UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)*
THE WELLCARE MANAGEMENT GROUP, INC.
-------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK
-------------------------------------------------------------------------------
(Title of Class of Securities)
949470 10 8
------------------------------------
(CUSIP Number)
Lawrence C. Tucker, Brown Brothers Harriman & Co.,
59 Wall Street, New York, New York 10005, (212) 493-8400
-------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 28, 1997
------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 35 Pages
Exhibit Index on Page 14
<PAGE>
SCHEDULE 13D
CUSIP No. 949470 10 8 Page 2 of 35 Pages
--------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The 1818 Fund II, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS* 00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
7 SOLE VOTING POWER -0-
NUMBER OF
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
The exact number of shares is not currently ascertainable,
as the Note is convertible into shares of Common Stock
based upon a formula which cannot yet be computed.
However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is
1,333,333 and 2,222,222, respectively.
9 SOLE DISPOSITIVE POWER -0-
10 SHARED DISPOSITIVE POWER
The exact number of shares is not currently ascertainable,
as the Note is convertible into shares of Common Stock
based upon a formula which cannot yet be computed.
However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is
1,333,333 and 2,222,222, respectively.
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
The exact number of shares is not currently ascertainable, as the Note is
convertible into shares of Common Stock based upon a formula which cannot
yet be computed. However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is 1,333,333 and
2,222,222, respectively.
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.44% of the Company's shares of Common Stock, assuming conversion of
the Note into the minimum number of shares issuable upon conversion.
26.04% of the Company's shares of Common Stock, assuming conversion of
the Note into the maximum number of shares issuable upon conversion.
14 TYPE OF REPORTING PERSON*
PN
- ------ --------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 949470 10 8 Page 3 of 35 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Brown Brothers Harriman & Co.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS* 00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
7 SOLE VOTING POWER -0-
NUMBER OF
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
The exact number of shares is not currently ascertainable,
as the Note is convertible into shares of Common Stock
based upon a formula which cannot yet be computed.
However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is
1,333,333 and 2,222,222, respectively.
9 SOLE DISPOSITIVE POWER -0-
10 SHARED DISPOSITIVE POWER
The exact number of shares is not currently ascertainable,
as the Note is convertible into shares of Common Stock
based upon a formula which cannot yet be computed.
However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is
1,333,333 and 2,222,222, respectively.
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
The exact number of shares is not currently ascertainable, as the Note is
convertible into shares of Common Stock based upon a formula which cannot
yet be computed. However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is 1,333,333 and
2,222,222, respectively.
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.44% of the Company's shares of Common Stock, assuming conversion of
the Note into the minimum number of shares issuable upon conversion.
26.04% of the Company's shares of Common Stock, assuming conversion of
the Note into the maximum number of shares issuable upon conversion.
14 TYPE OF REPORTING PERSON*
PN
- ------ --------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 949470 10 8 Page 4 of 35 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
T. Michael Long
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS* 00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION United States
7 SOLE VOTING POWER -0-
NUMBER OF
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
The exact number of shares is not currently ascertainable,
as the Note is convertible into shares of Common Stock
based upon a formula which cannot yet be computed.
However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is
1,333,333 and 2,222,222, respectively.
9 SOLE DISPOSITIVE POWER -0-
10 SHARED DISPOSITIVE POWER
The exact number of shares is not currently ascertainable,
as the Note is convertible into shares of Common Stock
based upon a formula which cannot yet be computed.
However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is
1,333,333 and 2,222,222, respectively.
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
The exact number of shares is not currently ascertainable, as the Note is
convertible into shares of Common Stock based upon a formula which cannot
yet be computed. However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is 1,333,333 and
2,222,222, respectively.
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.44% of the Company's shares of Common Stock, assuming conversion of
the Note into the minimum number of shares issuable upon conversion.
26.04% of the Company's shares of Common Stock, assuming conversion of
the Note into the maximum number of shares issuable upon conversion.
14 TYPE OF REPORTING PERSON*
IN
- ------ --------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 949470 10 8 Page 5 of 35 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Lawrence C. Tucker
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS* 00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION United States
7 SOLE VOTING POWER -0-
NUMBER OF
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
The exact number of shares is not currently ascertainable,
as the Note is convertible into shares of Common Stock
based upon a formula which cannot yet be computed.
However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is
1,333,333 and 2,222,222, respectively.
9 SOLE DISPOSITIVE POWER -0-
10 SHARED DISPOSITIVE POWER
The exact number of shares is not currently ascertainable,
as the Note is convertible into shares of Common Stock
based upon a formula which cannot yet be computed.
However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is
1,333,333 and 2,222,222, respectively.
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
The exact number of shares is not currently ascertainable, as the Note is
convertible into shares of Common Stock based upon a formula which cannot
yet be computed. However, the minimum and maximum number of shares of
Common Stock issuable upon conversion of the Note is 1,333,333 and
2,222,222, respectively.
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.44% of the Company's shares of Common Stock, assuming conversion of
the Note into the minimum number of shares issuable upon conversion.
26.04% of the Company's shares of Common Stock, assuming conversion of
the Note into the maximum number of shares issuable upon conversion.
14 TYPE OF REPORTING PERSON*
IN
- ------ --------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
CUSIP No. 949470 10 8 Page 6 of 35 Pages
Item 1. Security and Issuer.
-------------------
Item 1 is hereby amended by the deletion of the last sentence
thereof and the substitution of the following:
No person identified in Item 2 has acquired any shares of
Common Stock. However, such persons may be deemed to be the
beneficial owners of the shares of Common Stock reported in Item 5
by virtue of their acquisition of beneficial ownership of a 6%
Subordinated Convertible Note of the Company in the principal amount
of $20,000,000 due December 31, 2002 (the "Note"), initially issued
January 19, 1996 and then amended on February 28, 1997, pursuant to
an agreement (the "Letter Agreement") (a copy of which is attached
hereto as Exhibit 4 and incorporated by reference) among the Company
and the Fund. The Note, as amended, is convertible into shares of
Common Stock pursuant to a formula that establishes a conversion
price based upon a trailing average of the market price of the
Company's Common Stock over a specified period of time. Although the
conversion price cannot currently be ascertained because the formula
for computation of the conversion price cannot yet be computed, the
number of shares issuable upon conversion of the Note shall be not
less than 1,333,333 nor more than 2,222,222.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
Item 3 is hereby amended by deleting the language in the third
paragraph of Item 3 beginning with the period at the end of the first sentence
and adding the following in place thereof:
; provided, that any such redemption may only occur if it has
been approved in advance by the Commissioner of Health of the State
of New York. The Note, as amended by the Letter Agreement, may be
converted at the holder's option into a number of shares of Common
Stock equal to the principal amount of the Note being converted
divided by the "Conversion Price." The Conversion Price is
determined based upon a trailing average of the market price of the
Company's Common Stock over a
<PAGE>
CUSIP No. 949470 10 8 Page 7 of 35 Pages
specified period of time. Although the conversion price cannot
currently be ascertained because the formula for computation of the
conversion price cannot yet be computed, the number of shares
issuable upon conversion of the Note shall be not less than
1,333,333 nor more than 2,222,222.
Item 4. Purpose of Transaction.
----------------------
Item 4 is hereby amended and restated as follows:
The Fund acquired the Note for investment
purposes. The Note was amended by the Letter Agreement on February
28, 1997, as a result of certain developments that affected the
Company. The Note Purchase Agreement and the Registration Rights
Agreement (a copy of which is attached hereto as Exhibit 3 and
incorporated herein by reference), each dated January 19, 1996, and
each as amended by the Letter Agreement, contain, among other
things, certain provisions which relate to (i) the acquisition of
additional securities of the Company, (ii) the disposition of
securities of the Company and (iii) a change in the present Board of
Directors of the Company. With respect to the composition of the
Board, the Letter Agreement requires the Company to create a vacancy
on the Board and fill such vacancy with a designee of the Fund,
thereby resulting in two of the seats on the Company's Board being
filled by designees of the Fund.
In addition, the Note provides that upon default by the
Company in the payment of interest on the Note that continues for
180 days or a breach of any of the Company's agreements contained in
the Note, the Note Purchase Agreement or the Registration Rights
Agreement that continues unremedied for 180 days, the number of
members of the Board of directors of the Company shall be increased
by one and that the Company shall cause a designee of the holders of
a majority of the outstanding Notes to fill such vacancy. The right
of such holders to designate such director shall continue until such
time as all interest on the Note shall have been paid in full and
there shall exist no breach of the Company's agreements contained in
the Note, the Note Purchase Agreement or the Registration Rights
Agreement.
The Fund has agreed in the Note Purchase Agreement dated
January 19, 1996 and as amended by
<PAGE>
CUSIP No. 949470 10 8 Page 8 of 35 Pages
the Letter Agreement, that it will not until the earlier of (i) the
first anniversary of the date on which the Fund ceases to hold any
Notes and (ii) December 31, 2002, independently or as a member of a
group, purchase any shares of Common Stock that, if the price for
such shares when aggregated with the purchase price of any shares of
Common Stock (other than shares of Common Stock issued upon
conversion of all or any portion of the Notes) purchased thereby
subsequent to the date of the Note Purchase Agreement, exceeds
$10,000,000. Subject to the above limitation, the Reporting Persons
may from time to time acquire additional shares of Common Stock in
the open market or in privately negotiated transactions, subject to
availability of the shares of Common Stock at prices deemed
favorable, the Company's business or financial condition and to the
factors and conditions the Reporting Persons deem appropriate.
Alternatively, the Reporting Persons may sell all or a portion of
their Notes or shares of Common Stock in the open market or in
privately negotiated transactions subject to the terms of the Note
Purchase Agreement and to the factors and conditions referred to
above.
Except as described in the Note, the Note Purchase Agreement
and the Registration Rights Agreement, each as amended by the Letter
Agreement, and as set forth in the immediately preceding paragraph,
no Reporting Person has any present plans or proposals that relate
to or would result in: (a) the acquisition by any person of
additional securities of the issuer, or the disposition of
securities of the issuer; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries; (c) a sale or
transfer of a material amount of assets of the Company or of any of
its subsidiaries; (d) any change in the present board of directors
or management of the Company, including any plans or proposals to
change the number or term of such directors or to fill any existing
vacancies on such board; (e) any material change in the present
capitalization or dividend policy of the Company; (f) any other
material change in the Company's business or corporate structure;
(g) changes in the Company's charter, by-laws or instruments
corresponding thereto or other actions that may impede the
acquisition of control of the Company by any person; (h) causing a
class of securities of the Company to be delisted from a national
<PAGE>
CUSIP No. 949470 10 8 Page 9 of 35 Pages
securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities
association; (i) a class of equity securities of the Company
becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any
action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
------------------------------------
Item 5(a) through (c) is hereby amended by the deletion of the
second and third paragraphs thereof and the substitution in place thereof of the
following:
As described above, the Note, as amended, is convertible into
shares of Common Stock based upon a formula derived from the average
of the market price of the Company's Common Stock over a specified
period of time. Although the exact number of shares issuable upon
conversion cannot be ascertained at this time, the minimum and
maximum number of shares issuable to the Fund upon conversion is
1,333,333 and 2,222,222, respectively, representing approximately
17.44% and 26.04%, respectively, of the outstanding shares of Common
Stock (assuming the conversion of the Note and based on the number
of shares of Common Stock outstanding as of November 1, 1996, as
reported by the Company in its statement on Form 10-Q for the period
ending September 30, 1996).
By virtue of BBH & Co.'s relationship with the Purchaser, BBH
& Co. may be deemed to own beneficially no less than 1,333,333 and
no more than 2,222,222 shares of Common Stock, representing
approximately 17.44% and 26.04%, respectively, of the outstanding
shares of Common Stock (assuming the conversion of the Note and
based on the number of shares of Common Stock outstanding as of
November 1, 1996, as reported by the Company in its statement on
Form 10-Q for the period ending September 30, 1996). By virtue of
the resolution adopted by BBH & Co. designating Long and Tucker, or
either of them, as the sole and exclusive partners of BBH & Co.
having voting power (including the power to vote or to direct the
voting) and investment power (including the power to dispose or to
direct the disposition)
<PAGE>
CUSIP No. 949470 10 8 Page 10 of 35 Pages
with respect to the Note, and the Common Stock issuable upon
conversion of the Note, each of Long and Tucker may be deemed to own
beneficially no less than 1,333,333 and no more than 2,222,222
shares of Common Stock, representing approximately 17.44% and
26.04%, respectively, of the outstanding shares of Common Stock
(assuming the conversion of the Notes and based on the number of
shares of Common Stock outstanding as of November 1, 1996, as
reported by the Company in its statement on Form 10-Q for the period
ending September 30, 1996).
Item 6. Contracts, Arrangements, Understandings or Relationships with
-------------------------------------------------------------
Respect to the Common Stock of the Issuer.
------------------------------------------
Item 6 is hereby amended by deleting the last paragraph thereof and
replacing it with the following:
Except as described elsewhere in this Statement and as set
forth in the Note Purchase Agreement, the Note, the Registration
Rights Agreement and the Letter Agreement, to the best knowledge of
the Reporting Persons, there exist no contracts, arrangements,
understandings or relationships (legal or otherwise) among the
persons named in Item 2 and between such persons and any person with
respect to any securities of the Company, including but not limited
to transfer or voting of any securities of the Company, finder's
fees, joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
Item 7. Material To Be Filed as Exhibits.
--------------------------------
Item 7 is hereby amended by the addition of the following:
4. Letter Agreement, dated as of
February 28, 1997, by and between the Company and
the Fund.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
hereby certify that the information set forth in this statement is true,
complete and correct.
Dated: February 28, 1997
<PAGE>
CUSIP No. 949470 10 8 Page 11 of 35 Pages
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
General Partner
By: /s/ Lawrence C. Tucker
---------------------------------
Name: Lawrence C. Tucker
Title: Partner
BROWN BROTHERS HARRIMAN & CO.
By: /s/ Lawrence C. Tucker
---------------------------------
Name: Lawrence C. Tucker
Title: Partner
/s/ T. Michael Long
---------------------------------
T. Michael Long
/s/ Lawrence C. Tucker
---------------------------------
Lawrence C. Tucker
<PAGE>
CUSIP No. 949470 10 8 Page 12 of 35 Pages
SCHEDULE I
----------
Set forth below are the names and positions of all of the general partners
of BBH & Co. The principal occupation or employment of each person listed below
is private banker, and, unless otherwise indicated, the business address of each
person is 59 Wall Street, New York, New York 10005. Unless otherwise indicated,
each person listed below is a citizen of the United States.
Business Address
(if other than as
Name indicated above)
---- ----------------
Peter B. Bartlett
Brian A. Berris
Walter H. Brown
Douglas A. Donahue, Jr. 40 Water Street
Boston, Massachusetts 02109
Anthony T. Enders
Alexander T. Ercklentz
Terrence M. Farley
Elbridge T. Gerry, Jr.
Robert R. Gould
Kyosuko Kashimoto 8-14 Nihonbashi 30-Chome Chuo-ku
(citizen of Japan) Tokyo 103, Japan
Noah T. Herndon
Landon Hilliard
Radford W. Klotz, Jr.
Michael Kraynak, Jr.
T. Michael Long
Hampton S. Lynch, Jr.
Michael W. McConnell
<PAGE>
CUSIP No. 949470 10 8 Page 13 of 35 Pages
Business Address
(if other than as
Name indicated above)
---- ----------------
William H. Moore III
Donald B. Murphy
John A. Nielsen
Eugene C. Rainis
A. Heaton Robertson 40 Water Street
Boston, Massachusetts 02109
Jeffrey A. Schoenfeld
Stokley P. Towles 40 Water Street
Boston, Massachusetts 02109
Lawrence C. Tucker
Maarten van Hengel
Douglas C. Walker 1531 Walnut Street
Philadelphia, Pennsylvania 19102
Laurence F. Whittemore
Richard H. Witmer, Jr.
<PAGE>
CUSIP No. 949470 10 8 Page 14 of 35 Pages
INDEX TO EXHIBITS
-----------------
Page
Exhibit Description Number
- ------- ----------- ------
4 Letter Agreement, dated as of 15
February 28, 1997, by and between the
Company and the Fund (the Purchaser).
<PAGE>
Page 15 of 35 Pages
EXHIBIT 4
February 28, 1997
The WellCare Management Group, Inc.
Park West/Hurley Avenue Extension
P.O. Box 4059
Kingston, NY 12401
Gentlemen:
Reference is made to (i) the Note Purchase Agreement (the "Note
Purchase Agreement") dated as of January 19, 1996, between The WellCare
Management Group, Inc., a New York corporation (the "Company"), and The 1818
Fund II, L.P., a Delaware limited partnership (the "Purchaser"), (ii) the 6.0%
Subordinated Convertible Note (the "Note") due December 31, 2002 issued by the
Company to the Purchaser on January 19, 1996 and (iii) the Registration Rights
Agreement (the "Registration Rights Agreement" and, together with the Note
Purchase Agreement and the Note, the "Transaction Documents"), dated as of
January 19, 1996, between the Company and the Purchaser. Capitalized terms used
but not defined herein shall have the meanings specified in the Note Purchase
Agreement.
The Purchaser and the Company desire to effect certain amendments to
the Transaction Documents and to take certain other actions specified herein.
Therefore, for good and valuable consideration, the sufficiency of which is
hereby acknowledged, the Purchaser and the Company hereby agree as follows:
<PAGE>
Page 16 of 35 Pages
The WellCare Management Group, Inc. 2
I. Amendments of Note Purchase Agreement.
-------------------------------------
A. Amendment of Section 8.13. Section 8.13 of the Note Purchase
-------------------------
Agreement is hereby deleted in its entirety and replaced by the following new
Section 8.13:
"8.13 Board Representation; Management Rights.
---------------------------------------
(a) The Company shall at or prior to the Closing Date cause
one vacancy to be created on its Board of Directors (by increasing the number of
members of the Board of Directors or otherwise) and at the Closing Date shall
cause one person designated by the Purchaser to be elected to its Board of
Directors. The Company shall at the Company's next regularly scheduled Board of
Directors meeting, but in any event on or prior to December 17, 1996, cause one
additional vacancy to be created on the Board of Directors (by increasing the
number of members of the Board of Directors or otherwise) and shall cause one
additional person designated by the Purchaser to be elected to its Board of
Directors. (The persons elected to the Board of Directors of the Company
pursuant to this Section 8.13(a) are referred to herein as the "Purchaser
Designees.") Each Purchaser Designee shall serve until the next annual meeting
of stockholders of the Company following the election of such Purchaser Designee
to the Board of Directors.
(b) Within a reasonable time after the date (the "Amendment
Effective Date") of the amendment and restatement of this Section 8.13 effected
pursuant to that certain letter agreement, dated December 17, 1996, between the
Company and the Purchaser, the Company shall use its reasonable efforts to cause
two additional persons to be elected to the Board of Directors of the Company.
Each such person shall (i) be neither an officer, director or employee of the
Company or any Subsidiary of the Company nor an Affiliate of the Company and
(ii) have experience as a director of a public company or other relevant
experience. (The persons elected to the Board of Directors of the Company
pursuant to this Section 8.13(b) are referred to herein as the "Outside
Directors"). The qualifications that a person nominated by the Company as an
Outside Director is likely to have will include experience serving for at least
two years as the director of an issuer (1) whose securities were listed on
NASDAQ or the New York Stock Exchange during such two-year period, (2) that has
had (A) an average equity capitalization of $200,000,000 or more and (B) that
has had positive net income (determined in accordance with GAAP), in each case
throughout the period during which such person has served as a director thereof.
Each Outside Director shall serve until the next annual meeting of stockholders
of the Company following the election of such Outside Director to the Board of
Directors.
<PAGE>
Page 17 of 35 Pages
The WellCare Management Group, Inc. 3
(c) At the annual meeting of stockholders immediately
following the Closing Date, the Purchaser Designee specified in the first
sentence of Section 8.13(a) shall be designated a Class II director. At the next
annual meeting of stockholders of the Company following the Amendment Effective
Date, the Purchaser Designee specified in the second sentence of Section 8.13(a)
and one Outside Director shall be designated as a Class III Director and one
Outside Director shall be classified as a Class I Director. At each annual
meeting of stockholders of the Company at which the term of any Purchaser
Designee or Outside Director shall expire, so long as the Purchaser holds (A)
Common Shares, or (B) Notes convertible (after giving effect to any adjustments)
into Common Shares, that in the aggregate represent 2% or more of the total
number of shares of common stock of the Company then outstanding, (i) the
Purchaser shall be entitled to nominate such number of Purchaser Designees equal
to the number of Purchaser Designees whose terms shall expire at such meeting
and (ii) the Company shall use its reasonable efforts to nominate such number of
persons that meet the criteria for an Outside Director specified in Section
8.13(b) equal to the number of Outside Directors whose terms shall expire at
such meeting. The Company shall not amend its Certificate of Incorporation or
take any other action that will cause the Company's Board of Directors to
consist of more than twenty members. The Company shall cause each Purchaser
Nominee and Outside Director to be included in the slate of nominees recommended
by the Board of Directors to the Company's stockholders for election as
directors, and the Company shall use its best efforts, in the case of a
Purchaser Designee, or its reasonable efforts, in the case of an Outside
Director, to cause the election of such person or persons, including voting all
shares for which the Company holds proxies (unless otherwise directed by the
stockholder submitting such proxy), or is otherwise entitled to vote, in favor
of the election of such person or persons. The Principal Shareholders each
hereby agree that he shall vote all of his shares of common stock of the
Company, all other securi ties of the Company that are entitled to vote for
directors and all proxies (unless otherwise directed by the stockholder
submitting such proxy), in each case which he has the right to vote or power to
direct the vote, in favor of the election of such Purchaser Nominees and such
Outside Directors.
(d) In the event that any Purchaser Nominee shall cease to
serve as a director for any reason, other than by reason of the Purchaser not
being entitled to nominate a Purchaser Nominee as provided in Section 8.13(c),
the Company shall use its best efforts to cause the vacancy resulting thereby to
be filled by a nominee of the Purchaser. In the event that any Outside Director
shall cease to serve as a director for any reason, other than by reason of the
Company no longer being required to use its reasonable efforts to elect such
Outside Director as provided in Section 8.13(c), the Company shall use its
reasonable efforts to cause the vacancy resulting thereby to be filled by a
person that meets the criteria for an Outside Director specified in Section
8.13(b); provided, however, that any successor to an Outside Director need not
be reasonably acceptable to the Purchaser.
<PAGE>
Page 18 of 35 Pages
The WellCare Management Group, Inc. 4
(e) If requested by the Purchaser, the Purchaser shall have
the right to consult with and advise management of the Company and its
Subsidiaries on matters relating to the business and affairs of the Company,
which right shall continue only for so long as may be required to enable the
Purchaser to qualify as a "venture capital operating company" within the meaning
of Section 2510.3-101(d) of the plan asset regulations promulgated by the United
States Department of Labor.
(f) In the event that the Board of Directors of the Company
establishes Executive, Audit and Compensation Committees (or committees with
comparable functions), at least one Purchaser Nominee shall have the right, upon
the Purchaser's request, to serve on any such committee."
B. Addition of Section 8.15. The following new Section 8.15 is hereby
------------------------
added to the Note Purchase Agreement: "8.15. Notice of Issuance of Common Stock.
----------------------------------
Upon the issuance of any Common Shares (including the issuance of Common Shares
upon the exercise or conversion of options, warrants or other securities
exercisable for, or convertible into, Common Shares), the Company shall promptly
provide to the Purchaser notice of such issuance, which shall include the number
of Common Shares so issued and the purchase (or conversion or exercise) price
therefor."
II. Amendments of the Note: The Note is hereby amended as follows:
----------------------
A. Amendment of Section 2: Section 2 of the note is hereby amended by
----------------------
adding the following phrase to the end of the first sentence thereof: ";
provided, however, that if the Conversion Price calculated at the termination of
the Calculation Period is less than $15.00 (appropriately adjusted for stock
splits or stock dividends), then the Company shall, from such date until the
principal amount hereof is paid in full, pay interest on the principal amount
hereof, at a rate of 5.5% per annum."
B. Amendment of Section 5.1: Section 5.1 of the Note is hereby amended
------------------------
by deleting percentage "125%" from the seventh line thereof and replacing it
with the percentage "130%."
C. Amendment of Section 6.1: Section 6.1 of the Note is hereby amended
------------------------
by adding the following sentence after the second sentence thereof and before
the third sentence thereof:
"Notwithstanding the forgoing, the Company may redeem the Notes only
if the approval of the Commissioner of Health of the State of New York
(the "Approval") has been obtained and has not been withdrawn (in each
case, in the reasonable judgment of the holder), and if the Approval has
not been obtained or if obtained and has been withdrawn (in each case, in
the
<PAGE>
Page 19 of 35 Pages
The WellCare Management Group, Inc. 5
reasonable judgment of the holder) then the Company shall have no
right to redeem the Notes until Approval has been obtained and has not
been withdrawn (in each case, in the reasonable judgment of the holder).
Both partners will seek to obtain the Approval as soon as practicable
after the Amendment Effective Date."
D. Amendment of Section 6.2: Section 6.2 of the Note is hereby amended
------------------------
by adding the following sentence to the end thereof:
"In the event a Change of Control occurs within 24 months after the
redemption of any Notes pursuant to this Section 6 and the funds utilized
to effect such redemption were derived in whole or part from sources other
than (i) cash generated from operations of the business or (ii) borrowings
of the Company not guaranteed by third parties, the Company shall pay to
the Persons from whom such Notes were redeemed, on the date of such Change
of Control, an amount equal to 30% of the principal amount of the Notes so
redeemed from such Person."
E. Amendment of Section 7.1. Section 7.1 of the Note is hereby amended by
------------------------
deleting (i) the parenthetical phrase "(as defined below)" from the eleventh
line thereof and (ii) the third sentence thereof.
F. Amendment of Section 7.4(b). Section 7.4(b) of the Note is hereby
---------------------------
amended by deleting it in its entirety and replacing it with the following:
"(b) In case the Company shall at any time or from time to time
issue or sell shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock, or any options, warrants or other
rights to acquire shares of Common Stock) (other than (i) options to
acquire shares of Common Stock granted on or prior to June 30, 1996 to any
officer, director, employee or consultant of the Company or any Subsidiary
of the Company or (ii) up to 100,000 shares of Common Stock (subject to
adjustment) issued upon the exercise of those certain Stock Purchase
Warrants issued by the Company to J.J. Farrell Associates, Inc. on July 7,
1994), at a price per share less than either the Current Market Price per
share or the Conversion Price per share then in effect at the record date
referred to in the following sentence (treating (A) the price per share of
any security convertible or exchangeable or exercisable into shares of
Common Stock as equal to (i) the sum of the price for such security
convertible, exchangeable or exercisable into shares of Common Stock plus
any additional consideration payable (without regard to any anti-dilution
adjustments) upon the conversion, exchange or exercise of such security
into shares of Common Stock divided by (ii) the number of shares of Common
Stock initially underlying such converti-
<PAGE>
Page 20 of 35 Pages
The WellCare Management Group, Inc. 6
ble, exchangeable or exercisable security and (B) the price per share of
any security issued in connection with the settlement or compromise any
claim, action, suit, proceeding or dispute or in connection with the
satisfaction of any judgment relating to the foregoing as equal to $.01),
then, and in each such case, the Conversion Price then in effect shall be
adjusted by dividing the Conversion Price in effect on the day immediately
prior to such record date by a fraction (x) the numerator of which shall
be the sum of the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock issued or
to be issued (or the maximum number into which such convertible or
exchangeable securities initially may convert or exchange or for which
such options, warrants or other rights initi ally may be exercised) and
(y) the denominator of which shall be the sum of the number of shares of
Common Stock outstanding on such record date plus the number of shares of
Common Stock that the aggregate consideration for the total number of such
additional shares of Common Stock so issued (or into which such
convertible or exchangeable securities may convert or exchange or for
which such options, warrants or other rights may be exercised, plus the
aggregate amount of any additional consideration initially payable upon
con version, exchange or exercise of such security) would purchase at the
greater of the Current Market Price per share or the Conversion Price per
share on such record date. Such adjustment shall be made whenever such
shares of Common Stock, securities, options, warrants or other rights are
issued, and shall become effective retroactively to a date immediately
following the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such shares of
Common Stock, securities, options, warrants or other rights; provided,
however, that the determination as to whether an adjustment is required to
be made pursuant to this Section 7.4(b) shall only be made upon the
issuance of such shares of Common Stock or such convertible or
exchangeable securities, options, warrants or other rights, and not upon
the issuance of the security into which such convertible or exchangeable
security converts or exchanges, or the security underlying such option,
warrants or other right; provided further, that if any convertible or
exchangeable securities, options, warrants or other rights (or any
portions thereof) that shall have given rise to an adjustment pursuant to
this Section 7.4(b) shall have expired or terminated without the exercise
thereof and/or if by reason of the terms of such convertible or
exchangeable securities, options, warrants or other rights there shall
have been an increase or increases, with the passage of time or otherwise,
in the price payable upon the exercise or conversion thereof, then the
Conversion Price hereunder shall be readjusted (but to no greater extent
than originally adjusted with respect to the related event) on the basis
of (x) eliminating from the computation any additional shares of Common
Stock corresponding to such convertible or exchangeable securities,
options, warrants or other rights as shall have expired
<PAGE>
Page 21 of 35 Pages
The WellCare Management Group, Inc. 7
or terminated, (y) treating the additional shares of Common Stock, if any,
actually issued or issuable pursuant to the previous exercise of such
convertible or exchangeable securities, options, warrants or other rights
as having been issued for the consideration actually received and
receivable therefor and (z) treating any of such convertible or
exchangeable securities, options, warrants or other rights that remain
outstanding as being subject to exercise or conversion on the basis of
such exercise or conversion price as shall be in effect at the time."
G. Amendment of Section 10.5. Section 10.5 of the Note is hereby
-------------------------
amended by deleting the amount "$40,000,000" from the fourth line thereof and
replacing it with the amount $19,500,000.
H. Addition of Section 10.6. The following new Section 10.6 is hereby
------------------------
added to the Note:
10.6 Quarterly Calculation of Conversion Price. For each quarterly
-----------------------------------------
period of the Company, beginning with the quarterly period ending December 31,
1996, the Company shall prepare and deliver a written statement to the holder of
this Note within ten (10) days following the end of such quarterly period that
sets forth a calculation of the Conversion Price of this Note then in effect;
provided, further, that such written statement shall be accompanied by a
statement of the Company's independent accountants indicating that they have
reviewed and are in agreement with the calculation set forth in the
aforementioned statement.
I. Addition of Section 10.7. The following new Section 10.7 is hereby
------------------------
added to the Note:
10.7 Repurchases during Calculation Period. Neither the Company nor
-------------------------------------
any Subsidiary or Affiliate of the Company shall, during the Calculation Period,
repurchase, contract or agree to repurchase or make any announcement of its
intent to repurchase shares of the Company's Common Stock; provided that nothing
in this Section 10.7 shall prohibit officers and directors of the Company from
purchasing up to an aggregate of 300,000 shares of Common Stock during the
Calculation Period.
J. Amendment of Section 11.1: Section 11.1 of the Note is hereby
-------------------------
amended by adding the following subparagraphs (i) and (j) to the end thereof:
"(i) The Company or any subsidiary of the Company shall default in
the payment of any indebtedness for money borrowed having an aggregate
principal amount of $250,000 or more, or any lease obligation having
aggregate rental payments of $250,000 or more beyond any grace period
provided with respect thereto or any other event or condition shall exist
under
<PAGE>
Page 22 of 35 Pages
The WellCare Management Group, Inc. 8
any agreement or instrument under which such indebtedness for money
borrowed or lease obligation is created or evidenced beyond any applicable
grace period, if the effect of such event or condition is to cause the
holder of such indebtedness for money borrowed or lessor (or a trustee on
behalf of any such holder or lessor) to (i) cause such indebtedness for
money borrowed or lease obligation to become due prior to its date of
maturity or (ii) require the borrower or any Person that is a subsidiary
of the borrower to purchase such indebtedness for money borrowed or assume
such lease obligation; or
(j) Any action is taken by a federal, state or local regulatory
authority with respect to the Company and results in (i) the revocation of
any license necessary for the Company to conduct its business, (ii) the
Company being put into rehabilitation or receivership or (iii) the
appointment of a Custodian for the Company or for all or substantially all
of its business or the taking of similar action."
K. Amendment of Section 12. Section 12 of the Note is hereby amended
as follows:
(i) By inserting the following new sentence after the final sentence
of the defined term Current Market Price: "Notwithstanding the foregoing,
in no event shall the Current Market Price be less than the Conversion
Price in effect (or assumed to be in effect pursuant to clause (x) of the
definition of Conversion Price) at the time of the determination of the
Current Market Price.";
(ii) By inserting the following at the end of clause (i) of the
defined term Change of Control: "; provided that solely for purposes of
the definition of 'Contemplated Change of Control', a 'Change of Control'
in this clause (i) shall occur when such Person or Persons become such
beneficial holders entitling them to exercise 10% or more of such total
votes"; and
(iii) By inserting the following new defined term after the defined
term Common Stock: "'Conversion Price' shall mean as of the termination of
the Calculation Period, an amount equal to 115% of the average of the
Current Price of the Common Stock for the trading days during the
Calculation Period (excluding from such calculation the five highest
Current Prices and the five lowest Current Prices during the Calculation
Period and if no Current Price is available for any given day, such
trading day shall not be included in the determination of Conversion
Price), as appropriately adjusted for stock splits or stock dividends,
subject to the Conversion Price as so calculated being no less than $9.00
(appropriately adjusted for stock splits or stock dividends) or more than
$15.00 (appropriately adjusted for stock splits or stock dividends);
<PAGE>
Page 23 of 35 Pages
The WellCare Management Group, Inc. 9
provided, however, that the Conversion Price, as calculated in accordance
with the foregoing, shall then be adjusted for each event that occurred
during the Calculation Period that would, pursuant to Section 7.4, result
in an adjustment in the Conversion Price assuming that on the date of any
such event the Conversion Price was the amount determined pursuant to this
sentence as adjusted for events occurring prior to such date. As of any
date after termination of the Calculation Period, "Conversion Price" shall
be calculated in accordance with the preceding sentence (subject to
adjustment for events described in Section 7.4). 'Calculation Period'
shall mean the period commencing on the first trading day occurring after
August 1, 1996 and terminating on the earlier of (a) the trading day
immediately preceding March 1, 1997 or (b) if applicable, the date prior
to March 1, 1997 on which the notice required in Section 7.1 to exercise
the conversion right is delivered in accordance with the terms and
provisions of such Section 7.1; provided, however, that if a Contemplated
Change of Control shall occur on or prior to the trading day immediately
preceding March 1, 1997 or, if applicable, the date prior to March 1, 1997
on which the notice required in Section 7.1 to exercise the conversion
right is delivered in accordance with the terms and provisions of such
Section 7.1, then 'Calculation Period' shall mean the period commencing on
first trading day occurring after August 1, 1996 and terminating on (and
including) the date which is eleven trading days preceding the date of the
Contemplated Change of Control. 'Current Price' of Common Stock shall
mean, on any date, the average of the reported last bid and asked prices
per share of Common Stock on such date as reported by the National Market
System of the Nasdaq Stock Market. 'Contemplated Change of Control' of the
Company shall mean such time as (x) there is an announcement or filing of
any document with the Securities Exchange Commission by the
Company or any other Person which discloses an actual, proposed or
contemplated Change of Control of the Company or (y) there is a public
announcement that the Company has or will retain professional advisors or
consider or conduct a study with respect to alternatives that could
enhance shareholder value."
III. Amendments of the Registration Rights Agreement. The Registration Rights
-----------------------------------------------
Agreement is hereby amended as follows:
A. Amendment of Section 2.1(g). Section 2.1(g) of the Registration
---------------------------
Rights Agreement is hereby amended by deleting the number "two" from the fourth
line thereof and replacing it with the number "three."
B. Amendments of Section 2.2(a). Section 2.2(a) of the Registration
----------------------------
Rights Agreement is hereby amended by:
<PAGE>
Page 24 of 35 Pages
The WellCare Management Group, Inc. 10
(i) Deleting the phrase "Within eighteen months after the Closing
Date" from the first and second lines thereof and replacing it with the
phrase "On or prior to August 14, 1997"; and
(ii) Deleting the third sentence thereof.
C. Amendment of Section 2.2(c). Section 2.2(c) of the Registration
--------------------------
Rights Agreement is hereby amended by deleting the final sentence thereof.
IV. Representations and Warranties True. Except as set forth on Schedule IV, the
-----------------------------------
Company hereby represents and warrants to the Purchaser that on and as of the
date hereof, all representations and warranties of the Company contained in any
of the Transaction Documents (other than those specified in Section 5.11,
Section 5.12, Section 5.13 or, solely so far as it relates to any representation
or warranty specified in Section 5.11, 5.12 or 5.13, Section 5.21 of the Note
Purchase Agreement) are true and correct as of the date hereof as if made on the
date hereof and with the same effect as if set forth in this letter agreement.
V. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Purchaser as follows:
A. Due Authorization. The execution, delivery and performance by the
-----------------
Company of this Amendment have been duly authorized by all necessary corporate
action, and the provisions of this Amendment are valid and binding obligations
of the Company, enforceable in accordance with their respective terms.
B. Governmental Authorization; Third Party Consents. No approval, consent,
--------------------------
exemption, authorization, or other action by, or notice to, or filing with, any
(i) Governmental Authority or (ii) any other Person, is necessary or required in
connection with the execution, delivery or performance by the Company or enforce
ment against the Company of this letter agreement or the transactions
contemplated hereby except, in the case of (ii) with respect to any Contractual
Obligation, any such consent or other action that would not, individually or in
the aggregate, have a material adverse effect on the Condition of the Company if
not obtained.
C. Litigation. There are no actions, suits, proceedings, claims or
----------
disputes pending, or to the Company's Knowledge, threatened, at law, in equity,
in arbitration or before any Governmental Authority against the Company or any
of its Subsidiaries:
(a) with respect to this letter agreement or any of the
transactions contemplated hereby; or
<PAGE>
Page 25 of 35 Pages
The WellCare Management Group, Inc. 11
(b) except as set forth on Schedule V.C, that would, if adversely
determined, (i) have a material adverse effect on the Condition of the Company
or (ii) have a material adverse effect on the ability of the Company to perform
its obligations under this letter agreement. No injunction, writ, temporary
restraining order, decree or any order of any nature has been issued by any
court or other Governmental Authority purporting to enjoin or restrain the
execution, delivery and performance of this letter agreement.
D. Financial Condition. The Company heretofore has delivered to the
Purchaser true and correct copies of (i) the restated audited consolidated
financial statements of the Company and its Subsidiaries dated as of December
31, 1994 (the "Restated Financials"), (ii) the audited consolidated financial
statements of the Company and its Subsidiaries dated as of December 31, 1995
(the "1995 Financials"), (iii) the unaudited interim consolidated financial
statements of the Company and its Subsidiaries dated as of March 31, 1996 (the
"March 31 Interim Financials"), (iv) the unaudited interim consolidated
financial statements of the Company and its Subsidiaries dated as of June 30,
1996 (the "June 30 Interim Financials") and (v) the unaudited interim
consolidated financial statements of the Company and its Subsidiaries dated as
of September 30, 1996 (the "September 30 Interim Financials"). Each of the
Restated Financials, the 1995 Financials, the March 31 Interim Financials, the
June 30 Interim Financials and the September 30 Interim Financials have been
prepared in accordance with GAAP applied consistently throughout the periods
covered thereby and, in the case of the March 31 Interim Financials, the June 30
Interim Financials and the September 30 Interim Financials, except for normal
recurring year-end adjustments. Each of the Restated Financials,
the 1995 Financials, the March 31 Interim Financials, the June 30 Financials and
the September 30 Interim Financials presents fairly the consolidated financial
condition of the Company as of the date thereof, and the consolidated results of
operations of the Company for the period then ended. Except as set forth on
Schedule V.D., the March 31 Form 10-Q, the June 30 Form 10-Q or the September 30
10-Q (each as defined below), neither the Company nor any of its Subsidiaries
has any material direct or indirect indebtedness, liability or obligation,
whether known or unknown, fixed or unfixed, contingent or otherwise, and whether
or not of a kind required by GAAP to be set forth on a financial statement
(collectively "Liabilities"), other than (i) Liabilities fully and adequately
reflected on the 1995 Financials and (ii) those incurred since the date of the
1995 Financials in the ordinary course of business.
E. No Material Adverse Change. Since August 14, 1996, except as set forth
--------------------------
in the September 30 10-Q (as defined herein) and on Schedule V.E, there has not
been any material adverse change in the Condition of the Company, nor in the
opinion of the Company's senior management is any such change probable.
<PAGE>
Page 26 of 35 Pages
The WellCare Management Group, Inc. 12
F. Annual Report on Form 10-K; Quarterly Reports on Form 10-Q;
----------------------------------------------------------
Commission Documents.
- --------------------
(a) Each of (i) the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 filed by the Company with the Commission on
May 31, 1996 (the "1995 Form 10-K"), (ii) the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1996 filed by the Company with the
Commission on May 31, 1996 (the "March 31 10-Q"), (iii) the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1996 filed by the
Company with the Commission on August 14, 1996 (the "June 30 10-Q") and (iv) the
Company's Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1996 filed by the Company with the Commission on November 14, 1996 (the
"September 30 10-Q") was true and accurate in all material respects when filed
with the Commission and in compliance in all material respects with the require
ments of its report form.
(b) The Company has, since August 14, 1996, filed all registration
statements, proxy statements, reports and other documents required to be filed
by it under the Securities Act and the Exchange Act, and all amendments thereto
(collectively, the "Commission Documents"); and the Company has furnished the
--------------------
Purchaser correct and complete copies of all Commission Documents, each as filed
with the Commission, from and after August 14, 1996. Each Commission Document
was true and accurate in all material respects when filed with the Commission
and in compliance in all material respects with the requirements of its
respective report form.
VI. Amendment and Restatement of Notes. The Company hereby agrees that if
----------------------------------
requested to do so by the Purchaser, it will execute an amended and restated
Note (the "Amended and Restated Note") incorporating the amendments to the note
set forth in Section II of this letter agreement. Upon delivery of the Amended
and Restated Note, the Purchaser will surrender to the Company the Note
outstanding on the date hereof (the "Old Note"). The Amended and Restated Note
shall be dated the date of, and be in the same denomination as, the Old Note
replaced by it. From and after the date of delivery of the Amended and Restated
Note, all references in any Transaction Document, as amended hereby, to the term
"Note" or "Notes" shall be deemed to refer to the Amended and Restated Note.
VII. Counterparts. This letter agreement may be executed in counterparts, each
------------
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
VIII. Effect on Transaction Documents. The Purchaser hereby waives any claim
-------------------------------
under the Note Purchase Agreement that, based upon facts known to the Purchaser
on the date hereof, any representation or warranty of the Company set forth in
Section
<PAGE>
Page 27 of 35 Pages
The WellCare Management Group, Inc. 13
5.11, Section 5.13 (in respect to Section 5.13 solely with respect to the
financial statements and the notes thereto, Management's Discussion and Analysis
of Financial Condition and Results of Operations and Selected Financial
Information set forth in any Commission Document) or, solely so far as it
relates to any representation or warranty specified in Section 5.11 or 5.13,
Section 5.21 was not true and correct as of the Closing Date. The waiver by the
Purchaser specified above is made specifically in reliance upon the independent
auditors report of Deloitte & Touche, LLP contained in the 1995 Form 10-K. The
Purchaser hereby also waives (i) any violation that may have existed under
Section 8.1(a) of the Agreement from April 9, 1996 through May 31, 1996, (ii)
any violation that may have existed under Section 8.1(b) of the Agreement from
May 20, 1996 through May 31, 1996, (iii) any violation that may have existed
under Section 8.2(a) or (b) or Section 8.6(b)(i) or (ii) through the Amendment
Effective Date, to the extent any notice was required thereunder with respect to
any of the items specified in the other numbered clauses of this sentence or
relate to the Company's default under the Loan Agreement (as defined in the
Note) or the class action lawsuits brought against the Company and certain
officers and directors alleging violation of the federal securities laws and
(iv) any violation of Section 10.5 of the Note that may have existed from March
31, 1996 through the date hereof, and in each case any Event of Default (as
defined in the Note) that may have resulted therefrom. Except as specifically
set forth in this letter agreement, the Transaction Documents shall remain
unmodified and in full force and effect and are hereby ratified by the parties
thereto, as amended. The Company acknowledges and agrees that this letter
agreement does not represent an intention by the Purchaser (other than as set
forth herein) to waive, modify or forebear from exercising any of its rights,
powers and privileges under any Transaction Document and no such commitment,
waiver, modification (other than as set forth herein) or forbearance has been
offered, granted, extended or agreed, nor is any implied, by the Purchaser.
IX. Entire Agreement. This letter agreement, together with the Transaction
----------------
Documents as amended hereby, represents the complete understanding of the
parties with respect to the subject matter hereof.
X. Expenses. The Company shall promptly pay or reimburse to the Purchaser
--------
the fees and expenses (including fees, expenses and other charges of Paul,
Weiss, Rifkind, Wharton & Garrison and Coopers & Lybrand) incurred by the
Purchaser in connection with the Company's restatement of its financial
statements and related activities, investigations and other matters and the
preparation, negotiation and execution of this letter agreement and the
transactions contemplated hereby; provided that the Company shall not be
obligated to pay more than $100,000 under this paragraph.
<PAGE>
Page 28 of 35 Pages
The WellCare Management Group, Inc. 14
XI. Headings. Headings in this letter agreement are for reference only, and
--------
shall not affect the interpretation or meaning of any provision of this
Amendment.
XII. Governing law. This letter agreement shall be governed by, and construed
-------------
and interpreted in accordance with, the laws of the State of New York applicable
to agreements made and to be performed entirely within such State.
Very truly yours,
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
its General Partner
By: /S/ LAWRENCE C. TUCKER
---------------------------------
Name: Lawrence C. Tucker
Title: Partner
ACKNOWLEDGED AND AGREED:
THE WELLCARE MANAGEMENT GROUP, INC.
By:
-------------------------------
Name:
Title:
<PAGE>
Page 29 of 35 Pages
The WellCare Management Group, Inc. 14
XI. Headings. Headings in this letter agreement are for reference only, and
--------
shall not affect the interpretation or meaning of any provision of this
Amendment.
XII. Governing law. This letter agreement shall be governed by, and construed
-------------
and interpreted in accordance with, the laws of the State of New York applicable
to agreements made and to be performed entirely within such State.
Very truly yours,
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
its General Partner
By:
---------------------------------
Name: Lawrence C. Tucker
Title: Partner
ACKNOWLEDGED AND AGREED:
THE WELLCARE MANAGEMENT GROUP, INC.
By: /S/
-------------------------------
Name:
Title:
<PAGE>
Page 30 of 35 Pages
The WellCare Management Group, Inc. 15
As a material inducement to the Purchaser to
enter into this letter agreement, the
undersigned hereby agrees to continue to be
bound by and perform in accordance with
Sections 8.11, 8.13 (as amended by this
letter agreement), 8.14 and 10.1 of the Note
Purchase Agreement irrespective of the
amendments thereto effected pursuant to this
letter agreement.
/S/ ROBERT W. MOREY, JR.
- -------------------------------------------
Robert W. Morey, Jr.
/S/ EDWARD A. ULLMAN
- -------------------------------------------
Edward A. Ullmann
<PAGE>
Page 31 of 35 Pages
SCHEDULE IV TO LETTER AGREEMENT
DATED FEBRUARY 28, 1997
BY AND BETWEEN THE WELLCARE
MANAGEMENT GROUP, INC. AND
THE 1818 FUND II, L.P.
---------------------------
1. Schedules 3.16 and 5.6
----------------------
See Schedule V.C.
3. Schedule 5.16
-------------
Name of Corporation State of Incorporation
- ------------------- ----------------------
WellCare of New York, Inc. New York
Agente Benefit Consultants, Inc. New York
WellCare Medical Management, Inc. New York
WellCare Development, Inc. New York
WellCare of Connecticut, Inc. Connecticut
4. Schedule 5.17
-------------
Name of Individual Type of Relationship Stock Option Commitment
- ------------------ -------------------- -----------------------
Marystephanie Corsones Chief Financial 2,000 options at fair
Officer, employee market value on January 1
of each contract year
(through January 1997)
Lawrence Group Consultant Stock based on a formula
of hours worked quarterly
at a rate of $100/hour
J.J. Farrel Associates, Consultant Stock Purchase Warrants
Inc. issued July 7, 1994 which
provide for the holder's
purchase of up to 100,000
<PAGE>
Page 32 of 35 Pages
shares based upon a
formula purchase price.
Joseph R. Papa President and Chief 30,000 options per year on
Operating Officer each of 9/1/97,
9/1/98, and 9/1/99, at the
greater of fair market
value on the date of the
grant of $15, $20, $25,
respectively.
See also attached sheets
5. Section 5.18
------------
See Schedule V.E.1.
6. Section 5.24
------------
See Schedule V.E.2.
2
<PAGE>
Page 33 of 35 Pages
SCHEDULE V.C. TO LETTER AGREEMENT
DATED FEBRUARY 28, 1996
BY AND BETWEEN THE WELLCARE
MANAGEMENT GROUP, INC. AND
THE 1818 FUND II, L.P.
---------------------------
1. Hanovice v. The WellCare Management Group, Inc. In September
-----------------------------------------------
1995, an ophthalmologist who formerly served as a health care provider for
WellCare of New York, Inc. (the "WellCare HMO"), one of the Company's health
maintenance organizations ("HMOs"), commenced an action in the Supreme Court of
Ulster County of the State of New York, against the Company, asserting that the
Company breached an implied covenant of good faith and fair dealing, and
"interfered" with the plaintiff's contracts, in terminating his provider
contract with the WellCare HMO. The complaint seeks $1,000,000 in damages. In
October 1995, the Company filed a motion to dismiss, asserting that (i) the suit
was filed against an improper party, as the Company's subsidiary, not the
Company, was a party to the provider contract; (ii) damages are not justified in
any event as the plaintiff's provider contract was "at will" and termination was
properly effected thereunder; and (iii) the plaintiff's interference claim was
legally insufficient as pleaded. By Decision and Order, dated April 10, 1996
(the "Decision and Order"), the Company's motion to dismiss was granted and the
complaint was dismissed as against the Company. Plaintiff thereafter served an
amended complaint against WellCare HMO, limiting Plaintiff's claim to
$14,863.33. Since plaintiff has failed to timely perfect an appeal of the
Decision & Order, his opportunity to do so has lapsed. Counsel for both parties
are currently attempting to negotiate a settlement of plaintiff's remaining
claim.
2. Rosenberg v. WellCare HMO. On October 13, 1995, Justin
--------------------------
Rosenberg, a member covered under a WellCare HMO benefit plan (the "Plaintiff"),
commenced an action in the Supreme court of Ulster County of the State of New
York, against WellCare HO, asserting that the Plaintiff had to seek emergency
treatment from outside the network because her participating primary care
physician was not available after she collapsed. On November 24, 1995 Plaintiff
serves a complaint on WellCare HMO, seeking $100,000 in damages, plus interest
from October 20, 1993, disbursements, and attorney's fees. WellCare HMO believes
the claim is without merit and will continue to contest the action vigorously.
3. Reference is made to class action suits filed against the
Company and the SEC Formal Order of Private Investigation as set forth in the
Company's Quarterly Report of Form 10-Q for the quarterly period ended September
30, 1996 filed by the Company with the Securities ad Exchange Commission on
November 14, 1996.
4. Errol Nadler, M.D. A provider with a variety of contracts with
------------------
the Company claims that the Company owes him and his related corporate entities
approximately $140,000. No litigation has yet been commenced. The Company
believes that it has offsetting claims and that its net liability is
approximately $20,000. The Company is currently attempting to negotiate a
settlement of this claim.
<PAGE>
Page 34 of 35 Pages
5. New York State Insurance Department Report. The New York State
-------------------------------------------
Insurance Department ("NYSID") has completed its triennial audit of the Company
and WellCare HMO, and issued a report thereon dated January 10, 1997, a copy of
which has been provided to Purchaser (the "NYSID Report"). The NYSID Report
includes recommendations by NYSID with respect to the WellCare HMO and
recommends that WellCare HMO's failure to file all contracts, riders and rates
and to properly adjust the guaranteed rates of its group contracts and knowingly
charged incorrect rates be referred to the NYSID's Office of General Counsel for
disciplinary action. By letter dated February 12, 1997, the Company indicated
the extent to which it agrees with the NYSID Report and the areas of
disagreement. By letter dated February 18, 1997, the NYSID advised the Company
that it would make no changes to the NYSID Report.
2
<PAGE>
Page 35 of 35 Pages
SCHEDULE V.E. TO LETTER AGREEMENT
DATED FEBRUARY 28, 1997
BY AND BETWEEN THE WELLCARE
MANAGEMENT GROUP, INC. AND
THE 1818 FUND II, L.P.
---------------------------
1. Except as set forth in the NYSID Report.
2. The Company is in the process of renegotiating the reinsurance
agreement with each of Preferred Health Insurance Company of New York and
Preferred Life Insurance Company of New York.
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ________)*
THE WELLCARE MANAGEMENT GROUP, INC.
------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK
------------------------------------------------------------------------------
(Title of Class of Securities)
949470 10 8
------------------------------------
(CUSIP Number)
Lawrence C. Tucker, Brown Brothers Harriman & Co.,
59 Wall Street, New York, New York 10005, (212) 493-8400
------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 19, 1996
------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [X]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 158 Pages
Exhibit Index on Page 21
<PAGE>
SCHEDULE 13D
CUSIP No. 949470 10 8 Page 2 of 158 Pages
--------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The 1818 Fund II, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
689,655 shares of Common Stock, including Note convertible
into 689,255 shares of Common Stock
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
689,655 shares of Common Stock, including Note convertible
into 689,655 shares of Common Stock
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
689,655 shares of Common Stock, including Note convertible into
689,655 shares of Common Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.96% of the Company's shares of Common Stock, assuming conversion
of the Note
14 TYPE OF REPORTING PERSON*
PN
- ------ --------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 949470 10 8 Page 3 of 158 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Brown Brothers Harriman & Co.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS* 00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION New York
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
689,655 shares of Common Stock, including Note convertible
into 689,655 shares of Common Stock
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
689,655 shares of Common Stock, including Note convertible
into 689,655 shares of Common Stock
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
689,655 shares of Common Stock, including Notes convertible into
689,655 shares of Common Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.96% of the Company's shares of Common Stock, assuming conversion
of the Note
14 TYPE OF REPORTING PERSON*
PN
- ------ --------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 949470 10 8 Page 4 of 158 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
T. Michael Long
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
689,655 shares of Common Stock, including Note
convertible into 689,655 shares of Common Stock
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
689,655 shares of Common Stock, including Note
convertible into 689,655 shares of Common Stock
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
689,655 shares of Common Stock, including Note convertible into
689,655 shares of Common Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.96% of the Company's shares of Common Stock assuming, conversion
of the Note
14 TYPE OF REPORTING PERSON*
IN
- ------ --------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 949470 10 8 Page 5 of 158 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Lawrence C. Tucker
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING
PERSON
WITH
8 SHARED VOTING POWER
689,655 shares of Common Stock, including Note
convertible into 689,655 shares of Common Stock
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
689,655 shares of Common Stock, including Note
convertible into 689,655 shares of Common Stock
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
689,655 shares of Common Stock, including Note convertible into
689,655 shares of Common Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.96% of the Company's shares of Common Stock, assuming conversion
of the Note
14 TYPE OF REPORTING PERSON*
IN
- ------ --------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
CUSIP No. 949470 10 8 Page 6 of 158 Pages
Item 1. Security and Issuer.
-------------------
The securities to which this Statement on Schedule 13D relates are
the shares of common stock (the "Common Stock"), par value $.01 per share, of
The WellCare Management Group, Inc., a New York corporation (the "Company"),
whose principal executive office is located at Park West/Hurley Avenue
Extension, Kingston, New York 12401. Although no person identified in Item 2 has
acquired any shares of Common Stock, such persons may be deemed to be the
beneficial owners of the shares of Common Stock reported in Item 5 by virtue of
their acquisition of beneficial ownership of a 6.0% Subordinated Convertible
Note of the Company in the principal amount of $20,000,000 due December 31, 2002
(the "Note"), entitling the holder thereof to convert such Note into of 689,655
shares of Common Stock (subject to adjustment).
Item 2. Identity and Background.
-----------------------
(a), (b), (c) and (f). This Statement on Schedule 13D is being filed
by The 1818 Fund II, L.P., a Delaware limited partnership (the "Fund"), Brown
Brothers Harriman & Co., a New York limited partnership and general partner of
the Fund ("BBH & Co."), T. Michael Long ("Long") and Lawrence C. Tucker
("Tucker") (the Fund, BBH & Co., Long and Tucker are referred to collectively
herein as the "Reporting Persons").
<PAGE>
CUSIP No. 949470 10 8 Page 7 of 158 Pages
The Fund was formed to provide a vehicle for institutional and
substantial corporate investors to acquire significant equity interests in
medium-sized publicly owned United States corporations that could benefit from
the presence of a large, management supportive shareholder with a relatively
long-term investment goal. BBH & Co. is a private bank. Pursuant to a resolution
adopted by the partners of BBH & Co., BBH & Co. has designated and appointed
Long and Tucker, or either of them, the sole and exclusive partners of BBH & Co.
having voting power (including the power to vote or to direct the voting) and
investment power (including the power to dispose or to direct the disposition)
with respect to the shares of Common Stock into which the Notes are convertible.
The address of the principal business and principal offices of each
of the Fund and BBH & Co. is 59 Wall Street, New York, New York 10005.
The business address of each of Long and Tucker is 59 Wall Street,
New York, New York 10005. The present principal occupation or employment of each
of Long and Tucker is as a general partner of BBH & Co. Long and Tucker are
citizens of the United States.
The name, business address, present principal occupation or
employment (and the name, principal business and address of any corporation or
other organization in
<PAGE>
CUSIP No. 949470 10 8 Page 8 of 158 Pages
which such employment is conducted) and the citizenship of each general partner
of BBH & Co. is set forth on Schedule I hereto and is incorporated herein by
reference.
(d) and (e). During the last five years, neither any Reporting Person nor,
to the best knowledge of each Reporting Person, any person identified on
Schedule I has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
which any such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
Pursuant to the Note Purchase Agreement (a copy of
which is attached hereto as Exhibit 1 and incorporated herein by reference),
dated as of January 19, 1996 (the "Note Purchase Agreement"), by and between the
Company and the Fund, the Company issued, and the Fund acquired from the
Company, the Note for a purchase price (the "Purchase Price") of $20,000,000,
upon the terms and subject to the conditions set forth in the Note Purchase
Agreement.
<PAGE>
CUSIP No. 949470 10 8 Page 9 of 158 Pages
The funds used by the Fund to pay the Purchase Price were obtained
by the Fund from capital contributions made by its partners pursuant to
pre-existing capital commitments.
The Note (a copy of which is attached hereto as Exhibit 2 and
incorporated herein by reference) provides that the Company may at any time on
or after January 19, 2000, at its option, redeem all of the outstanding
principal amount of the Note. The Note may be converted at the holder's option
into a number of shares of Common Stock equal to the principal amount of the
Note being converted divided by the "Conversion Price," set at $29.00, but
subject to anti-dilution adjustments described in the Note.
Item 4. Purpose of Transaction.
----------------------
The Fund has acquired the Note for investment purposes. The Note
Purchase Agreement and the Registration Rights Agreement (a copy of which is
attached hereto as Exhibit 3 and incorporated herein by reference), dated
January 19, 1996, between the Company and the Fund (the "Registration Rights
Agreement"), contain, among other things, certain provisions which relate to (i)
the acquisition of additional securities of the Company, (ii) the disposition of
securities of the Company and (iii) a change in the present Board of Directors
of the Company, including plans to change the number of directors and to fill
the vacancy on the Board.
<PAGE>
CUSIP No. 949470 10 8 Page 10 of 158 Pages
In addition, the Note provides that upon the default by the Company
in the payment of interest on the Note that continues for 180 days or a breach
of any of the Company's agreements contained in the Note, the Note Purchase
Agreement or the Registration Rights Agreement that continues unremedied for 180
days, the number of members of the Board of Directors of the Company shall be
increased by one and that the Company shall cause a designee of the holders of a
majority of the outstanding Notes to fill such vacancy. The right of such
holders to designate such director shall continue until such time as all
interest on the Note shall have been paid in full and there shall exist no
breach of the Company's agreements contained in the Note, the Note Purchase
Agreement or the Registration Rights Agreement.
The Fund has agreed in the Note Purchase Agreement that it will not
until the earlier of (i) the first anni versary of the date on which the Fund
ceases to hold any Notes and (ii) December 31, 2002, independently or as a
member of a group, purchase any shares of Common Stock that, if the price for
such shares when aggregated with the purchase price of any shares of Common
Stock (other then shares of Common Stock issued upon conversion of all or any
portion of the Notes) purchased thereby subsequent to the date of the Note
Purchase Agreement, exceeds $10,000,000. Subject to the above limitation, the
Reporting Persons may from time to time acquire additional shares of Common
Stock
<PAGE>
CUSIP No. 949470 10 8 Page 11 of 158 Pages
in the open market or in privately negotiated transactions, subject to
availability of the shares of Common Stock at prices deemed favorable, the
Company's business or financial condition and to other factors and conditions
the Reporting Persons deem appropriate. Alternatively, the Reporting Persons may
sell all or a portion of their Notes or shares of Common Stock in the open
market or in privately negotiated transactions subject to the terms of the Note
Purchase Agreement and to the factors and conditions referred to above.
Except as described in the Note Purchase Agree ment, the Note and
the Registration Rights Agreement, and as set forth above in the immediately
preceding paragraph, no Reporting Person has any present plans or proposals that
relate to or would result in: (a) the acquisition by any person of additional
securities of the issuer, or the disposition of securities of the issuer; (b) an
extra ordinary corporate transaction, such as a merger, reorga nization or
liquidation, involving the Company or any of its subsidiaries; (c) a sale or
transfer of a material amount of assets of the Company or of any of its
subsidiaries; (d) any change in the present board of directors or management of
the Company, including any plans or proposals to change the number or term of
such directors or to fill any existing vacancies on such board; (e) any material
change in the present capitalization or dividend policy of the Company; (f) any
other material change in the Company's business or
<PAGE>
CUSIP No. 949470 10 8 Page 12 of 158 Pages
corporate structure; (g) changes in the Company's charter, by-laws or
instruments corresponding thereto or other actions that may impede the
acquisition of control of the Company by any person; (h) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action
similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
------------------------------------
(a) through (c). As set forth above, on
January 19, 1996, the Company issued to the Fund, and the Fund acquired from the
Company, the Note, which is in the principal amount of $20,000,000.
Giving effect to the conversion of the Note, the Fund beneficially
owns 689,655 shares of Common Stock, representing approximately 10.96% of the
outstanding shares of Common Stock (assuming the conversion of the Notes and
based on the number of shares of Common Stock outstanding as of January 11, 1996
as represented by the Company in the Note Purchase Agreement).
By virtue of BBH & Co.'s relationship with the Fund, BBH & Co. may
be deemed to own beneficially 689,655
<PAGE>
CUSIP No. 949470 10 8 Page 13 of 158 Pages
shares of Common Stock, representing approximately 10.96% of the outstanding
shares of Common Stock (assuming the conversion of the Notes and based on the
number of shares of Common Stock outstanding as of January 11, 1996 as repre
sented by the Company in the Note Purchase Agreement). By virtue of the
resolution adopted by BBH & Co. designating Long and Tucker, or either of them,
as the sole and exclusive partners of BBH & Co. having voting power (including
the power to vote or to direct the voting) and investment power (including the
power to dispose or to direct the disposition) with respect to the Notes, and
the Common Stock issuable upon conversion of the Notes, each of Long and Tucker
may be deemed to own beneficially 689,655 shares of Common Stock, representing
approximately 10.96% of the outstanding shares of Common Stock (assuming the
conversion of the Notes and based on the number of shares of Common Stock
outstanding as of January 11, 1996 as repre sented by the Company in the Note
Purchase Agreement).
Except as set forth above, no Reporting Person nor, to the best
knowledge of each Reporting Person, any person identified on Schedule I,
beneficially owns any shares of Common Stock or has effected any transaction in
shares of Common Stock during the preceding 60 days.
(d). To the best knowledge of the Reporting Persons, no person other
than the Reporting Persons has the right to receive or the power to direct the
receipt of
<PAGE>
CUSIP No. 949470 10 8 Page 14 of 158 Pages
dividends from, or the proceeds from the sale of, the shares of Common Stock
issuable upon conversion of the Notes.
(e). Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to the Common Stock
of the Issuer.
----------------------------------------------
The Company has entered into the Registration Rights Agreement with
the Fund, on the terms and conditions set forth therein, giving the Fund, among
other things, the right, on the terms and conditions set forth therein, to
require the Company to register for sale to the public the Note and any shares
of Common Stock acquired by the Fund upon conversion of the Notes.
In addition, pursuant to the Note Purchase Agreement, Robert W.
Morey, Jr. and Edward A. Ullmann (the "Principal Shareholders") have entered
into an agreement pursuant to which each Principal Shareholder agrees that he
shall vote all shares of Common Stock of the Company, all other securities of
the Company that are entitled to vote for directors and all proxies (unless
otherwise directed by the stockholder submitting such proxy), in each case which
he has the right to vote or power to direct the vote, in favor of the election
to the Board of Directors of the Company (i) any nominee that the Purchaser
shall have the right to designate for elections to the Board of Directors of the
Company pursuant to the Note Purchase Agreement and (ii) any nominee of the
holders of a majority of the
<PAGE>
CUSIP No. 949470 10 8 Page 15 of 158 Pages
outstanding principal amount of the Notes that such holders shall have the right
to designate for election to the Board of Directors of the Company pursuant to
the Notes.
Also, the Company and each Principal Shareholder have each agreed
that it or he will promptly notify and consult with the Fund with respect to any
proposed recapitalization, merger, consolidation or other similar transaction,
any other transaction that could result in a Change of Control (as defined in
the Notes) of the Company or any proposed amendment to the Company's Certificate
of Incorporation or By-laws that could result in a change in corporate
governance of the Company, and, if any such event or transaction occurs, the
Company and each Principal Shareholder have agreed to act in the best interests
of all shareholders of the Company.
As a result of the agreements described in the two immediately
preceding paragraphs, Messrs. Ullmann and Morey and the Reporting Persons may be
deemed to be members of a group that beneficially owns all the shares
beneficially owned by the members of such group. Each of the Reporting Persons
disclaims membership in such group.
Moreover, pursuant to the Note Purchase Agreement, so long as the
Reporting Persons continue to hold at least 25% of the total number of shares of
Common Stock, if any Principal Shareholder at any time or from time to time
proposes or agrees to sell or transfer to a Person (as defined in the Note
Purchase Agreement) or a group of
<PAGE>
CUSIP No. 949470 10 8 Page 16 of 158 Pages
Persons, in any transaction or series of related transactions, twenty percent
(20%) or more of the shares of Common Stock held by him, the Principal
Shareholder(s) proposing such disposition is required to give written notice of
such proposed sale to the Reporting Persons within 15 Business Days (as defined
in the Note Purchase Agreement) prior to the date of such sale. Such notice must
state the price and other terms of the proposed transaction, as well as the
number of shares proposed to be sold.
Except as described elsewhere in this Statement and as set forth in
the Note Purchase Agreement, the Note and the Registration Rights Agreement, to
the best knowledge of the Reporting Persons, there exist no contracts,
arrangements, understandings or relationships (legal or otherwise) among the
persons named in Item 2 and between such persons and any person with respect to
any securities of the Company, including but not limited to transfer or voting
of any securities of the Company, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies.
Item 7. Material To Be Filed as Exhibits.
--------------------------------
1. Note Purchase Agreement, dated as of January 19, 1996, by and
between the Company and the Fund.
<PAGE>
CUSIP No. 949470 10 8 Page 17 of 158 Pages
2. 6.0% Subordinated Convertible Note Due December 31, 2002 in the
aggregate principal amount of $20,000,000 as issued to the Fund on January 19,
1996.
3. Registration Rights Agreement, dated as of January 19, 1996,
between the Company and the Fund.
<PAGE>
CUSIP No. 949470 10 8 Page 18 of 158 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
hereby certify that the information set forth in this statement is true,
complete and correct.
Dated: January __, 1996
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
General Partner
By: /s/ Lawrence C. Tucker
------------------------------
Name: Lawrence C. Tucker
Title: Partner
BROWN BROTHERS HARRIMAN & CO.
By: /s/ Lawrence C. Tucker
------------------------------
Name: Lawrence C. Tucker
Title: Partner
/s/ T. Michael Long
------------------------------
T. Michael Long
/s/ Lawrence C. Tucker
------------------------------
Lawrence C. Tucker
<PAGE>
CUSIP No. 949470 10 8 Page 19 of 158 Pages
SCHEDULE I
----------
Set forth below are the names and positions of all of the general partners
of BBH & Co. The principal occupation or employment of each person listed below
is private banker, and, unless otherwise indicated, the business address of each
person is 59 Wall Street, New York, New York 10005. Unless otherwise indicated,
each person listed below is a citizen of the United States.
Business Address
(if other than as
Name indicated above)
---- ----------------
Peter B. Bartlett
Brian A. Berris
Walter H. Brown
Douglas A. Donahue, Jr. 40 Water Street
Boston, Massachusetts 02109
Anthony T. Enders
Alexander T. Ercklentz
Terrence M. Farley
Elbridge T. Gerry, Jr.
Kyosuko Kashimoto 8-14 Nihonbashi 30-Chome Chuo-ku
(citizen of Japan) Tokyo 103, Japan
Noah T. Herndon
Landon Hilliard
Radford W. Klotz, Jr.
Michael Kraynak, Jr.
T. Michael Long
Hampton S. Lynch, Jr.
Michael W. McConnell
William H. Moore III
<PAGE>
CUSIP No. 949470 10 8 Page 20 of 158 Pages
Business Address
(if other than as
Name indicated above)
---- ----------------
Donald B. Murphy
John A. Nielsen
Eugene C. Rainis
A. Heaton Robertson 40 Water Street
Boston, Massachusetts 02109
Jeffrey A. Schoenfeld
Stokley P. Towles 40 Water Street
Boston, Massachusetts 02109
Lawrence C. Tucker
Maarten van Hengel
Douglas C. Walker 1531 Walnut Street
Philadelphia, Pennsylvania 19102
Laurence F. Whittemore
Richard H. Witmer, Jr.
<PAGE>
CUSIP No. 949470 10 8 Page 21 of 158 Pages
INDEX TO EXHIBITS
-----------------
Page
Exhibit Description Number
- ------- ----------- ------
1 Note Purchase Agreement, dated as of 23
January 19, 1996, by and between the
Company and the Fund.
2 6.0% Subordinated Convertible Note 100
due December 31, 2002 in the aggre-
gate principal amount of $20,000,000
as issued to the Fund on January 19,
1996.
3 Registration Rights Agreement dated 133
January 19, 1996, between the Company
and the Fund.
<PAGE>
EXHIBIT 1
22
<PAGE>
EXHIBIT 1
- --------------------------------------------------------------------------------
NOTE PURCHASE AGREEMENT
By and Between
THE WELLCARE MANAGEMENT GROUP, INC.
And
THE 1818 FUND II, L.P.
----------------------------
Dated as of January 19, 1996
----------------------------
- --------------------------------------------------------------------------------
23
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS.............................................1
1.1 Definitions.............................................1
1.2 Accounting Terms; Financial Statements..................6
ARTICLE 2 PURCHASE AND SALE OF NOTES..............................7
2.1 Purchase and Sale of Notes..............................7
2.2 Fees....................................................7
2.3 Closing.................................................7
ARTICLE 3 CONDITIONS TO THE OBLIGATION
OF THE PURCHASER TO CLOSE ..............................7
3.1 Representations and Warranties True.....................8
3.2 Compliance with this Agreement..........................8
3.3 Officer's Certificate...................................8
3.4 Secretary's Certificate.................................8
3.5 Documents...............................................8
3.6 Purchase Permitted by Applicable Laws; Legal
Investment..............................................8
3.7 Opinion of Counsel......................................9
3.8 Approval of Counsel to the Purchaser....................9
3.9 Consents and Approvals..................................9
3.10 No Material Adverse Change..............................9
3.11 Due Diligence...........................................9
3.12 Conduct of Business....................................10
3.13 Registration Rights Agreement..........................10
3.14 Certificate of Incorporation and By-Laws
of the Company.........................................10
3.15 Market Conditions......................................10
3.16 No Litigation..........................................10
3.17 No Default or Breach...................................10
ARTICLE 4 CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE................................11
4.1 Representations and Warranties True....................11
4.2 Compliance with this Agreement.........................11
4.3 Issuance Permitted by Applicable Laws..................11
4.4 Approval of Counsel to the Company.....................11
4.5 Consents and Approvals.................................11
ARTICLE 5 REPRESENTATIONS AND
WARRANTIES OF THE COMPANY..............................12
5.1 Corporate Existence and Power..........................12
i
24
<PAGE>
PAGE
5.2 Corporate Authorization; No Contravention..............12
5.3 Governmental Authorization; Third
Party Consents.........................................13
5.4 Binding Effect; Use of Proceeds........................13
5.5 No Legal Bar...........................................14
5.6 Litigation.............................................14
5.7 No Default or Breach...................................14
5.8 Use of Proceeds; Margin Regulations....................15
5.9 Title to Properties....................................15
5.10 Taxes..................................................15
5.11 Financial Condition....................................15
5.12 No Material Adverse Change.............................16
5.13 Commission Documents...................................16
5.14 Environmental Matters..................................16
5.15 Investment Company.....................................17
5.16 Subsidiaries...........................................17
5.17 Capitalization.........................................17
5.18 Regulatory Matters.....................................18
5.19 Private Offering.......................................18
5.20 Broker's, Finder's or Similar Fees.....................18
5.21 Full Disclosure........................................18
5.22 Providers..............................................19
5.23 Large Employer Group Contracts.........................19
5.24 Reinsurance Agreements.................................19
ARTICLE 6 REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS OF THE PURCHASER..............20
6.1 Existence and Power....................................20
6.2 Authorization; No Contravention........................20
6.3 Binding Effect.........................................20
6.4 No Legal Bar...........................................20
6.5 Purchase for Own Account...............................20
6.6 Broker's, Finder's or Similar Fees.....................21
6.7 Purchase of Additional Common Shares...................21
ARTICLE 7 INDEMNIFICATION........................................22
7.1 Indemnification by the Company.........................22
7.2 Notification...........................................23
7.3 Registration Rights Agreement..........................24
ARTICLE 8 AFFIRMATIVE COVENANTS..................................24
8.1 Financial Statements...................................24
8.2 Certificates; Other Information........................25
8.3 Preservation of Existence..............................25
8.4 Payment of Obligations.................................26
8.5 Compliance with Laws...................................26
8.6 Notices................................................26
8.7 Issue Taxes............................................27
8.8 Payment and Conversion of Notes........................27
ii
25
<PAGE>
PAGE
8.9 Inspection.............................................27
8.10 Registration and Listing...............................28
8.11 Shareholder Agreement..................................28
8.12 HSR Act Filing.........................................28
8.13 Board Representation; Management Rights................28
8.14 Principal Shareholder Agreement........................30
ARTICLE 9 NEGATIVE COVENANTS................................30
9.1 Consolidations and Mergers.............................30
9.2 Transactions with Affiliates...........................31
9.3 Use of Proceeds........................................31
9.4 No Inconsistent Agreements.............................32
9.5 Offer or Sale of Notes.................................32
ARTICLE 10 DISPOSITIONS...........................................32
10.1 Dispositions by Principal Shareholders.................32
10.2 Dispositions by the Purchaser..........................32
10.3 Private Sale...........................................34
10.4 Legends................................................35
ARTICLE 11 MISCELLANEOUS..........................................35
11.1 Survival of Provisions.................................35
11.2 Notices................................................36
11.3 Successors and Assigns.................................37
11.4 Amendment and Waiver...................................37
11.5 Counterparts; Headings.................................37
11.6 Expenses...............................................38
11.7 Determinations.........................................38
11.8 Governing Law..........................................38
11.9 Jurisdiction...........................................38
11.10 Severability.............................................38
11.11 Rules of Construction....................................39
11.12 Remedies.................................................39
11.13 Entire Agreement.........................................39
11.14 Attorneys' Fees..........................................39
11.15 Publicity................................................39
11.16 Confidentiality..........................................40
EXHIBITS
Exhibit A Form of 6.0% Subordinated Convertible Note
Exhibit B Form of Registration Rights Agreement
Exhibit C Opinion of Epstein, Becker & Green, P.C.
Exhibit D Insider Trading Policy of the Company
SCHEDULES
iii
26
<PAGE>
NOTE PURCHASE AGREEMENT, dated as of January 19, 1996, by and
between The WellCare Management Group, Inc., a New York corporation (the
"COMPANY"), and The 1818 Fund II, L.P., a Delaware limited partnership (the
"PURCHASER").
The Company proposes that the Company issue to the Purchaser, and
the Purchaser purchase, 6.0% Subordinated Convertible Notes in the aggregate
principal amount of $20,000,000 (the "NOTES"), upon the terms and subject to the
conditions set forth in this Agreement.
For consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, and unless the context
requires a different meaning, the follow ing terms have the meanings indicated:
"AFFILIATE" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.
"AGREEMENT" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any other federal,
state or foreign law for the relief of debtors, as any such laws may be amended
from time to time.
"BUSINESS DAY" means any day other than a Satur day, Sunday or other
day on which commercial banks in the State of New York are authorized or
required by law to close.
"CLASS A COMMON STOCK" means the Class A Common Stock, par value
$.01 per share, of the Company.
"CLOSING" has the meaning assigned to that term in
Section 2.3.
"CLOSING DATE" means the date specified in Sec
tion 2.3.
27
<PAGE>
2
"CODE" means the Internal Revenue Code of 1986, as
amended.
"COMMISSION" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"COMMON SHARES" means the shares of common stock,
par value $.01, of the Company.
"COMMON STOCK OF THE COMPANY" means Class A Common Stock, Common
Shares and any other series or class of common stock of the Company.
"COMMISSION DOCUMENTS" has the meaning assigned to
that term in Section 5.13.
"COMPANY" means The WellCare Management Group,
Inc., a New York corporation.
"COMPANY'S KNOWLEDGE" shall mean any fact or circumstance that is
known to, or could reasonably be expected to come to the attention of, Ullmann,
Marystephanie Corsones or Robert Goff.
"CONDITION OF THE COMPANY" means the assets, busi ness, properties,
operations or financial condition of the Company and its Subsidiaries, taken as
a whole, after giving effect to this Agreement.
"CONSOLIDATED NET WORTH" means, as of the date of determination with
respect to any Person, the consolidated stockholders' equity and surplus of such
Person and its Subsidiaries, determined in accordance with GAAP.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct
or indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, let ter of credit or other obligation (the "PRIMARY
OBLIGATION") of another Person (the "PRIMARY OBLIGOR"), including, with out
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase, repurchase or otherwise acquire such primary obligations or any
property constitut ing direct or indirect security therefor, or (b) to advance
or provide funds (i) for the payment or discharge of any such primary
obligation, or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor or (c) to
purchase property, securities or services primarily for the (purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to
28
<PAGE>
3
make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of any such primary obli gation against loss in respect
thereof. The amount of any Contingent Obligation shall be deemed to be an amount
equal to the stated or determinable amount of the primary obliga tion in respect
of which such Contingent Obligation is made or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof as determined by
the Company in good faith.
"CONTRACTUAL OBLIGATIONS" means as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"CONVERSION SHARES" means the Common Shares issued or issuable upon
conversion of the Notes.
"ENVIRONMENTAL LAWS" means any federal, state, or local law, common
law doctrine, rule, order, decree, judg ment, injunction, license, permit or
regulation relating to environmental matters, including those pertaining to land
use, air, soil, surface water, ground water (including the protection, cleanup,
removal, remediation or damage thereof), or any other environmental matter,
together with any other laws (federal, state or local) relating to emis sions,
discharges, releases or threatened releases of any contaminant including,
without limitation, medical, bio logical, biohazardous or radioactive waste and
materials, into ambient air, land, surface water, groundwater, personal property
or structures, or otherwise relating to the manu facture, processing,
distribution, use, treatment, storage, disposal, transportation, discharge or
handling of any contaminant, including, without limitation, the Comprehen sive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 ET
SEQ.), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801 ET SEQ.),
the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 ET SEQ.), the
Federal Water Pollution Control Act (33 U.S.C. ss. 1251 ET SEQ.), the Clean Air
Act (42 U.S.C. ss. 1251 ET SEQ.), and thE Toxic Substances Control Act (15
U.S.C. ss. 2601 ET SEQ.), as such laws have been amended or supplemented and any
analogous future federal, or present or future state or local laws, statutes and
regulations promulgated thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"50% THRESHOLD" has the meaning provided therefor
in Section 10.2(c).
29
<PAGE>
4
"GAAP" means generally accepted accounting principles in the United
States in effect from time to time.
"GOVERNMENTAL AUTHORITY" means the government of any nation, state
or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing, including
without limitation United States Federal and State insurance and health offices
or commissions.
"HAZARDOUS MATERIALS" means those substances which are regulated by
or form the basis of liability under any Environmental Laws.
"HOLDER" means the Purchaser and any subsequent direct or indirect
transferee of Notes or Conversion Shares other than a transferee who has
acquired Notes or Conversion Shares that have been the subject of a distribution
pursuant to a registered public offering, or, in the case of Conversion Shares,
a transferee who has acquired such Conversion Shares after such shares have been
the subject of a distribution to the public pursuant to Rule 144 or otherwise
distributed under circumstances not requiring a legend as described in Section
6.5.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations of the Federal Trade Commission
thereunder.
"INDEBTEDNESS" means as to any Person (a) all obligations of such
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured),(b) all obligations evidenced by notes,
bonds, debentures or similar instru ments, (c) all obligations to pay the
deferred purchase price of property or services, except trade accounts payable
and accrued liabilities arising in the ordinary course of business, (d) all
interest rate and currency swaps and simi lar agreements under which payments
are obligated to be made, whether periodically or upon the happening of a con
tingency, (e) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to reposses sion or sale of such
property), (f) all obligations under leases which have been or should be, in
accordance with
30
<PAGE>
5
GAAP, recorded as capital leases, (g) all indebtedness secured by any Lien on
any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
non-recourse to the credit of that Person, and (h) any Contingent Obligation for
any of the foregoing.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a cap italized lease obligation, or any financing
lease having substantially the same economic effect as any of the fore going).
"MOREY" means Mr. Robert W. Morey, Jr.
"NASDAQ" shall mean the National Market System of
the Nasdaq Stock Market.
"NOTES" means the 6.0% Subordinated Convertible Notes due December
31, 2002 of the Company in substantially the form of Exhibit A hereto.
"PERSON" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"PRINCIPAL SHAREHOLDER" means Morey and Ullmann,
individually, and "Principal Shareholders" means Morey and
Ullmann, collectively.
"PURCHASER" means The 1818 Fund II, L.P., a Delaware limited
partnership.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement in the form attached hereto as Exhibit B.
"REQUIREMENTS OF LAW" means as to any Person, the Certificate of
Incorporation and By-laws or other organiza tional or governing documents of
such Person, and any law, treaty, rule, regulation, right, privilege,
qualification, license or franchise or determination of an arbitrator or a court
or other Governmental Authority, in each case appli-
31
<PAGE>
6
cable or binding upon such Person or any of its property or to which such Person
or any of its property is subject.
"RULE 144" or "RULE 144A" means Rule 144 or Rule 144A, as the case
may be, as promulgated by the Commission under the Securities Act, and any
successor rule or regulation thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder.
"SOLVENT" means, with respect to any Person, that the fair saleable
value of the assets and property of such Person is, on the date of
determination, greater than the total amount of liabilities (including
contingent and unliq uidated liabilities) of such Person as of such date and
that, as of such date, such Person is able to pay all lia bilities of such
Person as such liabilities mature. In computing the amount of contingent or
liquidated liabilities at any time, such liabilities will be computed as the
amount which, in light of all the facts and circumstances existing at such time,
represents the amount that is probable to become an actual or matured liability.
"SUBSIDIARY" means, with respect to any Person, a corporation or
other entity of which 50% or more of the vot ing power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"TIME OF PURCHASE" has the meaning provided there
for in Section 2.3.
"ULLMANN" means Mr. Edward A. Ullmann.
1.2 ACCOUNTING TERMS; FINANCIAL STATEMENTS. All accounting terms
used herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice. The term
"sound accounting practice" shall mean such accounting prac tice as, in the
opinion of the independent accountants reg ularly retained by the Company,
conforms at the time to GAAP in the United States applied on a consistent basis
except for changes with which such accountants concur. If any changes in
accounting principles are hereafter occasioned by promulgation of rules,
regulations, pronouncements or opin ions by or are otherwise required by the
Financial Account ing Standards Board or the American Institute of Certified
Public Accountants (or successors thereto or agencies with
32
<PAGE>
7
similar functions), and any of such changes results in a change in the method of
calculation of, or affect the results of such calculation of, any of the
financial cove nants, standards or terms found herein, then the parties hereto
agree to enter into and diligently pursue negoti ations in order to amend such
financial covenants, standards or terms so as to reflect fairly and equitably
such changes, with the desired result that the criteria for evaluating the
Company's financial condition and results of operations shall be the same after
such changes as if such changes had not been made.
ARTICLE 2
PURCHASE AND SALE OF NOTES
2.1 PURCHASE AND SALE OF NOTES. Subject to the terms and conditions
herein set forth, the Company agrees that it will issue to the Purchaser, and
the Purchaser agrees that it will acquire from the Company, at the Time of
Purchase one or more Notes for an aggregate purchase price of $20,000,000 (the
"PURCHASE PRICE"). The Purchaser shall pay the Company the Purchase Price in
immediately available funds by wire transfer to an account previously designated
by the Company in a notice delivered to the Purchaser one day prior to the
Closing Date; PROVIDED that the Purchaser shall deduct from such payment the
facility fee payable to the Purchaser at the Time of Purchase pursuant to
Section 2.2.
2.2 FEES. The Company shall pay to the Purchaser at the Time of
Purchase a facility fee equal to $800,000, which payment shall be made by way of
deduction from the Purchase Price as provided in Section 2.1 hereof.
2.3 CLOSING. The purchase and issuance of the Notes shall take place
at the closing (the "CLOSING") to be held at the offices of Paul, Weiss, Rifkind
Wharton & Garrison, 1285 Avenue of the Americas, New York, New York 10019-6064
on Friday, January 19, 1996 at 10:00 a.m., New York City time, or at such other
place or such other time or date as the Company and the Purchaser may agree upon
(the "Closing Date"). The time at which such Closing shall be concluded is
herein called the "TIME OF PURCHASE."
33
<PAGE>
8
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASER TO CLOSE
The obligation of the Purchaser to purchase the Notes, to pay the
Purchase Price at the Closing and to perform any obligations hereunder shall be
subject to the satisfaction or waiver of the following conditions on or before
the Closing Date:
3.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company contained in Article 5 hereof shall be true and
correct in all material respects at and as of the Time of Purchase (and after
giving effect to the transactions contemplated hereby) as if made at and as of
such date.
3.2 COMPLIANCE WITH THIS AGREEMENT. The Company shall have performed
and complied in all material respects with all of its agreements and conditions
set forth or contemplated herein that are required to be performed or complied
with by the Company on or before the Closing Date.
3.3 OFFICER'S CERTIFICATE. The Purchaser shall have received a
certificate, dated the Closing Date and signed by the President or a Vice
President of the Company, certifying that the conditions set forth in Sections
3.1 and 3.2 hereof have been satisfied on and as of such date.
3.4 SECRETARY'S CERTIFICATE. The Purchaser shall have received a
certificate, dated the Closing Date and signed by the Secretary or an Assistant
Secretary of the Company, certifying the truth and correctness of attached
copies of the Certificate of Incorporation and By-Laws of the Company and the
resolutions of the Board of Directors of the Company approving this Agreement
and the transactions contemplated hereby.
3.5 DOCUMENTS. The Purchaser shall have received copies of such
documents as it reasonably may request in connection with the sale of the Notes
and the transactions contemplated hereby, all in form and substance reasonably
satisfactory to the Purchaser.
3.6 PURCHASE PERMITTED BY APPLICABLE LAWS; LEGAL INVESTMENT. The
acquisition of and payment for the Notes to be acquired by the Purchaser
hereunder, and the consummation of the transactions contemplated hereby (a)
shall not be prohibited by any applicable law or governmental regulation, (b)
shall not subject the Purchaser to any penalty under or pursuant to any
applicable law or governmental regulation
34
<PAGE>
9
and (c) shall be permitted by the laws and regulations of
the jurisdictions to which it is subject.
3.7 OPINION OF COUNSEL. The Purchaser shall have received the
opinion of Epstein Becker & Green, P.C., coun sel to the Company, dated the
Closing Date, substantially in the form of Exhibit C.
3.8 APPROVAL OF COUNSEL TO THE PURCHASER. All actions and
proceedings hereunder and all documents required to be delivered by the Company
hereunder or in connection with the consummation of the transactions
contemplated hereby, and all other related matters, shall have been reasonably
acceptable to Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the
Purchaser, as to their form and substance.
3.9 CONSENTS AND APPROVALS. All consents, exemp tions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons, including with respect to
Contractual Obligations of the Company, necessary or required in connection with
the execu tion, delivery or performance (including, without limita tion, the
issuance of the Notes and the issuance of the Conversion Shares) by the Company
or enforcement against the Company of this Agreement, the Notes or the
Registration Rights Agreement (other than, with respect to the issuance of
Conversion Shares, any required pre-merger notification and related filings
pursuant to the HSR Act, the filing of a notification with Nasdaq upon the first
issuance of any Conversion Shares and filings under the Securities Act, any
applicable state securities or "blue sky" laws upon the issuance of any
Conversion Shares to any Person other than the Purchaser and any other required
approval under Section 98.9 of Article 44 of the New York Public Health Law)
shall have been obtained and be in full force and effect and the Purchaser shall
have been furnished with appropriate evidence thereof.
3.10 NO MATERIAL ADVERSE CHANGE. Except as set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(the "1994 Form 10-K") or in the Company's Reports on Form 10-Q for the
quarterly periods ended March 31, 1995, June 30, 1995 and Septem ber 30, 1995
(the "1995 Forms 10-Q"), there shall have been no material adverse change in the
Condition of the Company since December 31, 1994.
3.11 DUE DILIGENCE. The Purchaser shall have
completed its due diligence review of the Condition of the
Company and shall be reasonably satisfied with the results
of such review.
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<PAGE>
10
3.12 CONDUCT OF BUSINESS. The Company and its Subsidiaries shall
have conducted their business in the ordinary course from the date hereof to the
Closing Date.
3.13 REGISTRATION RIGHTS AGREEMENT. The Company
shall have duly executed and delivered to the Purchaser the
Registration Rights Agreement.
3.14 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE COMPANY. No
amendments to the Certificate of Incorporation or By-Laws of the Company as in
effect on the date hereof shall have been effected.
3.15 MARKET CONDITIONS. Prior to the Closing Date, (a) trading in
securities generally on the NYSE shall not have been suspended or limited or
minimum or maximum prices shall not have been generally established on such
exchange, or additional material governmental restrictions, not in force on the
date of this Agreement, shall not have been imposed upon trading in securities
generally by such exchange or by order of the Commission or any court or other
Governmental Authority, (b) a general banking moratorium shall not have been
declared by either federal or New York State authorities and (c) any material
adverse change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any outbreak
or material escalation of hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis shall not have occurred.
3.16 NO LITIGATION. Except as set forth in SCHEDULE 3.16, no action,
suit, proceeding, claim or dispute shall have been brought or otherwise arisen
at law, in equity, in arbitration or before any Governmental Authority against
the Company or any of its Subsidiaries which would, if adversely determined, (i)
have a material adverse effect on the Condition of the Company or (ii) have a
material adverse effect on the ability of the Company to perform its obligations
under this Agreement, the Notes or the Registration Rights Agreement.
3.17 NO DEFAULT OR BREACH. Neither the Company nor any of its
Subsidiaries shall have been in default under or with respect to any Contractual
Obligation in any respect, which, individually or together with all such
defaults, would be materially adverse to the Condition of the Company or which
could materially adversely affect the ability of the Company to perform its
obligations under this Agreement, the Notes or the Registration Rights
Agreement.
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ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
The obligations of the Company to issue and sell the Notes, and to
perform any other obligations hereunder, shall be subject to the satisfaction or
waiver of the fol lowing conditions on or before the Closing Date:
4.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Purchaser contained in Section 6 hereof shall be true and
correct in all material respects at and as of the Time of Purchase (and after
giving effect to the transactions contemplated hereby) as if made at and as of
such date.
4.2 COMPLIANCE WITH THIS AGREEMENT. The Pur chaser shall have
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Purchaser on or before the Closing Date.
4.3 ISSUANCE PERMITTED BY APPLICABLE LAWS. The issuance of the Notes
to be issued by the Company hereunder and the consummation of the transactions
contemplated hereby (a) shall not be prohibited by any applicable law or govern
mental regulation, (b) shall not subject the Company to any penalty under or
pursuant to any applicable law or governmental regulation and (c) shall be
permitted by the laws and regulations of the jurisdictions in which it is
subject.
4.4 APPROVAL OF COUNSEL TO THE COMPANY. All actions and proceedings
hereunder and all documents required to be delivered by the Purchaser hereunder
or in connection with the consummation of the transactions contemplated hereby,
and all other related matters, shall have been rea sonably acceptable to Epstein
Becker & Green, P.C., counsel to the Company, as to their form and substance.
4.5 CONSENTS AND APPROVALS. All consents, exemp tions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons necessary or required in connection
with the execution, delivery or performance by the Purchaser or enforcement
against the Purchaser of this Agreement shall have been obtained and be in full
force and effect, and the Company shall have been furnished with appropriate
evidence thereof.
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ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as
follows:
5.1 CORPORATE EXISTENCE AND POWER. The Company
and each of its Subsidiaries:
(a) is duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of
its incorporation;
(b) has (i) full corporate power and authority and (ii) all
governmental licenses, franchises, permits, certificates, authorizations,
consents and approvals to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently, or is
currently proposed to be, engaged;
(c) except as otherwise set forth on SCHEDULE 5.1(C), is duly
qualified as a foreign corporation, licensed and in good standing under the laws
of each juris diction where its ownership, lease or operation of property or the
conduct of its business requires such qualification; and
(d) is in compliance with all Requirements
of Law;
except, in the case of (b)(ii), (c) or (d) of this Sec tion 5.1, to the extent
that the failure to do so would not have a material adverse effect on the
Condition of the Company.
5.2 CORPORATE AUTHORIZATION; NO CONTRAVENTION.
The execution, delivery and performance by the Company of
this Agreement, the Notes, the Registration Rights Agreement
and the transactions contemplated hereby and thereby,
including without limitation the issuance of the Notes and
the Conversion Shares:
(a) is within the Company's power and
authority and has been duly authorized by all necessary
action;
(b) does not contravene the terms of the
Company's Certificate of Incorporation or By-laws or other
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organizational or governing documents of the Company or any of its Subsidiaries,
or any amendment thereof; and
(c) except as set forth on SCHEDULE 5.2(C), will not violate,
conflict with or result in any breach or contravention of or the creation of any
Lien under, (i) any Contractual Obligation of the Company or any of its
Subsidiaries, or (ii) any order or decree directly relating to the Company or
any of its Subsidiaries, except, in the case of (i), any violation, conflict,
breach, contravention or creation of Lien that would not, individually or in the
aggregate have a material adverse effect on the Condition of the Company.
5.3 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. Other than,
with respect to the issuance of Conversion Shares, (i) any required pre-merger
notification and related filings under the HSR Act (ii) the filing of a
notification with Nasdaq upon the first issuance of any Conversion Shares and
(iii) filings under the Securities Act and any applicable state securities or
"blue sky" laws upon the issuance of any Conversion Shares to any Person other
than the Purchaser, no approval, consent, exemption, authorization, or other
action by, or notice to, or filing with, any (a) Governmental Authority or (b)
any other Person, is necessary or required in connection with the execution,
delivery or performance by the Company or enforcement against the Company of
this Agreement, the Notes, the Registration Rights Agreement or the transactions
contemplated hereby or thereby except, in the case of (b) with respect to any
Contractual Obligation, any such consent or other action that would not,
individually or in the aggregate, have a material adverse effect on the
Condition of the Company if not obtained.
5.4 BINDING EFFECT; USE OF PROCEEDS. This Agreement has been duly
executed and delivered by the Company, and at the Time of Purchase each of the
Registra tion Rights Agreement and the Notes will be duly executed and delivered
by the Company, and this Agreement constitutes the legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
its terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforceability of
creditors' rights and remedies, generally, and subject to general equitable prin
ciples and at the Time of Purchase each of the Registration Rights Agreement and
the Notes will constitute the legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws
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14
affecting the enforceability of creditors' rights and reme dies, generally, and
subject to general equitable princi ples. The Purchase Price will be used by the
Company to repay Indebtedness, to make acquisitions or for general corporate
purposes.
5.5 NO LEGAL BAR. Neither the execution, deliv ery and performance
of this Agreement, the Notes and the Registration Rights Agreement nor the
borrowings under the Notes and the use of the proceeds thereof will violate any
Requirement of Law or any Contractual Obligation of the Com pany or any of its
Subsidiaries or any rule or regulation of NASDAQ. Except as set forth on
SCHEDULE 5.5, neither the Company nor any of its Subsidiaries has previously
entered into any agreement granting any registration rights to any Person and no
such agreement listed on SCHEDULE 5.5 is inconsistent with the rights to be
granted to the Purchaser in the Registration Rights Agreement.
5.6 LITIGATION. There are no actions, suits, proceedings, claims or
disputes pending, or to the Company's Knowledge, threatened, at law, in equity,
in arbitration or before any Governmental Authority against the Company or any
of its Subsidiaries:
(a) with respect to this Agreement, the
Notes or the Registration Rights Agreement or any of the
transactions contemplated hereby or thereby; or
(b) except as set forth on SCHEDULE 5.6, which would, if
adversely determined, (i) have a material adverse effect on the Condition of the
Company or (ii) have a material adverse effect on the ability of the Company to
perform its obligations under this Agreement, the Notes or the Registration
Rights Agreement. No injunction, writ, temporary restraining order, decree or
any order of any nature has been issued by any court or other Governmental
Authority purporting to enjoin or restrain the execution, delivery, and
performance of this Agreement, the Notes or the Registration Rights Agreement.
5.7 NO DEFAULT OR BREACH. No event has occurred and is continuing or
would result from the incurring of obligations by the Company under this
Agreement or under the Registration Rights Agreement which constitutes, or would
with notice or the passage of time constitute, a default under or breach of any
of the provisions of Article 8 or 9 or an Event of Default under the Notes.
Neither the Company nor any of its Subsidiaries is in default under or with
respect to any Contractual Obligation that requires annual payments by the
Company or any Subsidiary in excess of $100,000.00 in any respect, which,
individually or together
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15
with all such defaults, would be materially adverse to the Condition of the
Company, or which could materially adversely affect the ability of the Company
to perform its obligations under this Agreement, the Notes or the Registration
Rights Agreement. This Section 5.7 does not relate to any agreements between the
Company and any provider or provider network, which agreements are subject to
Section 5.23.
5.8 USE OF PROCEEDS; MARGIN REGULATIONS. No portion of the proceeds
of the issuance of the Notes has been or will be used, directly or indirectly,
(a) to pur chase or carry margin stock as defined in Regulation G of the Federal
Reserve Board, (b) to repay or otherwise refinance Indebtedness of the Company,
any of its Subsidiar ies or others incurred to purchase or carry margin stock or
(c) to extend credit for the purpose of purchasing or carry ing any margin
stock.
5.9 TITLE TO PROPERTIES. The Company and each of its Subsidiaries
have good record and marketable title in fee simple to, or hold leases in full
force and effect in all their real property, except for such defects in title as
could not, individually or in the aggregate, have a materi ally adverse effect
on the Condition of the Company, or the ability of the Company to perform its
obligations under this Agreement, the Notes or the Registration Rights
Agreement.
5.10 TAXES. The Company and its Subsidiaries have filed or caused to
be filed, or have properly filed exten sions for, all income tax returns which
are required to be filed and have paid or caused to be paid all taxes as shown
on said returns and on all assessments received by it to the extent that such
taxes have become due on or prior to the date hereof, except taxes the validity
or amount of which is being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside. The Company and
its Subsidiaries have paid or caused to be paid, or have established reserves
that the Company or each Subsidiary reasonably believes to be adequate in all
material respects, for all income tax liabilities applicable to the Company and
its Subsidiaries for all fiscal years which have not been examined and reported
on by the taxing authorities (or closed by applicable statutes).
5.11 FINANCIAL CONDITION. The Company heretofore has delivered to
the Purchaser true and correct copies of audited consolidated financial
statements of the Company and its Subsidiaries dated as of December 31, 1994
(the "1994 FINANCIALS") and the unaudited consolidated financial state ments of
the Company and its Subsidiaries dated as of March 31, 1995, June 30, 1995 and
September 30, 1995 (the
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"1995 INTERIM FINANCIALS") (collectively, the "Financials"). The Financials have
been prepared in accordance with GAAP applied consistently throughout the
periods covered thereby, with only such deviations from GAAP as are identified
in the footnotes of the Financials, and present fairly the consoli dated
financial condition of the Company as of the dates thereof, and the consolidated
results of operations of the Company for the period, or portion thereof, then
ended (except, in the case of the 1995 Interim Financials, for normal recurring
year-end adjustments and the absence of footnotes). Except as set forth in
Schedule 5.11, neither the Company nor any of its Subsidiaries has any material
direct or indirect indebtedness, liability or obligation, whether known or
unknown, fixed or unfixed, contingent or otherwise, and whether or not of a kind
required by GAAP to be set forth on a financial statement (collectively
"LIABILITIES"), other than (i) Liabilities fully and adequately reflected on the
1994 Financials and (ii) those incurred since the date of the 1994 Financials in
the ordinary course of business.
5.12 NO MATERIAL ADVERSE CHANGE. Except as set forth in the 1994
Form 10-K or in the 1995 Forms 10-Q, there has not been any material adverse
change in the Condition of the Company, nor in the opinion of the Company's
senior management is any such change probable.
5.13 COMMISSION DOCUMENTS. The Company has filed all registration
statements, proxy statements, reports and other documents required to be filed
by it under the Securi ties Act and the Exchange Act, and all amendments thereto
(collectively, the "COMMISSION DOCUMENTS"); and the Company has furnished the
Purchaser correct and complete copies of all Commission Documents, each as filed
with the Commission, from and after August 1993. Except as set forth on SCHEDULE
5.13, each Commission Document was true and accu rate in all material respects
when filed with the Commission and in compliance in all material respects with
the require ments of its respective report form.
5.14 ENVIRONMENTAL MATTERS.
(a) The property, assets and operations of the Company and its
Subsidiaries comply in all material respects with all applicable Environmental
Laws (except to the extent that failure to comply with such Environmental Laws
would not have a material adverse effect on the Condition of the Company).
(b) To the Company's Knowledge, none of the
property, assets or operations of the Company or its
Subsidiaries is the subject of any federal, state or local
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17
investigation evaluating whether any remedial action is needed to respond to a
release of any Hazardous Materials into the environment or that is in
contravention of any federal, state or local law, order or regulation that is
likely to have a material adverse effect on the Condition of the Company.
(c) Neither the Company nor its Subsidiaries has received any
notice or claim, nor are there pending, or to the Company's Knowledge
threatened, lawsuits against them, with respect to violations of an
Environmental Law or in connection with any release of any Hazardous Materials
into the environment.
(d) Neither the Company nor any of its Sub sidiaries has any
material contingent liability (material to the Condition of the Company) in
connection with any release of any Hazardous Materials into the environment.
5.15 INVESTMENT COMPANY. Neither the Company nor
any Person controlling the Company is an "investment com
pany" within the meaning of the Investment Company Act of
1940, as amended.
5.16 SUBSIDIARIES. SCHEDULE 5.16 sets forth a complete and accurate
list of all of the Subsidiaries of the Company together with their respective
jurisdictions of incorporation or organization. Except as set forth on SCHEDULE
5.16, each such Subsidiary is directly or indi rectly wholly owned by the
Company.
5.17 CAPITALIZATION. As of the Closing Date, the authorized capital
stock of the Company will consist of 1,599,109 shares of Class A common stock,
par value $.01 per share, 20,000,000 shares of common stock, par value of $.01
per share, and 1,000,000 shares of preferred stock, par value of $.01 per share,
of which as of the Closing Date 1,484,119 shares of Class A common stock,
4,793,641 shares of common stock and no shares of Preferred Stock will be issued
and outstanding and 14,266 shares of common stock will be held in the Company's
treasury. Except as set forth in SCHEDULE 5.17, there are no shares of capital
stock of the Company reserved for issuance. All of the outstanding shares of
capital stock of the Company have been duly authorized and are fully paid and
non-assessable. The conversion shares to be issued upon conversion of the Notes
are duly authorized, and, when so issued, will be fully paid and non-assessable.
Except as set forth in SCHEDULE 5.17, there are no options, warrants or other
rights to purchase shares of capital stock or other securities of the Company,
nor is the Company obligated in any manner to issue shares of its capital stock
or other securities. Except as
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18
contemplated hereby and for relevant state and federal securities laws, there
are no restrictions on the Company's ability to transfer shares of capital stock
of the Company.
5.18 REGULATORY MATTERS. Each of the Company and each of its
Subsidiaries possesses and is in compliance with all permits, licenses or other
approvals and accreditations as may be required under applicable federal, state
or local laws and regulations necessary to conduct its business, except for any
permits, licenses or other approvals that, individually or in the aggregate,
would not have a material adverse effect on the Condition of the Company if not
obtained.
5.19 PRIVATE OFFERING. No form of general solic itation or general
advertising was used by the Company or, to the Company's Knowledge, its
representatives in connec tion with the offer or sale of the Notes and the
Company has offered the Notes solely to the Purchaser. No registration of the
Notes pursuant to the provisions of the Securities Act or any state securities
or "blue sky" laws will be required by the offer, sale or issuance of the Notes
pur suant to this Agreement.
5.20 BROKER'S, FINDER'S OR SIMILAR FEES. Except as set forth herein,
there are no brokerage commissions, finder's fees or similar fees or commissions
payable in con nection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with the Company or any of its
Subsidiaries, or any action taken by any such entity.
5.21 FULL DISCLOSURE. No statement by the Company contained in this
Agreement, in the Notes or the Registration Rights Agreement, or by the Company
in any documents, certificates, notices, or consents (collectively, "Documents")
delivered to the Purchaser in connection with the purchase and sale of the Notes
at or prior to the Closing, contains (or will contain) an untrue statement of a
material fact or omits (or will omit) to state a material fact required to be
stated therein or necessary to make the statements made, in the light of the
circumstances in which made, not materially false or misleading. Notwithstanding
anything to the contrary in this Section 5.22, the Stockholders make no
representations and warranties with respect to any information contained in any
document that is, or relates in any manner to, a forecast, projection, opinion,
an estimate of future performance or an estimate of financial performance
relating to prior periods. This Section 5.22 does not relate to the Commission
Documents, which documents are subject to Section 5.13.
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19
5.22 PROVIDERS. To the Company's Knowledge, each of the Company's
providers and provider networks has all governmental licenses, franchises,
permits, certificates, authorizations, consents and approvals (collectively,
"Provider Permits") to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently, or is
currently proposed to be, engaged, except for any Provider Permits that,
individually or in the aggregate, would not have a material adverse effect on
the Condition of the Company if not obtained. To the Company's Knowledge, within
the last twelve months no provider or provider network of the Company has
canceled or otherwise terminated, or threatened in writing to cancel or
otherwise terminate, the relationship of such provider or provider network with
the Company, except for any such provider or provider network the ter mination
of whose relationship with the Company would not, individually or in the
aggregate, have a material adverse effect on the Condition of the Company. To
the Company's Knowledge, no provider or provider network of the Company has
during the last twelve months decreased its relationship with the Company or
decreased its services to the Company, except for any such decreases that would
not, individually or in the aggregate, have a material adverse effect on the
Condition of the Company.
5.23 LARGE EMPLOYER GROUP CONTRACTS. To the Company's Knowledge, no
party to any employer group contract that includes 5% or more of the Company's
enrollees is contemplating the cancellation of such contract and there exists no
event that could have a material adverse effect on any such contract.
5.24 REINSURANCE AGREEMENTS. The reinsurance agreement between the
Company and each of Preferred Health Insurance Company of New York and Preferred
Life Insurance Company of New York is in full force and effect. Such agreements
are adequate to cover any excess losses that could arise from any known
contingencies of the Company.
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ARTICLE 6
REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS OF THE PURCHASER
The Purchaser represents and warrants to, and covenants and agrees
with, the Company as follows:
6.1 EXISTENCE AND POWER. The Purchaser:
(a) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
organization;
(b) has the power and authority to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently, or is currently proposed to be, engaged; and
(c) is in compliance with all Requirements
of Law.
6.2 AUTHORIZATION; NO CONTRAVENTION. The execu
tion, delivery and performance by the Purchaser of this
Agreement and the Registration Rights Agreement:
(a) is within the Purchaser's power and
authority and has been duly authorized by all necessary
action;
(b) does not contravene the terms of the
Purchaser's Amended and Restated Agreement of Limited
Partnership, or any amendment thereof; and
(c) will not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, any Contractual Obligation
of the Purchaser, or any order or decree directly relating to the Purchaser.
6.3 BINDING EFFECT. This Agreement has been duly executed and
delivered by the Purchaser, and this Agreement constitutes the legal, valid and
binding obligation of the Purchaser enforceable against it in accordance with
its terms.
6.4 NO LEGAL BAR. The execution, delivery and
performance of this Agreement will not violate any Require
ment of Law or any Contractual Obligation of the Purchaser.
6.5 PURCHASE FOR OWN ACCOUNT. The Notes
(including for purposes of this Section, the Conversion
Shares) to be acquired by the Purchaser pursuant to this
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21
Agreement are being acquired for its own account and with no intention of
distributing or reselling such securities or any part thereof in any transaction
that would be in vio lation of the securities laws of the United States of
America, or any state, without prejudice, however, to the rights of such
Purchaser at all times to sell or otherwise dispose of all or any part of such
securities under an effective registration statement under the Securities Act,
or under an exemption from such registration available under the Securities Act,
and subject, nevertheless, to the dispo sition of the Purchaser's property being
at all times within its control. If the Purchaser should in the future decide to
dispose of any of such securities, the Purchaser understands and agrees that it
may do so only in compliance with the Securities Act, the Exchange Act and
applicable state securities laws, as then in effect, and that stop-transfer
instructions to that effect, where applicable, will be in effect with respect to
such securities. If the Purchaser should decide to dispose of such securities,
the Purchaser will have the obligation in connection with such disposition, at
the Purchaser's expense, of delivering an opinion of counsel of recognized
standing in securities law, in connection with such disposition to the effect
that the proposed disposition of such securities would not be in violation of
the Securities Act or any applicable state securities laws and, assuming such
opinion is required and is otherwise appropriate in form and substance under the
circumstances, the Company will accept, and will recommend to any applicable
transfer agent or trustee for any of such securities that it accept, such
opinion. The Purchaser agrees to the imprinting, so long as required by law, of
a legend on all of such securities to the following effect: "THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
6.6 BROKER'S, FINDER'S OR SIMILAR FEES. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding with the Purchaser or any action taken by the Purchaser.
6.7 PURCHASE OF ADDITIONAL COMMON SHARES. Until
the earlier of (i) the first anniversary of the date on
which the Purchaser ceases to hold any Notes and
(ii) December 31, 2002, the Purchaser hereby covenants and
agrees that it will not, independently or as a member of a
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22
"group" (within the meaning of Section 13(d)(3) of the Exchange Act), purchase
Common Shares if the purchase price for such shares, when aggregated with the
purchase price of any Common Shares purchased thereby subsequent to the date
hereof, exceeds $10,000,000. The acquisition by the Purchaser of Common Shares
upon conversion of all or any portion of the Notes shall not be deemed to be the
purchase thereby of Common Shares for the purposes of this Section 6.7.
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY. In addition to all other sums
due hereunder or provided for in this Agreement, the Company agrees to indemnify
and hold harmless the Purchaser, Brown Brothers Harriman & Co. and their
respective officers, directors, agents, employees, subsidiaries, partners and
controlling persons (each, an "INDEMNIFIED PARTY") from and against any and all
losses, claims, damages, expenses (including reasonable fees, disbursements and
other charges of counsel) or other liabilities ("LOSSES") resulting from any
legal, administra tive or other actions (including actions brought by the
Company or any equity holders of the Company or derivative actions brought by
any Person claiming through the Company or in the Company's name), proceedings
or investigations (whether formal or informal), or written threats thereof,
based upon, relating to or arising out of this Agreement, the Notes, the
Registration Rights Agreement or the trans actions contemplated hereby or
thereby; PROVIDED, HOWEVER, that the Company shall not be liable under this
Section 7.1 to the extent that it is finally judicially determined that such
Losses resulted primarily from the willful misconduct, bad faith or gross
negligence of such indemnified party; PROVIDED FURTHER, that if and to the
extent that such indem nification is unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of such
indemnified liability which shall be permissible under applicable laws. In
connection with the obligation of the Company to indemnify for expenses as set
forth above, the Company further agrees to reimburse each indemnified party for
all such expenses (including reason able fees, disbursements and other charges
of counsel) as they are incurred by such indemnified party; PROVIDED, HOWEVER,
that if an indemnified party is reimbursed here under for any expenses, such
reimbursement of expenses shall be refunded to the extent it is finally
judicially deter mined that the Losses in question resulted primarily from
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the willful misconduct, bad faith or gross negligence of
such indemnified party.
7.2 NOTIFICATION. Each indemnified party under this Article 7 will,
promptly after the receipt of notice of the commencement of any action or other
proceeding against such indemnified party in respect of which indemnity may be
sought from the Company under this Article 7, notify the Company in writing of
the commencement thereof. Delivery of notice to the Company, however, shall be a
condition prece dent to any liability of the Company under this Article 7;
PROVIDED, HOWEVER, that the omission of any indemnified party so to notify the
Company of any such action shall not relieve the Company from any liability
which it may have to such indemnified party (i) other than pursuant to this
Article 7 or (ii) under this Article 7 unless, and only to the extent that, such
omission adversely affects the ability of the Company to defend against or
diminish losses arising out of such claim, action or proceeding. In case any
such action or other proceeding shall be brought against any indemnified party
and it shall notify the Company of the commencement thereof, the Company shall
be entitled to participate therein and, to the extent that it may wish, to
assume the defense thereof, with counsel reasonably satis factory to such
indemnified party; PROVIDED, HOWEVER, that any indemnified party may, at its own
expense, retain separate counsel to participate in such defense. Notwith
standing the foregoing, in any action or proceeding in which both the Company
and an indemnified party is, or is reason ably likely to become, a party, such
indemnified party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such indemnified party, (a) there
are or may be legal defenses available to such indemnified party or to other
indemnified parties that are different from or additional to those available to
the Company or (b) any conflict or potential conflict exists between the Company
and such indemnified party that would make such separate representation advis
able; PROVIDED, HOWEVER, that in no event shall the Company be required to pay
fees and expenses under this Section 7 for more than one firm of attorneys in
any jurisdiction in any one legal action or group of related legal actions. The
Company agrees that the Company will not, without the prior written consent of
the Purchaser (which consent shall not be unreasonably withheld), settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated hereby (if any
indemnified party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
uncondi tional release of the Purchaser and each other indemnified
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party from all liability arising or that may arise out of such claim, action or
proceeding. The rights accorded to indemnified parties hereunder shall be in
addition to any rights that any indemnified party may have at common law, by
separate agreement or otherwise.
7.3 REGISTRATION RIGHTS AGREEMENT. Notwithstand ing anything to the
contrary in this Article 7, the indemni fication and contribution provisions of
the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.
ARTICLE 8
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees (a) with the Purchaser, with
respect to all of this Article 8, and (b) with any other Holder, with respect to
all of this Article 8 except Sections 8.1(c), 8.9, 8.11 and 8.13, that, unless
the Purchaser or any other Holder, as the case may be, waives compliance in
writing:
8.1 FINANCIAL STATEMENTS. The Company shall
deliver to the Purchaser and any other Holder, in form and
substance satisfactory to the Purchaser and such other
Holder:
(a) as soon as available, but not later than one hundred (100)
days after the end of each fiscal year of the Company, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such year and the related consolidated statements of income and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for
the previous year, all in reasonable detail and accompanied by a management
summary and analysis of the operations of the Company and its Subsidiaries for
such fiscal year and by the opinion of Deloitte & Touche LLP (or any successor
thereto) or another nationally recognized independent public accounting firm,
which report shall state that such consolidated financial statements present
fairly the financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years; PROVIDED, HOWEVER, that the
delivery of a copy of the Company's Annual Report on Form 10-K shall satisfy the
requirements OF this Section 8.1(a);
(b) commencing with the fiscal period ending on March 31,
1996, as soon as available, but in any event not later than fifty (50) days
after the end of each of the
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first three fiscal quarters of each year, the unaudited con solidated balance
sheet of the Company and its Subsidiaries, and the related consolidated
statements of income and cash flow for such quarter and for the period
commencing on the first day of the fiscal year and ending on the last day of
such quarter, all certified by the Company's Chief Financial Officer; PROVIDED,
HOWEVER, that the delivery of a copy of the Company's Quarterly Report on Form
10-Q shall satisfy the requirements of this Section 8.1(b);
(c) budgets, documentation of material financial transactions,
projections, operating reports, acquisition analyses, presentations to banks,
financial institutions or potential investors, consultants' reports and such
other financial and operating data of the Company and its Subsidiaries as the
Purchaser may reasonably request.
(d) at any time when it is not subject to Section 13 or 15(d)
of the Exchange Act, upon request, to the Purchaser and prospective purchasers
of the Notes, information of the type that would satisfy the requirement of
subsection (d)(4)(i) of Rule 144A; and
(e) except as otherwise provided in Sec tions 8.1(a) and (b),
promptly after the same are filed, copies of all Commission Documents.
8.2 CERTIFICATES; OTHER INFORMATION. The Company
shall furnish to the Purchaser and to any other Holder:
(a) concurrently with the delivery of the financial statements
referred to in Section 8.1(a), a certi ficate of the Company's Chief Financial
Officer stating that to best of his or her knowledge no default under or breach
of Articles 8 and 9 or the Notes shall have occurred subsequent to the delivery
of the previous such certificate, except as specified in such certificate; and
(b) concurrently with the delivery of the financial statements
referred to in Sections 8.1(a) and (b), a certificate of an officer of the
Company including calcu lations set forth in reasonable detail showing the
Company's compliance with the financial covenants contained in the Notes.
8.3 PRESERVATION OF EXISTENCE. The Company
shall, and shall cause each of its Subsidiaries to:
(a) preserve and maintain in full force and
effect its corporate existence and good standing under the
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laws of its jurisdiction of incorporation except as
permitted by Section 9.1;
(b) preserve and maintain in full force and effect all
material rights, privileges, qualifications, licenses and franchises necessary
in the normal conduct of its business; and
(c) use its reasonable efforts to preserve
its business organization.
8.4 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause its
Subsidiaries to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including without limitation:
(a) all tax liabilities, assessments and governmental charges
or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsi diary;
and
(b) all lawful claims which the Company and each of its
Subsidiaries is obligated to pay, which are due and which, if unpaid, might by
law become a Lien upon its property.
8.5 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of Law
and with the directions of any Governmental Authority having jurisdiction over
it or its business, except such as to which such fail ure to comply would not
have a material adverse effect on the Condition of the Company.
8.6 NOTICES. Upon knowledge of any executive officer of the Company
of the events described below, the Company shall give written notice within 10
days to the Purchaser:
(a) of the occurrence of any default under, or breach of, any
provision of Article 8 or 9 or the Notes accompanied by a certificate specifying
the nature of such default or breach, the period of existence thereof and the
action that the Company has taken or proposes to take with respect thereto; and
(b) of any (i) default or event of default under any
Contractual Obligation of the Company or any of its Subsidiaries that could have
a material adverse effect on the Condition of the Company, or (ii) dispute,
litiga-
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tion, investigation, proceeding or suspension which may exist at any time
between the Company or any of its Subsidi aries and any Governmental Authority
that could have a material adverse effect on the Condition of the Company.
Each notice pursuant to this Section 8.6 shall be accompanied by a
statement by the Chief Executive Officer, President or Chief Financial Officer
of the Company setting forth details of the occurrence referred to therein and
stating what action the Company proposes to take with respect thereto.
8.7 ISSUE TAXES. The Company shall pay, or cause to be paid, all
documentary and similar taxes levied under the laws of any applicable
jurisdiction in connection with the issuance of the Notes, the Conversion Shares
and the execution and delivery of the other agreements and documents
contemplated hereby and any modification of the Notes or such other agreements
and documents and will hold the Purchaser harmless, without limitation as to
time, against any and all liabilities with respect to all such taxes.
8.8 PAYMENT AND CONVERSION OF NOTES. The Company shall pay the
principal of and interest on the Notes on the dates and in the manner provided
therein. The Company shall at all times reserve and keep available out of its
author ized Common Shares, solely for the purpose of issue or delivery upon
conversion of the Notes as provided therein, such number of Common Shares shall
then be issuable or deliverable upon the conversion of all outstanding principal
amount of the Notes. Such Common Shares shall, when issued or delivered in
accordance with the Notes, be duly and validly issued and fully paid and
non-assessable. The Company shall issue the Common Shares into which the Notes
are convertible upon the proper surrender of the Notes in accordance with the
provisions of such Notes and shall otherwise comply with the terms thereof.
8.9 INSPECTION. Subject to Section 11.16, the Company will permit,
and will cause each of its Subsidiaries to permit, representatives of the
Purchaser to visit and inspect any of its properties, to examine its corporate,
financial and operating records and make copies thereof or abstracts therefrom,
and to discuss its affairs, finances and accounts with their respective
directors, officers and independent public accountants, all at such reasonable
times during normal business hours and as often as may be reason ably requested,
upon reasonable advance notice to the Company. Subject to Section 11.6, the
costs of such inspec tions shall be borne solely by the Purchaser.
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8.10 REGISTRATION AND LISTING. If any Common Shares required to be
reserved for purposes of conversion of the Notes as provided in the Notes
require registration with or approval of any Governmental Authority under any
Federal or state or other applicable law before such Common Shares may be issued
or delivered upon conversion, the Company will in good faith and as
expeditiously as possible endeavor to cause such Common Shares to be duly
registered or approved, as the case may be, unless such registration or approval
is required solely because of a breach of the Purchaser's representation
contained in Section 6.5. So long as the Common Shares are quoted on the Nasdaq
or quoted or listed on any other national securities exchange, the Company will,
if permitted by the rules of such system or exchange, quote or list and keep
quoted or listed on such exchange or Nasdaq, upon official notice of issuance,
all Common Shares issuable or deliverable upon conversion of the Notes. The
Company will, promptly upon the first issuance of any Conversion Shares, file
with Nasdaq a Notification Form for Listing of Additional Shares.
8.11 SHAREHOLDER AGREEMENT. The Company and each Principal
Shareholder each agree that it or he will promptly notify and consult with the
Purchaser with respect to any proposed recapitalization, merger, consolidation
or other similar transaction, any other transaction that could result in a
Change of Control (as defined in the Notes) of the Company or any proposed
amendment to the Company's Certifi cate of Incorporation or By-laws that could
result in a change in corporate governance of the Company. The Company and each
Principal Shareholder agree to act in the best interests of all shareholders of
the Company in connection with any of the events or transactions referred to in
the immediately preceding sentence.
8.12 HSR ACT FILING. The Company shall prepare and file, and
cooperate with the Purchaser so that it may prepare and file, in each case
within 15 Business Days of a request by the Purchaser, notification and report
forms in compliance with the HSR Act, and shall otherwise fully com ply with the
requirements of the HSR Act. Each of the Company and the Purchaser shall bear
all of its own expenses in connection with any such preparation and filing.
8.13 BOARD REPRESENTATION; MANAGEMENT RIGHTS.
(a) The Company shall at or prior to the Closing Date cause
one vacancy to be created on its Board of Directors (by increasing the number of
members of the Board of Directors or otherwise) and at the Closing Date shall
cause one person designated by the Purchaser to be elected to its Board of
Directors. Such designee shall serve until
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the next annual meeting of stockholders of the Company following the election of
such person to the Board of Directors.
(b) Commencing with the next annual meeting of stockholders of
the Company following the election of such person to the Board of Directors (the
"First Annual Meeting"), and at each annual meeting of stockholders of the
Company at which Class II Directors are to be elected, so long as the Purchaser
holds (A) Common Shares, or (B) Notes convertible (after giving effect to any
adjustments) into Common Shares, that in the aggregate represent 3% or more of
the total number of shares of common stock of the Company then outstanding, the
Purchaser shall be entitled to nominate, from time to time, such number of
directors (which director or directors shall be designated Class II Directors at
the First Annual Meeting) to the Company's Board of Directors equal to the
greater of (i) one director and (ii) the product of the total number of
directors and a fraction the numerator of which equals the total number of
Common Shares (including Common Shares issued or issuable upon conversion of the
Notes) then held by the Purchaser and the denominator of which equals the total
number of shares of common stock then outstanding (including Common Shares
issued or issuable upon conversion of the Notes) determined by rounding to the
nearest whole number of directors; PRO VIDED, HOWEVER, that (1) in no event
shall the Purchaser be entitled to nominate more than two directors pursuant to
this Section 8.13 and (2) if the Purchaser holds (a) Common Shares or (b) Notes
convertible (after giving effect to any adjustments) into Common Shares, that in
the aggregate represent less than 5% of the total number of shares of common
stock of the Company then outstanding, then in such event the Purchaser shall be
entitled to nominate no more than one director pursuant to this Section 8.13;
PROVIDED FURTHER, that the Company shall not amend its Certificate of
Incorporation or take any other action that will cause the Company's Board of
Directors to consist of more than twenty members. The Company shall cause such
nominee or nominees of Purchaser to be included in the slate of nominees recom
mended by the Board to the Company's stockholders for elec tion as directors,
and the Company shall use its best efforts to cause the election of such nominee
or nominees, including voting all shares for which the Company holds proxies
(unless otherwise directed by the stockholder sub mitting such proxy) or is
otherwise entitled to vote, in favor of the election of such person. The
Principal Shareholders each hereby agrees that he shall vote all of his shares
of common stock of the Company, all other securi ties of the Company that are
entitled to vote for directors and all proxies (unless otherwise directed by the
stock holder submitting such proxy), in each case which he has the
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right to vote or power to direct the vote, in favor of the election of such
nominee or nominees of the Purchaser.
(c) In the event any such nominee of the Purchaser shall cease
to serve as a director for any reason, other than by reason of the Purchaser not
being entitled to nominate a nominee as provided in Section 8.13(b), the Company
shall use its best efforts to cause the vacancy resulting thereby to be filled
by a nominee of the Purchaser.
(d) If requested by the Purchaser, the Purchaser shall have
the right to consult with and advise management of the Company and its
Subsidiaries on matters relating to the business and affairs of the Company,
which right shall continue only for so long as may be required to enable the
Purchaser to qualify as a "venture capital operating company" within the meaning
of Section 2510.3-101(d) of the plan asset regulations pro mulgated by the
United States Department of Labor.
(e) In the event the Board of Directors of the Company
establishes committees from time to time, at least one of the nominees of the
Purchaser shall have the right, upon the Purchaser's request, to serve on such
committee.
8.14 PRINCIPAL SHAREHOLDER AGREEMENT. The Principal Shareholders
each hereby agrees that he shall vote all shares of common stock of the Company,
all other securities of the Company that are entitled to vote for directors and
all proxies (unless otherwise directed by the stockholder submitting such
proxy), in each case which he has the right to vote or power to direct the vote,
in favor of the election of the nominee of the holders of a majority of the
outstanding principal amount of the Notes nominated pursuant to Section 8 of the
Notes.
ARTICLE 9
NEGATIVE COVENANTS
The Company hereby covenants and agrees that:
9.1 CONSOLIDATIONS AND MERGERS. The Company shall not merge,
consolidate with or into, or convey, trans fer, lease or otherwise dispose of
(whether in one transac tion or in a series of transactions) all or
substantially all of its assets (whenever acquired), except that the Company may
consolidate or merge with or into, or sell all or substantially all of its
assets to, any Person if:
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(a) the corporation formed by such consolidation or surviving
such merger or the Person which acquires all or substantially all of the assets
of the Corporation shall be (after giving effect to such transac tion) a Solvent
corporation organized and existing under, the laws of the United States, any
state thereof, or the District of Columbia and, in the case of the acquisition
of all or substantially all of the assets of the Corporation, shall expressly
assume in writing all of the obligations of the Company under this Agreement,
the Notes (including, without limitation, the obligation to issue shares of
common stock upon the conversion of any portion of the Notes) and the
Registration Rights Agreement;
(b) immediately after giving effect to such transaction, no
default under, or breach of, the provisions of Articles 8 and 9 hereof or the
Notes, exists;
(c) the corporation formed by or surviving any such
transaction or the Person which acquires all or substantially all of the assets
of the Company shall have a Consolidated Net Worth at least equal to the
Consolidated Net Worth of the Company immediately prior to such transaction; and
(d) the Company shall have furnished to the holders of the
Notes or Conversion Shares (i) an opinion of counsel satisfactory to the holders
of a majority of the Conversion Shares or a majority in principal amount of the
Notes, addressing the matters (other than solvency) set forth in clause (a)
above and (ii) the certificate of the Chief Financial Officer of the Company to
the effect that such transaction has been consummated in compliance with the
foregoing requirements; PROVIDED that nothing in this Section 9.1 shall affect
the rights of any Holder under this Agreement, the Notes or the Registration
Rights Agreement.
9.2 TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall
not permit any of its Subsidiaries to, enter into any transaction with any
Affiliate of the Company or of any such Subsidiary, except in the ordinary
course of business and pursuant to the reasonable requirements of the business
of the Company or such Subsidiary and on terms no less favorable to the Company
or such Subsidiary than those the Company or such Subsidiary would obtain in a
comparable arm's-length transaction with a Person not an Affiliate of the
Company or such Subsidiary.
9.3 USE OF PROCEEDS. No portion of the proceeds of the Notes will be
used, directly or indirectly, (i) to purchase or carry margin stock as defined
in Regulation U or T of the Federal Reserve Board, (ii) to repay or otherwise
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refinance Indebtedness of the Company or others incurred to purchase or carry
margin stock or (iii) to extend credit for the purpose of purchasing or carrying
any margin stock.
9.4 NO INCONSISTENT AGREEMENTS. Neither the Com pany nor any of its
Subsidiaries shall enter into any loan or other agreement, or enter into any
amendment or other modification to any currently existing agreement, which by
its terms restricts or prohibits the ability of the Company to issue Common
Shares upon conversion of the Notes or to pay interest on the Notes in
accordance with this Agreement and the terms of the Notes; PROVIDED, HOWEVER,
that the foregoing shall not prevent the Company from entering into loan or
other agreements that contain, or any amendment or other modification to any
currently existing credit agree ment to provide, restrictions on the ability of
the Company to optionally redeem or prepay the Notes, following the occurrence
of a default or event of default under such agreements.
9.5 OFFER OR SALE OF NOTES. Neither the Company, nor anyone acting
on its behalf, will offer or sell the Notes or any other security so as to
require the registra tion of the Notes or Conversion Shares pursuant to the pro
visions of the Securities Act or any state securities or "blue sky" laws, unless
such Notes and Conversion Shares are so registered.
ARTICLE 10
DISPOSITIONS
10.1 DISPOSITIONS BY PRINCIPAL SHAREHOLDERS. So long as the
Purchaser continues to hold at least 25% of the Conversion Shares, if any
Principal Shareholder at any time or from time to time proposes or agrees to
sell or transfer to a Person or a "group" (within the meaning of Section
13(d)(3) of the Exchange Act) of Persons, in any transaction or series of
related transactions, twenty percent (20%) or more of the shares of common stock
of the Company held by him, the Principal Shareholder(s) proposing such
disposition shall give written notice of such proposed sale to the Purchaser
within 15 Business Days prior to the date of such sale, which notice shall state
the price and other terms of the proposed transaction and shall state the number
of shares proposed to be sold.
10.2 DISPOSITIONS BY THE PURCHASER. Until the
earliest to occur of (i) the second anniversary of the
Closing Date, (ii) the date on which the Purchaser ceases to
own (A) Conversion Shares or (B) Notes convertible (after
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giving effect to any adjustments) into Common Shares, that in the aggregate
represent 5% or more of the total shares of common stock of the Company then
outstanding, (iii) the occurrence of a Change of Control and (iv) the occurrence
of a breach of any of the covenants set forth in Sections 8.8, 8.10, 8.11, 8.12,
8.13 or 8.14, Article 9 or the Notes, the Purchaser may only sell or otherwise
transfer such Notes or Conversion Shares in accordance with the following:
(a) The Purchaser may sell or otherwise transfer Notes or
Conversion Shares pursuant to the exercise of the registration rights set forth
in the Registration Rights Agreement.
(b) The Purchaser may sell or otherwise transfer Notes or
Conversion Shares pursuant to the provisions of Rule 144 or Rule 144A.
(c) The Purchaser may sell or otherwise transfer to any Person
in a transaction (other than a sale or other transfer pursuant to Rule 144 or
Rule 144A) not constituting a public offering any Notes or Conversion Shares
that, in the aggregate with any and all other such sales or transfers, do not
represent (after giving effect to the conversion of any Notes to be so sold or
previously so sold) a number of Conversion Shares in excess of 50% of the number
of Conversion Shares which the aggregate principal amount of the Notes purchased
under this Agreement could have been converted at the Time of Purchase (the "50%
THRESHOLD").
(d) If the Purchaser shall desire to sell or otherwise
transfer to any Person in a transaction (other than a sale or other transfer
pursuant to Rule 144 or Rule 144A) not constituting a public offering any Notes
or Conversion Shares in excess of the 50% Threshold, the Purchaser shall give
the Company notice of its desire to sell or otherwise dispose of such
securities, specifying the number of such securities the Purchaser desires to
sell and the price at, and terms and conditions on, which the Purchaser desires
to sell such securities, and offering to sell such securities to the Company at
such price and on such terms and conditions. If, within 10 Business Days of
receiving such notice, the Company does not accept such offer in writing, the
Purchaser shall be free for a period of 60 Business Days to sell such securities
to any Person at a price not less than 95% of the price offered to the Com pany,
and on terms and conditions substantially equivalent to those offered to the
Company. If the Purchaser does not sell such securities subject to such notice
within such 60 Business Day period, the sale of such securities shall thereafter
be subject again to the provisions of this Sec-
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tion 10.2. If the Company accepts such offer within the time period specified in
the preceding sentence, then the Company shall purchase the securities specified
in such notice as promptly as is reasonably practicable, but in no event later
than 10 Business Days following such acceptance. If the Company for whatever
reason fails to purchase such securities on or prior to the date specified in
the preced ing sentence, the Purchaser may, among other remedies avail able to
it, sell such securities to any Person at any price and on any terms.
(e) Notwithstanding anything in this Sec tion 10.2 to the
contrary, the Purchaser may, at any time and from time to time, subject to
applicable securities laws, sell or otherwise transfer Conversion Shares or
Notes (i) pursuant to an exchange offer or a tender offer not opposed by a
majority of the Board of Directors of the Company, (ii) pursuant to any all cash
tender offer made by any Person for all of the issued and outstanding Common
Shares or (iii) to any Person holding a partnership interest in the Purchaser;
PROVIDED, HOWEVER, that any Person to whom such securities are transferred
pursuant to clause (iii) shall agree to be bound by all of the transfer
restrictions set forth in this Section 10.2.
(f) Except as otherwise provided in Sec tion 10.2(e), any
securities transferred by the Purchaser pursuant to this Section 10.2 shall not
thereafter be sub ject to the provisions of this Section 10.2.
10.3 PRIVATE SALE. If the Company at any time or from time to time
proposes or agrees to sell in excess of 100,000 Common Shares in one transaction
or a series of related transactions and such sale is not pursuant to an
effective registration statement under the Securities Act (a "Private Sale"),
the Company shall give written notice of such proposed Private Sale to the
Purchaser within 15 Business Days prior to the date of such sale, which notice
shall state the price and others terms of the proposed transaction and shall
state the number of shares proposed to be sold. The Purchaser may, upon giving
written notice thereof to the Company within 10 Business Days after receipt of
such notice, participate in such sale on the same terms and conditions as those
offered by the Company by including in such sale such number of Conversion
Shares that the Purchaser requests the Company to include in such sale; PROVIDED
that the Purchaser may withdraw its request to have any of its Conversion Shares
be included in such sale at any time prior to the date of consummation of such
sale. If the investment banking firm acting as placement agent of such Private
Sale, or if there is no placement agent, the majority of the Company's Board of
Directors, concludes in
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good faith that the number of Common Shares requested by the Purchaser to be
included in the Private Sale would materially adversely affect such sale, and
the Company has so advised the Purchaser in writing, then the Company will
include in such Private Sale to the extent of the number of Common Shares that
the placement agent or Board of Directors, as aforesaid, determined in writing
could be sold in such sale, FIRST, all Common Shares proposed by the Company to
be sold for its account and SECOND such Common Shares requested by the Purchaser
to be included in such sale. Notwithstanding anything contained in this Section
10.2, the Company shall not, if any Requesting Holder shall have requested the
registration of Conversion Shares in the registration, consummate the sale of
the securities included in the registration until such time as any applicable
waiting period under the HSR Act shall have expired or early termination
thereunder shall have been granted. The Company will pay all the expenses of
each Private Sale, excluding any placement agent commissions with respect to
Conversion Shares sold by the Purchaser in such sale. The Purchaser shall not be
required to make any representations or warranties to or agreements with the
Company or placement agent other than representations, warranties or agreements
regarding the Purchaser. The provisions set forth in Section 2.8 of the
Registration Rights Agreement shall be applicable to any Private Sale or
proposed Private Sale in which the Purchaser sells or proposes to sell
Conversion Shares. Notwithstanding the foregoing, the Purchaser shall cease to
have the right to participate in a Private Sale pursuant to this Section 10.3 if
it ceases to hold at least 50% of the Conversion Shares.
10.4 LEGENDS. The Purchaser agrees to the imprinting, so long as
required by the terms of this Agree ment, of a legend on certificates
representing all of the Notes and Conversion Shares to the following effect:
"THE TRANSFER OF THE [NOTES/SECURITIES] REPRESENTED BY
THIS CERTIFICATE IS RESTRICTED BY A NOTE PURCHASE
AGREEMENT ON FILE AT THE OFFICE OF THE COMPANY."
ARTICLE 11
MISCELLANEOUS
11.1 SURVIVAL OF PROVISIONS. All of the representations and
warranties made herein and each of the provisions of Articles 1, 5, 6, 7, 8, 9,
10 and 11 shall survive the execution and delivery of this Agreement, any
investigation by or on behalf of the Purchaser or any Affiliate thereof,
acceptance of the Notes and payment
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therefor, payment or prepayment of the Notes upon redemption or otherwise,
conversion of the Notes or termination of this Agreement.
11.2 NOTICES. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(a) if to the Purchaser at the following
address:
The 1818 Fund II, L.P.
c/o Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Telecopier No.: (212) 493-8429
Attention: Mr. Walter W. Grist
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopier No.: (212) 757-3990
Attention: Marilyn Sobel, Esq.
(b) if to the Company at the following
address:
The WellCare Management Group, Inc.
Park West/Hurley Avenue Extension
P.O. Box 4059
Kingston, New York 12401
Telecopier No.: (914) 334-7820
Attention: Marystephanie Corsones
with a copy to:
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Telecopier No.: (212) 661-0989
Attention: Jeffrey H. Becker, Esq.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; when delivered by
courier, if deliv ered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
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11.3 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the suc cessors and permitted assigns of the
parties hereto. The Purchaser may assign any of its rights under this Agreement,
the Notes or the Registration Rights Agreement to any of its Affiliates. Subject
to the restrictions of this Agreement, the Purchaser may assign any of its
rights under this Agree ment, the Notes or any Conversion Shares, or a portion
thereof, to any other Person; PROVIDED that the Purchaser may not assign its
rights under Section 10.1 or 10.3. The Company may not assign any of its rights
under this Agreement without the written consent of the Purchaser. Except as
provided in Article 7, no Person other than the parties hereto and their
successors and permitted assigns is intended to be a beneficiary of this
Agreement, the Notes, any Conversion Shares or the Registration Rights
Agreement.
11.4 AMENDMENT AND WAIVER. No failure or delay on the part of the
Company or the Purchaser in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or fur ther exercise thereof
or the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the Company, the Purchaser or any Holder at law, in equity or
otherwise. Except as otherwise provided herein, no amendment, modification,
termination or waiver of any provision of this Agreement, or consent to any
departure by the Company from any provision of this Agreement, shall be
effective unless signed in writing by or on behalf of holders representing at
least a majority of (i) the then aggregate outstanding principal amount of Notes
and (ii) the Conversion Shares.
Any amendment, supplement or modification of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Company from the terms of any provision of this
Agreement, shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement, no notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances.
11.5 COUNTERPARTS; HEADINGS. This Agreement may
be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so exe
cuted shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
The headings in this Agreement are for convenience of
63
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38
reference only and shall not limit or otherwise affect the
meaning hereof.
11.6 EXPENSES. The Company shall promptly pay, or reimburse the
Purchaser, all fees and expenses (including fees, expenses and other charges of
Paul, Weiss, Rifkind, Wharton & Garrison and Coopers & Lybrand) incurred by the
Purchaser in connection with the Purchaser's due diligence review of the Company
and the preparation, negotiation and execution of this Agreement, the Notes and
the Registration Rights Agreement and the transactions contemplated hereby and
thereby; PROVIDED that the Company shall not be obligated to pay such expenses
unless the Closing takes place and the Company shall not be obligated to pay
more than an aggregate of $100,000 under this Section 11.6.
11.7 DETERMINATIONS. All determinations to be made by the Company,
the Purchaser or any Holder hereunder in its opinion or judgment or with its
approval or otherwise shall be made by it in its sole discretion.
11.8 GOVERNING LAW. This Agreement has been negotiated, executed and
delivered in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without regard to princi ples
of conflicts of law.
11.9 JURISDICTION. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceed ing arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby may be brought
in the courts of the State of New York located in New York City or of the United
States of America for the Southern District of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an incon venient forum. Each party hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such suit, action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth in Section 11.2, such service to
become effective 10 days after such mailing.
11.10 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held
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<PAGE>
39
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
11.11 RULES OF CONSTRUCTION. Unless the context otherwise requires,
"or" is not exclusive, and references to sections, articles or subsections refer
to sections, articles or subsections of this Agreement.
11.12 REMEDIES. If a breach of this Agreement, the Notes, Conversion
Shares or the Registration Rights Agreement by the Company occurs and is
continuing, any Holder may pursue any available remedy by proceeding at law or
in equity to enforce the performance (including, without limitation, the
specific performance) of this Agreement, the Notes, such Conversion Shares or
the Registration Rights Agreement. A Holder may maintain a proceeding even if it
does not possess any of the Notes or such Conversion Shares or does not produce
any of them in the proceeding. Except as otherwise provided by law, a delay or
omission by any Holder in exercising any right or remedy accruing upon any such
breach shall not impair the right or remedy or constitute a waiver of or
acquiescence in any such breach. No remedy is exclusive of any other remedy. All
available remedies are cumulative.
11.13 ENTIRE AGREEMENT. This Agreement, together with the exhibits
hereto, the Notes and the Registration Rights Agreement, is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. This Agreement,
together with the exhibits hereto, the Notes and the Registration Rights
Agreement, supersede all prior agreements and understandings between the parties
with respect to such subject matter.
11.14 ATTORNEYS' FEES. In any action or proceed ing brought to
enforce any provision of this Agreement, the Notes, any Conversion Shares and
the Registration Rights Agreement or any other document or instrument
contemplated hereby or thereby, or where any provision hereof or thereof is
validly asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees, charges and disbursements in addition to any other
available remedy.
11.15 PUBLICITY. Except as may be required by applicable law,
neither party hereto shall issue a publicity release or announcement or
otherwise make any public dis closure concerning this Agreement or the
transactions con templated hereby, without prior approval by the other party
hereto. If any announcement is required by law to be made by either party
hereto, prior to making such announcement such party will deliver a draft of
such announcement to the
65
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40
other party and shall give the other party an opportunity to
comment thereon.
11.16 CONFIDENTIALITY. The Purchaser agrees that any confidential
information and affairs of the Company and its Subsidiaries obtained (i) during
any inspection pursuant to Section 8.9, (ii) pursuant to Section 8.1(c) or (iii)
from the Company or any of its Subsidiaries which is clearly marked
"Confidential" on the first or cover page thereof (collectively, the
"Information") shall be kept confidential by the Purchaser, and that the
Purchaser shall not use such Information in violation of law. The Purchaser also
agrees to abide by any blackout periods established pursuant to the insider
trading policy of the Company, a copy of which is attached hereto as Exhibit D,
as such policy is in effect on the date hereof; PROVIDED, HOWEVER, that the
Purchaser shall cease to be bound by such policy if (i) no designee of the
Purchaser serves as a director of the Company and (ii) the Purchaser is no
longer entitled to receive the documents specified in Section 8.1.
The term "Information" shall not include any information which (i)
at the time of disclosure or there after is generally available to the public
(other than as a result of its disclosure by the Purchaser), (ii) was avail able
to the Purchaser on a non-confidential basis prior to disclosure to the
Purchaser by the Company or (iii) becomes available to the Purchaser on a
non-confidential basis from a Person who is not to the Purchaser's knowledge
otherwise bound by a confidentiality agreement with the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
as of the date first above written.
THE WELLCARE MANAGEMENT GROUP, INC.
By: /s/ Marystephanie Corsones
---------------------------------------
Name: Marystephanie Corsones
Title: Vice President of Finance and
Chief Financial Officer
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
General Partner
By:
-------------------------------
Name:
Title: General Partner
As a material inducement to the Purchaser to enter
into this Agreement, the undersigned hereby agrees
to be bound by and perform in accordance with
Sections 8.11, 8.13, 8.14 and 10.1 of this
Agreement.
---------------------------------------
Robert W. Morey, Jr.
/s/ Edward A. Ullmann
---------------------------------------
Edward A. Ullmann
67
<PAGE>
41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
as of the date first above written.
THE WELLCARE MANAGEMENT GROUP, INC.
By:
---------------------------------------
Name:
Title:
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
General Partner
By: /s/ Lawrence C. Tucker
-------------------------------
Name:
Title: General Partner
As a material inducement to the Purchaser to enter
into this Agreement, the undersigned hereby agrees
to be bound by and perform in accordance with
Sections 8.11, 8.13, 8.14 and 10.1 of this
Agreement.
---------------------------------------
Robert W. Morey, Jr.
---------------------------------------
Edward A. Ullmann
68
<PAGE>
41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
as of the date first above written.
THE WELLCARE MANAGEMENT GROUP, INC.
By:
---------------------------------------
Name:
Title:
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
General Partner
By:
-------------------------------
Name:
Title: General Partner
As a material inducement to the Purchaser to enter
into this Agreement, the undersigned hereby agrees
to be bound by and perform in accordance with
Sections 8.11, 8.13, 8.14 and 10.1 of this
Agreement.
/s/ Robert W. Morey, Jr.
---------------------------------------
Robert W. Morey, Jr.
/s/ Edward A. Ullmann
---------------------------------------
Edward A. Ullmann
69
<PAGE>
EXHIBIT C
[LETTERHEAD OF EPSTEIN BECKER & GREEN, P.C.]
January 19, 1996
The 1818 Fund II, L.P.
c/o Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Re: The WellCare Management Group, Inc.
----------------------------------
Dear Sir or Madam:
We have acted as special counsel to The WellCare Management Group,
Inc., a New York corporation (the "Company"), in connection with the Company's
execution and delivery of: (i) the Note Purchase Agreement dated as of the date
hereof (the "Agreement") between the Company and The 1818 Fund II, L.P., a
Delaware limited partnership (the "Purchaser"); (ii) the 6% Subordinated
Convertible Note dated of even date herewith in the principal amount of Twenty
Million Dollars ($20,000,000) made by the Company and payable to the order of
the Purchaser (the "Note"); and (iii) the Registration Rights Agreement dated of
even date herewith (the "Registration Rights Agreement") by and between the
Company and the Purchaser. All capitalized terms used herein which are not
otherwise defined shall have the respective meanings ascribed to them in the
Agreement.
As such counsel, we have examined originals or copies of each of the
following:
(1) The Agreement;
(2) The Note;
(3) The Registration Rights Agreement;
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The 1818 Fund II, L.P.
January 19, 1996
Page 2
(4) The Certificate of the Secretary of the Company, of even date
herewith (the "Secretary's Certificate"), certifying as to the
truth, correctness and completeness of the attached: (i)
Certificate of Incorporation of the Company, as amended; (ii)
By-Laws of the Company, as amended; and (iii) unanimous
written consent of the Company's Directors approving and
adopting in all respects the Agreement, the Note and the
Registration Rights Agreement and the transactions
contemplated thereby, and the issuance of the Note and, upon
conversion of the Note, the issuance of the Conversion
Shares;
(5) The Good Standing Certificates issued by the Secretary of
State of the State of New York with respect to the Company and
each of the Subsidiaries (other than WellCare of Connecticut,
Inc. ("WCI") and The CM Group, Inc., a Kansas corporation
("CM") and Cost Management Technologies, Inc., a Kansas
corporation ("CMT", hereinafter collectively with CM referred
to as the "Kansas Companies"); and
(6) Such other corporate records of the Company, certificates of
public officials, certificates of officers of the Company and
such other documents as we have deemed necessary as a basis
for the opinion expressed herein.
In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to the original documents of all documents submitted to us as, and
represented to be certified, photostatic, reproduced or conformed copies of
original documents, and the authenticity of all such documents. For purposes of
this opinion, the terms "Subsidiary" and "Subsidiaries" shall mean each of the
corporations listed on Schedule 5.16 of the Agreement but excluding WCI and each
of the Kansas Companies for which no opinion is hereinafter expressed. As to
questions of fact material to this opinion, we have relied, without independent
verification, upon the representations and warranties of the Company in the
Agreement except, when we have used the expression "to our actual knowledge" in
the foregoing opinion, such phrase shall be deemed to be to "Opinion Giver's
Actual Knowledge" as defined in Section 6-A of the Legal Opinion Accord of the
American Bar Association Section of Business Law (1991). We have also assumed,
for purposes of this opinion, the due authorization, execution and delivery by
the Purchaser of each of the Agreement and the Registration Rights Agreement.
In addition, we have participated in the closing on the date hereof
at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the
Purchaser, at 1285 Avenue of the Americas, New York, New York 10019, at which we
delivered, on behalf of the Company, counterparts of the Agreement and the
Registration Rights Agreement, the original of the Note, each executed by the
Company, the Secretary's Certificate, an officer's certificate and this opinion
(collectively, the "Documents"), against receipt, on behalf of the Company, of
71
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The 1818 Fund II, L.P.
January 19, 1996
Page 3
counterparts of the Agreement and the Registration Rights Agreement executed by
the Purchaser, all Documents to be held in escrow and released upon confirmation
from the Company of receipt of the Purchase Price.
Subject to the assumptions, exceptions, qualifications and
limitations con tained herein, we are of the opinion that:
1. Each of the Company and each Subsidiary (a) is duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; (b)(i) has full corporate power and authority and (ii) to our
actual knowl edge, has all governmental licenses, franchises, permits,
certificates, authorizations, consents and approvals to own and operate its
property and to conduct the business in which it is currently engaged, except
for those licenses, franchises, permits, certificates, authorizations, consents
and approvals, the absence of which would not have a material adverse effect on
the Condition of the Company.
2. The execution, delivery and performance by the Company of the
Agreement, the Note, the Registration Rights Agreement and the transactions
contem plated thereby, and the issuance of the Note, and, upon conversion of the
Note, the issuance of the Conversion Shares (i) are within the Company's
corporate power and authority and have been duly authorized by all necessary
corporate action, (ii) do not contravene the terms of the Company's Certificate
of Incorporation or By-Laws or any of its Subsidiaries, or any amendment
thereof, and, (iii) to our actual knowledge, will not violate, conflict with or
result in any breach or contravention of, or the creation of any Lien under (x)
any Contractual Obligation with respect to those contracts listed on Exhibit A
hereto; or (y) any order or decree directly relating to the Company or any of
its Subsidiaries.
3. To our actual knowledge, except as set forth on Schedules 3.16
and 5.6 of the Agreement, there are no actions, suits, proceedings or claims
pending, or threatened in writing, at law, in equity, in arbitration or before
any Governmental Authority against the Company or any Subsidiary with respect to
the Agreement, the Note, the Conversion Shares, the Registration Rights
Agreement or any of the trans actions contemplated thereby or which would, if
adversely determined (i) have a material adverse effect on the Condition of the
Company, or (ii) have a material adverse effect on the ability of the Company to
perform its obligations under the Agreement, the Note or the Registration Rights
Agreement. To our actual knowledge, no injunction, writ, temporary restraining
order or decree has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution and performance of the Agreement,
the Note or the Registration Rights Agreement or, upon conversion of the Note,
the issuance of the Conversion Shares.
4. All of the outstanding shares of capital stock of the Company
have been duly authorized and all such shares issued on or prior to August 19,
1993 are fully paid and nonassessable. Except as set forth on Schedule 5.17 of
the Agreement, to our actual knowledge,
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The 1818 Fund II, L.P.
January 19, 1996
Page 4
there are no shares of capital stock of the Company reserved for issuance. The
Conversion Shares to be issued upon conversion of the Note are duly authorized,
and, when so issued, will be fully paid and non-assessable. Except as set forth
on Schedule 5.17 of the Agreement, to our actual knowledge, there are no
options, warrants or other rights to purchase shares of capital stock or other
securities of the Company, nor is the Company obligated in any manner to issue
shares of its capital stock or other securities. Except as contemplated hereby
and for relevant state and federal securities laws, there are no restrictions on
the Company's ability to transfer shares of capital stock of the Company.
5. To our actual knowledge, other than (i) any required pre-merger
notification and related filings under the HSR Act; and (ii) any required
approval under Section 98.9 of Article 44 of the New York Public Health Law, in
each case with respect to the issuance of the Conversion Shares, no approval,
consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority is necessary or required in connection with the
execution, delivery or performance by the Company or the enforcement against the
Company of the Agreement, the Note, the Registration Rights Agreement or the
transactions contemplated thereby; provided, however, that no opinion is
expressed in this paragraph 5 with respect to the approvals, consents,
exemptions, authorizations, or other actions, or filings required under Federal
or New York state securities or blue sky laws, which opinion is set forth in
paragraph 9 hereof.
6. Each of the Agreement, the Note and the Registration Rights
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company enforceable against the
Company in accordance with their respective terms subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforceability of creditors' rights and remedies, generally,
and subject to general equitable principles.
7. Neither the execution, delivery and performance of the Agreement,
the Note and the Registration Rights Agreement nor the borrowings under the Note
will violate any rule or regulation of NASDAQ or Article 44 of the New York
Public Health Law or Federal or New York state securities or blue sky laws. To
our actual knowledge, except as set forth on Schedule 5.5 of the Agreement,
neither the Company nor any Subsidiary has previously entered into any agreement
granting any registration rights to any Person that is inconsistent with the
rights granted to the Purchaser in the Registration Rights Agreement.
8. The Company is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
9. Assuming the accuracy of the representations and warranties of
the Company contained in the Agreement, and assuming the compliance by the
Company with the covenants contained in the Agreement, no registration of the
Conversion Shares or the Note
73
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The 1818 Fund II, L.P.
January 19, 1996
Page 5
pursuant to the provisions of the Securities Act, or any New York state
securities or blue sky laws, will be required by the offer, sale or issuance of
the Note to the Purchaser (other than the filing of New York State Form M-11
with the New York State Department of Law and the filing of the New York State
Notice and the Further State Notice with the New York State Department of State,
the filing of each which has been effected) or, upon conversion of the Note, the
issuance of the Conversion Shares to the Purchaser (other than the filing of the
New York State Further State Notice with the New York State Department of State,
if required) pursuant to the Agreement.
We do not express any opinion herein concerning the law of any
jurisdiction other than the laws of the State of New York and the federal laws
of the United States of America, and this opinion is limited to the effect of
the present law of the State of New York and the federal laws of the United
States of America and to the facts bearing upon this opinion as they exist at
present. We have not independently verified any assumptions herein made.
This opinion is made solely of even date herewith and is for the
sole benefit of the addressee and is not to be quoted or relied on by, nor may
copies be delivered to, any other person. or used for any other purpose, without
prior written consent, which we may grant or deny in our sole and absolute
discretion. We make no undertaking to supplement this opinion if, after the date
hereof, facts or circumstances come to our attention or changes in the law occur
which could affect such opinion.
Very truly yours,
/s/ Epstein Becker & Green, P.C.
EPSTEIN BECKER & GREEN, P.C.
74
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The 1818 Fund II, L.P.
January 19, 1996
Page 6
EXHIBIT A TO THAT CERTAIN LEGAL OPINION OF
EPSTEIN BECKER & GREEN, P.C. DATED JANUARY 19, 1996
---------------------------------------------------
1. Loan Agreement dated June 28, 1995 (the "Key Bank Loan Agreement") by and
among the Company, WellCare of New York, Inc., WellCare Development, Inc.
("Development"), WellCare Administration, Inc., WellCare Medical
Management, Inc. and Key Bank of New York ("Key Bank").
2. Mortgage dated January 31, 1994 securing the principal amount of $580,000
made by Development in favor of Key Bank.
3. Mortgage dated February 27, 1995 securing the principal amount of $282,500
made by Development in favor of Key Bank.
4. Consolidated Term Promissory Note dated February 27, 1995 in the principal
amount of $862,500 made by Development and payable to the order of Key
Bank.
5. Consolidated Promissory Note dated December 14, 1994 in the principal
amount of $4,610,000 made by Development and payable to the order of Key
Bank.
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EXHIBIT D
THE WELLCARE MANAGEMENT GROUP, INC.
STATEMENT OF POLICY REGARDING
SECURITIES INVESTMENTS BY WELLCARE PERSONNEL
INTRODUCTION
- ------------
As a result of the public offering of securities by The WellCare Management
Group, Inc. ("WellCare" or the "Company"), the Company, its directors, officers,
and employees, including employees of WellCare of New York, Inc. and any of
WellCare's other subsidiaries or affiliated companies, are subject to "insider
trading" laws. Such laws prohibit individuals with material nonpublic
information with respect to a company from buying or selling securities of that
company or from giving such information ("tipping") to another person. In
addition, such laws require companies and supervisory personnel to affirmatively
supervise the actions of employees.
In order to assure that WellCare and its directors, officers, and employees are
attentive to these laws, and to maintain the integrity and reputation of
WellCare and its directors, officers, and employees, WellCare has adopted the
policy set forth herein. Directors, officers, and employees of the Company
-------------------------------------------------
should carefully read this Statement of Policy and are expected to sign the
- ---------------------------------------------------------------------------
attached statement acknowledging that they have read and understood the same.
- -----------------------------------------------------------------------------
STATEMENT
- ---------
1. GENERAL PROHIBITIONS
--------------------
No director, officer, or employee of WellCare or any of WellCare's
subsidiaries or affiliated companies (collectively, "WellCare Personnel") who
has material nonpublic information relative to the Company may buy or sell
securities of the Company or give, communicate or in any way convey ("tip") such
information to another person.
(a) PERSONS COVERED
---------------
This policy applies not only to all directors, officers, and
employees of WellCare and its subsidiaries or affiliated companies, but also to
spouses, family members and others who live in their households, business
partners and any other people who might reasonably be deemed to have a
relationship (legal, personal, or otherwise) meriting coverage. Therefore, all
references in this statement of policy to WellCare Personnel shall also apply to
such people.
(b) WHAT IS MATERIAL INFORMATION?
----------------------------
The term "material information" should be broadly construed. It
includes any information which, if publicly disclosed, a) might have an effect
on the market for the Company's securities generally, b) might affect an
individual investment decision ofa reasonable although perhaps speculative
investor, or c) might cause an insider to change his/her trading patterns. Such
information should be viewed as including:
(i) projections of future earnings or losses;
(ii) news of a pending or proposed merger, acquisition or tender offer;
(iii) news of a significant new business transaction or agreement;
(iv) a declaration of a stock split or the offering of additional
securities;
(v) new or expanded services areas, significant new products or
services;
(vi) significant litigation or litigation developments; and
(vii) significant new contracts or loss of business.
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Developments with respect to WellCare's physician network or member
enrollment are examples of material inside information. Information as to the
success, failure or even the unchanging status of particular aspects of the
Company's business can be considered material.
(c) WHEN IS INFORMATION DEEMED PUBLIC?
---------------------------------
WellCare Personnel may trade only when they are certain that
official announcements of material information have been sufficiently publicized
so that the public has had the opportunity to evaluate the information. Thus,
WellCare Personnel may not attempt to "beat the market" by trading
simultaneously with, or shortly after, the official release of material
information. In addition, insider trading is not made permissible merely because
material information is reflected by rumors or other unofficial statements in
the marketplace. As a general rule, WellCare Personnel (with the exception of
directors, officers, and all employees in the finance department) should not
engage in any transactions until the third business day after an announcement is
made. For example, if an announcement is made on a Monday, the first day of
which an employee can trade in the Company's securities would be Thursday. If an
announce ment is made on a Friday, the first day of permissible trades would be
Wednesday.
Directors and officers of the Company, and employees in the finance
department should not sell or purchase securities of the Company, other than a
purchase upon the exercise of employee stock options, for a two-week period
preceding, and a two-day period following, release of the Company's quarterly
and annual financial information.
2. ADDITIONAL PROHIBITED TRANSACTIONS AND SIX-MONTH HOLDING PERIOD
---------------------------------------------------------------
WellCare Personnel should not engage in short sales, buy on margin, or
trade in puts, calls or other options of the Company's securities. In addition,
any Company securities purchased in the open market must, in general, be held
for a minimum of six months.
(a) PROHIBITED TRANSACTIONS
-----------------------
WellCare encourages its employees to invest, but not to speculate in
its securities by in-and-out trading. In order to avoid the appearance that any
Company employee is speculating in its securities, the Company has adopted the
above-mentioned policy of prohibited transactions for all Company Personnel.
(b) SIX-MONTH HOLDING PERIOD
------------------------
The short-swing profit rules of the Securities and Exchange
Commission (the "SEC") already prohibit officers and directors from selling
securities within six months of a purchase. The Company's policy expands this
rule to all WellCare Personnel. However, the rule does not apply to option
exercises or other incentive plan exercises, except to the extent required for
officers and directors.
3. COMPANY SANCTIONS
-----------------
In addition to the legal consequences associated with violations of
"insider trading" laws (described below), WellCare Personnel who fail to comply
with the policy as set forth in this statement of policy can be subject to
sanctions imposed directly by the Company, including dismissal for cause.
Page 2 of 4
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LEGAL CONSEQUENCES
- ------------------
The consequences of violating insider trading laws are severe for directors,
officers, employees, and companies. Individuals who trade on inside information
or who "tip" information to others can face a civil penalty of up to three times
the profit gained or loss avoided, a criminal fine (no matter how small the
profit) of up to $1,000,000, and a jail term of up to ten years. A company (as
well as supervisory personnel) that fails to take appropriate steps to prevent
illegal trading is subject to a civil penalty of the greater of $1,000,000 or
three times the profit gained or loss avoided as a result of an employee's
violation and a criminal penalty of up to $2,500,000. Even if an investigation
by the SEC does not result in criminal or civil sanctions, the investigation
itself can tarnish a person's or a company's reputation and irreparably damage a
person's career.
COMPANY ASSISTANCE
- ------------------
Questions concerning the Company's policy as set forth herein should be directed
to Nancy Lavallee, Corporate Secretary of WellCare.
Page 3 of 4
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THE WELLCARE MANAGEMENT GROUP, INC.
CONFIDENTIALITY OF INFORMATION
AND SECURITIES INVESTMENTS BY WELLCARE PERSONNEL
TO: Nancy Lavallee
FROM:
-----------------------------------------
Print Name
-----------------------------------------
Position (within WellCare or its subsidiaries or affiliated
companies)
This is to acknowledge that I have received, read and understand the
Company's Statement of Policy Regarding Securities Investments by WellCare
Personnel. I agree to comply fully with all of its terms.
-----------------------------------------
Signature
-----------------------------------------
Date
PLEASE SIGN, DATE, AND RETURN THIS ACKNOWLEDGMENT TO:
Nancy L. Lavallee, Corporate Secretary
The WellCare Management Group, Inc.
Suite 212
Park West/Hurley Avenue Extension
P.O. Box 4059
Kingston, NY 12401
Page 4 of 4
79
<PAGE>
SCHEDULES 3.16 AND 5.6
TO NOTE PURCHASE AGREEMENT
DATED JANUARY 19, 1996
BY AND BETWEEN THE WELLCARE
MANAGEMENT GROUP, INC. AND
THE 1818 FUND II, L.P.
---------------------------
1. Hanovice v. The WellCare Management Group, Inc. In September
-----------------------------------------------
1995, an ophthalmologist who formerly served as a health care provider for
WellCare of New York, Inc. (the "WellCare HMO"), one of the Company's health
maintenance organizations ("HMOs"), commenced an action in the Supreme Court of
Ulster County of the State of New York, against the Company, asserting that the
Company breached an implied covenant of good faith and fair dealing, and
"interfered" with the plaintiff's contracts, in terminating his provider
contract with the WellCare HMO. The complaint seeks $1,000,000 in damages. In
October 1995, the Company filed a motion to dismiss, asserting that (i) the suit
was filed against an improper party, as the Company's subsidiary, not the
Company, was a party to the provider contract; (ii) damages are not justified in
any event as the plaintiff's provider contract was "at will" and termination was
properly effected thereunder; and (iii) the plaintiff's interference claim was
legally insufficient as pleaded. The Company is also seeking payment of
attorneys' fees incurred in making the motion. The Company believes the claims
are without merit and that it will continue to contest the action vigorously.
2. Prior to the fourth quarter of 1994, the WellCare HMO contracted
directly (the "Direct Contracts") with primary care physicians and specialists,
capitating substantially all primary care physicians with a fixed monthly fee
payable to a primary care physician for each HMO member selecting such
physician, with a portion thereof allocated to a risk-sharing account, involving
specialists as well as other costs. In the fourth quarter of 1994, the WellCare
HMO entered into new contractual arrangements with four newly established
regional health care delivery networks (the "Alliances"), under which the
WellCare HMO changed its capitation arrangements from capitating primary care
physicians with attendant risk sharing pools to capitating the four Alliances.
The Alliances have been organized as either professional service corporations or
not-for-profit or business corporations organized as independent practice
associations and each Alliance has entered into provider agreements with most of
the primary care physicians and specialists located within such Alliance's
geographic region who were parties to the Direct Contracts. An issue has arisen
with respect to one of the Alliances.
As of October 1, 1994, the WellCare HMO entered into an agreement
with AMB Medical Services, P.C. ("AMB"), one of the four Alliances, to arrange
for AMB to provide primary health care services and specialist services to
members of the WellCare HMO in consideration for a capitation fee. The agreement
contemplated an assignment of the agreement to a business corporation having the
corporate authority to assume the contract. The agreement
80
<PAGE>
was subsequently assigned to Hudson Health Care Alliance IPA, Inc. ("Hudson").
By letter dated June 8, 1995, the WellCare HMO and EMS Consulting, Inc. set
forth their intention that ownership of Hudson be transferred to another
physician identified by the WellCare HMO. Counsel to Alan Bigman, M.D., the sole
shareholder of AMB and Hudson, subsequently indicated to the Company that AMB
and Hudson had elected Subchapter S status. Based upon such entities not having
recognized any revenue or incurred any expenses in 1994, Dr. Bigman reported no
income from such entities on his 1994 Form 1040 tax return in which counsel
claimed that AMB and Hudson were merely "transparent" entities. (The basis for
such non recognition was discussed in a letter by Dr. Bigman to Adele Reiter,
Esq. in-house counsel to the Company.) The Company has taken the position (for
both financial reporting and income tax purposes) that such entities were
capitated under the agreement and that the Company recorded such capitation
payments as medical expenses.
81
<PAGE>
SCHEDULE 5.1(c)
TO NOTE PURCHASE AGREEMENT
DATED JANUARY 19, 1996
BY AND BETWEEN THE WELLCARE
MANAGEMENT GROUP, INC. AND
THE 1818 FUND II, L.P.
---------------------------
None
82
<PAGE>
SCHEDULE 5.2(c)
TO NOTE PURCHASE AGREEMENT
DATED JANUARY 19, 1996
BY AND BETWEEN THE WELLCARE
MANAGEMENT GROUP, INC. AND
THE 1818 FUND II, L.P.
---------------------------
None
83
<PAGE>
SCHEDULE 5.5
TO NOTE PURCHASE AGREEMENT
DATED JANUARY 19, 1996
BY AND BETWEEN THE WELLCARE
MANAGEMENT GROUP, INC. AND
THE 1818 FUND II, L.P.
---------------------------
Registration rights granted by The WellCare Management Group, Inc.
(the "Company") to J.J. Farrell Associates ("Farrell") pursuant to Stock
Purchase Warrants issued to Farrell by the Company on July 7, 1994.
84
<PAGE>
SCHEDULE 5.11
TO NOTE PURCHASE AGREEMENT
DATED JANUARY 19, 1996
BY AND BETWEEN THE WELLCARE
MANAGEMENT GROUP, INC. AND
THE 1818 FUND II, L.P.
---------------------------
None
85
<PAGE>
SCHEDULE 5.13
TO NOTE PURCHASE AGREEMENT
DATED JANUARY 19, 1996
BY AND BETWEEN THE WELLCARE
MANAGEMENT GROUP, INC. AND
THE 1818 FUND II, L.P.
---------------------------
In connection witht he filing of the WellCare Management Group,
Inc.'s (the "Company") Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, the Company inadvertently filed an incorrect Summary
Compensation Table which, instead of describing compensation of executives of
the Company, described their stock options in the Company.
86
<PAGE>
SCHEDULE 5.16
TO NOTE PURCHASE AGREEMENT
DATED JANUARY 19, 1996
BY AND BETWEEN THE WELLCARE
MANAGEMENT GROUP, INC. AND
THE 1818 FUND II, L.P.
---------------------------
Name of Corporation State of Incorporation
- ------------------- ----------------------
WellCare of New York, Inc. New York
WellCare Administration, Inc. New York
WellCare Medical Management, Inc. New York
WellCare Development, Inc. New York
WellCare of Connecticut, Inc. Connecticut
The CM Group, Inc. Kansas*
Cost Management Technologies, Inc. Kansas*
* Completion by The WellCare Management Group, Inc. (the "Company") of the
acquisition of these two (2) companies is subject to the Company's Board
ratification and completion of the Stock Purchase Agreement dated as of December
29, 1995.
87
<PAGE>
SCHEDULE 5.17
TO NOTE PURCHASE AGREEMENT
DATED JANUARY 19, 1996
BY AND BETWEEN THE WELLCARE
MANAGEMENT GROUP, INC. AND
THE 1818 FUND II, L.P.
---------------------------
<TABLE>
<CAPTION>
Name of Individual Type of Relationship Stock Option Commitment
- ------------------ -------------------- -----------------------
<S> <C> <C>
Marystephanie Corsones Chief Financial Officer, 2,000 options at fair market value
employee on January 1, of each contract year
(through January 1997)
Peter Kraft Vice President-Marketing, 1,000 options at fair market value
employee on January 1 of each contract year
(through January 1997)
Adele Reiter General Counsel, Stock Options in lieu of salary
employee based on a discounted formula
(discounted formula = $20,000
salary/annum)
George Rowland Medical Director, 1,000 options at fair market value
employee on January 1 of each contract year
(through January 1997)
Edward Ullmann Chief Executive Officer, 10,000 options at fair market value
employee on January 1 of each contract year
(through January 1997)
Lawrence Group Consultant Stock based on a formula of hours
worked quarterly at a rate of
$100/hour
J.J. Farrell Associates, Consultant Stock Purchase Warrants issued
July 7, 1994 which provide for the
holder's purchase of up to 100,000
shares based upon a formula
purchase price
</TABLE>
See also attached sheets.
88
<PAGE>
WELLCARE MANAGEMENT GROUP, INC.
ANALYSIS - STOCK OPTIONS
AS OF: JANUARY 11, 1996
<TABLE>
<CAPTION>
DATE OF NOT
NAME PRICE GRANT EXERCISABLE EXERCISABLE TOTAL
- --------------------------- ----- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Alisandrella, Gloria-Ann 11.75 01-Jul-93 500 500 1,000
Anderson, Lorraine 11.75 01-Jul-93 500 500 1,000
Arlantico, Patrick 11.75 01-Jul-93 5,000 5,000 10,000
Ashdown, Geraldine 11.75 01-Jul-93 0 750 750
Avila, Sharon 11.75 01-Jul-93 500 500 1,000
Bannen, Susan 11.75 01-Jul-93 200 1,000 1,200
Barath, Deborah 11.75 01-Jul-93 0 250 250
Bechtold, Joanne 11.75 01-Jul-93 125 250 375
Bell, Jeffrey 11.75 01-Jul-93 0 500 500
Harney, Doreen 11.75 01-Jul-93 375 750 1,125
Bergensen, Alyssa 11.75 01-Jul-93 0 500 500
Berkowitz, Susan 11.75 01-Jul-93 0 1,000 1,000
Borcherdt, Margaret 11.75 01-Jul-93 500 1,000 1,500
Bridge, Erika 11.75 01-Jul-93 450 750 1,200
Brooks, Kathleen 11.75 01-Jul-93 0 1,500 1,500
Brown, Maryann 11.75 01-Jul-93 1,000 1,000 2,000
Burnap, Bonnie 11.75 01-Jul-93 250 500 750
Carpenter, Thomas 11.75 01-Jul-93 0 1,000 1,000
Coilazo, Theresa 11.75 01-Jul-93 0 750 750
Cozza, Cynthia 11.75 01-Jul-93 500 1,000 1,500
Crimmins, Joel 11.75 01-Jul-93 500 1,000 1,500
Decker, Diana 11.75 01-Jul-93 1,000 1,000 2,000
Dellay, Janice 11.75 01-Jul-93 125 250 375
DeRubertis, Lisa 11.75 01-Jul-93 750 750 1,500
Dickerson, Yvonne 11.75 01-Jul-93 700 750 1,450
Dieter, Cheryl 11.75 01-Jul-93 125 250 375
DiLorenzo, Kathleen 11.75 01-Jul-93 0 1,000 1,000
Diopoulos, Christine 11.75 01-Jul-93 500 1,000 1,500
Dodge, Patrick 11.75 01-Jul-93 1,250 2,500 3,750
Donald, Maureen 11.75 01-Jul-93 750 750 1,500
Downton, Sandra 11.75 01-Jul-93 0 500 500
Eisenberg, Nell 11.75 01-Jul-93 1,500 3,000 4,500
Flynn, Jesse 11.75 01-Jul-93 0 750 750
Gakenheimer, Diane 11.75 01-Jul-93 0 750 750
Gifford, Linda 11.75 01-Jul-93 1,000 1,000 2,000
Goff, Robert 11.75 01-Jul-93 1,000 5,000 6,000
Gramlich, Marguerite 11.75 01-Jul-93 0 250 250
Haaland, Jann 11.75 01-Jul-93 750 750 1,500
Hasbrouck, Michele 11.75 01-Jul-93 375 750 1,125
Hauck, Hal 11.75 01-Jul-93 750 750 1,500
Herman, Nancy 11.75 01-Jul-93 0 1,250 1,250
Hughes, Andrea 11.75 01-Jul-93 1,000 1,000 2,000
</TABLE>
89
<PAGE>
WELLCARE MANAGEMENT GROUP, INC.
ANALYSIS - STOCK OPTIONS
AS OF: JANUARY 11, 1996
<TABLE>
<CAPTION>
DATE OF NOT
NAME PRICE GRANT EXERCISABLE EXERCISABLE TOTAL
- --------------------------- ----- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Hughes, Kimberly 11.75 01-Jul-93 250 250 500
Imhof, Kathleen Kennedy 11.75 01-Jul-93 750 750 1,500
Johnston, Judith 11.75 01-Jul-93 250 500 750
Kahrs, Arthur 11.75 01-Jul-93 0 500 500
Kaufman, Pamela 11.75 01-Jul-93 0 750 750
Keehn, Donna 11.75 01-Jul-93 750 750 1,500
Kehoe, Nona 11.75 01-Jul-93 375 750 1,125
Kell, Nancy 11.75 01-Jul-93 0 1,000 1,000
Kilgour, Patricia 11.75 01-Jul-93 750 750 1,500
Kiriauski, Alice 11.75 01-Jul-93 750 1,000 1,750
Kita, Oliver 11.75 01-Jul-93 1,000 1,000 2,000
Kluepfel, Carol 11.75 01-Jul-93 340 750 1,090
Knott, Lisa 11.75 01-Jul-93 0 750 750
Kraft, Kevin 11.75 01-Jul-93 1,500 1,500 3,000
Kraft, Peter 11.75 01-Jul-93 5,000 5,000 10,000
Kurry, Cindy 11.75 01-Jul-93 500 500 1,000
Lanava, Lucinda 11.75 01-Jul-93 500 1,000 1,500
Lavallee, Nancy 11.75 01-Jul-93 5,000 5,000 10,000
Littlefoot, Marilyn 11.75 01-Jul-93 500 1,000 1,500
Madison, Michelle 11.75 01-Jul-93 1,500 1,500 3,000
Mangrelli, Kathleen 11.75 01-Jul-93 625 1,250 1,875
McClaine, Ronni 11.75 01-Jul-93 500 500 1,000
Meeker, Patricia 11.75 01-Jul-93 500 1,000 1,500
Mooney, Kathryn 11.75 01-Jul-93 375 750 1,125
Morano, Peggy 11.75 01-Jul-93 250 500 750
Morano, Vincent 11.75 01-Jul-93 500 1,000 1,500
Murphy, Charlene 11.75 01-Jul-93 500 500 1,000
Palmiter, Bradley 11.75 01-Jul-93 750 1,500 2,250
Pearce, Gloria 11.75 01-Jul-93 125 250 375
Perry, Michael 11.75 01-Jul-93 0 500 500
Petro, Jacqueline 11.75 01-Jul-93 0 500 500
Piedmonte, Michael 11.75 01-Jul-93 1,550 2,500 4,050
Pino, Linda 11.75 01-Jul-93 625 1,250 1,875
Pritchard, Patricia 11.75 01-Jul-93 250 1,000 1,250
Reilly, Toni Pelletieri 11.75 01-Jul-93 0 1,000 1,000
Rizzuto, Michele 11.75 01-Jul-93 350 750 1,100
Sawyer, Karen 11.75 01-Jul-93 0 750 750
Seils, Jackie 11.75 01-Jul-93 610 750 1,360
Serfis, Kim 11.75 01-Jul-93 0 1,250 1,250
Servo, Jody 11.75 01-Jul-93 1,500 1,500 3,000
Stokes, Wanda 11.75 01-Jul-93 0 1,000 1,000
Strein, G. William 11.75 01-Jul-93 3,500 5,000 8,500
</TABLE>
90
<PAGE>
WELLCARE MANAGEMENT GROUP, INC.
ANALYSIS - STOCK OPTIONS
AS OF: JANUARY 11, 1996
<TABLE>
<CAPTION>
DATE OF NOT
NAME PRICE GRANT EXERCISABLE EXERCISABLE TOTAL
- --------------------------- ----- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Sweeney, Laurel 11.75 01-Jul-93 1,000 1,000 2,000
Tobiassen, Deborah 11.75 01-Jul-93 500 1,000 1,500
Van Dyke, Maureen 11.75 01-Jul-93 0 1,000 1,000
Whitaker, Lois 11.75 01-Jul-93 1,250 1,250 2,500
Williams, Allan 11.75 01-Jul-93 500 1,000 1,500
Woolley, Melody 11.75 01-Jul-93 0 1,500 1,500
Youmans, Jennie 11.75 01-Jul-93 250 500 750
Zappone, Patricia 11.75 01-Jul-93 625 1,250 1,875
Domino, MD, Frank 11.75 01-Jul-93 0 250 250
Gallant, MD, Jennifer 11.75 01-Jul-93 250 250 500
Gold, Carmel 11.75 01-Jul-93 500 1,000 1,500
Guneratne, MD, Franklin 11.75 01-Jul-93 0 1,500 1,500
Herman, Bernie 11.75 01-Jul-93 500 500 1,000
Hoyt, Jan-Lauritzen 11.75 01-Jul-93 500 500 1,000
Hutchinson, Ronald 11.75 01-Jul-93 500 1,000 1,500
Jobson, G. Mark 11.75 01-Jul-93 500 1,000 1,500
Krivda, Joseph 11.75 01-Jul-93 375 750 1,125
Lieblich, MD, Neil 11.75 01-Jul-93 625 1,250 1,875
Nadler, Errol 11.75 01-Jul-93 1,500 1,500 3,000
Quinn, Edward 11.75 01-Jul-93 0 1,000 1,000
Rissman, MD, Randall 11.75 01-Jul-93 2,500 2,500 5,000
Rosen, Laura 11.75 01-Jul-93 250 250 500
Thompson, Joan 11.75 01-Jul-93 500 500 1,000
Corsones, Marystephanie 11.75 13-Aug-93 500 500 1,000
Tialios, Yannios 11.75 13-Aug-93 500 1,000 1,500
Markes, John 14.00 07-Sep-93 500 500 1,000
Ullman, Edward 23.50 01-Jan-94 5,000 5,000 10,000
Adin, Mary 17.25 01-Aug-94 125 375 500
Alecca, Mellisa 17.25 01-Aug-94 125 375 500
Alesio, Christopher 17.25 01-Aug-94 125 375 500
Alisandrella, Gloria-Ann 17.25 01-Aug-94 63 187 250
Allers, Pamela 17.25 01-Aug-94 125 375 500
Angelo, Gina 17.25 01-Aug-94 0 375 375
Arlantico, Patrick 17.25 01-Aug-94 500 1,500 2,000
Bannen, Susan 17.25 01-Aug-94 188 562 750
Bechtold, Joanne 17.25 01-Aug-94 63 187 250
Bergensen, Alyssa 17.25 01-Aug-94 1 187 188
Berkowitz, Susan 17.25 01-Aug-94 125 375 500
Betaudier, John 17.25 01-Aug-94 250 750 1,000
Borcherdt, Margaret 17.25 01-Aug-94 63 187 250
Bradley, Celeste 17.25 01-Aug-94 125 375 500
Brady, Stephanie 17.25 01-Aug-94 125 375 500
</TABLE>
91
<PAGE>
WELLCARE MANAGEMENT GROUP, INC.
ANALYSIS - STOCK OPTIONS
AS OF: JANUARY 11, 1996
<TABLE>
<CAPTION>
DATE OF NOT
NAME PRICE GRANT EXERCISABLE EXERCISABLE TOTAL
- --------------------------- ----- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Brooks, Kathleen 17.25 01-Aug-94 63 187 250
Brown, Maryann 17.25 01-Aug-94 125 375 500
Canavan, Cheryl 17.25 01-Aug-94 63 187 250
Carena MD, Gina 17.25 01-Aug-94 125 375 500
Carpenter, Thomas 17.25 01-Aug-94 125 375 500
Cavano, Carol 17.25 01-Aug-94 63 187 250
Clancy, Joan 17.25 01-Aug-94 375 1,125 1,500
Collazo, Theresa 17.25 01-Aug-94 125 375 500
Buboltz-Cooke, Linda 17.25 01-Aug-94 125 375 500
Corsones, Marystephanie 17.25 01-Aug-94 750 2,250 3,000
Cozza Cynthia 17.25 01-Aug-94 125 375 500
Dellay, Janice 17.25 01-Aug-94 1 187 188
Denver, Kathleen 17.25 01-Aug-94 63 187 250
DeRubertis, Lisa 17.25 01-Aug-94 63 187 250
Diamond, Donald 17.25 01-Aug-94 250 750 1,000
Dieter, Cheryl 17.25 01-Aug-94 125 375 500
Diopoulos, Christine 17.25 01-Aug-94 63 187 250
DiPace, Andrea 17.25 01-Aug-94 188 562 750
Dodge, Patrick 17.25 01-Aug-94 125 375 500
Domino MD, Frank 17.25 01-Aug-94 0 375 375
Ede, Loretta 17.25 01-Aug-94 125 375 500
Eisenberg, Neil 17.25 01-Aug-94 125 375 500
Fabiano, Cosmo 17.25 01-Aug-94 125 375 500
Finch, John 17.25 01-Aug-94 250 750 1,000
Fong, Donna 17.25 01-Aug-94 63 187 250
Formisano, Marjorie 17.25 01-Aug-94 125 375 500
Gifford, Linda 17.25 01-Aug-94 63 187 250
Gilliland, Robert 17.25 01-Aug-94 125 375 500
Gold, Carmel 17.25 01-Aug-94 125 375 500
Griffis, Barbara 17.25 01-Aug-94 63 187 250
Grovenburg MD, Lucinda 17.25 01-Aug-94 125 375 500
Hafner MD, Daniel 17.25 01-Aug-94 250 750 1,000
Herman, Nancy 17.25 01-Aug-94 125 375 500
Hoyt, Jan-Lauritzen 17.25 01-Aug-94 125 375 500
Hughes, Kim 17.25 01-Aug-94 125 375 500
Imhof, Kathleen 17.25 01-Aug-94 50 150 200
Johnston, Judith 17.25 01-Aug-94 63 187 250
Kaufman, Pamela 17.25 01-Aug-94 0 375 375
Keehn, Donna 17.25 01-Aug-94 125 375 500
Kell, Nancy 17.25 01-Aug-94 0 375 375
Kerner DO, David 17.25 01-Aug-94 125 375 500
Kiriauski, Alice 17.25 01-Aug-94 125 375 500
</TABLE>
92
<PAGE>
WELLCARE MANAGEMENT GROUP, INC.
ANALYSIS - STOCK OPTIONS
AS OF: JANUARY 11, 1996
<TABLE>
<CAPTION>
DATE OF NOT
NAME PRICE GRANT EXERCISABLE EXERCISABLE TOTAL
- --------------------------- ----- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Kita, Oliver 17.25 01-Aug-94 250 750 1,000
Korey MD, Cathie 17.25 01-Aug-94 125 375 500
Kraft, Kevin 17.25 01-Aug-94 250 750 1,000
Kress, Gwen 17.25 01-Aug-94 0 375 375
Kurry, Cynthia 17.25 01-Aug-94 125 375 500
LaMagna, Gina 17.25 01-Aug-94 125 375 500
Lukazewski, Judith 17.25 01-Aug-94 13 187 200
Madison, Michelle 17.25 01-Aug-94 125 375 500
Mangrelli, Kathleen 17.25 01-Aug-94 125 375 500
Markes, John 17.25 01-Aug-94 125 375 500
McClaine, Ronni 17.25 01-Aug-94 63 187 250
Mooney, Kathryn 17.25 01-Aug-94 125 375 500
Morano, Vince 17.25 01-Aug-94 125 375 500
Murphy, Charlene 17.25 01-Aug-94 63 187 250
Palmiter, Bradley 17.25 01-Aug-94 125 375 500
Petro, Jacqueline 17.25 01-Aug-94 125 375 500
Piedmonte, Michael 17.25 01-Aug-94 125 375 500
Pino, Linda 17.25 01-Aug-94 125 375 500
Pritchard, Patricia 17.25 01-Aug-94 63 187 250
Ramaswami MD, Ravi 17.25 01-Aug-94 375 1,125 1,500
Reilly, Kellene 17.25 01-Aug-94 125 375 500
Riccardi, Jennifer 17.25 01-Aug-94 125 375 500
Rizzuto, Michele 17.25 01-Aug-94 63 187 250
Rose, Linda 17.25 01-Aug-94 63 187 250
Savino, Catherine 17.25 01-Aug-94 63 187 250
Sawyer, Karen 17.25 01-Aug-94 125 375 500
Schwartz, Andrew 17.25 01-Aug-94 0 750 750
Scott, Bret 17.25 01-Aug-94 63 187 250
Serfis, Kim 17.25 01-Aug-94 125 375 500
Servo, Jody 17.25 01-Aug-94 125 375 500
Sherman, Barbara 17.25 01-Aug-94 125 375 500
Smith, Nancy 17.25 01-Aug-94 125 375 500
Snyder, Mary Ann 17.25 01-Aug-94 125 375 500
Steenbergen MD, Mark 17.25 01-Aug-94 125 375 500
Stokes, Wanda 17.25 01-Aug-94 63 187 250
Stumpf, Sharon 17.25 01-Aug-94 125 375 500
Sweeney, Laurel 17.25 01-Aug-94 500 1,500 2,000
Tialios, Ioannis John 17.25 01-Aug-94 750 2,250 3,000
Tobiassen, Deborah 17.25 01-Aug-94 1 187 188
Vickery, Lynda 17.25 01-Aug-94 0 375 375
Wacholder, Stephanie 17.25 01-Aug-94 500 1,500 2,000
Whitaker, Lois 17.25 01-Aug-94 125 375 500
</TABLE>
93
<PAGE>
WELLCARE MANAGEMENT GROUP, INC.
ANALYSIS - STOCK OPTIONS
AS OF: JANUARY 11, 1996
<TABLE>
<CAPTION>
DATE OF NOT
NAME PRICE GRANT EXERCISABLE EXERCISABLE TOTAL
- --------------------------- ----- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Wilkinson, Diana 17.25 01-Aug-94 188 562 750
Williams, Allan 17.25 01-Aug-94 125 375 500
Yallum, Robert 17.25 01-Aug-94 0 375 375
Youmans, Jennie 17.25 01-Aug-94 125 375 500
Zappone, Patricia 17.25 01-Aug-94 125 375 500
Graham, Marlene 17.25 01-Aug-94 125 375 500
Guneratne MD, Franklin 17.25 01-Aug-94 0 750 750
Hausler DO, Gerald 17.25 01-Aug-94 250 750 1,000
Lieblich MD, Neil 17.25 01-Aug-94 250 750 1,000
Mandelbaum MD, Joel 17.25 01-Aug-94 250 750 1,000
Muise, Jeffrey 17.25 01-Aug-94 250 750 1,000
Robbins MD, Chester L. 17.25 01-Aug-94 250 750 1,000
Rosen, Laura 17.25 01-Aug-94 125 375 500
Schellhammer, Wayne 17.25 01-Aug-94 500 1,500 2,000
Schuman, Joan 17.25 01-Aug-94 750 2,250 3,000
Siegel, Daniel 17.25 01-Aug-94 500 1,500 2,000
Thompson, Robert 17.25 01-Aug-94 250 750 1,000
Wodka DPM, Michael 17.25 01-Aug-94 250 750 1,000
Zubroff, Elizabeth 17.25 01-Aug-94 250 750 1,000
Corsones, Marystephanie 24.50 01-Jan-95 500 1,500 2,000
Kraft, Peter 24.50 01-Jan-95 250 750 1,000
Rowland, G. 24.50 01-Jan-95 250 750 1,000
Ullmann, Edward 24.50 01-Jan-95 2,500 7,500 10,000
Casey, Francis W. 19.69 06-Jun-95 3,000 0 3,000
Adin, Mary 19.75 10-Aug-95 0 250 250
Alecca, Mellisa 19.75 10-Aug-95 0 500 500
Alesia, Christopher 19.75 10-Aug-95 0 750 750
Alisandrella, Gloria 19.75 10-Aug-95 0 250 250
Almstead, Abby 19.75 10-Aug-95 0 300 300
Angelo, Gina 19.75 10-Aug-95 0 250 250
Arlantico, Patrick 19.75 10-Aug-95 0 2000 2000
Auchmoedy, Deana 19.75 10-Aug-95 0 100 100
Bannen, Susan 19.75 10-Aug-95 0 1500 1500
Barton, Audra 19.75 10-Aug-95 0 250 250
Baumgartner, James 19.75 10-Aug-95 0 1000 1000
Bell, Jeffrey 19.75 10-Aug-95 0 250 250
Berkowitz, Susan 19.75 10-Aug-95 0 500 500
Bessette, Claudia 19.75 10-Aug-95 0 400 400
Betaudier, John 19.75 10-Aug-95 0 1500 1500
Borcherdt, Margaret 19.75 10-Aug-95 0 1000 1000
Brady, Stephanie 19.75 10-Aug-95 0 750 750
Bridge, Erika 19.75 10-Aug-95 0 300 300
</TABLE>
94
<PAGE>
WELLCARE MANAGEMENT GROUP, INC.
ANALYSIS - STOCK OPTIONS
AS OF: JANUARY 11, 1996
<TABLE>
<CAPTION>
DATE OF NOT
NAME PRICE GRANT EXERCISABLE EXERCISABLE TOTAL
- --------------------------- ----- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Brooks, Kathleen 19.75 10-Aug-95 0 500 500
Brown, Maryann 19.75 10-Aug-95 0 750 750
Buboltz-Cooke, Linda 19.75 10-Aug-95 0 500 500
Buda, Lorraine 19.75 10-Aug-95 0 250 250
Buonfiglio, Deborah 19.75 10-Aug-95 0 250 250
Burnap, Bonnie 19.75 10-Aug-95 0 500 500
Cahill, Kevin 19.75 10-Aug-95 0 1,000 1,000
Canavan, Cheryl 19.75 10-Aug-95 0 750 750
Cane, Craig 19.75 10-Aug-95 0 750 750
Carpenter, Thomas 19.75 10-Aug-95 0 1,500 1,500
Cavano, Carol 19.75 10-Aug-95 0 250 250
Cheico, Philip 19.75 10-Aug-95 0 750 750
Clancy, Joan 19.75 10-Aug-95 0 500 500
Collazo, Theresa 19.75 10-Aug-95 0 750 750
Cozza, Cynthia 19.75 10-Aug-95 0 500 500
Dellay, Janice 19.75 10-Aug-95 0 250 250
Deperto, Ronald 19.75 10-Aug-95 0 1,000 1,000
DeRubertis, Lisa 19.75 10-Aug-95 0 250 250
Diamond, Donald 19.75 10-Aug-95 0 1,500 1,500
Dickerson, Yvonne 19.75 10-Aug-95 0 500 500
Dieter, Cheryl 19.75 10-Aug-95 0 500 500
Dilorenzo, Kathleen 19.75 10-Aug-95 0 750 750
Diopoulos, Christine 19.75 10-Aug-95 0 250 250
DiPace, Andrea 19.75 10-Aug-95 0 300 300
Dodge, Patrick 19.75 10-Aug-95 0 1,000 1,000
Donald, Maureen 19.75 10-Aug-95 0 500 500
Dowley, Carol 19.75 10-Aug-95 0 750 750
Earl, Jeannine 19.75 10-Aug-95 0 500 500
Ede, Loretta 19.75 10-Aug-95 0 500 500
Edwards, Todd 19.75 10-Aug-95 0 250 250
Eisenberg, Neil 19.75 10-Aug-95 0 500 500
Ennist, Barbara 19.75 10-Aug-95 0 750 750
Fainstein, Boris 19.75 10-Aug-95 0 500 500
Feth, Kathleen 19.75 10-Aug-95 0 500 500
Finch, John 19.75 10-Aug-95 0 2,000 2,000
Formisano, Marjorie 19.75 10-Aug-95 0 250 250
Fricke, Kathleen 19.75 10-Aug-95 0 250 250
Gifford, Linda 19.75 10-Aug-95 0 250 250
Gillliland, Robert 19.75 10-Aug-95 0 750 750
Goff, Robert 19.75 10-Aug-95 0 1,000 1,000
Gold, Carmel 19.75 10-Aug-95 0 250 250
Griffis, Barbara 19.75 10-Aug-95 0 500 500
</TABLE>
95
<PAGE>
WELLCARE MANAGEMENT GROUP, INC.
ANALYSIS - STOCK OPTIONS
AS OF: JANUARY 11, 1996
<TABLE>
<CAPTION>
DATE OF NOT
NAME PRICE GRANT EXERCISABLE EXERCISABLE TOTAL
- --------------------------- ----- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Hans, Joan 19.75 10-Aug-95 0 750 750
Harbinger, Wendy 19.75 10-Aug-95 0 250 250
Harmon-Bailey, Gloria 19.75 10-Aug-95 0 250 250
Harney, Doreen 19.75 10-Aug-95 0 500 500
Herman, Nancy 19.75 10-Aug-95 0 750 750
Higgins, Phyliss 19.75 10-Aug-95 0 250 250
Hughes, Andrea 19.75 10-Aug-95 0 300 300
Hughes, Kimberly 19.75 10-Aug-95 0 200 200
Imhof, Kathleen 19.75 10-Aug-95 0 500 500
Ippolito, Mary 19.75 10-Aug-95 0 100 100
Jayner, Michael 19.75 10-Aug-95 0 500 500
Johnston, Judith 19.75 10-Aug-95 0 500 500
Jones, Deborah 19.75 10-Aug-95 0 250 250
Kallos, Christopher 19.75 10-Aug-95 0 250 250
Kaufman, Pamela 19.75 10-Aug-95 0 500 500
Kehoe, Nona 19.75 10-Aug-95 0 500 500
Kell, Nancy 19.75 10-Aug-95 0 500 500
Kilgour, Patricia 19.75 10-Aug-95 0 500 500
Kirlauski, Alice 19.75 10-Aug-95 0 500 500
Kita, Oliver 19.75 10-Aug-95 0 1,000 1,000
Kraft, Kevin 19.75 10-Aug-95 0 1,750 1,750
Kress, Gwendolyn 19.75 10-Aug-95 0 500 500
Kurry, Cynthia 19.75 10-Aug-95 0 500 500
Kuster, Diana 19.75 10-Aug-95 0 400 400
Lanava, Lucinda 19.75 10-Aug-95 0 500 500
Larios, Florence (Tootie) 19.75 10-Aug-95 0 200 200
Lavallee, Nancy 19.75 10-Aug-95 0 1,500 1,500
Littlefoot, Marilyn 19.75 10-Aug-95 0 500 500
Lombardi, Suzanne 19.75 10-Aug-95 0 250 250
Lukaszewski, Judith 19.75 10-Aug-95 0 100 100
Madison, Michello 19.75 10-Aug-95 0 500 500
Maher, Bernadette 19.75 10-Aug-95 0 500 500
Mangrelli, Kathleen 19.75 10-Aug-95 0 1,000 1,000
McClaine, Ronni 19.75 10-Aug-95 0 250 250
Mcleod, Trudy 19.75 10-Aug-95 0 250 250
Meeker, Patricia 19.75 10-Aug-95 0 250 250
Meyerson, Cathy 19.75 10-Aug-95 0 250 250
Mojica, Luz 19.75 10-Aug-95 0 250 250
Mooney, Kathryn 19.75 10-Aug-95 0 500 500
Morano, Vincent 19.75 10-Aug-95 0 300 300
Motrie, Brenda 19.75 10-Aug-95 0 250 250
Murphy, Charlene 19.75 10-Aug-95 0 250 250
</TABLE>
96
<PAGE>
WELLCARE MANAGEMENT GROUP, INC.
ANALYSIS - STOCK OPTIONS
AS OF: JANUARY 11, 1996
<TABLE>
<CAPTION>
DATE OF NOT
NAME PRICE GRANT EXERCISABLE EXERCISABLE TOTAL
- --------------------------- ----- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Myers, Robin 19.75 10-Aug-95 0 250 250
Palmiter, Bradley 19.75 10-Aug-95 0 1,200 1,200
Peck, Anna 19.75 10-Aug-95 0 250 250
Petro, Jacqueline 19.75 10-Aug-95 0 200 200
Piedmonte, Cynthia 19.75 10-Aug-95 0 750 750
Lino, Linda 19.75 10-Aug-95 0 1,000 1,000
Pritchard, Patricia 19.75 10-Aug-95 0 250 250
Riccardi, Jennifer 19.75 10-Aug-95 0 500 500
Rider, Donna 19.75 10-Aug-95 0 250 250
Rizzuto, Michele 19.75 10-Aug-95 0 500 500
Robins, Lisa 19.75 10-Aug-95 0 500 500
Roosa, Carol 19.75 10-Aug-95 0 500 500
Roth, Steven 19.75 10-Aug-95 0 500 500
Savino, Joyce 19.75 10-Aug-95 0 250 250
Savino, Catherine 19.75 10-Aug-95 0 250 250
Sawyer, Karen 19.75 10-Aug-95 0 250 250
Schelhammer, Wayne 19.75 10-Aug-95 0 1,000 1,000
Schiskie, Frederick 19.75 10-Aug-95 0 500 500
Schwartz, Andrew 19.75 10-Aug-95 0 1,000 1,000
Scoones, Laura 19.75 10-Aug-95 0 500 500
Scott, Bret 19.75 10-Aug-95 0 500 500
Sails, Jacklyn 19.75 10-Aug-95 0 200 200
Serfis, Kim 19.75 10-Aug-95 0 750 750
Servo, Jody 19.75 10-Aug-95 0 500 500
Sherman, Barbara 19.75 10-Aug-95 0 400 400
Shorr, Ann 19.75 10-Aug-95 0 100 100
Sindt, Linda 19.75 10-Aug-95 0 250 250
Smith, Daniel 19.75 10-Aug-95 0 500 500
Snyder, Mary Ann 19.75 10-Aug-95 0 500 500
Stokes, Wanda 19.75 10-Aug-95 0 500 500
Stumpf, Sharon 19.75 10-Aug-95 0 750 750
Sweeney, Laurel 19.75 10-Aug-95 0 1,200 1,200
Thompson, Robert 19.75 10-Aug-95 0 1,000 1,000
Thurston, Patricia 19.75 10-Aug-95 0 250 250
Toblassen, Deborah 19.75 10-Aug-95 0 250 250
Tschan, Kenneth 19.75 10-Aug-95 0 400 400
Vickery, Lynn 19.75 10-Aug-95 0 250 250
Wacholder, Stephanie 19.75 10-Aug-95 0 2,000 2,000
Waddell, Lisa 19.75 10-Aug-95 0 250 250
Webb, Jean 19.75 10-Aug-95 0 250 250
Weintraub, David 19.75 10-Aug-95 0 200 200
Wheeler, Douglas 19.75 10-Aug-95 0 500 500
</TABLE>
97
<PAGE>
WELLCARE MANAGEMENT GROUP, INC.
ANALYSIS - STOCK OPTIONS
AS OF: JANUARY 11, 1996
<TABLE>
<CAPTION>
DATE OF NOT
NAME PRICE GRANT EXERCISABLE EXERCISABLE TOTAL
- --------------------------- ----- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Whitaker, Lois 19.75 10-Aug-95 0 500 500
Wilkinson, Diana 19.75 10-Aug-95 0 250 250
Williams, Allan 19.75 10-Aug-95 0 250 250
Wiltshire, Robert 19.75 10-Aug-95 0 500 500
Wojciechowski, Jon 19.75 10-Aug-95 0 200 200
Woolley, Melody 19.75 10-Aug-95 0 750 750
Yallum, Robert 19.75 10-Aug-95 0 1,000 1,000
Youmans, Jennie 19.75 10-Aug-95 0 750 750
Zacharczyk, Sally 19.75 10-Aug-95 0 500 500
Alderfer-Abbott, Doug & Judy 19.75 10-Aug-95 0 1,000 1,000
Bell, Kathy 19.75 10-Aug-95 0 100 100
Casey, Sally 14.81 10-Aug-95 0 3,000 3,000
Graham, Marlene 19.75 10-Aug-95 0 300 300
Markes, John 19.75 10-Aug-95 0 1,200 1,200
Muise, Jeffrey 19.75 10-Aug-95 0 500 500
Schuman, Joan 19.75 10-Aug-95 0 1,000 1,000
Zubroff, Elizabeth 19.75 10-Aug-95 0 750 750
Ott, John 17.63 09-Sep-95 0 2,740 2,740
Reiter, Adele 17.63 24-Oct-95 0 3,408 3,408
Carsones, Marystephanie 21.50 01-Jan-96 0 2,000 2,000
Kraft, Peter 21.50 01-Jan-96 0 1,000 1,000
Rowland, G 21.50 01-Jan-96 0 1,000 1,000
Ullmann, Edward 21.50 01-Jan-96 0 10,000 10,000
----------- ----------- ---------
TOTALS 97,778 304,234 402,012
----------- ----------- ---------
</TABLE>
98
<PAGE>
EXHIBIT 2
99
<PAGE>
EXHIBIT 2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT OR SUCH LAWS.
THE TRANSFER OF THIS NOTE IS RESTRICTED BY A NOTE
PURCHASE AGREEMENT BY AND BETWEEN THE 1818 FUND II, L.P.
AND THE ISSUER OF THIS NOTE, A COPY OF WHICH IS ON FILE
AT THE OFFICE OF THE ISSUER OF THIS NOTE.
THE WELLCARE MANAGEMENT GROUP, INC.
6.0% SUBORDINATED CONVERTIBLE NOTE
DUE DECEMBER 31, 2002
New York, New York
January 19, 1996
FOR VALUE RECEIVED, the undersigned, The WellCare Management Group,
Inc., a New York corporation (the "Company"), hereby promises to pay to The 1818
Fund II, L.P. or registered assigns, at such place as the holder of this Note
shall from time to time designate to the Company in writing, on December 31,
2002, or, if such date is not a Business Day, on the next day that is a Business
Day, a total of Twenty Million Dollars ($20,000,000) with daily interest from
the date hereof to and including the maturity hereof at the rate set forth in
Section 2 hereof, said interest being payable in quarterly installments in
arrears on the Business Day immediately preceding the last Business Day of
March, June, September and December in each year, commencing March 31, 1996, to
the Person in whose name this Note is registered at the close of business on the
fifteenth day of the month in which the payment date occurs, and at the stated
or any accelerated maturity hereof or, if the date of any such stated or
accelerated maturity is not a Business Day, on the next day that is a Business
Day. In case an Event of Default (as defined in Section 11) shall occur and be
continuing, the entire principal amount of this Note may become or be declared
to be due and payable in the manner and with the effect provided herein. Certain
capi talized terms used herein are defined in Section 12. Capitalized terms not
defined herein have the meanings
100
<PAGE>
2
ascribed to them in the Note Purchase Agreement, dated as of the date hereof, by
and between the Company and The 1818 Fund II, L.P. (as amended, supplemented or
modified in accordance with the terms thereof, the "Note Purchase Agreement").
Section 1. THE NOTES.
This 6.0% Subordinated Convertible Note is issued pursuant to the
Note Purchase Agreement and the holder of this Note is entitled to the benefits
of this Note, the Note Purchase Agreement and the Registration Rights Agreement
and may enforce the agreements of the Company contained herein and therein and
exercise the remedies provided for hereby and thereby or otherwise available in
respect hereto and thereto. All of the 6.0% Subordinated Convertible Notes
issued pursuant to the Note Purchase Agreement are referred to herein as the
"Notes."
Section 2. INTEREST.
The Company will pay interest on the principal amount hereof, until
the principal amount hereof is paid in full, at a rate of 6.0% per annum.
Interest on this Note will accrue from and including the most recent date to
which interest has been paid (or, if no interest has been paid, from and
including the date of issuance of this Note) to but excluding the date of
payment. Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. The Company shall pay interest on overdue principal and on
overdue interest (including without limitation, Special Interest (as defined in
Section 4)) to the full extent permitted by law at a rate equal to 8.0% per
annum.
Section 3. METHOD OF PAYMENT.
The registered holder of this Note at the close of business on the
fifteenth day of the month in which the interest payment date occurs, or, if
such date is not a Business Day, on the next succeeding Business Day shall be
entitled to receive interest on this Note, even if this Note is converted or
cancelled after the record date and on or before the interest payment date. The
holder of this Note must surrender it to the Company to collect the principal
payment; PROVIDED, HOWEVER, that, if upon surrender of this Note the holder does
not receive the full principal amount of this Note plus accrued but unpaid
interest thereon (including without limitation, Special Interest), then the
holder shall be issued a new Note equal in principal amount to the outstanding
principal balance on this Note. The Company will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. The
101
<PAGE>
3
Company shall pay principal, interest and all other amounts due hereunder in
immediately available funds.
Section 4. SPECIAL INTEREST.
In the event that the Company shall declare a dividend or make any
other distribution (including, without limitation, in capital stock (which shall
include, without limitation, any options, warrants or other rights to acquire
capital stock) of the Company, whether or not pursuant to a shareholder rights
plan, "poison pill" or similar arrange ment, or other property or assets) on or
with respect to the Common Stock other than (x) a Regular Distribution (as
defined in Section 7.4(f)) or (y) a dividend or distribution paid solely in
shares of Common Stock, then the Board of Directors of the Company shall
declare, and the holder of this Note shall be entitled to receive, interest
("Special Interest") in an amount equal to the amount of such dividend or
distribution received by a holder of the number of shares of Common Stock for
which this Note is convertible on the record date for such dividend or
distribution. Any such amount shall be paid to the holder of this Note at the
same time such dividend or distribution is made to holders of shares of Common
Stock.
Section 5. MANDATORY REDEMPTION AT THE OPTION OF THE
HOLDER.
5.1 CHANGE OF CONTROL. If one or more events constituting a Change
of Control shall occur, the holder of this Note shall have the right, on the
date specified in Section 5.2 (the "Mandatory Redemption Date"), to require the
Company to redeem (a "Mandatory Redemption") all (but not less than all) of the
Notes then held by such holder at a price (the "Mandatory Redemption Price")
equal to (i) 125% of the principal amount of such Notes plus (ii) an amount
equal to all accrued and unpaid interest thereon (including, without limitation,
Special Interest), whether or not cur rently payable, to the applicable
Mandatory Redemption Date, in immediately available funds.
5.2 NOTICE. Notice of a Change of Control (the "Change of Control
Notice") shall be mailed no more than 15 Business Days after the occurrence of a
Change of Control to each holder of Notes, at such holder's address as it
appears on the transfer books of the Company. The date fixed for each Mandatory
Redemption shall be fixed by the Company and shall be no less than 20 days or
more than 40 days after the date of the Change of Control Notice. Not
withstanding the foregoing and Section 5.1 hereof, in the event of the
occurrence of a Change of Control of the types set forth in any of clauses
(iii), (iv) or (vi) of the definition of "Change of Control," the Change of
Control
102
<PAGE>
4
Notice shall be mailed to each holder of Notes no later than 10 Business Days
prior to the consummation of the transac tion contemplated by such clause (iii),
(iv) or (vi), as the case may be, and the Company shall not be required to pur
chase any Notes unless such transaction shall be consum mated, in which case the
Company shall be required to pur chase such Notes immediately prior to the
consummation of such transaction.
5.3 PROVISIONS OF NOTICE. The right of the hold ers of Notes to
require the Company to effect a Mandatory Redemption shall remain in effect from
the time of the mailing of, until the redemption date set forth in, the Change
of Control Notice. The Change of Control Notice shall be accompanied by a copy
of the information most recently required to be supplied under Sections 8.1(a)
and 8.1(b) of the Note Purchase Agreement. The Change of Control Notice shall
contain all instruments and materials necessary to enable the holder of this
Note to tender this Note pursuant to the Change of Control Offer. The Change of
Control Notice, which shall govern the terms of the Mandatory Redemption, shall
state:
(i) that a Change of Control has occur red, that each
holder of Notes has the right to require the Company to effect a
Mandatory Redemption pursuant to this Section 5 and that tendered
Notes will be redeemed;
(ii) the redemption price and the date
for redemption;
(iii) that each holder of Notes may require the Company
to redeem all (but not less than all) Notes held thereby;
(iv) that the Notes redeemed pursuant to the Mandatory
Redemption shall cease to accrue interest after the designated date
for purchase (unless the Company shall default in the payment of the
Mandatory Redemption Price, in which case the Notes shall not cease
to accrue interest after such date;
(v) such other information respecting the procedures for
effecting the Mandatory Redemption as the Company shall include and
such other information as may be required by law; and
(vi) that (unless otherwise required by law) any holder
of Notes will be entitled to with draw his or her election if the
Company receives, not later than the close of business on the third
103
<PAGE>
5
Business Day next preceding the date scheduled for redemption,
facsimile transmission or letter set ting forth the name of such
holder, the principal amount of Notes such holder delivered for
redemp tion and a statement that such holder is withdraw ing
election to have such Notes redeemed.
5.4 REDEMPTION PROCEDURE. The holder of this Note may elect to
require the Company to redeem all (but not less than all) of the Notes held by
such holder pursuant to a Mandatory Redemption by delivery of written notice
thereof to the Company prior to the date fixed for such Mandatory Redemption. If
the holder of this Note so elects, on the date fixed for any Mandatory
Redemption, such holder shall surrender all of the Notes held thereby to the
Company at the place designated in the Change of Control Notice. From and after
the Mandatory Redemption Date (i) such Notes shall no longer be deemed
outstanding, (ii) the right to receive interest thereon shall cease to accrue
and (iii) all rights of the holders of such Notes shall cease and terminate,
excepting only the right to receive the Mandatory Redemption Price therefor;
PROVIDED, HOWEVER, that if the Company shall default in the payment of the
Mandatory Redemption Price, the Notes shall thereafter be deemed to be
outstanding and the holders thereof shall have all of the rights of a holder of
Notes until such time as such default shall no longer be continuing or shall
have been waived by holders of at least 66-2/3% of the then outstanding
principal amount of the Notes.
Section 6. OPTIONAL REDEMPTION.
6.1 REDEMPTION BY COMPANY. Except as otherwise provided herein, the
Company shall not have any right to prepay or redeem this Note. On and after
January 19, 2000 the Company shall have the right, at any time and from time to
time at its sole option and election, to redeem (the "Optional Redemption") the
Notes, in whole but not in part, on not less than 30 days notice of the date of
redemption, which must be a Business Day (any such date an "Optional Redemption
Date") at a price (the "Optional Redemption Price") equal to (i) 100% of the
outstanding principal amount of the Notes plus (ii) an amount equal to all
accrued and unpaid interest thereon (including without limitation, Special
Interest), whether or not currently payable, to the Optional Redemption Date, in
cash or other immediately available funds. If the Company shall commence a
voluntary case under any Bankruptcy Law or consent to the entry of an order for
relief in an involuntary case under any Bankruptcy Law or to the appointment of
a Custodian of the corporation or of any substantial part of its property, or
make an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they
104
<PAGE>
6
become due, the Company shall be deemed to have elected to redeem the Notes as
provided in this Section 6.1 and shall so redeem the Notes as provided in this
Section 6.
6.2 CHANGE OF CONTROL. Notwithstanding the fore going, any Notes
redeemed pursuant to this Section 6 at a time when the Corporation would be
required to deliver a Change of Control Notice in accordance with Section 5 in
anticipation of, in connection with or as a result of a potential Change of
Control shall be redeemed at a price equal to the Mandatory Redemption Price.
6.3 NOTICE. Notice of the Optional Redemption (the "Optional
Redemption Notice") shall be mailed at least 30, but not more than 60, days
prior to the date fixed for redemption to each holder of the Notes, at such
holder's address as it appears on the transfer books of the Company. In order to
facilitate the redemption of the Notes, the Board of Directors of the Company
may fix a record date for the determination of the Notes to be redeemed, or may
cause the transfer books of the Company for the Notes to be closed, not more
than 60 days or less than 30 days prior to the date fixed for such redemption.
6.4 DEPOSIT OF FUNDS. On the Optional Redemption Date, the Company
shall, and at any time after the Optional Redemption Notice shall have been
mailed and before the date of Optional Redemption the Company may, deposit for
the benefit of the holders of the Notes the funds necessary for the Optional
Redemption with a bank or trust company in the Borough of Manhattan, The City of
New York, having a capital and surplus of at least $100,000,000. Any moneys so
deposited by the Company and unclaimed at the end of two years from the date
designated for the Optional Redemption shall revert to the general funds of the
Company or as otherwise required by law. After such reversion, any such bank or
trust company shall, upon demand, pay over to the Company such unclaimed amounts
and thereupon such bank or trust company shall be relieved of all responsibility
in respect thereof and any holder of Notes shall look only to the Company for
the payment of the Optional Redemption Price. In the event that moneys are
deposited pursuant to this Section 6.4 in respect of Notes that are converted in
accordance with the provisions of Section 7, such moneys shall, upon such
conversion, revert to the general funds of the Company and, upon demand, such
bank or trust company shall pay over to the Company such moneys and shall be
relieved of all responsibilities to the holders of such con verted Notes in
respect thereof. Any interest accrued on funds deposited pursuant to this
Section 6.4 shall be paid from time to time to the Company for its own account.
105
<PAGE>
7
6.5 TERMINATION OF RIGHTS. The Optional Redemption Notice having
been given as aforesaid, upon the deposit of funds pursuant to Section 6.4 in
respect of the Notes to be redeemed pursuant to Section 6.1, notwithstand ing
that any such Notes themselves shall not have been sur rendered for
cancellation, from and after the Optional Redemption Date (i) the Notes shall no
longer be deemed outstanding, (ii) the rights to receive interest thereon shall
cease to accrue and (iii) all rights of the holders of the Notes shall cease and
terminate, excepting only the right to receive the Optional Redemption Price
therefor and the right to convert such Notes into shares of Common Stock until
the close of business on the Optional Redemption Date, in accordance with
Section 7; PROVIDED, HOWEVER, that if the Company shall default in the payment
of the Optional Redemption Price, the Notes shall thereafter be deemed to be
outstanding and the holders thereof shall have all of the rights of a holder of
Notes until such time as such default shall no longer be continuing or shall
have been waived by holders of at least 66-2/3% of the then outstanding
principal amount of the Notes.
Section 7. CONVERSION.
7.1 RIGHT TO CONVERT. Following the expiration or termination of
applicable waiting periods under the HSR Act, including any extensions thereof,
the holder of this Note shall have the right, at its option, at any time and
from time to time, to convert, subject to the terms and provisions of this
Section 7, all or any integral multiple of $100,000 of the then outstanding
principal amount of this Note into such number of fully paid and non-assessable
shares of Common Stock as is equal, subject to Section 7.7, to the quotient of
the principal of this Note being so con verted divided by the Conversion Price
(as defined below) then in effect. Notwithstanding the foregoing, if the holder
of this Note shall have purchased this Note in a pub lic offering or subsequent
to such a public offering thereof, then the holder of this Note may convert all
or any integral multiple of $1,000 of the outstanding principal amount of this
Note. The Conversion Price shall be $29.00, subject to adjustment as set forth
in Section 7.4. Such con version right shall be exercised by the surrender of
this Note to the Company at any time during usual business hours at its
principal place of business to be maintained by it, accompanied by written
notice that the holder elects to convert this Note (or a specified portion of
the outstanding principal amount thereof) and specifying the name or names (with
address) in which a certificate or certificates for shares of Common Stock are
to be issued and (if so required by the Company) by a written instrument or
instruments of transfer in form reasonably satisfactory to the Company duly
executed by the holder or its duly authorized legal repre-
106
<PAGE>
8
sentative and transfer tax stamps or funds therefor, if required pursuant to
Section 7.11. If less than all of the then outstanding principal amount of this
Note is to be con verted, the Company will promptly issue and deliver to the
holder a new Note in the principal amount of the unconverted portion of the Note
submitted for conversion; PROVIDED, HOW EVER, that the principal amount of such
Note shall not be less than $1,000.00; PROVIDED FURTHER, that if the principal
amount of the unconverted portion of this Note is less than $1,000.00, then such
amount shall be paid to the holder of this Note in cash or other immediately
available funds upon such conversion.
7.2 ISSUANCE OF COMMON STOCK. As promptly as practicable after the
surrender, as herein provided, of this Note for conversion pursuant to Section
7.1, the Company shall deliver to or upon the written order of the holder of
this Note so surrendered a certificate or certificates representing the number
of fully paid and nonassessable shares of Common Stock into which this Note may
be or has been converted in accordance with the provisions of this Section 7.
Subject to the following provisions of this paragraph and of Section 7.4, such
conversion shall be deemed to have been made immediately prior to the close of
business on the date that this Note shall have been sur rendered in satisfactory
form for conversion, and the Person or Persons entitled to receive the shares of
Common Stock deliverable upon conversion of this Note shall be treated for all
purposes as having become the record holder or holders of such shares of Common
Stock at such appropriate time, and such conversion shall be at the Conversion
Price in effect at such time; PROVIDED, HOWEVER, that no surrender shall be
effective to constitute the Person or Persons entitled to receive the shares of
Common Stock deliverable upon such conversion as the record holder or holders of
such shares of Common Stock while the transfer books of the Company for shares
of Common Stock shall be closed (but not for any period in excess of five days),
but such surrender shall be effective to constitute the Person or Persons
entitled to receive such shares of Common Stock as the record holder or holders
thereof for all purposes immedi ately prior to the close of business on the next
succeeding day on which such transfer books are open, and such conver sion shall
be deemed to have been made at, and shall be made at the Conversion Price in
effect at, such time on such next succeeding day. In case of the redemption of
this Note pur suant to Section 6, the right of conversion shall cease and
terminate at the close of business on the date fixed for redemption, unless the
Company shall default in the payment of the applicable redemption price for this
Note. If the last day for the exercise of the conversion right shall not be a
Business Day, then such conversion right may be exer cised on the next
succeeding Business Day.
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7.3 PAYMENT OF INTEREST. When this Note is con verted, all interest
(including, without limitation, Special Interest) accrued and unpaid (whether or
not currently pay able) on this Note to the date of conversion shall be
immediately due and payable, in cash or other immediately available funds, and
must accompany the shares of Common Stock issued upon such conversion.
7.4 ADJUSTMENT OF CONVERSION PRICE. The
Conversion Price shall be subject to adjustment as follows:
(a) In case the Company shall at any time or from time to time
(i) pay a dividend or make a distribution (other than a dividend or distribution
paid or made to the holder of this Note in the manner provided in Section 4) on
the outstanding shares of Common Stock in shares of Common Stock or other equity
interests (which, for purposes of this Section 7.4 shall include, without
limitation, any dividends or distributions in the form of options, warrants or
other rights to acquire shares of Common Stock or other equity interests) of the
Company, (ii) subdivide the outstanding shares of Common Stock into a larger
number of shares of Common Stock, (iii) combine the outstanding shares of Common
Stock into a smaller number of shares of Common Stock, (iv) issue any equity
interest in a reclassification of the shares of Common Stock or (v) pay a
dividend or make a dis tribution on the outstanding shares of Common Stock in
shares of Common Stock or other equity interests pursuant to a rights plan,
"poison pill" or similar arrangement, then, and in each such case, the
Conversion Price in effect immediately prior to such event shall be adjusted
(and any other appropriate actions shall be taken by the Company) so that the
holder of this Note thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock or other securities of the Company
that such holder would have owned or would have been entitled to receive upon or
by reason of any of the events described above, had this Note been converted
immediately prior to the occurrence of such event. An adjustment made pursuant
to this Section 7.4(a) shall become effective retroactively (i) in the case of
any such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of shares of Common
Stock entitled to receive such dividend or distribu tion or (ii) in the case of
any such subdivision, combina tion or reclassification, to the close of business
on the day upon which such corporate action becomes effective.
(b) In case the Company shall at any time or from time to time
issue or sell shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock, or any options, warrants or other
rights to acquire shares of Common Stock) (other than (i) options
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("Existing Stock Options") to acquire shares of Common Stock granted prior to
the date hereof, or eligible for award as of the date hereof to any officer,
director, employee or consultant of the Company or any Subsidiary of the
Company, (ii) options granted to any officer, director, employee or consultant
of the Company or any Subsidiary of the Company pursuant to a stock option plan
(including any such plan adopted by the Company subsequent to the date hereof),
but only to the extent that, as of the date of the grant of any such option, the
number of shares of Common Stock issuable upon the exercise of all options
granted to officers, directors, employees and consultants of the Company as of
such date (including Existing Stock Options and whether or not such options are
currently exercisable or have previously been exercised) do not exceed 15% of
the shares of Common Stock issued and outstanding as of such date or (iii) up to
100,000 shares of Common Stock (subject to adjustment) issued upon the exercise
of those certain Stock Purchase Warrants issued by the Company to J.J. Farrell
Associates, Inc. on July 7, 1994), in either case pursuant to any stock option
plan of the Company in effect as of the date hereof, at a price per share less
than the Current Market Price per share then in effect at the record date
referred to in the following sentence (treating the price per share of any
security convertible or exchangeable or exercisable into shares of Common Stock
as equal to (i) the sum of the price for such security convertible, exchangeable
or exercisable into shares of Common Stock plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security into shares of Common Stock divided by
(ii) the number of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security), then, and in each such case, the
Conversion Price then in effect shall be adjusted by dividing the Conversion
Price in effect on the day immediately prior to such record date by a fraction
(x) the numerator of which shall be the sum of the number of shares of Common
Stock outstanding on such record date plus the number of additional shares of
Common Stock issued or to be issued (or the maximum number into which such
convertible or exchangeable securities initially may convert or exchange or for
which such options, warrants or other rights initially may be exercised) and (y)
the denominator of which shall be the sum of the number of shares of Common
Stock outstanding on such record date plus the number of shares of Common Stock
that the aggregate consideration for the total number of such additional shares
of Common Stock so issued (or into which such convertible or exchangeable
securities may convert or exchange or for which such options, warrants or other
rights may be exercised, plus the aggregate amount of any additional
consideration initially payable upon conversion, exchange or exercise of such
security) would pur-
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chase at the Current Market Price per share on such record date. Such adjustment
shall be made whenever such shares of Common Stock, securities, options,
warrants or other rights are issued, and shall become effective retroactively to
a date immediately following the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
shares of Common Stock, securities, options, warrants or other rights; PRO
VIDED, HOWEVER, that the determination as to whether an adjustment is required
to be made pursuant to this Sec tion 7.4(b) shall only be made upon the issuance
of such shares of Common Stock or such convertible or exchangeable securities,
options, warrants or other rights, and not upon the issuance of the security
into which such convertible or exchangeable security converts or exchanges, or
the security underlying such option, warrants or other right; PROVIDED FURTHER,
that if any convertible or exchangeable securities, options, warrants or other
rights (or any portions thereof) that shall have given rise to an adjustment
pursuant to this Section 7.4(b) shall have expired or terminated without the
exercise thereof and/or if by reason of the terms of such convertible or
exchangeable securities, options, warrants or other rights there shall have been
an increase or increases, with the passage of time or otherwise, in the price
payable upon the exercise or conversion thereof, then the Conversion Price
hereunder shall be readjusted (but to no greater extent than originally adjusted
with respect to the related event) on the basis of (x) eliminating from the
computation any additional shares of Common Stock corresponding to such
convertible or exchangeable securities, options, warrants or other rights as
shall have expired or terminated, (y) treat ing the additional shares of Common
Stock, if any, actually issued or issuable pursuant to the previous exercise of
such convertible or exchangeable securities, options, warrants or other rights
as having been issued for the consideration actually received and receivable
therefor and (z) treating any of such convertible or exchangeable securities,
options, warrants or other rights that remain outstanding as being subject to
exercise or conversion on the basis of such exer cise or conversion price as
shall be in effect at the time.
(c) In case the Company shall at any time or from time to time
distribute on or with respect to the shares of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and the shares of Common Stock
are not changed or exchanged) cash, evidences of indebtedness of the Company or
another issuer, securities of the Company or another issuer or other assets
(excluding (i) Regular Distributions, (ii) dividends and distributions paid or
made to the holder of this Note in the manner provided in Section 4 and (iii)
dividends payable in shares of Common Stock for which adjustment is made under
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Section 7.4(a)) or rights or warrants to subscribe for or purchase securities of
the Company (excluding those referred to in Section 7.4(b)) then, and in each
such case, the Conversion Price then in effect shall be adjusted by divid ing
the Conversion Price in effect immediately prior to the date of such
distribution by a fraction (x) the numerator of which shall be the Current
Market Price of the shares of Common Stock on the record date referred to below
and (y) the denominator of which shall be such Current Market Price of the
shares of Common Stock less the amount that a willing buyer would pay a willing
seller in an arm's-length transaction at such time (as determined in good faith
by the Board of Directors of the Company) for the portion of the cash, evidences
of indebtedness, securities or other assets so distributed or of such
subscription rights or warrants applicable to one Unit (but such denominator not
to be less than one); PROVIDED, HOWEVER, that no adjustment shall be made with
respect to any distribution of rights to purchase securities of the Company if
the holder of this Note would otherwise be entitled to receive such rights upon
conversion at any time of this Note into shares of Common Stock unless such
rights are subsequently redeemed by the Company, in which case such redemption
shall be treated for purposes of this Section 7.4(c) as a distribution on the
shares of Common Stock. Such adjustment shall be made whenever any such
distribution is made; PROVIDED, HOWEVER, that in the case of a Cash Distribution
(as defined in Section 7.4(f)) such adjustment shall be calculated not later
than 45 days following the last day of the Calculation Period (as defined in
Section 7.4(f)). The adjustment shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
distribu tion.
(d) In case the Company at any time or from time to time shall
take any action affecting the shares of Common Stock or its other equity
interests, if any, other than an action described in any of Section 7.4(a)
through Section 7.4(c), inclusive, or Section 7.8, then, and in each such case,
the Conversion Price shall be adjusted in such manner and at such time as the
Board of Directors of the Company in good faith determines to be equitable in
the circumstances (such determination to be evidenced in a resolution, a
certified copy of which shall be mailed to the holders of the Notes).
(e) Notwithstanding anything herein to the contrary, no
adjustment under this Section 7.4 need be made to the Conversion Price unless
such adjustment would require an increase or decrease of at least 1% of the
Conversion Price then in effect. Any lesser adjustment shall be car ried forward
and shall be made at the time of and together
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with the next subsequent adjustment, which, together with any adjustment or
adjustments so carried forward, shall amount to an increase or decrease of at
least 1% of such Conversion Price. Any adjustment to the Conversion Price
carried forward and not theretofore made shall be made immediately prior to the
conversion of this Note pursuant hereto.
(f) For purposes of Section 7.4(c), a "Regular Distribution"
shall mean a distribution of cash or cash equivalents on or with respect to the
Common Stock (a "Cash Distribution") in an amount that, when added to the amount
of all other Cash Distributions made during the 12- month period ending on the
last day of the fiscal quarter of the Company in which such Cash Distribution is
made (or, if this Note has been outstanding for a period shorter than 12 months,
the period from the first day of the fiscal quarter in which this Note was
issued to the last day of such fiscal quarter) (the "Calculation Period"), does
not exceed, on the Business Day immediately preceding the date of such distri
bution, either (i) 1% of the Current Market Price of the Common Stock or (ii)
12.5% of the net income of the Company (calculated in accordance with generally
accepted accounting principles consistently applied) for the 12-month period
ending on the last day of the immediately preceding fiscal quarter of the
Company.
7.5 NO ADJUSTMENT FOR TAKING RECORD ONLY. If the Company shall take
a record of the holders of shares of Common Stock for the purpose of entitling
them to receive a dividend or other distribution, and shall thereafter and
before the distribution to holders thereof legally abandon its plan to pay or
deliver such dividend or distribution, then thereafter no adjustment in the
Conversion Price then in effect shall be required by reason of the taking of
such record.
7.6 OFFICERS' CERTIFICATE. Upon any increase or decrease in the
Conversion Price, then, and in each such case, the Company promptly shall
deliver to the registered holder of this Note at least 10 Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Company, setting forth in reason
able detail the event requiring the adjustment and the method by which such
adjustment was calculated and specify ing the increased or decreased Conversion
Price then in effect following such adjustment.
7.7 NO FRACTIONAL SHARES ISSUED. No fractional
Shares or scrip representing fractional shares of Common
Stock shall be issued upon the conversion of this Note. If
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more than one Note shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be com puted on the basis of the aggregate outstanding principal
amount of the Notes so surrendered. If the conversion of any Note or Notes
results in a fraction, an amount equal to such fraction multiplied by the
Current Market Price of the Common Stock on the Business Day preceding the day
of con version shall be paid to such holder in cash by the Company.
7.8 SUBSEQUENT TRANSACTIONS. In case of any capital reorganization
or reclassification or other change of outstanding shares of Common Stock or
other equity inter ests, if any, or in case of any consolidation or merger of
the Company with or into another Person (other than a con solidation or merger
in which the Company is the resulting or surviving Person and which does not
result in any reclas sification or change of shares of Common Stock or other out
standing equity interests, if any), or in case of any sale or other disposition
to another Person of all or substanti ally all of the assets of the Company (any
of the foregoing, a "Transaction"), the Company, or such successor or purchas
ing Person, as the case may be, shall execute and deliver to each holder of
Notes at least 10 Business Days prior to effecting any of the foregoing
Transactions a certificate stating that the holder of each Note then outstanding
shall have the right thereafter to convert such Note into the kind and amount
(estimating such amount to the extent necessary) of equity securities or other
securities (of the Company or another issuer) or property or cash receivable
upon such Transaction by a holder of the number of shares of Common Stock into
which such Note could have been converted immedi ately prior to such
Transaction. Such certificate shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 7. If, in the case of any such Transaction, the equity securities, other
securities, cash or property receivable thereupon by a holder of shares of
Common Stock includes equity or other securities of a Person other the successor
or purchasing Person and other than the Company, that controls or is controlled
by the successor or purchas ing Person or which, in connection with such
Transaction, issues equity securities, other securities, other property or cash
to holders of shares of Common Stock, then such certificate also shall be
executed by such Person, and such Person shall, in such certificate,
specifically acknowledge the obligations of such successor or purchasing Person
and acknowledge its obligations to issue such equity securities, other
securities, other property or cash to the holders of Notes upon conversion of
the Notes as provided above. The provisions of this Section 7.8 and any
equivalent thereof in any such certificate similarly shall apply to successive
Transactions. The provisions of this Section 7.8 and any
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equivalent thereof in any such certificate are and shall be in addition to, and
not in lieu of, the requirements of the Note Purchase Agreement with respect to
a Change of Control Offer.
7.9 NOTICE OF CERTAIN EVENTS. In case at any
time or from time to time:
(a) the Company shall declare a dividend (or any other
distribution) on the shares of Common Stock or other equity interests, if any,
of the Company;
(b) the Company shall authorize the granting to the holders of
the shares of Common Stock or other equity interests, if any, of the Company of
rights or warrants to subscribe for or purchase any equity interests of any
class or of any other rights or warrants;
(c) there shall be any reclassification of the shares of
Common Stock or other equity interests, if any, of the Company, or any
consolidation or merger to which the Company is a party and for which approval
of any holders of shares of Common Stock of the Company is required, or any sale
or other disposition of all or substantially all of the assets of the Company;
or
(d) of the voluntary or involuntary dissolu
tion, liquidation or winding up of the Company;
then the Company shall mail to each holder of Notes at such holder's address as
it appears on the transfer books of the Company, as promptly as possible but in
any event at least ten days prior to the applicable date hereinafter specified,
a notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution or rights or warrants or, if a record is not to
be taken, the date as of which the holders of shares of Common Stock of record
to be entitled to such dividend, distribution or rights are to be determined, or
(y) the date on which such reclassification, consolidation, merger, sale,
conveyance, dissolution, liquidation or winding up is expected to become
effective; PROVIDED, HOWEVER, that in the case of any event to which Section 7.8
applies, the Company shall give at least 10 days' prior written notice as
aforesaid. Such notice shall also specify the date as of which it is expected
that holders of shares of Common Stock of record shall be entitled to exchange
their shares of Common Stock for equity securities or other securities or
property or cash deliverable upon such reclassification, consolidation, merger,
sale, conveyance, dissolution, liquidation or wind ing up.
7.10 RESERVATION OF SHARES. The Company shall at
all times reserve and keep available for issuance upon the
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conversion of the Notes, such number of its authorized but unissued shares of
Common Stock as will from time to time be sufficient to permit the conversion of
all the then out standing principal amount of the Notes and shall take all
action required to increase the authorized number of shares of Common Stock if
at any time there shall be insufficient authorized but unissued shares of Common
Stock to permit such reservation or to permit the conversion of all the then
outstanding principal amount of the Notes.
7.11 ISSUE TAXES. The issuance or delivery of certificates for
shares of Common Stock upon the conversion of Notes shall be made without charge
to the converting holder of Notes for such certificates or for any tax in res
pect of the issuance or delivery of such certificates or the securities
represented thereby, and such certificates shall be issued or delivered in the
respective names of, or in such names as may be directed by, the holders of the
Notes converted; PROVIDED, HOWEVER, that the Company shall not be required to
pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than that of the
holder of the Notes, and the Company shall not be required to issue or deliver
such certificate unless or until the Person or Persons requesting the issuance
or delivery thereof shall have paid to the Company the amount of such tax or
shall have established to the reasonable satisfaction of the Company that such
tax has been paid.
Section 8. BOARD REPRESENTATION.
8.1 DESIGNATION OF DIRECTORS. If on any date (i) the Company shall
have defaulted in the payment of interest (including, without limitation,
Special Interest) on the Notes when the same becomes due and payable and such
default continues for a period of 180 days, whether or not such payment shall be
prohibited by Section 9 hereof, or (ii) a breach of any of the Company's
agreements contained in the Notes, the Note Purchase Agreement or the
Registration Rights Agreement shall have occurred and such breach shall have
continued unremedied for 180 days, then the Company shall cause the number of
members of its Board of Directors to be increased by one and shall cause one per
son designated by the holders of a majority of the outstand ing principal amount
of the Notes to be elected to its Board of Directors as a member of such class
of the Board of Directors the term of which shall have the longest unexpired
portion. Such designee shall serve until the next annual meeting of stockholders
of the Company following the elec tion of such person to the Board of Directors
at which directors of such class are to be elected.
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8.2 ELECTION AT ANNUAL MEETINGS. Commencing with the next annual
meeting of stockholders of the Company fol lowing the election of such person to
the Board of Directors at which directors of such class are to be elected, and
at each annual meeting of stockholders thereafter at which directors of such
class are to be elected, until such time as (i) all interest (including, without
limitation, Special Interest) shall have been paid in full and (ii) there shall
exist no breach of any of the Company's agreements contained in the Notes, the
Note Purchase Agreement or the Registration Rights Agreement, the holders of a
majority of the outstanding principal amount of the Notes shall be entitled to
nominate one director to the Company's Board of Directors. The Company shall
cause such nominee to be included in the slate of nominees recommended by the
Board to the Company's stockholders for election as directors, and the Company
shall use its best efforts to cause the election of such nominee, including
voting all shares for which the Company holds proxies (unless otherwise directed
by the stockholder submitting such proxy) or is otherwise entitled to vote, in
favor of the election of such person.
8.3 VACANCIES. In the event any such nominee of the holders of a
majority of the outstanding principal amount of the Notes shall cease to serve
as a director for any reason, other than by reason of the holders of a major ity
of the outstanding principal amount to the Notes not being entitled to nominate
a nominee as provided in Section 8.2, the Company shall use its best efforts to
cause the vacancy resulting thereby to be filled by a nominee of the holders of
a majority of the outstanding principal amount of the Notes.
8.4 RESIGNATION OF DIRECTOR. If at any time (i) all interest
(including, without limitation, Special Interest) shall have been paid in full
and (ii) there shall exist no breach of any of the Company's agreements
contained in the Notes, the Note Purchase Agreement or the Registration Rights
Agreement, the right of the holders of a majority of the outstanding principal
amount of the Notes to designate one director shall cease (subject to revesting
in the event of each and every subsequent event of the charac ter giving rise to
such right) and such director shall promptly tender his resignation.
Section 9. SUBORDINATION.
9.1 AGREEMENT OF SUBORDINATION. The Company covenants and agrees,
and the holder of this Note (whether upon original issue or upon transfer,
assignment or exchange thereof), by his acceptance hereof, likewise covenants
and agrees, that the payment of the principal of, premium, if any, and interest
on this Note, together with any other
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payments payable in respect of this Note, including, without limitation, any
amount payable in connection with the redemption or repurchase of this Note
("Subordinated Amounts") shall, to the extent and in the manner hereinafter set
forth, be subordinated and subject in right of payment to the prior payment in
full of all Senior Indebtedness, whether outstanding at the date of this Note or
hereafter incurred.
The term "Senior Indebtedness" shall mean the principal of, premium,
if any, and interest on, and any other payment due pursuant to any of the
following, whether outstanding at the date hereof or hereafter incurred or
created:
(a) all indebtedness of the Company for money borrowed arising
under or in connection with the Loan Agreement, as it may be further amended or
modified from time to time, and all renewals, extensions, refundings or
refinancings of such indebtedness incurred with financial institutions,
insurance companies or other institutional lenders (any such indebtedness and
renewals, extensions, refundings or refinancings thereof, "Senior Institutional
Indebtedness");
(b) all indebtedness of the Company for money borrowed other
than Senior Institutional Indebtedness (including, without limitation, any
indebtedness secured by a mortgage, conditional sales contract or other Lien
which is (i) given to secure all or part of the purchase price of property
subject thereto, whether given to the vendor of such property or to another, or
(ii) existing on property at the time of acquisition thereof);
(c) all indebtedness of the Company evi
denced by notes, debentures, bonds or other securities sold
by the Company for money;
(d) all lease obligations of the Company which are capitalized
on the books of the Company in accord ance with generally accepted accounting
principles;
(e) all indebtedness of others of the kinds described in
either of the preceding clauses (b) or (c) and all lease obligations of others
of the kind described in the preceding clause (d) assumed by or guaranteed in
any manner by the Company or in effect guaranteed by the Company through an
agreement to purchase, contingent or otherwise.
(f) all indebtedness of any Subsidiary of
the Company for which the Company is liable as a guarantor;
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(g) all renewals, extensions, refundings or refinancings of
indebtedness of the kinds described in any of the preceding clauses (b), (c),
(e) and (f) and all renewals or extensions of lease obligations of the kinds
described in either of the preceding clauses (d) and (e);
(h) interest accruing subsequent to the fil ing of a petition
initiating any bankruptcy, insolvency or similar proceeding with respect to any
indebtedness or lease obligation of the Company;
(i) all obligations of the Company in res pect of any interest
rate or currency swap or similar agree ments entered into with any holder of any
Senior Indebtedness; and
(j) all fees, expenses, reimbursements and other amounts
payable to holders of Senior Indebtedness under the terms of the instrument or
lease creating or evi dencing the same,
unless, in the case of any particular indebtedness, lease, renewal, extension,
refunding or refinancing, the instrument or lease creating or evidencing the
same or the assumption or guarantee of the same expressly provides that such
indebtedness, lease, renewal, extension, refunding or refin ancing is not senior
in right of payment to the Notes or is expressly subordinate by its terms in
right of payment to all other indebtedness of the Company.
This Section 9 shall constitute a continuing offer to all persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Indebtedness, and such provisions are made for the benefit of the holders
of Senior Indebtedness, and such holders are made obligees hereunder and they
and/or each of them may enforce such pro visions in accordance with the
provisions of this Note.
No provision of this Section 9 shall prevent the occurrence of any
default or Event of Default hereunder.
9.2 PAYMENTS TO NOTE HOLDERS. No payment shall be made by the
Company of any Subordinated Amounts: (a) in the event and during the
continuation of any default in the payment (a "Payment Default") of principal,
premium, if any, interest or any other payment due on any Senior Indebtedness
under or in connection with the instrument, agreement or lease evidencing such
Senior Indebtedness and the holders of the requisite principal amounts of such
Senior Indebtedness or their agents shall not have delivered to the holder of
this Note a notice of waiver of the benefits of this clause (a) and a consent to
the making of scheduled payments on or on account of this Note or taking any
other prohibited
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action until further notice from such holders or such agents; or (b) in the
event of receipt of written notice by the holder of this Note from the holders
of any Senior Institutional Indebtedness or their representatives of a default
(other than a Payment Default) permitting acceleration of any Senior
Institutional Indebtedness for a period (the "Blockage Period") terminating on
the earlier to occur of (i) the cure, waiver or cessation of such default or
(ii) 180 days from the date of receipt of written notice thereof by the holder
of this Note. At the expiration of such Blockage Period, and so long as there
does not exist a Payment Default, the Company shall promptly pay to the holder
of this Note all sums not paid during such Blockage Period as a result of this
paragraph. For all purposes of this paragraph, no event of default that existed
or was con tinuing with respect to the Senior Institutional Indebtedness to
which the Blockage Period relates on the date such Blockage Period commenced
shall be or be made the basis for the commencement of any subsequent Blockage
Period by the holder or holders of such Senior Institutional Indebtedness (or
their respective agents) unless such event of default is cured or waived for a
period of not less than 90 consecutive days. There shall be no more than one
Blockage Period initiated in any 360-day period.
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full, or payment thereof provided for
in money in accordance with its terms, before any payment (other than equity
securities or other securi ties of the Company or any other entity, the payment
of which is subordinated at least to the extent provided in this Section 9 to
the payment of all Senior Indebtedness that may at the time be outstanding) is
made on account of the principal, premium, if any, or interest on, or other
amounts payable in respect of, this Note including, without limitation, any
amount payable in connection with the redemption of this Note; and upon any such
dissolution, winding-up or liquidation or reorganization any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holder of this Note would
be entitled, except for the provisions of this Section 9, shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidat ing trustee, agent
or other Person making such payment or distribution, or by the holder of this
Note if received by them or it, directly to the holders of Senior Indebtedness
(pro rata to such holders on the basis of the respective
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amounts of Senior Indebtedness held by such holders) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay all
Senior Indebtedness in full, in money or money's worth, after giving effect to
any concur rent payment or distribution to or for the holders of Senior
Indebtedness, before any payment or distribution is made to the holder of this
Note.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
holder of this Note before all Senior Indebtedness is paid in full, or provision
is made for such payment in money in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of and shall be paid over or
deli vered to the holders of Senior Indebtedness or their repre sentative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instrument evi dencing any Senior Indebtedness may have been issued,
as their respective interests may appear, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in money in accordance with its terms, after giving effect
to any concurrent payment or distribution to or for the holders of such Senior
Indebtedness.
9.3 SUBROGATION OF NOTE. Subject to the payment in full of all
Senior Indebtedness, the rights of the holder of this Note shall be subrogated
to the rights of the hold ers of Senior Indebtedness to receive payments or
distribu tions of cash, property or securities of the Company applic able to the
Senior Indebtedness until the principal of (and premium, if any) and interest on
this Note (including, with out limitation, Special Interest) shall be paid in
full; and, for the purposes of such subrogation, no payments or distributions to
the holders of the Senior Indebtedness of any cash, property or securities to
which the holder of this Note would be entitled except for the provisions of
this Section 9, and no payment over pursuant to the provisions of this Section
9, to or for the benefit of the holders of Senior Indebtedness by the holder of
this Note, shall, as between the Company, its creditors other than holders of
Senior Indebtedness, and the holder of this Note, be deemed to be a payment by
the Company to or on account of the Senior Indebtedness. It is understood that
the provisions of this Section 9 are and are intended solely for the pur pose of
defining the relative rights of the holder of this Note, on the one hand, and
the holders of the Senior Indebtedness, on the other hand.
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If any payment or distribution to which the holder of this Note
would otherwise have been entitled but for the provisions of this Section 9
shall have been applied, pur suant to the provisions of this Section 9 to the
payment of amounts payable under Senior Indebtedness of the Company, then, and
in such case, the holder of this Note shall be entitled to receive from the
holders of Senior Indebtedness the full amount of any such payments or
distributions received by holders of Senior Indebtedness in excess of the amount
sufficient to pay in full all amounts payable under, or in respect of, the
Senior Indebtedness of the Company.
Nothing contained in this Section 9 or elsewhere in this Note is
intended to or shall impair or affect, as between the Company, its creditors
other than the holders of Senior Indebtedness, and the holder of this Note, the
obli gation of the Company, which is absolute and unconditional, to pay to the
holder of this Note the principal of (and premium, if any) and interest
(including without limitation, Special Interest) on this Note as and when the
same shall become due and payable in accordance with its terms, or is intended
to or shall affect the relative rights of the holder of this Note and creditors
of the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the holder of this Note from exercising all
remedies otherwise permitted by applicable law upon default under this Note,
subject to the rights, if any, under this Section 9 of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred
to in this Section 9, the holder of this Note shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such disso
lution, winding-up, liquidation or reorganization proceed ings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent
or other Persons making such payment or distribution, delivered to the holder of
this Note, for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto and
to this Section 9.
9.4 NOTICE TO NOTE HOLDERS. The Company shall give prompt written
notice to the holder of this Note of any fact known to the Company that would
prohibit the making of any payment to the holder of this Note.
9.5 NOTE HOLDER'S RELATION TO SENIOR
INDEBTEDNESS. The holder of this Note shall be entitled to
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all the rights set forth in this Section 9 in respect of any Senior Indebtedness
at any time held by it, to the extent as any other holder of Senior
Indebtedness, and nothing in this Note shall deprive the holder of this Note of
any of its rights as such holder.
With respect to the holders of Senior Indebted ness, the holder of
this Note undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Note, and no implied cove
nants or obligations with respect to the holders of Senior Indebtedness shall be
read into this Note against the holder of this Note. The holder of this Note
shall not be deemed to owe any fiduciary duty to the holders of Senior Indebt
edness and the holder of this Note shall not be liable to any holder of Senior
Indebtedness if it shall mistakenly pay over or deliver to the Company or any
other Person money or assets to which any holder of Senior Indebtedness shall be
entitled by virtue of this Section 9 or otherwise.
Section 10. COVENANTS.
10.1 NOTICE OF DEFAULTS. The Company will give notice in writing to
the holder of this Note immediately upon becoming aware of the occurrence of any
Default or Event of Default under this Note.
10.2 CONSOLIDATIONS AND MERGERS. The Company shall not merge,
consolidate with or into, or convey, trans fer, lease or otherwise dispose of
(whether in one transac tion or in a series of transactions) all or
substantially all of its assets (whenever acquired), except that the Company may
consolidate or merge with or into, or sell all or substantially all of its
assets to, any Person if:
(a) the corporation formed by such consoli dation or surviving
such merger or the Person that acquires all or substantially all of the assets
of the Company shall be (after giving effect to such transaction) a Solvent cor
poration organized and existing under, the laws of the United States, any state
thereof, or the District of Columbia and, in the case of the acquisition of all
or substantially all of the assets of the Corporation, shall expressly assume in
writing all of the obligations of the Company under the Note Purchase Agreement,
this Note (including, without limitation, the obligation to issue shares of
common stock upon the conversion of any portion of this Note) and the
Registration Rights Agreement;
(b) immediately after giving effect to such
transaction, no default under, or breach of, the provisions
of this Note, exists;
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(c) the corporation formed by or surviving any such
transaction or the Person that acquires all or sub stantially all of the assets
of the Company shall have a Consolidated Net Worth at least equal to the
Consolidated Net Worth of the Company immediately prior to such transac tion;
and
(d) the Company shall have furnished to the holder of this
Note (i) an opinion of counsel satisfactory to the holders of a majority of the
outstanding principal amount of the Notes, addressing the matters (other than
sol vency) set forth in clause (a) above and (ii) the certifi cate of the Chief
Financial Officer of the Company to the effect that such transaction has been
consummated in compli ance with the foregoing requirements; PROVIDED, HOWEVER,
that nothing in this Section 10.2 shall affect the rights of the holder of this
Note under the Note Purchase Agreement, this Note or the Registration Rights
Agreement.
10.3 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Neither the
Borrower nor any Subsidiary of the Borrower will enter into or permit to exist
any transactions with (a) any Person who is a holder of 5% or more of any class
of equity or debt securities of the Borrower or an Affiliate of any such holder,
or (b) a director or officer of the Borrower or a Subsidiary of the Borrower,
(the Persons referred to in clauses (a) and (b) being referred to herein as
"Affiliated Persons") other than on terms and conditions as favorable to the
Borrower or such Subsidiary as would be obtainable at the time in a comparable
arm's length transaction with any Person who is not such an Affiliated Person.
10.4 CUSIP NUMBERS; PORTAL AND DTC. The Borrower will use
commercially reasonable efforts to obtain CUSIP numbers for the Notes and, if
requested by the holder of this Note, to arrange for the Notes to be eligible
for transfer through the Depositary Trust Company and through the PortalSM
Market of the National Association of Securities Dealers, Inc.
10.5 CONSOLIDATED TANGIBLE NET WORTH. The Company will not permit
its Consolidated Tangible Net Worth, measured on the last day of each fiscal
quarter of the Company, to be less than $40,000,000. "Consolidated Tangible Net
Worth" means, at any particular date, the sum of (i) all amounts that would be
included under paid-in capital, retained earnings and capital stock on a consoli
dated balance sheet of the Company and its Subsidiaries and (ii) the net
proceeds received by the Company upon the issuance of the Notes, LESS all
amounts that would be included under intangible assets and treasury stock on a
consolidated balance sheet of the Company and its Subsidiaries, in all cases
determined on a consolidated
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basis in accordance with generally accepted accounting prin ciples in the United
States in effect from time to time as at such date.
Section 11. DEFAULTS AND REMEDIES.
11.1 EVENT OF DEFAULT. An "Event of Default"
shall occur if:
(a) the Company defaults in the payment of interest
(including, without limitation, Special Interest) on this Note when the same
becomes due and payable and such default continues for a period of 15 Business
Days, whether or not such payment shall be prohibited by the provisions of
Section 9 hereof;
(b) the Company defaults in the payment of principal of this
Note when the same becomes due and payable at maturity, upon redemption or
otherwise, whether or not such payment shall be prohibited by the provisions of
Sec tion 9 hereof;
(c) the Company fails to comply with any
provision of Section 10 hereof or Article 9 of the Note
Purchase Agreement;
(d) the Company fails to comply with any agreements (other
than those referred to in clauses (a), (b) or (c) above) in the Note Purchase
Agreement, this Note or the Registration Rights Agreement and, if such failure
is capable of being remedied, such failure continues unremedied for 30 days
after notice thereof by the holders of a major ity of the then outstanding
principal amount of the Notes;
(e) the Company or any of its Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an
order for relief against it in an involuntary case,
(iii) consents to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or other similar
official (a "Custodian") of it or for all or substantially all of its
property, or
(iv) makes a general assignment for
the benefit of its creditors;
(f) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
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(i) is for relief against the Company
or any of its Subsidiaries in an involuntary case,
(ii) appoints a Custodian of the
Company or any of its Subsidiaries or for all or
substantially all of its property, or
(iii) orders the winding up or liquida tion of the
Company or any of its Subsidiaries and the order or decree remains
unstayed and in effect for 60 days;
(g) the Company or any of its Subsidiaries defaults in the
payment of Indebtedness aggregating in excess of $1,000,000 when due, after any
grace periods with respect thereto shall have expired and upon non-waiver by the
holders of any such Indebtedness and such default con tinues unremedied for 30
days, or there has been an acceler ation of in excess of $1,000,000 aggregate
principal amount of Indebtedness of the Company by the holder thereof following
an event of default as defined in any mortgage, indenture, agreement or
instrument under which there may be issued or by which there may be secured or
evidenced such Indebtedness of the Company, whether such Indebtedness now exists
or shall hereafter be created; or
(h) a judgment for the payment of money the uninsured portion
of which exceeds $10,000,000 shall be rendered against the Company or any of its
Subsidiaries and shall remain undischarged for a period (during which execution
shall not be effectively stayed) of 60 days after the date on which the judgment
has been rendered, unless (i) no proceeding for execution of such judgment has
been commenced or (ii) any such proceeding has been stayed.
11.2 ACCELERATION. If an Event of Default occurs under clauses (e)
or (f) of Section 11.1, then the principal of and the accrued interest on all
Notes shall become due and payable immediately, whether or not notice of such
Event of Default shall have been given by any holder of Notes. If any Event of
Default occurs and is continuing for a period of fifteen (15) days, holders
holding a majority of the then outstanding principal amount of the Notes by
notice to the Company may declare the principal of and accrued interest on all
the Notes to be due and payable immediately. Upon such declaration such
principal and interest shall be due and payable immediately. The holders of a
majority of the then outstanding principal amount of the Notes may rescind an
acceleration and its consequences if all existing Events of Default (other than
nonpayment of principal or interest that has become due solely because of the
acceleration) have been cured or waived and if the rescission would not conflict
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27
with any judgment or decree. Nothing in this Section 11.2
shall limit or modify the provisions of Section 9.
11.3 OTHER REMEDIES. If an Event of Default occurs and is
continuing, the holder of this Note may pursue any available remedy by
proceeding at law or in equity to collect the payment of principal of or
interest on this Note or to enforce the performance of any provision of this
Note, the Note Purchase Agreement or the Registration Rights Agreement.
The holder of this Note may maintain a proceeding even if it does
not possess the Note or does not produce it in the proceeding. Except as
otherwise provided by law, a delay or omission by the holder of this Note in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclu sive of any other remedy. All available
remedies are cumu lative.
11.4 WAIVER OF DEFAULTS. Holders of a majority of the then
outstanding principal amount of the Notes may waive in writing a default and its
consequences (other than a default in the payment of principal of or interest on
this Note). When a default is waived, it is deemed cured, but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any consequent right.
11.5 CONTROL BY MAJORITY. Holders of a majority in outstanding
principal amount of the Notes may direct the time, method and place of
conducting any proceeding for any legal remedy available to the holders;
PROVIDED, HOWEVER, that if an "Event of Default" occurs under clause (a) or (b)
of Section 11.1, the holder of this Note, if it exercises its right to
accelerate the maturity of this Note, may proceed, subject to the penultimate
sentence of Sec tion 11.2, to enforce its remedies with or without the holders
of any other Notes at the time and place and in the manner determined by such
holder in its sole discretion.
Section 12. DEFINITIONS.
For the purposes of this Note, the following terms shall have the
meanings indicated:
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended.
"Business Day" shall mean any day other than a
Saturday, Sunday or other day on which commercial banks in
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28
the State of New York are authorized or required by law to
close.
"CHANGE OF CONTROL" of the Company shall mean such
time as:
(i) Any Person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) other than the Principal Shareholders
or the Purchaser is or becomes the beneficial owner, directly or
indirectly, of outstanding shares of capital stock of the Company,
entitling such Person or Persons to exercise 50% or more of the
total votes entitled to be cast at a regular or special meeting, or
by action by written consent, of shareholders of the Company (the
term "beneficial owner" shall be determined in accord ance with Rule
13d-3, promulgated by the Commission under the Exchange Act);
(ii) A majority of the Board of Directors of the Company
shall consist of Persons other than Continuing Directors. The term
"CONTINUING DIRECTOR" shall mean any member of the Board of
Directors of the Company on the Closing Date and any other member of
the Board of Directors who shall be recommended or elected to
succeed or become a Continuing Director by a majority of Continuing
Directors who are then mem bers of the Board of Directors of the
Company.
(iii) The shareholders of the Company shall have approved
a recapitalization, reorgani zation, merger, consolidation or
similar transac tion, in each case, with respect to which all or
substantially all the Persons who were the respec tive beneficial
owners of the outstanding shares of capital stock of the Company
immediately prior to such recapitalization, reorganization, merger
or consolidation, beneficially own, directly or indirectly, less
than 50% of the combined voting power of the then outstanding shares
of capital stock of the Company resulting from such recapi
talization, reorganization, merger, consolidation or similar
transaction;
(iv) The shareholders of the Company shall have approved
of the sale or other disposi tion of all or substantially all the
assets of the Company in one transaction or in a series of related
transactions;
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29
(v) Immediately after any merger, con solidation,
recapitalization or similar transac tion, the Principal Shareholders
(A) shall have increased the aggregate percentage of the out
standing shares of capital stock of the Company they beneficially
own, directly or indirectly, by 10% of such outstanding shares of
capital stock or more (or if the entity surviving such transaction
is a corporation, the Principal Shareholders' ownership in the new
entity shall have increased by 10% or more of their aggregate
percentage of ownership of the Company immediately prior to the
transaction) and (B) shall be the beneficial owners directly or
indirectly, of outstanding shares of stock of the Company (or any
Person surviving such transaction) entitling them collec tively to
exercise 50% or more of the total voting power of shares of capital
stock of the Company (or the surviving Person in such transaction)
and, in anticipation of, in connection with or as a result of, such
transaction, the Company (or such surviving Person) shall have
incurred or issued additional Indebtedness such that the total
Indebtedness so incurred or issued equals at least 50% of the
consideration payable in such transac tion; PROVIDED, HOWEVER, that
any such transaction shall not be considered a Change of Control if
the holders of Notes shall have participated therein on no less than
a PARI PASSU basis (assuming con version of all such holders' Notes
into Conversion Shares) with the Principal Shareholders;
(vi) The shareholders of the Company approve any
transaction (or if no such approval is required, upon the occurrence
of any transaction) the result of which is that the Common Shares
shall no longer be required to be registered under Section 12 of the
Exchange Act and that the hold ers of shares of Common Stock do not
receive com mon stock of the Person surviving such transaction that
is required to be registered under Section 12 of the Exchange Act.
"Class A Common Stock" shall mean the Class A Common Stock, par
value $.01 per share, of the Company.
"Common Stock" shall mean the common stock, par value $.01 per
share, of the Company.
"Current Market Price" per share of Common Stock shall mean, on any
date specified herein for the determination thereof, (a) the average daily
Market Price of the Common Stock for the twenty trading days immediately preced-
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30
ing such date (if no Market Price is available for any given day, such trading
day shall not be included in the determin ation of the Current Market Price),
and (b) if the Common Stock is not then listed or admitted to trading on any
national securities exchange or quoted in the over-the-counter market, a market
price per share determined in good faith by the Board of Directors of the
Company or, if the holders of a majority of the Notes so elect within twenty
business days after notice of the necessity of such calculation shall have been
delivered by the Company to the holders of the Notes, then at the Company's
expense by an appraiser chosen by the holders of a majority of the Notes with
the consent of the Company, which consent shall not be unreasonably withheld.
"Loan Agreement" shall mean the Loan Agreement
among the Company, WellCare of New York, Inc, WellCare
Development, Inc., WellCare Administration, Inc., Wellcare
Medical Management, Inc. and Key Bank of New York, dated
June 28, 1995.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) the closing price per share of the Common Stock on such
date published in the Wall Street Journal or, if no such closing price on such
date is published in the Wall Street Journal, the closing price on such date, as
officially reported on the principal national securities exchange on which the
Common Stock is then listed or admitted to trading; or (b) if the Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the National
Association of Securities Dealers, Inc., the last trading price (the clos ing
sale price) of the Common Stock on such date; or (c) if there shall have been no
trading on such date or if the Common Stock is not so designated, the average of
the reported closing bid and asked prices of the Units, on such date as shown by
the National Market System of the Nasdaq Stock Market and reported by any member
firm of the New York Stock Exchange selected by the Company.
"Person" shall mean any individual, firm, corpora tion, partnership,
limited liability company, trust, incor porated or unincorporated association,
joint venture, joint stock company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or other wise) of such
entity.
"Subsidiary" shall mean, with respect to any Person, a corporation
or other entity of which 50% or more of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
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Section 13. MISCELLANEOUS.
13.1 GOVERNING LAW. THIS NOTE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE.
13.2 WAIVER OF NOTICE. The Company, to the extent permitted by law,
hereby waives presentment, demand, notice, protest and all other demands and
notices in connec tion with delivery, acceptance, performance and enforcement of
this Note, except as specifically otherwise provided herein or in the Note
Purchase Agreement.
13.3 AMENDMENT. The terms of this Note other than the principal
amount, the maturity date and the inter est rate, may be amended only by the
written agreement of the holders of the majority of the then outstanding princi
pal amount of the Notes, and then only if identical amend ments are made
simultaneously to all other then outstanding Notes. The principal amount,
maturity date and interest rate of this Note may be amended only by the written
agree ment of the holder of this Note.
13.4 REACQUIRED NOTES. Any Note converted, redeemed, purchased or
otherwise acquired by the Company or any of its Subsidiaries in full in any
manner whatsoever, shall be deemed canceled immediately upon such conversion,
redemption, purchase or other acquisition. None of the out standing principal
amounts of any Notes held by the Company or any of its Subsidiaries or
Affiliates shall be deemed at any time to be outstanding for purposes of
determining whether the holders of any percentage of the outstanding principal
amount of the Notes have taken or desire to take any action as holders of the
Notes.
13.5 EXCHANGE OF NOTES. At the option of the holder of this Note,
this Note may be exchanged for other Notes of like tenor and of a like aggregate
principal amount, upon surrender of this Note at the principal office of the
Company; PROVIDED, HOWEVER, that the minimum denomin ation of any Note to be
issued in exchange for this Note shall be at least $100,000, unless the holder
of this Note shall have purchased this Note in a public offering or sub sequent
to a public offering thereof, in which case the
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32
minimum denomination of any Note to be issued in exchange for this Note shall be
at least $1,000.
THE WELLCARE MANAGEMENT GROUP, INC.
By: /s/ Marystephanie Corsones
-----------------------------------------
Name: Marystephanie Corsones
Title: Vice President of Finance and
Chief Financial Officer
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EXHIBIT 3
132
<PAGE>
EXHIBIT 3
================================================================================
REGISTRATION RIGHTS AGREEMENT
between
THE WELLCARE MANAGEMENT GROUP, INC.
and
THE 1818 FUND II, L.P.
---------------------------------------
Dated January 19, 1996
---------------------------------------
================================================================================
133
<PAGE>
TABLE OF CONTENTS
PAGE
1. Background.......................................................1
2. Registration Under Securities Act, etc...........................1
2.1 Registration on Request....................................1
2.2 Shelf Registration.........................................4
2.3 Incidental Registration....................................5
2.4 Registration Procedures....................................7
2.5 Underwritten Offerings....................................11
2.6 Preparation; Reasonable Investigation.....................12
2.7 Limitations, Conditions and Qualifications to
Obligations under Registration Covenants..................12
2.8 Indemnification...........................................13
3. Definitions.....................................................16
4. Rule 144 and Rule 144A..........................................18
5. Lock-up Periods.................................................19
6. Amendments and Waivers..........................................19
7. Nominees for Beneficial Owners..................................19
8. Notices.........................................................20
9. Assignment......................................................20
10. Calculation of Percentage Interests in Registrable
Securities......................................................20
11. No Inconsistent Agreements......................................21
12. Remedies........................................................21
13. Certain Distributions............................................21
14. Severability....................................................21
15. Entire Agreement................................................21
16. Headings........................................................22
17. GOVERNING LAW...................................................22
18. Counterparts....................................................22
i
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REGISTRATION RIGHTS AGREEMENT, dated January 19, 1996, between THE
WELLCARE MANAGEMENT GROUP, INC., a New York corporation (the "Company"), and THE
1818 FUND II, L.P., a Delaware limited partnership (the "Purchaser").
1. BACKGROUND. Pursuant to a Note Purchase Agreement, dated January
19, 1996, between the Company and the Purchaser (the "Purchase Agreement"), the
Purchaser has agreed to purchase from the Company, and the Company has agreed to
issue to the Purchaser, $20 million of the Company's 6% Subordinated Convertible
Notes due December 31, 2002 (the "Notes"), which under certain circumstances may
be converted into shares of the Company's Common Stock, par value $.01 per
share. Capitalized terms used herein but not otherwise defined shall have the
meanings given them in the Purchase Agreement or in Section 3.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1 REGISTRATION ON REQUEST.
(a) REQUEST. At any time, or from time
to time, of one or more holders (the "Initiating Holders") of 20% or more of the
Conversion Shares, may, upon written request, require the Company to effect the
registration under the Securities Act of any Registrable Securities held by such
Initiating Holders. The Company promptly will give written notice of such
requested registration to all other holders of Registrable Securities who may
join in such registration, and thereupon the Company will use its best efforts
to effect, at the earliest possible date, the registration under the Securities
Act, including by means of a shelf registration on Form S-3 (or any successor
form) pursuant to Rule 415 under the Securities Act if so requested in such
request (but only if the Company is then eligible to use such a shelf
registration and if Form S-3 (or such successor form) is then available to the
Company), of
(i) the Registrable Securities
that the Company has been so requested to register by
such Initiating Holders, and
(ii) all other Registrable
Securities that the Company has been requested to register by the holders
thereof (such holders together with the Initiating Holders hereinafter are
referred to as the "Selling Holders") by written request given to the
Company within 30 days after the giving of such written notice by the
Company, all to the extent requisite to permit the disposition of the
Registrable Securities so to be registered.
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2
(b) REGISTRATION OF OTHER SECURITIES.
Whenever the Company shall effect a registration pursuant to this Section 2.1,
no securities other than Registrable Securities shall be included among the
securities covered by such registration unless (i) the managing underwriter of
such offering shall have advised each Selling Holder of Registrable Securities
to be covered by such registration in writing that the inclusion of such other
securities would not adversely affect such offering or (ii) the Selling Holders
of not less than 50% of all Registrable Securities to be covered by such
registration shall have consented in writing to the inclusion of such other
securities.
(c) REGISTRATION STATEMENT FORM.
Registrations under this Section 2.1 shall be on such appropriate registration
form of the Commission as shall be reasonably selected by the Company.
(d) EFFECTIVE REGISTRATION STATEMENT.
A registration requested pursuant to this Section 2.1 shall not be deemed to
have been effected (i) unless a registra tion statement with respect thereto has
become effective and remained effective in compliance with the provisions of the
Securities Act with respect to the disposition of all Regis trable Securities
covered by such registration statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement (unless the failure to so dispose of such Registrable
Securities shall be caused solely by reason of a failure on the part of the
Selling Holders) (PROVIDED, HOWEVER, that except with respect to any
registration statement filed pursuant to Rule 415 under the Securities Act, such
period need not exceed 135 days), (ii) if after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason not attributable to the Selling Holders and has not thereafter become
effective, or (iii) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such registration are not
satisfied or waived, other than by reason of a failure on the part of the
Selling Holders.
(e) SELECTION OF UNDERWRITERS. The
underwriter or underwriters of each underwritten offering of the Registrable
Securities so to be registered shall be selected by the Selling Holders of more
than 50% of each class of Registrable Securities to be included in such
registration and shall be reasonably acceptable to the Company.
(f) PRIORITY IN REQUESTED REGISTRATION.
If the managing underwriter of any underwritten offering
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shall advise the Company in writing (and the Company shall so advise each
Selling Holder of Registrable Securities requesting registration of such advice)
that, in its opinion, the number of securities requested to be included in such
registration exceeds the number that can be sold in such offering within a price
range acceptable to the Selling Holders of 66-2/3% of the Registrable Securities
requested to be included in such registration, the Company, except as provided
in the following sentence, will include in such registration, to the extent of
the number and type that the Company is so advised can be sold in such offering,
Registrable Securities requested to be included in such registration, pro rata
among the Selling Holders requesting such registration on the basis of the
estimated gross proceeds from the sale thereof. If the total number of
Registrable Securities requested to be included in such registration cannot be
included as provided in the preceding sentence, holders of Registrable
Securities requesting registration thereof pursuant to Section 2.1, representing
not less than 33-1/3% of the Registrable Securities with respect to which
registration has been requested and constituting not less than 66-2/3% of the
Initiating Holders, shall have the right to withdraw the request for
registration by giving written notice to the Company within 20 days after
receipt of such notice by the Company and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which holders of Registrable Securities are entitled pursuant to Section 2.1
hereof. In connection with any such registration to which this Section 2.1(f) is
applicable, no securities other than Registrable Securities shall be covered by
such registration.
(g) LIMITATIONS ON REGISTRATION ON
REQUEST. Notwithstanding anything in this Section 2.1 to the contrary and except
as otherwise provided in Section 2.1(g)(y), in no event will the Company be
required to (i) effect, in the aggregate, more than two registrations pursuant
to this Section 2.1,(ii) effect more than one registration pursuant to this
Section 2.1 within the twelve-month period occurring immediately subsequent to
the effectiveness (within the meaning of Section 2.1(d)) of a registration
statement filed pursuant to this Section 2.1 or (iii) effect an underwritten
offering pursuant to this Section 2.1 within six months of the consummation of
an underwritten offering pursuant to the Shelf Registration.
(h) LISTING. The Company shall list
the Registrable Securities subject to Section 2.1(a) on the National Market of
the Nasdaq Stock Market or another of the national securities exchanges or
automated quotation system and shall provide for redesignation of the securities
to be offered into denominations suitable for public trading upon request of any
underwriter or underwriters of any underwritten offering of Registrable
Securities.
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(i) EXPENSES. The Company will pay all
Registration Expenses (except for any underwriting commissions or discounts) in
connection with any registration requested pursuant to this Section 2.1;
PROVIDED, HOWEVER, that the Company will not be required to pay the Registration
Expenses with respect to any registration the request for which has been
withdrawn pursuant to the penultimate sentence of Section 2(f).
2.2 SHELF REGISTRATION.
(a) FILING AND EFFECTIVENESS OF SHELF
REGISTRATION. Within eighteen months after the Closing Date, the Company shall
file an "evergreen" shelf registration statement solely with respect to the
Registrable Securities and pursuant to Rule 415 under the Securities Act (the
"Shelf Registration"). The Shelf Registration shall be on Form S-3 (or any
successor form) if the Company is then eligible to use Form S-3 (or such
successor form). The Shelf Registration shall provide that the Notes may only be
sold in an underwritten offering; PROVIDED, HOWEVER, that the foregoing shall
not limit the manner of sale of the Conversion Shares. The Company shall use its
best efforts to have the Shelf Registration declared effective as soon as
reasonably practicable after such filing, and shall use its best efforts to keep
the Shelf Registration effective and updated, from the date such Shelf
Registration is declared effective until such time as all of the Registrable
Securities shall cease to be Registrable Securities. Notwithstanding the
foregoing, the Company may, upon six months prior written notice to the holders
of Registrable Securities, withdraw the Shelf Registration if, subsequent to the
fourth anniversary of the Closing Date, fewer than 20% of the Conversion Shares
remain Registrable Securities.
(b) SUPPLEMENTS AND AMENDMENTS;
EXPENSES. The Company shall supplement or amend, if necessary, the Shelf
Registration, as required by the instructions applicable to such registration
form or by the Securities Act or as reasonably required by the holders of (or
any underwriter for) more than 50% of the Registrable Securities and the Company
shall furnish to the holders of the Registrable Securities to which the Shelf
Registration relates copies of any such supplement or amendment prior to its
being used and/or filed with the Commission. The Company shall pay all
Registration Expenses in connection with the Shelf Registration, whether or not
it becomes effective, and whether all, none or some of the Registrable
Securities sold pursuant to the Shelf Registration. In no event shall the Shelf
Registration include securities other than Registrable Securities, unless the
holders of more than 50% of the Registrable Securities consent to such
inclusion.
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(c) UNDERWRITING PROCEDURES. If the
holders of more than 50% of the Registrable Securities so elect, the offering of
all or a portion of such Registrable Securities pursuant to the Shelf
Registration shall be in the form of an underwritten offering and the managing
underwriter or underwriters selected for such offering shall be selected by the
Original Purchaser or such holders, as the case may be, and reasonably
acceptable to the Company. The Original Purchaser or such holders shall provide
the Company with notice of the identity of the managing underwriter or
underwriters it or they have selected a reasonable time prior to the
commencement of any such underwritten offering. Notwithstanding the foregoing,
if the Original Purchaser or such holders shall elect to sell any Notes in an
underwritten offering and the Board of Directors of the Company shall determine
in good faith that, or the Company shall receive a written opinion (an
"Opinion") of an independent investment banking firm of national standing to the
effect that, effecting such an offering would have an adverse effect (an
"Adverse Effect") on any primary equity offering or financing transaction
contemplated by the Company at such time or on the public trading market for the
Common Stock, then the Original Purchaser or such holders shall not effect such
an underwritten offering of the Notes; PROVIDED, HOWEVER, that the Original
Purchaser or such holders may, after the expiration of 90 days from such
election (or any subsequent election pursuant to this proviso), elect to effect
such an underwritten offering of the Notes, and may effect such offering unless
the Board of Directors of the Company shall again determine that, or the Company
shall again receive an Opinion to the effect that, such an offering would have
an Adverse Effect.
2.3 INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE
SECURITIES. If the Company at any time proposes to register any shares of Common
Stock or any securities convertible into Common Stock under the Securities Act
by registration on any form other than Forms S-4 or S-8, whether or not for sale
for its own account, it will each such time give prompt written notice to all
registered holders of Registrable Securities of its intention to do so and of
such holders' rights under this Section 2.2. Upon the written request of any
such holder (a "Requesting Holder") made as promptly as practicable and in any
event within 30 days after the receipt of any such notice (10 days if the
Company states in such written notice or gives telephonic or telecopied notice
to all registered holders of Registrable Securities, with written confirmation
to follow promptly thereafter, stating that (i) such registration will be on
Form S-3 and (ii) such shorter period of time is required because of a planned
filing date) (which request shall specify the Registrable
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Securities intended to be disposed of by such Requesting Holder), the Company
will use its best efforts to effect the registration under the Securities Act of
all Registrable Securities that the Company has been so requested to register by
the Requesting Holders thereof; PROVIDED, HOWEVER, that prior to the effective
date of the registration statement filed in connection with such registration,
immediately upon notification to the Company from the managing underwriter of
the price at which such securities are to be sold, if such price is below the
price that any Requesting Holder shall have indicated to be acceptable to such
Requesting Holder, the Company shall so advise such Requesting Holder of such
price, and such Requesting Holder shall then have the right to withdraw its
request to have its Registrable Securities included in such registration
statement; PROVIDED FURTHER, that if, at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Requesting Holder of Registrable Securities and (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from any obligation of the Company to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to cause such
registration to be effected as a registration under Section 2.1, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. Notwithstanding anything contained in this
Section 2.3(a), the Company shall not, if any Requesting Holder shall have
requested the registration of Conversion Shares in the registration, consummate
the sale of the securities included in the registration until such time as any
applicable waiting period under the Hart-Scott-Rodino Act shall have expired or
early termination thereunder shall have been granted. No registration effected
under this Section 2.3 shall relieve the Company of its obligation to effect any
registration upon request under Section 2.1.
(b) PRIORITY IN INCIDENTAL REGISTRA
TIONS. If the managing underwriter of any underwritten offering shall inform the
Company by letter of its opinion that the number or type of Registrable
Securities requested to be included in such registration would materially
adversely affect such offering, and the Company has so advised the Requesting
Holders in writing, then the Company will include in such registration, to the
extent of the number and type that the Company is so advised can be sold
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in (or during the time of) such offering, FIRST, all securi ties proposed by the
Company to be sold for its own account, SECOND, if such offering has been
requested by a Person pursuant to any registration rights agreement between the
Company and such Person and by the terms of such registration rights agreement
the securities subject to such registration rights agreement must be included in
such registration prior to those held by the Requesting Holders, the securities
requested to be included in such offering by such Person and THIRD, Registrable
Securities requested to be included in such registration pursuant to this
Agreement and such other securities proposed to be registered by the Company for
the accounts of each other Person and that by the terms of any applicable
registration rights agreement between the Company and such Person the securities
subject to such registration rights agreement must be included in the same
proportion as the Registrable Securities of any Requesting Holder under this
Agreement, pro rata among such Requesting Holders and such other Persons on the
basis of the estimated proceeds from the sale thereof.
(c) EXPENSES. The Company will pay all
Registration Expenses in connection with any registration effected pursuant to
this Section 2.3.
2.4 REGISTRATION PROCEDURES. If and whenever the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 2.1, 2.2 and 2.3, the Company will, as
expeditiously as possible:
(i) prepare and (within 90 days after the end of the
period within which requests for registration may be given to the Company
or in any event as soon thereafter as practicable) file with the
Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective; PROVIDED, HOWEVER, that the
Company may discontinue any registration of its securities that are not
Registrable Securities (and, under the circum stances specified in Section
2.3(a), its securities that are Registrable Securities) at any time prior
to the effective date of the registration statement relating thereto;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement until such time as all
of such Registrable Securities have been disposed of in
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accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement; PROVIDED,
HOWEVER, that except with respect to any such registration statement filed
pursuant to Rule 415 under the Securities Act, such period need not exceed
135 days;
(iii) furnish to each seller of Registrable Securities
covered by such registration statement, such number of conformed copies of
such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents, as
such seller may reasonably request;
(iv) use its best efforts (x) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such States of
the United States of America where an exemp tion is not available and as
the sellers of Registrable Securities covered by such registration
statement shall reasonably request, (y) to keep such registration or
qualification in effect for so long as such registra tion statement
remains in effect and (z) to take any other action that may be reasonably
necessary or advisable to enable such sellers to consummate the
disposition in such jurisdictions of the securities to be sold by such
sellers, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other federal or state governmental agencies or author
ities as may be necessary in the opinion of counsel to the Company and
counsel to the seller or sellers of Registrable Securities to enable the
seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) in the case of an underwritten or "best efforts"
offering, furnish at the effective date of such registration statement to
each seller of Regis-
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trable Securities, and each such seller's underwriters, if any, a
signed counterpart of:
(x) an opinion of counsel for the Company, dated
the effective date of such regis tration statement and, if
applicable, the date of the closing under the underwriting
agreement, and
(y) a "comfort" letter signed by the independent
public accountants who have certified the Company's financial
statements included or incorporated by reference in such
registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent to the date
of such financial statements, as are customa rily covered in opinions of
issuer's counsel and in accountants' comfort letters delivered to the
under writers in underwritten public offerings of securities and, in the
case of the accountants' comfort letter, such other financial matters,
and, in the case of the legal opinion, such other legal matters, as the
underwriters may reasonably request;
(vii) cause representatives of the Company to
participate in any "road show" or "road shows" reasonably requested by any
underwriter of an underwritten or "best efforts" offering of any
Registrable Securities;
(viii)notify each seller 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,
upon dis covery that, or upon the happening of any event as a result of
which, the prospectus included in such regis tration statement, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not mislead ing, in the light of the circumstances
under which they were made, and at the request of any such seller promptly
prepare and furnish to it a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
state ments therein not misleading in the light of the circumstances under
which they were made;
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(ix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and, if required, make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not
more than eighteen months, beginning with the first full calendar month
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 promulgated thereunder, and promptly furnish to each such
seller of Registrable Securities a copy of any amendment or supplement to
such registration statement or prospectus;
(x) provide and cause to be maintained a transfer agent
and registrar (which, in each case, may be the Company) for all
Registrable Securities covered by such registration statement from and
after a date not later than the effective date of such registration; and
(xi) use its best efforts to list all Registrable
Securities covered by such registration statement on the National Market
of the Nasdaq Stock Market or any national securities exchange on which
Registrable Securities of the same class covered by such registration
statement are then listed and, if no such Registrable Securities are so
listed, on the National Market of the Nasdaq Stock Market or any national
securities exchange on which the Common Stock is then listed.
The Company may require each seller of Registrable Securi ties as to which any
registration is being effected to furnish the Company in a reasonably prompt
manner such information regarding such seller and the distribution of such
securities as the Company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (vii) of this
Section 2.4, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivi sion (vii) of this
Section 2.4 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
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2.5 UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS.
If requested by the underwriters for any underwritten offering by holders of
Registrable Securities pursuant to a registration requested under Section 2.1 or
pursuant to the Shelf Registration Statement, the Company will use its best
efforts to enter into an underwriting agreement with such underwriters for such
offering, such agreement to be reasonably satisfactory in substance and form to
each such holder and the underwriters and to contain such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of that type, including, without limitation, indemnities to the
effect and to the extent provided in Section 2.8. The holders of the Registrable
Securities proposed to be sold by such underwriters will reasonably cooperate
with the Company in the negotiation of the underwriting agreement. Such holders
of Registrable Securities to be sold by such underwriters shall be parties to
such underwriting agreement and may, at their option, require that any or all of
the representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made to
and for the benefit of such holders of Registrable Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. No holder of Registrable Securities shall be
required to make any representations or warranties to, or agreements with, the
Company other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution or any other representations required by applicable law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS.
If the Company proposes to register any of its securities under the Securities
Act as contemplated by Section 2.3 and such securities are to be distributed by
or through one or more underwriters, the Company will, if requested by any
Requesting Holder of Registrable Securities, use its best efforts to arrange for
such underwriters to include all the Registrable Securities to be offered and
sold by such Requesting Holder among the securities of the Company to be
distributed by such underwriters, subject to the provisions of Section 2.3(b).
The holders of Registrable Securities to be distributed by such underwriters
shall be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the
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obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
Requesting Holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Requesting Holder, such Requesting Holder's Registrable Securities and such
Requesting Holder's intended method of distribution or any other representations
required by applicable law.
(c) UNDERWRITING DISCOUNTS AND
COMMISSION. The holders of Registrable securities sold in any offering pursuant
to Section 2.5(a) or Section 2.5(b) shall pay all underwriting discounts and
commissions of the underwriter or underwriters with respect to the Registrable
Securities sold thereby.
2.6 PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
will give each of them such reasonable access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
2.7 LIMITATIONS, CONDITIONS AND QUALIFICA TIONS TO OBLIGATIONS
UNDER REGISTRATION COVENANTS. The Company shall be entitled to postpone for a
reasonable period of time (but not exceeding 120 days) the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to Section 2.1 if the Company determines, in its good faith judgment,
that such registration and offering would interfere with any material financing,
acquisition, corporate reorganization or other material transaction involving
the Company or any of its affiliates and promptly gives the holders of
Registrable Securities requesting registration thereof pursuant to Section 2.1
written notice of such determination, containing a general statement of the
reasons for such postponement and an approximation of the anticipated delay. If
the Company shall so postpone the filing of a registration statement, holders of
Registrable Securities requesting registration thereof pursuant to Section 2.1,
representing not less than 33-1/3% of the Registrable Securities with respect to
which
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registration has been requested and constituting not less than 66-2/3% of the
Initiating Holders, shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which holders of Registrable Securities are entitled pursuant to Section 2.1
hereof.
2.8 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY.
The Company will, and hereby does, indemnify and hold harmless, in the case of
any registration statement filed pursuant to Section 2.1, 2.2 or 2.3, each
seller of any Registrable Securities covered by such registration statement and
each other Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls such seller or any
such underwriter within the meaning of the Securities Act, and their respective
directors, officers, partners, members and agents, against any losses, claims,
damages or liabilities, joint or several, to which such seller or underwriter or
any such director, officer, partner, member, agent or controlling person may
become subject under the Securities Act or otherwise, including, without
limitation, the fees and expenses of legal counsel (including those incurred in
connection with any claim for indemnity hereunder), insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or 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, and the Company will
reimburse such seller or underwriter and each such director, officer, partner,
member and controlling Person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, liability, action or proceeding; PROVIDED, HOWEVER, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such seller or underwriter, as the case
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may be, specifically stating that it is for use in the preparation thereof; and
PROVIDED FURTHER, that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securi
ties or any other Person, if any, who controls such under writer within the
meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, partner, member, agent or controlling person and shall
survive the transfer of such securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. As
a condition to including any Registrable Securities in any registration
statement, the Company shall have received an undertaking satisfactory to it
from the prospective seller of such Registrable Securities, to indemnify and
hold harmless (in the same manner and to the same extent as set forth in Section
2.8(a)) the Company, and each director of the Company, each officer of the
Company and each other Person, if any, who participates as an underwriter in the
offering or sale of such securities and each other Person who controls the
Company or any such underwriter within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such seller specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; PROVIDED, HOWEVER, that
the liability of such indemnifying party under this Section 2.8(b) shall be
limited to the amount of the net proceeds received by such indemnifying party in
the offering giving rise to such liability. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly
after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim
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referred to in Section 2.8(a) or (b), such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action; PROVIDED, HOWEVER, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 2.8, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it may wish, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; PROVIDED, HOWEVER, that any indemnified party may, at its own expense,
retain separate counsel to participate in such defense. Notwithstanding the
foregoing, in any action or proceeding in which both the Company and an
indemnified party is, or is reasonably likely to become, a party, such
indemnified party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such indemnified party, (a) there
are or may be legal defenses available to such indemnified party or to other
indemnified parties that are different from or additional to those available to
the Company or (b) any conflict or potential conflict exists between the Company
and such indemnified party that would make such separate representation
advisable; PROVIDED, HOWEVER, that in no event shall the Company be required to
pay fees and expenses under this Section 2.7 for more than one firm of attorneys
in any jurisdiction in any one legal action or group of related legal actions.
No indemnifying party shall be liable for any settlement of any action or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that 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 or which requires action other than the
payment of money by the indemnifying party.
(d) CONTRIBUTION. If the indemnifica
tion provided for in this Section 2.8 shall for any reason be held by a court to
be unavailable to an indemnified party under Section 2.8(a) or (b) hereof in
respect of any loss, claim, damage or liability, or any action in respect
thereof, then, in lieu of the amount paid or payable under Section 2.8(a) or
(b), the indemnified party and the indem nifying party under Section 2.8(a) or
(b) shall contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in
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connection with investigating the same, including those incurred in connection
with any claim for indemnity hereunder), (i) in such proportion as is
appropriate to reflect the relative fault of the Company and the prospective
sellers of Registrable Securities covered by the registration statement which
resulted in such loss, claim, damage or liability, or action or proceeding in
respect thereof, with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action or proceeding in respect
thereof, as well as any other relevant equitable considerations or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and such prospective sellers from the offering of the
securities covered by such registration statement; PROVIDED, HOWEVER, that for
purposes of this clause (ii), the relative benefits received by the prospective
sellers shall be deemed not to exceed the amount of proceeds received by such
prospective sellers. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. Such prospective sellers' obligations to contribute as
provided in this Section 2.8(d) are several in proportion to the relative value
of their respective Registrable Securities covered by such registration
statement and not joint. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such Person's consent, which consent shall not be unreasonably
withheld.
(e) OTHER INDEMNIFICATION. Indemnifi
cation and contribution similar to that specified in the preceding subdivisions
of this Section 2.8 (with appropriate modifications) shall be given by the
Company and each seller of Registrable Securities with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Securities Act.
(f) INDEMNIFICATION PAYMENTS. The
indemnification and contribution required by this Sec tion 2.8 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
3. DEFINITIONS. As used herein, unless the
context otherwise requires, the following terms have the
following respective meanings:
"COMMISSION" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
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"COMMON STOCK" shall mean and include the Common Stock, par value
$.01 per share, of the Company and each other class of capital stock of the
Company that does not have a preference over any other class of capital stock of
the Company as to dividends or upon liquidation, dissolution or winding up of
the Company and, in each case, shall include any other class of capital stock of
the Company into which such stock is reclassified or reconstituted.
"EXCHANGE ACT" means 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. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include a reference to the comparable section, if any, of any such similar
Federal statute.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"INITIATING HOLDER" is defined in Section 2.1.
"PERSON" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"REGISTRABLE SECURITIES" means (i) any Conversion Shares and any
Related Registrable Securities, (ii) the Notes and any Related Registrable
Securities, and (iii) any shares of Common Stock owned by the Purchaser. As to
any particular Registrable Securities, once issued, such securities shall cease
to be Registrable Securities when (a) a registration statement with respect to
the sale of such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
registration statement, (b) they shall have been sold as permitted by Rule 144
(or any successor provision) under the Securities Act and the purchaser thereof
does not receive "restricted securities" as defined in Rule 144, (c) they shall
have been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not, in the opinion of counsel for
the holders, require registration of them under the Securities Act or (d) they
shall have ceased to be outstanding. All references to percentages of
Registrable Securities shall be calculated pursuant to Section 9.
"REGISTRATION EXPENSES" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration
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and filing fees, all fees of the New York Stock Exchange, Inc., other national
securities exchanges or the National Association of Securities Dealers, Inc.,
all fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messen ger and delivery expenses,
the fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of "cold comfort" letters required by
or incident to such performance and compliance, any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (excluding any
underwriting discounts or commissions with respect to the Registrable
Securities) and the reasonable fees and expenses of one counsel to the Selling
Holders (selected by Selling Holders representing at least 50% of the
Registrable Securities covered by such registration); PROVIDED, HOWEVER, that in
connection with a registration pursuant to Section 2.3, the expenses of such
counsel shall not exceed $50,000. Notwithstanding the foregoing, in the event
the Company shall determine, in accordance with Section 2.3(a) or Section 2.7,
not to register any securities with respect to which it had given written notice
of its intention to so register to holders of Registrable Securities, all of the
costs of the type (and subject to any limitation to the extent) set forth in
this definition and incurred by Requesting Holders in connection with such
registration on or prior to the date the Company notifies the Requesting Holders
of such determination shall be deemed Registration Expenses.
"RELATED REGISTRABLE SECURITIES" means with respect to Conversion
Shares, Notes or Common Stock, any securities of the Company issued or issuable
with respect to any Conversion Shares, Notes or Common Stock by way of a
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
"REQUESTING HOLDER" is defined in Section 2.3.
"SECURITIES ACT" means 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. References to a
particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
"SELLING HOLDER" is defined in Section 2.1.
"SHELF REGISTRATION" is defined in Section 2.2.
4. RULE 144 AND RULE 144A. The Company shall
take all actions reasonably necessary to enable holders of
Registrable Securities to sell such securities without
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registration under the Securities Act within the limitation of the provisions of
(a) Rule 144 under the Securities Act, as such Rule may be amended from time to
time, (b) Rule 144A under the Securities Act, as such Rule may be amended from
time to time, or (c) any similar rules or regulations hereafter adopted by the
Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with such requirements.
5. LOCK-UP PERIODS. So long as the Purchaser holds (i) shares of
Common Stock or (ii) Notes convertible into shares of Common Stock that in the
aggregate represents 5% or more of the total number of shares of Common Stock
then outstanding, the Purchaser, in the event the Company effects an
underwritten public offering agrees, if requested by the managing underwriter or
underwriters for such underwritten offering not to effect (except as part of
such underwritten offering) any public sale or distribution of Registrable
Securities, including a sale pursuant to Rule 144, during the period commencing
5 days prior to and ending no more than 90 days subsequent to the date of the
execution of an underwriting or pricing agreement with respect to such
underwritten offering (a "Lock-Up Period"); PROVIDED, HOWEVER, that the
Purchaser will not be required to agree to such Lock-Up Period unless all
holders of 5% or more of the Common Stock agree to such Lock-Up Period.
Notwithstanding the foregoing, the Company shall not be required to agree to
Lock-Up Periods in effect for more than 190 days in the aggregate within a
365-day period.
6. AMENDMENTS AND WAIVERS. This Agreement may be amended with the
consent of the Company and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the holder or holders of at least 50% of the Registrable
Securities affected by such amendment, action or omission to act. Each holder of
any Registrable Securities at the time or there after outstanding shall be bound
by any consent authorized by this Section 5, whether or not such Registrable
Securi ties shall have been marked to indicate such consent.
7. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any holder or holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so
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elects, the Company may require assurances reasonably satis factory to it of
such owner's beneficial ownership of such Registrable Securities.
8. NOTICES. All notices, demands and other
communications provided for or permitted hereunder shall be
made in writing and shall be by registered or certified
first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(a) if to the Purchaser, addressed to
it in the manner set forth in the Purchase Agreement, or at such other address
as it shall have furnished to the Company in writing in the manner set forth
herein;
(b) if to any other holder of Regis
trable Securities, at the address that such holder shall have furnished to the
Company in writing in the manner set forth herein, or, until any such other
holder so furnishes to the Company an address, then to and at the address of the
last holder of such Registrable Securities who has furnished an address to the
Company; or
(c) if to the Company, addressed to it
in the manner set forth in the Purchase Agreement, or at such other address as
the Company shall have furnished to each holder of Registrable Securities at the
time outstand ing in the manner set forth herein.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; when delivered to a
courier, if delivered by overnight courier service; two business days after
being deposited in the mail, postage prepaid, if mailed; and when receipt is
acknowledged, if telecopied.
9. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and, with respect to the
Company, its respective successors and permitted assigns and, with respect to
the Purchaser, any holder of any Registrable Securities, subject to the
provisions respecting the minimum numbers of percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein. Except by operation of law, this
Agreement may not be assigned by the Company without the prior written consent
of the holders of a majority in interest of the Registrable Securities
outstanding at the time such consent is requested.
10. CALCULATION OF PERCENTAGE INTERESTS IN REGISTRABLE SECURITIES.
For purposes of this Agreement, all references to a percentage of the
Registrable Securities shall be calculated based upon the number of shares of
Registrable Securities outstanding at the time such calcula-
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tion is made, assuming the conversion of all Notes into shares of Common Stock.
11. NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
Without limiting the generality of the foregoing, the Company will not hereafter
enter into any agreement with respect to its securities that grants, or modify
any existing agreement with respect to its securities to grant, to the holder of
its securities in connection with an incidental registration of such securities
higher priority to the rights granted to the Purchasers under Section 2.3(b).
12. REMEDIES. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
13. CERTAIN DISTRIBUTIONS. The Company shall not at any time make a
distribution on or with respect to the Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and such Registrable
Securities are not changed or exchanged) of securities of another issuer if
holders of Registrable Securities are entitled to receive such securities in
such distribution as holders of Registrable Securities and any of the securities
so distributed are registered under the Securities Act, unless the securities to
be distributed to the holders of Registrable Securities are also registered
under the Securities Act.
14. SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Purchaser shall be enforceable to the fullest extent permitted by law.
15. ENTIRE AGREEMENT. This Agreement, together
with the Purchase Agreement (including the exhibits and
schedules thereto) and the Notes, is intended by the parties
as a final expression of their agreement and intended to be
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a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement, the Purchase
Agreement (including the exhibits and schedules thereto) and the Notes supersede
all prior agreements and understandings between the parties with respect to such
subject matter.
16. HEADINGS. The headings in this Agreement are
for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
18. COUNTERPARTS. This Agreement may be executed
in multiple counterparts, each of which when so executed
shall be deemed an original and all of which taken together
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
THE WELLCARE MANAGEMENT GROUP, INC.
By: /s/ Marystephanie Corsones
------------------------------
Name: Marystephanie Corsones
Title: Vice President of Finance and
Chief Financial Officer
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
General Partner
By:
------------------------
Name:
Title: General Partner
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
THE WELLCARE MANAGEMENT GROUP, INC.
By:
------------------------------
Name:
Title:
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
General Partner
By: /s/ Lawrence C. Tucker
------------------------
Name:
Title: General Partner
158
