STOCK PURCHASE AGREEMENT
BY AND AMONG
FHP INTERNATIONAL CORPORATION
AND
TALBERT MEDICAL MANAGEMENT CORPORATION,
ON THE ONE HAND,
AND
KATHRYN M. ADAIR,
GLORIA L. AUSTIN,
WILLIAM P. BRACCIODIETA,
LARRY L. GEORGOPOLOUS,
GARY E. GOLDSTEIN, M.D.,
RICHARD D. JACOBS,
R. JUDD JESSUP,
JACK D. MASSIMINO,
BARBARA C. MCNUTT,
KENNETH S. ORD,
WESTCOTT W. PRICE III,
WALTER R. STONE,
MARGARET VAN METER,
AND
MICHAEL J. WEINSTOCK,
ON THE OTHER HAND
March 15, 1996
TABLE OF CONTENTS
Page
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1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Accounting Terms. . . . . . . . . . . . . . . . . . . . . . 2
1.2 Terms Generally . . . . . . . . . . . . . . . . . . . . . . 2
2. Purchase and Sale of Stock . . . . . . . . . . . . . . . . . . . . 2
2.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . 2
2.2 Closing and Closing Date. . . . . . . . . . . . . . . . . . 3
3. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Additional Securities. . . . . . . . . . . . . . . . . . . . . . . 4
5. FHP Options to Purchase. . . . . . . . . . . . . . . . . . . . . . 4
5.1 Options Related to Termination of Employment. . . . . . . . 4
5.2 Unrestricted Option . . . . . . . . . . . . . . . . . . . . 4
5.3 Performance Options . . . . . . . . . . . . . . . . . . . . 5
5.4 Mechanics of Option Exercise. . . . . . . . . . . . . . . . 6
5.5 Certain Adjustments . . . . . . . . . . . . . . . . . . . . 7
6. Drag-Along Rights and Tag-Along Rights . . . . . . . . . . . . . . 7
6.1 Drag-Along Rights . . . . . . . . . . . . . . . . . . . . . 7
6.2 Tag-Along Rights. . . . . . . . . . . . . . . . . . . . . . 8
6.3 Same Terms and Conditions . . . . . . . . . . . . . . . . . 8
7. Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 8
7.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . 8
7.2 Incidental Registration . . . . . . . . . . . . . . . . . . 9
(a) Right to Include Registrable Securities. . . . . . . . 9
(b) Priority in Incidental Registrations . . . . . . . . . 9
(c) Seller Information; Suspension . . . . . . . . . . . . 9
7.3 Underwritten Offerings; Lockup. . . . . . . . . . . . . . . 10
7.4 Indemnification/Indemnification Agreements. . . . . . . . . 10
7.5 Termination of Registration Rights. . . . . . . . . . . . . 10
7.6 Registration Expenses . . . . . . . . . . . . . . . . . . . 11
8. Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9. Representations, Warranties and Agreements . . . . . . . . . . . . 11
9.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . 11
9.2 Investment Representations. . . . . . . . . . . . . . . . . 11
9.3 Legends; Stop Transfer. . . . . . . . . . . . . . . . . . . 13
10. Certain Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 14
10.1 Right of First Refusal. . . . . . . . . . . . . . . . . . . 14
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11. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.1 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.2 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . 16
11.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.4 No Third Party Beneficiaries. . . . . . . . . . . . . . . . 18
11.5 Assignment by FHP . . . . . . . . . . . . . . . . . . . . . 18
11.6 Time is of the Essence. . . . . . . . . . . . . . . . . . . 18
11.7 Entire Agreement; Amendments. . . . . . . . . . . . . . . . 18
11.8 Severability. . . . . . . . . . . . . . . . . . . . . . . . 19
11.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 19
11.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 19
11.11 Waiver of Jury Trials; Consent to Jurisdiction. . . . . . . 19
11.12 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of March 15, 1996, by and among FHP International Corporation, a
Delaware corporation ("FHP"), Talbert Medical Management Corporation, a Delaware
corporation (the "Company"), Kathryn M. Adair ("Adair"), Gloria L. Austin
("Austin"), William P. Bracciodieta ("Bracciodieta"), Larry L. Georgopolous
("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard D. Jacobs
("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino ("Massimino"), Barbara
C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W. Price III ("Price"),
Walter R. Stone ("Stone"), Margaret Van Meter ("Van Meter"), and Michael J.
Weinstock ("Weinstock"). In this Agreement, Adair, Austin, Bracciodieta,
Georgopolous, Goldstein, Jacobs, Jessup, Massimino, McNutt, Ord, Price, Stone,
Van Meter and Weinstock are referred to individually as a "Management Investor"
and collectively as the "Management Investors."
A. WHEREAS, FHP has formed the Company to function as a physician
practice management company to provide practice management services to certain
professional corporations; and
B. WHEREAS, FHP has acquired 9,100,000 shares of the Class A
Voting Common Stock of the Company, par value $.01 (one cent) per share (the
"Class A Common Stock"), which shares of Class A Common Stock comprise all of
the issued and outstanding shares of Class A Common Stock of the Company, for
consideration in the amount of $91,000.00; and
C. WHEREAS, the Company and FHP regard the services provided to
the Company by the Management Investors as valuable to the Company and FHP, and
have determined that it would be to the advantage and in the best interests of
the Company and FHP to provide for the issuance of shares of Class B Common
Stock of the Company, par value $.01 (one cent) per share (the "Class B Common
Stock," with the Class A Common Stock and the Class B Common Stock collectively
referred to herein as the "Common Stock"), to the Management Investors as
provided for in this Agreement (i) as an inducement to remain in the service of
the Company and FHP, and (ii) as an incentive for increased efforts during such
service; and
D. WHEREAS, FHP desires to provide for the issuance of shares of
Class B Common Stock of the Company to the Management Investors, and the
Management Investors wish to acquire such shares from the Company, all on the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties to this
Agreement mutually agree as follows:
1. DEFINITIONS.
1.1 ACCOUNTING TERMS. In this Agreement, "GAAP" means generally
accepted accounting principles, consistently applied. All accounting terms
not specifically defined herein shall be construed in accordance with GAAP.
1.2 TERMS GENERALLY. The definitions in this Agreement shall apply
equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation" if such phrase does not actually appear. The headings
of Sections are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. Unless the context shall otherwise require, any reference to
any agreement or other instrument or statute or regulation is to it as
amended and supplemented from time to time (and, in the case of a statute
or regulation, to any successor provision). Any reference in this
Agreement to a "day" or a number of "days" (without the explicit
qualification of "business") shall be interpreted as a reference to a
calendar day or number of calendar days. If any action or notice is to be
taken or given on or by a particular calendar day, and such calendar day is
not a business day, then such action or notice shall be deferred until, or
may be taken or given, on the next business day.
2. PURCHASE AND SALE OF STOCK.
2.1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, each of the Management Investors, severally and not jointly,
agrees to purchase, and FHP agrees to cause the Company to, and the Company
agrees to, issue, sell and transfer to each of the Management Investors,
severally and not jointly, at the Closing (as defined below), for
consideration in the amount of $.01 (one cent) per share, the following: as
to each such Management Investor, the number of shares of the Class B
Common Stock of the Company (the "Stock") set forth in that certain
schedule signed by each of FHP, the Company, and such Management Investor
(each, a "Management Investor Schedule"). The aggregate number of shares
of Stock issued to the Management Investors shall be 900,000, and the Stock
issued to the Management Investors, collectively, initially shall comprise
9% of the total outstanding Common Stock of the Company (the "Management
Stock"). Stock certificates evidencing the Management Stock, in addition
to blank stock
2
powers executed by each Management Investor, initially shall be held by the
Assistant Secretary of FHP (the "Escrow Holder"), and shall continue to be
held by the Escrow Holder for the periods set forth in Section 3 below,
subject to the rights and limitations set forth in this Agreement. All
shares of Management Stock shall be fully paid and nonassessable shares.
Except as otherwise provided in this Agreement, each Management Investor
shall have all rights of a shareholder with respect to the Management
Stock, including rights to vote, to receive dividends (including stock
dividends), to participate in stock splits or other recapitalizations, and
to exchange such shares in a merger, consolidation or other reorganization
or exchange of shares.
2.2 CLOSING AND CLOSING DATE. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place on the date
ten (10) days following the date of the execution of this Agreement.
3. RESTRICTIONS. Subject to other limitations contained in this
Agreement, the Management Investors shall not have any right to sell, give,
pledge, hypothecate or otherwise transfer or dispose of any Management Stock
(the "Restrictions") until the Restrictions lapse as provided in this Section 3.
Prior to the lapse of the Restrictions, and subject to the provisions of
Section 3.1 below, the Management Stock shall continue to be held in escrow by
the Escrow Holder and shall be deemed to be "Restricted Securities." The
Restrictions shall lapse, and the Management Stock (and a proportional amount of
any Additional Securities (as defined herein)) shall vest, during the period
commencing on the date of the Closing and ending on July 1, 1999 (the "Vesting
Period") as follows:
3.1 The Restrictions imposed on the Restricted Securities under
this Section 3 shall lapse as to 25% of the shares of the Management Stock
issued to each Management Investor on July 1 of each year during the
Vesting Period. Upon the lapse of the Restrictions on shares of the
Management Stock, such shares shall cease to be Restricted Securities.
Within thirty (30) days after the lapse of the Restrictions on shares of
the Management Stock, the Escrow Holder shall, upon receiving confirmation
from the Company that the Management Investor's withholding obligations, if
any, under Section 8 of this Agreement have been satisfied, transmit to the
Management Investor the certificates evidencing those shares of Management
Stock with respect to which the Restrictions have lapsed; PROVIDED,
HOWEVER, that certificates representing shares of Management Stock which
are subject to a Performance Purchase Option under Section 5.3, below,
shall not be released from escrow until such time as the applicable
Performance Purchase Option has expired without having been exercised.
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3.2 The occurrence of a change in control of the Company or FHP
shall not be an event which causes Restrictions imposed upon and remaining
applicable to Management Stock to terminate.
4. ADDITIONAL SECURITIES. Any securities received as the result of
ownership of Restricted Securities ("Additional Securities"), including, without
limitation, securities received as a stock dividend or stock split, or as a
result of a merger, consolidation, recapitalization or reorganization, shall be
held by the Escrow Holder in the same manner and subject to the same conditions
as the Restricted Securities with respect to which they were issued. Each
Management Investor shall be entitled to direct the Escrow Holder to exercise
any warrant or option received as Additional Securities upon supplying the funds
necessary to do so, in which event the securities so purchased shall constitute
Additional Securities. In the event any Restricted Securities or Additional
Securities consist of a security by its terms or otherwise convertible or
exchangeable for another security at the election of the holder thereof, each
Management Investor may exercise any such right or conversion or exchange, and
any securities so acquired shall be deemed Additional Securities.
5. FHP OPTIONS TO PURCHASE. Notwithstanding the foregoing, the
Management Stock held by the Management Investors shall be subject to the
following terms:
5.1 OPTIONS RELATED TO TERMINATION OF EMPLOYMENT. Prior to the
lapse of the Restrictions on any Restricted Securities, and upon such time
as a Management Investor ceases to be employed by one of the Company, FHP,
or an Affiliate (as defined below) of FHP, FHP shall have the option to
purchase from such Management Investor, and such Management Investor shall
be obligated to sell to FHP, for consideration in the amount of $.01 (one
cent) per share (subject to Section 5.5, below), all or any portion of such
Restricted Securities (including any Additional Securities issued in
respect of such Restricted Securities) at the date of such termination of
employment. As used herein, an "Affiliate" of a Person (as defined in
Section 9.2(a), below) shall mean a Person controlling, under common
control with or controlled by such Person.
5.2 UNRESTRICTED OPTION. At any time prior to October 1, 1999, FHP
shall have the option to purchase from any Management Investor(s), and such
Management Investor(s) shall be obligated to sell to FHP, any or all of the
Management Stock, together with any Additional Securities issued in respect
of such Management Stock, of such Management Investor(s), at a price per
share of $30.00 (subject to Section 5.5, below).
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5.3 PERFORMANCE OPTIONS. FHP shall have the option to purchase
from any Management Investor(s), and such Management Investor(s) shall be
obligated to sell to FHP, for consideration in the amount of $.01 (one
cent) per share (subject to Section 5.5, below), certain amounts of the
Management Stock, together with any Additional Securities issued in respect
of such Management Stock, under the following circumstances (the
"Performance Purchase Options"):
(a) If the Company fails to meet the Financial Goal, as
adjusted, for the fiscal year 1996, as approved by the Audit Committee of
FHP's Board of Directors (the "Audit Committee") in accordance with the
procedures outlined in Section 5.3(d) below, FHP shall have the option to
purchase from each Management Investor that portion of the Management Stock
with respect to which the Restrictions lapsed on July 1, 1996 comprising
20% of the total amount of such Management Stock.
(b) If the Company fails to meet the Financial Goal, as
adjusted, for the fiscal year 1997, as approved by the Audit Committee in
accordance with the procedures outlined in Section 5.3(d) below, FHP shall
have the option to purchase from each Management Investor that portion of
the Management Stock with respect to which the Restrictions lapsed on
July 1, 1997 comprising 20% of the total amount of such Management Stock.
(c) If the Company fails to meet the Financial Goal, as
adjusted, for the fiscal year 1998, as approved by the Audit Committee in
accordance with the procedures outlined in Section 5.3(d) below, FHP shall
have the option to purchase from each Management Investor up to an
additional 20% of the total amount of Management Stock pursuant to the
following formula: for every $100,000 below the amount which is $4 million
below the Financial Goal, FHP shall have the option to purchase from each
Management Investor 0.5% of the total amount of such person's Management
Stock. For example, if the Company's fiscal year 1998 results are $7
million below the Financial Goal for the fiscal year 1998, FHP may purchase
additionally that portion of the Management Stock with respect to which the
Restrictions lapsed on July 1, 1998 comprising 15% of the total amount of
such Management Stock.
(d) The Financial Goals for the fiscal years 1996, 1997 and
1988 shall be as approved by the Audit Committee in accordance with the
following guidelines: The Financial Goal for fiscal year 1996 will be a
pretax loss of $21,784,000 (after allocation of FHP corporate charges and
after net interest income or expense). This pretax loss assumes that the
Fountain Valley Hospital, Salt Lake City
5
Hospital, and Westminster subacute facility (collectively the "Hospitals")
were sold on July 1, 1995. The Financial Goal for fiscal year 1996 will be
adjusted to reflect the following: (i) an adjustment will be made to
include the budget of daily operating expenses for every day the Hospitals
are not sold during the fiscal year (the daily expenses to be added to
budget are as follows: Fountain Valley - $35,271, Utah Hospital - $21,271,
and Westminster subacute - $10,000); (ii) an adjustment will be made to
reflect interest on any debt incurred in connection with the formation of
the Company or lease expenses in excess of depreciation for assets leased
from FHP or its subsidiaries. The Financial Goal for fiscal year 1997 will
be equivalent to the Financial Goal for fiscal year 1996 (a pretax loss of
$21,784,000) adjusted to reflect (x) the annual impact of adjustments under
clause (ii) above and (y) an improvement of $20,000,000. The Financial
Goal for fiscal year 1998 will be the Financial Goal for fiscal year 1997
plus an improvement of $20,000,000. The determination of the Financial
Goal for fiscal year 1996 will be approved by the Audit Committee, and the
initial determination of the Financial Goals for fiscal year 1997 and 1998
will be approved by the Audit Committee prior to July 1, 1996, and July 1,
1997, respectively. The Audit Committee may, in its sole discretion
exercised in good faith, adjust the Financial Goals if it determines that
such adjustment is necessary or desirable to accomplish the purposes of
this Agreement. The determination as to whether the Company has met the
Financial Goal for any particular fiscal year shall be made by the Audit
Committee within 90 days after the end of such fiscal year (as to each
fiscal year, the "Determination Date"). The determinations of the Audit
Committee shall be conclusive and binding upon the parties in all respects.
5.4 MECHANICS OF OPTION EXERCISE.
(a) An option granted under Sections 5.1 or 5.2 hereof shall
be exercised by FHP upon 30 days' prior written notice to such effect to
the Management Investor(s) whose shares are subject to the option.
(b) With respect to each Performance Purchase Option granted
under Section 5.3 hereof, FHP shall have 90 days from the Determination
Date for such fiscal year within which to exercise the Performance Purchase
Option for that fiscal year.
(c) In the event that an option under this Section 5 is
exercised, the total purchase price for such shares shall be paid by bank
check at the time the certificate or certificates evidencing the shares
involved are delivered. Delivery of the certificate or certificates
6
evidencing the shares involved, properly endorsed, shall be made, against
payment therefor, immediately after the date of exercise of the option
granted under this Section 5, or such other time as may be agreed upon by
the parties to such transaction.
5.5 CERTAIN ADJUSTMENTS. The Audit Committee may, in its sole
discretion exercised in good faith, adjust the number of shares of Management
Stock that may be purchased by FHP at any time upon the exercise of the options
provided in this Section 5, and the purchase price per share pursuant thereto,
if it determines that such adjustment is equitably required to prevent the
dilution or enlargement of the rights of FHP or the Management Investors, as
appropriate, that otherwise would result from any stock dividend, stock split,
combination of shares, recapitalization or other change in capital structure of
the Company, merger, consolidation, spin-off, reorganization, partial or
complete liquidation, issuance of rights or warrants to purchase securities, or
any other corporate transaction or event having an effect similar to any of the
foregoing.
6. DRAG-ALONG RIGHTS AND TAG-ALONG RIGHTS. The provisions of this
Section 6 shall expire at such time as there has been sold or distributed to the
public in a spin-off or in one or more underwritten public offerings pursuant to
one or more Registration Statements (as defined in Section 7) filed with, and
declared effective by, the Commission under the Securities Act (both as defined
in Section 7) an aggregate number of shares of the Common Stock of the Company
equal to at least twenty percent (20%) of the Common Stock of the Company
outstanding after the last such public offering.
6.1 DRAG-ALONG RIGHTS. If FHP proposes a transaction which would
involve the sale or other transfer for consideration by FHP of an amount of
shares of Common Stock of the Company, which, if completed, would result in
a person or entity (other than FHP or its direct or indirect subsidiaries
or affiliates) acquiring 80% or more of the shares of the outstanding
Common Stock of the Company held by FHP (a "Proposed Transaction"), then
FHP shall give written notice (a "Transaction Notice") to the Management
Investors describing the material terms of the Proposed Transaction. FHP
shall be entitled to require each Management Investor to include in such
Proposed Transaction all of such Management Investor's shares of Management
Stock; PROVIDED, HOWEVER, that no Management Investor shall be required to
enter into any Proposed Transaction pursuant to this Section 6.1 unless the
terms and conditions of the Proposed Transaction provide that either (a)
such Management Investor will not be required to participate in any
indemnification of the buyer or buyers, or (b) if such Management Investor
will participate in such indemnification, (i) such Management Investor's
liability
7
will be several and not joint and several, and (ii) such Management
Investor's liability will be capped at the market value, determined at the
time of receipt, of the net pre-tax proceeds to be received by such
Management Investor pursuant to the terms of the Proposed Transaction.
6.2 TAG-ALONG RIGHTS. In connection with any Proposed Transaction,
each Management Investor shall have a right to include in such Proposed
Transaction up to the number of shares of Management Stock computed by
multiplying (i) the total number of shares of Common Stock of the Company
proposed to be sold or otherwise disposed of by FHP pursuant to the
Proposed Transaction by (ii) a fraction, the numerator of which shall equal
the aggregate number of shares of Management Stock owned by such Management
Investor and which are no longer subject to the Restrictions provided for
in Section 3 or the Performance Options provided for in Section 5.3 as of
the close of business on the day immediately preceding the date of the
Transaction Notice and the denominator of which shall equal the sum of the
aggregate number of shares of the Common Stock of the Company issued and
outstanding on a fully diluted basis on such date. Any Management Investor
desiring to exercise his or her tag-along right must deliver a written
notice of exercise to FHP within 10 days after the date FHP gives the
Transaction Notice to such Management Investors.
6.3 SAME TERMS AND CONDITIONS. In the case of both the drag-along
rights described in Section 6.1 and the tag-along rights described in
Section 6.2, a sale of Management Stock by a Management Investor shall be
at the same price per share (in both amount and purchase medium) applicable
to the sale of the shares of Common Stock of the Company by FHP and
otherwise shall be on terms and conditions at least as favorable as those
applicable to FHP.
7. REGISTRATION RIGHTS.
7.1 CERTAIN DEFINITIONS. As used in this Section 7 and elsewhere
in this Agreement, the following terms shall have the following respective
meanings: (a) "Commission" shall mean the Securities and Exchange
Commission or any other Federal agency at the time administering the
Securities Act; (b) "Exchange Act" shall mean the Securities Exchange Act
of 1934, or any similar Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time;
(c) "Registrable Securities" shall mean all Management Stock and Additional
Securities held by the Management Investors which are no longer subject to
the restrictions specified in Section 3 or the purchase options granted to
FHP under Section 5; (d) "Securities Act" shall mean the Securities Act of
1933, or any similar Federal statute, and the rules and regulations
8
of the Commission thereunder, all as the same shall be in effect at the
time; and (e) The terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement
or similar document in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
7.2 INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company
proposes to register any of its Common Stock under the Securities Act
(other than by a registration on Form S-4 or S-8 or any successor or
similar forms or filed in connection with an exchange offer or any offering
of securities solely to the Company's existing stockholders), whether or
not for sale for its own account, the Company will each such time give
written notice thereof to all Management Investors and, upon the written
request of any Management Investor made within 20 days after the receipt of
any such notice, the Company will use its best efforts to effect the
registration under the Securities Act of the Registrable Securities for
which the Management Investor(s) has requested registration thereof;
PROVIDED, HOWEVER, that if the Company shall determine for any reason (i)
not to register such securities, then the Company shall be relieved of its
obligation to use best efforts to effect registration of the Registrable
Securities, or (ii) to delay registration of such securities, then the
Company shall be permitted to delay registering any Registrable Securities.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration
pursuant to this Section 7 involves an underwritten offering, and the
managing underwriter shall advise the Company that, in its opinion, the
number of securities requested and otherwise proposed to be included in
such registration exceeds the number which can be sold in such offering
within a price range acceptable to the Company, the Company will include in
such registration, to the extent of the number which the Company is so
advised can be sold in such offering, (i) first, all securities proposed to
be sold by the Company, (ii) second, all securities proposed to be sold by
FHP, and (iii) third, the number of Registrable Securities requested to be
included in such registration by the Management Investors and securities of
other persons requested to be included in such registration that, in the
opinion of such managing underwriter, can be sold, such amount to be
allocated among all such Management Investors and other persons pro rata
based upon the respective number of securities each such person has
requested to be included in such registration.
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(c) SELLER INFORMATION; SUSPENSION. The Company may require
each seller of Registrable Securities to furnish the Company such
information regarding such seller and the distribution of such securities
as the Company may from time to time reasonably request. Notwithstanding
any other provision of this Agreement, the Management Investors understand
that there may be periods during which the Company may determine, in good
faith, that it is in the best interest of the Company and its stockholders
to defer disclosure of any material facts regarding the Company business
which the Company requires for reasonable business purposes to remain
confidential (collectively, "Non-Public Information"), until such
information has reached a more advanced stage and that during such periods
sales of Registrable Securities and the effectiveness of any registration
statement covering Registrable Securities may be suspended or delayed.
Each Management Investor agrees by acquisition of such Registrable
Securities that upon receipt of any notice from the Company of (i) the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, or (ii) the
development of any Non-Public Information, then such Management Investor
will forthwith discontinue such Management Investor's disposition of
Registrable Securities pursuant to the registration statement relating to
such Registrable Securities.
7.3 UNDERWRITTEN OFFERINGS; LOCKUP.
In connection with any distribution by one or more underwriters
of the Company's securities registered pursuant to this Section 7, to the extent
not inconsistent with applicable law, each Management Investor agrees as a
condition to such Management Investor's rights under this Agreement not to
effect any public sale or distribution of any equity securities of the Company,
or any securities convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144 under the Securities Act (or
any similar provision then in force), during such period as may be agreed to
between the Company and the underwriters, except as part of such underwritten
registration.
7.4 INDEMNIFICATION/INDEMNIFICATION AGREEMENTS. Notwithstanding
the foregoing, the Company may require, as a condition to including any
Management Investor's Registrable Securities in any registration statement filed
pursuant to this Sections 7, that each Management Investor who has requested
that his or her Registrable Securities be included in such registration
statement enter into an indemnification agreement
10
with the Company on terms and conditions customary for indemnification
agreements in connection with transactions of this type.
7.5 TERMINATION OF REGISTRATION RIGHTS. The registration rights
granted to the Management Investors pursuant to this Section 7 shall terminate:
(a) As to any particular Registrable Securities, at the time that such
Registrable Securities can be sold by the Management Investor holding such
Registrable Securities pursuant to Rule 144 or successor rules without the
necessity for registration; (b) Upon transfer by the Management Investor of such
Registrable Securities; and (c) In any event, ten years from the date of this
Agreement.
7.6 REGISTRATION EXPENSES. All expenses incurred by the Company
incident to the Company's performance of or compliance with this Section 7,
including, without limitation, all registration and filing fees, fees and
expenses of compliance with state securities or blue sky laws, printing expenses
and fees and disbursements of counsel for the Company and all independent public
accountants (including the expenses of any audit), but excluding underwriting
commissions, and discounts and expenses agreed to be paid to underwriters (all
such expenses being herein called "Registration Expenses"), shall be borne by
the Company.
8. WITHHOLDING. The Management Investors acknowledge that the
Company may withhold compensation (in cash, or, at the Company's option, in
stock) to satisfy all applicable federal, state, and local income, employment
and other tax withholding requirements.
9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
9.1 AUTHORIZATION. FHP and each Management Investor represent and
warrants that this Agreement, when executed and delivered by each of them, will
constitute a valid and legally binding obligation of each of them, enforceable
against each of them in accordance with its terms.
9.2 INVESTMENT REPRESENTATIONS.
(a) This Agreement is made with the Management Investors in
reliance upon each Management Investor's representation to the Company and
to FHP, which by such Management Investor's execution and delivery hereof
each Management Investor hereby confirms, that the shares of the Management
Stock to be received by such Management Investor will be acquired for
investment for such Management Investor's own account, not as a nominee or
agent, and not with a view to the sale in connection with a public
distribution of any part thereof; and (ii) such Management Investor has no
present intention of selling, granting a
11
participation in or otherwise distributing, and does not have any contract,
undertaking, agreement or arrangement with any natural person, corporation,
partnership, association or other entity ("Person") to sell, transfer or
grant a participation to such Person, or to any third Person, with respect
to any of the shares of the Management Stock.
(b) Each Management Investor understands that the Management
Stock has not been registered under the Securities Act on the ground that
the sale and the issuance of Management Stock hereunder is exempt from
registration under the Securities Act pursuant to Section 4(2) thereof and
regulations issued thereunder, and that FHP's and the Company's reliance on
such exemption is predicated on the Management Investors' representations
set forth herein.
(c) Each Management Investor represents that such Management
Investor is an executive officer or director of the Company or FHP. Each
Management Investor further represents that, during the course of the
transaction and prior to such Management Investor's purchase of shares of
the Management Stock, such Management Investor had access to, the
opportunity to ask questions of, and receive answers from, representatives
of FHP and the Company concerning the terms and conditions of the offering
and to obtain additional information (to the extent FHP or the Company
possessed such information or could acquire it without unreasonable effort
or expense) necessary to verify the accuracy of any information furnished
to such Management Investor or to which such Management Investor had
access.
(d) Each Management Investor has relied solely on its own
investigations in making a decision to purchase the Management Stock, and
has received no representation or warranty from FHP or the Company, or any
of the affiliates, employees or agents of either.
(e) Each Management Investor understands that the Management
Stock may not be sold, transferred or otherwise disposed of without
registration or qualification under the Securities Act and the California
Corporate Securities Law of 1968, as amended (the "CSL") or pursuant to an
exemption therefrom, and that in the absence of an effective registration
statement and permit covering the Management Stock or an available
exemption from registration under the Securities Act and qualification
under the CSL, the Management Stock must be held indefinitely. Each
Management Investor represents that, in the absence of such an effective
registration statement and permit covering the Management Stock, such
Management Investor will sell, transfer or otherwise dispose of the
Management Stock only in a manner consistent with his or its
representations set
12
forth herein and then only in accordance with the provisions of this
Agreement and applicable laws and regulations.
(f) Each Management Investor agrees that, except as
specifically contemplated hereunder, in no event will such Management
Investor transfer or dispose of any of the Management Stock other than
pursuant to an effective registration statement under the Securities Act,
unless and until (i) there is compliance with all requirements contained in
other sections of this Agreement; (ii) the Management Investor shall have
notified the Company of the proposed disposition and shall have furnished
the Company with a statement of the circumstances surrounding the
disposition; (iii) if requested by the Company, at the expense of the
Management Investor or transferee, such Management Investor shall have
furnished to the Company an opinion of counsel, reasonably satisfactory to
the Company, to the effect that such transfer may be consummated without
registration under the Securities Act; and (iv) the transferee executes and
delivers an assumption agreement, in form and substance satisfactory to
FHP, by which the transferee assumes all obligations of a Management
Investor under this Agreement.
9.3 LEGENDS; STOP TRANSFER.
(a) All certificates for shares of the Stock shall bear a
legend in substantially the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT
IN COMPLIANCE WITH SUCH ACT AND LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT
TRANSFERABLE, EXCEPT IN ACCORDANCE WITH THE PROCEDURES AND
RESTRICTIONS SET FORTH IN THE CERTIFICATE OF INCORPORATION AND
THE STOCK PURCHASE AGREEMENT DATED AS OF _________, 1996 AMONG
THE COMPANY, FHP INTERNATIONAL CORPORATION ("FHP"), KATHRYN M.
ADAIR, GLORIA L. AUSTIN, WILLIAM P. BRACCIODIETA, LARRY L.
GEORGOPOLOUS, GARY E. GOLDSTEIN, M.D., RICHARD D. JACOBS, R.
JUDD JESSUP, JACK D. MASSIMINO, BARBARA C. MCNUTT, KENNETH S.
ORD, WESTCOTT W. PRICE III, R. WALTER R. STONE, MARGARET VAN
MATER, AND MICHAEL J. WEINSTOCK (THE "STOCK PURCHASE
AGREEMENT"), INCLUDING BUT NOT LIMITED TO FHP'S OPTION TO
PURCHASE THE SECURITIES REPRESENTED BY THIS CERTIFICATE
PURSUANT TO SECTION 5.2 THEREOF. COPIES OF THE STOCK PURCHASE
AGREEMENT ARE FILED AT THE PRINCIPAL OFFICE OF THE COMPANY AND
ARE
13
AVAILABLE TO ANY HOLDER WITHOUT CHARGE UPON WRITTEN REQUEST
THEREFOR. ANY PURPORTED TRANSFER IN VIOLATION OF SUCH
RESTRICTIONS SHALL BE VOID AND OF NO EFFECT. AS USED HEREIN,
"TRANSFER" SHALL MEAN SALE, EXCHANGE, ASSIGNMENT, TRANSFER,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF ANY INTEREST IN A
SHARE EXCEPT BY OPERATION OF LAW IN CONNECTION WITH A MERGER OR
CONSOLIDATION OF THE COMPANY.
THE VOTING OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE IS
SUBJECT TO THE PROVISIONS OF THE CERTIFICATE OF INCORPORATION
AND THE STOCK PURCHASE AGREEMENT.
(b) The certificates for shares of the Management Stock shall
also bear any legend required by any applicable state securities law.
(c) In addition, the Company shall make a notation regarding
the restrictions on transfer of the Management Stock in its stock records,
and shares of the Management Stock shall be transferred on the records of
the Company only if transferred or sold pursuant to an effective
registration statement under the Securities Act covering such shares or
pursuant to and in compliance with the provisions of subsection 9.2(f)
hereof.
10. CERTAIN COVENANTS.
10.1 RIGHT OF FIRST REFUSAL. The provisions of this Section 10
shall expire at such time as there has been sold or distributed to the
public in a spin-off or in one or more underwritten public offerings
pursuant to one or more Registration Statements filed with, and declared
effective by, the Commission under the Securities Act.
(a) Each Management Investor agrees that such Management
Investor will not sell or otherwise dispose of all or any portion of the
Management Stock held by such Management Investor unless such sale or
disposition (i) involves only those shares of Management Stock (a) with
respect to which the Restrictions have lapsed, and (b) are no longer
subject to any of the options provided in Section 5 hereof, and (ii) is
made (a) for consideration that is payable in cash or cash equivalents at
the time of sale, (b) only in strict accordance with and after full
compliance with the provisions of this Section 10.1, and (c) pursuant to a
good faith offer to purchase such Management Stock in writing from a
responsible third party. In the event of any such proposed sale or other
disposition, the Management Investor proposing to make such sale or other
disposition (the "Selling Investor") will give notice to the Company and
14
concurrently to FHP containing a complete description of the transaction
proposed (the "Proposal"), including the number of shares of Management
Stock proposed to be sold or otherwise disposed of (the "Transfer Shares"),
the consideration to be paid per Transfer Share and the names of all other
parties to, and all other material terms of, the proposed transaction, and
a copy of the written offer from the third party.
(b) For a period of thirty (30) business days after delivery
of the Proposal (the "FHP Option Period"), FHP shall have the sole and
exclusive right to purchase all or any portion of the Transfer Shares owned
by the Selling Investor for the consideration stated in the Proposal and on
such other terms and conditions as those offered to the Selling Investor as
set forth in the Proposal.
(c) If within the FHP Option Period FHP does not exercise the
option provided in subsection (b) above as to all of the Transfer Shares,
then for a period of ten (10) days (the "Company Option Period") commencing
upon the expiration of the FHP Option Period (or such earlier time as FHP
has either given notice of exercise pursuant to (e) below or has advised
the Selling Investor that it does not intend to exercise such option), the
Company shall have the sole and exclusive right to purchase all or any
portion of the remaining Transfer Shares for the consideration and on the
other terms and conditions set forth in the Proposal.
(d) After expiration of the FHP Option Period and the Company
Option Period, if FHP and the Company have not exercised their respective
options so as to purchase, in the aggregate, all of the Transfer Shares
proposed to be sold by the Selling Investor, then none of such Transfer
Shares will be sold to either of said parties, and within a period ending
sixty (60) days after the expiration of the Company Option Period, the
Selling Investor may sell or otherwise dispose of the Transfer Shares as
are the subject of the Proposal, but (i) only for cash or cash equivalents,
and (ii) only in strict accordance with the terms and provisions set forth
in the Proposal.
(e) Any option granted under this Section 10.1 may be
exercised by notice in writing to the Selling Investor and the Company
stating that such option is exercised.
(f) In the event that the options under this Section 10.1 have
been exercised so as to purchase all of the Transfer Shares proposed to be
sold by the Selling Investor, delivery of the certificate or certificates
evidencing the Transfer Shares, properly endorsed, shall be made by the
Selling Investor against payment therefor within
15
ten (10) days after the expiration of the Company Option Period at the
principal office of the Company, unless a different time and place or both
is agreed upon by the parties to such transaction, and the total purchase
price with respect to such option shall be paid in the manner and at the
time or times specified in the Proposal.
(g) Notwithstanding anything to the contrary contained in this
Agreement, a Management Investor shall be permitted to transfer those
shares of such Management Investor's Management Stock with respect to
which the Restrictions have lapsed, to a Permitted Transferee (as defined
below) of such Management Investor. For purposes of this Agreement,
"Permitted Transferee" shall mean (i) any member of the immediate family of
such Management Investor, (ii) any trust, all of the beneficiaries of which
are members of the immediate family of such Management Investor, or (iii)
the estate or personal representative of such Management Investor if such
Management Investor is deceased; PROVIDED, HOWEVER, that any Permitted
Transferee to whom such shares of Management Stock are transferred pursuant
to this paragraph (g) shall be required, as a condition of such transfer,
to execute and deliver a written assumption agreement by which such
assignee assumes all rights and obligations of a Management Investor under
this Agreement, including but not limited to (i) the restrictions imposed
by Sections 5 hereof, and (ii) the rights and obligations of FHP under
Section 6 hereof. Any reference to a "Management Investor" contained in
this Agreement shall be deemed to include such Management Investor's
Permitted Transferees.
11. MISCELLANEOUS.
11.1 REMEDIES. The parties to this Agreement acknowledge and agree
that breach of any of the covenants of FHP, the Company and the Management
Investors set forth in this Agreement may not be compensable by payment of money
damages and, therefore, that the covenants of FHP, the Company and the
Management Investors set forth in this Agreement may be enforced in equity by a
decree requiring specific performance. Without limiting the foregoing, if any
dispute arises concerning the sale or other disposition of any of the Management
Stock subject to this Agreement, the parties to this Agreement agree that an
injunction may be issued restraining the sale or other disposition of such
Management Stock or rescinding any such sale or other disposition, pending
resolution of such controversy. Such remedies shall be cumulative and non-
exclusive and shall be in addition to any other rights and remedies the parties
may have under this Agreement.
11.2 ATTORNEYS' FEES. If any party to this Agreement brings an
action against another party to enforce its rights under this Agreement, the
prevailing party shall be entitled to
16
recover its costs and expenses, including without limitation reasonable
attorneys' fees and costs, incurred in connection with such action, including
any appeal of such action. In the event that a party brings such an action
against more than one of the other parties to this Agreement, any attorneys'
fees awarded against such other parties shall be equitably apportioned among
such other parties in light of all of the facts and circumstances surrounding
their involvement in such action.
11.3 NOTICES. Notices and other communication provided for herein
shall be in writing (including wire, telex, telecopy or similar writing) and
shall be sent, delivered, telexed or telecopied to:
The Company: Talbert Medical Management Corporation
9900 Talbert Avenue
Fountain Valley, CA 92708
Attn: President
With a copy to:
FHP: FHP International Corporation
9900 Talbert Avenue
Fountain Valley, CA 92708
Attn: Secretary
With a copy to:
The Management Kathryn M. Adair
Investors: 7021 Pinebrook Road
Park City, UT 84060
Gloria L. Austin
17 Whispering Wind
Irvine, CA 92714
William P. Bracciodieta
8121 Wadebridge Circle
Huntington Beach, CA 92646
Larry L. Georgopolous
12009 Ibex Avenue N.E.
Albuquerque, NM 87111
Gary E. Goldstein, M.D.
6 Amber Sky Drive
Rancho Palos Verdes, CA 90275
Richard D. Jacobs
17
4176 W. Jasper
Chandler, AZ 85226
R. Judd Jessup
30962 Via Serenidad
Coto de Caza, CA 92679
Jack D. Massimino
25362 Gallup Circle
Laguna Hills, CA 92653
Barbara C. McNutt
5628 Willowcreek Road
N. Las Vegas, NV 89031
Kenneth S. Ord
11 Emerald Glen
Laguna Niguel, CA 92677
Westcott W. Price III
1505 Emerald Bay
Laguna Beach, CA 92651
Walter R. Stone
6492 Doral Drive
Huntington Beach, CA 92648
Margaret Van Meter
#1 Cala Churcha Street
Barrigada Heights, GU 96921
Michael J. Weinstock
8 Morning Sun
Irvine, CA 92715
11.4 NO THIRD PARTY BENEFICIARIES. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person or entity
other than the parties hereto and their successors in interest and permitted
assignees, any rights or remedies under or by reason of this Agreement unless
expressly so stated otherwise in this Agreement.
11.5 ASSIGNMENT BY FHP. This Agreement shall be binding upon and
inure to the benefit of any successor or successors of FHP. This Agreement is
assignable by FHP to (i) any purchaser of all or substantially all of FHP's
shares of the capital stock of the Company, (ii) any wholly-owned subsidiary of
FHP, or (iii) the Company; PROVIDED, HOWEVER, that such assignee shall execute
and deliver a written assumption agreement by which such assignee assumes all
obligations of FHP under this Agreement. In the event of an assignment by FHP
pursuant to this Section 11.5, FHP shall have the ability to delegate the
functions to be performed by the Audit Committee hereunder
18
(including any discretionary functions) to any committee of such assignee with
substantially similar functions.
11.6 TIME IS OF THE ESSENCE. Time is of the essence in respect to
all provisions of this Agreement in which a definite time for performance is
specified.
11.7 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits
and Schedules specifically referred to herein represents the entire, final
agreement of the parties hereto with respect to the subject matter hereof,
superseding all prior agreements, understandings, discussions, negotiations and
commitments of any kind. This Agreement may not be amended or supplemented, nor
may any rights hereunder be waived, except in a writing signed by each of the
parties affected thereby.
11.8 SEVERABILITY. In the event that any provision or any part of
any provision of this Agreement is held to be illegal, invalid or unenforceable,
such illegality, invalidity or unenforceability shall not affect the validity or
enforceability of any other provision or part hereof.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 GOVERNING LAW. The validity, interpretation, enforceability,
and performance of this Agreement shall be governed by and construed in
accordance with the law of the State of Delaware, without reference to its
conflicts of law rules.
11.11 WAIVER OF JURY TRIALS; CONSENT TO JURISDICTION. WITH RESPECT
TO ANY LITIGATION ARISING OUT OF THIS AGREEMENT OR ANY RELATED TRANSACTION, THE
PARTIES EXPRESSLY WAIVE ANY RIGHT THEY MAY HAVE TO A JURY TRIAL AND AGREE THAT
ANY SUCH LITIGATION SHALL BE TRIED BY A JUDGE WITHOUT A JURY. Each party agrees
to non-exclusive personal jurisdiction and venue in the United States District
Court for the Central District of California (and any California State court
within that District) for that purpose, and appoints the person set forth in
Section 11.3 as its agent for service of process in such jurisdiction.
11.12 WAIVER. The waiver by any party of any instance of any other
party's noncompliance with any obligation or responsibility herein shall not be
deemed a waiver of other instances or of any party's remedies for such
noncompliance.
[the next page is the signature page]
19
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above mentioned.
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
--------------------------
Name: Burke F. Gumbiner
Title: Senior Vice President
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
---------------------------
Name: Michael A. Montevideo
Title: Assistant Treasurer
/s/ Kathryn M. Adair /s/ Jack D. Massimino
-------------------- ---------------------
Kathryn M. Adair Jack D. Massimino
/s/ Gloria L. Austin /s/ Barbara C. McNutt
-------------------- ---------------------
Gloria L. Austin Barbara C. McNutt
/s/ William P. Bracciodieta /s/ Kenneth S. Ord
--------------------------- --------------------
William P. Bracciodieta Kenneth S. Ord
/s/ Larry L. Georgopolous /s/ Westcott W. Price III
------------------------- -------------------------
Larry L. Georgopolous Westcott W. Price III
/s/ Gary E. Goldstein, M.D. /s/ Walter R. Stone
--------------------------- --------------------
Gary E. Goldstein, M.D. Walter R. Stone
/s/ Richard D. Jacobs /s/ Margaret Van Meter
--------------------- ----------------------
Richard D. Jacobs Margaret Van Meter
/s/ R. Judd Jessup /s/ Michael J. Weinstock
------------------ ------------------------
20
R. Judd Jessup Michael J. Weinstock
21
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
This AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT, dated as of May 31, 1996
(the "Amendment"), is made by and among FHP International Corporation, a
Delaware corporation ("FHP"), Talbert Medical Management Corporation, a Delaware
corporation (the "Company"), Talbert Health Services Corporation, a Delaware
corporation ("THSC"), Kathryn M. Adair, Gloria L. Austin, William P.
Bracciodieta ("Bracciodieta"), Larry L. Georgopolous, Gary E. Goldstein, M.D.,
Richard D. Jacobs, R. Judd Jessup, Jack D. Massimino, Barbara C. McNutt, Kenneth
S. Ord, Westcott W. Price III, Walter R. Stone, Margaret Van Meter, and Michael
J. Weinstock. Defined terms not defined herein shall have the meanings assigned
to them in the Stock Purchase Agreement.
WHEREAS, FHP, the Company and the Management Investors are parties to that
certain Stock Purchase Agreement, dated as of March 15, 1996 (the "Stock
Purchase Agreement"); and
WHEREAS, the Management Stock has not yet been issued to the Management
Investors pursuant to the Stock Purchase Agreement; and
WHEREAS, Bracciodieta is no longer in the employ of the Company; and
WHEREAS, FHP, the Company and the Management Investors desire to amend the
Stock Purchase Agreement in these and certain other respects as set forth below.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
1. AMENDMENTS TO STOCK PURCHASE AGREEMENT. The Stock Purchase Agreement
is hereby amended as follows:
(a) PURCHASE OF CLASS A COMMON STOCK AND THSC COMMON STOCK.
(1) The recitals on page 1 of the Stock Purchase Agreement are
hereby amended to read as follows:
"A. WHEREAS, FHP has formed the Company to function as a
physician practice management company to provide practice
management services to certain professional corporations; and
"B. WHEREAS, FHP has formed THSC to provide ancillary
medical services; and
"C. WHEREAS, FHP has acquired 9,100,000 shares of the Class
A Voting Common Stock of the Company, par value $.01 (one cent)
per share (the "TMMC Class A Common Stock", with the TMMC Class A
Common Stock and the Class B Common Stock of the Company, par
value $.01 (one cent) per share, collectively referred to herein
as the "TMMC Common Stock"), which shares of TMMC Class A Common
Stock comprise all of the issued and outstanding shares of the
common stock of the Company, for consideration in the amount of
$91,000.00; and
"D. WHEREAS, FHP has acquired 500 shares of the Common
Stock of THSC, no par value (the "THSC Common Stock"), which
shares of THSC Common Stock comprise all of the issued and
outstanding shares of the common stock of THSC, for consideration
in the amount of $1,000.00; and
"E. WHEREAS, the Company, FHP and THSC regard the services
provided to the Company by the Management Investors as valuable
to the Company, FHP, and THSC and have determined that it would
be to the advantage and in the best interests of the Company, FHP
and THSC to provide for the issuance of shares of TMMC Class A
Common Stock and THSC Common Stock to the Management Investors as
provided for in this Agreement (i) as an inducement to remain in
the service of the Company, FHP and THSC, and (ii) as an
incentive for increased efforts during such service; and
"F. WHEREAS, FHP desires to provide for the issuance of
shares of TMMC Class A Common Stock and THSC Common Stock to the
Management Investors, and the Management Investors wish to
acquire such shares from the Company and from THSC, respectively,
all on the terms and subject to the conditions set forth in this
Agreement."
(2) The first two sentences of Section 2.1 of the Stock Purchase
Agreement are hereby amended to read as follows:
"Subject to the terms and conditions of this Agreement, each
of the Management Investors, severally and not jointly, agrees to
purchase, and FHP agrees to cause the Company and THSC to, and
the Company and THSC, respectively, agree to, issue, sell and
transfer to each of the Management Investors, severally and not
jointly, at the Closing (as defined below), the following: (i)
for consideration in the amount of $.01 (one cent) per share, as
to each such Management Investor, the number of shares of the
TMMC Class A Common Stock (the "TMMC Stock") set forth in that
certain schedule signed by each of FHP, the Company, THSC
2
and such Management Investor (each, a "Management Investor
Schedule"), and (ii) for consideration in the amount of $2.00
(two dollars) per share, as to each such Management Investor, the
number of shares of the THSC Common Stock (the "THSC Stock", with
the TMMC Stock and the THSC Stock collectively referred to herein
as the "Stock") set forth in the Management Investor Schedules.
The aggregate number of shares of TMMC Stock issued to the
Management Investors shall be 880,000 (the "TMMC Management
Stock"), and the TMMC Stock issued to the Management Investors,
collectively, initially shall comprise approximately 8.8% of the
total outstanding common stock of the Company (the "TMMC
Management Stock"); and the aggregate number of shares of THSC
Stock issued to the Management Investors shall be 49, and the
THSC Stock issued to the Management Investors, collectively,
initially shall comprise approximately 8.8% of the total
outstanding common stock of THSC (the "THSC Management Stock,"
with the TMMC Management Stock and the THSC Management Stock
collectively referred to herein as the "Management Stock")."
(3) Pursuant to this Amendment, (i) all rights and obligations
created under the Stock Purchase Agreement between (a) FHP and the Management
Investors with respect to the TMMC Management Stock, and (b) the Company and the
Management Investors with respect to the TMMC Management Stock, shall hereby
also create separate and identical rights and obligations between (x) FHP and
the Management Investors with respect to the THSC Management Stock, and (y) THSC
and the Management Investors with respect to the THSC Management Stock,
respectively, as if two separate and identical sets of such rights and
obligations were originally created thereunder, (ii) all other rights and
obligations created under the Stock Purchase Agreement between (a) FHP and the
Management Investors, and (b) the Company and the Management Investors, shall
hereby also create separate and identical rights and obligations between (x) FHP
and the Management Investors, and (y) THSC and the Management Investors,
respectively, as if two separate and identical sets of such rights and
obligations were originally created thereunder, (iii) all references in the
Stock Purchase Agreement to "the Company," in so far as such references relate
to such rights and obligations created between the Management Investors and the
Company described in clauses (i)(b) and (ii)(b), shall also be references to
THSC and shall relate to such separate and identical rights and obligations
between the Management Investors and THSC as described in clauses (i)(y) and
(ii)(y), above, and (iv) all other references to "the Company" in the Stock
Purchase Agreement shall also be references to THSC; PROVIDED, HOWEVER, that the
foregoing clauses (iii) and (iv) shall not apply to those references to "the
Company" contained in Sections 5.1, 5.3, 8 and 11.5 of the Stock Purchase
Agreement.
(4) All references to "Common Stock" in Section 6 and 7 of the
Stock Purchase Agreement are hereby amended to read "TMMC Common Stock or THSC
Common Stock, as appropriate".
3
(5) Section 8 of the Stock Purchase Agreement is hereby amended
to read as follows:
"8. WITHHOLDING. The Management Investors acknowledge that
the Company, FHP or THSC, as appropriate, may withhold
compensation (in cash, or, at the option of the Company, FHP or
THSC, as appropriate, in stock) to satisfy all applicable
federal, state, and local income, employment and other tax
withholding requirements."
(6) The parties hereto acknowledge that there exists the
possibility that at some future date, THSC may be merged with or into the
Company, and in the event such merger occurs, it is presently contemplated that
upon the effective time of such merger (the "Effective Time"), each Management
Investor shall receive, in exchange for the shares of THSC Common Stock
purchased by such Management Investor pursuant to the Stock Purchase Agreement,
as amended by this Amendment (or, in the event that THSC and the Company are
merged into a new entity, for the shares of the THSC Common Stock and the shares
of the TMMC Common Stock so purchased by such Management Investor), the number
of shares of TMMC Common Stock (or shares of the common stock of the new entity)
which, when combined with the number of shares of TMMC Common Stock purchased by
such Management Investor pursuant to the Stock Purchase Agreement, as amended by
this Amendment (or which shares of the common stock of the new entity), would
result in the ownership by such Management Investor of the same percentage of
the total outstanding common stock of the Company (or of such merged entity)
immediately after the Effective Time as the percentage of the total outstanding
common stock of the Company owned by such Management Investor immediately prior
to the Effective Time. In such event, immediately following the Effective Time:
(i) all rights and obligations created under this Amendment
between (a) FHP and the Management Investors with respect to the THSC
Management Stock, and (b) THSC and the Management Investors with respect to
the THSC Management Stock, shall become rights and obligations between (x)
FHP and the Management Investors with respect to the TMMC Management Stock,
and (y) the Company and the Management Investors with respect to the TMMC
Management Stock, respectively, as if the separate and identical
obligations created pursuant to Section 1(a)(3)(i), above, had never been
created thereunder;
(ii) all other rights and obligations created pursuant to
this Amendment between (a) FHP and the Management Investors, and (b) THSC
and the Management Investors, shall become rights and obligations between
(x) FHP and the Management Investors, and (y) the Company and the
Management Investors, respectively, as if the separate and identical sets
of rights and obligations created pursuant to Section 1(a)(3)(ii), above,
had never been created thereunder;
4
(iii) all references in the Stock Purchase Agreement, as
amended by this Amendment, to "the Company," in so far as such references
relate to such rights and obligations created pursuant to Section
1(3)(a)(iii), above, between the Management Investors and THSC, shall be
references only to the Company, and shall no longer be references to THSC,
and shall relate only to the rights and obligations between the Management
Investors and the Company as described in clauses (i)(y) and (ii)(y) of
this Section 1(a)(6); and
(iv) all other references to "the Company" in the Stock
Purchase Agreement, as amended by this Amendment, shall be references to
the Company only.
Each Management Investor hereby agrees and consents that the execution of this
Amendment by such Management Investor shall constitute an agreement by such
Management Investor to (i) consent in writing to a merger of THSC with or into
the Company pursuant to Section 228 of the Delaware General Corporation Law, as
amended (the "DGCL"), and (ii) refrain from demanding any appraisal rights to
which such Management Investor might otherwise be entitled pursuant to Section
262 of the DGCL, or pursuant to any other provision of applicable law, in
connection with such a merger.
(b) REMOVAL OF PARTY TO STOCK PURCHASE AGREEMENT. The Stock Purchase
Agreement is hereby amended to remove all references to "William P.
Bracciodieta" and "Bracciodieta" in the Stock Purchase Agreement. Accordingly,
William P. Bracciodieta shall not be a party to the Stock Purchase Agreement.
2. NOTICES. Notices and other communication provided for herein or in
the Stock Purchase Agreement shall be in writing (including wire, telex,
telecopy or similar writing) and shall be sent, delivered, telexed or
telecopied, if to THSC, to:
Talbert Health Services Corporation
3540 Howard Way
Costa Mesa, CA 92626
Attn: President
3. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the law of the State of Delaware, without reference to its
conflicts of law rules.
4. NO OTHER AMENDMENTS. The Stock Purchase Agreement, as amended by this
Amendment, is and shall continue to be in full force and effect and is hereby in
all respects ratified and confirmed. Except as provided herein, nothing in this
Amendment shall waive or be deemed to waive or modify (except as expressly set
forth herein) any rights or obligations of any of the parties under the Stock
Purchase Agreement.
5
5. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which will be deemed to be an original but all of which
together will constitute but one instrument.
6
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of the
date first above mentioned.
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
------------------------------------
Name: Burke F. Gumbiner
Title: Senior Vice President
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
------------------------------------
Name: Michael A. Montevideo
Title: Assistant Treasurer
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
------------------------------------
Name: Michael A. Montevideo
Title: Assistant Treasurer
7
/s/ Kathryn M. Adair /s/ Jack D. Massimino
- -------------------------------- -----------------------------------
Kathryn M. Adair Jack D. Massimino
/s/ Gloria L. Austin /s/ Barbara C. McNutt
- ------------------------------- -----------------------------------
Gloria L. Austin Barbara C. McNutt
/s/ William P. Bracciodieta /s/ Kenneth S. Ord
- ------------------------------- -----------------------------------
William P. Bracciodieta Kenneth S. Ord
/s/ Larry L. Georgopolous /s/ Westcott W. Price III
- ------------------------------- -----------------------------------
Larry L. Georgopolous Westcott W. Price III
/s/ Gary E. Goldstein /s/ Walter R. Stone
- ------------------------------- -----------------------------------
Gary E. Goldstein, M.D. Walter R. Stone
/s/ Richard D. Jacobs /s/ Margaret Van Meter
- ------------------------------- -----------------------------------
Richard D. Jacobs Margaret Van Meter
- ------------------------------- /s/ Michael J. Weinstock
R. Judd Jessup -----------------------------------
Michael J. Weinstock
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Margaret Van Meter 20,000 TMMC
#1 Cala Churcha Street 1 THSC
Barrigada Heights, GU 96921
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-----------------------------------
Name: Burke F. Gumbiner
---------------------------------
Title: Senior Vice President
--------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
------------------------------------
Name: Michael A. Montevideo
----------------------------------
Title: Assistant Treasurer
---------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Margaret Van Meter
----------------------------------------
Margaret Van Meter
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Walter R. Stone 20,000 TMMC
6492 Doral Drive 1 THSC
Huntington Beach, CA 92648
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-------------------------------------
Name: Burke F. Gumbiner
-----------------------------------
Title: Senior Vice President
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Walter R. Stone
----------------------------------------
Walter R. Stone
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Westcott W. Price III 67,500 TMMC
1505 Emerald Bay 4 THSC
Laguna Beach, CA 92651
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-------------------------------------
Name: Burke F. Gumbiner
-----------------------------------
Title: Senior Vice President
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Westcott W. Price III
----------------------------------------
Westcott W. Price III
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Kenneth S. Ord 10,000 TMMC
11 Emerald Glen 1 THSC
Laguna Niguel, CA 92677
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-------------------------------------
Name: Burke F. Gumbiner
-----------------------------------
Title: Senior Vice President
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Kenneth S. Ord
----------------------------------------
Kenneth S. Ord
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Barbara C. McNutt 15,000 TMMC
8250 Fox Tail Way 1 THSC
Las Vegas, NV 89123
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-------------------------------------
Name: Burke F. Gumbiner
-----------------------------------
Title: Senior Vice President
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Barbara C. McNutt
----------------------------------------
Barbara C. McNutt
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Jack D. Massimino 500,000 TMMC
25362 Gallup Circle 27 THSC
Laguna Hills, CA 92653
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-------------------------------------
Name: Burke F. Gumbiner
-----------------------------------
Title: Senior Vice President
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Jack D. Massimino
----------------------------------------
Jack D. Massimino
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
R. Judd Jessup 67,500 TMMC
30962 Via Serenidad 4 THSC
Coto de Caza, CA 92679
FHP International Corporation,
a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
----------------------------------------
R. Judd Jessup
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Richard D. Jacobs 25,000 TMMC
4176 W. Jasper 1 THSC
Chandler, AZ 85226
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-------------------------------------
Name: Burke F. Gumbiner
-----------------------------------
Title: Senior Vice President
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Richard D. Jacobs
----------------------------------------
Richard D. Jacobs
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Gary E. Goldstein, M.D. 50,000 TMMC
6 Amber Sky Drive 3 THSC
Rancho Palos Verdes, CA 90275
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-------------------------------------
Name: Burke F. Gumbiner
-----------------------------------
Title: Senior Vice President
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
---------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Gary E. Goldstein
----------------------------------------
Gary E. Goldstein, M.D.
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Larry L. Georgopolous 20,000 TMMC
12009 Ibex Avenue N.E. 1 THSC
Albuquerque, NM 87111
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-------------------------------------
Name: Burke F. Gumbiner
-----------------------------------
Title: Senior Vice President
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Larry L. Georgopolous
----------------------------------------
Larry L. Georgopolous
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Gloria L. Austin 50,000 TMMC
17 Whispering Wind 3 THSC
Irvine, CA 92714
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-------------------------------------
Name: Burke F. Gumbiner
-----------------------------------
Title: Senior Vice President
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Gloria L. Austin
----------------------------------------
Gloria L. Austin
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Kathryn M. Adair 25,000 TMMC
7021 Pinebrook Road 1 THSC
Park City, UT 84060
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-------------------------------------
Name: Burke F. Gumbiner
-----------------------------------
Title: Senior Vice President
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Kathryn M. Adair
----------------------------------------
Kathryn M. Adair
8
MANAGEMENT INVESTOR SCHEDULE
This Management Investor Schedule has been prepared pursuant to Section 2.1
of that certain Stock Purchase Agreement, dated as of March 15, 1996, by and
among FHP International Corporation, a Delaware corporation ("FHP"), Talbert
Medical Management Corporation, a Delaware corporation (the "Company"), Kathryn
M. Adair ("Adair"), Gloria L. Austin ("Austin"), William P. Bracciodieta, Larry
L. Georgopolous ("Georgopolous"), Gary E. Goldstein, M.D. ("Goldstein"), Richard
D. Jacobs ("Jacobs"), R. Judd Jessup ("Jessup"), Jack D. Massimino
("Massimino"), Barbara C. McNutt ("McNutt"), Kenneth S. Ord ("Ord"), Westcott W.
Price III ("Price"), Walter R. Stone ("Stone"), Margaret Van Meter ("Van
Meter"), and Michael J. Weinstock ("Weinstock"), as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996, by and
among the same parties, and Talbert Health Services Corporation, a Delaware
corporation ("THSC").
MANAGEMENT INVESTOR # OF SHARES
Michael J. Weinstock 10,000 TMMC
8 Morning Sun 1 THSC
Irvine, CA 92715
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
-------------------------------------
Name: Burke F. Gumbiner
-----------------------------------
Title: Senior Vice President
----------------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
-------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
---------------------------------
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
------------------------------------
Name: Michael A. Montevideo
-----------------------------------
Title: Assistant Treasurer
----------------------------------
/s/ Michael J. Weinstock
----------------------------------------
Michael J. Weinstock
AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
This AMENDMENT No. 2 TO STOCK PURCHASE AGREEMENT, dated as of September 17,
1996 (the "Amendment"), is made by and among FHP International Corporation, a
Delaware corporation ("FHP"), Talbert Medical Management Corporation, a Delaware
corporation (the "Company"), Talbert Health Services Corporation, a Delaware
corporation ("THSC"), Kathryn M. Adair, Gloria L. Austin, Larry L. Georgopolous,
Richard D. Jacobs, Jack D. Massimino, Barbara C. McNutt, Kenneth S. Ord,
Westcott W. Price III, Walter R. Stone, Margaret Van Meter and Michael J.
Weinstock. Defined terms not defined herein shall have the meanings assigned to
them in the Stock Purchase Agreement.
WHEREAS, FHP, the Company and the Management Investors are parties to that
certain Stock Purchase Agreement, dated as of March 15, 1996, as amended by that
certain Amendment No. 1 to Stock Purchase Agreement, dated as of May 31, 1996
(collectively, the "Stock Purchase Agreement"); and
WHEREAS, FHP, PacifiCare Health Systems, Inc., a Delaware corporation
("PacifiCare"), N-T Holdings, Inc., a Delaware corporation, Neptune Merger
Corp., a Delaware corporation and Tree Acquisition Corp., a Delaware
corporation, have entered into that certain Amended and Restated Agreement and
Plan of Reorganization, dated September 17, 1996 (the "Reorganization
Agreement"); and
WHEREAS, the Reorganization Agreement provides that the common and
preferred stockholders of FHP will receive transferable rights (the "Rights") to
subscribe for 92.25% of the outstanding shares of either TMMC Common Stock or
the capital stock of an affiliated entity (the "Rights Offering"); and
WHEREAS, prior to the execution of the Stock Purchase Agreement, William P.
Bracciodieta ("Bracciodieta"), originally intended to be a party to the Stock
Purchase Agreement as a Management Investor, ceased to be in the employ of FHP,
and, after the execution of the Stock Purchase Agreement but prior to the
issuance of the Management Stock thereunder to the Management Investors, R. Judd
Jessup ("Jessup"), a party to the Stock Purchase Agreement as a Management
Investor, ceased to be in the employ of FHP, and, accordingly, no shares of
Management Stock were issued and sold to either Bracciodieta or Jessup pursuant
to the Stock Purchase Agreement; and
WHEREAS, in light of the execution of the Reorganization Agreement and the
termination of the employment of Bracciodieta and Jessup with the Company and
FHP, FHP, THSC, the Company and the Management Investors desire to amend the
Stock Purchase Agreement in certain respects as set forth below.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
1
1. AMENDMENTS TO STOCK PURCHASE AGREEMENT.
(a) ADJUSTMENT OF NUMBERS AND PERCENTAGES. The second sentence of
Section 2.1 of the Stock Purchase Agreement is hereby amended to read as
follows:
"The aggregate number of shares of TMMC Stock issued to the Management
Investors shall be 812,500 (the "TMMC Management Stock"), and the TMMC
Stock issued to the Management Investors, collectively, initially shall
comprise 8.125% of the total outstanding common stock of the Company (the
"TMMC Management Stock"); and the aggregate number of shares of THSC Stock
issued to the Management Investors shall be 45, and the THSC Stock issued
to the Management Investors, collectively, initially shall comprise
approximately 8.125% of the total outstanding common stock of THSC (the
"THSC Management Stock", with the TMMC Management Stock and the THSC
Management Stock collectively referred to herein as the "Management
Stock")."
(b) EXPIRATION OF CERTAIN OPTIONS. At the Effective Time (as that
term is defined in the Reorganization Agreement), the Stock Purchase Agreement
shall be amended to add the following as Section 12:
"12. EXPIRATION OF CERTAIN OPTIONS. Notwithstanding anything to the
contrary contained in this Agreement (including, without limitation, the
provisions of Sections 3.2 and 5.4, above):
12.1 TERMINATION OF FHP MANAGEMENT INVESTORS WITHOUT CAUSE. In
the event that the employment with FHP of any of the Management Investors
who are officers of FHP (the "FHP Management Investors") is terminated
without cause, any Restrictions remaining applicable to the Management
Stock owned by such FHP Management Investor shall terminate, and all
unvested Management Stock owned by such FHP Management Investor shall vest.
Such Restrictions shall be deemed to terminate, and such Management Stock
shall be deemed to vest, prior to the time FHP's repurchase option provided
for in Section 5.1, above, arises; PROVIDED, HOWEVER, that in such event,
the Management Stock owned by such FHP Management Investor shall remain
subject to the options provided by Sections 5.2 and 5.3, above, until the
first to occur of the expiration of such options pursuant to the terms of
Section 5, above, or the expiration of such options pursuant to the terms
of Section 12.2, below.
12.2 CHANGE IN CONTROL OF THE COMPANY. Both the option granted
under Section 5.1 and the Performance Purchase Option granted under Section
5.3 shall expire as to all Management Investors upon a Change in Control
(as herein defined) of TMMC which occurs at any time after the date of the
expiration of the subscription period during which the Rights are
exercisable under the Rights Offering (the "Expiration Date"). For
purposes of this Agreement, "Change in Control" means:
(a) The acquisition by any individual entity or group
(within the meaning of Section 13(d) or 14(d)(2) of the Exchange Act) (a
"Person") of
2
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of over 50% of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); PROVIDED, HOWEVER, that for
purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by FHP or PacifiCare, or (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or PacifiCare, or any corporation controlled by
the Company or PacifiCare; or
(b) Individuals who, as of the Expiration Date, constitute
the Board of Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors of the
Company; PROVIDED, HOWEVER, that any individual becoming a director
subsequent to the Expiration Date whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board of Directors of the Company."
2. FHP PURCHASE OF STOCK. The parties hereto consent to the purchase by
FHP from, and the issuance, sale and transfer to FHP by, (i) the Company of
87,500 shares of TMMC Common Stock, for consideration in the amount of $.01 per
share, and (ii) THSC of 5 shares of THSC Common Stock, for consideration in the
amount of $2.00 per share. Such purchases by FHP shall occur as soon as
practicable after the execution of this Amendment, and pursuant to a resolution
of the Board of Directors of each of the Company and THSC adopted as of
September 17, 1996.
3. FHP CAPITALIZATION OF THE COMPANY. The parties hereto consent to any
capital contributions which have been or will be made to the Company by FHP
pursuant to Section 4.15(b) of the Reorganization Agreement.
4. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the law of the State of Delaware, without reference to its
conflicts of law rules.
5. NO OTHER AMENDMENTS. The Stock Purchase Agreement, as amended by this
Amendment, is and shall continue to be in full force and effect and is hereby in
all respects ratified and confirmed. Except as provided herein, nothing in this
Amendment shall waive or be deemed to waive or modify (except as expressly set
forth herein) any rights or obligations of any of the parties under the Stock
Purchase Agreement.
3
6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which will be deemed to be an original but all of which
together will constitute but one instrument.
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of the
date first above mentioned.
FHP International Corporation, Talbert Health Services Corporation,
a Delaware corporation a Delaware corporation
By: /s/ Burke F. Gumbiner By: /s/ Michael A. Montevideo
--------------------------- --------------------------------
Name: Burke F. Gumbiner Name: Michael A. Montevideo
------------------------- ------------------------------
Title: Senior Vice President Title: Assistant Treasurer
------------------------ -----------------------------
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
---------------------------
Name: Michael A. Montevideo /s/ Kathryn M. Adair
------------------------- -----------------------------------
Title: Assistant Treasurer Kathryn M. Adair
------------------------
/s/ Gloria L. Austin /s/ Larry L. Georgopolous
------------------------------ -----------------------------------
Gloria L. Austin Larry L. Georgopolous
/s/ Richard D. Jacobs /s/ Jack D. Massimino
------------------------------ -----------------------------------
Richard D. Jacobs Jack D. Massimino
/s/ Barbara C. McNutt /s/ Kenneth S. Ord
------------------------------ -----------------------------------
Barbara C. McNutt Kenneth S. Ord
/s/ Westcott W. Price III /s/ Walter R. Stone
------------------------------ -----------------------------------
Westcott W. Price III Walter R. Stone
/s/ Margaret Van Meter /s/ Michael J. Weinstock
------------------------------ -----------------------------------
Margaret Van Meter Michael J. Weinstock
4
MANAGEMENT STOCK EXCHANGE AGREEMENT
[AMENDMENT NO. 3 TO STOCK PURCHASE AGREEMENT]
This Amendment No. 3 to Stock Purchase Agreement ("Amendment") is made
and entered into as of February 14, 1997 by and among FHP International
Corporation, a Delaware corporation ("FHP"), Talbert Medical Management Holdings
Corporation, a Delaware corporation ("Holdings"), Talbert Medical Management
Corporation, a Delaware corporation (the "Company"), Talbert Health Services
Corporation, a Delaware corporation ("THSC"), Kathryn M. Adair, Gloria L.
Austin, Larry L. Georgopolous, Gary E. Goldstein, M.D., Richard D. Jacobs, Jack
D. Massimino, Barbara C. McNutt, Kenneth S. Ord, Westcott W. Price III, Walter
R. Stone, Margaret Van Meter, and Michael J. Weinstock. Defined terms not
defined herein shall have the meanings assigned to them in the Stock Purchase
Agreement (as defined below).
WHEREAS, FHP, the Company, THSC and the Management Investors are
parties to that certain Stock Purchase Agreement dated as of March 15, 1996, as
amended on May 31, 1996 and September 17, 1996 (the "Stock Purchase Agreement").
WHEREAS, in connection with FHP's merger (the "FHP Merger") with
PacifiCare Health Systems, Inc., FHP intends to sell its holdings of common
stock of the Company and THSC to Holdings, which has been formed by FHP for the
purpose of acquiring all of the capital stock of the Company and THSC.
WHEREAS, concurrently with the FHP Merger, Holdings will distribute
rights to purchase common stock of Holdings (the "Holdings Stock") to the common
and preferred stockholders of FHP pursuant to a registration statement on Form
S-1 (the "Offering").
WHEREAS, the Management Investors collectively own 228,000 shares of
TMMC Stock and 41.75 shares of THSC Stock.
WHEREAS, the Management Investors desire to sell their TMMC Stock and
THSC Stock for the consideration described herein, including the Holdings Stock.
WHEREAS, the FHP, the Company, THSC and the Management Investors
desire to amend the Stock Purchase Agreement in these and certain other respects
as set forth below.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the parties hereby agree
as follows:
1. EXCHANGE OF TMMC STOCK AND THSC STOCK FOR HOLDINGS STOCK.
The Management Investors hereby exchange, assign, transfer and convey
to FHP all of their right, title and interest in and to, and their ownership of,
the TMMC Stock and THSC Stock in exchange for 228,000 shares of Holdings Stock,
distributed as to each Management Investor in a ratio of one (1) share of
Holdings Stock for one (1) share of TMMC Stock plus 41.75/228,000 share of THSC
Stock owned by each such Management Investor as set forth in the Management
Investor Schedules (as such Management Investor Schedules have been adjusted to
reflect the reverse stock-split of the Company effected on September 17, 1996).
The Holdings Stock received by each such Management Investor will be referred to
as "Holdings Management Stock."
2. CLOSING.
The exchange of TMMC Stock and THSC Stock for Holdings Stock as
contemplated by this Amendment (the "Closing") will take place at the same place
and on the same day as the closing of the FHP Merger.
3. CLOSING DELIVERIES.
(a) BY THE MANAGEMENT INVESTORS. At the Closing, the Management
Investors will deliver to Holdings certificates evidencing the TMMC Stock and
THSC Stock. Each certificate will be properly endorsed for transfer to or
accompanied by a duly executed stock power in favor of Holdings and will be in a
form acceptable for transfer on the books of TMMC and THSC.
(b) BY HOLDINGS. At the Closing, the Holdings will deliver to the
Management Investors certificates evidencing the Holdings Stock. Each
certificate will be properly endorsed for transfer to or accompanied by a duly
executed stock power in favor of each Management Investor and will be in a form
acceptable for transfer on the books of Holdings.
4. AMENDMENTS TO STOCK PURCHASE AGREEMENT.
a. Section 2 of the Stock Purchase Agreement is hereby amended as
follows:
i. The second sentence of Section 2.1 of the Stock Purchase
Agreement is hereby amended by deleting the phrase "(the "THSC Management
Stock", with the TMMC Management Stock and the THSC Management Stock
collectively referred to herein as the "Management Stock")" and replacing
it with the phrase "(the "THSC Management Stock", with the TMMC Management
Stock exchanged for 228,000 shares of the common stock ("Holdings Common
Stock") of Talbert Medical Management Holdings Corporation ("Holdings")
(the "Holdings Management Stock"))."
2
ii. The third sentence of Section 2.1 of the Stock Purchase
Agreement is hereby amended to read as follows:
"Stock certificates evidencing the Holdings Management Stock, in
addition to blank stock powers executed by each Management Investor, shall
be held by the Assistant Secretary of Holdings (the "Escrow Holder"), and
shall continue to be held by the Escrow Holder for the periods set forth in
Section 3 below, subject to the rights and limitations set forth in this
Agreement."
b. All references to "Management Stock" in the Stock Purchase
Agreement are hereby amended to read "Holdings Management Stock."
c. Section 5 of the Stock Purchase Agreement is amended as follows:
i. All references to "the Company" in section 5.1 are hereby
amended to also be references to Holdings.
ii. Section 5.3(a) of the Stock Purchase Agreement is hereby
amended to read as follows:
"If Holdings fails to meet the Financial Goal, as adjusted, for
the fiscal year 1996, as approved by the Audit Committee of the FHP
Board of Directors in accordance with the procedures outlined in
Section 5.3(d) below, FHP shall have the option to purchase from each
Management Investor that portion of the Management Stock with respect
to which the Restrictions lapsed on July 1, 1996 comprising 20% of the
total amount of such Management Stock."
iii. Section 5.3(b) of the Stock Purchase Agreement is hereby
amended to read as follows:
"If Holdings fails to meet the Financial Goal, as adjusted, for
the fiscal year 1997, as approved by the Audit Committee of FHP's
Board of Directors (the "Audit Committee") in accordance with the
procedures outlined in Section 5.3(d) below, FHP shall have the option
to purchase from each Management Investor that portion of the
Management Stock with respect to which the Restrictions lapsed on
July 1, 1997 comprising 20% of the total amount of such Management
Stock."
iv. All references to "the Company" in Section 5.3 are hereby
amended to be read "Holdings."
d. All references to "TMMC Common Stock or THSC Common Stock" in
Sections 6 and 7 of the Stock Purchase Agreement are hereby amended to read
"Holdings Common Stock."
3
e. Section 8 of the Stock Purchase Agreement is hereby amended to
read as follows:
"8. WITHHOLDING. The Management Investors acknowledge that
Holdings, the Company, FHP or THSC, as appropriate, may withhold
compensation (in cash, or, at the option of Holdings, the Company, FHP
or THSC, as appropriate, in stock) to satisfy all applicable federal,
state and local income, employment and other tax withholding
requirements."
f. All references to "the Company" in section 12 are hereby amended
to be references to Holdings. All references to "Outstanding Company Common
Stock" are hereby amended to be references to "Outstanding Holdings Common
Stock" and all references to "Outstanding Company Voting Securities" are hereby
amended to be references to "Outstanding Holdings Voting Securities."
5. OTHER AGREEMENTS REGARDING THE STOCK PURCHASE AGREEMENT.
a. The parties to this agreement hereby agree that the Holdings Stock
acquired herein by the Management Investors falls within the definition of
"Additional Securities" as such term is defined in the Stock Purchase Agreement,
and is subject to the same conditions as the TMMC Stock and THSC Stock with
respect to which they were exchanged.
b. The parties hereby agree that the Offering is a distribution to
the public which triggers the expiration of the "Drag-Along Rights" and "Tag-
Along Rights" contained in Section 6 of the Stock Purchase Agreement and the
"Right of First Refusal" contained in Section 10.1 of the Stock Purchase
Agreement.
c. The parties hereby agree that the Registration Rights in Section 7
of the Stock Purchase Agreement will not be exercisable in connection with the
Offering or in connection with an offering by FHP pursuant to its shelf
registration rights.
d. The parties hereby agree that the restrictions on transfer of the
Management Stock contained in Section 10 of the Stock Purchase Agreement will
not prevent any transactions contemplated by this Amendment.
6. NOTICES. Notices and other communications provided for herein or in the
Stock Purchase Agreement shall be in writing (including wire, telex, telecopy or
similar writing) and shall be sent, delivered, telexed or telecopied, if to
Holdings, to:
Talbert Medical Management Holdings Corporation
3540 Howard Way
Costa Mesa, CA 92626-1417
Attn: President
Telecopier: (714) 436-4860
4
with copies to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071
Attn: C. James Levin, Esq.
Telecopier: (213) 669-6407
7. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the law of the State of Delaware, without reference to its
conflicts of law rules.
8. NO OTHER AMENDMENTS. The Stock Purchase Agreement, as amended previously
and by this Amendment, is and shall continue to be in full force and effect and
is hereby in all respects ratified and confirmed. Except as provided herein,
nothing in this Amendment shall waive or be deemed to waive or modify (except as
expressly set forth herein) any rights or obligations of any of the parties
under the Stock Purchase Agreement.
9. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which will be deemed to be an original but all of which
together will constitute but one instrument.
[remainder of page intentionally left blank]
5
IN WITNESS WHEREOF, the parties have duly executed this Amendment as
of the date first written above.
FHP International Corporation,
a Delaware corporation
By: /s/ Burke F. Gumbiner
------------------------------
Burke F. Gumbiner
Senior Vice President
Talbert Medical Management Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
------------------------------
Name: Michael A. Montevideo
Title: Assistant Treasurer
Talbert Health Services Corporation,
a Delaware corporation
By: /s/ Michael A. Montevideo
------------------------------
Name: Michael A. Montevideo
Title: Assistant Treasurer
Talbert Medical Management Holdings Corporation
a Delaware corporation
By: /s/ Michael A. Montevideo
------------------------------
Name: Michael A. Montevideo
Title: Assistant Treasurer
S-1
/s/ Kathryn M. Adair /s/ Jack D. Massimino
- ----------------------------- ----------------------------
Kathryn M. Adair Jack D. Massimino
/s/ Gloria L. Austin /s/ Barbara C. McNutt
- ----------------------------- ----------------------------
Gloria L. Austin Barbara C. McNutt
/s/ Larry L. Georgopolous /s/ Westcott W. Price III
- ----------------------------- ----------------------------
Larry L. Georgopolous Westcott W. Price III
/s/ Gary E. Goldstein, M.D. /s/ Walter R. Stone
- ----------------------------- ----------------------------
Gary E. Goldstein, M.D. Walter R. Stone
/s/ Richard D. Jacobs /s/ Margaret Van Meter
- ----------------------------- ----------------------------
Richard D. Jacobs Margaret Van Meter
/s/ Kenneth S. Ord /s/ Michael J. Weinstock
- ----------------------------- ----------------------------
Kenneth S. Ord Michael J. Weinstock
S-2
AMENDMENT NO. 4 TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT ("Amendment") is made and
entered into as of February 14, 1997 by FHP International Corporation, a
Delaware corporation ("FHP"), as separate agreements between FHP and each of
Westcott W. Price III, Kenneth S. Ord and Michael J. Weinstock (each an
"Executive"), with reference to the following facts:
A. Each Executive is a party to a separate Employment Agreement with
FHP dated as of February 1, 1996 (each, as previously amended, such
Executive's "Employment Agreement").
B. FHP, Talbert Medical Management Corporation and Talbert Health
Services Corporation, each a Delaware corporation which is a wholly owned
subsidiary of FHP (the "Company" and "THSC," respectively), the Executives,
and certain other persons are parties to that certain Stock Purchase
Agreement made and entered into as of March 15, 1996, as amended by Amendment
No. 1 to Stock Purchase Agreement dated as of May 31, 1996, Amendment No. 2
to Stock Purchase Agreement dated as of September 17, 1996, and Amendment No.
3 to Stock Purchase Agreement dated as of February 14, 1997 (collectively,
the "Talbert Stock Purchase Agreement").
C. FHP, N-T Holdings, Inc., a Delaware corporation ("PacifiCare
Holding"), and certain other corporations are parties to that certain Amended
and Restated Agreement and Plan of Reorganization dated as of November 11,
1996 (the "Reorganization Agreement"), pursuant to Section 4.15 of which
PacifiCare Holding is required to cause the issuance of rights to
shareholders of FHP to purchase, directly or indirectly through one or more
other corporations formed to facilitate such purchase, all of FHP's interest
in TMMC and THSC. In accordance with Section 4.15, the issuance of such
rights to purchase stock of Talbert Medical Management Holdings Corporation,
a Delaware corporation formed to acquire FHP's interest in TMMC and THSC
("TMMHC"), has been registered under the Securities Act of 1933 (the "Talbert
Rights Offering"). TMMC and THSC collectively, and TMMHC if it acquires TMMC
and THSC in connection with the Talbert Rights Offering, are referred to
herein as "Talbert," and stock of TMMC and THSC, or of TMMHC if the
Executives acquire stock of TMMHC pursuant to the Talbert Stock Purchase
Agreement, is referred to herein as "Talbert Stock."
-1-
D. FHP and the Executives deem it to be in their mutual best interests
to amend the Talbert Stock Purchase Agreement to delete certain restrictions
imposed thereby upon stock of Talbert owned by the Executives, provided the
Talbert Rights Offering results in the issuance of Talbert Stock to the
public.
NOW, THEREFORE, the parties agree as follows:
1. DELETION OF PERFORMANCE PURCHASE OPTIONS. Subject to and upon the
expiration of seven (7) days following the closing of an issuance of Talbert
Stock upon the exercise of rights issued in the Talbert Rights Offering (such
closing the "Talbert IPO Closing"), the Talbert Stock Purchase Agreement with
respect to each Executive shall be and hereby is amended by deleting the
provisions of Section 5.3 thereof (relating to the "Performance Purchase
Options" as therein defined).
2. UPDATING OF PARACHUTE PAYMENT CALCULATIONS. FHP shall cause Deloitte
& Touche LLP, as the "Accounting Firm" (as defined in Section 11(b) of the
Employment Agreement of each Executive), to make calculations for each
Executive, as of the date of the Talbert IPO Closing and assuming
effectiveness of the amendment of the Talbert Stock Purchase Agreement
pursuant to Section 1 of this Amendment (such calculations as to an
Executive, a "Parachute Recalculation"), as to (i) whether a Payment (as
defined in Section 11 of his Employment Agreement) or benefit paid or
required to be paid to him by FHP is or would be an excess parachute payment
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (an "Excess Parachute Payment"), and (ii) the amount of Talbert Stock
(such amount, a "Parachute Adjustment"), if any, that such Executive would
have to forfeit pursuant to Section 2(b) below in order to avoid treatment of
any such Payment or benefit as an Excess Parachute Payment. With respect to
each Executive, the Parachute Recalculation shall be deemed to be
determinations required to be made under Section 11 of his Employment
Agreement.
a. NO EXCESS PARACHUTE PAYMENT. If the Parachute Recalculation for an
Executive indicates that no Excess Parachute Payment is or has been required
to be made by FHP to Executive, then the amendment pursuant to Section 1 of
this Amendment shall be deemed to be fully effective.
b. EXCESS PARACHUTE PAYMENT. If, but for the provision of this Section
2(b), the Parachute Recalculation for an Executive indicates that a Parachute
Adjustment is required in order to avoid treatment of a Payment or benefit
referred to above as an Excess Parachute Payment to such Executive, then, (i)
effective upon the expiration of seven (7) days following the Talbert IPO
Closing, such Executive shall
-2-
be deemed to have forfeited to FHP that number of his shares of Talbert Stock
corresponding to the Parachute Adjustment for such Executive (and Executive
shall promptly surrender the certificate or certificates for such number of
shares to FHP), and (ii) the amendment pursuant to Section 1 hereof shall be
deemed to be fully effective as to the balance of shares of Talbert Stock
owned by such Executive.
3. LIMITATION IN THE EVENT OF EXCESS PARACHUTE PAYMENTS. All amounts
payable to the Executives for services are intended to be reasonable
compensation therefor. Notwithstanding the foregoing, should the Internal
Revenue Service determine, or the applicable court if such Internal Revenue
Service determination is disputed, that payment to Executive of any amount
payable under his Employment Agreement, together with any other amounts that
must be included in such determination, will result in the payment to him of
an Excess Parachute Payment, then such Executive shall repay to the Company,
the minimum amount ("Overpayment") that would have to be repaid such that the
Parachute Adjustment with respect to that Executive would be zero. Any
forfeiture by such Executive of Talbert Stock pursuant to Section 2(b) hereof
shall be treated as such a repayment on the date of forfeiture to the extent
of the fair market value of such Talbert Stock as of such date. Any
Overpayment shall be treated for all purposes as a loan by FHP to Executive
from the date such Overpayment was made in an amount equal to the value of
such Overpayment as of such date, which loan Executive shall repay to FHP,
together with interest at the applicable federal rate under Section
7872(f)(2)(B) of the Internal Revenue Code of 1986, as amended, within thirty
(30) business days after receipt by
-3-
Executive of a final determination by the Internal Revenue Service, or
appropriate court as the case may be.
4. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the law of the State of Delaware, without
reference to its conflicts of law rules.
5. NO OTHER AMENDMENTS. The Talbert Stock Purchase Agreement, as
amended by this Amendment, is and shall continue to be in full force and
effect and is hereby in all respects ratified and confirmed. Except as
provided herein, nothing in this Amendment shall waive or modify or be deemed
to waive or modify (except as expressly set forth herein) any rights or
obligations of any of the parties under the Talbert Stock Purchase Agreement.
6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute but one instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
FHP International Corporation,
a Delaware corporation
By: /s/ Nick Franklin
-----------------------
Name: Nick Franklin
-----------------------
Title: Senior Vice President
-----------------------
/s/ Westcott W. Price III
------------------------------
Westcott W. Price III
/s/ Kenneth S. Ord
------------------------------
Kenneth S. Ord
/s/ Michael J. Weinstock
------------------------------
Michael J. Weinstock
-4-
The undersigned parties to the Talbert Stock Purchase Agreement consent
to the foregoing Amendment.
Talbert Medical Management Corporation
a Delaware corporation
By: /s/ Jack Massimino
-----------------------
Name: Jack Massimino
-----------------------
Title: President and CEO
-----------------------
Talbert Health Services Corporation
a Delaware corporation
By: /s/ Jack Massimino
-----------------------
Name: Jack Massimino
-----------------------
Title: President and CEO
-----------------------
/s/ Kathryn M. Adair
------------------------------
Kathryn M. Adair
/s/ Gloria Austin
------------------------------
Gloria L. Austin
/s/ Larry L. Georgopolous
------------------------------
Larry L. Georgopolous
/s/ Richard D. Jacobs
------------------------------
Richard D. Jacobs
/s/ Jack D. Massimino
------------------------------
Jack D. Massimino
/s/ Barbara C. McNutt
------------------------------
Barbara C. McNutt
------------------------------
Walter R. Stone
-5-