation. The Company will also provide Stockholder
with as many copies of the prospectus contained in any such registration
statement as it may reasonably require. After consummation of the Initial
Public Offering, the Company will timely file with the Commission such
information as the Commission requires under the Exchange Act of 1934, as
amended. Beginning after the second anniversary of the Issuance Date and after
consummation of the Initial Public Offering, the Company agrees, upon request
from an Stockholder, to cooperate in transfers of the Conversion Stock pursuant
to Rule 144 under the Securities Act.
(c) INDEMNIFICATION. The Company and Stockholder agree to provide
standard indemnification to the other relating to the disclosures in the
registration statement made by the Company or the Stockholder, as the case may
be.
(d) EXPENSES. In the event the Stockholder exercises its rights under
this SECTION 3.1, Stockholder shall bear its proportionate share of the cost and
expenses of such registration.
(e) EXPIRATION. The obligations of the Company under this SECTION 3.1
shall expire on the fifth anniversary of the Company's Initial Public Offering.
This SECTION 3.1 shall not apply to a registration of Securities of Common
Stock on Form S-8 or Form S-4 or their then equivalents relating to an offering
of shares of Common Stock to be issued solely in connection with any acquisition
of any entity or business or otherwise issuable in connection with any stock
option or employee benefit plan.
3.2 MARKET STANDSTILL. Stockholder agrees that in the event the Company
proposes to offer for sale to the public any of its equity securities in any
public offering (whether for its own account or the account of others), and if
requested in writing by the Company and an underwriter of the proposed offering
of Common Stock or other securities of the Company, then the Stockholder will
agree to a restriction whereby Stockholder and any other holder of Stock will
not sell, grant any option or right to buy or sell, or otherwise transfer or
dispose of in any manner, to the public in any open market transactions, any
Common Stock or other securities of the Company held by it for 180 days (the
"LOCK-UP PERIOD") following the effective date of the registration statement of
the Company filed under the Securities Act. Such agreements shall be in writing
and in form and substance pursuant to customary and prevailing terms and
conditions for such lock-up agreements. The Company may impose stop-transfer
instructions with respect to the securities subject to the foregoing
restrictions until the end of the Lock-Up Period.
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<PAGE>
3.3 LIMITATION ON STOCK HOLDINGS. The Stockholder agrees that in no
event, shall it, either independently or together with its Affiliates, own
Common Stock or rights to acquire Common Stock, that represent, or if converted
to Common Stock would represent, more than twenty percent (20%) of the Company's
issued and outstanding Common Stock.
4. NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered personally, mailed by
certified mail (return receipt requested) or sent by express delivery service,
or facsimile transmission to the parties at the following addresses or at such
other addresses as shall be specified by the parties by like notice:
if to the Company:
545 E. John Carpenter Freeway
Suite 1900
Irving, TX 75062
Attention: Chief Executive Officer
Fax No.: (214) 830-6196
if to Stockholder:
Blue Cross and Blue Shield of Texas, Inc.
P.O. Box 655924
Dallas, TX 75265-5924
Attention: General Counsel
Fax No.:
Notice so given shall, in the case of notice so given by mail, be deemed to
be given and received on the fourth calendar day after posting, in the case of
notice so given by express delivery service, on the date of actual delivery and,
in the case of notice so given by facsimile transmission or personal delivery,
on the date of actual transmission or personal delivery, as the case may be.
5. SEVERABILITY.
If any provision of this Agreement shall be held to be illegal, invalid or
unenforceable under any applicable law, then such contravention or invalidity
shall not invalidate the entire Agreement. Such provision shall be deemed to be
modified to the extent necessary to render it legal, valid and enforceable, and
if no such modification shall render it legal, valid and enforceable, then this
Agreement shall be construed as if not containing the provision held to be
invalid, and the rights and obligations of the parties shall be construed and
enforced accordingly.
6. COMPLETE AGREEMENT.
This Agreement and those documents expressly referred to herein and of even
date herewith, embody the complete agreement and understanding among the parties
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.
7. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, with the same effect as if
all parties had signed the same document. All such counterparts shall be deemed
an original, shall be construed together and shall constitute
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one and the same instrument.
8. SUCCESSORS AND ASSIGNS.
This Agreement is intended to bind and inure to the benefit of and be
enforceable by and against the Stockholder and the Company, and their respective
heirs, successors and assigns. Stockholder hereby agrees not to transfer or
assign, directly or indirectly, any of the Stock unless such transferee or
assignee agrees in writing (i) to be bound by the provisions of this Agreement
and (ii) not to make subsequent assignments or transfers other than in
accordance with this Agreement. Notwithstanding the foregoing, any holder of
the Stock shall be bound by the provisions of this Agreement even if such holder
is not a party hereto or otherwise agreed in writing to be bound by the
provisions hereof.
9. CHOICE OF LAW.
THE INTERNAL LAW OF THE STATE OF TEXAS (AND NOT THE LAW OF CONFLICTS) WILL
GOVERN THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT.
10. REMEDIES.
Each of the parties to this Agreement will be entitled to enforce its
rights under this Agreement specifically, to recover damages by reason of 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 that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement. In the event a party hereto brings an action
under this agreement, the prevailing party in such dispute shall be entitled to
recover from the losing party all fees, costs and expenses of enforcing any
right of such prevailing party under or with respect to this Agreement,
including without limitation such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
11. AMENDMENTS AND WAIVERS.
Any provision of this Agreement may be amended or waived only with the
prior written consent of each of the parties hereto.
12. CONFIDENTIALITY.
Each of the parties hereto agrees to hold in the strictest confidence the
existence of this Agreement and the terms and conditions hereof. Specifically,
but without limiting the generality of the foregoing, each of the parties hereto
agrees not to disclose the existence of this Agreement or any of its terms to
any third party without the prior written consent of every other party hereto
(unless such disclosure is required by law).
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
ADVANCE PARADIGM, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BLUE CROSS AND BLUE SHIELD OF
TEXAS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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EXHIBIT 10.1
MANAGED PHARMACEUTICAL AGREEMENT
MAIL SERVICE AND CLAIM ADJUDICATION
THIS AGREEMENT is made and entered into as of NOVEMBER 1, 1993, by and
between ADVANCE PRESCRIPTION MANAGEMENT, INC., (hereinafter, "APM"), a Delaware
corporation maintaining its principal place of business at 545 E. John Carpenter
Freeway, Suite 1900, Irving, TX 75062, and THE MEGA LIFE & HEALTH INSURANCE
COMPANY, 4001 MCEWEN, SUITE 200, DALLAS, TX 75244 (hereinafter,
"Administrator"). APM and Administrator are hereinafter referred to jointly as
the "Parties" or singularly as a "Party".
DEFINITIONS
A. "Participants" ("Participants") shall mean those individuals and their
dependents included on a list of Participants furnished to APM by the
Administrator in a mutually agreeable form
B. "Primary Cardholder" shall mean that one individual through whom
eligibility of that individual and their dependents is determined.
C. "Mail Service Pharmacy" or "Mail Service" ("Mail Service Pharmacy" or
"Mail Service") shall mean the pharmaceutical dispensing facility which utilizes
the US Postal Service or common carriers to deliver product and which shall be a
facility owned by an APM affiliate or another facility designated by APM for
use under the terms of this agreement.
D. "Mail" shall mean to deliver to the United States Post Office for
first class delivery in a properly addressed envelope or package, with
sufficient postage paid, or to United Parcel Service or a similar carrier
selected by APM in its sole discretion.
E. "Prescription" or "Prescription Order" shall mean a valid and legal
order to dispense a prescription drug under all applicable statutes and
regulations of the United States, (including the Food and Drug Administration)
and the state and local jurisdiction in which the dispensing facility is
located, such order being authorized by a person legally qualified to do so.
Such terms shall not include (i) appliances, devices, bandages, heat lamps,
braces, splints, artificial appliances, health and beauty aids, cosmetics,
dietary supplements (ii) drugs required by law to be labeled: "Caution - Limited
By Federal Law To Investigational Use" and (iii) experimental drugs not approved
by the Food and Drug Administration.
F. "Prescription Drug" or "Medication" shall mean drugs and biologicals
which can be dispensed only pursuant to a Prescription Order and which, by law,
are required to bear the legend: "Caution - Federal Law Prohibits Dispensing
Without Prescription".
G. "Generic Drug" means the chemical and generic name as determined by
the United States Adopted Names Council (USANC) and accepted and rated "A" or
"AB" by the Federal Food and Drug Administration (FDA) of those drug products
having the same active ingredients as a drug product prescribed by its trade or
brand name.
H. "Advance Retail Network of Pharmacies" or "Providers" means the retail
pharmacies under contract with APM to participate in providing retail
prescription services to Participants on behalf of APM.
I. "Medi-Span Databases" means the data provided to APM by Medi-Span,
Inc. for use in the Company's pricing methods and/or Drug utilization review
programs.
RECITALS
A. Administrator desires to offer eligible Participants a Prescription Drug
program pursuant to a specified plan.
B. APM is in the business of administering prescription drug benefit plans,
including a Administrator-reimbursed claim indemnification and Mail Service
prescription drug programs, all collectively known as Advance
<PAGE>
Pharmaceutical Management Program ("APMP"). Under the APMP, Participants
pay a portion of the cost of their Prescription Drugs according to a
benefit program defined by Administrator. Prescription drugs are obtained
via the Advance Mail Service Pharmacy or the Advance Retail Network of
Pharmacies ("Network Providers"), both collectively hereinafter referred
to the "Providers".
TERMS OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Parties hereby agree as follows:
1. APM RESPONSIBILITIES
APM will administer, on Administrator's behalf, an APMP, as follows:
(a) Prior to the beginning of the Administrator's plan year for any
Participant enrolled by Administrator, APM will provide
Administrator with copies of informational material for
distribution to Participants, including but not limited to a
general description of the APMP, standard Prescription Drug I.D.
cards, Mail Service patient profiles & retail reimbursement claim
forms used to file out-of-network retail claims.
(b) APM will administer the APMP, and Participants will obtain their
Prescription Drugs, in the manner described in Exhibit A ("How It
Works"), attached hereto and incorporated herein. APM will
process and adjudicate all Participant's claims according to the
terms of specific drug benefit program selected by Administrator
pursuant to the form attached hereto as Exhibit C
("Administrator's Drug Benefit Program").
(c) APM will, on at least a weekly basis, advise Administrator of the
sum of the processed claims and the Mail Service Prescriptions
filled which have been processed by APM on behalf of
Participants.
(d) APM will, on at least a weekly basis, provide Administrator with
a summary invoice of all claims paid and Mail Service
prescriptions filled on its behalf.
2. MAIL SERVICE PHARMACY
(a) APM shall designate the Mail Service Pharmacy to fill
prescriptions with drugs or medications dispensed by licensed
pharmacies for Participants designated by the Administrator and
to mail such drugs or medications to Participants subject to the
terms and conditions set forth herein. APM will administer
delivery of Mail Service Prescriptions according to the
Administrator's Drug Benefit Program. APM's designated Mail
Service vendor will check for eligibility of the Participant and
whether the drug is covered under the Administrator's Drug
Benefit Program prior to processing the prescription.
(b) APM shall designate a Mail Service Pharmacy which to the best
knowledge of APM operates in accordance with all applicable
statutes and regulations of the jurisdiction in which the
dispensing facility is located and shall dispense only those
Prescription Drugs which, in its sole discretion, fulfill the
requirements of the Prescription writer and comply with
applicable legal requirements.
(c) APM will cause to be dispensed new or refill prescriptions upon
receipt of a valid Prescription or refill order for any
Participant and shall deposit the filled Prescription in the mail
in a suitable package, with postage prepaid, properly addressed
to Participant's address as last provided to APM by Administrator
or as appearing on the face of the Prescription Order. Valid
Participant Prescriptions will be filled and mailed within two
business days of receipt of APM or the Mail Service Pharmacy.
APM shall not be liable for any delay in delivery, either to
Administrator or Participant. If a Prescription allows, and the
patient agrees to the substitution of a less expensive Generic
Drug, the APM designated Mail Service Pharmacy will fill the
prescription with the Generic Drug as provided by law.
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(d) The APM Mail Service Pharmacy will dispense drugs in quantities
up to the days supply as defined in Exhibit C, subject to
limitations imposed on controlled substances and to limitations
specified in the Prescription.
(e) The Mail Service Pharmacy shall maintain required information
("profiles") on all Participants, beginning with the first
Prescription received for each Participant. Such profiles will
include, but not be limited to, a history of all drugs dispensed
for a period to coincide with the then current term of this
Agreement, drug interaction and allergy information as provided
to APM by the Participant at the time the first Prescription is
filled or at any time thereafter, and any other information
deemed important by APM or mutually agreed upon by APM and the
Administrator. APM shall not assume any liability or obligation
to any person arising out of any inaccuracies or discrepancies in
the data supplied by the Administrator, Participant and/or
Databases. The Mail Service Pharmacy shall keep records of all
Prescriptions filled for Participants for three (3) years after
the date of filing such Prescriptions or such longer period as
may be required by Federal or State law.
(f) The Mail Service Pharmacy will have the right to refuse to fill
or renew a Prescription for any Participant when, in the
pharmacist's professional judgment, either filling or renewing
such prescription is not in the best medical interest of the
Participant or there is any doubt in the sole opinion of APM [or
the pharmacist] as to the authenticity of the Prescription.
(g) The pricing arrangement under which Administrator will be billed
by APM for Mail Service dispensing will be as defined on Exhibit
C.
3. ADMINISTRATOR RESPONSIBILITIES
(a) Administrator will provide APM with an eligibility tape, a
listing or application in a format mutually acceptable to the
Parties, which lists all Participants and dependents (where
known), and gives pertinent eligibility data (the "Eligibility
List"). The information provided will identify the line of
business and benefit package in which the Participant is
enrolled. Administrator will provide a complete updated
Eligibility List for APM on a monthly basis or more frequently as
is mutually acceptable to the Parties.
(b) Administrator shall notify Participants that they have been
enrolled in the APMP and explain its benefits. Administrator
shall distribute the APMP information material to all eligible
Participants.
(c) Subject to Section 6 hereof, Administrator will, in publications,
advertising and other personnel communications, endeavor to
communicate the APMP and its use. Administrator shall permit APM
to meet with or otherwise communicate directly with prospective
Participants concerning the APMP in a reasonable manner and at
various times to be mutually agreed upon by APM and the
Administrator, in order to promote the use of APM's service.
(d) Administrator is responsible to indemnify all prescription drug
claims pursuant to the design of the benefit plan, and will
provide funds to APM for any payable claims in accordance with
Section 4 hereof.
4. PAYMENT OF APPROVED CLAIMS
(a) APM shall submit to Administrator, on a weekly interval (or more
often as may be agreed upon by the Parties) a statement of
account (the "Statement of Account"), the total amount of claims
made by Participant and Providers under the APMP which have been
processed and approved for payment by APM (referred to as
"payable" claims) during the period of time specifically set
forth in such statement of account.
(b) Upon receipt of the Statement of Account, Administrator will
ensure that sufficient funds to pay the claims are deposited into
a bank account which APM will have access (the "Bank Account"),
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<PAGE>
and so notify APM. APM shall have no obligation to release or
mail payment of any claims until funds are received from
Administrator.
(c) Administrator hereby authorizes APM to draw upon the funds on
deposit in Administrator's Bank Account, by means of electronic
funds draw or such other means as shall be mutually agreed upon
by the Parties. Administrator shall maintain on an ongoing basis
a minimum deposit in the Bank Account in an amount approximately
equal to the average amount of the claims set forth in the
previous two Statements of Account. APM shall be entitled to
withdraw from the Bank Account the amount specified in the
Statement of Account on the second business day following
Administrator's receipt of such statement. Upon the request of
APM, Administrator shall execute and deliver any and all
documents and instruments as may be necessary in order to provide
for APM to be empowered to draw upon such finds in order to
effect such payments.
(d) Within three (3) working days after the withdrawal of such amount
from the Bank Account, APM shall mail to each Provider or Primary
Cardholder, drafts drawn on APM's own account, amounts which
equal the payable claims.
(e) Administrator shall pay APM for any Prescription dispensed to a
Participant provided the actual dispensing date precedes the
receipt of a revised Eligibility List of Participants from
Administrator deleting from the Eligibility List, or not
including, the name of the Participant for whom said prescription
was dispensed. Notwithstanding Section 14(b) hereof, receipt
means the earlier of actual receipt or five (5) business days
after mailing to APM, P.O. Box 819054, Dallas, Texas 75381-9054,
"Return Receipt Requested."
(f) Should Administrator, for any reason, persistently and
unreasonably fail to make timely payment or become insolvent, or
enter into voluntary or involuntary bankruptcy, APM shall be
entitled to cease adjudication of claims and/or the dispensing of
prescriptions under this Agreement, while maintaining all rights
hereunder.
5. ADMINISTRATIVE FEES
Administrator shall pay to APM a separate administrative fee per paid
claim which is manually processed and per each paid claim received
electronically via computerized link with the Providers as set forth
in Exhibit C. Administrator shall remit payment for all outstanding
administrative fee's to APM within fifteen (15) days of the date of
invoice which will occur on the first day of each month.
6. USE OF SERVICE MARKS
APM shall not refer to the terms "THE MEGA LIFE & HEALTH INSURANCE
COMPANY" in any advertising, customer marketing materials or any other
third-party communications without the express prior written consent
of Administrator.
Administrator agrees that the term "ADVANCE PHARMACEUTICAL MANAGEMENT
PROGRAM", the design of that program and the computer systems which
support it, as well as all other service marks currently in use or
claimed by APM, are the intellectual property of APM, and agrees not
to use any such service marks in any advertising, customer marketing
materials or any other third-party communication without the express
prior written consent of APM.
7. CUSTOMER SERVICE
A timely and positive response to any Participant complaint will be
provided by APM. APM will maintain, at its sole expense, toll-free
"800" numbers both outside and within the State of Texas for customer
inquiries or complaints. APM will endeavor to respond to any customer
complaint forwarded by Administrator within one business day of
receiving same.
8. RECORDS AND REPORTS
(a) MAINTENANCE OF RECORDS. APM shall maintain, in original form, on
microfilm or computer tape, documentation of all claims received
by APM and the manner of their processing. All such records
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<PAGE>
shall remain accessible to Administrator for examination and
audit by Administrator throughout the calendar year in which they
are created and for three calendar years thereafter. Such audit
may be conducted by Administrator, upon reasonable prior written
notice, at reasonable intervals during the regular business hours
of APM; provided, however, that in conducting any such audit,
Administrator shall not interfere with the business or operations
of APM. All claims processing and other records pertaining to
the administration of the APMP shall be and remain the property
of APM.
(b) MANAGEMENT INFORMATION REPORTS. APM shall mail or cause to be
mailed to Administrator within 5 working days after the end of
each month, an electronic summary of all claims paid and Mail
Service Prescriptions filled during the preceding month. Such
summary shall include the total of such payments made with
respect to each group or risk category where Administrator has
requested such a total, and shall contain such other data and be
in such form as may be agreed upon by the Parties. Additional
custom reporting which may be requested by Administrator and
agreed upon by the Parties will be billed at a rate of $100 per
programming hour.
(c) MUTUAL RIGHT TO AUDIT. In order to verify the amount of fees due
to APM hereunder, APM shall have the right to inspect and audit,
or cause to be inspected and audited the books and records of
Administrator relating to the existence and number of
Participants. Similarly, Administrator shall have the right to
audit the business records of APM which directly relate to
billings made to Administrator for claims reimbursement.
Administrator and APM shall fully cooperate with representatives
of Administrator and with independent accountants hired by
Administrator to conduct any such inspection or audit. Such
audits shall only be made at reasonable intervals, upon prior
written notice, during normal business hours, and without undue
interference to the Party's business activity. If any such audit
shall disclose that additional amounts are due to Administrator,
such amounts shall be paid within ten (10) days after receipt of
the audit report, plus interest on the terms specified in Section
14(e) hereof.
9. RELATIONSHIP OF THE PARTIES
It is understood and agreed by the Parties hereto that APM and
Administrator are independent contractors and that nothing in this
Agreement is intended to make either Party a general or special agent,
fiduciary, legal representative, joint venturer, or partner of the
other for any purpose.
10. INDEMNIFICATION
Each Party (First Party) shall be responsible for and shall indemnify,
defend and hold harmless the other Party from any and all damage,
claims, expenses, liabilities and losses, including reasonable
attorney's fees and court costs, to the extent arising out of this
Agreement and resulting from any act, negligence or fault of the First
Party or its employees, agents or representatives either incidental to
or in the performance of its duties or obligations under this
Agreement.
APM shall maintain, during the term of this Agreement, liability
insurance with limits not less than $1,000,000 per occurrence,
evidence of which shall be furnished to the Administrator upon written
request but which amount shall not serve to limit APM's obligation to
indemnify Administrator as described above.
11. TERM OF ENGAGEMENT
The initial term of this Agreement will be for one (1) year commencing
on the effective date hereof, unless earlier terminated in accordance
with the provisions of Section 12 below. This Agreement will
automatically be renewed for additional one (1) year terms unless
terminated in accordance with Section 12 below.
12. TERMINATION
This Agreement may be terminated as follows:
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(a) Upon the mutual written consent of the Parties hereto; or
(b) This Agreement shall terminate one year from the date hereof. It
shall be renewed, however, for additional periods of 12 months,
provided that either party does not notify the other within 90
days of the end of a period that it wishes to terminate. In the
event either party so notifies, termination shall be effective
after the end of the then current period.
(c) At APM's option, if Administrator shall fail within thirty (30)
days of receipt of Statement of Account, to make sufficient funds
available in accordance with Section 4 hereof.
(d) Except as provided in paragraph (b) and (c) directly above, at
either Party's option, if the other Party fails to comply with
any provision of this Agreement and does not correct such failure
within thirty (30) days after written notice of such failure to
comply (which notice shall describe the action that the other
Party must take to correct such failure) is delivered to the
other Party.
Termination of this Agreement shall not relieve either Party of any
unfulfilled obligations hereunder, unless otherwise agreed to in
writing between the Parties.
13. CONFIDENTIALITY OF ELIGIBILITY DATA
APM agrees that all Eligibility Lists are the proprietary and
confidential information of the Administrator and agrees that it will
not disclose any such information to third parties, with the exception
of those parties directly involved in the processing and adjudication
of claims, without the express prior written consent of the
Administrator.
14. GENERAL PROVISIONS
(a) NOTICES. All notices and other communications required under
this Agreement shall be in writing and shall be deemed to have
been duly given upon receipt of registered or certified mail,
postage prepaid, return receipt requested or by facsimile
transmission, or delivered by hand or by overnight or similar
delivery service, fees prepaid, to the party to whom it is to be
given at the addresses set forth in the opening paragraph of this
Agreement.
(b) ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding among the Parties hereto with respect to the
subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, and conditions,
express or implied, oral or written, of any nature whatsoever
with respect to the subject matter hereof. This Agreement may
not be modified or amended other than by an agreement in writing.
(c) NON-WAIVER. The failure of either Party to insist, in any one or
more instances, upon performance of any of the terms, covenants
or conditions of this Agreement shall not be construed as a
waiver or a relinquishment of any right or claim granted or
arising hereunder or of the future performance of any such term,
covenant, or condition, and such failure shall in no way affect
the validity of this Agreement or the rights and obligations of
the Parties hereunder.
(d) ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective successors
and assigns. This Agreement and the rights and obligations of
the Parties hereunder may not be assigned by either Party, by
operation of law or otherwise without the written consent of the
other party, which consent will not be unreasonably withheld.
(e) INTEREST ON LATE PAYMENTS. All fees and other amounts which the
Administrator owes to APM shall bear interest from the date due
until they are fully paid, at the rate of one percent (1%), per
month unless such rate exceeds the maximum rate allowable by
applicable law, in which case such amounts shall bear interest at
the maximum legally allowable rate, which shall be deemed to be
the agreed upon rate of interest.
(f) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas without giving
effect to its conflict of laws rules or choice of laws rules.
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(g) SURVIVAL. Should any part, term or condition of this Agreement
be declared illegal or unenforceable or in conflict with any
other laws, the remaining provisions shall be valid and not
affected thereby.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their proper and duly authorized officers on the date first
above written. By executing the Agreement, the undersigned individuals hereby
warrant and represent that they have read this Agreement in its entirety and
agree to all its terms.
APM: ADMINISTRATOR:
ADVANCE PRESCRIPTION MANAGEMENT, INC. THE MEGA LIFE & HEALTH INSURANCE COMPANY
By: /s/ Danny Phillips By: /s/ Richard Estell
Title: Vice President Title: President
Date: 6/3/94 Date: 6/10/94
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PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED WITH THE
LEGEND: "CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION." AND THE APPROPRIATE SECTION HAS
BEEN MARKED AT THE APPROPRIATE PLACE BY BRACKETS.
FORM OF HEALTH BENEFIT MANAGEMENT SERVICES AGREEMENT
[......]
<PAGE>
EXHIBIT 10.14
PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED WITH THE
LEGEND: "CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION." AND THE APPROPRIATE SECTION HAS
BEEN MARKED AT THE APPROPRIATE PLACE BY BRACKETS.
ADVANCE PARADIGM, INC.
MANAGED PHARMACY BENEFIT SERVICES AGREEMENT
This Managed Pharmacy Benefit Services Agreement dated as of September 1,
1995, is entered into by and between Advance ParadigM, Inc. and Blue Cross and
Blue Shield of Texas, Inc.
PRELIMINARY STATEMENT
A. Client provides a pharmacy benefit to certain individuals enrolled and
entitled to benefits under the Client's benefit plans.
B. Pursuant to the terms and conditions of this Agreement, Client desires to
retain API to provide, and API desires to provide for Client, pharmacy benefit
management services including without limitation (i) mail service pharmacy
through which Eligible Members may receive Prescription Drugs through the mail,
(ii) claims processing, retail network management and payment of claims to
participating pharmacies for prescription drugs furnished to Eligible Members,
and (iii) clinical management, formulary and drug rebate services (collectively,
the "PBM SERVICES").
TERMS OF AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS. Unless the context otherwise requires, the terms defined in
this SECTION 1 shall have the meanings herein specified for all purposes of
this Agreement, including singular and plural forms of any terms herein
defined.
"AGREEMENT" shall mean this Managed Pharmacy Benefit Services Agreement.
"API" shall mean Advance ParadigM, Inc., a Delaware corporation, together
with its wholly-owned subsidiaries.
"API NETWORK" shall mean the nationwide network of retail pharmacies
(including API's Advance Rx-Registered Trademark- network for Client's
Members First Program), excluding Texas under contract with API to dispense
Prescriptions to Eligible Members and custom networks developed to meet
specific Client needs.
"APOTHEQUERY-Registered Trademark- shall mean the proprietary relational
database developed by API to analyze drug and medical claims data.
"APPROVED CLAIMS" shall have the meaning assigned to such term in SECTION
3(d)(ii) hereof.
<PAGE>
"AWP" shall mean the then current average wholesale price for a
prescription drug as listed in a pharmaceutical industry pricing guide,
including but not limited to the MEDI-SPAN PRESCRIPTION PRICING GUIDE.
"CLIENT" shall mean Blue Cross and Blue Shield of Texas, Inc., a Texas non-
profit group hospital service corporation and any of its wholly-owned or
partially-owned subsidiaries.
"DUR" shall mean drug utilization review.
"EFFECTIVE DATE" shall mean the day that PBM Services begin for each Plan
covered by this Agreement.
"ELIGIBILITY LIST" shall have the meaning assigned to such term in SECTION
3(a) hereof.
"ELIGIBLE MEMBER" shall mean each individual entitled to benefits under a
Plan.
"ENCRYPTED FORMAT" shall mean the process pursuant to which symbols are
assigned by computer to disguise specified information in a database.
"FORMULARY" shall have the meaning assigned to such term in SECTION 2(e)
hereof.
"GENERIC DRUG" means the chemical and generic name as determined by the
United States Adopted Names Council (USANC) and accepted by the Federal
Food and Drug Administration (FDA), of those drug products having the same
active ingredients as a drug product prescribed by its trade or brand name.
"GROUP" shall mean those employer groups or other plan sponsors for which
Client administers the pharmacy benefit.
"MAC" shall mean the then current maximum allowable cost for a prescription
drug listed as a drug available from more than one manufacturer in API's
pharmaceutical MAC pricing formula, including but not limited to formulas
utilizing the MEDI-SPAN PRESCRIPTION PRICING GUIDE.
"MEDI-SPAN DATABASES" means the data provided to API by Medi-Span, Inc. for
use in the Company's pricing methods and/or DUR programs.
"MEMBERS FIRST PROGRAM" is a value-added prescription drug discount program
offered by Client.
"NETWORK PHARMACY" shall mean each retail pharmacy participating in the
Primary Network and the API Network.
"PBM SERVICES" shall mean pharmacy benefit management services as defined
in the Preliminary Statements.
"PLANS" shall mean all of the Client's prescription drug benefit plans for
groups to which API will provide PBM services under this Agreement.
"PRESCRIPTION" shall mean a valid and legal order to dispense a drug
legally eligible for dispensing under the laws and regulations of the
United States, including the Food and Drug Administration and the state
laws in which the dispensing facility is located.
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"PRESCRIPTION DRUG" shall mean drugs and biologicals which can be dispensed
only pursuant to a Prescription and which, by law, are required to bear the
legend: "Caution-Federal Law Prohibits Dispensing Without Prescription".
"PRIMARY NETWORK" shall mean the networks of retail pharmacies under
contract with Client to dispense Prescriptions to Eligible Participants.
"PROCESSED PRESCRIPTION DRUG CLAIM" shall mean a fully-adjudicated
reimbursable claim and does not include claims rejected by the on-line
system.
"QUARTER" shall mean each three month period of a calendar year commencing
on each January 1, April 1, July 1 and October 1.
"THERAPEUTIC INTERCHANGE" shall mean upon approval of the prescriber, a
process of substituting one drug for another drug that may be chemically
distinct, and can be expected to have the same clinical effect when
administered to patients under specified conditions.
2. PLAN INFORMATION. Client shall make best efforts to provide API with
certain Plan information not otherwise in the possession of API and
necessary for API to perform or provide the PBM Services, including without
limitation benefit certificates, eligible drugs, co-pays, deductibles,
maximum allowance benefits, investigational drug usage, generic drug usage,
and any drugs excluded under the Plan. The performance guarantees specified
in EXHIBIT D with respect to each Plan shall not be effective until the
thirty-first day following Client's delivery of the Plan information under
this SECTION 2.
3. PHARMACY BENEFIT MANAGEMENT SERVICES. API shall provide pharmacy benefit
management services for the benefit of the Plan in accordance with the
terms and conditions of this SECTION 3.
(a) ELIGIBILITY LIST AND UPDATES. As early as practicable for each Group
to which API will provide PBM Services hereunder, Client shall
provide API with a complete and final eligibility tape or list in an
agreed upon format which shall list all Eligible Members and set forth
all pertinent eligibility data (the "ELIGIBILITY LIST"). The
performance guarantees specified in EXHIBIT D with respect to a Group
shall not be effective until the eighth day following Client's
delivery to API of a complete and final Eligibility List for such
Group in a format consistent with API's requirements. Client shall
provide a complete and updated Eligibility List to API as frequently
as mutually agreed to by the parties hereto. For purposes of this
Agreement, an individual will be deemed an Eligible Member during the
period beginning on the third business day following delivery to API
of a revised Eligibility List which includes such individual and
ending on the third business day following delivery of a revised
Eligibility List which excludes such individual.
(b) NOTIFICATION AND PROGRAM PROMOTION. Client shall notify Eligible
Members that API has been selected to provide PBM Services. Client
shall use its best efforts to promote utilization of the PBM Services
to Eligible Members. As mutually agreed upon by API and Client, API
shall be permitted to meet with or otherwise communicate directly with
prospective Eligible Members concerning the PBM Services in a
reasonable manner and at various times.
(c) MAIL SERVICE. API shall fill Prescriptions for Eligible Members and
shall mail such drugs or medications to such Eligible Members subject
to the following terms and conditions:
3
<PAGE>
(i) DISTRIBUTION OF INFORMATION. API shall provide Client with
copies of informational material explaining the mail service and
an adequate number forms necessary for Eligible Members to
utilize mail service. Client shall distribute the mail service
informational materials and forms to all Eligible Members.
(ii) DELIVERY AND DISPENSING. API shall dispense through its mail
service pharmacy new or refill Prescription orders upon receipt
from an Eligible Member of (i) a valid Prescription order or a
completed refill order form and (ii) the applicable co-payment,
if any. API shall cause the filled Prescriptions to be mailed to
each Eligible Member via common carrier at the address set forth
in the Eligibility List or as appearing on the face of the
Prescription. API shall not be liable to either Client or
Eligible Member for any delay in delivery resulting from
circumstances beyond API's control as set forth in SECTION 16(k)
of the Agreement.
(iii)MAIL SERVICE PHARMACY. API shall operate its mail service
pharmacy in compliance with state and federal pharmaceutical laws
and regulations and shall dispense only those prescription drugs
which, in its sole discretion, fulfill the requirements of the
prescription writer and comply with applicable law. The licensed
pharmacists employed by API in the mail service pharmacy shall
have the right to refuse to fill or renew a Prescription for any
Eligible Member when, in the pharmacist's professional judgment,
the filling or renewing of such Prescription is not in the best
interest of the Eligible Member or the pharmacist has reason to
doubt the authenticity of the Prescription.
(iv) GENERIC SUBSTITUTION. If a Prescription allows, and the patient
agrees to the substitution of a less expensive Generic Drug,
API's mail service pharmacy will fill the Prescription with a
Generic Drug which, in the professional judgment of the
dispensing pharmacist, fulfills the requirements of the
Prescription and applicable laws.
(v) THERAPEUTIC INTERCHANGE. API shall from time to time implement
Therapeutic Interchange programs through its mail service
pharmacy to promote Formulary products in accordance with the
procedure for implementing Formulary strategy set forth in
EXHIBIT E attached hereto.
(vi) PATIENT PROFILES AND DUR. API shall request information from
each Eligible Member to submit with his or her first mail order
Prescription a form containing information regarding, among other
things, any drug allergies of such Eligible Member. API shall
utilize this information to develop a patient profile on each
Eligible Member which will include the information submitted by
such member as well as a history of Prescription Drugs dispensed
to such member during the term of this Agreement. Each mail
order Prescription will be subject to DUR based on the patient
profiles and mail service utilization history as well as
concurrent DUR through the Advance Rx-Registered Trademark-
claims adjudication system (as further explained in SECTION
3(d)(iii) hereof). API shall not be liable for any indirect,
special or consequential damages arising from the use or lack of
use of such DUR services in accordance with SECTION 10 of this
Agreement.
(vii)QUANTITIES. API shall provide the quantity of the drug
specified by a Prescription or refill order in quantities of up
to a 90 day supply; PROVIDED, that API shall dispense the drugs
under any Prescription or refill order in accordance
4
<PAGE>
with Plan design. API shall comply with all limitations imposed
on controlled substances.
(viii)TOLL FREE CLIENT SERVICE. API shall maintain, at its sole
expense, toll free "800" numbers for patient counseling for
Eligible Members, Client inquiries and other Client service or
informational needs.
(ix) BILLING FOR MAIL SERVICE. Approved Claims for Prescriptions
filled by the mail service pharmacy shall be included in the
Statement of Account as further described in SECTION 5 hereof.
(d) RETAIL PHARMACY NETWORK SERVICES AND CLAIMS ADJUDICATION. API shall
adjudicate claims for Prescription Drugs furnished by pharmacies under
the Plan in accordance with the following terms and conditions:
(i) PHARMACY NETWORKS.
(A) PRIMARY NETWORKS. The parties acknowledge that Client has
entered into agreements with certain retail pharmacies
located in the State of Texas which pharmacies constitute
the Primary Networks (as defined herein). The Eligible
Members will continue to utilize the Primary Networks to
obtain their Prescription Drugs in the State of Texas. API
shall process, and Client shall pay, the claims submitted by
the pharmacies participating in the Primary Network in
accordance with Client's agreements with such pharmacies.
(B) API NETWORK. In addition to the Primary Networks, the
Eligible Members shall have access to the nationwide API
Network outside of Texas and, as a Group specific option,
may have access to the API mail service pharmacy to obtain
Prescription Drugs. API shall process claims submitted by
the API Network in accordance with API's agreements with
such pharmacies. API shall provide, in a format mutually
agreed upon by Client and API a method for identification of
pharmacies participating in the API Network from a national,
state and local basis.
(C) CUSTOM NETWORK. API shall work with Client to develop
custom networks to meet specific Client needs.
(D) RELEASE OF INFORMATION. API shall furnish to each Network
Pharmacy such information regarding the applicable Plan and
Eligible Members as is necessary for the operation of the
Advance Rx-Registered Trademark- claims adjudication system.
Client hereby authorizes API to release such information to
the Network Pharmacies as API, in its sole discretion, deems
necessary regarding the applicable Plan and Eligible Members
to the Network Pharmacies.
(ii) CLAIMS ADJUDICATION. Through its Advance Rx-Registered
Trademark- claims adjudication system, API shall (A) process
electronic or manual claims submitted by pharmacies; (B) process
API claim forms submitted by Eligible Members; (C) determine
whether the claim qualifies for reimbursement in accordance with
the terms of the applicable Plan and the Eligibility List; and
(D) calculate the payment of such claims pursuant to the
applicable Plan (each such claim an "APPROVED CLAIM"). API shall
notify the submitting Network Pharmacy or Eligible Member of
nonreimburseable claims.
5
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
(iii)CONCURRENT DRUG UTILIZATION REVIEW. Through its Advance
Rx-Registered Trademark- system, API shall provide on-line
concurrent DUR messaging to the Network Pharmacies and will take
appropriate action based on Plan specifications. Concurrent DUR
shall include, but not be limited to, the following edits: (A)
duplicate therapy; (B) early refills and frequency limitations;
(C) duplicate drug; (D) potential drug interaction(s), in which
case the provider is notified on-line and the level of severity
would be indicated; (E) drug preference screening; and (F)
minimum/maximum dose range (which includes on-line alert of
pharmacist). API shall not be liable for any indirect, special
or consequential damages arising from the use or lack of use of
such concurrent DUR services in accordance with SECTION 10 of the
Agreement.
(e) FORMULARY SERVICES. API shall develop and maintain a formulary for
the benefit of the Plan (the "FORMULARY"). Copies of the Formulary
shall be distributed to (i) those physicians included in a Plan's
physician network (at a rate of one physician Formulary per 100
enrolled lives) or (ii) in the case of a non-physician managed Plan,
to those Eligible Members of such Plan. Client agrees to pay postage
and packaging in connection with all Formulary distributions. API
agrees to work directly with Client to institute Formulary steerage
controls at the point-of-sale, including without limitation, hard edit
blocks, differential patient copays, soft edits (e.g. on-line
formulary messages), promoting Formulary compliance to pharmacists and
therapeutic interchange programs.
(f) CLINICAL SERVICES. API and Client's Clinical Pharmacy Department
shall work together to develop programs and initiatives which promote
appropriate and cost-effective pharmacotherapy. API shall, upon
request of and at no additional cost to Client:
(i) produce monographs for new agents;
(ii) provide drug/medical information services;
(iii) design drug use evaluation (DUE) programs, including criteria
development, validation by Clients's prescribers, data
collection, intervention and follow-up assessments;
(iv) analyze prescription claims data (and medical claims data when
available) to target areas for intervention;
(v) produce and deliver to Client a quarterly newsletter
customized to Client topics and initiatives. API shall bear up
to $3,000 per Quarter of the expenses associated with such
newsletter; and
(vi) provide P&T Committee support.
(g) REBATE SERVICES. Beginning October 1, 1995, API will obtain rebates
from drug manufacturers (the "REBATES") based on the Plans' drug
utilization for each calendar quarter.
(i) PAYMENT OF REBATES. [......]
(ii) MEDICAID/MEDICARE ELIGIBLE MEMBERS. No Rebates shall be obtained
for drug utilization which has been submitted by any entity other
than API, specifically including Medicaid, Medicare or other
state or federal health care program which receives Rebates
directly from drug manufacturers, to drug manufacturers for
discounts, rebates or other price reduction. Client shall
clearly identify to API those Eligible Members whose drug
utilization has been otherwise submitted to drug manufacturers or
whose claims have been or will be filed for reimbursement with
Medicaid, Medicare or any other state or federal health care
program. If Client fails to identify such members or claims and
any drug manufacturer's audit
6
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
of its rebate program reveals improperly calculated rebates
involving such members and claims, then Client shall be solely
responsible for the reimbursement of any Rebates improperly made
based on such drug utilization. Notwithstanding the foregoing,
this provision shall not be construed to prohibit Client from
participating in Medicare risk contracting.
(h) APOTHEQUERY-Registered Trademark- SERVICES. Subject to the terms and
conditions hereof, Client shall be entitled to utilize the
ApotheQuery-Registered Trademark- system. API will provide Client
with training for use of ApotheQuery-Registered Trademark- and
[......] hours per month of on-line query access in accordance with
EXHIBIT F attached hereto. The parties will mutually agree upon a
management report to reflect Client's utilization of the
ApotheQuery-Registered Trademark- system.
(i) CLAIMS ADJUDICATION SYSTEM ACCESS. During the term of this Agreement,
API agrees to provide Client with reasonable on-line access to the
data maintained by API on behalf of Client. API shall consult with
Client regarding the hardware and software necessary to access API's
claims adjudication system. API shall provide Client with training
and support to obtain access to API's claims adjudication system.
Client agrees to cooperate with API in the development of an efficient
means of access. All reasonable costs associated with Client's
connectivity to API's current claims adjudication system, as it exists
on the commencement date of this Agreement as specified in SECTION 7,
shall be borne by Client.
4. PAYMENT FOR SERVICES.
(a) ADMINISTRATIVE FEE. Client agrees to pay API a monthly
administrative fee in consideration of the claims adjudication,
clinical management and formulary/rebate services rendered by API
in an amount equal to
[......]
(b) MAIL SERVICE REIMBURSEMENT RATE. Client agrees to pay the claims
submitted for prescriptions dispensed by the mail service
pharmacy at the following rates:
Brand Drugs: [......] plus a [ ......] dispensing fee
Generic Drugs: [......] plus a [...... ] dispensing fee.
(c) NETWORK PHARMACY REIMBURSEMENT RATE. Client agrees to pay the
approved claims of the pharmacies participating in the API
Network outside of the State of Texas or custom networks at
either the following rates or, with respect to any custom
networks, those negotiated rates mutually agreed upon by API and
Client:
Brand Drugs: [......] plus a [ ] dispensing fee
Generic Drugs: [......] plus [......] dispensing fee;
PROVIDED, however, that the approved claims of those pharmacies
participating in the Primary Networks shall be paid at the rates set
forth in the Client's contract with such pharmacies.
(d) APOTHEQUERY-Registered Trademark- FEE. Client agrees to pay API
a monthly fee for the utilization of the ApotheQuery-Registered
Trademark- system in an amount equal to [......]. Each such
claim shall be stored on-line for up to a maximum of [......] of
rolling data.
7
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
5. PAYMENT OF APPROVED CLAIMS.
(a) STATEMENT OF ACCOUNT. API shall submit to Client on a weekly
basis a statement of account (the "STATEMENT OF ACCOUNT") that
reflects the total number and dollar amounts of the Approved
Claims.
(b) PAYMENT OF STATEMENT OF ACCOUNT. Client agrees to pay the amount
of the Approved Claims reflected on the Statement of Account
within two (2) business days of receipt of the Statement of
Account by wire or electronic funds transfer to an account
designated by API.
(c) PAYMENT OF APPROVED CLAIMS. API shall mail drafts drawn on an
account of API to each pharmacy or Eligible Member in the amount
of their respective Approved Claims within three (3) business
days of receipt of payment of the Statement of Account. API
shall have no obligation to release or mail payment of any
Approved Claims until payment of the Statement of Account is
received by API.
(d) CESSATION OF SERVICES. Should Client, for any reason, fail to
pay timely any Statement of Account in accordance with SECTION
5(B) hereof, or become insolvent or generally unable to pay its
creditors when due, API shall notify Client of such default and,
if such default remains uncured for five (5) days following such
notice, API shall be entitled to cease adjudication of claims
and/or the dispensing of Prescriptions under this Agreement while
maintaining all of API's rights hereunder.
6. RECORDS, REPORTS AND PROFILES.
(a) MAINTENANCE OF RECORDS. API shall maintain, in original form, on
microfilm or computer tape, documentation of all claims processed
and Prescriptions filled via mail service for five (5) years.
All such records shall remain accessible to Client for
examination and audit by Client throughout the calendar year in
which they are created and for such additional period as may be
required by Federal or State law. In addition, API shall
maintain, in original form, on microfilm or computer tape, a copy
of this Agreement in accordance with applicable law. API
understands that documentation of each claim processed is
proprietary and confidential information of Client and shall be
treated as such in accordance with SECTION 13 of this Agreement;
provided however that the foregoing shall not limit API's right
to use such data so long as patients' name and address and
Client's identity are in an Encrypted Format.
(b) MANAGEMENT INFORMATION REPORTS. API shall provide Client with
the reports specified in EXHIBIT B hereto in accordance with the
schedule set forth in EXHIBIT B.
(c) SPECIAL REPORTS. Any reports which are not set forth in EXHIBIT
B shall be considered "Special Reports." Client agrees that for
each Special Report, Client shall pay API for the programming
necessary to produce such Special Reports at a rate of (i)
[......] per in-house man-hour of programming time, or, (ii) in
the event API must outsource such programming services to a
programmer from its software vendor, [......], provided that API
agrees to comply with the following procedure:
(i) API must receive a request for a Special Report from an
employee in Client's Pharmacy Programs Department who has
been identified by Client in writing as a "designated
person" for purposes of this SECTION 6(c);
(ii) API must deliver an estimated cost of programming the
Special Report to such designated person; and
8
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
(iii)API must receive authorization from such designated person
prior to programming and running the Special Report.
API shall be entitled to rely on Client's representations
regarding the authority of any employee who acts as a "designated
person" under this SECTION 6(c).
7. TERM AND RENEWAL.
Unless otherwise terminated in accordance with SECTION 8 herein, or
otherwise extended, this Agreement shall commence on September 1, 1995
and end on [......]; provided that the parties acknowledge that the
Formulary/Rebate Services shall not commence until October 1, 1995.
This Agreement shall automatically renew for a twelve-month period on
[......], and on each [......] thereafter (each a "renewal date"),
unless either party notifies the other in writing within ninety (90)
days prior to the renewal date of such year of its intent to terminate
this Agreement.
8. TERMINATION AND DEFAULT.
(a) TERMINATION. In addition to API's and Client's right under
SECTION 5(d) hereof, this Agreement may be terminated as follows:
(i) Upon the mutual written consent of the parties hereto;
(ii) At either party's option, if the other party fails to comply
with any provision of this Agreement and fails to correct
such failure within thirty (30) days of receipt of written
notice of such failure to comply (which notice shall
describe the action that the other party must take to
correct such failure);
(iii) At either party's option, if the other party becomes
insolvent or seeks protection voluntarily or involuntarily,
under any bankruptcy laws;
(iv) At Client's option, if API accepts a bona fide offer to sell
substantially all of the assets or stock of API; provided
that, within thirty (30) days of the effective date of such
sale, Client gives API thirty (30) days written notice of
intention to terminate; or
(v) At either party's option, without cause, upon one hundred
twenty (120) days written notice of intention to terminate.
Client agrees that if it exercises this option during the
initial term of this Agreement, Client will pay to API an
early termination penalty according to the following
schedule:
Date on which Termination Occurs Early Termination Penalty
-------------------------------- -------------------------
[......]
(b) DEFAULT, PAYMENT OBLIGATIONS AND INTEREST.
9
<PAGE>
(i) UNFULFILLED PAYMENT OBLIGATIONS. In the event either API or
Client terminate this Agreement in accordance with the terms
of SECTION 8(a), all unfulfilled payment obligations for any
of the services provided herein shall be paid within thirty
(30) days of the effective date of such termination;
provided that all Rebates shall be payable to the Client
within thirty (30) days of receipt from the manufacturer.
(ii) INTEREST ON LATE PAYMENTS. If Client or API fails to pay
any amounts due under this Agreement within fourteen (14)
days of the due date, such amount shall bear interest from
the date due until paid in full, at the rate of interest
determined by Texas Commerce Bank National Association as
its prime rate.
9. INDEMNIFICATION.
Each party and its officers, directors, employees, agents, successors
and assigns (each an "INDEMNITEE") shall be indemnified and held
harmless by the other party (the "INDEMNIFYING PARTY") against any and
all claims, loss, damage, costs and expenses ("LOSS"), including,
without limitation, attorneys' fees and expenses, actually incurred by
any Indemnitee arising out of or resulting from the actions or
omissions of the Indemnifying Party. Client further agrees to
indemnify and hold API, its officers, directors, employees, agents,
successors and assigns harmless from any Loss actually suffered or
incurred arising out or resulting from any claim or demand by current
or previous Eligible Members relating to this Agreement, including
without limitation any disclosures made by API, its officers,
directors, employees, agents, successors and assigns in accordance
with the terms and conditions hereof.
10. LIMITATION OF LIABILITY.
IN NO EVENT SHALL API BE LIABLE TO CLIENT OR ANY ELIGIBLE MEMBER FOR
ANY INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES OR LOST PROFITS,
ARISING OUT OF OR RELATED TO API'S PERFORMANCE UNDER THIS AGREEMENT OR
BREACH HEREOF, EVEN IF API HAS BEEN ADVISED OF THE POSSIBILITY
THEREOF. API'S LIABILITY TO CLIENT UNDER THIS AGREEMENT, IF ANY,
SHALL IN NO EVENT EXCEED THE TOTAL AMOUNT OF COMPENSATION DUE API FOR
THE PRIOR TWELVE (12) MONTHS OF THIS AGREEMENT.
API RELIES ON MEDI-SPAN OR INDUSTRY COMPARABLE DATABASES IN PROVIDING
CLIENT AND ELIGIBLE MEMBERS WITH DRUG UTILIZATION REVIEW SERVICES.
API HAS UTILIZED DUE DILIGENCE IN COLLECTING AND REPORTING THE
INFORMATION CONTAINED IN THE DATABASES AND HAS OBTAINED SUCH
INFORMATION FROM SOURCES BELIEVED TO BE RELIABLE. API, HOWEVER, DOES
NOT WARRANT THE ACCURACY OF REPORTS, ALERTS, CODES, PRICES OR OTHER
DATA CONTAINED IN THE DATABASES. THE CLINICAL INFORMATION CONTAINED IN
THE DATABASES AND THE FORMULARY IS INTENDED AS A SUPPLEMENT TO, AND
NOT A SUBSTITUTE FOR, THE KNOWLEDGE, EXPERTISE, SKILL, AND JUDGMENT OF
PHYSICIANS, PHARMACISTS, OR OTHER HEALTH-CARE PROFESSIONALS IN
ELIGIBLE MEMBERS' CARE. THE ABSENCE OF A WARNING FOR A GIVEN DRUG OR
DRUG COMBINATION SHALL NOT BE CONSTRUED TO INDICATE THAT THE DRUG OR
DRUG COMBINATION IS SAFE, APPROPRIATE OR EFFECTIVE IN ANY ELIGIBLE
MEMBER.
11. AUDIT.
10
<PAGE>
(a) AUDITS OF ELIGIBLE MEMBERS AND BUSINESS RECORDS. Client shall
have the right to audit the business records of API which
directly relate to billings made to Client for claims
reimbursement. Client and API shall fully cooperate with
representatives of each other and with independent accountants
hired by either party to conduct any such inspection or audit.
Such audits shall be at the auditing party's sole expense and
shall only be made during normal business hours, following
fifteen (15) days written notice, and without undue interference
to the audited party's business activity. If, after completion
of the audit under this SECTION 11(a), the audit reveals a
discrepancy in the results of the audit and the previous
calculations of the audited party, then the auditing party shall
deliver written notice which sets forth in reasonable detail the
basis of such discrepancy. The parties shall use reasonable
efforts to resolve the discrepancy within 30 days following
delivery of such notice, and such resolution shall be final,
binding and conclusive upon the parties hereto. If API and
Client are unable to reach a resolution within such 30-day
period, the parties shall resolve such dispute in accordance with
SECTION 14 hereof.
(b) RIGHT TO AUDIT REBATES. Client, at its sole expense, shall have
the right to audit the Rebates, including the contracts with drug
manufacturers applicable thereto, once in each twelve-month
period (following fifteen (15) days written notice to API) for
the purpose of validating the accuracy of the Rebate amounts
distributed to Client by API. Client and API agree that an
independent accounting firm agreeable to the parties hereto shall
conduct such audit, and that such firm will sign a
confidentiality statement with API insuring that all details and
terms of all manufacturers rebate contracts with API (except the
total aggregate amount due to Client) will be treated as
confidential to API and will not be revealed in any manner or
form by or to any person or entity. The report and determination
of the independent accounting firm under this SECTION 11(b) shall
be final, binding and conclusive on API and Client.
(c) PAYMENT OF DISCREPANCIES. Upon a final and conclusive
determination of a discrepancy revealed by an audit procedure
under this SECTION 11, the party which owes money shall pay such
sums to the other party within fifteen (15) days of the delivery
of the conclusive audit findings.
12. EXCLUSIVITY.
Client hereby grants API during the term of this Agreement, and any
renewals hereof, the exclusive right to provide PBM Services to those
Groups for which Client underwrites the pharmacy benefit; provided
that should any Group specifically request a PBM Services vendor other
than API, then, subject to API consent, which consent shall not be
unreasonably withheld, Client may utilize such vendor for purposes of
providing PBM Service to that Group. In addition, Client agrees that
it will promote API to all Groups as Client's preferred provider of
pharmacy benefit services and shall recommend that all Groups select
API as their vendor of pharmacy benefit management services. Client
agrees that, during the term of this Agreement, and any renewals
hereof, it will not negotiate, contract, or agree with any drug
manufacturer for the purpose of obtaining drug rebates unless
otherwise approved by API, which approval shall not be unreasonably
withheld. Client also agrees to cancel any existing agreement or
contracts with any drug manufacturers related to such drug rebates as
of the Effective Date of this Agreement unless otherwise approved by
API, which approval shall not be unreasonably withheld.
13. CONFIDENTIALITY.
11
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
(a) CONFIDENTIAL AND PROPRIETARY INFORMATION. Client and API each
recognize and acknowledge that, by receipt and possession of
certain information of the other, each will discover certain of
the other's confidential and proprietary information, skills,
know-how, technical expertise, and methods. This confidential and
proprietary information includes, but is not limited to: (a) the
terms of this Agreement, (b) the content and format of all
reports generated by the parties under this Agreement, (c)
details of the operation of the PBM Services and (d) the
Formulary. Each party acknowledges and agrees that such
information is confidential, valuable and proprietary to the
business of each party, and that each party's success and ability
to compete depends on keeping such information confidential.
Each party hereto covenants and agrees not to, directly or
indirectly, and agrees to cause its officers, directors,
employees, agents and affiliates not to, use, publish,
disseminate or otherwise disclose, any of the other party's
confidential or proprietary information now or later possessed by
each, without prior written consent of the other party.
(b) CONFIDENTIALITY OF ELIGIBILITY LISTS. API agrees that all
Eligibility Lists are the proprietary and confidential
information of the Client and agrees that, subject to SECTION
3(d)(i) hereof, it will not disclose any such information to
third parties, without the prior written consent of the Client;
provided that upon receipt of a request for information
pertaining to an Eligible Member that is signed by such Eligible
Member, API shall be entitled to release such information in
accordance with the request. API shall be entitled to assume the
genuiness of all signatures, the authenticity of all such
requests, the conformity of copies of such requests to the
original and that the persons executing such requests have full
power and authority to deliver such request.
(c) BREACH OF CONFIDENTIALITY COVENANT. API and Client acknowledge
that any violation or breach of confidentiality would cause
irreparable harm and that such harm cannot be adequately
compensated in money damages. API and Client agree that any such
violation or breach may be enjoined by any court of competent
jurisdiction, without waiver of any other right to claim damages
incurred by either API or Client in connection with such a
violation.
14. NOTICE UPON SALE.
[......]
15. ARBITRATION.
Any controversy or claim arising out of or relating to this Agreement,
or the breach hereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association. The award rendered in such arbitration may provide for
equitable remedies, reimbursement for attorney's or accountant's fees,
and/or pre-award interest as the arbitrators shall see fit. Such
award shall be final, and judgment on it may be entered in or enforced
by any court, state or federal, having jurisdiction thereover. This
provision shall not preclude the impleading or joining of one of the
parties hereto by another party in an action brought by a third party.
Any party may apply to an appropriate court of law for a preliminary
injunction, attachment or other similar remedy available to it in aid
of the arbitration proceedings provided for herein. The arbitrators
shall have the
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power and may render awards in support thereof, to require any party
to an arbitration proceeding hereunder to produce relevant documents
for inspection and copying by any other party to such arbitration
proceedings.
16. GENERAL.
(a) NOTICE. Any notice required to be given pursuant to the terms
and provisions of this Agreement shall be in writing and shall be
sent by certified mail, return receipt requested, or by overnight
delivery service to the parties at the addresses below or such
other address as shall be specified by the parties by like notice
to API at:
Advance ParadigM, Inc.
Attn: Vice President - Legal Affairs
P.O. Box 542906
Dallas, Texas 75354-2906
and to Client at:
Blue Cross and Blue Shield of Texas
Attn: Mr. Lyndol Cypert
P.O. Box 655924
Dallas, TX 75265-5924
(b) BINDING NATURE AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
successors and assigns. Neither party may assign this Agreement
without the prior written consent of the other; PROVIDED,
however, that either party may transfer or assign its rights and
obligations under this Agreement, to any affiliate, and PROVIDED
further that no such assignment shall have the effect of
releasing such party from any of its obligations under this
Agreement.
(c) HEADINGS AND INTERPRETATION. The headings of the various
sections of this Agreement are inserted for convenience only and
do not, expressly or by implication, limit, define or extend the
specific terms of the section so designated.
(d) GOVERNING LAW. The validity, enforceability, and interpretation
of this Agreement shall be determined and governed by the
internal laws of the State of Texas (and not the law of
conflicts).
(e) ENTIRE AGREEMENT. This Agreement contains all the terms and
conditions agreed upon by the parties, and supersedes all prior
understandings, writings, proposals, representations, or
communications, oral or written, of the parties hereto.
(f) AUTHORITY. API and Client warrant that each has full power and
authority to enter into and perform this Agreement, and the
person signing this Agreement on behalf of each party certifies
that such person has been properly authorized and empowered to
enter into this Agreement on behalf of such party.
(g) NON-COMPETITION IN HIRING. During the term of this Agreement,
and for a period of one (1) year thereafter, neither Client nor
API shall, without the prior written consent of the other party,
knowingly employ or solicit for hire, or knowingly allow its
officers, directors, agents or affiliates to employ or solicit
for hire, any employees of the other party.
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(h) NON-WAIVER. The failure of either party to insist, in any one or
more instances, upon performance of any of the terms, covenants
or conditions of this Agreement shall not be construed as a
waiver or a relinquishment of any right or claim granted or
arising hereunder or of the future performance of any such term,
covenant, or condition, and such failure shall in no way affect
the validity of this Agreement or the rights and obligations of
the parties hereunder.
(i) OFFSET. In the event of a payment default by Client which
remains uncured for a period of fourteen (14) days from the date
due, API shall be entitled, and Client hereby authorizes API, to
offset the amount of such payment defaults against any Rebates
payable to Client hereunder; provided, that nothing in this
SECTION 6(i) shall in anyway limit the performance guarantees
specified in EXHIBIT D.
(j) RELATIONSHIP OF PARTIES. This Agreement shall not constitute or
otherwise imply a joint venture, pooling arrangement, partnership
or formal business organization of any kind. Both parties shall
be considered independent contractors and neither party shall be
considered an agent of the other. Under no circumstances shall
employees of one party be deemed the employees of the other
party.
(k) FORCE MAJEURE. Neither API nor Client shall be liable for any
failure or delay in performing all or part of their respective
obligations under the terms of this Agreement resulting from
unavailability of pharmaceuticals, failure of drug manufacturers
to pay Rebates, legislative action, war, acts of any person
engaged in a subversive activity, sabotage, riot, strikes, slow-
downs, lock-outs, or labor stoppage, freight embargoes, fires,
explosions, flood, earthquake or other acts of God, or by reason
of the judgment, filing or order of any court or agency of
competent jurisdiction occurring subsequent to the signing of
this Agreement, or any other similar circumstances beyond their
control.
(l) SURVIVAL. Should any part, term or condition of this Agreement
be declared illegal or unenforceable or in conflict with any
other laws, the remaining provisions shall be valid and not
affected thereby.
(m) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all
of which taken together shall constitute one and the same
instrument.
(n) DEPARTMENTS OF INSURANCE. The parties acknowledge that each
party is subject to the statutes and regulations in the states in
which this Agreement will be performed. The parties acknowledge
that the laws and regulations of several states permit
Departments of Insurance to have access to API's books and
records relating to this Agreement for purpose of examination,
audit and inspection, subject to confidentiality obligations.
[APPLICABLE ONLY IF ANY ELIGIBLE MEMBERS RESIDE IN ARIZONA: API
shall provide at least fifteen (15) days' written notice of the
termination, cancellation or any other change in the terms of
this Agreement to those Departments of Insurance identified in
EXHIBIT C hereto.]
(o) FURTHER ASSURANCES. From time to time upon request and without
further consideration, the parties hereto shall, and shall cause
their subsidiaries, to execute, deliver or acknowledge such
documents and do such further acts as the other party hereto may
reasonably require to effectuate its obligations contemplated by
this Agreement.
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(p) NON-AFFILIATION WITH BCBSA. API understands that this Agreement
constitutes a contract between API and Blue Cross Blue Shield of
Texas, Inc. (BCBSTX) as "Client", that BCBSTX is an independent
corporation operating under a license from the Blue Cross Blue
Shield Association, an association of independent Blue Cross and
Blue Shield Plans (the "Association"), permitting BCBSTX to use
the Blue Cross Blue Shield Service Marks in Texas, and that
BCBSTX is not contracting as the agent of the Association. API
acknowledges that it has not entered into this Agreement based
upon representations by any person other than BCBSTX and that no
person, entity or organization other than BCBSTX shall be held
accountable or liable to API for any of BCBSTX's obligations to
API created under this Agreement. This Paragraph 7.15(c) shall
not create any additional obligations whatsoever on the part of
BCBSTX other than those obligations created under other
provisions of this Agreement.
(q) SERVICE MARKS. Client retains the exclusive right to any
distinctive trademarks or service marks (collectively referred to
herein as "marks") that may presently exist or may hereafter be
adopted, including, but not limited to, the Blue Cross Blue
Shield trade name and service marks. API agrees not to use the
marks in any manner without the prior written consent of Client
and upon the termination of its obligations under this Agreement,
API shall immediately discontinue the use of such marks and
forthwith destroy or return to Client any tangible materials
bearing such marks.
(r) PERFORMANCE GUARANTEES. Subject to the terms and conditions of
this Agreement, API shall adhere to and comply with all
performance guarantees as described in EXHIBIT D.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their proper and duly authorized officers on the date
first above written. By executing the Agreement, the undersigned individuals
hereby warrant and represent that they have read this Agreement in its entirety
and agree to all its terms.
ADVANCE PARADIGM, INC.
/s/ David D. Halbert
By:
------------------------------------
David D. Halbert
Chief Executive Officer
BLUE CROSS AND BLUE SHIELD OF TEXAS
/s/ Lyndol J. Cypert
By:
------------------------------------
Name: Lyndol J. Cypert
Title: Vice President
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