STANDSTILL AGREEMENT
This Standstill Agreement (this "Agreement") is entered into as of
February 14, 1997, between FHP International Corporation, a Delaware corporation
(FHP International Corporation, with all of its current and future affiliates
and associates, is hereinafter referred to as "FHP") and Talbert Medical
Management Holdings Corporation, a Delaware corporation (the "Company").
RECITALS
WHEREAS, FHP, as of the date hereof, owns rights (the "Rights") to
purchase 2,772,000 shares of Common Stock of the Company, par value $.01 per
share (the "Common Stock"), that when issued will constitute 92.4% of the
Company's outstanding securities with the power to vote with respect to the
election of directors generally ("Voting Securities").
WHEREAS, the Company has filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-1 (the "Form
S-1") with respect to the offering to FHP's stockholders of the Rights held by
FHP and the underlying shares of the Company's Common Stock (the "Offering").
WHEREAS, if the Offering is not fully subscribed, FHP will receive
from the Company shares of Common Stock not subscribed for in the Offering (any
such shares received by FHP are the "Unsubscribed Shares," which together with
all Voting Securities subsequently acquired by FHP, are the "FHP Shares").
WHEREAS, FHP and the Company are entering into this Agreement to
define the future relationship between FHP and the Company in respect of the
Voting Securities and certain other matters in consideration of the mutual
covenants contained herein. Nothing in this Agreement will prevent the
consummation of sales of Common Stock pursuant to the exercise of Rights.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the Company and FHP hereby
agree as follows:
ARTICLE 1. REPRESENTATIONS AND WARRANTIES
SECTION 1.1 FHP'S REPRESENTATIONS AND WARRANTIES. In order to induce
the Company to enter into this Agreement, FHP represents and warrants that FHP
owns Rights to purchase 2,772,000 shares of Common Stock, which represent all of
the Voting Securities Beneficially Owned by FHP as of the date hereof.
SECTION 1.2 COMPANY'S REPRESENTATIONS AND WARRANTIES. In order to
induce FHP to enter this Agreement, the Company represents and warrants that the
authorized capital of the Company consists of 15 million shares of Common Stock,
par value $.01 per share, and 1.2 million shares of preferred stock, par value
$.01 per share. There are presently 228,000 outstanding shares of Common Stock.
The Company has also issued to FHP Rights to purchase 2,772,000 shares of Common
Stock. The Company has granted options to purchase 70,250 shares of Common
Stock. The Company has declared, in connection with the adoption of its
Stockholder Rights Agreement, a dividend distribution as of the expiration date
of the Rights (the "Expiration Date") to all holders of Common Stock of a right
to purchase a unit initially consisting of one one-hundredth of a share of
Junior Participating Preferred Stock. There are no other outstanding options,
warrants or rights to purchase any equity securities of the Company.
ARTICLE 2. SALES BY FHP
SECTION 2.1 SALES BY FHP.
(a) With the exception of the transactions contemplated by the
Offering, FHP will not sell any FHP Shares until 180 days after the Expiration
Date (the "Waiting Period").
(b) After the Waiting Period, FHP will be permitted to sell all or
any portion of its total holdings of Common Stock, subject to compliance with
(i) federal and state securities laws, (ii) if applicable, Sections 3.2 or 3.5
of this Agreement, and (iii) the restrictions contained in Section 3.1 of this
Agreement.
ARTICLE 3. REGISTRATION RIGHTS
SECTION 3.1 RESTRICTIONS ON TRANSFER. FHP agrees that it will not,
directly or indirectly, sell, transfer or otherwise dispose of FHP Shares
constituting more than 3% of the outstanding Common Stock of the Company to any
person or group of persons who are affiliates (as defined under Rule 12b-2 of
the regulations promulgated under the Securities Exchange Act of 1934, as
amended) ("Affiliates") except in an underwritten public offering.
SECTION 3.2 SHELF REGISTRATION. The Company will file a registration
statement on Form S-3 (a "Shelf Form S-3") providing for the sale by FHP,
pursuant to Rule 415 of the Commission under the Securities Act, and/or any
similar rule that may be adopted by the Commission, of the FHP Shares and the
Company will use all commercially reasonable efforts to cause the Shelf Form S-3
to become and remain continuously effective for the period beginning on the
first anniversary of the Expiration Date and ending on the date FHP may sell all
of the remaining FHP Shares it holds free of any restrictions under the federal
securities laws (including any restrictions under Rule 144) or, if earlier, on
the date the distribution described in the Shelf Form S-3 is complete.
SECTION 3.3 REGISTRATION PROCEDURES PURSUANT TO SECTION 3.2. In
connection with the Company's obligations pursuant to Section 3.2 hereof, the
Company will:
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(a) prepare and file with the Commission the Shelf Form S-3, provided
that before filing a Shelf Form S-3 or prospectus or any amendments or
supplements thereto, the Company will furnish to FHP's counsel copies of all
such documents proposed to be filed; and the Company will use its reasonable
efforts to cause the Shelf Form S-3 to become effective by the date set forth in
Section 3.2 or as soon as practicable thereafter;
(b) prepare and file with the Commission such amendments and
supplements to the Shelf Form S-3 and the prospectus used in connection
therewith as may be necessary to maintain the effectiveness of the Shelf
Form S-3 (for the applicable period specified in Section 3.2 hereof), and
comply with the provisions of the Securities Act with respect to the disposition
of all of the FHP Shares during such applicable period in accordance with the
intended methods of disposition by FHP as set forth in the Shelf Form S-3 (which
will include sales on the securities exchange or market system on which the
Common Stock trades, or in private transactions, or underwritten public
offerings, at fixed prices, or market prices, or negotiated prices);
(c) promptly notify FHP and provide copies of all related documents
(i) when the Shelf Form S-3, the prospectus or any prospectus supplement or any
amendment has been filed, and, with respect to a Shelf Form S-3 or any post-
effective amendment, when the same has become effective, (ii) of any request by
the Commission for amendments or supplements to the Shelf Form S-3 or the
prospectus or for additional or supplemental information, (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of the Shelf
Form S-3 or the written threat or initiation of any proceedings for that
purpose, (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the FHP Shares for sale in any
jurisdiction or the written threat or initiation of any proceeding for that
purpose, or (v) at any time when a prospectus is required to be delivered under
the Securities Act in connection with the Shelf Form S-3, the happening of any
event as a result of which the Shelf Form S-3, prospectus, any prospectus
supplement, or any document incorporated by reference in any of the foregoing
contains 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,
in the light of the circumstances under which they are made, not misleading;
(d) make reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Shelf Form S-3 or any post-effective
amendment thereto or any state filing made in connection therewith at the
earliest practicable date;
(e) furnish to FHP such number of copies of the Shelf Form S-3, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in the Shelf Form S-3 and such other documents as FHP
may reasonably request in order to facilitate the disposition of the FHP Shares
being offered;
(f) cause all such FHP Shares to be listed on each securities
exchange or market system on which the Company's Common Stock is then listed or
designated;
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(g) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission;
(h) use all commercially reasonable efforts to (i) register or
qualify the FHP Shares under such other securities laws or Blue Sky laws of such
jurisdictions as FHP will reasonably request, (ii) keep such registrations or
qualifications in effect for so long as the Shelf Form S-3 remains in effect and
(iii) take any and all such actions as may be reasonably necessary or advisable
to enable FHP to consummate the disposition in such jurisdictions of the FHP
Shares; PROVIDED, HOWEVER, that the Company will not be required for any such
purpose to (A) qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify or (B)
consent to general service of process in any such jurisdiction; and
(i) cooperate with FHP to effect the offering and to facilitate the
timely preparation and delivery of certificates representing FHP Shares to be
sold under the Shelf Form S-3 and not bearing any restrictive legends and such
other actions as may be reasonably necessary to complete the offering.
SECTION 3.4 SUPPLEMENTS; AMENDMENTS. Upon the occurrence of any
event contemplated by Section 3.3(c)(v), the Company will, as soon as reasonably
practicable, prepare and furnish to FHP a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to the
purchasers of FHP Shares, such prospectus will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 3.5 PIGGYBACK REGISTRATIONS. The Company will notify FHP in
writing at least thirty (30) days prior to the filing of any registration
statement under the Act for purposes of an underwritten public offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to employee benefit plans or with
respect to corporate reorganizations or other transactions under Rule 145 of the
Act) and will afford FHP an opportunity to include in such underwritten offering
all or part of the FHP Shares. Should FHP desire to include in any such
offering all or any part of the FHP Shares, it will, within fifteen (15) days
after the above-described notice from the Company, so notify the Company in
writing. If FHP decides not to include all of the FHP Shares in any such
offering, FHP will nevertheless continue to have the right to include FHP Shares
in any subsequent registration statement or registration statements as may be
filed by the Company with respect to underwritten offerings of its securities.
The right of FHP to be included in a registration pursuant to this
Section 3.5 will be conditioned upon FHP's participation in such underwriting.
If FHP intends to distribute FHP Shares through such underwriting, FHP will
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of the Agreement, if
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the underwriter determines in good faith that marketing factors require a
limitation of the number of shares to be underwritten, the number of shares that
may be included in the underwriting will be allocated first to the Company;
second to FHP and any other stockholder of the Company (other than FHP) who is
not also an employee or director of the Company, on a pro rata basis; and third,
to any other stockholder of the Company that is also an employee or director of
the Company on a pro rata basis. No such reduction will reduce the securities
being offered by the Company for its own account to be included in the
registration and underwriting.
SECTION 3.6 EXPENSES. All expenses incurred by the Company in
complying with Section 3.2 and 3.5 hereof, including registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees of the National Association of
Securities Dealers, Inc., listing or quotation fees and fees of transfer agents
and registrars, will be borne in full by the Company. FHP will be responsible
for all registration and filing fees, underwriting commissions, transfer taxes,
discounts and fees with respect to the FHP Shares and the fees and expenses of
counsel and accountants for FHP.
SECTION 3.7 INDEMNIFICATION BY THE COMPANY. In connection with any
registration statement that the Company may file pursuant to this Agreement, the
Company will, and it hereby agrees to, indemnify and hold harmless FHP and each
of its directors and officers, and each other person, if any, that controls any
such person within the meaning of the Securities Act, from and against any and
all losses, claims, damages or liabilities, and expenses (including without
limitation reasonable fees of counsel and any amounts paid in any settlement
effected with the consent of the Company) to which any of FHP and/or such
director, officer or controlling person thereof may become subject under the
Securities Act, the common law or otherwise, insofar as such losses, claims,
damages or liabilities (or any actions or proceedings, whether commenced or
threatened and whether civil, criminal or administrative, in respect thereof) or
expenses arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the registration statement, or
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereto or (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the statement
therein, in light of the circumstances in which they were made, not misleading;
PROVIDED, HOWEVER, that the Company will not be liable to any such person in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding, whether commenced or threatened, in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any registration statement, or
prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by such person
expressly for use therein; and PROVIDED, FURTHER, that the Company will not be
liable to any such person under the indemnity agreement in this Section 3.7 to
the extent that any such loss, claim, damage or liability (or action or
proceeding, whether commenced or threatened, in respect thereof) or expense
results from the fact that FHP Shares were sold to a person
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to whom there was not sent or given a copy of the registration statement or
prospectus or of the prospectus as then amended or supplemented.
(b) In connection with the registration statement in which the FHP
Shares are registered, FHP will, and FHP hereby agrees to indemnify and hold
harmless the Company, each director and officer of the Company and such other
person, if any, who controls the Company within the meaning of the Securities
Act, from and against any and all losses, claims, damages or liabilities, and
expenses (including without limitation reasonable fees of counsel and any
amounts paid in settlement effected with the consent of FHP) to which the
Company, such director or officer or controlling person may become subject under
the Securities Act, the common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened and whether civil, criminal or administrative, in respect thereof) or
expenses arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact in or omission or alleged omission to state a
material fact required to be stated in the registration statement or any
prospectus contained therein, or any amendment or supplement thereto, or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by FHP expressly for use therein; PROVIDED, THAT the
obligation to indemnify will be limited to the net amount of proceeds received
by FHP from the sale of FHP Shares pursuant to the registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding with respect to
which a claim for indemnification may be made pursuant to this Section 3.7 or a
written threat to commence such action or proceeding, the indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
give written notice thereof (including a reasonable explanation of the
circumstances in connection therewith and copies of all writings received
relating thereto) to the latter; PROVIDED, HOWEVER, that the failure of any
indemnified party to give notice as provided herein will not relieve the
indemnifying party of any obligations under this Section 3.7 unless such failure
to provide notice prejudices in any material way the rights of the indemnifying
party to conduct the defense of such action or proceeding. In case any such
action is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and after such
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof unless the indemnifying party has
failed to assume the defense of such claim and to employ counsel reasonably
satisfactory to such indemnified person. No indemnifying party will consent to
entry of any judgment or enter into any settlement with respect to a claim made
against an indemnified party without the consent of the indemnified party, which
consent will not be unreasonably withheld, or unless such judgment or settlement
includes as an unconditional
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term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in connection with the circumstances out of
which the action or proceeding arose for all persons that may be entitled to or
obligated to provide indemnification or contribution under this Section 3.7. No
indemnified party will consent to entry of any judgment or enter into any
settlement of any action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party, which consent
will not be unreasonably withheld. An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
the indemnifying party with respect to such claim.
(d) If for any reason the indemnification provided for in Sections
3.7(b) or 3.7(c) is unavailable or insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages, liabilities or expenses
specifically covered by the indemnification provisions set forth in Sections
3.7(b) or 3.7(c), then the indemnifying party will contribute to the amount paid
or payable by the indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party, as well as
any other relevant equitable considerations; PROVIDED, that the obligation to
contribute will be individual to FHP and will be limited to the net amount of
proceeds received by FHP from the sale of the FHP Shares pursuant to the
registration statement. The relative fault of such indemnifying party and
indemnified party will be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this Section 3.7 were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to in the first sentence of this paragraph. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
SECTION 3.8 NON-ASSIGNABILITY OF REGISTRATION RIGHTS. The rights to
cause the Company, or its successors or assigns to register the FHP shares
pursuant to this Agreement are reserved solely for the use and benefit of FHP
and may not be assigned or transferred by FHP to any other person other than to
an Affiliate of FHP. A merger or consolidation of or transfer of all or
substantially all the assets of FHP or a change of control of FHP (a
"Fundamental Transaction") will not be deemed an assignment for purposes of this
Section 3.8 and the FHP Shares held by FHP immediately prior to the consummation
of a Fundamental Transaction will remain subject to this Agreement subsequent to
such Fundamental Transaction.
SECTION 3.9 BLACKOUT. In the event that the Company determines in
good faith that it would be seriously detrimental to the Company and its
stockholders to allow the
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Shelf Form S-3 to remain effective during the pendency of a transaction that the
Company deems to be material for the purposes of disclosure under the Exchange
Act, and that it would be seriously detrimental to amend the Shelf Form S-3 or
file a Form 8-K under the Exchange Act to disclose such material event, it may
furnish a certificate signed by the Chairman of the Board of Directors or the
President of the Company to FHP setting forth the Company's basis for such
determination (a "Determination Certificate"). Ten business days following the
delivery of a Determination Certificate, the Company will be entitled to suspend
the effectiveness of the Shelf Form S-3 (provided that such suspension does not
conflict with the terms of any underwriting agreement) for a period of not more
than 60 days. Within 10 days before the expiration of such 60-day period, the
Company may deliver another Determination Certificate and may increase the
period of such suspension to a total period not to exceed 90 days. Following
the expiration of the 60-day suspension period or 90-day suspension period, as
applicable, and for a period of 180 days thereafter, the Company may not suspend
the effectiveness of the Shelf Form S-3 without the prior written consent of
FHP.
ARTICLE 4. VOTING
SECTION 4.1 VOTING. FHP agrees that, during the term of this
Agreement, for so long as FHP Beneficially Owns any FHP Shares, FHP will (a) be
present, in person or represented by proxy, at all shareholder meetings of the
Company so that all Voting Securities Beneficially Owned by FHP may be counted
for the purpose of determining the presence of a quorum at such meetings and (b)
vote or consent, or cause to be voted or a consent to be given, with respect to
all Voting Securities Beneficially Owned by FHP on all matters submitted to
shareholders for a vote or consent in the same proportion as Voting Securities
are voted by holders unaffiliated with FHP.
ARTICLE 5. STANDSTILL PROVISIONS
SECTION 5.1 STANDSTILL PROVISIONS. FHP agrees that, during the term
of this Agreement, without the Company's prior written consent, FHP will not:
(a) acquire, announce an intention to acquire, offer or propose to
acquire, or agree to acquire, directly or indirectly, by purchase or otherwise,
Beneficial Ownership of any Voting Securities, or direct or indirect rights to
options to acquire (through purchase, exchange, conversion or otherwise) any
Voting Securities;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" (within the meaning of the meaning of Rule 14a-1
under the Exchange Act) to vote any Voting Securities, seek to advise, encourage
or influence any person or entity with respect to the voting of any Voting
Securities, initiate or propose any shareholder proposal or induce or attempt to
induce any other person to initiate any shareholder proposal;
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(c) make any statement or proposal, whether written or oral, to the
Board of Directors of the Company, or to any director, officer or agent of the
Company, or make any public announcement or proposal whatsoever with respect to
a merger or other business combination, sale or transfer of assets,
recapitalization, dividend, share repurchase, liquidation or other extraordinary
corporate transaction with the Company or any other transaction which could
result in a change of control, or solicit or encourage any other person to make
any such statement or proposal;
(d) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the 1934 Act) with respect to any securities of
the Company, other than a group which FHP is a member of as of the date hereof
(provided that any "group" formed in connection with the disposition of FHP
Shares pursuant to Article 3 will be permitted);
(e) deposit any FHP Shares into a voting trust or subject any FHP
Shares to any arrangement or agreement with respect to the voting of any FHP
Shares other than this Agreement;
(f) execute any written consent with respect to the Company, except
in accordance with Section 4;
(g) otherwise act, alone or in concert with others, to seek to
exercise any control over the management, Board of Directors or policies of the
Company;
(h) make a public request to the Company (or its directors, officers,
shareholders, employees or agents) to amend or waive any provisions of this
Agreement, the Certificate of Incorporation or Bylaws of the Company, or the
Stockholder Rights Agreement of the Company, including without limitation any
public request to permit FHP or any other person to take any action in respect
of the matters referred to in this Section 5.1;
(i) take any action that might require the Company to make a public
announcement regarding the possibility of any transaction referred to in
paragraph (c) above or similar transaction or, advise, assist or encourage any
other persons in connection with the foregoing;
(j) propose a nominee for director, or express support or opposition
for any nominee for director; or
(k) disclose any intention, plan or arrangement inconsistent with the
foregoing.
ARTICLE 6. GENERAL
SECTION 6.1 NOTIFICATION AS TO CERTAIN MATTERS. FHP will notify the
Company of any change in FHP's Beneficial Ownership involving in the aggregate
not less than 30,000
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shares of Voting Securities not later than two business days after such change
and from time to time, upon request, will notify the Company of the number of
shares of Voting Securities Beneficially Owned by FHP and of the names and
addresses of all persons included in the definition of FHP hereunder, including,
without limitation, affiliates to whom FHP Shares have been transferred in
accordance with Article 3. The Company will notify FHP from time to time, upon
request, of the number of Voting Securities outstanding.
SECTION 6.2 SPECIFIC PERFORMANCE. Each of FHP and the Company
acknowledges that the other party would not have an adequate remedy at law for
money damages if any of the covenants or agreements of the other party in this
Agreement were not performed in accordance with its terms and therefore agrees
that the other party will be entitled to specific enforcement of such covenants
or agreements and to injunctive and other equitable relief in addition to any
other remedy to which it may be entitled, at law or in equity.
SECTION 6.3 NOTIFICATION OF RESTRICTIONS. Any certificates
representing the FHP Shares will bear the following legend, which legend will
remain until such time as the securities represented by the certificates are
transferred in accordance with the provisions of this Agreement:
THESE SECURITIES ARE SUBJECT TO THE PROVISIONS OF AN AGREEMENT BETWEEN
THE ISSUER AND FHP INTERNATIONAL CORPORATION AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN ACCORDANCE THEREWITH.
SECTION 6.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties, covenants and agreements contained in this
Agreement will survive the execution of this Agreement and any investigation at
any time by FHP, the Company, or on behalf of either of them.
SECTION 6.5 ENTIRE AGREEMENT. This Agreement, together with the
other agreements of the parties of even date herewith, contains the entire
understandings of the parties with respect to the subject matter of the
agreements. This Agreement may not be amended except by a writing signed by the
parties. Except as specifically provided herein, this Agreement is not
assignable by either of the parties. This Agreement is binding upon the
respective successors of the parties and upon transferees of Voting Securities
who are affiliates or associates of FHP.
SECTION 6.6 SEVERABILITY. If any terms, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restriction of this Agreement will remain in full force and
effect, unless the action would substantially impair the benefits to either
party of the remaining provisions of this Agreement.
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SECTION 6.7 NOTICES. Any notices and other communications required
to be given pursuant to this Agreement will be delivered by hand, by registered
or certified mail, postage prepaid, return receipt requested, by private
courier, by facsimile or by telex, as follows:
(a) If to the Company:
Talbert Medical Management Holdings Corporation
3540 Howard Way
Costa Mesa, CA 92626-1417
Attention: President
Telecopier: (714) 436-4860
with copies to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071
Attention: C. James Levin, Esq.
Telecopier: (213) 669-6407
(b) If to FHP International Corporation:
FHP International Corporation
3120 Lake Center Drive
Santa Ana, CA 92704
Attention: Secretary
Telecopier: (714) 825-5710
With copies to:
Konowiecki & Rank
First Interstate World Center
633 W. Fifth Street
Los Angeles, CA 90071-2007
Attention: Joseph Konowiecki
Telecopier: (213) 229-0992
SECTION 6.8 TERM AND EFFECTIVENESS.
(a) This Agreement will become effective upon the Expiration Date,
UNLESS the amount of Unsubscribed Shares is in excess of twenty percent (20%) of
the outstanding Voting Securities on the Expiration Date, in which event this
Agreement will be null and void.
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(b) This Agreement will expire on the seventh anniversary of the
Expiration Date.
(c) Article 2 and Section 6.1 will not apply at any time that FHP
Beneficially Owns less than 3% of the outstanding shares of Voting
Securities. Article 3 will not apply to the extent FHP Beneficially Owns less
than 3% of the outstanding shares of Voting Securities upon the Expiration
Date, and the holding period for restricted securities under Rule 144 has
been reduced to one year.
SECTION 6.9 GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of California disregarding
conflict of law provisions.
SECTION 6.10 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, which together will constitute a single agreement.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date provided first written above.
FHP INTERNATIONAL CORPORATION
By: /s/ Westcott W. Price III
----------------------------------
Westcott W. Price III
President and Chief Executive
Officer
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
By: /s/ Jack D. Massimino
----------------------------------
Jack D. Massimino
President and Chief Executive
Officer
S-1