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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
March 1, 2000 000-05667
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Date of Report (Date of earliest event reported) Commission File Number
SEAL HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 64-0769296
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5601 N. Dixie Highway, Suite 411
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Fort Lauderdale, Florida 33334
(Address of Principal Executive Offices) (Zip Code)
(954) 771-1772
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(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On March 1, 2000, Seal Holdings Corporation ("Registrant") agreed to
purchase 3,211,453 shares of the Series A Convertible Voting Preferred Stock
("Preferred Shares") of Healthology, Inc., a Delaware corporation
("Healthology"), pursuant to a Series A Preferred Stock Purchase Agreement dated
March 1, 2000 between the Registrant and Healthology and certain related
agreements (collectively, the "Healthology Transaction") for cash in two
installments, subject to certain closing conditions. Healthology is a
privately-held, online health media company that produces and distributes
original content generated by health professionals. Healthology's content is
in-depth, topic-focused and event-driven and is delivered in various formats,
including text articles and live audio/video webcast programs (streaming media).
Healthology delivers its proprietary content to consumers on the Internet via
the web sites of various distribution partners and portal customers, as well as
websites it has developed.
The Healthology Transaction is the Registrant's first Internet
investment and is consistent with the Registrant's strategy of focusing its
resources on acquiring, or making strategic investments in, companies that
provide services in healthcare and life sciences, with particular interest in
information technology companies with Internet applications.
The total purchase price for the Preferred Shares is $3,211,453
("Purchase Price"), of which $1,000,000 (for 1,000,000 Preferred Shares) was
paid at the initial closing on March 1, 2000 ("Initial Closing") and $2,211,453
(for 2,211,453 Preferred Shares) is payable at a second closing (the "Second
Closing"), subject to the satisfaction of certain closing conditions by
Healthology. The purchase price was determined by arms-length negotiations
between the Registrant and Healthology. After the Second Closing, the Registrant
expects to have acquired an approximate 21% interest in the issued shares of
Healthology, and an interest of approximately 19% on a fully diluted basis.
Effective as of the Initial Closing, Healthology's Board of Directors
will include two representatives selected by the Registrant. However, the
Registrant will no longer have the right to elect two directors if, after
Healthology's satisfaction of the conditions to the Second Closing, the
Registrant fails to purchase the remaining 2,211,453 Preferred Shares (the
"Remaining Shares") by the Second Closing. If Healthology fails to satisfy the
conditions to the Second Closing, the Registrant may elect not to purchase the
Remaining Shares. Should the Registrant elect not to purchase the Remaining
Shares because Healthology failed to satisfy the conditions to the Second
Closing, thereafter Registrant will be entitled to elect only one director.
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The Preferred Shares have certain super-voting rights with respect to
the election of directors. The Registrant is entitled to voting rights equal to
such number of shares of Healthology Common Stock (as defined below) as will
guarantee that the Registrant, solely for the purposes of electing directors,
shall have no less than 26% of the voting power of the outstanding capital stock
of Healthology and will be the single largest such voting stockholder (the
"Super-Voting Right"), provided that (i) the Registrant exercises its preemptive
rights on future issuances of securities by Healthology and (ii) Healthology
does not issue more than 25% of its then outstanding equity in any transaction
to a single person or entity. In addition, the foregoing Super-Voting Right
terminates upon the occurrence of a Qualified Public Offering (as such term is
defined in the Certificate of Designation of Series A Convertible Voting
Preferred Stock of Healthology, a copy of which is attached as an exhibit
hereto) or in the event Healthology satisfies all of the conditions to the
Second Closing and the Registrant fails to purchase the Remaining Shares.
Additionally, in connection with the Healthology Transaction, the
Registrant has been granted certain registration rights, tag-along rights and
preemptive rights, and is subject to certain drag-along rights.
The Preferred Shares are convertible at any time, at the option of the
Registrant, into shares of Common Stock of Healthology ("Healthology Common
Stock"), initially on a one for one basis, subject to adjustment under certain
circumstances (the "Conversion Rate"). The Preferred Shares are automatically
convertible at the Conversion Rate into Healthology Common Stock upon the
consummation by Healthology of a Qualified Public Offering.
As compensation for investment banking services provided to the
Registrant by Benedetto Gartland and Company, Inc. ("BGC") in connection with
the Healthology Transaction, 5% of the 1,000,000 shares purchased in the Initial
Closing has been transferred and 5% of the 2,211,453 shares to be acquired in
the Second Closing will be transferred to BGC. The Registrant will retain voting
control over all such shares. A director of the Registrant is a principal of
BGC.
The Registrant obtained the funds for the Purchase Price through an
advance to the Registrant by M. Lee Pearce, M.D., the Chairman of the Board and
the majority stockholder of the Registrant, and certain of his affiliates
(collectively, "Pearce"). Consistent with Pearce's previous undertaking to
provide the Registrant with funding of up to $10 million for future acquisitions
and operations as approved by the Board of Directors, effective March 1, 2000,
Pearce advanced $1,650,000 of which $1.0 million was used to fund the purchase
of 1,000,000 Preferred Shares at the Initial Closing, $550,000 was used for
general working capital purposes, and the remaining $100,000 will be used by the
Registrant for general working capital purposes and to pay for certain costs and
expenses incurred in connection with the Healthology Transaction. The Registrant
also anticipates that Pearce will advance funds necessary to fund the Second
Closing. The Registrant anticipates that it will work with Pearce on the terms
upon which the advances will be converted into an equity interest in, or a
longer term obligation of, the Registrant.
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Since September 30, 1999, when the Registrant sold its last operating
business in the medical field, the Registrant has been relying on a temporary
one-year exclusion from investment company status under the Investment Company
Act of 1940 (the "1940 Act"). A company that owns investment securities having a
value exceeding 40% of the value of its total assets is subject to registration
and regulation as an investment company unless it qualifies for a statutory or
regulatory exclusion or exemption from investment company status. The term
"investment securities" does not include securities of other companies
controlled primarily by the Registrant. The Registrant believes that when it
completes its investment in Healthology, based upon its current asset mix, it
will not be treated as an investment company. The Registrant believes that its
investment in Healthology will not be considered an "investment security" so
long as the Super-Voting Right remains in effect. If the Registrant loses the
Super-Voting Right or its relative asset values change, and the Registrant does
not qualify for any other exclusion or exemption afforded by the 1940 Act, it
may be required either to register as an investment company or take significant
business actions that are contrary to its business objectives in order to avoid
being required to register as an investment company. For example, the Registrant
might be compelled to acquire additional assets that it might not otherwise have
acquired, be forced to forgo opportunities to acquire interests in companies or
other assets or be forced to sell or refrain from selling such interests or
assets. In addition, the Registrant might need to sell certain assets which are
considered to be investment securities.
In the discussion above, any statement of the Registrant's future
expectations, including without limitation, plans and objectives for future
operations, future agreements, future economic performance or expected
operational developments and all other statements regarding the future are
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and as that term is defined in the Private Securities Litigation Reform
Act of 1995. The Registrant intends that the forward-looking statements be
subject to the safe harbors created thereby. These forward-looking statements
are based on the Registrant's strategic plans and involve risks and
uncertainties which may cause actual results to differ materially from the
forward-looking statements. Factors, risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking statements
herein include, without limitation, the Registrant's ability to raise capital,
to execute its business strategy in a very competitive environment, the
Registrant's degree of financial leverage, risks associated with acquisitions
and the integration thereof, risks associated with start-up and early-stage
enterprises, risks associated with providing services over the Internet,
regulatory considerations (particularly in the health care industry), contingent
liabilities, as well as other risks referenced from time to time in the
Registrant's filings with the Securities and Exchange Commission. The Company
does not undertake any obligations to release publicly any revisions to such
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a), (b)
In accordance with Instruction 4 of this Item 7, financial statements required
by this Item will be filed by an amendment to this initial report on Form 8-K
not later than 60 days after the date hereof.
(c) Exhibits
4.2 Certificate of Designation of Series A Convertible Voting Preferred
Stock of Healthology, Inc. filed February 29, 2000.
4.3 Investor's Rights Agreement between Healthology, Inc. and Seal Holdings
Corporation dated March 1, 2000.
4.4 Stockholders' Agreement between Healthology, Inc., Seal Holdings
Corporation and certain existing stockholders of Healthology, Inc.
dated March 1, 2000.
10.12 Series A Preferred Stock Purchase Agreement between Healthology, Inc.
and Seal Holdings Corporation dated March 1, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SEAL HOLDINGS CORPORATION
By: /s/ Cecilio M. Rodriguez
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Cecilio M. Rodriguez
Secretary and Treasurer
Dated: March 16, 2000
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HEALTHOLOGY, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE VOTING PREFERRED STOCK
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Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
We, the undersigned, being the President and Secretary, respectively, of
Healthology, Inc., a Delaware corporation (the "Corporation"), DO HEREBY
CERTIFY, pursuant to Section 151 of the General Corporation Law of the State of
Delaware that the following resolution was duly adopted by the Board of
Directors of the Corporation.
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Corporation by the provisions of the Certificate
of Incorporation of the Corporation, the Board of Directors hereby creates and
designates a series of preferred stock of the Corporation, par value $.01 per
share, and the Board of Directors hereby fixes the relative rights and
preferences of the shares of such series as follows:
1. Designation. The shares of such series of Preferred Stock shall be
designated "Series A Convertible Voting Preferred Stock" which shall be senior
to all other capital stock of the Corporation (referred to herein as the "Series
A Preferred Stock").
2. Authorized Number. The number of shares constituting the Series A
Preferred Stock shall be 3,500,000.
3. Dividends. The holders of record of shares of the Series A Preferred
Stock shall be entitled to receive dividends, when, as and if declared by the
Board of Directors, out of funds legally available therefore. Dividends on the
Series A Preferred Stock will be non-cumulative. No dividend shall be paid on
the Common Stock or any other series of the Corporation's preferred stock at a
rate greater than the rate at which the dividends are paid on the Series A
Preferred Stock (based on the number of shares of Common Stock into which the
Series A Preferred Stock is convertible on the date the dividend is declared)
and the Series A Preferred Stock shall be entitled to participate in any such
dividends (on the same basis). Dividends paid on the Series A Preferred Stock
are in preference to dividends paid on the Common Stock.
4. Liquidation Preference. If: (i) the Corporation or a third-party
acquiror consummates a transaction or series of transactions in which more than
50% of the voting power of the Corporation is disposed of to a single person or
group of affiliated persons; (ii) the Corporation consolidates or merges with or
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into any other corporation or entity in a transaction in which the Corporation
is not the surviving company; (iii) the Corporation sells all or substantially
all of its assets to a third party; or (iv) a voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation occurs (each of such
events, a "Liquidation"), then the holders of the Series A Preferred Stock, at
their option, will be entitled to receive in preference to the holders of Common
Stock an amount (the "Liquidation Preference") equal to $1.00 per share (subject
to adjustment for the events specified in subparagraphs 6(d) and 6(e) below)
plus any dividends declared and unpaid on the Series A Preferred Stock to that
date. After setting apart or paying in full the Liquidation Preference, the
remaining assets (whether stated capital or surplus), if any, and all
consideration received by the Corporation in excess of the Liquidation
Preference, shall be distributed to the holders of record of the issued and
outstanding shares of Common Stock. If upon any Liquidation of the Corporation,
whether voluntary or involuntary, the assets to be distributed among the holders
of Series A Preferred Stock shall be insufficient to permit payment in full to
the holders of Series A Preferred Stock of the Liquidation Preference, then the
entire assets of the Corporation shall be distributed ratably among such holders
in proportion to the full respective distributive amounts to which they are
entitled. Written notice of a Liquidation, stating a payment date, the estimated
amount of the Liquidation Preference, and the place where said amounts shall be
payable shall be given by mail not less than ten (10) days prior to the payment
date stated therein, to each holder of record of Series A Preferred Stock at his
address as shown by the records of the Corporation. Notwithstanding the
foregoing, however, the failure of the Corporation to give such notice, or any
defect therein, shall not affect the legality or validity of any dividend,
distribution or other action or event. Shares of Series A Preferred Stock shall
not be entitled to be converted into shares of Common Stock in order to
participate in any distribution, or series of distributions, as shares of Common
Stock, without first foregoing participation in the distribution, or series of
distributions, as shares of Series A Preferred Stock.
5. Conversion. The holders of the Series A Preferred Stock shall have the
following conversion rights:
(a) Optional Conversion. Each share of Series A Preferred Stock shall be
convertible at any time, at the option of the holder of record thereof, into
fully paid and nonassessable shares of Common Stock at the "Conversion Rate" (as
defined in Section 5(c) below) then in effect upon surrender to the Corporation
or its transfer agent of the certificate or certificates representing the shares
of Series A Preferred Stock to be converted, as provided below, or if the holder
notifies the Corporation or its transfer agent that such certificate or
certificates have been lost, stolen or destroyed, upon the execution and
delivery of an agreement satisfactory to the Corporation to indemnify the
Corporation from any losses incurred by it in connection therewith (without
requiring the posting of any security).
(b) Mandatory Conversion. Each share of Series A Preferred Stock shall
automatically be converted into fully paid and nonassessable shares of Common
Stock at the Conversion Rate then in effect upon the consummation by the
Corporation of a public offering of its Common Stock pursuant to a firm
commitment underwriting and an effective registration under the Securities Act
of 1933, as amended, in which the Corporation receives gross proceeds of at
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least $20,000,000 (before the deduction of underwriters' commissions and
expenses) and the Corporation has a post-initial public offering valuation, on a
pro forma basis, of at least $60,000,000 (a "Qualified Public Offering"). Upon
the consummation of a Qualified Public Offering, the outstanding shares of
Series A Preferred Stock shall be converted automatically without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent; provided, however, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless certificates evidencing such shares of the Series A Preferred Stock being
converted are delivered to the Corporation or its transfer agent, as provided
below, or the holder notifies the Corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any losses
incurred by it in connection therewith (without requiring the posting of any
security).
(c) Basis For Conversion; Converted Shares. The basis for any conversion
under this Section 5 shall be the "Conversion Rate" in effect at the time of
conversion, which for the purposes hereof shall mean the number of shares of
Common Stock issuable with respect to each share of Series A Preferred Stock to
be converted under this Section 5. Initially, the Conversion Rate shall be 1:1,
i.e., one share of Common Stock for each share of Series A Preferred Stock being
converted. Such Conversion Rate shall be subject to adjustment as provided in
Section 6 below. As used herein, the term "Conversion Price" initially shall be
$1.00, but shall be subject to adjustment as provided herein. If any fractional
interest in a share of Common Stock would be deliverable upon conversion of
Series A Preferred Stock, the Corporation shall pay in lieu of such fractional
share a cash amount equal to the Conversion Price of such fractional share
(computed to the nearest one hundredth of a share) in effect at the close of
business on the date of conversion. Any shares of Series A Preferred Stock which
have been converted shall be canceled and the certificates representing shares
of Series A Preferred Stock so converted shall represent the right to receive
(x) such number of shares of Common Stock into which such shares of Series A
Preferred Stock are convertible, plus (y) cash payable for any fractional share
plus (z) all accrued but unpaid dividends relating to such shares. Upon the
conversion of shares of Series A Preferred Stock as provided in this Section 5,
the Corporation shall promptly pay all then declared and accrued but unpaid
dividends to the holder of the Series A Preferred Stock being converted, if any.
The Board of Directors of the Corporation shall at all times reserve a
sufficient number of authorized but unissued shares of Common Stock to be issued
in satisfaction of the conversion rights and privileges aforesaid.
(d) Mechanics of Conversion. Before any holder of shares of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, or deliver an appropriate indemnity agreement (without requiring
the posting of any security) at the office of the Corporation or its transfer
agent for the Series A Preferred Stock and in the case of a conversion pursuant
to Section 5(a) above, shall give written notice to the Corporation of the
election to convert the same and shall state therein the name or names in which
the certificate or certificates for shares of Common Stock are to be issued. The
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Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled (together with a check payable to
such holder or nominee in the amount of any cash amounts payable as a result of
a conversion into fractional shares of Common Stock and all accrued but unpaid
dividends) as aforesaid. A certificate or certificates will be issued for the
remaining shares of Series A Preferred Stock in any case in which fewer than all
of the shares of Series A Preferred Stock represented by a certificate are
converted. Any such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series A Preferred Stock to be converted, or in the case of automatic
conversion, upon consummation of a Qualified Public Offering, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
6. Adjustment of Conversion Price and Conversion Rate. The number and kind
of securities issuable upon the conversion of the Series A Preferred Stock, the
Conversion Price and the Conversion Rate shall be subject to adjustment from
time to time in accordance with the following provisions:
(a) Certain Definitions. For purposes of this Section 6:
(i) The term "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued, or deemed to be issued by the Corporation
pursuant to Section 6(g) below, after the Original Issue Date (as defined below)
except shares of Common Stock issuable upon conversion of the Series A Preferred
Stock now or hereafter issued by the Corporation and shares issuable pursuant to
the exercise of options or warrants outstanding on the Original Issue Date.
(ii) The term "Common Stock" shall be deemed to mean the Common
Stock, par value $.01 per share, and the stock of the Corporation of any class,
or series within a class, whether now or hereafter authorized, which has the
right to participate in the distribution of either earnings or assets of the
Corporation without limit as to the amount.
(iii) The term "Convertible Securities" shall mean any evidence of
indebtedness, shares or other securities convertible into or exchangeable for
Common Stock.
(iv) The term "Options" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities except options issued pursuant to any employee stock plan issued
prior to the Original Issue Date.
(v) The term "Original Issue Date" shall mean the date of the
initial issuance of the Series A Preferred Stock.
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(b) Reorganization; Share Exchange; Reclassification. In the event of
a reorganization, share exchange, or reclassification, other than a change in
par value, or from par value to no par value, or from no par value to par value
or a transaction described in subsection (c) or (d) below, each share of Series
A Preferred Stock shall, after such reorganization, share exchange or
reclassification, be convertible into the kind and number of shares of stock or
other securities or other property of the Corporation which the holder of Series
A Preferred Stock would have been entitled to receive if the holder had held the
Common Stock issuable upon conversion of such share of Series A Preferred Stock
immediately prior to such reorganization, share exchange, or reclassification.
(c) Merger; Consolidation. If (i) the Corporation consolidates or
merges into or with any other corporation or corporations or any other entity or
entities (excluding any merger or consolidation in which the Corporation is the
surviving corporation and which does not result in any change in the Common
Stock), (ii) in a single transaction or a series of related transactions, the
Corporation sells or transfers all or substantially all its assets or (iii) the
Corporation engages in any capital reorganization or any reclassification of the
stock of the Corporation (other than as a result of stock dividends,
subdivisions, split-up or combination of shares), each share of Series A
Preferred Stock shall, after such merger, consolidation, reorganization,
reclassification or transaction(s), be convertible into the kind and number of
shares of stock and/or other securities, cash or other property which the holder
of such share of Series A Preferred Stock would have been entitled to receive if
the holder had held the Common Stock issuable upon conversion of such share of
Series A Preferred Stock immediately prior to such merger or consolidation.
(d) Subdivision or Combination of Shares. In case outstanding shares
of Common Stock shall be subdivided, the Conversion Price shall be appropriately
reduced as of the effective date of such subdivision so that the number of
shares of Common Stock issuable upon conversion of any shares of Preferred Stock
shall be increased in proportion to such increase of outstanding shares. In case
outstanding shares of Common stock shall be combined, the Conversion Price shall
be appropriately increased as of the effective date of such combination so that
the number of shares of Common Stock issuable upon conversion of any shares of
Preferred Stock shall be decreased in proportion to such decrease of outstanding
shares.
(e) Stock Dividends. In case shares of Common Stock are issued as a
dividend or other distribution on the Common Stock, then the Conversion Price
shall be adjusted, as of the earliest of the date of such declaration, payment
or other distribution, to that price determined by multiplying the Conversion
Price in effect immediately prior to such declaration, payment or other
distribution by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to the payment of such
dividend or other distribution, and (ii) the denominator of which shall be the
total number of shares of Common Stock outstanding immediately after the payment
of such dividend or other distribution. In the event that the Corporation shall
declare or pay any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration, then the Corporation shall be deemed to have
made a dividend payable in Common Stock on an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to acquire Common
Stock.
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(f) Issuance of Additional Shares of Common Stock. If the Corporation
shall issue any Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to Section 6(g) below) after the
Original Issue Date, for no consideration or for a consideration per share less
than the Conversion Price in effect on the date of and immediately prior to such
issue, then in such event, the Conversion Price shall be reduced, concurrently
with such issue, to a Conversion Price equal to the quotient obtained by
dividing:
(i) an amount equal to the total number of shares of Common Stock
outstanding immediately prior to such issuance or sale multiplied by the
Conversion Price in effect immediately prior to such issuance or sale, plus the
net consideration, if any, received or deemed to be received by the Corporation
upon such issuance or sale, by
(ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For purposes of these formulas, all shares of Common Stock issuable upon the
exercise of outstanding Options or issuable upon the conversion (at the
Conversion Price in effect immediately before such determinations) of the Series
A Preferred Stock or outstanding Convertible Securities (including Convertible
Securities issued upon the exercise of outstanding Options), shall be deemed
outstanding shares of Common Stock.
(g) Deemed Issue of Additional Shares of Common Stock. In the event
the Corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities, then the maximum number of
shares of Common Stock issuable upon the exercise of such Options, or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue of Options or Convertible
Securities or, in case such a record date shall have been fixed, as of the close
of business on such record date, provided that in any such case in which
Additional Shares of Common stock are deemed to be issued:
(i) no further adjustments in the Conversion Price shall be made
upon the subsequent issue of Convertible Securities or shares of Common Stock
upon the exercise of such Options or the issue of Common Stock upon the
conversion or exchange of such Convertible Securities on the original terms
therefor; and
(ii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any decrease in the
consideration payable to the Corporation, or increase in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issuance of such Options or
Convertible Securities (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, upon any such decrease
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or increase becoming effective, shall be recomputed to reflect such decrease or
increase if it would result in a reduction of the Conversion Price (provided,
however, that no such adjustment of the Conversion Price shall affect Common
Stock previously issued upon conversion of the Series A Preferred Stock).
(h) Determination of Consideration. For purposes of this Section 6,
the consideration received by the Corporation for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the aggregate amount
of cash received by the Corporation; and
(B) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of the issue, as determined by
the Board of Directors in good faith.
(ii) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Shares of Common Stock deemed
to have been issued pursuant to Section 6(g) above, relating to Options and
Convertible Securities, shall be the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto) payable to the
Corporation upon the exercise of such Options or the conversion or exchange of
such Convertible Securities including any amounts received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities or receivable on the exercise of Options for Convertible Securities;
provided that if in the case of Options or Convertible Securities the minimum
aggregate amount of additional consideration cannot be ascertained, but is a
function of anti-dilution or similar protective clauses, the Corporation shall
be deemed to have received the minimum amounts of consideration without
reference to such clauses.
(i) Adjustment of Conversion Rate. Upon each adjustment of the
Conversion Price under the provisions of this Section 6, the Conversion Rate
shall be adjusted to an amount determined by dividing $1.00 by such adjusted
Conversion Price.
(j) Other Provisions Applicable to Adjustment Under this Section. The
following provisions will be applicable to the adjustments in Conversion Price
and Conversion Rate as provided in this Section 6:
(i) Treasury Shares. The number of shares of Common Stock at any
time outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the account of the Corporation. For purposes
of this Section 6, the sale or other disposition of any Common Stock of the
Corporation theretofore held in its treasury shall, unless otherwise set forth
herein, be deemed to be an issuance thereof.
(ii) Other Action Affecting Common Stock. In case the Corporation
shall take any action affecting the outstanding number of shares of Common Stock
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other than an action described in any of the foregoing subsections 6(b) to 6(g)
hereof, inclusive, which would have an inequitable or dilutive effect on the
holders of Series A Preferred Stock, the Conversion Price shall be adjusted in
such manner and at such time as the Board of Directors of the Corporation on the
advice of the Corporation's independent public accountants may in good faith
determine to be equitable in the circumstances.
(k) Notices of Adjustments. Whenever the Conversion Rate and
Conversion Price is adjusted as herein provided, an officer of the Corporation
shall compute the adjusted Conversion Rate and Conversion Price in accordance
with the foregoing provisions and shall prepare a written certificate setting
forth such adjusted Conversion Rate and Conversion Price and showing in detail
the facts upon which such adjustment is based, and such written instrument shall
promptly be delivered to the record holders of the Series A Preferred Stock.
7. Put. (a) If fraud is committed by or on behalf of the Company in
connection with that certain Series A Preferred Sock Purchase Agreement (the
"Stock Purchase Agreement") between the Company and Seal Holdings Corporation or
the Affiliated Agreements (as defined in the Stock Purchase Agreement) or if the
Company fails to perform in any material respect its obligations under the Stock
Purchase Agreement or the Affiliated Agreements to provide information or to
provide pre-emptive, tag-along or registration rights in accordance with the
terms of the Stock Purchase Agreement and the Affiliated Agreements, and such
failure remains uncured twenty (20) days after written notice from Investor,
then Investor may put its Shares (or any Common Stock acquired upon conversion
of the Shares) to the Company at a price equal to the greater of (i) the
original purchase price plus any dividends declared and unpaid or (ii) the fair
market value of the Shares (or any Common Stock acquired upon conversion of the
Shares). This right is in addition to any other remedy at law or in equity
available to the Investor.
(b) If the Shares are publicly traded, the value of the Shares shall
be the average closing price of such Shares during the previous five (5) trading
days prior to the breach. If there is no public market for the Shares, the fair
market value of such Shares will be valued by an appraiser of recognized
standing selected by the Investor and the Company or, if they cannot agree on an
appraiser within ten (10) days, each shall select an appraiser of recognized
standing and the two appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by the Investor and the Company. If the time
for the closing of the put has expired but for the determination of the value of
the purchase price, then such closing shall be held on or prior to the fifth (5)
business day after such valuation shall have been made pursuant to this
subsection.
8. Notices of Record Dates and Effective Dates. In case (i) the Corporation
shall declare a dividend (or any other distribution) on the Common Stock payable
otherwise than in shares of Common Stock; (ii) the Corporation shall authorize
the granting to the holders of Common Stock of rights to subscribe for or
purchase any shares of capital stock of any class or any other rights; (iii) of
any reorganization, share exchange or reclassification of the capital stock of
the Corporation, or of any consolidation or merger to which the Corporation is
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party or of the sale, lease or exchange of all or substantially all of the
property of the Corporation; or, (iv) of the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, then the Corporation
shall cause to be mailed to the record holders of the Series A Preferred Stock
at least ten (10) days prior to the applicable record date or effective date
hereinafter specified, a notice stating the date on which a record is to be
taken for the purpose of such dividend, distribution or rights, or, if a record
is not to be taken, the date as of which the holders of record of Common Stock
to be entitled to such dividend, distribution or rights are to be determined or
the date on which such dividend, granting of rights, reclassification,
reorganization, share exchange, consolidation, merger, sale, lease, exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such dividend, granting of rights, reclassification,
reorganization share exchange, consolidation, liquidation, merger, sale, lease,
exchange, dissolution, liquidation or winding up.
9. No Impairment. The Corporation will not, through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or modify or seek to
avoid or modify the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will, at all times, in good
faith, assist in the carrying out of all the provisions hereof and in the taking
of all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holder of Series A Preferred Stock against impairment.
10. Voting Rights. The holders of the Series A Preferred Stock shall be
entitled to notice of any stockholder's meeting. In addition to any special
voting rights provided by applicable law or by contract (including, without
limitation, that certain Investor's Rights Agreement between the Corporation and
Seal Holdings Corporation), the holders of shares of Series A Preferred Stock
shall be entitled to vote upon all matters upon which holders of the Common
Stock have the right to vote, and shall be entitled to the number of votes equal
to the number of full shares of Common Stock into which such shares of Series A
Preferred Stock could be converted pursuant to the provisions of Section 5
hereof, at the record date for the determination of the stockholders entitled to
vote on such matters, or, if no such record date is established, at the date
such vote is taken or any written consent of stockholders is solicited, such
votes to be counted together with all other shares of capital stock having
general voting powers and not separately as a class.
11. Protective Provisions. In addition to any other class vote that may be
required by law, or any other rights provided by law, so long as any shares of
Series A Preferred Stock are outstanding, this Corporation shall not, without
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of the Series A
Preferred Stock (other than the Corporation):
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1. alter or change the rights, preferences, privileges or restrictions
provided for the benefit of the Series A Preferred Stock;
2. create any new class or series of shares (or reclassify any
existing series of shares into shares) having any rights, preferences or
privileges senior to the Series A Preferred Stock;
3. amend, alter or change or repeal the Certificate of Incorporation
in any manner inconsistent with the provisions of this Section;
4. enter into any contract, commitment or other agreement or
understanding which would restrict or prohibit any holder of Series A Preferred
Stock from exercising any of its respective rights under any agreement(s) with
the Corporation; or
5. merge with another entity in connection with a transaction in which
the holders of Series A Preferred Stock will receive consideration of less than
$3.00 per share.
12. Amendment; Waiver. Except as expressly prohibited by law, this
Certificate of Designation may be amended and any provision herein may be waived
with the approval of the holders of a majority of the Series A Preferred Stock
and the Board of Directors of the Corporation. Any amendment or waiver so
effected shall be binding upon each holder of Series A Preferred Stock.
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IN WITNESS WHEREOF, this Certificate has been signed by the President
and attested to by the Secretary of Healthology, Inc. as of the 28th day of
February, 2000.
By:/s/ Steven M. Haimowitz, MD
-------------------------------------
Steven M. Haimowitz, MD
President and Chief Executive Officer
Attest:
By: /s/ Matthew Caleb
----------------------------------
Secretary
<PAGE>
HEALTHOLOGY, INC.
INVESTOR'S RIGHTS AGREEMENT
March 1, 2000
<PAGE>
Table of Contents
Page
----
SECTION I.
Restrictions on Transferability; Registration Rights
1.1. Certain Definitions...................................................1
1.2. Demand Registration ..................................................3
1.3. Company Registration .................................................5
1.4. Expenses of Registration..............................................6
1.5. Registration Procedures...............................................6
1.6. Indemnification ......................................................8
1.7. Information by Holder.................................................9
1.8. Rule 144 Reporting...................................................10
1.9. Transfer of Registration Rights......................................10
1.10. Standoff Agreement...................................................11
SECTION II.
Preemptive Rights
2.1. Investor's Preemptive Rights for New Securities
Issued by the Company...............................................11
2.2. Assignment...........................................................13
2.3. Termination of Preemptive Rights.....................................13
SECTION III.
Affirmative Covenants of the Company
3.1. Financial Information................................................14
3.2. Financial Information Following a Public Offering....................14
3.3. Assignment of Rights to Financial Information........................15
3.4. Board of Directors...................................................15
3.5. Insurance............................................................15
3.6. Definition of Investor...............................................15
3.7. Reserved Employee Shares.............................................16
3.8. Voting Rights Regarding Election of Directors........................16
3.9. Election of Chief Medical Officer....................................16
3.10. Notification of Issuance of Securities...............................16
3.11. Termination of Certain Covenants.....................................17
3.12. 1998 Audit...........................................................17
SECTION IV.
Miscellaneous
4.1. Governing Law........................................................17
4.2. Third Parties........................................................17
4.3. Survival.............................................................17
4.4. Successors and Assigns...............................................17
4.5. Entire Agreement; Amendment..........................................17
4.6. Rights of Holders....................................................17
4.7. Notices, Etc.........................................................18
4.8. Delays or Omissions..................................................18
4.9. Counterparts.........................................................18
4.10. Severability of this Agreement.......................................18
4.11. Attorneys' Fees......................................................19
4.12. Further Assurances...................................................19
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INVESTOR'S RIGHTS AGREEMENT
---------------------------
THIS INVESTOR'S RIGHTS AGREEMENT (the "Agreement") is entered into as
of the 1st day of March, 2000, by and between HEALTHOLOGY, INC., a Delaware
corporation (the "Company"), with principal offices located at 361 Broadway, New
York, NY 10013 and Seal Holdings Corporation (the "Investor").
RECITALS
A. The Company and the Investor are entering into a Series A Preferred
Stock Purchase Agreement dated of even date herewith (the "Series A Agreement")
pursuant to which the Company shall sell, and the Investor shall acquire, shares
of the Company's Series A Preferred Stock (the "Series A Preferred").
B. The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Series A Agreement.
C. The Investor and the Company desire that the transactions
contemplated by the Series A Agreement be consummated.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
SECTION I.
Restrictions on Transferability; Registration Rights
----------------------------------------------------
1.1. Certain Definitions. All capitalized terms used in this Agreement
and not defined herein shall have the meanings set forth in the Series A
Agreement. The following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Conversion Shares" shall mean the Common Stock issued or issuable upon
conversion of the Shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, 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.
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"Holder" shall mean a holder of Registrable Securities, whether that
person is the Investor or any person holding Registrable Securities to whom the
rights under this Agreement have been transferred in accordance with Section 1.9
hereof.
"Initiating Holders" shall mean the Investor or transferees of the
Investor under Section 1.9 hereof who in the aggregate are Holders of not less
than fifty percent (50%) of the Registrable Securities then outstanding.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company
in complying with Sections 1.2 and 1.3 hereof, including, without limitation,
all registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
"Registrable Securities" shall mean (i) the Conversion Shares; and (ii)
any Common Stock of the Company issued or issuable in respect of the Shares or
Conversion Shares or other securities issued or issuable with respect to the
Shares or Conversion Shares upon any stock split, stock dividend,
recapitalization, or similar event, or any Common Stock otherwise issued or
issuable with respect to the Shares or Conversion Shares (excluding any
securities issued pursuant to an acquisition); provided, however, that shares of
Common Stock or other securities shall only be treated as Registrable Securities
if and so long as they have not been sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction.
"Restricted Securities" shall mean the securities of the Company
required to bear the legends referred to in Section 3.2 of the Stockholders'
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, 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.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for any Holder.
"Shares" shall mean the shares of Series A Preferred.
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1.2. Demand Registration.
(a) Request for Registration. As long as the Investor purchases
all 3,211,453 shares of Series A Preferred by the Second Closing Date after
satisfaction by the Company of all of the conditions to such Second Closing
Date, as set forth in the Series A Agreement, if at any time after the earlier
of six months following the Company's initial public offering and the date which
is three years from the Closing Date, Initiating Holders request (in writing)
that the Company file a Registration Statement for at least 50% (or in the event
of an underwritten offering such lesser percentage as may result from any
underwriter cutback pursuant to Section 1.2(b) hereof) of the then outstanding
Registrable Securities, provided that the reasonably anticipated aggregate
proceeds in a public offering would exceed $25.0 million if such offering would
constitute the initial public offering by the Company and $7.5 million in all
other cases (prior to Selling Expenses), the Company will:
(i) promptly give written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, and in any event within sixty
(60) days of the receipt of such written request, effect such registration
(including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under applicable blue sky
or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within thirty (30)
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 1.2:
(1) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(2) During the one hundred eighty (180) day period
following the effective date of the first public offering of the Common Stock
(or other securities) of the Company to the general public which is effected
pursuant to a registration statement filed with, and declared effective by, the
Commission under the Securities Act (the "Initial Public Offering");
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(3) If the Company shall deliver notice to the holders of
the Registrable Securities within thirty (30) days of any registration request
of its good faith intent to file a registration statement for the Initial Public
Offering within ninety (90) days, together with evidence reasonably satisfactory
to the holders of the Registrable Securities, that an underwriter has been
engaged in connection with such Initial Public Offering; provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(4) After the Company has effected two (2) such
registrations pursuant to this subparagraph 1.2(a) and such registrations have
been declared or ordered effective and the Company has otherwise complied with
its obligations under Section 1.5 hereof with respect to such registrations;
(5) If the Company shall furnish to such Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.2 shall be deferred for a period not to
exceed ninety (90) days from the date of receipt of written request from the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve (12) month period.
Subject to the foregoing clauses (1) through (5), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
Section 1.2 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.2(a)(i). The right of any Holder to registration pursuant to Section
1.2 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.2 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided herein. Notwithstanding the foregoing, the Initiating Holders
seeking registration may (i) determine whether or not an offering pursuant to
this section will be underwritten and (ii) if underwritten, who the managing
underwriter will be.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Initiating Holders. Notwithstanding any other provision of this Section
1.2, if the managing underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders of Registrable
Securities and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
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<PAGE>
Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of filing the
registration statement; provided, however, that the number of Registrable
Securities to be included in such underwriting shall not be reduced unless all
other securities are first entirely excluded from the underwriting. No
Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration.
1.3. Company Registration.
(a) Notice of Registration. If, following the Company's initial
public offering, at any time or from time to time, the Company shall determine
to register any of its securities, either for its own account or the account of
a security holder or holders other than (i) a registration relating solely to
employee benefit plans, or (ii) a registration relating solely to a Commission
Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests made within thirty (30) days after receipt of such written notice
from the Company by any Holder.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 1.3, if the managing
underwriter determines that marketing factors require the elimination or a
limitation of the shares to be underwritten, the managing underwriter may choose
to eliminate or limit such shares. Any limit on the number of Registrable
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Securities to be included in the registration and underwriting, will be done so
on a pro rata basis based on the total number of securities (including, without
limitation, Registrable Securities) entitled to registration pursuant to
registration rights granted by the Company. To facilitate the allocation of
shares in accordance with the above provisions, the Company or the underwriters
may round the number of shares allocated to any Holder or other holder to the
nearest 100 shares. If any Holder or other holder disapproves of the terms of
any such underwriting, he or she may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.3 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
1.4. Expenses of Registration. All Registration Expenses incurred in
connection with any registration pursuant to Sections 1.2 and 1.3 shall be borne
by the Company, provided that the Company shall not be required to pay the
Registration Expenses of any registration proceeding begun pursuant to Section
1.2, the request of which has been subsequently withdrawn by the Initiating
Holders, unless the Initiating Holders agree to forfeit their right to one
demand registration under Section 1.2. In such case as the Holders are
responsible for such Registration Expenses, (i) the Holders of Registrable
Securities to have been registered shall bear all such Registration Expenses pro
rata on the basis of the number of shares to have been registered, and (ii) the
Company shall be deemed not to have effected a registration pursuant to
subparagraph 1.2(a) of this Agreement. Notwithstanding the foregoing, however,
if at the time of the withdrawal, the Holders have learned of a material adverse
change in the condition, business or prospects of the Company from that known to
the Holders at the time of their request, then the Holders shall not be required
to pay any of said Registration Expenses. In such case, the Company shall be
deemed not to have effected a registration pursuant to subparagraph 1.2(a) of
this Agreement. Unless otherwise stated, all Selling Expenses relating to
securities registered on behalf of the Holders and all other registration
expenses incurred in connection with any registration pursuant to this Section 1
shall be borne by the Holders of the registered securities included in such
registration pro rata on the basis of the number of shares so registered.
1.5. Registration Procedures. In the case of each registration by the
Company pursuant to this Section 1, the Company will keep each Holder advised in
writing as to the initiation of each registration and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
(and amendments and supplements thereto) with respect to such securities and use
its best efforts to cause such registration statement (and amendments and
supplements thereto) to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the registration
statement has been completed;
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(b) Furnish to the Holders participating in such registration and
to the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(c) Use commercially reasonable efforts to register and qualify
the securities covered by the registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act;
(d) In the event of any underwritten public offering, enter into
and perform all its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(e) Immediately notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statement therein not misleading in light of the circumstances then
existing;
(f) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(g) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration; and
(h) Use commercially reasonable efforts to furnish, at the request
of any Holder requesting registration of Registrable Securities pursuant to this
Section 1, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this Section
1, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
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1.6. Indemnification.
(a) The Company will indemnify each Holder of Registrable
Securities included in a registration pursuant to this Agreement, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to each
registration effected pursuant to this Agreement, and each underwriter, if any,
and each person who controls any underwriter within the meaning of Section 15 of
the Securities Act, against all expenses, claims, losses, damages or liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act, the Exchange Act, state
securities laws or any rule or regulation promulgated under such laws applicable
to the Company in connection with any such registration, and the Company will
reimburse each such Holder, each of its officers and directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, as such expenses are incurred,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by any Holder, controlling person or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each other such Holder, each of
its officers, directors and partners and each person controlling such Holder
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within the meaning of Section 15 of the Securities Act, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any 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 will reimburse the Company, such Holders, such
directors, officers, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, as such expenses
are incurred, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
is made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by such Holder and stated to be
specifically for use therein. Notwithstanding the foregoing, the liability of
each Holder under this Section 1.6(b) shall be limited to an amount equal to the
net proceeds of the shares sold by such Holder, unless such liability arises out
of or is based on the willful misconduct by such Holder.
(c) Each party entitled to indemnification under this Section 1.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that an Indemnified Party (together with all
other Indemnified Parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 1 unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
1.7. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.
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1.8. Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) So long as the Investor owns any Restricted Securities, to
furnish to the Investor forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as the Investor may reasonably request in
availing itself of any rule or regulation of the Commission allowing the
Investor to sell any such securities without registration.
1.9. Transfer of Registration Rights. The rights to cause the Company
to register securities granted to the Investor under Sections 1.2 and 1.3 may be
assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by the Investor (together with any
affiliate); provided that (a) such transfer may otherwise be effected in
accordance with applicable securities laws, (b) written notice of such
assignment is given to the Company, and (c) such transferee or assignee (i) is a
wholly-owned subsidiary or constituent partner (including limited partners,
retired partners, spouses and ancestors, lineal descendants and siblings of such
partners) (ii) is a family member or trust for the benefit of such Investor or
spouses (who acquire Registrable Securities by gift, will or intestate
succession) of such Investor, or (iii) acquires from such Investor at least
150,000 shares of Registrable Securities (as appropriately adjusted for stock
splits and the like).
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1.10. Standoff Agreement. Each Holder agrees in connection with the
initial public offering of the Company's securities (other than a registration
of securities in a Rule 145 transaction or with respect to an employee benefit
plan) that, upon request of the Company and its underwriters managing any
underwritten offering of the Company's securities to enter into an agreement,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company and such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days from the effective date of such registration) as may
be requested by the Company or such managing underwriters; provided, that (i)
the officers and directors of the Company who own stock of the Company also
agree to such restrictions and (ii) the holders of the Company's securities with
registration rights similar to those granted in Sections 1.2 and 1.3 herein also
agree to, or are bound by, such restrictions.
SECTION II.
Preemptive Rights
2.1. Investor's Preemptive Rights for New Securities Issued by the
Company.
(a) Preemptive Rights. The Company hereby grants to the Investor
the right of first offer to purchase its Pro Rata Portion of any New Securities
(as defined in subsection 2.1(b)) which the Company may, from time to time,
propose to sell and issue. The Investor's "Pro Rata Portion" for purposes of
this Section 2.1 is the ratio that (x) the sum of the number of shares of the
Company's Common Stock then held by such Investor and the number of shares of
the Company's Common Stock issuable upon conversion of the Preferred Stock then
held by such Investor bears to (y) the sum of the total number of shares of
Company's Common Stock then outstanding and the number of shares of the
Company's Common Stock issuable upon conversion of the then outstanding
securities then exercisable for or convertible into, directly or indirectly,
shares of Common Stock.
(b) Definition of New Securities. Except as set forth below, "New
Securities" shall mean any shares of capital stock of the Company, including,
without limitation, Common Stock and Preferred Stock, whether authorized or not,
and rights, options or warrants to purchase said shares of Common Stock or
Preferred Stock, and securities of any type whatsoever that are, or may become,
convertible into said shares of Common Stock or Preferred Stock. Notwithstanding
the foregoing, "New Securities" does not include (i) the Shares or the
Conversion Shares, (ii) securities offered to the public generally pursuant to a
registration statement under the Securities Act, (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or shares or other reorganization
whereby the Company or its shareholders own not less than a majority of the
voting power of the surviving or successor corporation, (iv) up to 1,604,690
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shares of the Company's Common Stock or related options convertible into or
exercisable for such Common Stock issued to employees, doctors, officers and
directors of, and consultants to, the Company, pursuant to any arrangement
approved by the Board of Directors of the Company, provided that such number of
shares of Common Stock may be increased by a majority vote of the members of the
Compensation Committee (as reconstituted in accordance with Section 3.4 below)
of the Board of Directors after the Closing Date, (v) shares of the Company's
Common Stock or related options convertible into or exercisable for such Common
Stock issued to any bank, equipment lessor or other similar financial
institution if and to the extent that the transaction in which such sale or
grant is to be made is approved by a majority of the Company's Board of
Directors, including at least one of the Investor Directors (if the Investor has
a right to elect directors), as defined in the Stockholders' Agreement (vi)
shares of the Company's Common Stock issued (or options, warrants, or similar
rights issued) in connection with agreements to license technology or agreements
to provide sponsored research if and to the extent that such issuance is
approved by a majority of the members of the Company's Board of Directors,
including at least one of the Investor Directors (if the Investor has a right to
elect directors) (vii) stock issued pursuant to any rights or agreements,
including, without limitation, convertible securities, options and warrants,
provided that the Company shall have complied with the right of first offer
established by this Section 2.1 with respect to the initial sale or grant by the
Company of such rights or agreements, or (viii) stock issued in connection with
any stock split, stock dividend or recapitalization by the Company.
(c) Notice of Right. In the event the Company proposes to
undertake an issuance of New Securities, it shall give the Investor at least
thirty (30) days prior written notice (sixty (60) days prior written notice if
such transaction involves the sale and issuance of more than 25% of the
Company's equity securities) of its intention, describing the type of New
Securities and the price and terms upon which the Company proposes to issue the
same. The Investor shall have twenty (20) days from the date of receipt of any
such notice to agree to purchase shares of such New Securities (up to the amount
referred to in subsection 2.1(a)), for the price and upon the terms specified in
the notice, by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased. Notwithstanding the foregoing, in
the event that the Company is to sell and issue more than 25% of its equity
securities in any one transaction, the Investor's Super-Voting Right, as defined
below, will remain in effect for a maximum of ninety (90) days following the
receipt of the notice relating to such sale.
(d) Exercise of Right. If the Investor exercises its right of
first refusal hereunder, the closing of the purchase of the New Securities with
respect to which such right has been exercised shall take place within sixty
(60) calendar days after the Investor gives notice of such exercise, which
period of time shall be extended in order to comply with applicable laws and
regulations. Upon exercise of such right of first refusal, the Company and the
Investor shall be legally obligated to consummate the purchase contemplated
thereby, subject to customary standard closing conditions, and shall use their
best efforts to secure any approvals required in connection therewith.
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(e) Lapse and Reinstatement of Right. In the event the Investor
fails to exercise the right of first refusal provided in this Section 2.1 within
the period specified in 2.1(c) and 2.1(d), the Company shall have forty-five
(45) days thereafter to sell or enter into an agreement with the purchaser
thereof (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within forty-five (45) days from the date of said agreement)
to sell the New Securities not elected to be purchased by the Investor at the
price and upon the terms no more favorable to the purchasers of such securities
than specified in the Company's notice. In the event the Company has not sold
the New Securities or entered into such an agreement to sell the New Securities
within said forty-five (45) day period (or sold and issued New Securities in
accordance with the foregoing within forty-five (45) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities
without first offering such securities to the Investor in the manner provided
above.
(f) Valuation of Property. Should the purchase price specified in
the notice be payable in property other than cash or evidences of indebtedness,
the Investor shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If the Investor and the Company
cannot agree on such cash value within fifteen (15) days after the receipt of
notice, the valuation shall be made by an appraiser of recognized standing
selected by the Investor and the Company or, if they cannot agree on an
appraiser within twenty (20) days after the receipt of notice, each shall select
an appraiser of recognized standing and the two appraisers shall designate a
third appraiser of recognized standing, whose appraisal shall be determinative
of such value. The cost of such appraisal shall be shared equally by the
Investor and the Company. The Investor may elect, either before or after an
appraisal has been completed, to withdraw its offer to purchase New Securities,
in which event any costs associated with the selection and retention of
appraiser(s) shall be borne by Investor. If the time for the closing of the
purchase has expired but for the determination of the value of the purchase
price, then such closing shall be held on or prior to the fifth business day
after such valuation shall have been made pursuant to this subsection.
2.2. Assignment. The right of the Investor to purchase any part of the
New Securities may be assigned by the Investor to a third party who acquires at
least 1,000,000 shares of Restricted Securities (as adjusted for stock splits
and the like), provided that the Company receives written notice of such
assignment.
2.3. Termination of Preemptive Rights. The rights under Section 2.1 of
this Agreement shall terminate on and be of no further force or effect on the
date of the closing of a firmly underwritten public offering on Form S-1 or Form
SB-2 resulting in aggregate gross proceeds to the Company of at least
$20,000,000, before deduction of underwriters commissions and expenses and
reflecting a post-initial public offering valuation of the Company, on a pro
forma basis, of at least $60.0 million (a "Qualified Public Offering"), on which
the Company is required to file reports with the Commission pursuant to Section
13 or 15(d) of the Exchange Act.
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SECTION III.
Affirmative Covenants of the Company
------------------------------------
The Company hereby covenants and agrees as follows:
3.1. Financial Information. So long as the Investor owns at least 5% of
the Preferred Stock or is required to file SEC reports, the Company will furnish
to the Investor:
(a) As soon as practicable after the end of each fiscal year, and
in any event within sixty (60) days thereafter, audited financial statements,
certified as true and correct by the chief financial officer of the Company, of
the Company and its subsidiaries, if any, as of the end of such fiscal year,
prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in comparative form the figures for the
previous fiscal year, all in reasonable detail and audited by independent public
accountants of national standing selected by the Company and reasonably
acceptable to the Investor (it being understood that each of Grant Thornton LLP
and any "Big Five" accounting firm shall be acceptable to the Investor) and a
statement showing the number of shares of each class and series of capital stock
and securities convertible into or exercisable for shares of capital stock
outstanding at the end of the period, the number of common shares issuable upon
conversion or exercise of any outstanding securities convertible or exercisable
for common shares and the exchange ratio or exercise price applicable thereto,
all in sufficient detail as to permit the Investor to calculate its percentage
equity ownership in the Company on a fully diluted basis; and
(b) As soon as practicable, but in any event within twenty-five
(25) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, interim financial statements, certified as true and correct
by the chief financial officer of the Company, prepared in accordance with
generally accepted accounting principles consistently applied as of the end of
such fiscal quarter and a statement showing the number of shares of each class
and series of capital stock and securities convertible into or exercisable for
shares of capital stock outstanding at the end of the period, the number of
common shares issuable upon conversion or exercise of any outstanding securities
convertible or exercisable for common shares and the exchange ratio or exercise
price applicable thereto, all in sufficient detail as to permit the Investor to
calculate its percentage equity ownership in the Company on a fully diluted
basis.
3.2. Financial Information Following a Public Offering. Following the
Company's initial public offering, the Company will deliver or make available to
the Investor copies of the Company's 10-K's, 10-Q's, 8-K's and Annual Reports to
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Shareholders promptly after such documents are filed with the Securities and
Exchange Commission. The Company shall use its best efforts to make such
information available to the Investor, and otherwise cooperate with the Investor
to assure that such information is received by the Investor in a time frame
which allows the Investor a reasonable opportunity to timely meet its filing
obligations under the Securities Act and the Exchange Act (without giving effect
to any potential extension periods that may be associated with such acts).
3.3. Assignment of Rights to Financial Information. The rights granted
pursuant to Section 3.1 may be assigned by the Investor to a third party who
acquires at least 1,000,000 shares of Restricted Securities (as adjusted for
stock splits and the like), provided that the Company receives written notice of
such assignment.
3.4. Board of Directors. The Company's Board of Directors shall provide
that the Investor shall have the right to elect two (2) directors; provided,
however, that the Investor shall no longer have the right to elect two (2)
directors in the event the Company shall satisfy all of the conditions precedent
to the Second Closing Date set forth in the Series A Agreement and the Investor
shall fail to purchase the remaining 2,211,453 shares of Series A Preferred
Stock on or prior to the Second Closing Date. If the Company issues $7.0 million
or more in equity to one investor, and that investor is only entitled to
designate one (1) director (or none), then the Investor will be entitled to
designate one (1) director. The directors designated by the Investor are
referred to as the "Investor Directors". At all times the Board of Directors
will have both a Compensation Committee and an Audit Committee. Except as
otherwise set forth in the Stockholders' Agreement, the Compensation Committee
will be comprised of Steven M. Haimowitz, MD, one outside director and one
Investor Directors (if applicable). The Audit Committee will be comprised
exclusively of outside directors and one (1) Investor Director (if applicable).
3.5. Insurance. As soon as practicable, the Company shall maintain key
man life insurance policies in the amount of $5,000,000 (if possible, but in no
event less than $1,000,000) on the life of Steven M. Haimowitz, MD, $1,000,000
on the life of Matthew Caleb, M.D. and $1,000,000 on the life of Anton Konikoff
naming the Company as beneficiary and shall use commercially reasonable efforts
to obtain and maintain directors and officers liability insurance as soon as
practicable in an amount and under such terms and with such insurer as is
reasonably acceptable to the Investor Directors (if applicable). Steven M.
Haimowitz, MD, Matthew R. Caleb, MD and Anton E. Konikoff will enter into
employment agreements with the Company satisfactory to the Investor.
3.6. Definition of Investor. For purposes of determining the amount of
shares held by an Investor, all entities affiliated with an Investor shall be
treated as a single investor.
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3.7. Reserved Employee Shares. The 1,604,690 shares of Common Stock
reserved for employees, officers, directors of, doctors, and consultants to, the
Company (the "Employee Shares"), are to be issued from time to time under
restricted stock purchase agreements and the Company's stock plan as may be
determined and approved by the Board of Directors. Unless unanimously approved
by the Board of Directors, any additional options issued after the Closing Date
shall only be issued at a price equal to the fair market value at the time of
grant upon approval of a majority of the members of the Compensation Committee.
3.8. Voting Rights Regarding Election of Directors. As long as the
Investor and its Permitted Transferees hold all of the Series A Preferred Stock,
each share of Series A Preferred shall have the voting rights, with respect to
the election of directors, equivalent to such number of shares of Common Stock
as will guarantee that the Investor, only for the purpose of electing directors,
(i) shall have no less than 26% of the voting power of the outstanding capital
stock of the Company and (ii) will be the single largest such voting shareholder
(the "Super Voting Right"), unless, in either case, the Investor does not
exercise any preemptive rights it may have or the Company issues more than 25%
of its then outstanding equity in any transaction to a single person or entity.
Notwithstanding the foregoing, the Investor shall no longer have such
Super-Voting Right in the event the Company shall satisfy all of the conditions
precedent to the Second Closing Date set forth in the Series A Agreement and the
Investor shall fail to purchase the remaining 2,211,453 shares of Series A
Preferred Stock on or prior to the Second Closing Date. Notwithstanding anything
herein to the contrary, in the event that the Company fails to deliver to the
Investor by March 21, 2000 a binder or policy evidencing the Insurance and the
Investor does not purchase the remaining 2,211,453 Shares, then Investor shall
not have the Super-Voting Right as of June 26, 2000. This Super-Voting Right
will be assignable by the Investor to any transferee or purchaser of all of the
Shares owned by the Investor (whether pursuant to one or more closings, and, as
adjusted), but if and only if such rights are reasonably necessary for the
transferee not to be considered an Investment Company, as defined in the
Investment Company Act of 1940, as amended, and if a majority of the Board of
Directors approves such transfer, such approval not to be unreasonably withheld.
3.9. Election of Chief Medical Officer. Robert G. Tancredi, M.D. shall
have the right to approve the Board of Director's election of the first Chief
Medical Officer of the Company, such approval not to be unreasonably withheld.
3.10. Notification of Issuance of Securities. As long as the Investor
shall own at least one million (1,000,000) shares of Restricted Securities (as
adjusted for stock splits and the like), the Company shall give the Investor
notice of any discussions or negotiations that may reasonably lead to a
transaction involving the issuance of New Securities and will advise Investor of
the status of the negotiations or discussions, subject to confidentiality
requirements.
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3.11. Termination of Certain Covenants. The covenants set forth in this
Section other than Section 3.2 hereof shall terminate on, and be of no further
force or effect after, the date of closing of a Qualified Public Offering on
which the Company is required to file reports with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act.
3.12. 1998 Audit. Within thirty (30) days of the Closing Date, the
Company shall use its best efforts to deliver to the Investor audited financial
statements as of, and for the period ended, December 31, 1998, prepared by Grant
Thornton LLP in accordance with generally accepted accounting principles
consistently applied.
SECTION IV.
Miscellaneous
-------------
4.1. Governing Law. This Agreement shall be governed in all respects by
the laws of the State of New York.
4.2. Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
4.3. Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Investor and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or exhibit delivered by or on
behalf of the Company pursuant hereto shall be deemed to be the representations
and warranties of the Company hereunder as of such date of such certificate or
exhibit.
4.4. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
4.5. Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
4.6. Rights of Holders. Each holder of Registrable Securities shall
have the absolute right to exercise or refrain from exercising any right or
rights that such holder may have by reason of this Agreement, including, without
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limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
4.7. Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, return receipt requested, or otherwise
delivered by hand or by messenger, addressed (a) if to the Investor, at such
Investor's address set forth on Exhibit A, or at such other address as the
Investor shall have furnished to the Company in writing, or (b) if to any other
holder of any Shares, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares who has so
furnished an address to the Company, or (c) if to the Company, at its address
set forth on the first page of this Agreement addressed to the attention of the
Corporate Secretary, or at such other address as the Company shall have
furnished to the Investors. If notice is provided by mail, notice shall be
deemed to be given upon proper deposit with the United States mail.
4.8. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to the Company or any holder of any Shares under this
Agreement shall impair any such right, power or remedy of the Company or such
holder, nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of the
Company or any holder of any breach or default under this Agreement, or any
waiver on the part of the Company or any holder of any provisions or conditions
of this Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing or as provided in this Agreement. All
remedies, either under this Agreement or by law or otherwise afforded to the
Company or any holder, shall be cumulative and not alternative.
4.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all parties hereto,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
4.10. Severability of this Agreement. In the event that any provision
of this Agreement becomes or is declared by a court of competent jurisdiction to
be illegal, unenforceable or void, this Agreement will continue in full force
and effect without said provision and the parties agree to replace such
provision with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such provisions;
provided that no such severability will be effective against a party if it
materially and adversely changes the economic benefits of this Agreement to such
party.
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4.11. Attorneys' Fees. In the event that any dispute among the parties
to this Agreement should result in litigation, 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. This right is in addition to any remedy
available at law or in equity.
4.12. Further Assurances. The parties shall cooperate and take such
actions, and execute such other documents as either may reasonably request in
order to carry out the provisions or purposes of this Agreement.
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HEALTHOLOGY, INC. SERIES A INVESTOR:
By: /s/ Steven M. Haimowitz, MD
----------------------------
Steven M. Haimowitz, MD SEAL HOLDINGS
President and Chief CORPORATION
Executive Officer
By: /s/ Robert G. Tancredi, MD
------------------------------------
Robert G. Tancredi, MD
President and Chief Executive Officer
<PAGE>
EXHIBIT A
SERIES A INVESTOR SCHEDULE
No. of Shares of
Name Series A Preferred
3,211,453
SEAL Holdings Corporation
5601 North Dixie Highway
Suite 411
Fort Lauderdale, FL 33334
<PAGE>
================================================================================
STOCKHOLDERS' AGREEMENT
dated as of March 1, 2000
among
HEALTHOLOGY, INC.
AND
ITS STOCKHOLDERS
===============================================================================
<PAGE>
Table of Contents
Page
----
Section 1. Board of Directors.............................................1
1.1 Number of Directors........................................1
1.2 Election...................................................1
1.3 Committees.................................................3
1.4 Vacancies and Removal......................................3
Section 2. Right of First Refusal; Co-Sale Right..........................4
2.1 Restrictions on Transfer...................................4
2.2 Right of First Refusal.....................................4
2.3 Right of Co-Sale...........................................6
2.4 Non-Exercise of Rights.....................................8
2.5 Prohibited Transfers.......................................8
2.6 Permitted Transfer.........................................8
2.7 Assignment.................................................9
Section 3. Restrictions on Transfer.......................................9
3.1 General....................................................9
3.2 Legend.....................................................9
3.3 Procedures for Transferring...............................10
3.4 Termination of Restrictions...............................10
Section 4. Certain Corporate Actions.....................................10
Section 5. Miscellaneous.................................................11
5.1.Lock-Up Agreements........................................11
Steven M. Haimowitz, MD, Matthew R............................11
5.2 Termination...............................................11
This Agreement shall terminate and be of no further
force or effect from and after the consummation of
a Qualified IPO, as defined in the Investor's
Rights Agreement..........................................11
5.3 Injunctive Relief.........................................11
5.4 Assignment................................................11
5.5 Successors and Assigns....................................11
5.6 Entire Agreement..........................................12
5.7 Notices...................................................12
5.8 Modifications; Amendments; Waivers........................12
5.9 Counterparts..............................................12
5.10 Headings.................................................12
5.11 Severability.............................................12
5.12 Governing Law............................................13
5.13 Representations and Warranties...........................13
5.14 Further Assurances.......................................13
i
<PAGE>
STOCKHOLDERS' AGREEMENT, dated as of March 1st, 2000, among
HEALTHOLOGY, INC., a Delaware corporation (the "Company"), the stockholders set
forth on Schedule I attached hereto (the "Existing Stockholders"), the investor
listed on Schedule II attached hereto (the "Investor"), and the other
stockholders listed on Schedule III attached hereto (the "New Stockholders", and
collectively with the Existing Stockholders and the Investor, the
"Stockholders").
WHEREAS, upon consummation of the transactions contemplated by
the Series A Stock Purchase Agreement, dated as of the date hereof, between the
Company and the Investor (the "Series A Agreement"), the Stockholders will own
the number of shares of Common Stock, par value $.01 per share (the "Common
Stock") and the number of shares of Series A Preferred Stock, par value $.01 per
share (the "Series A Preferred Stock") of the Company as set forth on Schedule
I, Schedule II and Schedule III attached hereto (collectively, the "Shares");
and
WHEREAS, one of the conditions to the purchase by the Investor
under the Series A Agreement of the Series A Preferred Stock is the execution of
an agreement relating to the election of members to the Company's Board of
Directors (the "Board of Directors") and restrictions on the terms of
dispositions by the Stockholders of their Shares.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and the investment by the Investor under the Series
A Agreement, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows (capitalized terms used herein and not defined
herein have the meanings set forth in the Series A Agreement):
Section 1. Board of Directors
1.1 Number of Directors.
The authorized number of the Board of Directors shall not be more
than nine (9). Notwithstanding the foregoing, the authorized number of directors
stated in the prior sentence may be changed upon the affirmative vote of a
majority of the members of the Board of Directors, which such vote shall include
the affirmative vote of one of the Investor Directors (as defined below).
1.2 Election.
(a) At any time at which Stockholders of the Company will have
the right to or will vote shares of capital stock of the Company in an election
of directors, Steven M. Haimowitz, M.D. shall be entitled to cause and maintain
the election to the Board of Directors of one (1) representative. Such
representative shall initially be Steven M. Haimowitz, M.D.
(b) At any time at which Stockholders of the Company will have
the right to or will vote shares of capital stock of the Company in an election
of directors, Matthew Caleb, M.D. shall be entitled to cause and maintain the
election to the Board of Directors of one (1) representative. Such
representative shall initially be Matthew Caleb, M.D.
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(c) At any time at which Stockholders of the Company will have
the right to or will vote shares of capital stock of the Company in an election
of directors, Janice Lazo and Franco Foti shall be entitled to cause and
maintain the election to the Board of Directors of one (1) representative.
(d) As long as the Investor or its Permitted Transferees (as
defined below) owns at least 50% of the aggregate amount of such shares of
Series A Preferred Stock originally purchased, any time at which Stockholders of
the Company will have the right to or will vote shares of capital stock of the
Company in an election of directors, the Stockholders shall vote all shares of
capital stock of the Company presently owned or hereafter acquired by them so as
to cause and maintain the election to the Board of Directors of two (2)
representatives designated by the Investor. Notwithstanding the foregoing, the
Investor will not have the right to designate any director if it fails to
purchase the remaining 2,211,453 shares of Series A Preferred by the Second
Closing Date, as defined in the Series A Agreement, after satisfaction by the
Company of all of the conditions to such Second Closing Date, as set forth in
the Series A Agreement. Notwithstanding anything herein to the contrary, in the
event that the Company fails to deliver to Investor a binder or policy
evidencing the insurance by March 21, 2000 and Investor does not purchase the
remaining 2,211,453 Shares in accordance with the Series A Agreement, then
Investor shall have the right to elect one (1) director. Such representatives
shall initially be Robert G. Tancredi, M.D. and John J. Rydzewski (the "Investor
Directors"), it being understood that the Stockholders shall not be obligated to
vote their shares of capital stock in favor of more than two (2) such
representatives. In the event that subsequent to the Closing Date the Company
issues $7.0 million or more in equity securities to one investor, and that
investor is only entitled to designate one (1) director (or no director), then
the Investor will be entitled to designate only one (1) director, and the
Stockholders shall vote all shares of capital stock of the Company presently
owned or hereafter acquired by them so as to cause and maintain the election to
the Board of Directors of only one (1) representative designated by the
Investor.
(e) If any Stockholder shall refuse to vote the Shares held by it
as provided in this Agreement at any meeting of the Stockholders of the Company,
or shall refuse to give its written consent in lieu of a meeting, thereupon,
without further action by such Stockholder, the President or any Vice President
of the Company shall be, and hereby is, irrevocably constituted the
attorney-in-fact and proxy of such Stockholder for the purpose of voting, and
shall vote such shares at such meeting as provided in this Agreement, or give
such consent, as the case may be. Should the provisions of this Agreement be
construed to constitute the granting of proxies, such proxies shall be deemed
coupled with an interest and are irrevocable for the term of this Agreement.
(f) It is agreed and understood that monetary damages would not
adequately compensate an injured party for the breach of this Agreement by any
party, that this Agreement shall be specifically enforceable, and that any
breach or threatened breach of this Agreement shall be the proper subject of a
temporary or permanent injunction or restraining order. Further, each party
hereto waives any claim or defense that there is an adequate remedy at law for
such breach of threatened breach.
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1.3 Committees.
At all times the Board Of Directors shall have both a
Compensation Committee and an Audit Committee in addition to such other
committees as are created by the Board of Directors. The Compensation Committee
shall be comprised of Steven M. Haimowitz, M.D., one independent director
determined in accordance with the Independent Director Standards issued by the
Securities and Exchange Commission and the American Institute of Certified
Public Accountants ("Independent Director") and one Investor Director (if any
Investor Directors have been elected to the Board). Notwithstanding the
foregoing, until an Independent Director is elected to the Board of Directors,
Steven M. Haimowitz, M.D., Matthew Caleb, M.D. and John Rydzewski shall act as
the Compensation Committee (the "Initial Compensation Committee"); provided,
however, that the Initial Compensation Committee shall not have the power to act
with respect to compensating or altering the current compensation of either
Steven M. Haimowitz, M.D. or Matthew Caleb, M.D., and provided, further, that
the Initial Compensation Committee shall not have the power to grant more than
(i) 100,000 options to purchase equity securities of the Company to any
individual or (ii) 500,000 options to purchase equity securities of the Company
in the aggregate without the unanimous consent of the Initial Compensation
Committee. If by the time that is sixty (60) days after the Closing Date (or
Second Closing Date) an Independent Director has not yet been elected to the
Board of Directors, the Initial Compensation Committee shall consist only of
Steven Haimowitz, M.D. and John Rydzewski, and the Board of Directors shall
break all dead-locks between them, if any. The Audit Committee shall be
comprised exclusively of Independent Directors and Investor Director(s) (if any
Investor Directors have been elected), as determined by the Board of Directors.
1.4 Vacancies and Removal.
(a) Each director designated in Section 1.2 shall be elected at
any annual or special meeting of Stockholders (or by written consent in lieu of
a meeting of Stockholders) and shall serve until his successor is elected and
qualified or until his earlier resignation or removal.
(b) The director elected by Steven M. Haimowitz, M.D. may be
removed during his or her term of office, without cause, by and only by the
affirmative vote or written consent of Steven M. Haimowitz, M.D. The director
elected by Matthew Caleb, M.D. may be removed during his or her term of office,
without cause, by and only by the affirmative vote or written consent of Matthew
Caleb, M.D. The director elected by Janice Lazo and Franco Foti may be removed
during his or her term of office, without cause, by and only by the affirmative
vote or written consent of Janice Lazo and Franco Foti. Each Investor Director
may be removed during his or her term of office, without cause, by and only by
the affirmative vote or written consent of the Investor. Each Independent
Director may be removed during his or her term of office, without cause, by and
only by the affirmative vote or written consent of not less than five directors.
(c) Any vacancy in the office of the director appointed by Steven
M. Haimowitz, M.D. may only be filled by the vote or written consent of Steven
M. Haimowitz, M.D. Any vacancy in the office of the director appointed by
Matthew Caleb, M.D. may only be filled by the vote or written consent of Matthew
Caleb, M.D. Any vacancy in the office of the director appointed by Janice Lazo
and Franco Foti may only be filled by the vote or written consent of Janice Lazo
and Franco Foti. Any vacancy in the office of any Investor Director may only be
filled by the vote or written consent of the Investor.
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(d) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the Board
of Directors and any committees thereof. So long as the Investor shall be
entitled to appoint a director pursuant to Section 1.2(c), the Company's
Certificate of Incorporation and Bylaws shall provide for indemnification and
exculpation of directors to the fullest extent permitted under applicable law.
Section 2. Right of First Refusal; Co-Sale Right
2.1 Restrictions on Transfer.
Without limiting any other restriction contained in this
Agreement, no Stockholder may sell, assign, transfer, pledge, bequeath,
hypothecate, mortgage, grant any proxy with respect to, or in any other way
encumber or otherwise dispose of, directly or indirectly (collectively, a
"Transfer") any shares except pursuant to a Permitted Transfer (as defined
below) unless such Stockholder first complies with the provisions of Sections 2
and 3.
2.2 Right of First Refusal
(a) Transfer Notice. If at any time a Stockholder (the "Selling
Stockholder") proposes to Transfer equity securities to one or more unrelated
third parties (which parties shall be accredited investors) pursuant to an
understanding with such third parties, then such Selling Stockholder shall give
the Company and each Stockholder written notice of the Selling Stockholder's
intention to make the Transfer (the "Transfer Notice"), which Transfer Notice
shall include (i) a description of the equity securities to be transferred
("Offered Shares"), (ii) the identity of the prospective transferee(s) and (iii)
the consideration and the material terms and conditions upon which the proposed
Transfer is to be made (including a description of any expenses a Stockholder
exercising its purchase option under this Section 2.2 would be required to bear
or any indemnification such Stockholder would be required to provide pursuant to
Subsection 2.3(e) of this Agreement). The Transfer Notice shall certify that the
Selling Stockholder has received a firm offer from the prospective transferee(s)
and in good faith believes a binding agreement for the Transfer is obtainable on
the terms set forth in the Transfer Notice. The Transfer Notice shall also
include a copy of any written proposal, term sheet or letter of intent or other
agreement relating to the proposed Transfer. The Company shall provide any
information reasonably requested by a Selling Stockholder to be provided to a
potential purchaser of such Selling Stockholder's Shares.
(b) Company's Option. The Company shall have an option for a
period of ten (10) days from receipt of the Transfer Notice to elect to purchase
the Offered Shares at the same price and subject to the same material terms and
conditions as described in the Transfer Notice. The Company may exercise such
purchase option and, thereby, purchase all (or a portion of) the Offered Shares
by notifying the Selling Stockholder in writing before expiration of such ten
(10) day period as to the number of such shares which it wishes to purchase. If
the Company gives the Selling Stockholder notice that it desires to purchase
such shares, then payment for the Offered Shares shall be by check or wire
transfer, against delivery of the Offered Shares to be purchased at a place
agreed upon between the parties and at the time of the scheduled closing
therefor, which shall be not later than forty-five (45) days after the Company's
receipt of the Transfer Notice, unless the Transfer Notice contemplated a later
closing with the prospective third party transferee(s) or unless the value of
the purchase price has not yet been established pursuant to Section 2.2(e). If
the Company fails to purchase all of the Offered Shares by exercising the option
granted in this Section 2.2(b) within the period provided, the Offered Shares
shall be subject to the options granted to the Stockholders pursuant to this
Agreement.
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(c) Additional Transfer Notice. Subject to the Company's right
set forth in Section 2.2(b), if at any time the Selling Stockholder proposes a
Transfer, then, after the Company has declined to purchase all, or a portion of,
the Offered Shares, the Selling Stockholder shall give each Stockholder an
"Additional Transfer Notice" which shall include all of the information and
certifications required in a Transfer Notice and shall additionally identify the
Offered Shares which the Company has declined to purchase (the "Remaining
Shares") and briefly describe Stockholders' rights of first refusal and co-sale
(if applicable) with respect to the proposed Transfer.
(d) Stockholders' Option. The Stockholders shall have an option
for a period of twenty (20) days from the Stockholders' receipt of the
Additional Transfer Notice from the Selling Stockholder set forth in Section
2.2(c) to elect to purchase their respective pro rata shares of the Remaining
Shares at the same price and subject to the same material terms and conditions
as described in the Additional Transfer Notice. Each Stockholder may exercise
such purchase option and, thereby, purchase all or any portion of his, her or
its pro rata share (with any reallotments as provided below) of the Remaining
Shares, by notifying the Selling Stockholder and the Company in writing, before
expiration of the twenty (20) day period as to the number of such shares which
he, she or it wishes to purchase (including any reallotment). Each Stockholders'
pro rata share of the Remaining Shares shall be a fraction of the Remaining
Shares, of which the number of shares of Common Stock (including shares of
Common Stock issuable upon conversion of Preferred Shares) owned by such
Stockholder on the date of the Transfer Notice shall be the numerator and the
total number of shares of Common Stock (including shares of Common Stock
issuable upon conversion of Preferred Shares) held by all Stockholders on the
date of the Transfer Notice shall be the denominator. Each Stockholder shall
have a right of reallotment such that, if any other Stockholder fails to
exercise the right to purchase its full pro rata share of the Remaining Shares,
the other participating Stockholders may exercise an additional right to
purchase, on a pro rata basis, the Remaining Shares not previously purchased.
Each Stockholder shall be entitled to apportion Remaining Shares to be purchased
among its partners and affiliates, provided that such Stockholder notifies the
Selling Stockholder of such allocation. If a Stockholder gives the Selling
Stockholder notice that it desires to purchase its pro rata share of the
Remaining Shares and, as the case may be, its reallotment, then payment for the
Remaining Shares shall be by check or wire transfer, against delivery of the
Remaining Shares to be purchased at a place agreed upon between the parties and
at the time of the scheduled closing therefor, which shall be not later than
forty-five (45) days after the Company's receipt of the Transfer Notice, unless
the Transfer Notice contemplated a later closing with the prospective third
party transferee(s) or unless the value of the purchase price has not yet been
established pursuant to Section 2.2(e).
(e) Valuation of Property. Should the purchase price specified in
the Transfer Notice or Additional Transfer Notice be payable in property other
than cash or evidences of indebtedness, the Company (or the Stockholders) shall
have the right to pay the purchase price in the form of cash equal in amount to
the value of such property. If the Selling Stockholder and the Company (or the
Stockholders) cannot agree on such cash value within ten (10) days after the
Company's receipt of the Transfer Notice (or the Stockholders' receipt of the
Additional Transfer Notice), the valuation shall be made by an appraiser of
recognized standing selected by the Selling Stockholder and the Company (or the
Stockholders) or, if they cannot agree on an appraiser within twenty (20) days
after the Company's receipt of the Transfer Notice (or the Stockholders' receipt
of the Additional Transfer Notice), each shall select an appraiser of recognized
standing and the two appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by the Selling Stockholder and the Company (or
the Stockholders), (with the half of the cost borne by the Stockholders pro rata
by each based on the number of shares such parties were interested in purchasing
pursuant to this Section 2.2.) The Selling Stockholder may elect, either before
or after an appraisal has been completed, to withdraw its offer to make a
Transfer, in which event all options to purchase under this Section 2.2 shall be
null and void as to such withdrawn Transfer; provided, however, that in such
event, the Selling Stockholder shall bear all the costs of the appraisal, if
any, including any costs associated with the selection and retention of
appraiser(s). If the time for the closing of the Company's purchase (or the
Stockholders') has expired but for the determination of the value of the
purchase price offered by the prospective transferee(s), then such closing shall
be held on or prior to the fifth business day after such valuation shall have
been made pursuant to this subsection.
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(f) Notwithstanding anything else contained in this Subsection
2.2, neither the Company nor any Stockholder shall have the right to purchase
any Offered Shares unless all of the Offered Shares are to be purchased pursuant
to the exercise of the right of first refusal granted hereby.
2.3 Right of Co-Sale.
(a) To the extent the Company and the Stockholders do not
exercise their respective rights of refusal as to all of the Offered Shares
pursuant to Section 2.2, then the Investor, if it so notifies the Selling
Stockholder in writing within thirty (30) days after receipt of the Transfer
Notice referred to in Section 2.2(a), shall have the right to participate in
such sale of equity securities on the same terms and conditions as specified in
the Transfer Notice. Such Investor's notice to the Selling Stockholder shall
indicate the number of shares of equity securities the Investor wishes to sell
under its right to participate. To the extent the Investor exercises such right
of participation in accordance with the terms and conditions set forth below,
the number of shares of equity securities that the Selling Stockholder may sell
in the Transfer shall be correspondingly reduced.
(b) The Investor may sell, at its discretion, all or any part of
(i) that number of shares of equity securities equal to the product obtained by
multiplying (a) the aggregate number of shares of equity securities covered by
the Transfer Notice by (b) a fraction, the numerator of which is the number of
shares of Common Stock (including shares of Common Stock issuable upon
conversion of Shares) owned by the Investor on the date of the Transfer Notice
and the denominator of which is the total number of shares of Common Stock
(including shares of Common Stock issuable upon conversion of Shares) owned by
the Selling Stockholder and the Investor on the date of the Transfer Notice or
(ii) an equivalent number of shares to that being sold by the Selling
Stockholder.
(c) The Investor shall effect its participation in the sale by
promptly delivering to the Selling Stockholder for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent:
(i) the type and number of shares of equity securities which the Investor
elects to sell; or
(ii) that number of shares of equities securities which are at such time
convertible into the number of shares of Common Stock which the
Investor elects to sell; provided, however, that if the prospective
third-party purchaser objects to the delivery of equity securities in
lieu of Common Stock, the Investor shall convert such equity
securities into Common Stock and deliver Common Stock as provided in
this Section 2.3. The Company agrees to make any such conversion
concurrent with the actual transfer of such shares to the purchaser
and contingent on such transfer.
(d) The stock certificate or certificates that the Investor
delivers to the Selling Stockholder pursuant to Section 2.3(c) shall be
transferred to the prospective purchaser in consummation of the sale of the
equity securities pursuant to the terms and conditions specified in the Transfer
Notice, and the Selling Stockholder shall concurrently therewith remit to the
Investor that portion of the sale proceeds to which the Investor is entitled by
reason of its participation in such sale. To the extent that any prospective
purchaser or purchasers prohibits such assignment or otherwise refuses to
purchase shares or other securities from the Investor exercising its rights of
co-sale hereunder, the Selling Stockholder shall not sell to such prospective
purchaser or purchasers any equity securities unless and until, simultaneously
with such sale, the Selling Stockholder shall purchase such shares or other
securities from the Investor for the same consideration and on the same terms
and conditions as the proposed transfer described in the Transfer Notice. The
Investor shall retain all rights with respect to the Shares until receipt of
payment of the purchase price therefor.
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(e) The Investor participating in a Transfer pursuant to this
subsection 2.3 shall pay its pro rata share (based on the total number of shares
to be sold) of the expenses incurred in connection with such sale and shall be
obligated to join on a pro rata basis (based on the total number of shares to be
sold) in any indemnification or other obligations that the Selling Stockholder
originating the sale agrees to provide in connection with such sale (other than
any such obligations that relate specifically to a particular Selling
Stockholder such as indemnification with respect to representations and
warranties given by a Selling Stockholder regarding its title to and ownership
of the shares being sold), provided, however, that the Investor shall not be
obligated in connection with such sale to agree to indemnify or hold harmless
the purchasers with respect to an amount in excess of the net cash proceeds paid
to the Investor in connection with such sale. Notwithstanding the foregoing, the
Investor may elect, if it is dissatisfied with the definitive documentation
relating to its right of co-sale, to withdraw its participation under this
subsection 2.3.
2.4 Non-Exercise of Rights. To the extent that the Company and the
Stockholders have not exercised their rights to purchase the Offered Shares or
the Remaining Shares within the time periods specified in Section 2.2 and the
Investor has not exercised its rights to participate in the sale of the Offered
Shares or the Remaining Shares within the time periods specified in Section 2.3,
the Selling Stockholder shall have a period of ninety (90) days from the
expiration of such rights in which to sell the Offered Shares or the Remaining
Shares, as the case may be, upon terms and conditions (including the purchase
price) no more favorable than those specified in the Transfer Notice to the
third-party transferee(s) identified in the Transfer Notice. In the event
Selling Stockholder does not consummate the sale or disposition of the Remaining
Shares within the ninety (90) day period from the expiration of these rights,
the Company's and the Stockholder's first refusal rights and the Investor's
co-sale rights shall continue to be applicable to any subsequent disposition of
the Offered Shares or the Remaining Shares by the Selling Stockholder until such
right lapses in accordance with the terms of this Agreement. Furthermore, the
exercise or non-exercise of the rights of the Company and the Stockholders under
this Section 2 to purchase equity securities from the Selling Stockholder or to
participate in sales of equity securities by the Selling Stockholder shall not
adversely affect their rights to make subsequent purchases from the Selling
Stockholder of equity securities or subsequently participate in sales of equity
securities by the Selling Stockholder.
2.5 Prohibited Transfers.
(a) In the event a Selling Stockholder should sell any equity
securities in contravention of the Company's and the Stockholders' rights of
first refusal and the Investor's co-sale rights, such sale shall be void and the
Company agrees it will not effect such a transfer nor will it treat any alleged
transferee(s) as the holder of such shares without the written consent of all
Stockholders or the Investor, as the case may be.
(b) No Stockholder may transfer Shares to any competitor of the
Company or any party affiliated with a competitor of the Company. For purposes
of this Section 2.5(b), a "competitor" shall mean any person or entity engaged
in a business which involves (i) the production or distribution of healthcare
content, (ii) the provision of on-line health-related interactive marketing
services, (iii) the establishment of a network of healthcare professionals for
the purpose of on-line activities or (iv) the creation or maintenance of
healthcare related web sites.
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2.6 Permitted Transfer.
(a) The terms and conditions of Sections 2.1, 2.2, and 2.3 shall
not apply to any Permitted Transfer by any Stockholder. For purposes of this
Agreement, "Permitted Transfer" means (a) any transfer by any Stockholder who is
a natural person (i) to or for the benefit of any parent, sibling, spouse, child
or grandchild of such Stockholder, or to a trust for the benefit of any such
Stockholder, or to a trust for the benefit of any of the foregoing, (ii) by will
or the laws of descent and distribution or (iii) to a Stockholder or (b) any
transfer by the Investor to any of its affiliates or any Stockholders (any
person to whom a Permitted Transfer is made being defined as a "Permitted
Transferee"); provided, that it shall be a condition of each such Transfer (A)
that the Permitted Transferee agree to be bound by the terms and conditions of
this Agreement as a Stockholder and execute a counterpart of this Agreement, as
set forth in Section 4.3 and (B) voting control over the Shares to be
transferred shall be retained by the transferring Stockholder. For purposes of
this Section 2.6, an affiliate of the Investor shall mean a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Investor.
(b) The rights of Section 2.2 shall not apply to Transfers by
Stockholders that own less than .25% of the outstanding shares of Common Stock
on a fully diluted basis.
2.7 Assignment. The right of each Stockholder to purchase or sell any
equity securities from or with any Selling Stockholder may be assigned in whole
or in part to any partner, subsidiary, affiliate or Stockholder.
Section 3. Restrictions on Transfer
3.1 General.
The Shares may not be Transferred except after compliance with
the conditions specified in this Section and Section 2. Any attempt by any
Stockholder to transfer any Shares in violation of any provision of this
Agreement will be void. The Company will not be required (i) to transfer on its
books any Shares that have been transferred in violation of this Agreement, or
(ii) to treat as owner of such Shares, or to accord the right to vote or pay
dividends to any purchaser, donee or other transferee to whom such Shares may
have been so transferred.
3.2 Legend.
(a) Each certificate representing Shares shall (unless otherwise
permitted by the provisions of Section 3.4(a)) be stamped or otherwise imprinted
with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT."
(b) Each certificate representing Shares shall (unless otherwise
permitted by the provisions of Section 3.4(b)) be stamped or otherwise imprinted
with a legend in substantially the following form:
"THE TRANSFER AND VOTING OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN A STOCKHOLDERS' AGREEMENT, DATED AS OF
MARCH 1, 2000, BETWEEN HEALTHOLOGY, INC. (THE "COMPANY"), AND THE
STOCKHOLDERS OF THE COMPANY, AND NO TRANSFER OF THESE SECURITIES
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE
TO THE SECRETARY OF THE COMPANY."
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3.3 Procedures for Transferring.
Upon request by the Company, any Stockholder Transferring Shares
shall deliver a written opinion of counsel for such Stockholder, addressed to
the Company, stating that in the opinion of such counsel (which opinion and
counsel shall be reasonably satisfactory to the Company), the proposed Transfer
does not involve a transaction requiring registration or qualification of such
Shares under the Securities Act of 1933, as amended (the "Securities Act") or
the securities or "blue sky" laws of any state of the United States. Subject to
Section 2, such Stockholder shall be entitled to Transfer such Shares if the
Company does not reasonably object to such Transfer and request such opinion
within fifteen (15) days after delivery of Transfer Notice to the Company, or,
if it requests such opinion, after it has received such opinion. Subject to
Section 3.4, each certificate or other instrument evidencing the securities
issued upon the Transfer of any Shares (and each certificate or other instrument
evidencing any untransferred balance of such Shares) shall bear the legends set
forth in Section 3.2.
3.4 Termination of Restrictions.
(a) If (i) any Shares are sold or otherwise disposed of pursuant
to an effective registration statement under the Securities Act or in a
transaction contemplated by Section 3.3 which does not require that the Shares
so transferred bear the legend set forth in Section 3.2(a) or (ii) the holder of
Shares has met the requirements for Transfer of such Restricted Shares under
Rule 144(k) under the Securities Act (subject to the delivery of opinions as set
forth above), then the holder of such Shares shall be entitled to receive from
the Company, without expense, a new certificate not bearing the restrictive
legend set forth in Section 3.2(a).
(b) Upon the termination of this Agreement pursuant to Section
5.1, the holders of Shares shall be entitled to receive from the Company,
without expense, new certificates not bearing the restrictive legend set forth
in Section 3.2(b).
Section 4. Certain Corporate Actions
If the Stockholders of more than 66 2/3% of the Company's equity
securities, including the Series A Preferred Stock as if converted, but not
including outstanding options and warrants (on a fully diluted basis) desire to
sell all of their shares to a purchaser who wishes to purchase all of the
Company's outstanding shares at a price in excess of $3.00 per share, subject to
adjustment for stock dividends, stock splits, or similar events, then such
Stockholders shall have the right, upon twenty (20) days prior written notice,
to require the other Stockholders of the Company to sell, and the purchaser
shall purchase, all of their shares on the same terms and conditions.
9
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Section 5. Miscellaneous
5.1 Lock-Up Agreements
Steven M. Haimowitz, MD, Matthew R. Caleb, MD, Franco Foti,
Janice Lazo, BW Ventures I, LLP, Gorann, LLC, Spydre LLC and the Investor agree
to execute lock-up agreements with the Company pursuant to which such
Stockholders will agree, if so requested by the Company or any underwriters'
representative in connection with the first public offering of the Common Stock
of the Company, not to sell or otherwise transfer any securities of the Company
during a period of up to one hundred and eighty (180) days following the
effective date of the registration statement.
5.2 Termination.
This Agreement shall terminate and be of no further force or
effect from and after the consummation of a Qualified IPO, as defined in the
Investor's Rights Agreement.
5.3 Injunctive Relief.
It is acknowledged that it will be impossible to measure the
damages that would be suffered by the parties hereto if any other party fails to
comply with the provisions of this Agreement and that in the event of any such
failure, the affected party will not have an adequate remedy at law. The
affected party shall, therefore, be entitled to obtain specific performance of
the obligations hereunder and to obtain immediate injunctive relief. The other
party shall not argue, as a defense to any proceeding for such specific
performance or injunctive relief, that the affected party has an adequate remedy
at law.
5.4 Assignment.
(a) Without limiting the restrictions on transfer contained in
the Series A Agreement and in this Agreement, the Company and each Stockholder
(in the case of a transfer of Shares) shall cause any person or entity who
acquires Shares to become a Stockholder hereunder, unless at the time of such
purchase such person or entity was a Stockholder, in which case such person or
entity shall remain a Stockholder hereunder.
(b) Execution of a counterpart of this Agreement by any person or
entity who acquires Shares and an amendment adding the name or such person or
entity shall be a condition of any acquisition of such Shares by such person or
entity.
5.5 Successors and Assigns.
This Agreement shall bind and inure to the benefit of the Company
and the Stockholders and, subject to Section 5.4, their respective successors
and assigns, and such successors and assigns shall obtain all of the rights of
their respective assignors.
10
<PAGE>
5.6 Entire Agreement.
This Agreement contains the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior arrangements
or understandings with respect hereto.
5.7 Notices.
All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument and shall be deemed to have been duly given when delivered in
person, by telecopy, by nationally-recognized overnight courier, or by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be designated
in writing by the addressee as follows: (a) if to an Existing Stockholder, at
the address and telecopier numbers set forth on Schedule I, (b) if to the
Investor, at the address and telecopier numbers set forth in Schedule II and (c)
if to the Company, at the address set forth in the Series A Agreement. All such
notices, requests, consents and other communications shall be deemed to have
been delivered (a) in the case of personal delivery or delivery by telecopy, on
the date of such delivery, (b) in the case of nationally-recognized overnight
courier, on the next business day and (c) in the case of mailing, on the third
business day following such mailing if sent by certified mail, return receipt
requested.
5.8 Modifications; Amendments; Waivers.
The terms and provisions of this Agreement may not be modified,
waived or amended, except pursuant to a writing signed by the Company, the
Investor and the Existing Stockholders holding at least 51% of the outstanding
shares of Common Stock.
5.9 Counterparts.
This Agreement may be executed in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute but one agreement.
5.10 Headings.
The headings of the various sections of this agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
5.11 Severability.
It is the desire and intent of the parties that the provisions
of this Agreement be enforced to the fullest extent permissible under the law
and public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any provision of this Agreement would be held in any
jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
11
<PAGE>
5.12 Governing Law.
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to principles
governing conflicts of laws.
5.13 Representations and Warranties.
Each Stockholder represents and warrants that (a) this Agreement
has been duly authorized, executed and delivered by such Stockholder and
constitutes the valid and binding obligation of such Stockholder, enforceable in
accordance with its terms, and (b) each Stockholder has not granted and is not a
party to any proxy, voting trust or other agreement which is inconsistent with,
conflicts with or violates any provision of this Agreement. No holder of Shares
shall grant any proxy or become party to any voting trust or other agreement
which is inconsistent with, conflicts with or violates any provision of this
Agreement.
5.14 Further Assurances.
The parties shall cooperate and take such actions, and execute
such other documents as either may reasonably request in order to carry out the
provisions or purposes of this Agreement.
[Signature Pages Immediately Follow]
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Stockholders' Agreement as of the date first above written.
HEALTHOLOGY, INC. SEAL HOLDINGS CORPORATION
By: /s/ Steven M. Haimowitz, MD By: /s/ Robert G. Tancredi, MD
------------------------------------- -----------------------------
Steven M. Haimowitz, M.D., President Robert G. Tancredi, MD
and Chief Executive Officer President and Chief Executive
Officer
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Stockholders' Agreement as of the date first above written.
COMMON STOCKHOLDERS:
/s/ Steven M. Haimowitz, MD
--------------------------------------
Steven M. Haimowitz, MD
/s/ Matthew Caleb, MD
--------------------------------------
Matthew Caleb, MD
/s/ Franco Foti
--------------------------------------
Franco Foti
/s/ Janice Lazo
--------------------------------------
Janice Lazo
14
<PAGE>
SPYDRE TECHNOLOGIES, LLC
By:
/s/ Aashish Kalra
--------------------------------------
Aashish Kalra
GORANN LLC
By:
/s/ David Beatty
--------------------------------------
David Beatty
BW VENTURES I, LLC
By:
/s/ Thomas A. Humphreys, Manager
---------------------------------------
WADE, GOLDSTEIN, LANDAU, ABRUZZO,
MACKAREY, & DAVIDSON PC
By:
--------------------------------------
Jeffrey W. Block
--------------------------------------
Sylvia Blum
15
<PAGE>
--------------------------------------
Mark R. Crosby
--------------------------------------
Henry Haimowitz
--------------------------------------
Ira L. Haimowitz
--------------------------------------
Stephen D. Houck
/s/ Thomas A. Humphreys
--------------------------------------
Thomas A. Humphreys
--------------------------------------
Byung-Kil Joe
--------------------------------------
Evan S. Lobel
16
<PAGE>
--------------------------------------
William H. Lobel
--------------------------------------
Gregory McCurdy
--------------------------------------
Jim Metropolous
--------------------------------------
Michael Niro
--------------------------------------
Judith M. Schaaf
--------------------------------------
Eric Schumacher
--------------------------------------
Andrew Tobias
<PAGE>
--------------------------------------
David J. Weinberger
--------------------------------------
Peter Wilson
--------------------------------------
Michael A. King
17
<PAGE>
SCHEDULE I
EXISTING STOCKHOLDERS
Number of Shares
Name of Common Stock
- ---- ----------------
Steven Haimowitz, M.D. 6,087,030
Matthew Caleb, M.D. 2,608,737
Spydre Technologies LLC 325,000
Gorann LLC 675,000
Franco Foti 250,000
Janice Lazo 250,000
Brown & Wood Ventures 166,667
Other 788,081
Sch-I
<PAGE>
SCHEDULE II
INVESTOR SCHEDULE
Number of Shares
Name and Address of Series A Preferred Stock
- ---------------- ---------------------------
SEAL Holdings Corporation
5601 North Dixie Highway
Suite 411
Fort Lauderdale, FL 33334 3,211,453
Sch-II
<PAGE>
SCHEDULE III
ASSIGNEES OF INVESTOR
2
<PAGE>
HEALTHOLOGY, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
March 1, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Stock...............................................1
1.1 Sale and Issuance of Series A Preferred Stock....................1
1.2 Closing Date.....................................................1
2. Representations and Warranties of the Company............................2
2.1 Organization, Good Standing and Qualification....................2
2.2 Capitalization...................................................2
2.3 Subsidiaries.....................................................3
2.4 Authorization....................................................3
2.5 Valid Issuance of Preferred and Common Stock.....................3
2.6 Third Party Consents.............................................3
2.7 Litigation.......................................................4
2.8 Employees........................................................4
2.9 Patents and Trademarks...........................................5
2.10 Compliance with Other Instruments................................5
2.11 Permits..........................................................6
2.12 Registration Rights..............................................6
2.13 Title to Property and Assets.....................................6
2.14 Brokers or Finders...............................................6
2.15 Corporate Documents..............................................6
2.16 Agreements; Action...............................................6
2.17 Related-Party Transactions.......................................7
2.18 Tax Returns, Payments and Elections..............................7
2.19 Minute Books.....................................................7
2.20 Financial Statements.............................................8
2.21 Changes..........................................................8
2.22 Manufacturing and Marketing Rights...............................9
2.23 Disclosure to Investor...........................................9
2.24 Year 2000 Compatibility.........................................10
2.25 Use of Proceeds.................................................10
2.26 Software........................................................10
2.27 Customer Warranties.............................................10
2.28 Disclosure......................................................11
3. Representations and Warranties of the Investor..........................11
3.1 Experience......................................................11
3.2 Investment......................................................11
3.3 Accredited Investor.............................................11
3.4 Rule 144........................................................11
3.5 No Public Market................................................12
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
3.6 Access to Data..................................................12
3.7 Authorization...................................................12
4. Conditions of Investor's Obligations....................................12
4.1 Representations and Warranties..................................12
4.2 Performance.....................................................12
4.3 Compliance Certificate..........................................13
4.4 By-laws.........................................................13
4.5 Board of Directors..............................................13
4.6 Opinion of Company Counsel......................................13
4.7 Investor's Rights Agreement.....................................13
4.8 Stockholders' Agreement.........................................13
4.9 Blue Sky........................................................13
4.10 Proceedings and Documents.......................................13
4.11 Lock-Up Agreements..............................................13
5. Conditions of the Company's Obligations.................................14
5.1 Representations and Warranties..................................14
5.2 Payment of Purchase Price.......................................14
5.3 Blue Sky........................................................14
5.4 Investor's Rights Agreement.....................................14
5.5 Stockholders' Agreement.........................................14
5.6 Proceedings and Documents.......................................14
5.7 Lock-Up Agreement...............................................14
6. Miscellaneous...........................................................14
6.1 Put.............................................................14
6.2 Governing Law...................................................15
6.3 Survival of Warranties; Indemnification.........................15
6.4 Successors and Assigns..........................................15
6.5 Entire Agreement; Amendment.....................................15
6.6 Notices, Etc....................................................16
6.7 Delays or Omissions.............................................16
6.8 Finder's Fee....................................................16
6.9 Attorneys' Fees.................................................16
6.10 Counterparts....................................................16
6.11 Severability of this Agreement..................................17
6.12 Co-Investment Right.............................................17
6.13 Further Assurances..............................................17
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
Exhibit A.........Investor Schedule
Exhibit B.........Certificate of Designation
Exhibit C.........Investor's Rights Agreement
Exhibit D.........Stockholders' Agreement
Exhibit E.........Opinion of Company Counsel
-iii-
<PAGE>
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of the 1st day of March, 2000, by and between HEALTHOLOGY, INC., a
Delaware corporation (the "Company"), with principal offices located at 361
Broadway, New York, NY 10013, and the Investor whose name and address is set
forth on the Investor Schedule attached as Exhibit A hereto (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series A Preferred Stock.
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing Date (as defined below) the Certificate of
Designation in the form attached hereto as Exhibit B (the "Certificate").
(b) Subject to the terms and conditions of this Agreement, the
Investor agrees to purchase, and the Company agrees to sell and issue to the
Investor, the number of shares of the Company's Series A Preferred Stock (the
"Series A Preferred") set forth opposite the Investor's name on Exhibit A hereto
for the purchase price set forth thereon. The shares of Series A Preferred are
referred to herein as the "Shares."
1.2 Closing Date.
(a) The purchase and sale of the Shares shall take place at the
offices of Brown & Wood LLP, One World Trade Center, New York, New York, at
10:00 a.m., on March 1, 2000, or at such other time and place as the Company and
the Investor mutually agree upon orally or in writing (which time and place are
designated as the "Closing Date"). At the Closing Date the Company shall deliver
to the Investor certificates, registered in such names and denominations as
requested, representing 3,211,453 shares to be purchased by the Investor against
payment of the purchase price therefor by check or wire transfer of immediately
available funds.
(b) Notwithstanding Subsection 1.2(a), if key-man insurance (the
"Insurance") in the amount of $1.0 million ($5.0 million if such request is not
expected to delay the issuance of the $1.0 million policy) on the life of Steven
Haimowitz, M.D. is not issued by the Closing Date, the Shares will be purchased
in two installments: (i) $1,000,000 (1,000,000 Shares to be purchased on the
Closing Date) and (ii) $2,211,453 (2,211,453 Shares to be purchased at a later
date, the "Second Closing Date") in accordance with the following: (i) if the
Company obtains a binder or a policy evidencing the Insurance by 5:00 p.m.
E.S.T. on March 21, 2000, then the Second Closing Date shall be five (5)
business days following the delivery to Investor of such binder or policy and
(ii) if the Company does not obtain a binder or policy evidencing the Insurance
by 5:00 p.m. E.S.T. on March 21, 2000, then Investor shall have until March 28,
2000 to elect to purchase the remaining shares. During such five business day
period, the Company shall provide the Investor all information known to it
regarding the status of the Insurance. At the end of such five business day
period, if a binder or a policy for the Insurance has not been issued, and the
Investor has elected not to purchase the remaining 2,211,453 Shares, the
Investor will lose its right to fund such remaining Shares.
<PAGE>
(c) Immediately following the Closing Date, the Company shall,
and shall cause Steven Haimowitz, M.D. to, notify in writing EAC Brokerage, Inc.
and North American Life Insurance Company (together, the "Insurance Companies")
that each waives all confidentiality and nondisclosure with respect to, and
authorizes the Insurance Companies to discuss with Investor representatives, the
Insurance, the applications for such Insurance, the results of all examinations
and tests performed in connection therewith and the status of the application
process.
2. Representations and Warranties of the Company. Except as set forth
in the Schedule of Exceptions delivered separately to the Investor, the Company
(including, for purposes hereof, its predecessor, Healthology, LLC) hereby
represents and warrants as follows:
2.1 Organization, Good Standing 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 corporate power and authority to
own and operate its properties and assets, and to carry on its business as
currently conducted and as proposed to be conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on its
business or properties. True and accurate copies of the Company's Certificate of
Incorporation and By-laws, each as amended and in effect at the Closing Date,
have been delivered to the Investor.
2.2 Capitalization. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, of which 11,150,505 shares are
issued and outstanding immediately prior to the Closing Date and 15,000,000
shares of Preferred Stock, 3,500,000 shares of which are designated as Series A
Preferred, none of which are issued and outstanding. All such issued and
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable. The Company has reserved 3,211,453 shares of Series A
Preferred for issuance hereunder. The Company has further reserved 2,600,000
shares of Common Stock for issuance to employees, officers, directors and
doctors pursuant to the Company's Non-Qualified Option Plan, of which 995,310
shares of Common Stock are subject to issuance upon exercise of options that are
currently outstanding; and 500,000 shares of Common Stock are reserved for
issuance upon exercise of outstanding warrants to purchase Common Stock. Except
as set forth in the Schedule of Exceptions, as delivered separately to the
Investor, there are no outstanding rights, options, warrants, convertible
securities, preemptive rights, rights of first refusal or other rights for the
purchase or acquisition from the Company of any securities of the Company. All
outstanding shares have been issued in compliance with state and federal
securities laws. No outstanding options, warrants or other securities
exercisable for or convertible into Common Stock or any other equity securities
of the Company provide for acceleration or vesting, or require anti-dilution
adjustments, by reason of the consummation of the transactions contemplated
hereby, or any change of control, merger, sale of assets or similar transaction.
The Company is not a party or subject to any agreement or understanding and, to
the best of the Company's knowledge, there is no agreement or understanding
between any persons or entities that affects or relates to the voting or giving
of written consent with respect to any security or voting by a director of the
Company.
-2-
<PAGE>
2.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. Except as disclosed in Section 2.3 of the Schedule of
Exceptions, the Company is not a party to any written or oral agreement
governing its participation in any joint venture, partnership, or similar
arrangement.
2.4 Authorization. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of the Certificate, the Investor's Rights Agreement
between the Company and the Investor and the Stockholders' Agreement by and
among the Company, its stockholders and the Investor, each of even date
herewith, (the "Affiliated Agreements") and this Agreement, the performance of
all obligations of the Company hereunder and thereunder, and the authorization,
issuance (or reservation for issuance), sale and delivery of the Shares being
sold hereunder and the Common Stock issuable upon conversion of the Series A
Preferred has been taken or will be taken prior to the Closing Date, and this
Agreement and the Affiliated Agreements constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, subject to: (i) judicial principles limiting the availability of specific
performance, injunctive relief, and other equitable remedies; (ii) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect generally relating to or affecting creditors' rights; and (iii)
limitations on the enforceability of the indemnification provisions of this
Agreement and the Investor's Rights Agreement.
2.5 Valid Issuance of Preferred and Common Stock. The Shares that
are being purchased by the Investor hereunder, when issued, sold and delivered
in accordance with the terms of this Agreement for the consideration expressed
herein will be duly and validly issued, fully paid, and nonassessable, will have
the rights, preferences, privileges and restrictions described in the
Certificate, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Affiliated Agreements and
under applicable state and federal securities laws. The Common Stock issuable
upon conversion of the Series A Preferred purchased under this Agreement has
been duly and validly reserved for issuance and, upon issuance in accordance
with the terms of the Certificate, will be duly and validly issued, fully paid,
and nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Affiliated Agreements and
under applicable state and federal securities laws. The issuance and delivery of
the Shares and the Common Stock issuable upon conversion thereof, as applicable,
are not subject to any preemptive or other similar rights or any liens or
encumbrances, except for preemptive rights that have been waived, which are
listed on Section 2.5 of the Schedule of Exceptions.
-3-
<PAGE>
2.6 Third Party Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration,
notice to or filing with, any third party or federal, state or local
governmental authority on the part of the Company is required in connection with
the offer, sale or issuance of the Shares (and the Common Stock issuable upon
conversion of the Shares), or the consummation of any other transaction
contemplated hereby, including, without limitation, the merger of the Company's
predecessor, Healthology, L.L.C., into the Company, except for the following:
(i) the filing of the Certificate in the office of the Secretary of State of
Delaware, which shall be filed by the Company on or prior to the Closing Date;
(ii) the filing of such notices as may be required under the Securities Act of
1933, as amended (the "Securities Act"); and (iii) the compliance with other
applicable state securities laws, which compliance will have occurred within the
appropriate time periods therefor. Based in part on the representations of the
Investor set forth in Section 3 below, the offer, sale and issuance of the
Shares in conformity with the terms of this Agreement are exempt from the
registration requirements of Section 5 of the Securities Act and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemptions.
2.7 Litigation. There is no action, suit, proceeding or
investigation pending or, to the best of the Company's knowledge, currently
threatened before any court, administrative agency or other governmental body
against the Company, nor is the Company aware that there is any basis for the
foregoing. The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or threatened (or any basis therefor known
to the Company) involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
intellectual property, information or techniques allegedly proprietary to any of
their former employers, or their obligations under any agreements with their
former employers. The Company is not a party or subject to, and none of its
assets is bound by, the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company currently pending or that the
Company intends to initiate.
2.8 Employees. (a) No employees of the Company are represented by
any labor union or covered by any collective bargaining agreement. There is no
pending or, to the best of the Company's knowledge, threatened labor dispute or
labor union organizing activity involving the Company and any of its employees.
To the best of the Company's knowledge, none of the Company's employees are
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of the Company or that would conflict
in any manner with the Company's business as proposed to be conducted. To the
best of the Company's knowledge, neither the execution nor delivery of this
Agreement or the Affiliated Agreements, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed to be conducted, will conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any of such employees is now
obligated;
-4-
<PAGE>
(b) Except as stated in Section 2.8(b) of the Schedule of
Exceptions, the Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. The employment of each officer and employee
of the Company is terminable at the will of the Company. The Company has
complied in all material respects with all applicable state and federal equal
employment opportunity laws and with all other laws related to employment. To
the best of the Company's knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company or otherwise; and to the best of the Company's knowledge the
continued employment by the Company of its present employees, and the
performance of the Company's contracts with its independent contractors, will
not result in any such violation. The Company has not received any notice
alleging that any such violation has occurred. No employee of the Company has
been granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company;
(c) Neither the Company nor any of its subsidiaries have, nor
have they ever had, any Employee Benefit Plan as defined in the Employee
Retirement Income Security Act of 1974, as amended, and no other employee
benefit plan or program.
2.9 Patents and Trademarks. The Company owns or possesses or has
adequate licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights, domain names, URLs, trade secrets, information,
proprietary rights and processes necessary for its business as now conducted and
as proposed to be conducted without, to its knowledge, any conflict with or
infringement of the rights of others. A list of all patents, patent
applications, trademarks, trademark applications, URLs and domain names of the
Company (or licenses or rights to so use the patents, trademarks, URLs or domain
names of others) is set forth on Section 2.9 of the Schedule of Exceptions.
There are no outstanding options, licenses, or agreements of any kind relating
to the foregoing, nor is the Company bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity nor is the Company aware that there is any basis for
the foregoing. The Company does not and will not need to utilize any inventions
of any of its employees (or people it currently intends to hire) made prior to
their employment by the Company that have not previously been fully and
exclusively assigned to the Company without restrictions.
2.10 Compliance with Other Instruments. The Company is not in
violation or default of any provision of its Certificate of Incorporation or
By-laws, each as amended and in effect on and as of the Closing Date. The
Company is not in violation or default of any material provision of any
instrument, mortgage, deed of trust, loan, contract, commitment, judgment,
decree, order or obligation to which it is a party or by which it or any of its
properties or assets are bound or in violation in any material respect of any
provision of any federal, state or local statute, rule or governmental
regulation. The execution, delivery and performance of and compliance with this
Agreement and the Affiliated Agreements, and the issuance and sale of the Shares
and the issuance of Common Stock upon the conversion thereof, will not result in
any such violation, be in conflict with or constitute, with or without the
passage of time or giving of notice, a default under any such provision, require
any consent or waiver under any such provision (other than any consents or
waivers that have been obtained), or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company pursuant to any such provision. The Company has avoided every condition,
and has not performed any act, the occurrence of which would result in the
Company's loss of any material right granted under any assignment, license,
distribution or other agreement.
-5-
<PAGE>
2.11 Permits. The Company has all material franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, and the Company believes it can obtain, without undue
burden or expense, any similar authority for the conduct of its business as
planned to be conducted. The Company is not in default under any of such
franchises, permits, licenses, or other similar authority and neither the
execution, delivery nor performance of this Agreement and the Affiliated
Agreements and the consummation of the transactions contemplated hereby and
thereby will result in any suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
2.12 Registration Rights. Except as provided in the Investor's
Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
2.13 Title to Property and Assets. The Company has good and
marketable title to all of its properties and assets free and clear of all
mortgages, liens and encumbrances, except liens for current taxes and
assessments not yet due. With respect to the properties and assets it leases,
the Company is in compliance with such leases and holds a valid leasehold
interest free of all liens, claims or encumbrances, and to the best knowledge of
the Company, all other parties to the leases are in compliance with all material
terms of such leases. The Company's properties and assets are in good condition
and repair in all material respects.
2.14 Brokers or Finders. The Company has not agreed to incur,
directly or indirectly, any liability for brokerage or finders' fees, agents'
commissions or other similar charges in connection with this Agreement or any of
the transactions contemplated hereby.
2.15 Corporate Documents. Except for amendments necessary to satisfy
representations and warranties or conditions contained herein (the form of which
amendments has been approved by counsel to the Investor), the Certificate of
Incorporation and By-laws of the Company are in the form previously provided to
the Investor or its counsel.
2.16 Agreements; Action. (a) Except for agreements explicitly
contemplated hereby and by the Affiliated Agreements, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound that may (i) involve obligations
(contingent or otherwise) of, or payments to the Company in excess of, $25,000,
(ii) involve the license of any patent, copyright, trade secret or other
proprietary right to or from the Company, (iii) involve provisions restricting
or affecting the development, manufacture or distribution of the Company's
products or services, (iv) involve indemnification by the Company with respect
to infringement of proprietary rights, or (v) otherwise have a material effect
on the Company's business or financial condition.
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(c) The Company has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $25,000 or, in the case of
indebtedness and/or liabilities individually less than $25,000, in excess of
$25,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
2.17 Related-Party Transactions. No employee, officer, or director
of the Company or member of his or her immediate family is indebted to the
Company, nor, except for the reimbursement of expenses in connection with the
ordinary course of business, is the Company indebted (or committed to make loans
or extend or guarantee credit) to any of them. To the best of the Company's
knowledge, none of such persons has any direct or indirect ownership interest in
any firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation that competes
with the Company, except that employees, officers, or directors of the Company
and the members of their immediate families may own stock in publicly traded
companies that may compete with the Company. No member of the immediate family
of any officer or director of the Company is directly or indirectly interested
in any material contract with the Company.
2.18 Tax Returns, Payments and Elections. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith that are listed in
the Schedule of Exceptions. To the Company's knowledge, no tax liens or other
claims exist with respect to any assets owned by the Company. The Company has
not elected pursuant to the Code, to be treated as a Subchapter S corporation or
a collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Code.
2.19 Minute Books. The minute books of the Company provided to the
Investor contain a complete summary of all meetings of directors and
shareholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
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2.20 Financial Statements. The Company has delivered to and made
available to the Investor's satisfaction, its audited financial statements
(prepared by Grant Thornton LLP in accordance with generally accepted accounting
principals) at December 31, 1999 (referred to herein as the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principals applied on a consistent basis
throughout the periods indicated and with each other. The Financial Statements
fairly present the financial condition and operating results of the Company as
of the dates, and for the periods, indicated therein. Except as set forth in the
Financial Statements, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to December 31, 1999, and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of the Company. Except
as disclosed in the Financial Statements, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.21 Changes. Except as set forth in the Schedule of Exceptions,
since December 31, 1999, there has not been:
(a) any change in the assets, liabilities, financial condition
or operation results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, affecting the assets, properties, financial condition, operating
results, prospects or business of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(e) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
(f) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(g) except for licenses and co-branding arrangements entered
into in the ordinary course of business, any sale, assignment or transfer of any
patents, trademarks, copyrights, trade secrets or other intangible assets;
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(h) any resignation or termination of employment of any key
officer of the Company; and the Company, to the best of its knowledge, does not
know of the impending resignation or termination of employment of any such
officer;
(i) receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company;
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company to or for the
benefit of its stockholders, employees, officers or directors, or any members of
their immediate families, other than travel advances and other advances made in
the ordinary course of its business;
(l) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(m) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
assets, properties, financial condition, operating results, business or
prospects of the Company (as such business is presently conducted and as it is
proposed to be conducted);
(n) any warranties or indemnifications or other contingent
liabilities provided to any party, other than in the ordinary course of
business; or
(o) any agreement or commitment by the Company to do any of the
things described in this Section 2.21.
2.22 Manufacturing and Marketing Rights. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market or sell
its products.
2.23 Disclosure to Investor. The Company has fully provided the
Investor with all the information that the Investor has requested for deciding
whether to purchase the Series A Preferred and all information that the Company
believes is reasonably necessary to enable the Investor to make such decision.
Any information provided to the Investor in the business plan of the Company,
including any financial projections, are merely descriptions and estimates made
by the Company and are not intended to be commitments of the Company; provided,
however, that the Company represents that such business plan and projections
were prepared in good faith and that the Company reasonably believes there is a
reasonable basis for such business plan and projections.
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2.24 Year 2000 Compatibility. To the Company's knowledge, as of the
Closing Date, all Date-Sensitive Systems are Year 2000 Compliant, as such term
is defined below, except as such noncompliance would not materially adversely
effect the Company. "Date Data" means any data of any type that includes date
information or which is otherwise derived from, dependent on or related to date
information. "Date-Sensitive System" means any software that processes any Date
Data that the Company has itself developed for its internal use, or that the
Company sells, leases, licenses, assigns or otherwise provides, or the provision
or operation of which the Company provides the benefit, to its customers. "Year
2000 Compliant" means that each such system accurately processes all Date Data,
including for the twentieth and twenty-first centuries, without loss or any
functionality or performance, including but not limited to calculating,
comparing, sequencing, storing and displaying such Date Data (including all leap
year considerations), when used as a stand-alone system or in combination with
other software or hardware.
2.25 Use of Proceeds. The proceeds from the sale of the Shares will
be used to fund the following prior to the end of 2000: (i) continued direct and
indirect marketing of the Company; (ii) additional acquisition and development
of enhanced Internet software; (iii) further recruitment of, and initial
operating expenses for, key personnel to expand the products and services
offered and the Company's Web Site; and (iv) capital purchases of computers,
office furniture and equipment, as well as for working capital (including
consulting services for Web Site functionality enhancements) and other general
corporate purposes.
2.26 Software. The current software applications used by the Company
in the operation of its business (other than "off-the-shelf" software available
to the general public by purchase or download), as set forth and described on
Section 2.26 of the Schedule of Exceptions hereto (the "Software"), have been
designed or developed by the Company's management information or development
staff or by consultants on the Company's behalf, is original and capable of
copyright protection in the United States, and the Company has complete rights
to and ownership of such software, except as indicated on the Schedule of
Exceptions. To the Company's knowledge, no part of any such software is an
imitation or copy of, or infringes upon, the software of any other person or
violates or infringes upon any common law or statutory rights of any other
person, including, without limitation, rights relating to defamation,
contractual rights, copyrights, trade secrets, and rights or privacy or
publicity. To the Company's knowledge, the Software, to the extent it is
licensed from any third party licensor or constitutes "off-the-shelf" software,
is held by the Company legitimately. To the Company's knowledge, all of the
Company's computer hardware has legitimately-licensed software installed
therein. To the Company's knowledge, the Software is free from any software
defect or programming or documentation error which might have a materially
adverse effect on the Company.
2.27 Customer Warranties. There are no pending, nor to the knowledge
of the Company, threatened, claims under or pursuant to any warranty, whether
express or implied, on products or services sold prior to the Closing Date by
the Company that are not disclosed or referred to in the Financial Statements
and that are not fully reserved against. There is no reason to expect an
increase in warranty claims in the future. The standard terms and conditions of
the Company's warranties have been delivered to counsel for the Investor.
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2.28 Disclosure. Neither this Agreement, nor the Schedule of
Exceptions, nor any written materials supplied to Investor by the Company,
contains any untrue statement of a material fact or omits a material fact known
to the Company necessary to make each statement contained herein or therein not
misleading. There is no fact which the Company has not disclosed to the Investor
herein and of which the Company, or any of its officers or directors is aware
and which would reasonably be anticipated to have a material adverse effect on
the Company. The Company has disclosed to the Investor all material information
relating to the business of the Company or the transactions contemplated by this
Agreement which a prudent investor would reasonably require in evaluating an
equity investment in the Company.
3. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company with the respect to the transactions
contemplated hereby that:
3.1 Experience. The Investor is experienced in evaluating start-up
companies such as the Company, is able to fend for itself in transactions such
as the one contemplated by this Agreement, has such knowledge and experience in
financial and business matters that Investor is capable of evaluating the merits
and risks of Investor's prospective investment in the Company, and has the
ability to bear the economic risks of the investment.
3.2 Investment. The Investor is acquiring the Shares (and the Common
Stock issuable upon conversion of the Shares) for investment for such Investor's
own account and not with the view to, or for resale in connection with, any
distribution thereof. Such Investor understands that the Shares (and the Common
Stock issuable upon conversion of the Shares) have not been registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent as expressed herein. Such Investor
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to any
third person with respect to any of the Shares (or any Common Stock acquired
upon conversion of the Shares). Such Investor understands and acknowledges that
the offering of the Shares pursuant to this Agreement and any issuance of Common
Stock on conversion of the Shares will not be registered under the Securities
Act on the ground that the sale provided for in this Agreement and the issuance
of securities hereunder is exempt from the registration requirements of the
Securities Act.
3.3 Accredited Investor. The Investor is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
3.4 Rule 144. The Investor acknowledges that the Shares (and the
Common Stock issuable upon conversion of the Shares) must be held indefinitely
unless subsequently registered under the Securities Act or an exemption from
such registration is available. Such Investor is aware of the provisions of Rule
144 promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions. Such Investor covenants that, in the absence of an effective
registration statement covering the stock in question, such Investor will sell,
transfer, or otherwise dispose of the Shares (and any Common Stock issued on
conversion of the Series A Preferred) only in a manner consistent with such
Investor's representations and covenants set forth in this Section 3. In
connection therewith, such Investor acknowledges that the Company will make a
notation on its stock books regarding the restrictions on transfers set forth in
this Section 3 and will transfer securities on the books of the Company only to
the extent not inconsistent therewith.
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3.5 No Public Market. The Investor understands that no public market
now exists for any of the securities issued by the Company, and that the Company
has made no assurances that a public market will ever exist for any of the
Company's securities.
3.6 Access to Data. The Investor has received and reviewed
information about the Company and has had an opportunity to discuss the
Company's business, management and financial affairs with its management and to
review the Company's facilities. Except for the representations and warranties
made by the Company in Section 2 hereof, such Investor understands that such
discussions, as well as any written information issued by the Company, were
intended to describe the aspects of the Company's business and prospects which
the Company believes to be material, but were not necessarily a thorough or
exhaustive description.
3.7 Authorization. This Agreement, when executed and delivered by
such Investor, will constitute a valid and legally binding obligation of the
Investor, enforceable in accordance with its terms, subject to: (i) judicial
principles respecting election of remedies or limiting the availability of
specific performance, injunctive relief, and other equitable remedies; (ii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect generally relating to or affecting creditors' rights; and
(iii) limitations on the enforceability of the indemnification provisions of
this Agreement and the Investor's Rights Agreement.
4. Conditions of Investor's Obligations. The obligations of the
Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing Date (and any Second Closing Date, if
applicable) of each of the following conditions, the waiver of which shall not
be effective unless the Investor consents in writing thereto:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing Date (and the Second Closing Date, if applicable) with the same effect
as though such representations and warranties had been made on and as of the
date of such Closing Date (or Second Closing Date, if applicable).
4.2 Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing Date
(and the Second Closing Date, if applicable).
4.3 Compliance Certificate. The President of the Company shall
deliver to the Investor at the Closing Date (and the Second Closing Date, if
applicable) a certificate stating that the conditions specified in Sections 4.1
and 4.2 have been fulfilled.
4.4 By-laws. The By-laws of the Company shall provide that the Board
of Directors of the Company shall consist of no more than nine (9) persons and
that such provision may not be amended without the consent of the Investor.
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4.5 Board of Directors. Effective upon the Closing Date, the
Company's Board of Directors shall include two (2) representatives selected by
the Investor; provided, however, that the Investor shall no longer have the
right to elect two (2) directors if, after the Company's satisfaction of all the
conditions to the Second Closing Date as set forth in this Agreement, the
Investor fails to purchase the remaining 2,211,453 Shares by the Second Closing
Date (if applicable). Notwithstanding the foregoing, in the event that the
Company fails to deliver to Investor a binder or policy evidencing the Insurance
by March 21, 2000 and Investor does not purchase the remaining 2,11,453 Shares,
then Investor shall have the right to elect one (1) director.
4.6 Opinion of Company Counsel. The Investor shall have received
from Brown & Wood LLP, counsel for the Company, an opinion, dated as of the
Closing Date, in the form attached hereto as Exhibit E.
4.7 Investor's Rights Agreement. The Company and the Investor shall
have entered into the Investor's Rights Agreement. Such agreement shall contain
provisions acceptable to the Investor regarding the provision of financial
information to the Investor and the agreement by the Company to enter into
employment agreements with and to provide key man insurance on the lives of
certain officers of the Company.
4.8 Stockholders' Agreement. The Company, at least 66 2/3% of the
Existing Stockholders, as such term is defined in the Stockholders' Agreement,
and the Investor shall have executed the Stockholders' Agreement on or prior to
the Closing Date. However, the Company will use its best efforts to make sure
that each of the Existing Stockholders become parties to such agreement after
the Closing Date.
4.9 Blue Sky. The Company shall have obtained all necessary permits
and qualifications, if any, or secured an exemption therefrom, required by any
state or country for the offer and sale of the Shares.
4.10 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated hereby, and all documents and
instruments incident to these transactions, shall be reasonably satisfactory in
substance to the Investor and its counsel.
4.11 Lock-Up Agreements. The Company will cause Steven M. Haimowitz,
MD, Matthew R. Caleb, MD, Franco Foti, Janice Lazo, Brown & Wood Ventures,
Gorann, LLC and Spydre LLC to agree to execute lock-up agreements with the
Company pursuant to which such holders will agree, if so requested by the
Company or any underwriters' representative in connection with the first public
offering of the Common Stock of the Company, not to sell or otherwise transfer
any securities of the Company during a period of up to one hundred and eighty
(180) days following the effective date of the registration statement.
5. Conditions of the Company's Obligations. The obligations of the
Company to the Investor under this Agreement are subject to the fulfillment on
or before the Closing Date (and the Second Closing Date, if applicable) of each
of the following conditions by the Investor:
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5.1 Representations and Warranties. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing Date (and the Second Closing Date, if applicable) with the same effect
as though such representations and warranties had been made on and as of the
Closing Date (or the Second Closing Date, if applicable).
5.2 Payment of Purchase Price. The Investor shall have delivered the
purchase price specified in Section 1.2 against delivery of the Shares by the
Company to the Investor. The Investor's delivery of the purchase price shall be
in the form of a check or wire transfer.
5.3 Blue Sky. The Company shall have obtained all necessary permits
and qualifications, if any, or secured an exemption therefrom, required by any
state or country for the offer and sale of the Shares.
5.4 Investor's Rights Agreement. The Investor shall have executed
the Investor's Rights Agreement on or prior to the Closing Date.
5.5 Stockholders' Agreement. The Investor shall have executed the
Stockholders' Agreement on or prior to the date of the Closing Date.
5.6 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated hereby, and all documents and
instruments incident to these transactions, shall be reasonably satisfactory in
substance to the Company and its counsel.
5.7 Lock-Up Agreement. The Investor will agree to execute a lock-up
agreement with the Company pursuant to which it will agree, if so requested by
the Company or any underwriters' representative in connection with the first
public offering of the Common Stock of the Company, not to sell or otherwise
transfer any securities of the Company during a period of up to one hundred and
eighty (180) days following the effective date of the registration statement.
6. Miscellaneous.
6.1 Put. (a) If fraud is committed by or on behalf of the Company in
connection with this Agreement or the Affiliated Agreements or if the Company
fails to perform in any material respect its obligations under this Agreement or
the Affiliated Agreements to provide information or to provide pre-emptive,
tag-along or registration rights in accordance with the terms of this Agreement
and the Affiliated Agreements, and such failure remains uncured twenty (20) days
after written notice from Investor, then Investor may put its Shares (or any
Common Stock acquired upon conversion of the Shares) to the Company at a price
equal to the greater of (i) the original purchase price plus any dividends
declared and unpaid or (ii) the fair market value of the Shares (or any Common
Stock acquired upon conversion of the Shares). This right is in addition to any
other remedy at law or in equity available to the Investor.
(b) If the Shares are publicly traded, the value of the Shares
shall be the average closing price of such Shares during the previous five (5)
trading days prior to the breach. If there is no public market for the Shares,
the fair market value of such Shares will be valued by an appraiser of
recognized standing selected by the Investor and the Company or, if they cannot
agree on an appraiser within ten (10) days, each shall select an appraiser of
recognized standing and the two appraisers shall designate a third appraiser of
recognized standing, whose appraisal shall be determinative of such value. The
cost of such appraisal shall be shared equally by the Investor and the Company.
If the time for the closing of the put has expired but for the determination of
the value of the purchase price, then such closing shall be held on or prior to
the fifth (5) business day after such valuation shall have been made pursuant to
this subsection.
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6.2 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of New York.
6.3 Survival of Warranties; Indemnification. The warranties,
representations and covenants of the Company and Investor contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing Date (and any Second Closing Date, if applicable) and
shall in no way be affected by any investigation of the subject matter thereof
made by or on behalf of the Investor or the Company. The parties agree to
indemnify one another (and each officer, director, employee and affiliate of
each party) for, and hold each other harmless from and against: (i) any and all
damages, losses and other liabilities of any kind, including, without
limitation, judgments and costs of settlement, and (ii) any and all
out-of-pocket costs and expenses of any kind, including, without limitation,
reasonable fees and disbursements of counsel for such party (all of which
expenses shall be periodically reimbursed as incurred), in each case, suffered
or incurred in connection with (A) any investigative, administrative or judicial
proceeding or claim or action (collectively, a "claim") brought or threatened
relating to or arising out of the Agreement or the Affiliated Agreements, or the
transactions contemplated hereby and thereby or (B) any inaccuracy in any
representation or warranty of the parties made or incorporated by reference in
the Agreement or the Affiliated Agreements or any breach by the parties of any
covenant or agreement made or incorporated by reference in the Agreement or the
Affiliated Agreements.
6.4 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
6.5 Entire Agreement; Amendment. This Agreement, the Affiliated
Agreements and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement among the parties with regard to the
subjects hereof and thereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party affected thereby.
6.6 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, return receipt requested, or otherwise
delivered by hand or by messenger, addressed (a) if to the Investor, at the
Investor's address set forth on Exhibit A, or at such other address as said
Investor shall have furnished to the Company in writing, with a copy to Stuart
Rosow, Proskauer Rose LLP, 1585 Broadway, New York, NY 10036, or (b) if to any
other holder of any Shares, at such address as such holder shall have furnished
the Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares who has so
furnished an address to the Company, or (c) if to the Company, at its address
set forth on the first page of this Agreement addressed to the attention of the
President, or at such other address as the Company shall have furnished to the
Investor. If notice is provided by mail, notice shall be deemed to be given upon
proper deposit with the United States mail.
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6.7 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to the Company or to any holder of any Shares shall
impair any such right, power or remedy of the Company or such holder, nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of the Company or any
holder of any breach or default under this Agreement, or any waiver on the part
of the Company or any holder of any provisions or conditions of this Agreement,
must be in writing and shall be effective only to the extent specifically set
forth in such writing or as provided in this Agreement. All remedies, either
under this Agreement or by law or otherwise afforded to the Company or any
holder, shall be cumulative and not alternative.
6.8 Finder's Fee. The Company and the Investor shall indemnify and
hold each other harmless from any liability for any commission or compensation
in the nature of a finder's fee (including the costs, expenses and legal fees of
defending against such liability) for which the Company or the Investor, or any
of their respective partners, employees, or representatives, as the case may be,
is responsible.
6.9 Attorneys' Fees. In the event that any dispute among the parties
to this Agreement should result in litigation, 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 and the transactions contemplated hereby, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.
6.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all parties hereto,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
6.11 Severability of this Agreement. In the event that any provision
of this Agreement becomes or is declared by a court of competent jurisdiction to
be illegal, unenforceable or void, this Agreement will continue in full force
and effect without said provision and the parties agree to replace such
provision with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such provisions;
provided that no such severability will be effective against a party if it
materially and adversely changes the economic benefits of this Agreement to such
party.
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<PAGE>
6.12 Co-Investment Right. Certain members of the management, board
of directors and employees involved in the transactions contemplated by this
Agreement of SEAL Holdings Corporation, as well as certain members of Benedetto,
Gartland & Company, Inc. involved in the transactions contemplated by this
Agreement, each of whom must be an accredited investor, shall have the right, in
the aggregate, to purchase up to 150,000 shares of the Company's Common Stock at
a price of $1.00 per share, exercisable within thirty (30) days after the
Closing Date. The Company has also determined to sell 50,000 shares of Common
Stock, in a separate transaction, to Patrick Campbell. These sales shall take
place pursuant to supplementary purchase agreements whereby such persons agree
to make similar representations to those made by the Investor and the Company
agrees to make similar representations to them. Such persons shall also become
parties to the Stockholders' Agreement and have the same rights as the Existing
Stockholders therein. Such persons will not have any of the rights granted to
the Investor in the Investor's Rights Agreement. The Investor shall receive no
preemptive rights to purchase its pro rata portion of the foregoing 200,000
shares of Common Stock.
6.13 Further Assurances. The parties shall cooperate and take such
actions, and execute such other documents as either may reasonably request in
order to carry out the provisions or purposes of this Agreement.
(This space intentionally left blank.)
-17-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEALTHOLOGY, INC.
By: /s/ Steven M. Haimowitz, MD
-------------------------------------
Steven M. Haimowitz, MD,
President and Chief Executive Officer
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INVESTOR:
SEAL HOLDINGS CORPORATION
By: /s/ Robert G. Tancredi, MD
--------------------------------------
Robert G. Tancredi, MD
President and Chief Executive Officer
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBIT A
INVESTOR SCHEDULE
<TABLE>
<CAPTION>
Number of Shares
of Series A Aggregate Purchase Price
Preferred Stock Price per of Series A Preferred
Name Purchased Share Stock Purchased
- ---- ----------------- --------- ------------------------
<S> <C> <C> <C>
SEAL Holdings Corporation 3,211,453 $1.00 $3,211,453
5601 North Dixie Highway
Suite 411
Fort Lauderdale, FL 33334
</TABLE>
<PAGE>
EXHIBIT B
CERTIFICATE OF DESIGNATION
<PAGE>
EXHIBIT C
INVESTOR'S RIGHTS AGREEMENT
<PAGE>
EXHIBIT D
STOCKHOLDERS' AGREEMENT
<PAGE>
EXHIBIT E
OPINION OF COMPANY COUNSEL
