1
EXHIBIT (C)(7)
EXECUTION COPY
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made as of June 14,
1999 by and among TA MergerCo, Inc., a Delaware corporation ("MergerCo"), each
of the Persons listed on the signature pages attached hereto, and each of the
other Persons who hereafter agree to become party to and bound by this Agreement
(collectively, the "Stockholders"). Capitalized terms used but not otherwise
defined herein are defined in Section 9 hereof or, in the case of Section
1(a)(vi) herein, in the form of Amended and Restated Certificate of
Incorporation of the Company (the "Charter") attached to the Merger Agreement
(as defined below).
WHEREAS, MergerCo has been formed for the purpose of merging (the
"Merger") with and into Physicians' Specialty Corp., a Delaware corporation
("Target") pursuant to the terms, and subject to the conditions, set forth in
the Agreement and Plan of Merger, dated as of the date hereof, by and among
MergerCo and Target, as amended from time to time (the "Merger Agreement").
WHEREAS, by virtue of the Merger, Target will become the successor to
all of the rights, interests, duties and obligations of MergerCo, including,
without limitation, those arising under this Agreement, and after the Merger,
Target shall be deemed to be a party to this Agreement and all references in
this Agreement to MergerCo or the "Company" shall be deemed to be references to
Target.
WHEREAS, the Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition of
the Company's board of directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company and (iii) limiting the manner and terms
by which certain securities of the Company may be transferred.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Board of Directors.
(a) From and after the date hereof and until the provisions of
this Section 1 cease to be effective, each Stockholder shall vote all of his or
its Stockholder Shares and any other voting securities of the Company over which
such Stockholder has voting control and shall take all other necessary or
desirable actions within his or its control (whether in his or its capacity as a
stockholder, director, member of a board committee or officer of the Company or
otherwise, and including, without limitation, attendance at meetings in person
or by proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings), and the Company shall take all necessary and desirable
actions within its control (including, without limitation, calling special board
and stockholder meetings), in order to cause:
2
(i) the authorized number of directors on the
Board to be the amount necessary to allow for the designations provided
for pursuant to Section 1(a)(ii) below;
(ii) the following persons to be elected to the
Board (each a "Director"):
(A) up to two representatives to be
designated by the holders of a majority of the TA Shares from
time to time (the "TA Directors"), with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇ serving as the initial TA Directors;
(B) Subject to the proviso set forth in
Section 1(a)(viii), up to two representatives who are to be
initially jointly designated by, and mutually acceptable to,
the holders of a majority of each of the TA Shares and the
Management Shares (the "Independent Directors"), with the
initial Independent Directors to be determined prior to the
Effective Time of the Merger (as defined in the Merger
Agreement) by agreement of the persons who will serve as the
initial TA Directors and the initial Management Directors (as
hereinafter defined); and
(C) up to three representatives designated
by the holders of a majority of the Management Shares from
time to time (the "Management Stock Directors"), with ▇▇▇▇▇ ▇.
▇▇▇▇▇, M.D., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
serving as the initial Management Directors;
(iii) the Chairman of the Board of Directors (the
"Chairman") to be one of the Directors designated pursuant to Section
1(a)(ii) above and who is designated by a majority of the Board of
Directors to serve in such capacity, with ▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D., serving
as the initial Chairman;
(iv) the establishment of a compensation
committee (the "Compensation Committee") comprised of one TA Director
(to be selected by unanimous vote of the TA Directors), one Management
Director (to be selected by majority vote of the Management Directors)
and one Independent Director (to be selected by unanimous vote of the
TA Directors); with the Compensation Committee being empowered with, to
the fullest extent permitted by law, but subject to any specific
limitations imposed by the Charter or the By-laws of the Company or a
resolution of the Board, all of the authority granted to the Board in
determining policies, practices and procedures relating to the
compensation of executive officers and other managerial and key
employees of the Company and its Subsidiaries and the establishment and
administration of employee benefit plans and stock option plans;
(v) the removal from the Board (with or without
cause) of any TA Director(s) upon the written request of the holders of
a majority of the TA Shares (it being explicitly understood by the
parties hereto that the TA Directors constitute the "Convertible Stock
Director Designees" (as defined in the Charter));
2
3
(vi) the removal from the Board (with or without
cause) of any Independent Director(s) upon the written request of the
holders of a majority of each of the TA Shares and Management Shares;
provided, however, that in the event the Company: (A) breaches in any
material respect a covenant under Section A.8 or Section B.6 of its
Charter, which breach shall not have been cured within 30 days after
receipt of notice in writing by the Company specifying such breach; (B)
fails, for any reason other than (i) due to any action or inaction of a
holder or representative of a holder of Convertible Preferred Stock or
Redeemable Preferred Stock or (ii) as a result of restrictions on
redemption set forth in the Charter, to effect a redemption of the
Convertible Preferred Stock or Redeemable Preferred Stock on a
Convertible Redemption Date or Redeemable Redemption Date, as the case
may be; or (C) any "material event of default" (which term shall be
defined prior to the closing of the Merger in a schedule to be attached
hereto based upon the mutual agreement of the TA Investors and
Management Stockholders holding a majority of the Management Shares)
under the Company's loan agreements governing the Senior and
Subordinated Debt to be issued in connection with the Merger
(collectively, an "Event of Default"), then in each such case the
removal from the Board (with or without cause) of any Independent
Director(s) shall then and thereafter occur upon the written request of
the holders of a majority of the TA Shares (and shall not require the
request or consent of any holders of Management Shares);
(vii) the removal from the Board (with or without
cause) of any Management Director upon the written request of the
holders of a majority of the Management Shares; and
(viii) in the event that any representative
designated hereunder resigns or for any other reason ceases to serve as
a member of the Board during his term of office, the filling of the
resulting vacancy by a representative designated by the Person or
Persons originally entitled to designate such director pursuant to
Section l(a)(ii) above; provided, however, that if an Event of Default
has occurred and an Independent Director is removed from the Board
following a written request of the holders of a majority of the TA
Shares pursuant to Section 1(a)(vi) above, the resulting vacancy shall
instead be filled by a representative designated by holders of a
majority of the TA Shares, after which time the holders of a majority
of the TA Shares shall have the sole right to designate the Independent
Directors pursuant to Section 1(a)(ii)(B) above.
(b) There shall be at least four meetings of the Board
during every fiscal year, at least one of which shall be held in each 120-day
period during the Company's fiscal year. The Company shall pay all reasonable
out-of-pocket expenses incurred by each Director in connection with attending
regular and special meetings of the Board, the board of directors of any
Subsidiary of the Company and any committee thereof upon submission of
appropriate documentation of such expenses. So long as any Director designated
hereunder serves on the Board and for at least three years thereafter, the
Company shall use commercially reasonable efforts to maintain directors and
officers indemnity insurance coverage satisfactory to the holders of a majority
of the TA Shares,
3
4
and the Company's certificate of incorporation and bylaws shall provide for
indemnification and exculpation of Directors to the fullest extent permitted
under applicable law.
2. Representations and Warranties of Stockholders. Each
Stockholder represents and warrants that (i) this Agreement has been duly
authorized, executed and delivered by such Stockholder and constitutes the valid
and binding obligation of such Stockholder, enforceable in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization, and other laws affecting the enforcement
of creditor's rights generally and by general principles of equity, (ii) such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement, (iii) all Stockholder Shares have been acquired by
such Stockholder for investment and not with a view to the sale or distribution
thereof within the meaning of the Securities Act, (iv) such Stockholder has no
present intention of selling or otherwise disposing of any of the Stockholder
Shares for his or its own account, and (v) such Stockholder has been advised
that the Stockholder Shares have not been registered with the Securities and
Exchange Commission and may not be offered, sold or otherwise transferred except
in compliance with the Securities Act. No holder of Stockholder Shares shall
grant any proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
3. Restrictions on Transfer of Stockholder Shares.
(a) First Refusal Rights. At least 20 days prior to any
sale, transfer, assignment, pledge or other disposal (a "Transfer") of
Stockholder Shares by any Management Stockholder other than (i) pursuant to a
Public Sale, (ii) a Transfer to the Company or (iii) a Transfer pursuant to
Section 3(c) or Section 4, the Management Stockholder desiring such Transfer
(the "Transferor") shall deliver a written notice (the "Transfer Notice") to the
Company of its desire to Transfer Stockholder Shares of such class, specifying
in reasonable detail the identity of the prospective transferee(s), the number
of shares to be transferred and the terms and conditions of the Transfer,
including the proposed price per Stockholder Share of such class (which price
shall be payable solely in cash at the closing of the transaction or in
installments over time). The Transferor's Transfer Notice shall constitute an
irrevocable offer to sell all, but not less than all, of the Stockholder Shares
subject to such Transfer Notice (the "Offered Shares") to the Company or its
assigns on the basis described below, at a purchase price equal to the price
contained in the Transfer Notice. The Company or its assigns may elect to
purchase all, but not less than all, of the Offered Shares, upon the same terms
and conditions as those set forth in the Transfer Notice (the "Right of First
Refusal"), by delivering a written notice (the "Acceptance Notice") of such
election to the Transferor within 10 days (the "Right of First Refusal Election
Period") after the Transfer Notice has been received by the Company. The closing
of the purchase of any Offered Shares pursuant to this Section 3(a) shall take
place within 30 days after the date on which the Transferor receives the
Acceptance Notice. Subject to the provisions of Section 3(b) below, if the
Company or its assigns does not elect to purchase all of the Offered Shares,
then the Transferor may transfer all, but not less than all, of the Offered
Shares to the
4
5
transferee(s) identified in the Transfer Notice for (i) a price no less than the
price specified in the Transfer Notice and (ii) other terms no more favorable to
the transferee(s) thereof than as specified in the Transfer Notice; provided,
however, that such Transfer must be completed within the 120-day period
immediately following the date on which the Transfer Notice has been received by
the Company. Any Offered Shares not transferred within such 120-day period will
be again subject to the provisions of this Section 3(a) upon subsequent
transfer.
(b) Participation Rights.
(i) In the event that a Management Stockholder
desires to Transfer any Stockholder Shares (other than (i) pursuant to a Public
Sale or (ii) a Transfer pursuant to Section 3(c) or Section 4), and the Right of
First Refusal is not exercised by the Company or its assigns with respect to all
of the Offered Shares, then such Management Stockholder (hereinafter, the
"Transferor") may Transfer such Stockholder Shares only pursuant to and in
accordance with the terms of this Section 3(b)(i). Within 5 days of the
expiration of the Right of First Refusal Election Period, the Transferor shall
deliver a written notice (the "Sale Notice") to the Company, the TA Investors
and such other Management Stockholders who at the time of receipt of such Sale
Notice beneficially own at least 2.5% of the outstanding Stockholder Shares (as
reflected in the stock record books of the Company) (the "Principal Management
Stockholders"), with such Sale Notice specifying in reasonable detail the
identity of the prospective transferee(s), the Stockholder Shares to be sold and
the terms and conditions of the Transfer. In the event that either a TA Investor
or Principal Management Stockholder holds (x) the class of Stockholder Shares
which are to be transferred, (y) securities convertible, exchangeable or
exercisable for the class of Stockholder Shares which are to be transferred, or
(z) securities into which the class of Stockholder Shares which are to be
transferred are convertible, exchangeable or exercisable, then such TA
Investor(s) and/or Principal Management Stockholder(s), as the case may be, may
elect to participate in the contemplated Transfer by delivering written notice
of such election to the Transferor within 15 days after its receipt of the Sale
Notice. If any TA Investor or Principal Management Stockholder has elected to
participate in such Transfer (a "Participating Stockholder"), the Transferor and
each Participating Stockholder will be entitled to sell in the contemplated
Transfer, at the same price and on the same terms, a number of Stockholder
Shares of such class, or securities convertible, exchangeable or exercisable for
Stockholder Shares of such class (or securities into which such class of
Stockholder Shares are convertible, exchangeable or exercisable), equal to the
product of (i) the quotient determined by dividing the number of Stockholder
Shares of such class and securities convertible, exchangeable or exercisable for
Stockholder Shares of such class held by such Transferor or Participating
Stockholder by the aggregate number of Stockholder Shares of such class and
securities convertible, exchangeable or exercisable for Stockholder Shares of
such class owned by the Transferor and all Participating Stockholders and (ii)
the number of Stockholder Shares of such class and securities convertible,
exchangeable or exercisable for Stockholder Shares of such class to be sold in
the contemplated Transfer; provided, that Stockholder Shares which have not
vested (and will not vest as a result of such transaction) or are subject to
repurchase by the Company for less than fair market value shall not be counted
as Stockholder Shares for purposes of the above calculation. The Transferor
shall use its best efforts to obtain the agreement of the prospective
transferee(s) to the participation of the Participating
5
6
Stockholder(s) in any contemplated Transfer, and the Transferor shall not
Transfer any of its Stockholder Shares to the prospective transferee(s) unless
(1) the prospective transferee(s) agrees to allow the participation of the
Participating Stockholder(s) or (2) the Transferor agrees to purchase the number
of such class of Stockholder Shares from any Participating Stockholder which the
Participating Stockholder would have been entitled to sell pursuant to this
Section 3(b)(i). If any securities convertible, exchangeable or exercisable for
Stockholder Shares are included in any Transfer under this Section 3(b)(i), the
purchase price for such securities shall be equal to the full purchase price
determined hereunder for the Stockholder Shares covered by the portion of such
securities to be transferred, adjusted by the aggregate exercise price for such
shares. Each Stockholder transferring Stockholder Shares pursuant to this
Section 3(b)(i) shall be obligated to join on a pro rata basis (based on the
number of Stockholder Shares to be sold) in any indemnification or other
obligations that are part of the terms and conditions of the Transfer (other
than any such obligations that relate specifically to a particular Stockholder,
such as indemnification with respect to representations and warranties regarding
a Stockholder's title to and ownership of Stockholder Shares); provided, that no
Stockholder shall be obligated in connection with any Transfer to agree to any
indemnification in an amount in excess of the net proceeds received by such
Stockholder in such Transfer.
(ii) In the event that a TA Investor or TA
Investors desire to Transfer in excess of 50% of the Stockholder Shares held by
such TA Investor or TA Investors (other than (i) pursuant to a Public Sale or
(ii) a Transfer pursuant to Section 3(d) or Section 4), then such TA Investor or
TA Investors (hereinafter, the "TA Transferor") may Transfer such Stockholder
Shares only pursuant to and in accordance with the terms of this Section
3(b)(ii). The TA Transferor shall deliver a written notice (the "TA Sale
Notice") to the Company and each Principal Management Stockholder, with such TA
Sale Notice specifying in reasonable detail the identity of the prospective
transferee(s), the Stockholder Shares to be sold and the terms and conditions of
the Transfer. In the event that a Principal Management Stockholder holds (x) the
class of Stockholder Shares which are to be transferred, (y) securities
convertible, exchangeable or exercisable for the class of Stockholder Shares
which are to be transferred, or (z) securities into which the class of
Stockholder Shares which are to be transferred are convertible, exchangeable or
exercisable, then such Principal Management Stockholder may elect to participate
in the contemplated Transfer by delivering written notice of such election to
the TA Transferor within 15 days after its receipt of the TA Sale Notice. If any
Principal Management Stockholder has elected to participate in such Transfer (a
"Management Participating Stockholder"), the TA Transferor and each Management
Participating Stockholder will be entitled to sell in the contemplated Transfer,
at the same price and on the same terms, a number of Stockholder Shares of such
class, or securities convertible, exchangeable or exercisable for Stockholder
Shares of such class (or securities into which such class of Stockholder Shares
are convertible, exchangeable or exercisable), equal to the product of (i) the
quotient determined by dividing the number of Stockholder Shares of such class
and securities convertible, exchangeable or exercisable for Stockholder Shares
of such class held by such TA Transferor or Management Participating Stockholder
by the aggregate number of Stockholder Shares of such class and securities
convertible, exchangeable or exercisable for Stockholder Shares of such class
owned by the TA Transferor and all Management Participating Stockholders and
(ii) the number of Stockholder
6
7
Shares of such class and securities convertible, exchangeable or exercisable for
Stockholder Shares of such class to be sold in the contemplated Transfer;
provided, that Stockholder Shares which have not vested (and will not vest as a
result of such transaction) or are subject to repurchase by the Company for less
than fair market value shall not be counted as Stockholder Shares for purposes
of the above calculation. The TA Transferor shall use its best efforts to obtain
the agreement of the prospective transferee(s) to the participation of the
Management Participating Stockholder(s) in any contemplated Transfer, and the TA
Transferor shall not Transfer any of its Stockholder Shares to the prospective
transferee(s) unless (1) the prospective transferee(s) agrees to allow the
participation of the Management Participating Stockholder(s) or (2) the TA
Transferor agrees to purchase the number of such class of Stockholder Shares
from any Management Participating Stockholder which the Management Participating
Stockholder would have been entitled to sell pursuant to this Section 3(b)(ii).
If any securities convertible, exchangeable or exercisable for Stockholder
Shares are included in any Transfer under this Section 3(b)(ii), the purchase
price for such securities shall be equal to the full purchase price determined
hereunder for the Stockholder Shares covered by the portion of such securities
to be transferred, adjusted by the aggregate exercise price for such shares.
Each Stockholder transferring Stockholder Shares pursuant to this Section
3(b)(ii) shall pay his or its pro rata share (based on the number of Common
Stockholder Shares to be sold) of the expenses incurred by the Stockholders in
connection with such transfer. Each Management Participating Stockholder
transferring Stockholder Shares pursuant to this Section 3(b)(ii) shall be
obligated to join on a pro rata basis (based on the number of Stockholder Shares
to be sold) in any indemnification or other obligations that are part of the
terms and conditions of the Transfer (other than any such obligations that
relate specifically to a particular Stockholder, such as indemnification with
respect to representations and warranties given by a Stockholder regarding such
Stockholder's title to and ownership of Stockholder Shares); provided, that no
Stockholder shall be obligated in connection with any Transfer to agree to
indemnification in an amount in excess of the net proceeds received by such
Stockholder in such Transfer.
(c) Permitted Management Transfers. The restrictions
contained in this Section 3 shall not apply with respect to (i) any Transfer of
Stockholder Shares by any Management Stockholder pursuant to applicable laws of
descent and distribution or (ii) any Transfer of Stockholder Shares by any
Management Stockholder of up to 50% of the Stockholder Shares held by such
Management Stockholder (as of the effective date of the Merger) made to either
the members of such Management Stockholder's Family Group or to other Management
Stockholders; provided, that the restrictions contained in this Section 3 shall
continue to be applicable to the Stockholder Shares after any of the foregoing
Transfers; and provided, further, that the transferees of such Stockholder
Shares shall have agreed in writing to be bound by the provisions of this
Agreement, to the extent that they are not already bound, which affect the
Stockholder Shares so transferred. All transferees permitted under this Section
3(c) are collectively referred to herein as "Permitted Management Transferees."
Each Permitted Management Transferee shall be deemed a Management Stockholder
for purposes of this Agreement.
(d) Permitted TA Transfers. The restrictions contained in
this Section 3 shall not apply with respect to any Transfer of Stockholder
Shares by any TA Investor to any other TA Investor; provided,
7
8
that the restrictions contained in this Section 3 shall continue to be
applicable to the Stockholder Shares after any of the foregoing Transfers; and
provided, further, that the transferees of such Stockholder Shares shall have
agreed in writing to be bound by the provisions of this Agreement, to the extent
that they are not already bound, which affect the Stockholder Shares so
transferred. All transferees permitted under this Section 3(d) are collectively
referred to herein as "Permitted TA Transferees." Each Permitted TA Transferee
shall be deemed a TA Investor for purposes of this Agreement.
(e) Other Agreements. Notwithstanding anything herein to
the contrary, the rights of any Management Stockholder or TA Investor to
Transfer any Stockholder Shares pursuant to the terms of this Agreement shall be
subject to all such other limitations and restrictions, if any, to which such
Stockholder or such Stockholder Shares are subject.
(f) Transfers in Violation of Agreement; Termination of
Restrictions. Any transfer or attempted transfer of any Stockholder Shares in
violation of any provision of this Section 3 shall be void, and the Company
shall not record such transfer on its books or treat any purported transferee of
such Stockholder Shares as the owner of such shares for any purpose. The
restrictions set forth in this Section 3 shall continue with respect to each
Stockholder Share until the earlier of (i) the transfer of such Stockholder
Share in a Public Sale, or (ii) the consummation of a Sale of the Company or a
Qualified Public Offering.
4. Sale of the Company.
(a) Subject to Section 4(b) below, if the Board and the
holders of a majority of the TA Shares approve a Sale of the Company to any
non-Affiliates of the Company or the TA Investors (an "Approved Sale"), each
holder of Stockholder Shares shall vote for, consent to and raise no objections
against such Approved Sale. If the Approved Sale is structured as a (i) merger
or consolidation, each holder of Stockholder Shares shall waive any dissenters'
rights, appraisal rights or similar rights in connection with such merger or
consolidation or (ii) sale of stock, each holder of Stockholder Shares shall
agree to sell all of his Stockholder Shares and rights to acquire Stockholder
Shares on the terms and conditions approved by the Board and the holders of a
majority of the TA Shares. Each holder of Stockholder Shares shall take all
necessary or desirable actions in connection with the consummation of the
Approved Sale as reasonably requested by the Company and the TA Investors.
(b) The obligations of the holders of Stockholder Shares
set forth in Section 4(a) above with respect to an Approved Sale of the Company
are subject to the satisfaction of the following conditions: (i) upon the
consummation of the Approved Sale, all of the holders of each class of
Stockholder Shares shall receive the same form and amount of consideration per
share of Stockholder Shares as the other holders of such class, or if any
holders of a class of Stockholder Shares are given an option as to the form and
amount of consideration to be received, all holders of such class shall be given
the same option; and (ii) all holders of then currently exercisable rights to
acquire Stockholder Shares shall be given an opportunity to either (A) exercise
such rights prior to the consummation of the Approved Sale and participate in
such sale as holders of
8
9
Stockholder Shares or (B) upon the consummation of the Approved Sale, receive in
exchange for such rights consideration equal to the amount determined by
multiplying (1) the same amount of consideration per share of a class of
Stockholder Shares received by holders of such class of Stockholder Shares in
connection with the Approved Sale less the exercise price per share of such
class of Stockholder Shares of such rights to acquire such class of Stockholder
Shares by (2) the number of shares of such class of Stockholder Shares
represented by such rights.
(c) If the Company or the holders of the Company's
securities enter into any negotiation or transaction for which Rule 506 (or any
similar rule then in effect) promulgated by the Securities and Exchange
Commission may be available with respect to such negotiation or transaction
(including a merger, consolidation or other reorganization), the holders of
Stockholder Shares shall, at the request of the Company, appoint a "purchaser
representative" (as such term is defined in Rule 501) reasonably acceptable to
the Company and the Company shall pay the fees of such purchaser representative.
(d) Each Stockholder transferring Stockholder Shares
pursuant to this Section 4 will bear his or its pro rata share (based upon the
number of Common Stockholder Shares to be sold) of the costs of any sale of
Stockholder Shares pursuant to an Approved Sale to the extent such costs are
incurred for the benefit of all such holders of Stockholder Shares and are not
otherwise paid by the Company or the acquiring party. Each Stockholder
transferring Stockholder Shares pursuant to this Section 4 shall be obligated to
join on a pro rata basis (based on the number of Common Stockholder Shares to be
sold) in any indemnification or other obligations that are part of the terms and
conditions of the Approved Sale (other than any such obligations that relate
specifically to a particular Stockholder, such as indemnification with respect
to representations and warranties given by a Stockholder regarding such
Stockholder's title to and ownership of Stockholder Shares); provided, that no
Stockholders shall be obligated in connection with any Approved Sale to agree to
indemnification in an amount in excess of the net proceeds received by such
Stockholder in such Approved Sale.
5. Right to Participate in Certain Sales of Additional
Securities.
(a) The Company agrees that it will not sell or issue (i)
any shares of capital stock of the Company, (ii) securities convertible into or
exchangeable for capital stock of the Company or (iii) options, warrants or
rights carrying any rights to purchase capital stock of the Company, unless the
Company first submits a written offer to each TA Investor and Principal
Management Stockholder who holds any shares of capital stock of the Company
(collectively, the "Offerees") identifying the terms of the proposed sale
(including price, number or aggregate principal amount of securities and all
other material terms), and offers to each Offeree the opportunity to purchase
its Pro Rata Allotment (as hereinafter defined) of the securities (subject to
increase for over-allotment if some Offerees do not fully exercise their rights)
on terms and conditions, including price, not less favorable than those on which
the Company proposes to sell such securities to a third party or parties. Each
Offeree's "Pro Rata Allotment" of such securities shall be based on the ratio
which the Common Stockholder Shares then owned by it bears, on an as-converted
basis, to all of the then issued and outstanding Common Stockholder Shares as of
9
10
the date of such written offer. The Company's offer pursuant to this Section
5(a) shall remain open and irrevocable for a period of 15 days, and the
recipients of such offer shall elect to purchase by giving written notice
thereof to the Company within such 15-day period, including therein the maximum
number of securities which the Offeree would purchase if other Offerees do not
elect to purchase, with the rights of electing Offerees to purchase such
additional securities to be based upon the relative holdings of Common
Stockholder Shares of the electing Offerees in the case of over-subscription.
Any securities so offered which are not purchased pursuant to such offer may be
sold by the Company, but only on the terms and conditions set forth in the
initial offer, at any time within 120 days following the termination of the
above-referenced 15-day period but may not be sold to any other person or on
terms and conditions, including price, that are more favorable to the purchaser
than those set forth in such offer or after such 120-day period without renewed
compliance with this Section 5(a).
(b) Notwithstanding the foregoing, the right to purchase
granted under this Section 5 shall be inapplicable with respect to the sale or
issuance of (i) options to purchase shares of Common Stock granted or to be
granted pursuant to any employee or physician compensation plan approved by both
the Board and the Stockholders, (ii) securities issued as a result of any stock
split, stock dividend, reclassification or reorganization or similar event with
respect to the Common Stock, (iii) shares of Common Stock issued upon conversion
of the Convertible Preferred Stock or upon the exercise of the warrants to
purchase Common Stock issued to the underwriters of Target's initial Public
Offering or warrants issued to the Company's lenders at the time of the closing
of the Merger, (iv) shares of Common Stock, or securities convertible into or
exchangeable for Common Stock, issued in connection with acquisitions or other
business ventures that are approved by the Board, or (v) a maximum of 10,000
shares of Common Stock per year (as adjusted appropriately for stock splits,
stock dividends and other similar events).
6. Public Disclosures. The Company shall not, nor shall it permit
any Subsidiary to, disclose any TA Investor's name or identity as an investor in
the Company in any press release or other public announcement or in any document
or material filed with any governmental entity, without the prior written
consent of such TA Investor, unless such disclosure is required (or reasonably
believed to be required) by applicable law or governmental regulations or by
order of a court of competent jurisdiction, and in the event such disclosure is
required by applicable law or government regulations, then prior to making such
disclosure the Company shall give written notice to such TA Investor describing
in reasonable detail the proposed content of such disclosure and shall permit
such TA Investor to reasonably review and comment in a timely manner upon the
form and substance of such disclosure.
7. Securities Law Restrictions on Transfer of Stockholder Shares.
(a) General Provisions. Subject to the other limitations
contained in this Agreement, Stockholder Shares are transferable only pursuant
to (i) public offerings registered under the Securities Act, (ii) Rule 144 or
Rule 144A of the Securities and Exchange Commission ("SEC") (or any similar rule
or rules then in force) if such rule is available and (iii) subject to the
conditions specified in Section 7(b) below, any other legally available means of
transfer.
10
11
(b) Opinion Delivery. In connection with the transfer of
any Stockholder Shares (other than a transfer described in clauses (i) or (ii)
of Section 7(a) above or a transfer to the Company pursuant to Section 3(a)
above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities law matters to the effect that such transfer of
Stockholder Shares may be effected without registration of such Stockholder
Shares under the Securities Act. In addition, if the holder of the Stockholder
Shares delivers to the Company an opinion of such counsel that no subsequent
transfer of such Stockholder Shares shall require registration under the
Securities Act, the Company shall promptly upon such contemplated transfer
deliver new certificates for such Stockholder Shares which do not bear the
Securities Act portion of the legend set forth in Section 7(d). If the Company
is not required to deliver new certificates for such Stockholder Shares not
bearing such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to
be bound by the conditions contained in this Section.
(c) Rule 144A. Upon the request of any Stockholder, the
Company shall promptly supply to such Person or its prospective transferees all
information regarding the Company required to be delivered in connection with a
transfer pursuant to Rule 144A of the SEC.
(d) Legend. Each certificate or instrument representing
Stockholder Shares shall be imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON ____________, 1999, AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCKHOLDERS AGREEMENT,
DATED AS OF JUNE 10, 1999, AND AS AMENDED AND MODIFIED FROM TIME TO
TIME, BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN INVESTORS, AND THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE COMPANY
TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE."
(e) Legend Removal. If any Stockholder Shares become
eligible for sale pursuant to Rule 144(k), as confirmed by an opinion of
counsel, the Company shall, upon the request of the holder of such Stockholder
Shares, remove the Securities Act portion of the legend set forth in Section
7(d) from the certificates for such Stockholder Shares.
11
12
8. Definitions.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise, and if such Person is a partnership,
"Affiliate" shall also mean each general partner and limited partner of such
Person. Without limiting the generality of the foregoing, each investment fund
managed by TA Associates, Inc. or any successor thereto shall be deemed to be an
Affiliate of each of the initial holders of the TA Shares.
"Common Stock" means the Company's Common Stock, par value $.001 per
share, and any capital stock of any class of the Company hereafter authorized
which is not limited to a fixed sum or percentage of par or stated value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"Common Stockholder Shares" means Stockholder Shares which are (i)
Common Stock, (ii) warrants, options or other rights to subscribe for or to
acquire, directly or indirectly, Common Stock, whether or not then exercisable
or convertible, and (iii) stock or other securities which are convertible into
or exchangeable for, directly or indirectly, Common Stock, whether or not then
convertible or exchangeable (including, without limitation, the Convertible
Preferred Stock). As to any particular Common Stockholder Shares, such shares
shall cease to be Common Stockholder Shares when they have been disposed of in a
Public Sale or repurchased by the Company or any Subsidiary. References in this
Agreement to a majority of, or a certain percentage of, the Common Stockholder
Shares, shall be deemed to be references to a majority of the Common Stock
represented by the Common Stockholder Shares or a certain percentage of the
Common Stock represented by the Common Stockholder Shares, calculated on a
fully-diluted basis, as applicable.
"Convertible Preferred Stock" means the Company's Convertible
Participating Preferred Stock, par value $.001 per share.
"Family Group" means, in the case of any individual, his spouse and/or
descendants, and any trust, family limited partnership or other entity solely
for the benefit of such person and/or his spouse and/or descendants.
"Management Shares" means any capital stock, warrants, options or other
rights which constitute Stockholder Shares hereunder and which were initially
issued to Management Stockholders. References in this Agreement to "a majority
of the Management Shares" shall be deemed to be references to a majority of the
Management Shares that are Common Stockholder Shares, calculated on a
fully-diluted basis.
"Management Stockholders" means all Stockholders who are not TA
Investors.
12
13
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means the sale, in an underwritten public offering
registered under the Securities Act, of shares of the Company's Common Stock.
"Public Sale" means any sale of Stockholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"Qualified Public Offering" has the meaning set forth in the Charter.
"Sale of the Company" means (i) any sale, transfer or issuance or
series of sales, transfers and/or issuances of capital stock of the Company by
the Company or any holders thereof which results in any Person or group of
Persons (as the term "group" is used under the Exchange Act of 1934, as
amended), other than Persons who are holders of Stockholder Shares as of
immediately after the Merger, owning capital stock of the Company possessing the
voting power (under ordinary circumstances) to elect a majority of the Board,
and (ii) any sale or transfer of all or substantially all of the assets of the
Company and its Subsidiaries.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Stockholder Shares" means (i) any capital stock of the Company
purchased or otherwise acquired by any Stockholder, (ii) any warrants, options
or other rights to subscribe for or to acquire, directly or indirectly, any
capital stock of the Company, purchased or otherwise acquired by any
Stockholder, whether or not then exercisable or convertible, and (iii) any stock
or other securities which are convertible into or exchangeable for, directly or
indirectly, any capital stock of the Company, purchased or otherwise acquired by
any Stockholder, whether or not then convertible or exchangeable, (iv) any
securities or rights issued or issuable directly or indirectly with respect to
the securities and rights referred to in clauses (i), (ii) and (iii) above by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Stockholder Shares, such shares shall cease to be Stockholder
Shares when they have been disposed of in a Public Sale or repurchased by the
Company or any Subsidiary.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any
corporation, limited liability company, partnership, association, or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of such Person or a combination thereof,
or (ii) if a limited liability company, partnership, association, or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person
13
14
or one or more Subsidiaries of such Person or entity or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association, or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association, or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association, or other business
entity.
"TA Investors" means TA/Advent VIII, L.P., TA/Atlantic and Pacific IV,
L.P., TA Investors LLC and TA Executives Fund, LLC, and their Affiliates.
"TA Shares" means any capital stock, warrants, options or other rights
which constitute Stockholder Shares hereunder and which were initially issued to
any TA Investor. References in this Agreement to "a majority of the TA Shares"
shall be deemed to be references to a majority of the TA Shares that are Common
Stockholder Shares, calculated on a fully-diluted basis.
9. Additional Stockholders. In connection with the issuance of
any additional equity securities of the Company to any Person, the Company may
permit such Person to become a party to this Agreement and succeed to all of the
rights and obligations of a "Stockholder" under this Agreement by obtaining the
consent of the holders of a majority of the Common Stockholder Shares and an
executed counterpart signature page to this Agreement, and, upon such execution,
such Person shall for all purposes be a "Stockholder" party to this Agreement.
10. Miscellaneous Provisions.
(a) Termination. This Agreement shall terminate and be of
no further force and effect upon the closing of a Qualified Public Offering or a
Sale of the Company. Notwithstanding anything herein to the contrary, this
Agreement shall become effective upon the Effective Time of the Merger and shall
terminate and be of no further force and effect upon the termination of the
Merger Agreement pursuant to Section 9.1 thereof.
(b) Amendment and Waiver. Except as otherwise provided
herein, no modification, amendment, or waiver of any provision of this Agreement
will be effective against the Company or the holders of Stockholder Shares,
unless such modification, amendment, or waiver is approved in writing by the
Company and the holders of at least a majority of each of the TA Shares and the
Management Shares; provided, however, that in the event that such amendment or
waiver (i) is with respect to any provision of this Agreement which contains
rights which are unique to a single holder or group of holders of Stockholder
Shares or (ii) would materially and adversely affect a single holder or group of
holders of Stockholder Shares in a manner substantially different than any other
holders of Stockholder Shares, then such amendment or waiver will require the
consent of such holder of Stockholder Shares or a majority of the Common
Stockholder Shares held by such group of holders materially and adversely
affected. Notwithstanding the foregoing, if an amendment or modification of this
Agreement serves merely to add a party hereto, then such amendment or
modification will be effective against the Company and the holders of
Stockholder Shares if such amendment or modification is approved in writing
14
15
by the Company, the holders of a majority of the Common Stockholder Shares and
such new party hereto. The failure of any party to enforce any of the provisions
of this Agreement will in no way be construed as a waiver of such provisions and
will not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
(c) Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
(d) Entire Agreement. Except as otherwise expressly set
forth herein, this document embodies the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
(e) Successors and Assigns. Except as expressly otherwise
provided herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the Company and its successors and assigns and the Stockholders
and any subsequent holders of Stockholder Shares and the respective successors
and assigns of each of them.
(f) Counterparts. This Agreement may be executed in
separate counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
(g) Remedies. The parties hereto shall be entitled to
enforce their rights under this Agreement specifically to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party hereto may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief (without posting a bond or other
security) in order to enforce or prevent any violation of the provisions of this
Agreement.
(h) Notices. Any notice provided for in this Agreement
shall be in writing and shall be either (i) personally delivered, (ii) sent by
registered or certified mail (return receipt requested and postage prepaid),
(iii) sent by reputable overnight courier service (charges prepaid), or (iv)
sent by facsimile, in each case, to the Company at the address set forth below
and to any other recipient at the address indicated on the Notices Schedule
attached hereto, or if such recipient is not listed on the Notices Schedule
attached hereto, at the address indicated by the Company's records. Any Person
may change its address for purposes of this Agreement by
15
16
providing prior notice of such change to the other parties hereto in accordance
with this Section. Notices will be deemed to have been given hereunder (i) when
delivered personally, (ii) three days after being mailed, (iii) one day after
deposit with a reputable overnight courier service, or (iv) in the cases of
notices sent by facsimile, when receipt is acknowledged. The Company's address
is:
Physicians Specialty Corp
The Pavilion at Lake ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
President and Chairman
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
The TA Investors' address is:
▇/▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III, P.C.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(i) Governing Law. All questions concerning the
construction, validity and interpretation of this Agreement shall be governed by
and construed in accordance with the internal laws of the State of Delaware,
without giving effect to any choice of law or other conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Delaware.
(j) Dispute Resolution. All disputes, claims, or
controversies arising out of or relating to this Agreement or the negotiation,
validity or performance hereof that are not resolved by mutual agreement shall
be resolved solely and exclusively by binding arbitration to be conducted before
JAMS/Endispute, Inc. or its successor. The arbitration shall be held in Boston,
Massachusetts before a single arbitrator, acceptable to the holders of a
majority of the
16
17
Common Stockholder Shares, and shall be conducted in accordance with the rules
and regulations promulgated by JAMS/Endispute, Inc. unless specifically modified
herein.
Whenever a party shall decide to initiate arbitration proceedings it
shall first give written notice of its intent to do so to all other parties
hereto. The parties covenant and agree that during the sixty (60) day period
following such notice, they shall make good faith efforts to resolve the dispute
without arbitration; provided, that if such dispute cannot be resolved within
such sixty (60) day period, then the arbitration shall commence upon termination
of such sixty (60) day period.
(k) Business Days. If any time period for giving notice
or taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the state in which the Company's chief executive office is located,
the time period shall automatically be extended to the business day immediately
following such Saturday, Sunday or legal holiday.
(l) Construction. Whenever the context requires, each
term stated in either the singular or the plural shall include the singular and
the plural, and pronouns stated in either the masculine, the feminine or the
neuter gender shall include the masculine, feminine and neuter. All references
to Sections and Paragraphs refer to sections and paragraphs of this Agreement.
The use of the word "including" in this Agreement shall be by way of example
rather than limitation.
(m) Board Approval. Whenever this Agreement calls for or
refers to the consent or approval of any matter by any holder or holders of TA
Shares or Management Shares, such consent or approval shall be deemed given by
such holder if each of such holder's designees on the Board has, in his capacity
as a director of the Company, given his consent or approval with respect to such
matter at a duly convened meeting of the Board or pursuant to an effective
unanimous written consent of the Board, unless, with respect to any given
matter, such holder notifies the Company in writing that the consent or approval
at the Board level by such holder's designees on the Board does not constitute
the consent or approval by such holder itself.
(n) Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
18
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement on the day and year first above written.
TA MERGERCO, INC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President and Chief Executive Officer
19
[Stockholders Agreement]
[STOCKHOLDER SIGNATURE PAGES OMITTED]