SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of the earliest event reported) June 11, 1999
THE WELLCARE MANAGEMENT GROUP, INC.
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(Exact Name of Registrant as Specified in Its Charter)
New York
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(State or Other Jurisdiction of Incorporation)
0-21684 14-1647239
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(Commission File Number) (IRS Employer Identification No.)
Park West/Hurley Ave. Extension
Kingston, NY 12401
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(Address of Principal Executive Offices) (Zip Code)
(914) 338-4110
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(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 1. Changes in Control of Registrant
On June 11, 1999, pursuant to a Stock Purchase Agreement dated May 19,
1999, as amended on June 1, 1999 (the "Agreement"), between Dr. Kiran C. Patel
and The WellCare Management Group, Inc. ("WellCare"), Dr. Patel purchased shares
of a newly authorized series of preferred stock for $5 million. As a result of
that transaction, Dr. Patel owns and has the immediate right to vote 55% of the
outstanding voting stock of WellCare.
The preferred stock is subject to mandatory conversion into common
stock upon the amendment to WellCare's certificate of incorporation to increase
the number of authorized shares of common stock from 20 million to 75 million.
The preferred stock will be converted into 55% of the then outstanding common
stock of WellCare (after giving effect to such conversion) and will be subject
to anti-dilution rights under which Dr. Patel will generally preserve his 55%
interest in WellCare until there are 75 million shares of common stock
outstanding.
WellCare is a managed health care company and is the parent of WellCare
of New York, Inc. and WellCare of Connecticut, Inc., each a health maintenance
organization.
Item 7. Financial Statements and Exhibits
(c) Exhibits
3.1c Copy of Certificate of Amendment to Restated Certificate of
Incorporation
10.64 Copy of Stock Purchase Agreement dated May 19, 1999,
between The Wellcare Management Group, Inc. and Kiran C.
Patel.
10.65 Copy of Amendment to Stock Purchase Agreement dated June 1,
1999, between The Wellcare Management Group, Inc. and
Kiran C. Patel.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WELLCARE MANAGEMENT GROUP, INC.
By: /s/ Kiran C. Patel
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Kiran C. Patel
President
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
THE WELLCARE MANAGEMENT GROUP, INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being the Acting President and Chief
Executive Officer of The WellCare Management Group, Inc., a New York corporation
(hereinafter referred to as the "Corporation") organized and existing under the
Business Corporation Law ("BCL") of the State of New York, does hereby certify
the following:
FIRST: The Corporation's name is The WellCare Management
Group, Inc.
SECOND: The original Certificate of Incorporation of the
Corporation was filed by the Department of State under and pursuant to the BCL
on the 25th day of August, 1983 under the name Ullmann and Castellon, Inc.
THIRD: The purpose of this Certificate of Amendment is to
amend the Article IV, Section 3 of the Corporation's Certificate of
Incorporation for the purpose of designating two series of the Corporation's
authorized Preferred Stock. Article IV, Section 3 of the Corporation's
Certificate of Incorporation is hereby amended by adding new subparagraphs (d)
and (e) as follows:
(d) Pursuant to the authority conferred upon the Board
of Directors of the Corporation by the foregoing provisions of this Certificate
of Incorporation, the Board of Directors of the Corporation on June 1, 1999 duly
adopted a resolution creating a series of Preferred Stock, the designation and
number of shares thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof are as follows:
(i) Designation and Number.
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(1) The shares of such series shall be
designated as Senior Convertible Preferred Stock, Series A (the "Series A
Preferred Stock"). The number of shares initially constituting the Series A
Preferred Stock shall be 100,000, which number may be decreased (but not
increased) by the Board of Directors without a vote of stockholders; provided,
however, that such number may not be decreased below the number of then out-
standing shares of Series A Preferred Stock.
(2) The Series A Preferred Stock shall, with
respect to rights on liquidation, dissolution or winding up, rank (i) on a
parity with the Series B Preferred Stock, and (ii) prior to all other classes
and series of Junior Stock (as defined below) of the Corporation now or here-
after authorized including, without limitation, the Common Stock.
(3) Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in Section (d)(viii) below.
(ii) Dividends and Distributions.
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Each holder of shares of Series A Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors, dividends and other distributions (including, without limitation, any
options, warrants or other rights to acquire capital stock of the Corporation
whether or not pursuant to a shareholder rights plan, "poison pill" or similar
arrangement, or other property or assets) on a parity with each holder of Common
Stock. Such dividends and distributions shall be payable on each share of Series
A Preferred Stock in an amount equal to the dividends per share payable on the
number of shares of Common Stock into which such share of Series A Preferred
Stock would be convertible under Section (d)(vi) on the record date for
determining eligibility to receive such dividends, or if no record date is
established, on the date such dividends are actually paid.
(iii) Voting Rights.
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(1) The holders of the Series A Preferred
Stock shall be entitled to notice of all stockholders meetings in accordance
with the Corporation's bylaws, and except as otherwise required by applicable
law and with respect to those matters set forth in Section (d)(iii)(2), the
holders of the Series A Preferred Stock shall be entitled to vote on all matters
submitted to the stockholders for a vote together with the holders of the Common
Stock voting together as a single class with each share of Common Stock entitled
to one vote per share and each share of Series A Preferred Stock entitled to one
vote for each share of Common Stock issuable upon conversion of the Series A
Preferred Stock as of the record date for such vote or, if no record date is
specified, as of the date of such vote; provided, however, if there shall be
shares of Class A Common Stock of the Corporation outstanding on such date, the
holders of Series A Preferred Stock shall be entitled to such additional votes
per share that would give the holder(s) of the Series A Preferred Stock, as a
class, a 55% voting interest in the total number of votes of the issued and
outstanding Common Stock (after having given effect to the conversion of the
Series A Preferred Stock) and issued and outstanding Class A Common Stock,
combined.
(2) Unless the consent or approval of a
greater number of shares shall then be required by law, the affirmative vote of
the holders of at least 51% of the outstanding shares of Series A Preferred
Stock, voting separately as a single class, in person or by proxy, at a special
or annual meeting of stockholders called for the purpose, shall be necessary to:
(A) increase the authorized number of
shares of Series A Preferred Stock; and
(B) authorize, adopt or approve an amend-
ment to the Charter that would increase or decrease the par value of the shares
of Series B Preferred Stock or Series A Preferred Stock, or alter or change the
powers, preferences or special rights of the shares of Series B Preferred Stock
or Series A Preferred Stock, or otherwise affect the rights of the shares of the
Series B Preferred Stock adversely, including, without limitation, the liquida-
tion preference provisions.
(3) At each meeting of stockholders at which
the holders of shares of Series A Preferred Stock shall have the right, voting
separately as a single class, to take any action, the presence in person or by
proxy of the holders of record of one-third of the total number of shares of
Series A Preferred Stock then outstanding and entitled to vote on the matter
shall be necessary and sufficient to constitute a quorum. At any such meeting or
at any adjournment thereof:
(A) the absence of a quorum of the holders
of shares of any other class or series of capital stock shall not prevent the
taking of any action as provided in this Section (d)(iii); and
(B) in the absence of a quorum of the
holders of shares of Series A Preferred Stock, a majority of the holders of such
shares present in person or by proxy shall have the power to adjourn the meeting
as to the actions to be taken by the holders of shares of Series A Preferred
Stock from time to time and place to place without notice other than announce-
ment at the meeting until a quorum shall be present.
(4) For taking of any action as provided in
Section (d)(iii)(2) by the holders of shares of Series A Preferred Stock, each
such holder shall have one vote for each share of such stock standing in his
name on the transfer books of the Corporation as of any record date fixed for
such purpose or, if no such date be fixed, at the close of business on the
Business Day next preceding the day on which notice is given, or if notice is
waived, at the close of business on the Business Day next preceding the day on
which the meeting is held; provided, however, that shares of Series A Preferred
Stock held by the Corporation or any Affiliate of the Corporation shall not be
deemed to be outstanding for purposes of taking any action as provided in this
Section (d)(iii).
(iv) Reacquired Shares.
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Any shares of Series A Preferred Stock
converted, exchanged, redeemed, purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares of Series A Preferred Stock shall
upon their cancellation become authorized but unissued shares of preferred
stock, par value $.01 per share, of the Corporation and, upon the filing of an
appropriate Certificate of Designation with the Secretary of State of the State
of New York, may be reissued as part of another series of preferred stock, par
value $.01 per share, of the Corporation, but in any event may not be reissued
as shares of Series A Preferred Stock unless all of the shares of Series A
Preferred Stock issued on the Issue Date shall have already been redeemed or
converted.
(v) Liquidation, Dissolution or Winding Up.
--------------------------------------
(1) If the Corporation shall commence a
voluntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or consent to the
entry of an order for relief in an involuntary case under any such law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) 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
become due or if a decree or order for relief in respect of the Corporation
shall be entered by a court having jurisdiction in the premises in an
involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up (any such event, a
"Liquidation"), no distribution shall be made to the holders of shares of Junior
Stock unless, prior thereto, the holders of shares of Series A Preferred Stock
shall have received an amount per share of Series A Preferred Stock equal to the
greater of (A) the Stated Value, plus all declared and unpaid dividends to the
date of distribution, or (B) the proceeds in Liquidation that the holders of
Series A Preferred Stock would have received in respect of all shares of Common
Stock issuable to such holders upon conversion of a share of Series A Preferred
Stock owned by such holders, assuming that such share of Series A Preferred
Stock owned by such holders had been converted into shares of Common Stock in
accordance with Section (d)(vi) immediately prior to the Liquidation (such
greater amount being the "Series A Preferred Stock Liquidation Amount").
(2) Notwithstanding the foregoing, if the
assets distributable upon a Liquidation shall be insufficient to pay in full the
Series A Preferred Stock Liquidation Amount on all shares of Series A Preferred
Stock outstanding and any amount payable to the holders of Parity Stock, then
all of the assets available after payment of any amounts payable on the Senior
Stock shall be distributed among the holders of the Series A Preferred Stock and
the Parity Stock ratably in proportion to the respective amounts of the assets
to which they would otherwise be entitled.
(3) Neither the consolidation or merger of the
Corporation with or into any other Person nor the sale or other distribution to
another Person of all or substantially all the assets, property or business of
the Corporation, shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section (d)(v).
(vi) Conversion.
(1) At the later of (i) the amendment to the
Corporation's certificate of incorporation increasing the total number of
authorized shares of Common Stock by 55,000,000 shares or (ii) the obtainment of
all governmental and regulatory approvals necessary for the conversion of shares
of Series A Preferred Stock into shares of Common Stock, each outstanding share
of Series A Preferred Stock shall immediately and automatically, with no further
action required to be taken by the Corporation or the holder thereof, be
converted into, subject to the terms and provisions of this Section (d)(vi),
fully paid and non-assessable shares of Common Stock, subject to Section
(d)(vi)(7). Each share of Series A Preferred Stock is convertible into a number
of shares of Common Stock ("Number Issuable") which is initially 92.882 shares,
subject to adjustment as set forth in Section (d)(vi)(4). Immediately there-
after, each holder of Series A Preferred Stock shall be deemed to be the holder
of record of the Common Stock issuable upon conversion of such holder's Series A
Preferred Stock notwithstanding that the share register of the Corporation shall
then be closed or that certificates representing such Common Stock shall not
then be actually delivered to such Person. Upon notice from the Corporation,
each holder of Series A Preferred Stock so converted shall promptly surrender to
the Corporation, at any place where the Corporation shall maintain a transfer
agent for its Series A Preferred Stock and Common Stock, certificates represent-
ing the shares so converted, duly endorsed in blank or accompanied by proper
instruments of transfer. The shares of Common Stock issued upon the conversion
of shares of Series A Preferred Stock pursuant to Section(d)(vi)(1) shall be
subject to the anti-dilution rights set forth in Paragraph 2(b) of the Stock
Purchase Agreement dated May 19, 1999 by and between the Corporation and
Kiran C. Patel.
(2) As promptly as practicable after the
surrender, as herein provided, of any shares of Series A Preferred Stock for
conversion pursuant to Section (d)(vi)(1), the Corporation shall deliver to or
upon the written order of the holder of such shares so surrendered a certificate
or certificates representing the number of fully paid and non-assessable shares
of Common Stock into which such shares of Series A Preferred Stock may be or
have been converted in accordance with the provisions of this Section (d)(vi).
(3) To the extent permitted by law, when
shares of Series A Preferred Stock are converted, all dividends which have been
declared and are unpaid on the Series A Preferred Stock so converted to the date
of conversion shall be immediately due and payable and must accompany the shares
of Common Stock issued upon such conversion.
(4) The Number Issuable shall be subject to
adjustment from time to time as follows:
(A) In case the Corporation shall at any
time or from time to time after the Issue Date:
(I) pay a dividend or make a distribu-
tion on the outstanding shares of Common Stock in capital stock of the
Corporation;
(II) subdivide the outstanding shares
of Common Stock into a larger number of shares;
(III) combine the outstanding shares of
Common Stock into a smaller number of shares; or
(IV) issue any shares of its capital
stock in a reclassification of the Common Stock;
then, and in each such case, the Number Issuable in effect immediately prior
to such event shall be adjusted (and any other appropriate actions shall be
taken by the Corporation) so that the holder of any share of Series A Preferred
Stock thereafter converted shall be entitled to receive the number of shares of
Common Stock or other securities of the Company which such holder would have
owned or had been entitled to receive upon or by reason of any of the events
described above, had such share of Series A Preferred Stock been converted
immediately prior to the happening of such event. An adjustment made pursuant to
this clause (A) shall become effective retroactively (x) 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 distribution, or (y) in the case of any
such subdivision, combination or reclassification, to the close of business on
the date upon which such corporate action becomes effective.
(B) If, after the Issue Date, the
Corporation issues any shares of Common Stock other than pursuant to Section
(d)(vi)(4)(A) or upon conversion of Class A Common Stock or Series A Preferred
Stock or Series B Preferred Stock, there shall be a further adjustment to the
Number Issuable so as to give the holder(s) of the Series A Preferred Stock, as
a class, 55% of the aggregate of the total number of shares of (1) the issued
and outstanding Common Stock and (2) the issued and outstanding Class A Common
Stock (after taking into account such issuance of shares of Common Stock). If
any shares of Common Stock are issued by the Corporation for less than $.50 per
share between the Issue Date and the date the Series A Preferred Stock is
automatically converted under Section (d)(vi)(1) (each a "Discount Issuance"),
then the adjustment described in the immediately prior sentence, with respect to
each such Discount Issuance, shall be reduced by one-half (1/2). If any shares
of Common Stock are issued by the Corporation between the Issue Date and the
date the Series A Preferred Stock is automatically converted under Section
(d)(vi)(1) for consideration other than cash, then the consideration per share
shall be determined by the Board of Directors. The adjustments contemplated by
this Section (d)(vi)(4)(B) shall terminate at such time as the number of issued
and outstanding shares of Common Stock and Class A Common Stock (after giving
effect to any adjustment contemplated by this Section (d)(vi)(4)(B)) shall equal
Seventy Five Million (75,000,000).
(C) If the Corporation, at any time or
from time to time, shall take any action affecting its Common Stock similar to
or having an effect similar to any of the actions described in any of Section
(d)(vi)(4)(A) or Section (d)(vi)(8) (but not including any action described in
any such Section) and the Board of Directors of the Corporation in good faith
determines that it would be equitable in the circumstances to adjust the Number
Issuable as a result of such action, then, and in each such case, the Number
Issuable shall be adjusted in such manner and at such time as the Board of
Directors of the Corporation in good faith determines would 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 Series A Preferred Stock).
(D) Notwithstanding anything herein to the
contrary, no adjustment under this Section (d)(vi)(4) need be made to the Number
Issuable unless such adjustment would require an increase or decrease of at
least 1% of the Number Issuable then in effect. Any lesser adjustment shall be
carried forward and shall be made at the time of and together 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
Number Issuable. Any adjustment to the Number Issuable carried forward and not
theretofore made shall be made immediately prior to the conversion of any shares
of Series A Preferred Stock pursuant hereto.
(5) If the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then thereafter no adjustment in the Number Issuable then in
effect shall be required by reason of the taking of such record.
(6) Upon any increase or decrease in the
Number Issuable, then, and in each such case, the Corporation promptly shall
deliver to each registered holder of Series A Preferred Stock at least five (5)
Business Days prior to effecting any of the foregoing transactions a certi-
ficate, 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 Corpora-
tion, setting forth in reasonable detail the event requiring the adjustment and
the method by which such adjustment was calculated and specifying the increased
or decreased Number Issuable then in effect following such adjustment.
(7) No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of Series A
Preferred Stock. If more than one share of Series A Preferred Stock 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 computed on the
basis of the aggregate Stated Value of the shares of Series A Preferred Stock so
surrendered. If the conversion of any share or shares of Series A Preferred
Stock 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 conversion shall be paid to such holder in cash by the Corporation.
(8) In case of any capital reorganization or
reclassification or other change of outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value), or in case of any consolidation or merger of the Corpora-
tion with or into another Person (other than a consolidation or merger in which
the Corporation is the resulting or surviving Person and which does not result
in any reclassification or change of outstanding Common Stock), (any of the
foregoing, a "Transaction"), the Corporation, or such successor or purchasing
Person, as the case may be, shall execute and deliver to each holder of Series A
Preferred Stock at least ten (10) Business Days prior to effecting any of the
foregoing Transactions a certificate that the holder of each share of Series A
Preferred Stock then outstanding shall have the right thereafter to convert such
share of Series A Preferred Stock into the kind and amount of shares of stock or
other securities (of the Corporation 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 share of Series A Preferred Stock could have been
converted immediately prior to such Transaction. Such certificate shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section (d)(vi). If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Common Stock includes shares of stock or other securities of a
Person other than the successor or purchasing Person and other than the
Corporation, which controls or is controlled by the successor or purchasing
Person or which, in connection with such Transaction, issues stock, securities,
other property or cash to holders 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 stock, securities, other property
or cash to the holders of Series A Preferred Stock upon conversion of the shares
of Series A Preferred Stock as provided above. The provisions of this Section
(d)(vi)(8) and any equivalent thereof in any such certificate similarly shall
apply to successive Transactions.
(9) In case at any time or from time to time:
(A) the Corporation shall declare a
dividend (or any other distribution) on its Common Stock;
(B) the Corporation shall authorize the
granting to the holders of its Common Stock of rights or warrants to subscribe
for or purchase any shares of stock of any class or of any other rights or
warrants;
(C) there shall be any reclassification of
the Common Stock, or any consolidation or merger to which the Corporation is a
party and for which approval of any shareholders of the Corporation is required,
or any sale or other disposition of all or substantially all of the assets of
the Corporation; or
(D) there shall be any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation; then the
Corporation shall mail to each holder of shares of Series A Preferred Stock at
such holder's address as it appears on the transfer books of the Corporation, as
promptly as possible but in any event at least 10 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 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. Such notice also shall specify the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for shares of stock or other securities or property or cash
deliverable upon such reclassification, consolidation, merger, sale, conveyance,
dissolution, liquidation or winding up.
(10) After a date one hundred fifty (150) days
from the Issue Date, the Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Series A Preferred Stock
pursuant to Section (d)(vi)(1), 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 outstanding shares of Series A Preferred Stock, 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
outstanding shares of Series A Preferred Stock.
(11) The issuance or delivery of certificates
for Common Stock upon the conversion of shares of Series A Preferred Stock
pursuant to Section(d)(vi)(1) shall be made without charge to the converting
holder of shares of Series A Preferred Stock for such certificates or for any
tax in respect 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 (subject to compliance with the
applicable provisions of federal and state securities laws) in such names as may
be directed by, the holders of the shares of Series A Preferred Stock converted;
provided, however, that the Corporation shall not be required to pay any tax
which 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
shares of Series A Preferred Stock converted, and the Corporation 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
Corporation the amount of such tax or shall have established to the reasonable
satisfaction of the Corporation that such tax has been paid.
(vii) Certain Remedies.
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Any registered holder of Series A Preferred
Stock shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Certificate of Designation and to enforce specifically
the terms and provisions of this Certificate of Designation in any court of the
United States or any state thereof having jurisdiction, this being in addition
to any other remedy to which such holder may be entitled at law or in equity.
(viii) Definitions.
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For the purposes of this Article IV, Section
3(d), 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 Exchange Act.
"Business Day" shall mean any day other
than a Saturday, Sunday or other day on which commercial banks in The City of
New York, New York are authorized or required by law or executive order to
close.
"Common Stock" shall mean the common
stock, par value $.01 per share, and each other class of capital stock, of the
Corporation that does not have a preference over any other class of capital
stock of the Corporation as to dividends or upon liquidation, dissolution or
winding up of the Corporation and, in each case, shall include any other class
of capital stock of the Corporation into which such stock is reclassified or
reconstituted.
"Current Market Price" per share shall
mean, on any date specified herein for the determination thereof, (a) the
average daily Market Price of the Common Stock for those days during the period
of forty (40) days, ending on such date, which are Trading Days, 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, the Market Price
on such date.
"Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder.
"Fair Market Value" shall mean the amount
which a willing buyer, under no compulsion to buy, would pay a willing seller,
under no compulsion to sell, in an arm's-length transaction (assuming in the
case of Common Stock (i) that the Common Stock is valued "as if fully
distributed" and (ii) no consideration is given for minority investment
discounts, or discounts related to illiquidity or restrictions on
transferability).
"Issue Date" shall mean the original date
of issuance of shares of Series A Preferred Stock to Patel.
"Junior Stock" shall mean any capital
stock of the Corporation ranking junior (either as to dividends or upon liquida-
tion, dissolution or winding up) to the Series A Preferred Stock including,
without limitation, the Common Stock.
"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
average of the closing bid and asked prices on such date, as officially reported
on the principal national securities exchange on which the Common Stock is then
listed or admitted to trading; (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, the last trading price of the Common Stock on
such date; (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 Common Stock on such date as shown by NASDAQ and reported by any
member firm of the NYSE, selected by the Corporation; or (d) if the Common Stock
is not traded on NASDAQ, then the average of the reported closing bid and asked
prices of the Common Stock on such date as shown by the OTC Bulletin Board of
the National Association of Securities Dealers, Inc. If neither (a), (b), (c) or
(d) is applicable, Market Price shall mean the Fair Market Value per share
determined in good faith by the Board of Directors of the Corporation which
shall be deemed to be Fair Market Value unless holders of at least 51% of the
outstanding shares of Series A Preferred Stock request that the Corporation
obtain an opinion of a nationally recognized investment banking firm chosen by
such holders (at the Corporation's expense), in which event Fair Market Value
shall be as determined by such investment banking firm.
"NASDAQ" shall mean the National Market
System of the NASDAQ Stock Market.
"NYSE" shall mean the New York Stock
Exchange, Inc.
"Parity Stock" shall mean any capital
stock of the Corporation, including the Series B Preferred Stock, ranking on a
par (either as to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, including, without limitation, the Series B
Preferred Stock.
"Person" shall mean any individual, firm,
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind, and shall include any
successor (by merger) of such entity.
"Senior Stock" shall mean any capital
stock of the Corporation ranking senior (either as to dividends or upon liquida-
tion, dissolution or winding up) to the Series A Preferred Stock.
"Series B Preferred Stock" shall mean
shares of Senior Convertible Preferred Stock, Series B, par value $0.01 per
share, of the Company.
"Stated Value" shall mean $50.00 per
share of Series A Preferred Stock.
"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.
"Trading Days" shall mean a day on which
the national securities exchanges are open for trading.
(ix) Modification or Amendment.
-------------------------
Except as specifically set forth herein,
modifications or amendments to this Certificate of Designation may be made by
the Corporation with the consent of the holders of at least 51% of the
outstanding shares of Series A Preferred Stock.
<PAGE>
(e) Pursuant to the authority conferred upon the Board
of Directors of the Corporation by the foregoing provisions of this Certificate
of Incorporation, the Board of Directors of the Corporation on June 1, 1999 duly
adopted a resolution creating a series of Preferred Stock, the designation and
number of shares thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof are as follows:
(i) Designation and Number.
----------------------
(1) The shares of such series shall be
designated as Senior Convertible Preferred Stock, Series B (the "Series B
Preferred Stock"). The number of shares initially constituting the Series B
Preferred Stock shall be 100,000, which number may be decreased (but not
increased) by the Board of Directors without a vote of stockholders; provided,
however, that such number may not be decreased below the number of then out-
standing shares of Series B Preferred Stock.
(2) The Series B Preferred Stock shall, with
respect to rights on liquidation, dissolution or winding up, rank (i) on a
parity with the Series A Preferred Stock, and (ii) prior to all other classes
and series of Junior Stock (as defined below) of the Corporation now or here-
after authorized including, without limitation, the Common Stock.
(3) Capitalized terms used herein and not
other-wise defined shall have the meanings set forth in Section (e)(viii) below.
(ii) Dividends and Distributions.
---------------------------
(1) Each holder of shares of Series B
Preferred Stock, shall be entitled to receive, when, as and if declared by the
Board of Directors, dividends and other distributions (including, without
limitation, any options, warrants or other rights to acquire capital stock of
the Corporation whether or not pursuant to a shareholder rights plan, "poison
pill" or similar arrangement, or other property or assets) on a parity with each
holder of Common Stock. Such dividends and distributions shall be payable on
each share of Series B Preferred Stock in an amount equal to the dividends per
share payable on the number of shares of Common Stock into which such share of
Series B Preferred Stock would be convertible under Section (e)(vi) on the
record date for determining eligibility to receive such dividends, or if no
record date is established, on the date such dividends are actually paid.
(2) If at any time after 150 days of the Issue
Date all the shares of Series B Preferred Stock are not converted into fully
paid and non-assessable shares of Common Stock, as contemplated by Section
(e)(vi)(1), then the holders of shares of Series B Preferred Stock in preference
to the holders of Common Stock and of any shares of Parity Stock or other Junior
Stock of the Corporation, shall be entitled to receive, so long as all the
shares of Series B Preferred Stock are not converted into fully paid and non-
assessable shares of Common Stock, when, as and if declared by the Board of
Directors, out of the assets of the Corporation legally available therefor,
cumulative cash dividends at a rate on the Stated Value thereof equal to 6.0%,
calculated on the basis of a 360-day year consisting of twelve 30-day months and
compounded quarterly, accruing and payable in equal quarterly payments, in
immediately available funds, on the last day of March, June, September and
December or, if any such day is not a Business Day, the next succeeding Business
Day, in each year.
(iii) Voting Rights.
-------------
(1) Except for such voting rights as shall be
granted to the holders of shares of Series B Preferred Stock by this Section
(e)(iii) or by law, the holders of shares of Series B Preferred Stock shall have
no voting rights.
(2) (A) Unless the consent or approval of a
greater number of shares shall then be required by law, the affirmative vote of
the holders of at least 51% of the outstanding shares of Series B Preferred
Stock, voting separately as a single class, in person or by proxy, at a special
or annual meeting of stockholders called for the purpose, shall be necessary to:
(I) increase the authorized number of
shares of Series B Preferred Stock; and
(II) authorize, adopt or approve an
amendment to the Charter that would increase or decrease the par value of the
shares of Series B Preferred Stock or Series A Preferred Stock, or alter or
change the powers, preferences or special rights of the shares of Series B
Preferred Stock or Series A Preferred Stock, or otherwise affect the rights of
the shares of the Series B Preferred Stock adversely, including, without
limitation, the liquidation preference provisions.
(3) (A) At each meeting of stockholders at
which the holders of shares of Series B Preferred Stock shall have the right,
voting separately as a single class, to take any action, the presence in person
or by proxy of the holders of record of one-third of the total number of shares
of Series B Preferred Stock then outstanding and entitled to vote on the matter
shall be necessary and sufficient to constitute a quorum. At any such meeting or
at any adjournment thereof:
(I) the absence of a quorum of the
holders of shares of any other class or series of capital stock shall not
prevent the taking of any action as provided in this Section (e)(iii); and
(II) in the absence of a quorum of the
holders of shares of Series B Preferred Stock, a majority of the holders of such
shares present in person or by proxy shall have the power to adjourn the meeting
as to the actions to be taken by the holders of shares of Series B Preferred
Stock from time to time and place to place without notice other than announce-
ment at the meeting until a quorum shall be present.
(B) For taking of any action as provided
in Section (e)(iii)(2) by the holders of shares of Series B Preferred Stock,
each such holder shall have one vote for each share of such stock standing in
his name on the transfer books of the Corporation as of any record date fixed
for such purpose or, if no such date be fixed, at the close of business on the
Business Day next preceding the day on which notice is given, or if notice is
waived, at the close of business on the Business Day next preceding the day on
which the meeting is held; provided, however, that shares of Series B Preferred
Stock held by the Corporation or any Affiliate of the Corporation shall not be
deemed to be outstanding for purposes of taking any action as provided in this
Section (e)(iii).
(iv) Reacquired Shares.
-----------------
Any shares of Series B Preferred Stock
converted, exchanged, redeemed, purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares of Series B Preferred Stock
shall upon their cancellation become authorized but unissued shares of preferred
stock, par value $.01 per share, of the Corporation and, upon the filing of an
appropriate Certificate of Designation with the Secretary of State of the State
of New York, may be reissued as part of another series of preferred stock, par
value $.01 per share, of the Corporation, but in any event may not be reissued
as shares of Series B Preferred Stock unless all of the shares of Series B
Preferred Stock issued on the Issue Date shall have already been redeemed or
converted.
(v) Liquidation, Dissolution or Winding Up.
--------------------------------------
(1) If the Corporation shall commence a
voluntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or consent to the
entry of an order for relief in an involuntary case under any such law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any sub-
stantial 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
become due or if a decree or order for relief in respect of the Corporation
shall be entered by a court having jurisdiction in the premises in an
involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up (any such event, a
"Liquidation"), no distribution shall be made to the holders of shares of Junior
Stock unless, prior thereto, the holders of shares of Series B Preferred Stock
shall have received an amount per share of Series B Preferred Stock equal to the
greater of (A) the Stated Value, plus all declared and unpaid dividends to the
date of distribution plus all accrued and unpaid dividends, whether or not
declared or currently payable to the date of distribution, or (B) the proceeds
in Liquidation that the holders of Series B Preferred Stock would have received
in respect of all shares of Common Stock issuable to such holders upon
conversion of a share of Series B Preferred Stock owned by such holders,
assuming that such share of Series B Preferred Stock owned by such holders had
been converted into shares of Common Stock in accordance with Section (e)(vi)
immediately prior to the Liquidation (such greater amount being the "Series B
Preferred Stock Liquidation Amount").
(2) Notwithstanding the foregoing, if the
assets distributable upon a Liquidation shall be insufficient to pay in full the
Series B Preferred Stock Liquidation Amount on all shares of Series B Preferred
Stock outstanding and any amount payable to the holders of Parity Stock, then
all of the assets available after payment of any amounts payable on the Senior
Stock shall be distributed among the holders of the Series B Preferred Stock and
the Parity Stock ratably in proportion to the respective amounts of the assets
to which they would otherwise be entitled.
(3) Neither the consolidation or merger of the
Corporation with or into any other Person nor the sale or other distribution to
another Person of all or substantially all the assets, property or business of
the Corporation, shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section (e)(v).
(vi) Conversion.
----------
(1) At the later of (i) the amendment to the
Corporation's certificate of incorporation increasing the total number of
authorized shares of Common Stock by 55,000,000 shares or (ii) the obtainment
of all governmental and regulatory approvals necessary for the conversion of
shares of Series B Preferred Stock into shares of Common Stock, each outstanding
share of Series B Preferred Stock shall immediately and automatically, with no
further action required to be taken by the Corporation or the holder thereof, be
converted into, subject to the terms and provisions of this Section (e)(vi),
fully paid and non-assessable shares of Common Stock, subject to Section
(e)(vi)(7). Each share of Series B Preferred Stock is convertible into a number
of shares of Common Stock ("Number Issuable") which is initially 100 shares,
subject to adjustment as set forth in Section (e)(vi)(4). Immediately there-
after, each holder of Series B Preferred Stock shall be deemed to be the holder
of record of the Common Stock issuable upon conversion of such holder's Series B
Preferred Stock notwithstanding that the share register of the Corporation shall
then be closed or that certificates representing such Common Stock shall not
then be actually delivered to such Person. Upon notice from the Corporation,
each holder of Series B Preferred Stock so converted shall promptly surrender to
the Corporation, at any place where the Corporation shall maintain a transfer
agent for its Series B Preferred Stock and Common Stock, certificates represent-
ing the shares so converted, duly endorsed in blank or accompanied by proper
instruments of transfer.
(2) As promptly as practicable after the
surrender, as herein provided, of any shares of Series B Preferred Stock for
conversion pursuant to Section (e)(vi)(1), the Corporation shall deliver to or
upon the written order of the holder of such shares so surrendered a certificate
or certificates representing the number of fully paid and non-assessable shares
of Common Stock into which such shares of Series B Preferred Stock may be or
have been converted in accordance with the provisions of this Section (e)(vi).
(3) To the extent permitted by law, when
shares of Series B Preferred Stock are converted, all dividends which have been
declared and are unpaid and dividends which are accrued and are unpaid on the
Series B Preferred Stock so converted to the date of conversion shall be
immediately due and payable and must accompany the shares of Common Stock issued
upon such conversion.
(4) The Number Issuable shall be subject to
adjustment from time to time as follows:
(A) In case the Corporation shall at any
time or from time to time after the Issue Date:
(I) pay a dividend or make a distribu-
tion on the outstanding shares of Common Stock in capital stock of the Corpora-
tion;
(II) subdivide the outstanding shares
of Common Stock into a larger number of shares;
(III) combine the outstanding shares of
Common Stock into a smaller number of shares; or
(IV) issue any shares of its capital
stock in a reclassification of the Common Stock;
then, and in each such case, the Number Issuable in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be taken
by the Corporation) so that the holder of any share of Series B Preferred Stock
thereafter converted shall be entitled to receive the number of shares of Common
Stock or other securities of the Company which such holder would have owned or
had been entitled to receive upon or by reason of any of the events described
above, had such share of Series B Preferred Stock been converted immediately
prior to the happening of such event. An adjustment made pursuant to this clause
(A) shall become effective retroactively (x) 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 distribution, or (y) in the case of any such
subdivision, combination or reclassification, to the close of business on the
date upon which such corporate action becomes effective.
(B) If the Corporation, at any time or
from time to time, shall take any action affecting its Common Stock similar to
or having an effect similar to any of the actions described in any of Section
(e)(vi)(4)(A) or Section (e)(vi)(8) (but not including any action described in
any such Section) and the Board of Directors of the Corporation in good faith
determines that it would be equitable in the circumstances to adjust the Number
Issuable as a result of such action, then, and in each such case, the Number
Issuable shall be adjusted in such manner and at such time as the Board of
Directors of the Corporation in good faith determines would 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 Series B Preferred Stock).
(C) Notwithstanding anything herein to the
contrary, no adjustment under this Section (e)(vi)(4) need be made to the Number
Issuable unless such adjustment would require an increase or decrease of at
least 1% of the Number Issuable then in effect. Any lesser adjustment shall be
carried forward and shall be made at the time of and together 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
Number Issuable. Any adjustment to the Number Issuable carried forward and not
theretofore made shall be made immediately prior to the conversion of any shares
of Series B Preferred Stock pursuant hereto.
(5) If the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then thereafter no adjustment in the Number Issuable then in
effect shall be required by reason of the taking of such record.
(6) Upon any increase or decrease in the
Number Issuable, then, and in each such case, the Corporation promptly shall
deliver to each registered holder of Series B Preferred Stock at least 5
Business Days prior to effecting any of the foregoing transactions a certi-
ficate, 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 Corpora-
tion, setting forth in reasonable detail the event requiring the adjustment and
the method by which such adjustment was calculated and specifying the increased
or decreased Number Issuable then in effect following such adjustment.
(7) No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of Series B
Preferred Stock. If more than one share of Series B Preferred Stock 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 computed on the
basis of the aggregate Stated Value of the shares of Series B Preferred Stock so
surrendered. If the conversion of any share or shares of Series B Preferred
Stock 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 conversion shall be paid to such holder in cash by the Corporation.
(8) In case of any capital reorganization or
reclassification or other change of outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value), or in case of any consolidation or merger of the Corpora-
tion with or into another Person (other than a consolidation or merger in which
the Corporation is the resulting or surviving Person and which does not result
in any reclassification or change of outstanding Common Stock), (any of the
foregoing, a "Transaction"), the Corporation, or such successor or purchasing
Person, as the case may be, shall execute and deliver to each holder of Series B
Preferred Stock at least 10 Business Days prior to effecting any of the fore-
going Transactions a certificate that the holder of each share of Series B
Preferred Stock then outstanding shall have the right thereafter to convert such
share of Series B Preferred Stock into the kind and amount of shares of stock or
other securities (of the Corporation 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 share of Series B Preferred Stock could have been
converted immediately prior to such Transaction. Such certificate shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section (e)(vi). If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Common Stock includes shares of stock or other securities of a
Person other than the successor or purchasing Person and other than the
Corporation, which controls or is controlled by the successor or purchasing
Person or which, in connection with such Transaction, issues stock, securities,
other property or cash to holders 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 stock, securities, other property
or cash to the holders of Series B Preferred Stock upon conversion of the shares
of Series B Preferred Stock as provided above. The provisions of this Section
(e)(vi)(8) and any equivalent thereof in any such certificate similarly shall
apply to successive Transactions.
(9) In case at any time or from time to time:
(A) the Corporation shall declare a
dividend (or any other distribution) on its Common Stock;
(B) the Corporation shall authorize the
granting to the holders of its Common Stock of rights or warrants to subscribe
for or purchase any shares of stock of any class or of any other rights or
warrants;
(C) there shall be any reclassification of
the Common Stock, or any consolidation or merger to which the Corporation is a
party and for which approval of any shareholders of the Corporation is required,
or any sale or other disposition of all or substantially all of the assets of
the Corporation; or
(D) there shall be any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation;
then the Corporation shall mail to each holder of shares of Series B Preferred
Stock at such holder's address as it appears on the transfer books of the
Corporation, as promptly as possible but in any event at least 10 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 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. Such notice also shall specify the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for shares of stock or other securities or property
or cash deliverable upon such reclassification, consolidation, merger, sale,
conveyance, dissolution, liquidation or winding up.
(10) After 150 days of the Issue Date, the
Corporation shall at all times reserve and keep available for issuance upon the
conversion of the Series B Preferred Stock pursuant to Section (e)(vi)(1), 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 outstanding shares of
Series B Preferred Stock, 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 outstanding shares of Series B
Preferred Stock.
(11) The issuance or delivery of certificates
for Common Stock upon the conversion of shares of Series B Preferred Stock
pursuant to Section (e)(vi)(1) shall be made without charge to the converting
holder of shares of Series B Preferred Stock for such certificates or for any
tax in respect 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 (subject to compliance with the
applicable provisions of federal and state securities laws) in such names as may
be directed by, the holders of the shares of Series B Preferred Stock converted;
provided, however, that the Corporation shall not be required to pay any tax
which 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
shares of Series B Preferred Stock converted, and the Corporation 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
Corporation the amount of such tax or shall have established to the reasonable
satisfaction of the Corporation that such tax has been paid.
(vii) Certain Remedies.
----------------
Any registered holder of Series B Preferred
Stock shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Certificate of Designation and to enforce specifically
the terms and provisions of this Certificate of Designation in any court of the
United States or any state thereof having jurisdiction, this being in addition
to any other remedy to which such holder may be entitled at law or in equity.
(viii) Definitions.
-----------
For the purposes of this Article IV, Section
3(e), 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 Exchange
Act.
"Business Day" shall mean any day other than a
Saturday, Sunday or other day on which commercial banks in The City of New York,
New York are authorized or required by law or executive order to close.
"Common Stock" shall mean the common stock,
par value $.01 per share, and each other class of capital stock, of the
Corporation that does not have a preference over any other class of capital
stock of the Corporation as to dividends or upon liquidation, dissolution or
winding up of the Corporation and, in each case, shall include any other class
of capital stock of the Corporation into which such stock is reclassified or
reconstituted.
"Current Market Price" per share shall mean,
on any date specified herein for the determination thereof, (a) the average
daily Market Price of the Common Stock for those days during the period of 40
days, ending on such date, which are Trading Days, 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, the Market Price on such date.
"Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder.
"Fair Market Value" shall mean the amount
which a willing buyer, under no compulsion to buy, would pay a willing seller,
under no compulsion to sell, in an arm's-length transaction (assuming in the
case of Common Stock (i) that the Common Stock is valued "as if fully distri-
buted" and (ii) no consideration is given for minority investment discounts, or
discounts related to illiquidity or restrictions on transferability).
"Issue Date" shall mean the original date of
issuance of shares of Series B Preferred Stock to The 1818 Fund II, L.P., a
Delaware limited partnership.
"Junior Stock" shall mean any capital stock of
the Corporation ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Preferred Stock including, without
limitation, the Common Stock.
"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 average
of the closing bid and asked prices on such date, as officially reported on the
principal national securities exchange on which the Common Stock is then listed
or admitted to trading; (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, the last trading price of the Common Stock on such date;
(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 Common Stock on such date as shown by NASDAQ and reported by any member firm
of the NYSE, selected by the Corporation; or (d) if the Common Stock is not
traded on NASDAQ, then the average of the reported closing bid and asked prices
of the Common Stock on such date as shown by the OTC Bulletin Board of the
National Association of Securities Dealers, Inc. If neither (a), (b), (c) or (d)
is applicable, Market Price shall mean the Fair Market Value per share
determined in good faith by the Board of Directors of the Corporation which
shall be deemed to be Fair Market Value unless holders of at least 51% of the
outstanding shares of Series B Preferred Stock request that the Corporation
obtain an opinion of a nationally recognized investment banking firm chosen by
such holders (at the Corporation's expense), in which event Fair Market Value
shall be as determined by such investment banking firm.
"NASDAQ" shall mean the National Market System
of the NASDAQ Stock Market.
"NYSE" shall mean the New York Stock Exchange,
Inc.
"Parity Stock" shall mean any capital stock of
the Corporation, including the Series A Preferred Stock, ranking on a par
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series B Preferred Stock including, without limitation, the Series A Preferred
Stock.
"Person" shall mean any individual, firm,
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind, and shall include any
successor (by merger) of such entity.
"Senior Stock" shall mean any capital stock of
the Corporation ranking senior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Preferred Stock.
"Series A Preferred Stock" shall mean shares
of Senior Convertible Preferred Stock, Series A, par value $0.01 per share, of
the Company.
"Stated Value" shall mean $50.00 per share of
Series B Preferred Stock
"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.
"Trading Days" shall mean a day on which the
national securities exchanges are open for trading.
(ix) Modification or Amendment.
-------------------------
Except as specifically set forth herein,
modifications or amendments to this Certificate of Designation may be made by
the Corporation with the consent of the holders of at least 51% of the
outstanding shares of Series B Preferred Stock.
FOURTH: The Board of Directors duly authorized and approved
the foregoing amendments under the authority vested in said Board of Directors
under the provisions of the Corporation's Certificate of Incorporation and of
Section 502 of the BCL.
IN WITNESS WHEREOF, I have signed my name hereunto and affirm
that the statements made herein are true under the penalties of perjury on this
4th day of June, 1999.
/s/ Craig S. Dupont
------------------------------------
Name: Craig S. Dupont
Title: Acting President and Chief
Executive Officer
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
THE WELLCARE MANAGEMENT GROUP, INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated the 19th day of May,
1999, by and between KIRAN C. PATEL ("Purchaser"), and THE WELLCARE MANAGEMENT
GROUP, INC., a New York corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is the owner of record and beneficial owner of all
of the outstanding capital stock of WellCare of New York, Inc., a New York
corporation certified to operate a health maintenance organization in certain
counties in the State of New York ("WellCare-NY");
WHEREAS, WellCare-NY is the owner of record and beneficial owner of all
of the outstanding capital stock of WellCare of Connecticut, Inc., a Connecticut
corporation certified to operate a health maintenance organization in the State
of Connecticut ("WellCare-CT");
WHEREAS, the Company desires to sell to Purchaser, and Purchaser
desires to purchase from the Company, for the sum of Five Million Dollars
($5,000,000), shares of a newly authorized series of preferred stock of the
Company on the terms and subject to the conditions set forth herein (the "Series
A Preferred Stock"), as a result of which purchase Purchaser shall own and shall
have the immediate right to vote fifty-five percent (55%) of the outstanding
voting stock of the Company and such Series A Preferred Stock shall be
convertible into fifty-five percent (55%) of the outstanding shares of Common
Stock, $.01 par value per share (the "Common Stock") of the Company (after
giving effect to any shares issuable to any other holder of any outstanding
series of preferred stock of the Company and after the authorization of the
number of additional shares of Common Stock necessary to permit the conversion
of the Series A Preferred Stock into Common Stock as provided herein).
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and promises herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504 or any similar group defined under a similar provision of
state, local or foreign law.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, plan, occurrence, event, incident, action, failure
to act, or transaction of which the Company has Knowledge that could reasonably
be expected to form the basis for any specified consequence.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock of the Company, par value $.01
per share.
"Class A Common Stock" means the Class A common stock of the Company,
$.01 per share.
"Company" means The WellCare Management Group, Inc., a New York
business corporation.
"Company's Disclosure Letter" has the meaning set forth in Section 3(a)
below.
"CHMI" means Comprehensive Health Management, Inc., a Florida
corporation.
"Consents" has the meaning set forth in Section 5(b) below.
"Controlled Group of Corporations" has the meaning set forth in Code
Section 1563.
"Debt" means any liability except accounts payable and accrued
liabilities arising in the Ordinary Course of Business.
"Deferred Intercompany Transaction" has the meaning set forth in
Treasury Regulation Sections 1.1502-13.
"Distributed Assets" has the meaning set forth in Section 5(d) below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensa-
tion or retirement plan or arrangement which is an Employee Pension Benefit
Plan, (b) qualified defined contribution retirement plan or arrangement which is
an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any Multi-
Employer Plan), or (d) Employee Welfare Benefit Plan or material fringe benefit
plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental Laws" means any federal, state or local environmental
law, ordinance, rule or regulation, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(42 U.S.C. Section 9601 et seq.) as amended, the Hazardous Materials Trans-
portation Act (49 U.S.C. Section 1801 et seq.) as amended, the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) as amended, and
in the regulations adopted and rules promulgated pursuant thereto.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Occupational Safety and Health Act of
1970, the Medical Waste Tracking Act of 1988, the U. S. Public Vessel Medical
Waste Anti-Dumping Act of 1988, the Marine Protection, Research and Sanctuaries
Act and Human Services, National Institute for Occupational Safety and Health,
Infections Waste Disposal Guidelines, Publication No. 88-119, each as amended,
together with all other laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges thereunder) of
federal, state, local and foreign governments (and all agencies thereof)
concerning pollution or protection of the environment, public health and safety,
or employee health and safety, including laws relating to emissions, discharges,
releases or threatened releases of medical wastes, pollutants, contaminants, or
chemical, industrial, hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, or chemical, industrial, hazardous or
toxic materials or wastes. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended. "Excess Loss Account" has the meaning set forth in
Treasury Regulation ss. 1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" has the meaning set forth in Section 4(f) below.
"Fund" shall mean The 1818 Fund II, L.P.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hazardous Materials" means any flammable explosives, radioactive
materials, hazardous materials, hazardous wastes, hazardous or toxic substances
or related or similar material, asbestos or any material containing asbestos, or
petroleum or any other substance or material of a type and in quantities
regulated by Environmental Law.
"HCFA" means the Health Care Financing Administration.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the published rules and regulations thereunder.
"Knowledge" means actual knowledge of a Person.
"Liability" means any liability or obligation to pay money (whether
known or unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, and whether due or to become due),
including any liability for Taxes.
"Management Agreements" means the Management Agreements to be entered
into by and among WellCare-NY and WellCare-CT and CHMI and/or its successors and
assigns, in the forms attached hereto as Exhibit A.
"Material Adverse Effect" means any event, change or effect that,
individually or when taken together with all other such events, changes or
effects, is or could reasonably be expected (as far as can be foreseen at the
time) to be materially adverse to the business, assets, liabilities, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole, other than effects caused by changes in general
economic conditions or conditions generally affecting the types of businesses in
which the Company and its Subsidiaries are engaged.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
3(f) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
3(f) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3(f)
below.
"Multi-Employer Plan" has the meaning set forth in ERISA Section 3(37).
"Note" shall mean the promissory note by the Company to the Fund in the
amount of approximately Fifteen Million Dollars ($15,000,000).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any individual, partnership, corporation, association,
joint stock company, limited liability company, trust, joint venture,
unincorporated organization, or governmental entity (or any department, agency
or political subdivision thereof).
"Preferred Stock" means the preferred stock of the Company, $.01 par
value per share.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2(a) below.
"Purchaser's Disclosure Letter" has the meaning set forth in Section 4
below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge or other security interest, other than (a) mechanics', materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable, and (c) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
"Series A Preferred Stock" means the series of preferred stock of the
Company being issued for sale to Purchaser under this Agreement, which preferred
stock shall be issued pursuant to the terms set forth on Exhibit B attached
hereto, which shall include but not be limited to the following: (i) automatic
conversion into shares of Common Stock equal to Fifty-Five percent (55%) of the
outstanding Common Stock of the Company upon the authorization of the increase
of the capital stock of the Company to Seventy-Five Million Shares (75,000,000);
(ii) no liquidation preference; and (iii) no dividend preference.
"Shares" means that number of shares of Series A Preferred Stock being
sold to Purchaser under this Agreement.
"Statutory Net Worth" is defined by the New York statutes, rules and
regulations with respect to certified health maintenance organizations.
"Subsidiaries" shall have the meaning set forth in Rule 405 of the
Securities Act and shall include, with respect to the Company, without
limitation, WellCare Administration, Inc., WellCare-CT, WellCare-NY, WellCare
Development, Inc., WellCare Medical Management, Inc., WellCare Management
Corporation, and WellCare Foundation, Inc. (which is in the process of being
dissolved pursuant to Article 10 of the New York Not-for-Profit Corporation
Law).
"Tax" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to any Tax, including any schedule
or attachment thereto and any amendment thereof.
2. Purchase and Sale of Shares.
(a) Purchase and Sale. On and subject to the terms and
conditions of this Agreement, Purchaser agrees to purchase from the Company, and
the Company agrees to sell to Purchaser, the Shares. As set forth on Exhibit B
attached hereto regarding the terms of the Series A Preferred Stock, the Shares
shall have immediate voting rights equal to fifty-five percent (55%) of the
outstanding shares of Common Stock (after giving effect to the conditions set
forth in Sections 6(a)(vii), 6(a)(x) and 6(a)(xi) hereof and any conversion
rights pursuant thereto) of the Company, and the Shares shall be convertible
into fifty-five percent (55%) of the outstanding shares of Common Stock at the
time of conversion thereof (subject to the Section 2(b) hereof). For purposes of
the foregoing calculations only, the number of outstanding shares of Common
Stock shall include the Ten Million (10,000,000) shares of nonvoting common
stock issuable upon conversion of the Preferred Stock that is to be issued to
the Fund in satisfaction of the liabilities of the Company to the Fund under the
Note. The Purchaser acknowledges and agrees that as of the date of this
Agreement and as of the Closing Date there is not and there shall not be a
sufficient number of authorized shares of Common Stock to permit Purchaser to
convert the Shares into Common Stock, and that the charter of the Company must
be amended after the Closing to authorize such additional shares of Common Stock
as shall be necessary to permit Purchaser to convert the Shares into Common
Stock.
(b) Anti-Dilution of Shares. If the Company should either
directly or indirectly distribute, convey, sell or by any other means increase
its authorized, issued and outstanding shares, then Purchaser shall receive from
the Company those number of shares that would permit Purchaser to maintain his
ownership of fifty-five percent (55%) of the outstanding voting stock of the
Company. For purposes of this Section 2(b), the term "directly or indirectly"
includes, but is not limited to, stock sales, options, warrants, additional
public offerings, employee stock ownership options or plans, payment of shares
to creditors, bonuses of stock, or any other scheme or device to issue shares of
the Company. The terms of this Section 2(b) shall be applicable until
Seventy-Five Million (75,000,000) shares of capital stock of the Company being
authorized, issued or outstanding. Notwithstanding the foregoing sentence or
anything to the contrary set forth in this Agreement, after having given effect
to all of the transactions contemplated by this Agreement (including the
issuance of capital stock of the Company to the Purchaser and the Fund, the
conversion of any such stock and of the Class A Common Stock into Common Stock
or other capital stock of the Company, as applicable, and the post-Closing
authorization of the additional shares of Common Stock and other capital stock
necessary therefor, but excluding any issuance of capital stock of the Company
in connection with and in satisfaction of (i) outstanding claims payable by the
Company to any of its providers, (ii) any claims by any of the Company's
creditors, and (iii) any fee owed to Bear, Stearns & Co., Inc. by the Company),
if and to the extent the Company issues any shares of capital stock up to
Seventy-Five Million (75,000,000) shares and any such additional shares of
capital stock of the Company are issued for consideration less than or equal to
Fifty Cents ($0.50) per share (a "Below Value Issue"), Purchaser shall not be
issued such additional shares as are necessary to maintain his ownership of
fifty-five percent (55%) of the outstanding voting stock of the Company but
instead shall be issued such additional shares as will result in his ownership
being diluted by fifty percent (50%) of the shares issued in such Below Value
Issue.
(c) Payment of Purchase Price. At the Closing, Purchaser shall
deliver to the Company the sum of Five Million Dollars ($5,000,000.00) in
certified or other immediately available funds as payment for the Shares.
(d) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Epstein
Becker & Green, P.C., 250 Park Avenue, New York, New York 10177, commencing at
9:00 a.m. local time on or before June 1, 1999, or such other date as Purchaser
and the Company may mutually determine (the "Closing Date"); provided, however,
that the Closing Date shall be no later than June 1, 1999.
(e) Deliveries at the Closing. At the Closing, (i) Purchaser
will deliver to the Company the various consideration, certificates, instruments
and documents referred to in Section 7(a) below, and (ii) the Company will
deliver to Purchaser the various consideration, certificates, instruments, and
documents referred to in Section 7(b) below.
3. Representations and Warranties of the Company. The Company
represents and warrants to Purchaser that the statements contained in this
Section 3 are correct and complete as of the date of this Agreement with respect
to the Company, except as set forth in documents filed by the Company with the
SEC on or prior to the Closing Date hereof or the Company's Disclosure Letter
executed and delivered by the Company at or prior to the Closing (the "Company's
Disclosure Letter"). The Company's Disclosure Letter has been arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 3.
(a) Organization, Qualification, and Corporate Power. The
Company is a business corporation duly organized, validly existing, and in good
standing under the laws of the State of New York. Each of its Subsidiaries are
corporations duly organized, validly existing and in good standing in their
respective states of incorporation. The Company and each of its Subsidiaries is
duly authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required, except where the failure
to so qualify would not have a Material Adverse Effect. The Company owns one
hundred percent (100%) of all the outstanding capital stock of each of its
Subsidiaries. There are no stock options, voting agreements, warrants,
shareholder agreements or other obligations with respect to its Subsidiaries and
its Subsidiaries' capital stock. Other than its Subsidiaries, the Company does
not own, directly or indirectly, any capital stock, equity interest or other
ownership interest in any corporation, partnership, association, joint venture,
limited liability company or other entity. The Company and each of its
Subsidiaries have full corporate power and authority and all licenses,
approvals, permits, and authorizations necessary to carry on the business in
which each of them is engaged and to own and use their respective properties.
The Company's Disclosure Letter lists each of the Company's Subsidiaries, along
with the directors and officers of the Company and each of its Subsidiaries. The
Company has delivered to Purchaser correct and complete copies of the charter
and bylaws of the Company and each of its Subsidiaries (as amended to date). The
minute books of the Company and each of its Subsidiaries (which contain the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors of the Company and the minute books of each
of its Subsidiaries) are correct and complete. The Company and its Subsidiaries
are not in violation of any provision of their respective charters or bylaws.
(b) Capitalization. The authorized capital stock of the
Company consists of 1,041,233 shares of Class A Common Stock, 20,000,000 shares
of Common Stock, and 1,000,000 shares of Preferred Stock, of which, as of May 6,
1999, 926,243 shares of Class A Common Stock, 6,673,149 shares of Common Stock,
and, subject to Section 6(a)(vii) hereof, no shares of Preferred Stock are
outstanding, and 14,266 shares of Common Stock are held as treasury stock. The
Series A Preferred Stock has not been authorized as of the date hereof. In
addition, Paragraph 3(b) of Company's Disclosure Letter describes all
outstanding options, warrants, voting trust or agreements, and any other items
which are or maybe applicable to any of the unissued, issued, or outstanding
capital stock of the Company or its Subsidiaries. Except as disclosed in
Paragraph 3(b) of Company's Disclosure Letter, there are no outstanding or
authorized stock appreciation, phantom stock, profit participation, voting
trusts, proxies, options, warrants, purchase rights, preemptive rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Company or the Subsidiaries to issue, sell or
otherwise cause to become outstanding any of its capital stock.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company is subject or any provision
of the charter or bylaws of the Company (except that there is not and there
shall not be as of the Closing Date a sufficient number of shares of authorized
Common Stock to permit Purchaser to convert the Shares into Common Stock) or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any "put" right, agreement,
contract, lease, license, instrument or other arrangement to which the Company
is a party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets). The
Company is not required to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any Person in order for the parties
to consummate the transactions contemplated by this Agreement, except for the
Consents. To the best of the Company's Knowledge, except for the Consents and
the authorization of the Series A Preferred Stock, no consent, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
hereby.
(d) Brokers' Fees. The Company has no Liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement.
(e) Title to Assets. The Company has good and marketable title
to, or a valid leasehold interest in, all of its properties and assets, free and
clear of all Security Interests, and has not sold, transferred, exchanged or
conveyed any of its properties and assets since the date of the Most Recent
Balance Sheet except for properties and assets disposed of in the Ordinary
Course of Business.
(f) Financial Statements. Attached as collective Paragraph
4(f) to the Company's Disclosure Letter are the following financial statements
of the Company (collectively the "Financial Statements"): (i) unaudited balance
sheet and statement of income, changes in stockholders' equity, and cash flow as
of and for the fiscal year ended December 31, 1998 (the "Most Recent Fiscal Year
End"); and (ii) unaudited balance sheet and statement of income, changes in
stockholders' equity, and cash flow (the "Most Recent Financial Statements") as
of March 31, 1999 (the "Most Recent Fiscal Month End"). The Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis and in accordance with the books and records of the
Company, present fairly the financial condition of the Company and the results
of operations of the Company and its Subsidiaries for such periods and as of
such dates, and are correct and complete.
(g) Events Subsequent to Most Recent Fiscal Year End. Since
the Most Recent Fiscal Year End and up to the date of this Agreement, there has
not been any Material Adverse Effect regarding the business, financial
condition, operations, results of operations, or future prospects of the
Company. Without limiting the generality of the foregoing, since that date:
(i) the Company has not sold, leased, transferred or
assigned any of its assets, tangible or intangible,
other than for fair consideration in the Ordinary
Course of Business;
(ii) the Company has not entered into any agreement,
contract, lease or license (or series of related
agreements, contracts, leases, and licenses)
involving more than $50,000.00 (alone or in the
aggregate) or outside the Ordinary Course of
Business;
(iii) no party (including the Company) has accelerated,
terminated, modified or canceled any agreement,
contract, lease or license (or series of related
agreements, contracts, leases, and licenses)
involving more than $50,000.00 (alone or in the
aggregate) to which the Company is a party or by
which the Company or its properties are bound;
(iv) the Company has not created, suffered or permitted
to attach or be imposed any Security Interest upon
any of its assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) involving
more than $50,000.00 (alone or in the aggregate) or
outside the Ordinary Course of Business;
(vi) the Company has not made any capital investment in,
loan to, or acquisition of the securities or assets
of any other Person (or series of related capital
investments, loans and acquisitions) involving more
than $50,000.00 (alone or in the aggregate) or
outside the Ordinary Course of Business;
(vii) the Company has not issued any note, bond or other
debt instrument or security, or created, incurred,
assumed or guaranteed any indebtedness for borrowed
money or capitalized lease obligation;
(viii) the Company has not delayed or postponed the payment
of accounts payable and other Liabilities outside
the Ordinary Course of Business;
(ix) the Company has not canceled, compromised, waived or
released any right or claim (or series of related
rights and claims) involving more than $50,000.00
(alone or in the aggregate) or outside the Ordinary
Course of Business;
(x) the Company has not granted any license or sub-
license of any rights under or with respect to any
Intellectual Property;
(xi) unless approved in writing by Purchaser, there has
been no change made or authorized in the charter or
bylaws of the Company;
(xii) except as set forth in this Agreement, unless
approved in writing by Purchaser, the Company has
not issued, sold or otherwise disposed of any of its
capital stock, or granted any options, warrants or
other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its
capital stock;
(xiii) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to
its capital stock (whether in cash or in kind) or
redeemed, purchased or otherwise acquired any of its
capital stock;
(xiv) the Company has not experienced any damage,
destruction or loss (whether or not covered by
insurance) to its property;
(xv) the Company has not made any loan to, or entered
into any other transaction with, any of its
directors, officers and employees outside the
Ordinary Course of Business;
(xvi) the Company has not entered into any employment
contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such
contract or agreement outside the Ordinary Course of
Business;
(xvii) with respect to any of its directors, officers and
employees, the Company has not: (1) granted any
increase in the base compensation; (2) adopted,
amended, modified or terminated any bonus, profit-
sharing, incentive, severance or other plan,
contract or commitment for the benefit thereof (or
taken any such action with respect to any other
Employee Benefit Plan); or (3) made any other change
in employment terms;
(xviii) the Company has not made or pledged to make any
charitable or other capital contribution; and
(xix) the Company has not committed to any of the
foregoing.
(h) Undisclosed Liabilities. The Company has no Liability,
except for (i) Liabilities set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto); (ii) Liabilities which have arisen in
the Ordinary Course of Business after the Most Recent Fiscal Month End and (iii)
Liabilities described in Paragraph 3(h) of the Company's Disclosure Letter (and,
with respect to each Liability described in items (i)-(iii) immediately above,
none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, malpractice or
infringement, or violation of law, except for any violation of law of which
Purchaser has Knowledge based on information provided to Purchaser by the
Company).
(i) Legal Compliance. The Company and its Subsidiaries have
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local and foreign governments and all agencies thereof
(including but not limited to the New York and Connecticut Departments of
Insurance and Health, and HCFA), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced against any of them alleging any failure so to comply.
(j) Tax Matters.
(i) The Company has filed all Tax Returns that it has
been required to file. All such Tax Returns are
correct and complete in all material respects. All
Taxes owed by the Company (whether or not shown on
any Tax Return) have been paid or accrued in the
Financial Statements. The Company is not the
beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by
an authority in a jurisdiction where the Company does
not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security
Interests with respect to any of the assets of the
Company that have arisen in connection with any
failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required
to have been withheld and paid in connection with
amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third
party.
(iii) There is no dispute or claim concerning any Tax
Liability of the Company either (A) claimed or raised
by any authority in writing or (B) as to which the
Company has Knowledge. Paragraph 3(j) of the
Company's Disclosure Letter lists all federal, state,
local and foreign income Tax Returns filed with
respect to the Company for taxable periods ended on
or after December 31, 1992, indicates those Tax
Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit.
The Company has delivered to Purchaser correct and
complete copies of all examination reports in respect
of the audit of any Tax Return and statements of
deficiencies assessed against or agreed to by the
Company since December 31, 1992.
(iv) The Company has not waived any statute of limitations
in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(v) The Company has not filed a consent under Code
Section 341(f) concerning collapsible corporations.
The Company has not made any payment, is not
obligated to make any payment, or is not a party to
any agreement that under certain circumstances could
obligate it to make any payments that will not be
deductible under Code Section 280G. The Company has
not been a United States real property holding
corporation within the meaning of Code Section
897(c)(2) during the applicable period specified
in Code Section 897(c)(1)(A)(ii). The Company has
disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a
substantial understatement of federal income Tax
within the meaning of Code Section 6662. The Company
is not a party to any Tax allocation or sharing
agreement. The Company (A) has not been a member of
an Affiliated Group filing a consolidated federal
income Tax Return or (B) has no Liability for the
Taxes of any Person (other than of the Company under
Treasury Regulation Sections 1.1502-6 or any similar
provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
(vi) Paragraph 3(j) of the Company's Disclosure Letter
sets forth the following information with respect to
the Company as of the most recent practicable date:
(A) the basis of the Company in its assets; and
(B) the amount of any net operating loss, net capital
loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution.
(vii) The Company has no Knowledge of any Basis for any
authority to assess any additional Taxes for any
period for which Tax Returns have been filed by the
Company.
(k) Real Property. The Company shall not own any real property
at the time of the Closing, and has not executed and delivered or otherwise
entered into any contract to purchase any real property. Paragraph 3(k) of the
Company's Disclosure Letter lists and describes briefly all real property leased
or subleased to the Company. The Company has delivered to Purchaser correct and
complete copies of the mortgages, promissory notes, evidences of indebtedness,
leases and subleases listed in Paragraph 3(k) of the Company's Disclosure Letter
(as such have been amended to date). Prior to the Closing, the Company shall
have satisfied all indebtedness due with respect to any and all real property
and/or have transferred all real property back to the respective lenders by way
of deed-in-lieu or such other device and the Company shall have obtained full
releases of debt with respect thereto. With respect to each lease and sublease
listed in Paragraph 3(k) of the Company's Disclosure Letter, except as otherwise
set forth in such Paragraph of the Company's Disclosure Letter:
(i) to the best of the Company's Knowledge, the lease or
sublease is legal, valid, binding, enforceable, and
in full force and effect;
(ii) to the best of the Company's Knowledge, the lease or
sublease will continue to be legal, valid, binding,
enforceable, and in full force and effect on
identical terms following the consummation of the
transactions contemplated hereby;
(iii) the Company, and, to the best of Company's Knowledge,
no other party to the lease or sublease is in breach
or default, and no event has occurred which, with
notice or lapse of time, would constitute a breach or
default or permit termination, modification or
acceleration thereunder;
(iv) the Company, and, to the best of Company's Knowledge,
no party to the lease or sublease has repudiated any
provision thereof;
(v) to the best of Company's Knowledge, there are no
disputes, oral agreements or forbearance programs in
effect as to the lease or sublease;
(vi) with respect to each sublease, the representations
and warranties set forth in subsections (i)-(v) above
are true and correct with respect to the underlying
lease;
(vii) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(viii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities
(including licenses, permits and certificates of
need) required in connection with the operation
thereof and have been operated and maintained in
accordance with applicable laws, rules and regula-
tions; and
(ix) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary
for the operation of said facilities.
(l) Tangible Personal Property. The Company owns or leases all
machinery, equipment and other tangible assets necessary for the conduct of its
business as presently conducted. The Company has received with respect to all
such machinery and equipment all approvals of governmental authorities
(including licenses, permits and certificates of need) required in connection
with the operation thereof, and the same have been operated and maintained in
accordance with applicable laws, rules, and regulations.
(m) Intentionally Omitted.
(n) Contracts. Paragraph 3(n) of the Company's Disclosure
Letter lists the following contracts and other agreements to which the Company
is a party:
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person
providing for lease payments in excess of $50,000.00
per annum;
(ii) any agreement (or group of related agreements) for
the purchase or sale of inventory, commodities,
supplies, products or other personal property, or for
the furnishing or receipt of services, the
performance of which will extend over a period of
more than one year, result in a loss to the Company,
or involve consideration in excess of $50,000.00
(alone or in the aggregate);
(iii) any agreement concerning a partnership or joint
venture in which the Company or any of its
Subsidiaries is a partner or joint venturer;
(iv) any agreement (or group of related agreements) under
which the Company has created, incurred, assumed or
guaranteed any indebtedness for borrowed money, or
any capitalized lease obligation, in excess of
$50,000.00 (alone or in the aggregate), or under
which the Company has imposed a Security Interest on
any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or non-
competition;
(vi) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance,
or other plan or arrangement for the benefit of the
Company's current or former directors, officers and
employees;
(vii) any collective bargaining agreement;
(viii) any agreement for the employment of any individual
on a full-time, part-time, consulting or other
basis providing annual compensation in excess of
$50,000.00 (alone or in the aggregate) or providing
severance benefits;
(ix) any agreement under which the Company has advanced or
loaned any amount to any of its directors, officers
and employees outside the Ordinary Course of
Business;
(x) any agreement the default or termination of which
could have Material Adverse Effect on the Company; or
(xi) any other agreement (or group of related agreements)
the performance of which involves consideration in
excess of $50,000.00 (alone or in the aggregate). The
Company has delivered to Purchaser a correct and
complete copy of each written agreement listed in
Paragraph 3(n) of the Company's Disclosure Letter
(as amended to date) and a written summary setting
forth the terms and conditions of each oral agreement
referred to in Paragraph 3(n) of the Company's
Disclosure Letter. With respect to each such agree-
ment, to the best of the Company's Knowledge: (1) the
agreement is legal, valid, binding, enforceable and
in full force and effect; (2) the agreement will
continue to be legal, valid, binding, enforceable and
in full force and effect on identical terms following
the consummation of the transactions contemplated
hereby; (3) no party is in breach or default, and no
event has occurred which with notice or lapse of time
would constitute a breach or default, or permit
termination, modification or acceleration, under the
agreement; and (4) no party has repudiated any
provision of the agreement.
(o) Notes and Accounts Receivable. All notes and accounts
receivable of the Company are reflected properly on its books and records, are
valid receivables subject to no setoffs or counterclaims except contractual
adjustments or discount arrangements with third-party reimbursers.
(p) Insurance. Paragraph 3(p) of the Company's Disclosure
Letter sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability, medical
malpractice, and workers' compensation coverage and bond and surety
arrangements) to which the Company has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past five (5)
years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policy-
holder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other
basis) and amount (including a description of how
deductibles and ceilings are calculated and operate)
of coverage; and
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy which has not been
terminated or expired prior to the date hereof, to the best of the Company's
Knowledge: (A) the policy is in full force and effect; and (B) neither the
Company nor any other party to the policy is in breach or default (including
with respect to the payment of premiums or the giving of notices), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification, or acceleration, under
the policy. The Company has been covered during the past five (5) years by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. Paragraph 3(p) of the
Company's Disclosure Letter describes any self-insurance arrangements affecting
the Company.
(q) Litigation. Section 3(q) of the Company's Disclosure
Letter sets forth each instance in which either the Company (i) is subject to
any outstanding injunction, judgment, order, decree, ruling or charge; or (ii)
is a party, or its threatened to be made a party, to any action, suit,
proceeding, hearing or investigation of, in or before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator, except for any such threatened action
with respect to the Company's non-compliance with the health maintenance
organization laws, rules and regulations of the States of New York and
Connecticut or any of the creditors of the Company (including, without
limitation, any party to whom the Company may have outstanding claims payable)
of which Purchaser has Knowledge based on information provided to the Purchaser
by the Company.
(r) Employment and Labor Matters.
(i) To the best of the Company's Knowledge, there are no
collective bargaining agreements or other labor union agreements or under-
standings to which the Company or any of its Subsidiaries is a party or by which
any of them is bound, nor is it or any of its subsidiaries the subject of any
proceeding asserting that it or any subsidiary has committed an unfair labor
practice or seeking to compel it to bargain with any labor organization as to
wages or conditions. Except as set forth in Paragraph 3(r) of the Disclosure
Letter, neither the Company nor any of its subsidiaries has encountered any
labor union organizing activity, or had any actual or threatened employee
strikes, work stoppages, slowdowns, lockouts, labor disputes, lawsuits,
administrative proceedings or representation questions and no such actions are
threatened at present.
(ii) The Company and its Subsidiaries have complied
in all material respects with all laws relating to the employment of labor,
including any provisions thereof relating to wages, hours, overtime, bonuses,
severance pay, benefits, COBRA, WARN, state and local equivalents to the WARN
Act, Family and Medical Leave Act, FLSA, state wage/hour laws, Americans with
Disabilities Act, Age Discrimination in Employment Act, collective bargaining,
and the payment of social security, unemployment compensation and similar taxes,
and neither the Company nor its Subsidiaries are liable for any arrears of wages
or any taxes or penalties for failure to comply with any of the foregoing;
(iii) There are no charges, suits, actions, administrative
proceedings or investigations, and/or claims, instituted by or against, pending,
threatened against and/or affecting, naming or involving the Company or its
Subsidiaries, before any court, governmental agency, department, board of
instrumentality, or before any arbitrator concerning or in any way related to
the employees of the Company or its subsidiaries, including, without limitation,
actions involving unfair labor practices, wrongful discharge and/or any other
restriction on the right of the Company or its Subsidiaries to terminate their
respective employees, employment discrimination, occupational safety and health,
and workers' compensation;
(iv) There are no post-employment benefits, including but
not limited to retiree medical and retiree accidental death and disability
benefits, for current or former employees of Company or its Subsidiaries; and
(v) There are no express or implied agreements, policies,
practices or procedures, whether written or verbal, pursuant to which any
employee or agent or contractor of the Company or its Subsidiaries is not
terminable at will without cost to the Company or its Subsidiaries.
(s) Employee Benefits.
(i) Paragraph 3(s) of the Company's Disclosure Letter
lists each Employee Benefit Plan that the Company maintains or to which the
Company contributes:
(A) Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund)
complies in form and in operation in all
respects with the applicable requirements of
ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual
Reports, PBGC-1's, and Summary Plan Descrip-
tions) have been filed or distributed
appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of
Subtitle B of Title I of ERISA and of Code
Section 4980B have been met with respect to each
such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction
contributions) which are due have been paid to
each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and all contribu-
tions for any period ending on or before the
Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan
or accrued in accordance with the past custom
and practice of the Company. All premiums or
other payments for all periods ending on or
before the Closing Date have been paid with
respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the require-
ments of a "qualified plan" under Code Section
401(a) and has received, within the last two (2)
years, a favorable determination letter from the
Internal Revenue Service.
(E) The market value of assets under each such
Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multi-
Employer Plan) equals or exceeds the present
value of all vested and nonvested Liabilities
thereunder determined in accordance with PBGC
methods, factors, and assumptions applicable
to an Employee Pension Benefit Plan
terminating on the date for determination.
(F) The Company has delivered to Purchaser correct
and complete copies of the plan documents and
summary plan descriptions, the most recent
determination letter received from the Internal
Revenue Service, the most recent Form 5500
Annual Report, and all related trust agreements,
insurance contracts, and other funding agree-
ments which implement each such Employee Benefit
Plan.
(ii) With respect to each Employee Benefit Plan that
the Company maintains or ever has maintained or to which it contributes, ever
has contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is in
Employee Pension Benefit Plan (other than any
Multi-Employer Plan) has been completely or
partially terminated or been the subject of a
Reportable Event as to which notices would be
required to be filed with the PBGC. No proceed-
ing by the PBGC to terminate any such Employee
Pension Benefit Plan (other than any Multi-
Employer Plan) has been instituted or
threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No
Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or
comply in connection with the administration or
investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect to the
administration or the investment of the assets
of any such Employee Benefit Plan (other than
routine claims for benefits) is pending or
threatened.
(C) The Company has not incurred, and neither the
Company nor the directors and officers (and
employees with responsibility for employee
benefits matters) of the Company has any reason
to expect that the Company will incur, any
Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under
the Code with respect to any such Employee
Benefit Plan which is an Employee Pension
Benefit Plan.
(iii) The Company does not contribute to, has never
contributed to, and has not been required to contribute to any Multi-Employer
Plan or has any Liability (including withdrawal Liability) under any Multi-
Employer Plan.
(iv) The Company does not maintain, has never maintained,
has never contributed, and has not been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance with Code Section
4980B).
(t) Guaranties. The Company is not a guarantor or is not
otherwise liable for any Liability or obligation (including indebtedness) of any
other Person.
(u) Environment, Health, and Safety.
(i) The Company and its Subsidiaries have complied with
all Environmental, Health, and Safety Laws, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply.
Without limiting the generality of the preceding sentence, the Company and their
respective Affiliates has obtained and been in compliance with all of the terms
and conditions of all permits, licenses, and other authorizations which are
required under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety Laws.
(ii) The Company has no Liability for damage to any site,
location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the historical
business of the Company have been free of asbestos, PCB's, methylene chloride,
dioxins, dibenzofurans, trichloroethylene, 1,2-trans-dichloroethylene, and
Extremely Hazardous Substances.
(iv) The Company is not aware of any asbestos-containing
materials installed on any real property owned or leased by the Company, nor has
the Company received any notice from any governmental authority, landlord or any
third party alleging any violation of any Environmental Laws and the Company
does not use or store Hazardous Materials on its owned or leased real property,
except for reasonable quantities of cleaning and office supplies which are
maintained in accordance with laws.
(v) Healthcare Compliance. The Company has not
perpetrated any Medicare or Medicaid fraud or abuse nor has any government
agency claimed that the Company has committed any fraud or abuse within the last
five (5) years. The Company is participating in or otherwise authorized to
receive reimbursement from or is a party to Medicare, Medicaid and other third-
party payor programs. All necessary certifications and contracts required for
participation in such programs are in full force and effect and have not been
amended or otherwise modified, rescinded, revoked or assigned and, to the best
of the Company's Knowledge, no condition exists or event has occurred which in
itself or with the giving of notice or the lapse of time or both would result
in the suspension, revocation, impairment, forfeiture or non-renewal of any such
third party payor program. The Company is and, after the execution and delivery
hereof and of the Management Agreements, will be in full compliance with the
requirements of all such third party payor programs applicable thereto.
(w) Rates and Reimbursement Policies. The Company has no rate
appeal currently pending before any governmental authority or any administrator
of any third party payor program.
(x) Authorization of Transaction. The Company has all the
requisite legal capacity and, except as provided in Section 3(y), has full power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Assuming the due execution and delivery hereof by the
Purchaser, this Agreement constitutes the valid and legally binding obligation
of the Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, moratorium, insolvency and other laws affecting the rights of
creditors and general equity principles.
(y) Stockholder Approval Requirements. Except for the
authorization post-Closing of such number of additional shares of Common Stock
as shall be necessary to permit Purchaser to convert the Shares into Common
Stock, no other action by the stockholders of the Company is required to approve
this Agreement and the transactions contemplated hereby.
(z) The Company's SEC Filings. No document filed by the
Company with the SEC since December 31, 1995 contained a misstatement of a
material fact or failed to state a material fact required to be stated therein
or necessary to make the statements made therein in light of the circumstances
under which they were made not misleading as of the date such filing was made.
The Company has filed all documents required to be filed by it with the SEC
since December 31, 1995, except for the Company's Annual Statement on Form 10-K
for the year ended December 31, 1998 and the Company's Quarterly Report on Form
10-Q for the quarter ended March 30, 1999 which shall be filed with reasonable
promptness by the Company.
4. Representations and Warranties of Purchaser. Purchaser
represents and warrants to the Company that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement except as
set forth in the disclosure letter executed and delivered by Purchaser at or
prior to the Closing (the "Purchaser's Disclosure Letter"). Purchaser's
Disclosure Letter shall be satisfactory to the Company and its counsel and will
be arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
(a) Existence and Power.
(i) CHMI is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization;
(ii) CHMI 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
(iii) Purchaser and CHMI are in compliance with all
requirements of applicable law.
(b) Authorization; No Contravention. The execution, delivery
and performance by Purchaser of this Agreement and by CHMI of the Management
Agreements:
(i) are within Purchaser's and CHMI power and authority
and has been duly authorized by all necessary action;
(ii) will not violate, conflict with or result in any
breach or contravention of any contractual obligation of Purchaser or CHMI, or
any order or decree directly relating to Purchaser or CHMI.
(c) Binding Effect. This Agreement has been duly executed and
delivered by Purchaser, and this Agreement constitutes the legal, valid and
binding obligation of Purchaser enforceable against it in accordance with its
terms.
(d) Purchase for Own Account. The Shares (including, for
purposes of this Section 4(d), the shares of Common Stock into which the Shares
may be converted) to be acquired by Purchaser pursuant to this Agreement are
being acquired by Purchaser for his own account and with no intention of
distributing or reselling such securities or any part thereof in any transaction
that would be in violation of the securities laws of the United States of
America or any state, without prejudice, however, to the rights of 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 disposition of Purchaser's property being at all
times within its control. If Purchaser should in the future decide to dispose of
any of such securities, Purchaser understands and agrees that he may do so only
in compliance with the Securities Act, the Securities 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 Purchaser should decide to dispose of any of such
securities, Purchaser will have the obligation in connection with such
disposition, at 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. 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."
(e) 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 Purchaser or any action taken by Purchaser.
5. Pre-Closing Covenants. The parties agree as follows with
respect to the period between the execution of this Agreement and the Closing.
(a) General. Each of the parties will use his or its best
efforts to take all action and to do all things necessary in order to consummate
and make effective the transactions contemplated by this Agreement (including
satisfaction of the closing conditions set forth in Section 6 below).
(b) Notices and Consents. The Company will give all notices to
third parties, and will use its best efforts to obtain all third-party consents
and authorizations, that may be required by law or the terms of any contract to
which the Company may be subject. Each of the parties will (and the Company will
cause its Subsidiaries to) give any notices to, make any filings with, and use
its best efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies required to consummate the transaction
contemplated by this Agreement, including, without limitation, those required
under : (i) the New York Business Corporation Act; (ii) the Securities Exchange
Act, including the filing of a Schedule 14D-9 by the Company and the filing of a
Schedule 13-D by Purchaser; (iii) the Health Maintenance Organization Acts of
the States of New York and Connecticut and the published rules and regulations
thereunder; (iv) Section 1876 of the Social Security Act, as amended, and the
published rules and regulations thereunder; (v) the Federal Employee Health
Benefits Program (5 U.S.C. Section 8901 et seq.) as amended; and (vi) the HSR
Act (items (i)-(vi) above being collectively referred to herein as the
"Consents").
(c) Operation of Business. The Company will not engage or
permit any officer, director or employee of the Company to engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing, the
Company will not: (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase or otherwise
acquire any of its capital stock; or (ii) otherwise engage in any practice, take
any action, or enter into any transaction that would violate any of the
Company's representations and warranties set forth in Section 3(g) above.
(d) Preservation of Business; Distribution of Assets. Unless
Purchaser agrees in writing and except as provided in this Agreement, the
Company will keep its properties substantially intact, including its present
physical facilities, working conditions, and relationships with lessors,
licensors, suppliers, patients and employees. The Company will, or will cause
its Subsidiaries, to sell, transfer, assign, convey, return, terminate (or
permit termination of), permit foreclosure upon, or otherwise distribute or
dispose of the following assets (the "Distributed Assets"), so that such
Distributed Assets are not assets or liabilities of the Company as of the
Closing, except as agreed by Purchaser at or prior to the Closing and as set
forth on Schedule 5(d) attached hereto:
(i) all real property;
(ii) all leases with respect to real property;
(iii) all tangible property leases; and
(iv) automobiles, aircraft and other vehicles.
(e) Full Access. The Company will permit representatives of
Purchaser to have full access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of the Company, to all
premises, properties, personnel, books, records (including Tax records),
contracts and documents of or pertaining to the Company. In that regard, the
Company will cause the Company to permit the independent accountants for
Purchaser to conduct such audits of the financial statements of the Company as
Purchaser shall elect or be required to obtain, and shall cause the accounting
personnel of the Company to assist such accountants in the preparation for and
conduct of such audit.
(f) Notice of Developments. The Company will give prompt
written notice to Purchaser of any material adverse development of which it
learns that would constitute or otherwise cause a breach of any of the
representations and warranties set forth in Section 3 above. Purchaser will give
prompt written notice to the Company of any material adverse development of
which he learns that would constitute or otherwise cause a breach of any of the
representations and warranties set forth in Section 4 above. No disclosure by
any party pursuant to this Section 5(f), however, shall be deemed to amend or
supplement the Company's Disclosure Letter or the Purchaser's Disclosure Letter
(as applicable), or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
(g) Exclusivity. Except as expressly permitted by the
following provisions of this Section 5(g), the Company shall not, and the
Company shall not authorize or permit any officer, director or employee of, or
any financial advisor, attorney, accountant or other advisor or representative
retained by, the Company to, solicit, initiate, encourage, endorse, or enter
into any agreement with respect to, or take any other action to knowingly
facilitate, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as defined below).
Notwithstanding the foregoing, nothing contained in this Letter shall prevent
the Board of Directors of the Company from (i) furnishing information to,
entering into discussions or negotiations with, or consummating the sale of
assets of WellCare-NY relating to its commercial HMO products, (ii) furnishing
information or entering into discussions or negotiations with or consummating
any Acquisition Proposal with any person or entity if and only to the extent (A)
the Board of Directors of the Company shall have determined in good faith that
such action is required in the exercise of its fiduciary duties, based upon the
advice of counsel, or (B) directed to so act by New York of Connecticut HMO
regulatory authorities, (iii) complying with Rules 14d-9 and 14e-2 promulgated
under the Securities Exchange Act, or (iv) making any disclosures to the
Company's shareholders if the Board of Directors of the Company shall have
determined, after consultation with outside counsel, that failure to make such
disclosures would be inconsistent with applicable law. As used in this
Agreement, "Acquisition Proposal" shall mean any tender or exchange offer, or
proposal, other than a proposal by Purchaser or its Affiliates, or offer to
acquire in any manner an equity interest in the Company or its subsidiaries or
the assets of the Company or its subsidiaries.
(h) Authorization of Series A Preferred Stock. The Company
shall authorize the Series A Preferred Stock in accordance with the terms set
forth on Exhibit B attached hereto.
(i) SEC Filings. The Company shall file with the SEC and any
appropriate state securities regulatory authority with reasonable promptness all
required disclosures, documents and necessary filings. The cost and expenses
associated with any such filings shall be the responsibility of the Company.
6. Conditions Precedent to Obligation of the Parties to Close.
(a) Conditions to Obligation of Purchaser. The obligation of
Purchaser to consummate the transactions to be performed by it in connection
with Closing is subject to satisfaction of the following conditions, any of
which may be waived by Purchaser if it executes a writing so stating at or prior
to Closing:
(i) the representations and warranties set forth in
Section 3 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Company shall have performed and complied with
all of his covenants hereunder in all material respects through Closing;
(iii) all Consents shall have been obtained;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, (C) affect adversely the right of Purchaser
to own the Shares and to control the Company, or (D) affect adversely the right
of the Company to own its assets and to operate its business (and no such
injunction, judgment, order, decree, ruling or charge shall be in effect);
(v) Purchaser shall have received the resignations,
effective as of Closing, of each director and officer of the Company and the
Subsidiaries other than those whom Purchaser shall have specified in writing
prior to Closing;
(vi) WellCare-NY and WellCare-CT shall have executed and
delivered to CHMI the Management Agreements;
(vii) the Fund shall have converted the Note into One
Million (1,000,000) shares of Preferred Stock (which shares of Preferred Stock
shall be convertible into Ten Million (10,000,000) shares of non-voting common
stock of the Company, if and when such additional shares of common stock as are
necessary to permit such conversion have been authorized by the shareholders of
the Company) and the Company shall have entered into a shareholders' agreement
with the Fund pursuant to which the Fund and its Affiliates shall agree not to
sell any of such shares of Preferred Stock (or any of the shares of Common Stock
into which such Preferred Stock may be converted) for six (6) months after the
Closing Date;
(viii) the Company shall have entered into settlement agree-
ments with each of the twenty largest gross dollar volume hospitals to whom the
Company had outstanding claims payable as of April 30, 1999 (the "Settlement
Agreements"), which Settlement Agreements shall be in substantially the form
attached as Exhibit C hereto;
(ix) Premier Bank shall have cancelled its mortgage(s) on
certain of the real property of the Company and/or its Subsidiaries, taking a
deed-in-lieu of foreclosure, and Key Bank shall have terminated or cancelled its
mortgage(s) on certain of the real property of, and certain of its personal
property leases with, the Company and/or its Subsidiaries;
(x) the Company shall have settled the shareholders class
action litigation pursuant to a Stipulation of Settlement in substantially the
form attached hereto as Exhibit D;
(xi) all of the holders of the Class A Common Stock shall
have converted their shares of Class A Common Stock into Common Stock on a 1:1
basis, and no shares of Class A Common Stock shall remain outstanding;
(xii) the Company shall have authorized the Series A
Preferred Stock, which stock shall provide for the voting and non-dilution
rights set forth in Section 2(a) and 2(b);
(xiii) the Company shall have entered into stock restriction
agreements, with the following shareholders, the form of which shall have been
approved in writing by Purchaser and which shall restrict the sale, transfer or
assignment of such shareholders' stock of the Company: the Fund (as set forth in
Section 6(a)(vii) above), Robert Morey, Ed Ullmann, Mark Dean, and Charles Crew;
(xiv) WellCare-NY shall have closed, or shall close on the
Closing Date, the transaction between WellCare-NY and Group Health Incorporated
(Sub) ("GHI") pursuant to which WellCare-NY is selling to GHI certain assets
relating to WellCare-NY's commercial health maintenance organization business in
the State of New York, as set forth in the Asset Purchase Agreement dated
May 18, 1999 by and between WellCare-NY and GHI;
(xv) no matter shall have been set forth in the Company's
Disclosure Letter that has or will have a Material Adverse Effect and about
which Purchaser shall not have had Knowledge as of the date of this Agreement;
(xvi) Purchaser shall have received from the Company's
legal counsel an opinion in form and substance reasonably acceptable to
Purchaser and his counsel; and
(xvii) The Company shall have come to an agreement with Bear,
Stearns & Co., Inc. ("Bear Stearns") with respect to the payment or other
settlement of the fee owed by the Company to Bear Stearns, which agreement shall
be acceptable to Purchaser.
(b) Conditions to Obligation of the Company. The obligation of
the Company to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions, any of
which may be waived by the Company if it executes a writing so stating at or
prior to the Closing:
(i) the representations and warranties set forth in
Section 4 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Purchaser shall have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
(iii) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect);
(iv) WellCare-NY and WellCare-CT shall have executed and
delivered to the Company the Management Agreements; and
(v) the Company shall have received a fairness opinion
from Bear Stearns regarding the sale of the Shares to Purchaser.
7. Deliveries at Closing.
(a) Documents to be Delivered by Purchaser. At the Closing,
Purchaser shall deliver the following instruments and documents to the Company
or other appropriate party:
(i) Five Million Dollars ($5,000,000) in certified or
other immediately available funds;
(ii) a Certificate of Good Standing with respect to CHMI
from the Secretary of State of the State of Delaware,
evidencing the existence and good standing of the
Company, dated not more than five (5) days prior to
the Closing Date; and
(iii) the Management Agreements duly executed by CHMI.
(b) Documents to be Delivered by the Company. At the Closing,
the Company shall deliver the following instruments and documents to Purchaser:
(i) stock certificate(s) representing the Shares;
(ii) a certificate of existence or good standing from the
New York Secretary of State evidencing the existence
and good standing of the Company, dated not more than
five (5) days prior to the Closing Date, along with
certificates of good standing or existence from the
Secretary of State of Connecticut or any other states
in which the Company is transacting business, and
certificates of existence and good standing from the
appropriate state authority in each of the Company's
Subsidiaries' states of formation;
(iii) the resignations as described in Section 6(a)(v);
(iv) documents evidencing the Consents;
(v) a certificate, executed by the Secretary of the
Company, to the effect that attached thereto is a
copy of the Articles of Incorporation of the Company,
including amendments, certified by the New York
Secretary of State as of a date not more than five
(5) days before the Closing, and bylaws of the
Company, all of which are in full force and effect
and have not been amended;
(vi) the Management Agreements, duly executed by WellCare-
CT and WellCare-NY;
(vii) the opinion of the Company's counsel (as set forth in
Section 6(a)(xvi) above);
(viii) the corporate books and records of the Company and
each of its Subsidiaries, all of which shall be
delivered to Purchaser's counsel;
(ix) a certificate (dated the Closing Date and in form and
substance reasonably satisfactory to Purchaser)
signed by a President or Vice-President of the
Company, certifying that the conditions specified in
Section 6(a)(i) have been fulfilled; and
(x) a certificate of the Secretary of the Company (dated
the Closing Date and in form and substance reasonably
satisfactory to Purchaser) certifying and setting
forth (i) the names, signatures and positions of the
officers of the Seller authorized to execute this
Agreement and (ii) a copy of the resolutions adopted
by the Board of Directors of the Company authorizing
the execution, delivery and performance of this
Agreement and the transactions contemplated hereby.
8. Termination.
(a) Methods of Termination. Anything herein to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing: (i) by mutual consent of Purchaser and the Company; (ii) by Purchaser
if any material representation or warranty on the part of the Company shall have
been untrue when made or if the Company shall have failed to perform any
material agreement on its part contained herein at the time to be performed by
it; (iii) by the Company if any material representation or warranty on the part
of Purchaser shall have been untrue when made or Purchaser shall have failed to
perform any material agreement on his part contained herein at the time to be
performed by him; or (iv) by Purchaser or the Company by written notice if the
Closing has not occurred on or before June 1, 1999, unless a later date is
established by the mutual written consent of such parties before or after such
date or unless the failure of such consummation by June 1, 1999, shall be due to
the failure of the party seeking to terminate this Agreement to perform in all
material respects each of its obligations under this Agreement, including the
accuracy of the representations and warranties included herein, required to be
performed by it on or prior to such date pursuant to the terms hereof.
(b) Effect of Termination. After termination of this Agreement
as permitted by Section 8(a) above:
(i) each party hereto will redeliver all documents, work
papers, and other materials of any party relating to the transactions
contemplated hereby, and all copies of such materials, whether so obtained
before or after the execution hereof, to the party furnishing the same; and
(ii) all information received by any party hereto with
respect to any other party or the business of such other party (other than
information which is a matter of public knowledge or which has heretofore been
published in any publication for public distribution or filed as public
information with any governmental authority or which is required to be disclosed
by law or by judicial or administrative process) shall not at any time be used
for the advantage of, or disclosed to third parties by, such party.
Except as provided in this Section 8(b), after termination of
this Agreement as permitted by Section 8(a), no party hereto shall have any
liability or further obligation to any other party to this Agreement as a result
hereof.
9. Survival, Indemnification and Expenses.
(a) Survival. All representations and warranties made in the
Agreement shall survive, and shall not be extinguished by the Closing or any
investigation made by or on behalf of any party hereto, for a period of eighteen
(18) months after the Closing Date; provided, however, that any claims made in
respect thereof by any party hereto must be in writing and must be received by
the other party within said period; and provided, further, that (i) claims with
respect to the representations and warranties set forth in Section 3(j) with
respect to a particular Tax may be made until the expiration of all applicable
statutes of limitation (and any extensions thereof in effect at the Closing
Date) relative to the liability relating to such Tax and (ii) claims based on
fraud or willful misrepresentation may in each case be asserted at any time
within one (1) year after Purchaser learns of such fraud or willful
misrepresentation or breach of such representation and warranty.
(b) Indemnification by the Company. Subject to the limits set
forth in this Section 9, the Company agrees to indemnify and hold harmless
Purchaser, upon its demand, from and against any and all losses, liabilities,
damages, obligations, costs and expenses (including, without limitation, amounts
paid in settlement and reasonable costs of investigating, preparing to defend
and defending any claim, action, suit, proceeding, inquiry or investigations in
respect thereof) incurred by Purchaser resulting from, relating to, or arising
out of (i) the inaccuracy of any representation or warranty made herein by the
Company, or (ii) breach of any covenant contained herein by the Company.
If any action, suit, proceeding or claim shall be brought
against the Company or Purchaser by any third party, which action, suit,
proceeding or claim, if determined adversely to the interest of the Company or
Purchaser and which would entitle Purchaser to indemnity pursuant to this
Section 9(b), Purchaser shall promptly notify the Company of the same in writing
and, if the Company so elects, the Company shall assume the defense thereof,
including the employment of counsel satisfactory to Purchaser and the payment of
all reasonable cost and expenses in respect thereof. Purchaser shall have the
right to employ counsel separate from any counsel employed by the Company n any
action, suit, proceeding or claim and to control (or, if Purchaser has elected
to allow the Company to assume the defense thereof, participate in) the defense
thereof and the fees and expense of such counsel employed by Purchaser shall be
at the expense of the Company. The Company shall not be liable for any settle-
ment of any such action, suit, proceeding or claim effected without its written
consent (which shall not be unreasonably withheld), but if settled with the
written consent of the Company, or if there shall be a final judgment for
plaintiff in any such action, subject to the limits set forth in this Section 9,
the Company agrees to indemnify and hold harmless Purchaser from and against any
loss, liability, obligation, damage, cost or expense by reason of such settle-
ment or judgment.
(c) Indemnification by Purchaser. Subject to the limits set
forth in this Section 9, Purchaser hereby agrees to indemnify and hold harmless
the Company upon its demand, from and against any and all losses, liabilities,
damages, obligations, costs and expenses (including, without limitation, amounts
paid in settlement and reasonable costs and expenses of investigating, preparing
to defend and defending any claim, action, suit, proceeding, inquiry or
investigations in respect thereof) resulting from, relating to or arising out of
(i) the inaccuracy of any representation or warranty made herein by Purchaser or
(ii) the breach of any covenant by Purchaser contained herein.
If any action, proceeding or claim shall be brought or
asserted against the Company by any third party, which action, proceeding or
claim, if determined adversely to the interest of the Company, would entitle it
to indemnity pursuant to this Section 9(c), the Company shall promptly notify
Purchaser of the same in writing, and, if Purchaser so elects, Purchaser shall
assume the defense thereof, including the employment of counsel satisfactory to
the Company and the payment of all reasonable costs and expenses thereof. The
Company shall have the right to employ counsel separate from any counsel
employed by Purchaser in any such action, suit, proceeding or claim and to
control (or, if the Company has elected to allow Purchaser to assume the defense
thereof, participate in) the defense thereof and the fees and expenses of such
counsel employed by the Company shall be at its expense. Purchaser shall not be
liable for any settlement of such action, suit, proceeding or claim effected
without its written consent (which shall not be unreasonably withheld), but if
settled with its written consent, or if there shall be a final judgment for
plaintiff in any such action, subject to the limits set forth in this Section
9(c), Purchaser agrees to indemnify and hold the Company harmless from an
against any loss, liability, obligation, damage, cost or expense by reason of
such settlement or judgment.
(d) Claims for Indemnification. Neither party shall assert any
claim against the other for indemnification hereunder with respect to any
inaccuracy or breach of such warranties, representations or covenants entered
into or given under this Agreement unless and until the amount of such claim or
claims with respect thereto, as determined pursuant to this Section 9, shall
exceed Fifty Thousand Dollars ($50,000), calculated on a cumulative basis and
not a per item basis, and then only in respect to the excess over said Fifty
Thousand Dollars ($50,000).
(e) Reduction for Insurance, Etc. The gross amount which a
party ("Indemnifying Party") is liable to, for, or on behalf of the other party
("Indemnitee") pursuant to this Section 9 (the "Indemnifiable Loss") shall be
reduced (including, without limitation, retroactively) through subsequent
repayment as described below in this Section 9(e), by an amount equal to (i) any
insurance proceeds actually recovered by or on behalf of such Indemnitee (or the
Company to the extent such Indemnifiable Loss is suffered by the Company)
arising from the Indemnifiable Loss; and (iii) as to Purchaser only, in the
event that the Indemnifiable Loss is suffered by the Company directly, rather
than Purchaser, the amount in issue multiplied by fifty-five percent (55%), at
the time of such Indemnifiable Loss. If an Indemnitee shall have received or
shall have had paid on its behalf an indemnity payment in respect of an
Indemnifiable Loss and shall subsequently receive directly or indirectly
insurance proceeds or tax benefits in respect of such Indemnifiable Loss, then
such Indemnitee shall pay to such Indemnifying Party the amount of such
Insurance proceeds and/or tax benefits or, if less, the amount of such indemnity
payment.
10. Miscellaneous.
(a) Press Releases and Public Announcements. No party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of Purchaser and the
Company; provided, however, that any party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing party will use its best efforts to advise the other parties prior to
making the disclosure).
(b) Venue; Legal Fees. Any dispute arising under this
Agreement shall be brought in the Federal District Court Middle District
Florida, Tampa Division. The parties consent to and agree that venue for any
proceeding shall be with said Court. In addition, the prevailing party shall be
entitled to receive its costs and reasonable attorneys' fees for all phases of
the dispute, which includes, but is not limited to, those costs and attorney
fees associated with arbitration, mediation, pre-suit matters, trail of the
issues, post suit matters, appeals of any order, deposition and discovery costs,
and such similar items.
(c) No Third-party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Purchaser and the Company; provided, however, that Purchaser
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases Purchaser nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
(f) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims and other
communications hereunder shall be made in writing. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly given two (2)
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Company: Copy to:
The WellCare Management Group, Inc. Epstein Becker & Green, P.C.
Park West/Hurley Avenue Extension 250 Park Avenue
Kingston, New York 12401 New York, New York 10177
Attn.: President and CEO Attn.: Seth I. Truwit, Esquire
If to Purchaser: Copy to:
Kiran C. Patel Sandip I. Patel, Esquire
6800 N. Dale Mabry, Suite 268 Patel, Moore & O'Connor, P.A.
Tampa, Florida 33614 2240 Belleair Road, Suite 160
Clearwater, Florida 33764
Any party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Notwithstanding the foregoing, in the event the delivery of any
notice is refused, or returned unopened, having been addressed to the most
recent address provided by the intended recipient in accordance with these
notice provisions, such notice shall be deemed to have been delivered on the
date of the attempted delivery. Any party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Florida.
(j) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Purchaser and the Company. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(l) Expenses. Each of the parties will bear his or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
(m) Construction. Any reference to any federal, state, local
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The parties intend
that each representation, warranty and covenant contained herein shall have
independent significance.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
PURCHASER:
_________________________________________
KIRAN C. PATEL
THE COMPANY:
THE WELLCARE MANAGEMENT GROUP, INC.
By:______________________________________
Name: ___________________________________
Title: __________________________________
<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit A Forms of Management Agreements
Exhibit B Terms of Series A Preferred Stock
Exhibit C Form of Settlement Agreement
Exhibit D Form of Stipulation of Settlement
<PAGE>
INDEX OF SCHEDULES
------------------
Schedule 5.d. Assets Excluded from the Distributed Assets
AMENDMENT TO STOCK PURCHASE AGREEMENT
AMENDMENT (the "Amendment") dated as of June 1, 1999 to the
Stock Purchase Agreement (the "Agreement") dated May 19, 1999, by and between
KIRAN C. PATEL ("Purchaser"), and THE WELLCARE MANAGEMENT GROUP, INC., a New
York corporation (the "Company"). Capitalized terms used in this Amendment but
not otherwise defined herein shall have the respective meanings assigned thereto
in the Agreement.
W I T N E S S E T H:
WHEREAS, Purchaser and the Company wish to amend the Agreement
to change the location of the Closing set forth in Section 2(d) of the Agreement
and to extend the Closing Date set forth in Section 2(d) of the Agreement from
June 1, 1999 until June 9, 1999 or such other date as the parties may mutually
agree, provided that such date is not later than June 30, 1999;
WHEREAS, Purchaser and the Company wish to amend certain
provisions of the Agreement regarding the number of shares of preferred stock
that the Fund is to receive and to provide that the common stock to be issued to
the Fund upon conversion of such preferred stock shall be voting common stock;
WHEREAS, Purchaser and the Company wish to amend the Agreement
to provide that Purchaser will pay par value for all shares of Common Stock
issued to him pursuant to his anti-dilution rights after conversion of his
Series A Preferred Stock into Common Stock; and
WHEREAS, Purchaser wishes to acknowledge that he is not
entitled to receive any additional shares of capital stock of the Company to
provide him with a fifty-five percent (55%) voting interest in the Company in
the event that shares of Class A Common Stock remain outstanding as of the
date of conversion of the Series A Preferred Stock.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and promises herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The Closing. Paragraph 2(d) of the Agreement is hereby amended and
restated in its entirety as follows:
The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices
of Epstein Becker & Green, P.C., 250 Park Avenue, New York,
New York 10177, or at such other location as the parties may
mutually agree, commencing at 9:00 a.m. local time on or
before June 9, 1999, or such other date as Purchaser and the
Company may mutually determine (the "Closing Date"); provided,
however, that the Closing Date shall be no later than June 30,
1999.
2. Preferred Stock to be Issued to the Fund.
(a) The third sentence of Section 2(a) shall be deleted in its
entirety.
(b) Section 6(a)(vii) shall be amended and restated in its
entirety as follows:
the Fund shall have converted the Note into One Hundred
Thousand (100,000) shares of Preferred Stock (which shares of
Preferred Stock shall be convertible into Ten Million
(10,000,000) shares of Common Stock, if and when such
additional shares of Common Stock as are necessary to permit
such conversion have been authorized by the shareholders of
the Company);
3. Payment of Par Value for Post-Conversion Anti-Dilution Shares.
Section 2(b) of the Agreement is hereby amended by adding the following at the
end of the Section:
Purchaser hereby agrees that with respect to shares of Common
Stock issuable to Purchaser pursuant to Purchaser's
anti-dilution rights as set forth in this Section 2(b) after
conversion of Purchaser's Shares into Common Stock in
accordance with this Agreement (each a "Post-Conversion
Anti-Dilution Share"), Purchaser shall pay the Company par
value for each Post-Conversion Anti-Dilution Share upon
issuance thereof to Purchaser.
4. Post-Conversion Voting Rights. To the extent that any of the holders
of the Class A Common Stock shall not have converted such stock into Common
Stock as of the date the Series A Preferred Stock is converted into Common
Stock, Purchaser hereby acknowledges and agrees that nothing in the Agreement,
including, without limitation, Sections 2(a) and 2(b) thereof, shall entitle
Purchaser to receive from the Company, or obligate the Company to Purchaser, any
shares of capital stock of the Company in order to provide Purchaser with a
fifty-five percent (55%) voting interest in the total number of votes of the
issued and outstanding Common Stock and issued and outstanding Class A Common
Stock, combined.
5. Governing Law; Counterparts. This Amendment shall be governed by and
construed in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Florida. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
6. Amendments and Waivers. No amendment of any provision of this
Amendment shall be valid unless the same shall be in writing and signed by
Purchaser and the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
PURCHASER:
---------------------------------------------
KIRAN C. PATEL
THE COMPANY:
THE WELLCARE MANAGEMENT GROUP, INC.
By: __________________________________________
Name: ________________________________________
Title: _______________________________________
