Exhibit 10.3
STOCKHOLDER'S RIGHTS AGREEMENT
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THIS STOCKHOLDER'S RIGHTS AGREEMENT (this "AGREEMENT") is made and entered
into as of the 6th day of January, 1994 by and among Integrated Medical Systems,
Inc., a Colorado corporation ("IMS"), and McKesson Corporation, a Delaware
corporation ("MCKESSON").
RECITALS
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WHEREAS, McKesson and IMS are parties to that certain Stock Purchase
Agreement of even date herewith (the "PURCHASE AGREEMENT"), pursuant to which
McKesson has agreed to purchase and IMS has agreed to sell shares of IMS' 1993
Series C Preferred Stock;
WHEREAS, McKesson's obligations under the Purchase Agreement are
conditioned upon the execution and delivery by McKesson and IMS of this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
1. RESTRICTIONS ON TRANSFERABILITY OF
SECURITIES: REGISTRATION RIGHTS
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1.1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
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shall have the following respective meanings:
(A) "CLOSING" shall mean the date of the sale of the first tranche of
Shares.
(B) "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(C) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.
(D) "HOLDER" shall mean McKesson and any holder of Registrable
Securities to whom the registration rights conferred by this Agreement have
been transferred in compliance with Section 1.11 hereof.
(E) "INITIATING HOLDERS" shall mean any Holder or Holders who in the
aggregate hold not less than twenty-five percent (25%) of the outstanding
Registrable Securities. For purposes of such calculation, holders of
Shares shall be
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considered to hold the shares of Common Stock then issuable upon conversion
of such Shares.
(F) "OTHER STOCKHOLDERS" shall mean persons other than Holders who,
by virtue of agreements with IMS, are entitled to include their securities
in certain registrations.
(G) "RESTRICTED SECURITIES" shall mean the securities of IMS required
to bear or bearing the legend set forth in Section 1.3 hereof.
(H) "REGISTRABLE SECURITIES" shall mean (i) shares of Common Stock
issued or issuable pursuant to the conversion of the Shares and (ii) any
Common Stock issued as a dividend or other distribution with respect to or
in exchange for or in replacement of the shares referenced in (i) above,
provided, however, that Registrable Securities shall not include any shares
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of Common Stock that have previously been registered or that have otherwise
been sold to the public.
(I) THE TERMS "REGISTER", "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration statement
in compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
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(J) "REGISTRATION EXPENSES" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for IMS, blue sky
fees and expenses, expenses of any regular or special audits incident to or
required by any such registration, but shall not include Selling Expenses
and fees and disbursements of counsel for the Holders (but excluding the
compensation of regular employees of IMS, which shall be paid in any event
by IMS).
(K) "RULE 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the Commission.
(L) "RULE 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the Commission.
(M) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time, corresponding to such act.
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(N) "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and
all fees and disbursements of counsel for any Holder (other than the fees
and disbursements of counsel included in Registration Expenses).
(O) "SHARES" shall mean IMS' 1993 Series C Preferred Stock.
(P) "WARRANTS" shall the warrants granted to McKesson pursuant to the
Purchase Agreement.
1.2. DEMAND REGISTRATION.
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(A) DEMAND FOR REGISTRATION. If IMS shall receive from Initiating
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Holders at any time or times not earlier than the earlier of (i) three
years after the date of this Agreement or (ii) one year after the effective
date of the first registration statement filed by IMS covering an
underwritten offering of any of its securities to the general public, a
written request specifying that it is made pursuant to this Section 1.2
that IMS effect any registration with respect to all or a part of the
Registrable Securities having a reasonably anticipated aggregate offering
price, net of underwriting discounts and commissions, that exceeds
$1,000,000, IMS will:
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(i) promptly give written notice of the proposed registration to
all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to
effect such registration (including, without limitation, filing post-
effective amendments, appropriate qualifications under applicable blue
sky or other state securities laws and appropriate compliance with the
Securities Act) as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as
are specified in such request, together with all or such portion of
the Registrable Securities of any Holder or Holders joining in such
request as are specified in a written request received by IMS within
twenty (20) days after such written notice from IMS is effective.
IMS shall not be obligated to effect, or to take any action to effect,
any such registration pursuant to this Section 1.2:
(A) In any particular jurisdiction in which IMS would be
required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless
IMS is already subject to service in such jurisdiction and except
as may be required by the Securities Act;
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(B) After IMS has effected two such registrations pursuant
to this Section 1.2(a) and such registrations have been declared
or ordered effective;
(C) During the period starting with the date sixty (60)
days prior to IMS's good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the
effective date of, a registration pursuant to Section 1.3 hereof;
provided that IMS is actively employing in good faith all
reasonable efforts to cause such registration statement to become
effective;
(D) If the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on
Form S-3 pursuant to a request made under Section 1.5 hereof.
(B) Subject to the foregoing clauses (A) through (D), IMS shall file
a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or
requests of the Initiating Holders; provided, however, that if (i) in the
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good faith judgment of the Board of Directors of IMS, such registration
would be seriously detrimental to IMS and the Board of Directors of IMS
concludes, as a result, that it is essential to defer the filing of such
registration statement at such time, and (ii) IMS shall furnish to
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such Holders a certificate signed by the president of IMS stating that in
the good faith judgment of the Board of Directors of IMS, it would be
seriously detrimental to IMS for such registration statement to be filed in
the near future and that it is, therefore, essential to defer the filing of
such registration statement, then IMS shall have the right to defer such
filing for the period during which such disclosure would be seriously
detrimental, provided, that IMS may not defer the filing for a period of
more than one hundred eighty (180) days after receipt of the request of the
Initiating Holders, and, provided further, that (except as provided in
clause (c) above) IMS shall not defer its obligation in this manner more
than once in any twelve-month period.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 1.2(b) hereof,
include other securities of IMS and may include securities of IMS being
sold for the account of IMS.
(C) UNDERWRITING. If the Initiating Holders intend to distribute the
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Registrable Securities covered by their request by means of an
underwriting, they shall so advise IMS as a part of their request made
pursuant to Section 1.2 and IMS shall include such information in the
written notice referred to in Section 1.2(a)(i) above. The right of any
Holder to registration pursuant to Section 1.2 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion
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of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating
Holders and such Holder with respect to such participation and inclusion)
to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
(D) PROCEDURES. If IMS shall request inclusion in any registration
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pursuant to Section 1.2 of securities being sold for its own account, or if
other persons shall request inclusion in any registration pursuant to
Section 1.2, the Initiating Holders shall, on behalf of all Holders, offer
to include such securities in the underwriting and may condition such offer
on their acceptance of the further applicable provisions of this Section 1
(including Section 1.12). IMS shall (together with all Holders, and other
persons proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders, which
underwriter(s) are reasonably acceptable to IMS. Notwithstanding any other
provision of this Section 1.2, if the representative of the underwriters
advises the Initiating Holders in writing that marketing factors require a
limitation on the number of shares to be underwritten, the number of shares
to be included in the underwriting or registration shall be allocated as
set forth in Section 1.13 hereof. If the person who has requested
inclusion in such registration as provided above does not agree to the
terms of any
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such underwriting, such person shall be excluded therefrom by written
notice from IMS, the underwriter or the Initiating Holders. The securities
so excluded shall also be withdrawn from registration. Any Registrable
Securities or other securities excluded shall also be withdrawn from such
registration. If shares are so withdrawn from the registration and if the
number of shares to be included in such registration was previously reduced
as a result of marketing factors pursuant to this Section 1.2(d), then IMS
shall offer to all holders who have retained rights to include securities
in the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares
withdrawn, with such shares to be allocated among such Holders requesting
additional inclusion in accordance with Section 1.13.
1.3. COMPANY REGISTRATION.
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(a) If IMS shall determine to register any of its securities either
for its own account or the account of a security holder or holders
exercising their respective demand registration rights (other than pursuant
to Section 1.2 hereof), other than a registration relating solely to
employee benefit plans, or a registration relating solely to a Commission
Rule 145 transaction, or a registration on any registration form which does
not permit secondary sales, IMS will:
(i) promptly give to each Holder written notice thereof; and
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(ii) use its best efforts to include in such registration (and
any related qualification under blue sky laws or other compliance),
except as set forth in Section 1.3(b) below, and in any underwriting
involved therein, all the Registrable Securities specified in a
written request or requests, made by any Holder within twenty (20)
days after the written notice from IMS described in clause (i) above
is effective. Such written request may specify all or a part of a
Holder's Registrable Securities.
(b) If the registration of which IMS gives notice is for a registered
public offering involving an underwriting, IMS shall so advise the Holders
as a part of the written notice given pursuant to Section 1.3(a)(i). In
such event the right of any Holder to registration pursuant to Section 1.3
shall be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with
IMS and the holders of other securities of IMS distributing their
securities through such underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriter or
underwriters selected by IMS.
(c) Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises IMS in writing that marketing
factors require a
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limitation on the number of shares to be underwritten, IMS may (subject to
the following limitations) exclude all Registrable Securities from, or
limit the number of Registrable Securities to be included in, the
registration and underwriting:
(i) If the registration is the first IMS initiated registered
offering of IMS' securities to the general public, IMS may limit, to
the extent so advised by the underwriters, the amount of securities
(including Registrable Securities) to be included in the registration
by IMS' stockholders (including the Holders), or may exclude, to the
extent so advised by the underwriters, such underwritten securities
entirely from such registration.
(ii) If such registration is the second or any subsequent IMS-
initiated registered offering of IMS' securities to the general
public, IMS may limit, to the extent so advised by the underwriters,
the amount of securities to be included in the registration by IMS'
stockholders (including the Holders); provided, however, that the
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aggregate value of securities (including Registrable Securities) to be
included in such registration by IMS' stockholders (including the
Holders) may not be so reduced to less than twenty-five (25%) of the
total value of the securities.
IMS shall so advise all holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in the
registration and underwriting
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shall be allocated first to IMS for securities being sold for its own account
and thereafter as set forth in Section 1.13. If any person does not agree to
the terms of any such underwriting, he shall be excluded therefrom by written
notice from IMS or the underwriter. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
If shares are so withdrawn from the registration or if the number of shares
of Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, IMS shall then offer to all persons
who have retained the right to include securities in the registration the right
to include additional securities in the registration in an aggregate amount
equal to the number of shares so withdrawn, with such shares to be allocated
among the persons requesting additional inclusion in accordance with Section
1.13 hereof.
1.4. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
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connection with any registration, qualification or compliance pursuant to
Sections 1.3 and 1.5 hereof, and the first registration pursuant to Section 1.2
hereof and reasonable fees of one counsel for the selling stockholders in the
case of the first registration pursuant to Section 1.2 shall be borne by IMS;
provided, however, that if the Holders bear the Registration Expenses for any
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registration proceeding begun pursuant to Section 1.2 and subsequently withdrawn
by the Holders registering shares therein, such registration proceeding shall
not be counted as a requested registration pursuant to Section 1.2 hereof,
except in the event that such
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withdrawal is based upon material adverse information relating to IMS that is
different from the information known or available (upon request from IMS or
otherwise) to the Holders requesting registration at the time of their request
for registration under Section 1.2, in which event such registration shall not
be treated as a counted registration for purposes of Section 1.2 hereof, even
though the Holders do not bear the Registration Expenses for such registration.
All Selling Expenses relating to securities so registered shall be borne by the
holders of such securities pro rata on the basis of the number of shares of
securities so registered on their behalf.
1.5. REGISTRATION ON FORM S-3.
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(a) After its initial public offering, IMS shall use its best efforts
to qualify for registration on Form S-3 or any comparable or successor form
or forms. After IMS has qualified for the use of Form S-3, in addition to
the rights contained in the foregoing provisions of this Section 1, the
Holders of Registrable Securities shall have the right to request
registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and
the intended methods of disposition of such shares by such Holder or
Holders), provided, however, that IMS shall not be obligated to effect any
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such registration if (i) the Holders, together with the holders of any
other securities of IMS entitled to inclusion in such registration, propose
to sell Registrable Securities and such other securities (if any) on Form
S-3 at an aggregate price to the public of less than
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$1,000,000, or (ii) in the event that IMS shall furnish the certification
described in paragraph 1.2(a)(ii) (but subject to the limitations set forth
therein) or (iii) in a given twelve-month period, after IMS has effected
one (1) such registration in any such period.
(b) If a request complying with the requirements of Section 1.5(a)
hereof is delivered to IMS, the provisions of Sections 1.2(a)(i) and (ii)
and Section 1.2(b) hereof shall apply to such registration. If the
registration is for an underwritten offering, the provisions of Sections
1.2(c) and 1.2(d) hereof shall apply to such registration.
1.6. REGISTRATION PROCEDURES. In the case of each registration effected
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by IMS pursuant to Section 1, IMS will keep each Holder advised in writing as to
the initiation of each registration and as to the completion thereof. At its
expense, IMS will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; provided, however, that (i) such 120-day period
shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities)
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of IMS; and (ii) in the case of any registration of Registrable Securities
on Form S-3 that are intended to be offered on a continuous or delayed
basis, such 120-day period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities are
sold, provided that Rule 415, or any successor rule under the Securities
Act, permits an offering on a continuous or delayed basis, and provided
further that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events
representing a material or fundamental change in the information set forth
in the registration statement, the incorporation by reference of
information required to be included in (I) and (II) above to be contained
in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange
Act in the registration statement;
(b) Prepare and file with the Commission such amendments and supple
ments to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
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(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a
Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of 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 a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in
the light of the circumstances then existing, and at the request of any
such seller, prepare and furnish to such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
shares, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in
the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by IMS are then listed;
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(f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of
such registration;
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than 18 months,
beginning with the first month after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act; and
(h) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.2 hereof, IMS will enter
into an underwriting agreement reasonably necessary to effect the offer and
sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the
underwriter so requests the underwriting agreement will contain customary
contribution provisions.
1.7. INDEMNIFICATION.
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(a) IMS will indemnify each Holder, each of its officers, directors
and partners, legal counsel and accountants and each person controlling
such Holder
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within the meaning of Section 15 of the Securities Act, with respect to
which registration, qualification or compliance has been effected pursuant
to this Article 1, and each underwriter, if any, and each person who
controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages and liabilities
(or actions, proceedings or settlements in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other
document (including any related registration statement, notification or the
like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by IMS of the Securities Act or
any rule or regulation thereunder applicable to IMS and relating to action
or inaction required of IMS in connection with any such registration,
qualification or compliance, and will reimburse each such Holder, each of
its officers, directors, partners, legal counsel and accountants and each
person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability or action, provided that
IMS will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to IMS by
such Holder or underwriter and stated to be specifically for use
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therein. It is agreed that the indemnity agreement contained in this
Section 1.7(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of IMS (which consent has not been unreasonably
withheld).
(b) Each Holder will, if Registrable Securities held by him are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify IMS, each of its directors,
officers, partners, legal counsel and accountants and each underwriter, if
any, of IMS' securities covered by such a registration statement, each
person who controls IMS or such underwriter within the meaning of Section
15 of the Securities Act, each other such Holder and Other Stockholder and
each of their officers, directors and partners, and each person controlling
such Holder or Other Stockholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse IMS and such Holders, Other
Stockholders, directors, officers, partners, legal counsel and accountants,
persons, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the
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extent, but only to the extent, that such untrue statement (or alleged
untrue statements or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to IMS
by such Holder; provided, however, that the obligations of such Holder
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hereunder shall not apply to amounts paid in settlement of any such claims,
losses, damages or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 1. 7
(the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnifica tion (the "INDEMNIFYING PARTY" ) promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and
the Indemnified Party may participate in such defense at such party's
expense, and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 1.7, to the extent such failure is not
prejudicial. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent
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of each Indemnified Party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation. Each Indemnified
Party shall furnish such information regarding itself or the claim in
question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.7 is held
by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party hereunder, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or
omissions which resulted in such loss, liability, claim, damage or expense
as well as any other relevant equitable considerations. The relative fault
of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the
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Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
1.8. INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
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furnish to IMS such information regarding such Holder and the distribution
proposed by such Holder as IMS may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Article 1.
1.9. LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. From and after
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the date of this Agreement, IMS shall not, without the prior written consent of
a majority in interest of the Holders, enter into any agreement with any holder
or prospective holder of any securities of IMS giving such holder or prospective
holder any registration rights the terms of which are more favorable than the
registration rights granted to the Holders hereunder.
1.10. RULE 144 REPORTING. With a view to making available the benefits of
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certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration, IMS agrees to use its
best efforts to:
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(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
from and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by IMS for an offering of its
securities to the general public;
(b) File with the Commission in a timely manner all reports and other
documents required of IMS under the Securities Act and the Exchange Act at
any time after it has become subject to such reporting requirements;
(c) So long as a Holder owns any Restricted Securities, furnish to
the Holder forthwith upon written request a written statement by IMS as to
its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety (90) days following the effective date of the first
registration statement filed by IMS for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of IMS, and such other reports
and documents so filed as a Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Holder to
sell any such securities without registration.
-24-
1.11. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
---------------------------------------------
IMS to register securities granted to a Holder by IMS under Sections 1.2, 1.3
and 1.5 may be transferred or assigned by a Holder only to a transferee or
assignee of not less than 5% shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits and the like), and only provided that IMS is
given written notice at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and provided further that the
transferee or assignee of such rights assumes the obligations of such Holder
under this Article 1.
1.12. "MARKET STAND-OFF" AGREEMENT. If requested by IMS and an
---------------------------
underwriter of Common Stock (or other securities) of IMS, a Stockholder shall
not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of IMS held by such Stockholder (other than those included in the
registration) during the one hundred eighty (180) day period following the
effective date of a registration statement of IMS filed under the Securities
Act, provided that:
(a) such agreement only applies to the first such registration
statement of IMS, including securities to be sold on its behalf to the
public in an underwritten offering; and
-25-
(b) all Holders and officers and directors of IMS enter into similar
agreements;
The obligations described in this Section 1.12 shall not apply to a registration
relating solely to employee benefit plans on Form S-l or Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-14 or Form S-15 or similar forms
which may be promulgated in the future. IMS may impose stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing
restriction until the end of said one hundred eighty (180) day period.
1.13. ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in
----------------------------------------
which all of the Registrable Securities and other shares of Common Stock of IMS
(including shares of Common Stock issued or issuable upon conversion of shares
of any currently unissued series of Preferred Stock of IMS) with registration
rights (the "OTHER SHARES") requested to be included in a registration on behalf
of the Holders or other selling stockholders cannot be so included as a result
of limitations of the aggregate number of shares of Registrable Securities and
Other Shares which may be so included, the number of shares of Registrable
Securities and Other Shares which may be so allocated among the Holders and
other selling stockholders requesting inclusion of shares pro rata on the basis
of the number of shares of Registrable Securities and Other Shares that would be
held by such Holders and other selling stockholders, assuming conversion;
provided, however, that, so
-26-
that such allocation shall not operate to reduce the aggregate number of
Registrable Securities and Other Shares to be included in such registration, if
any Holder or other selling stockholder does not request inclusion of the
maximum number of shares of Registrable Securities and Other Shares allocated to
him pursuant to the above-described procedure, the remaining portion of his
allocation shall be reallocated among those requesting Holders and other selling
stockholders whose allocations did not satisfy their requests pro rata on the
basis of the number of shares of Registrable Securities and Other Shares that
would be held by such Holders and other selling stockholders, assuming
conversion, and this procedure shall be repeated until all of the shares of
Registrable Securities and Other Shares that may be included in the registration
on behalf of the Holders and other selling stockholders have been so allocated.
IMS shall not limit the number of Registrable Securities to be included in a
registration pursuant to this Agreement in order to include shares held by
stockholders with no registration rights or to include Founder's Stock or any
other shares of stock issued to employees, officers, directors or consultants
pursuant to IMS' Employee Stock Option Plan, or with respect to registrations
under Sections 1.2 or 1.5 hereof, in order to include in such registration
securities registered for IMS' own account.
1.14. TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
----------------------------------
request registration or inclusion in any registration pursuant to this Article 1
shall terminate on the closing of the first IMS-initiated registered public
offering of Common Stock of IMS, provided that all shares of Registrable
Securities held or entitled to be held upon
-27-
conversion by such Holder may immediately be sold under Rule 144 during any 90-
day period, or on such date after the closing of the first Company-initiated
registered public offering of Common Stock of IMS as all shares of Registrable
Securities held or entitled to be held upon conversion by such Holder may
immediately be sold under Rule 144 during any 90-day period; provided, however,
that the provisions of this Section 1.14 shall not apply to any Holder who owns
more than two percent (2%) of IMS' outstanding stock until the earlier of (x)
such time as such Holder owns less than two percent (2%) of the outstanding
stock of IMS, or (y) the expiration of three years after the closing of the
first registered public offering of Common Stock of IMS.
2. COVENANTS OF IMS
----------------
Throughout the period that any Holder owns any Registrable Securities, or
longer if otherwise designated, IMS hereby covenants and agrees as follows:
2.1. VOTING FOR DIRECTORS.
--------------------
(a) The authorized number of directors of IMS shall be eight,
two of whom shall be elected by McKesson.
(b) At such time as McKesson owns (including all shares that
McKesson would own upon exercise of all warrants issued to McKesson) less that
50% of
-28-
the issued 1993 Series C Preferred Stock (including all shares that McKesson
would own upon exercise of all warrants issued to McKesson), McKesson's rights
under Section 2.1(a) shall be reduced to the election of one director. At such
time as McKesson owns (including all shares that McKesson would own upon
exercise of all warrants issued to McKesson) less than 25% of the issued 1993
Series C Preferred Stock (including all shares that McKesson would own upon
exercise of all warrants issued to McKesson), McKesson shall have no rights
under Section 2.1(a).
(c) IMS shall have the right to authorize more than eight directors,
provided that McKesson shall be entitled to elect at least 20% of the directors
authorized (which percentage shall be adjusted to at least 10%, if appropriate,
as set forth in Section 2.1.(b).)
(d) Notwithstanding anything to the contrary in this Section 2.1, if
the Escrow Agent fails to deliver the Escrow Fund to IMS on or before the last
day of the Escrow Period (as set forth in Section 1.4.3 of the Stock Purchase
Agreement), McKesson shall have the right to elect only one director under this
Section 2.1.
2.2. ADVISORY BOARD. McKesson shall have the right to designate one
--------------
member of the IMS Operating Company Advisory Board and one member of the IMS
Business Development Group Advisory Board or any successors to these boards.
-29-
2.3. ACCESS TO MCKESSON PRODUCT LINES. During the period that the Network
--------------------------------
Sponsorship and Participation Agreement dated November 17, 1993 (the
"Sponsorship Agreement") between McKesson and IMS remains in effect, IMS shall
ensure that any joint venture agreements, or other agreements for the operation
of IMS Networks, provide McKesson access for the McKesson Product Lines to all
Subscribers designated by McKesson. For such access, McKesson shall have the
benefit of the preferred pricing provisions set forth in Footnote 1 to Exhibit A
of the Sponsorship Agreement. Capitalized terms used in this Section and not
otherwise defined in this Agreement shall have the meanings assigned to them in
the Sponsorship Agreement.
2.4. DIRECTED INVESTMENTS. Beginning on the date of release from escrow
--------------------
of $4,000,000 to IMS as described in the Stock Purchase Agreement, and
continuing throughout the period that the Sponsorship Agreement remains in
effect, IMS, upon receipt of written instructions from McKesson, shall spend for
regional or technical development efforts a total of up to $500,000 as directed
in writing by McKesson. This obligation shall be in addition to the obligation
of IMS to make directed investments under Section 5.1.c of the Sponsorship
Agreement.
2.5. APPROVAL RIGHTS FOR CERTAIN SERVICES. During the period that the
------------------------------------
Sponsorship Agreement is in effect, IMS will not introduce Prescription Benefit
Management Services (as defined in the Sponsorship Agreement) without the
approval of, and except on terms acceptable to, McKesson.
-30-
2.6. APPROVAL RIGHTS FOR JOINT VENTURES. During the period that the
----------------------------------
Sponsorship Agreement is in effect, IMS shall not, without the prior written
approval of McKesson, enter into any joint venture agreement, or other
agreement, for the operation of an IMS Network (as that term is defined in the
Sponsorship Agreement) with any entity engaged in a business defined as a
McKesson Product Line in the Sponsorship Agreement; provided however, that this
prohibition shall not apply with respect to agreements between IMS and any of
the following types of entities: (i) community coalitions of health service
payors or providers; (ii) health service payors doing business only in the
market served by the IMS Network; (iii) hospital or multi-hospital systems; (iv)
physician groups or organizations including, but not limited to PPOs, PHOs, IPAs
or MSOs.
2.7. RIGHT OF FIRST OFFER.
--------------------
(a) IMS hereby grants to each Holder who owns any Shares, any shares
of Common Stock issued upon conversion of the Shares or any shares of
Common Stock issued upon exercise of the Warrants the right of first offer
to purchase all or a portion of New Securities (as defined in this Section
2.7) which the Board of Directors of IMS may, from time to time, propose to
sell and issue. Each Holder shall have the right of over-allotment such
that if any Holder fails to exercise its right hereunder to purchase its
pro rata share of New Securities, the other Holders may purchase the non-
purchasing Holder's portion on a pro-rata basis within ten (10) days from
the date such non-purchasing Holder fails to exercise its right
-31-
hereunder to purchase its pro rata share of New Securities. This right of
first offer shall be subject to the following provisions:
(i) In the event IMS proposes to undertake an issuance of New
Securities, it shall give each Holder written notice of its intention,
describing the type of New Securities, and their price and the general
terms upon which IMS proposes to issue the same. Each Holder shall
have thirty (30) days after any such notice is effective to agree to
purchase such Holder's pro rata share of such New Securities for the
price and upon the terms specified in the notice by giving written
notice to IMS and stating therein the quantity of New Securities to be
purchased.
(ii) In the event the Holders fail to exercise fully the right
of first offer within said thirty (30)-day period and after the
expiration of the ten day period for the exercise of the over-
allotment provisions of this Section 2.7(a), IMS shall have one
hundred twenty (120) days thereafter to sell the New Securities
respecting which the Holders' right of first offer option set forth in
this Section 2.7(a) was not exercised, at a price and upon terms no
more favorable to the purchasers thereof than specified in IMS's
notice to Holders pursuant to Section 2.7(a)(i). In the event IMS has
not sold within said 120-day period, IMS shall not thereafter issue or
sell any New
-32-
Securities, without first again offering such securities to the
Holders in the manner provided in Section 2.7(a)(i) above.
(b) IMS hereby grants to each Holder who owns any Shares, any shares
of Common Stock issued upon conversion of the Shares or any shares of
Common Stock issued upon exercise of the Warrants the right of first offer
to purchase all or a portion of New Securities (as defined in this Section
2.7) which a prospective investor proposes to purchase from IMS. Each
Holder shall have the right of over-allotment such that if any Holder fails
to exercise its right hereunder to purchase its pro rata share of New
Securities, the other Holders may purchase the non purchasing Holder's
portion on a pro-rata basis within ten (10) days from the date such non-
purchasing Holder fails to exercise its right hereunder to purchase its pro
rata share of New Securities. This right of first offer shall be subject
to the following provisions:
(i) In the event a prospective investor expresses interest in
purchas ing New Securities from IMS, IMS shall give each Holder
written notice of such expression of interest, describing the type of
New Securities, and their price and the general terms upon which the
prospective investor proposes to purchase the same. Each Holder shall
have thirty (30) days after any such notice is effective to agree to
purchase such Holder's pro rata share of such New Securities for the
price and upon the terms specified in the notice by
-33-
giving written notice to IMS and stating therein the quantity of New
Securities to be purchased.
(ii) In the event the Holders fail to exercise fully the right
of first offer within said thirty (30)-day period and after the
expiration of the ten day period for the exercise of the over-
allotment provisions of this Section 2.3(a), IMS shall have one
hundred twenty (120) days thereafter to sell the New Securities
respecting which the Holders' right of first offer option set forth in
this Section 2.3(a) was not exercised, at a price and upon terms no
more favorable to such prospective investor than specified in IMS's
notice to Holders pursuant to Section 2.3(b)(i). In the event IMS has
not sold within said 120-day period, IMS shall not thereafter issue or
sell any New Securities, without first again offering such securities
to the Holders in the manner provided in Section 2.3(b)(i) above.
(c) "New Securities" shall mean any capital stock (including Common
Stock and/or Preferred Stock) of IMS whether now authorized or not, and
rights, options or warrants to purchase such capital stock, and securities
of any type whatsoever that are, or may become, convertible into capital
stock; provided that the term "New Securities" does not include (i) Shares
purchased under the Purchase Agreement; (ii) securities issued upon
conversion of the Shares; (iii) Common Stock issued pursuant to exercise of
the Warrants; (iv) options issued to IMS employees
-34-
provided the total options outstanding shall not exceed 2,500,000 shares
and provided that no options may be granted after the date of this
Agreement with an exercise price lower than $4.00 per share or, if lower,
the fair market value of common stock of IMS as evidenced by the issuance
of at least $100,000 of Common Stock to a non-affiliate at a lower price;
(v) Common Stock issued pursuant to exercise of such options; or (vi)
Common Stock issued upon exercise of warrants disclosed on Schedule 4 to
the Purchase Agreement; and
(d) Notwithstanding the provisions of this Section, IMS shall have no
obligation to provide a right of first offer to McKesson for prospective
sales as follows:
(i) sales of IMS New Securities to current directors, officers,
employees and shareholders of IMS as of the date of this agreement;
(ii) sales of up to 15% of IMS New Securities per investor to
accredited individual investors;
(iii) sales of up to 15% of IMS New Securities per investor to
institutional investors such as venture capital firms or portfolio
managers;
-35-
(iv) any sales of up to 5% per investor of IMS New Securities to
significant IMS' customers, which shall mean customers generating at least
5% of IMS' annual revenues; or
(v) any sales of up to 15% per investor of IMS New Securities to
potential investors which the IMS board of directors identifies as
potential strategic partners of IMS; provided, however, that the provisions
set forth in clauses d(i) through d(v) shall not apply to potential
investors which are engaged to any degree and for (ii) and (iii) have
invested in, to any degree, any of the businesses defined as the McKesson
Product Lines in the Sponsorship Agreement.
(e) If IMS sells shares to a purchaser as set forth in Section
(d), McKesson will have the right to purchase capital stock on the same
terms as those offered to such purchaser in such amounts as will preserve
McKesson's percentage of equity ownership in IMS at the time of IMS sale
under Section (d).
(f) Nothing in this Section shall constrain IMS' ability, at the sole
discretion of its board of directors, to effect a public offering of stock.
(g) The right of first offer granted under this Agreement shall
expire upon, and shall not be applicable to, the first sale of Common Stock
of IMS to the public effected pursuant to a registration statement filed
with, and declared
-36-
effective by the Commission under the Securities Act, involving at least
fifteen percent (15%) of IMS' aggregate outstanding shares after giving
effect to the public offering and resulting in proceeds of more than
Fifteen Million Dollars ($15,000,000).
(h) The right of first offer is assignable by each Holder to any
wholly owned subsidiary or parent of, or to any corporation or entity that
is, within the meaning of the Securities Act, controlling, controlled by or
under common control with, any such Holder, and (ii) such right is
assignable between and among any of the Holders.
(i) Notwithstanding anything to the contrary in this Section 2.7, the
Holders shall have approval rights for prospective purchasers described in
this Section 2.7 to the extent that such prospective purchasers are engaged
in any of the businesses defined as the McKesson Product Lines in the
Sponsorship Agreement.
2.8. BASIC FINANCIAL INFORMATION. IMS will furnish the following reports
---------------------------
to each Holder:
(a) As soon as practicable after the end of each fiscal year of IMS,
and in any event within ninety (90) days thereafter, a consolidated balance
sheet of IMS and its subsidiaries, if any, as at the end of such fiscal
year, and consolidated
-37-
statements of income and sources and applications of funds of IMS and its
subsidiaries, if any, for such year, prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in
each case in comparative form the figures for the previous fiscal year, all
in reasonable detail and certified by independent public accountants of
recognized national standing selected by IMS.
(b) As soon as practicable after the end of the first, second, and
third quarterly accounting periods in each fiscal year of IMS, and in any
event within forty-five (45) days thereafter, a consolidated balance sheet
of IMS and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of income and sources and applications
of funds of IMS and its subsidiaries for such period and for the current
fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied, subject to changes resulting
from normal year end audit adjustments, all in reasonable detail and
certified by the principal financial or accounting officer of IMS, except
that such balance sheet need not contain the notes required by generally
accepted accounting principles.
(c) From the date IMS becomes subject to the reporting requirements
of the Exchange Act, and in lieu of the financial information required
pursuant to Sections
-38-
1.1(a) and (b), copies of its annual reports on Form 10-K and its quarterly
reports on Form 10-Q, respectively.
2.9. ADDITIONAL INFORMATION AND RIGHTS.
---------------------------------
(a) IMS will permit any Holder to visit and inspect any of the
properties of IMS, including its books of account and other records (IMS
shall provide such copies thereof as McKesson may reasonably request), and
to discuss its affairs, finances and accounts with IMS's officers and its
independent public accountants, all at such reasonable times and as often
as any such person may reasonably request.
(b) Until the earlier to occur of (i) the date on which IMS is
subject to the reporting requirements of Sections 13(a) or 15(d) of the
Exchange Act, or (ii) the date on which quotations for the Common Stock of
IMS are reported by the automated quotations systems operated by the
National Association of Securities Dealers, Inc., or by an equivalent
quotations system, IMS will deliver the reports described below in this
Section 2.9 to each Holder:
(i) As soon as practical after the end of each month and in any
event within thirty (30) days thereafter a consolidated balance sheet
of IMS and its subsidiaries, if any, as at the end of such month and
consolidated
-39-
statements of income and of sources and applications of funds of IMS
and its subsidiaries, for each month and for the current fiscal year
of IMS to date, all subject to normal year-end audit adjustments,
prepared in accordance with generally accepted accounting principles
consistently applied and certified by the principal financial or
accounting officer of IMS.
(ii) Annually (but in any event at least thirty (30) days prior
to the commencement of each fiscal year of IMS) the financial plan of
IMS, in such manner and form as approved by the Board of Directors of
IMS, which financial plan shall include a projection of income and a
projected cash flow statement for such fiscal year and a projected
balance sheet as of the end of such fiscal year. Any material changes
in such business plan shall be submitted as promptly as practicable
after such changes have been approved by the Board of Directors of
IMS.
(iii) With reasonable promptness, such other information and
data with respect to IMS and its subsidiaries as any such person may
from time to time reasonably request.
(iv) As soon as practicable after transmission or occurrence and
in any event within ten days thereof, copies of any reports or
communications
-40-
delivered to any class of IMS's security holders or broadly to the
financial community, including any filings by IMS with any securities
exchange, the Securities and Exchange Commission or the National
Association of Securities Dealers, Inc.
(c) The provisions of Section 2.1 and this Section 2.2 shall not be
in limitation of any rights which any Holder may have with respect to the
books and records of IMS and its subsidiaries, or to inspect their
properties or discuss their affairs, finances and accounts, under the laws
of the jurisdictions in which they are incorporated.
2.10. PROMPT PAYMENT OF TAXES, ETC. IMS will promptly pay and discharge,
-----------------------------
or cause to be paid and discharged, when due and payable, all lawful taxes,
assessments and governmental charges or levies imposed upon the income, profits,
property or business of IMS or any subsidiary; provided, however, that any such
tax, assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if IMS shall
have set aside on its books adequate reserves with respect thereto, and
provided, further, that IMS will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor. IMS will promptly pay or cause to
be paid when due, or in conformance with customary trade terms or otherwise in
accordance with
-41-
policies related thereto adopted by IMS's Board of Directors, all other
indebtedness incident to operations of IMS.
2.11. MAINTENANCE OF PROPERTIES AND LEASES. IMS will keep its properties
------------------------------------
and those of its subsidiaries in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time make all needful and
proper repairs, renewals, replacements, additions and improvements thereto; and
IMS and its subsidiaries will at all times comply with each material provision
of all leases to which any of them is a party or under which any of them
occupies property if the breach of such provision might have a material and
adverse effect on the condition, financial or otherwise, or operations of IMS.
2.12. INSURANCE. Except as otherwise decided in accordance with policies
---------
adopted by IMS's Board of Directors, IMS will keep its assets and those of its
subsidiaries which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in IMS's line of business, and IMS will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated.
2.13. ACCOUNTS AND RECORDS. IMS will keep true records and books of
--------------------
account in which full, true and correct entries will be made of all dealings or
transactions in relation
-42-
to its business and affairs in accordance with generally accepted accounting
principles applied on a consistent basis.
2.14. INDEPENDENT ACCOUNTANTS. IMS will retain independent public
-----------------------
accountants of recognized national standing who shall certify IMS's financial
statements at the end of each fiscal year. In the event the services of the
independent public accountants so selected, or any firm of independent public
accountants hereafter employed by IMS are terminated, IMS will promptly
thereafter notify the Holders and will request the firm of independent public
accountants whose services are terminated to deliver to the Holders a letter
from such firm setting forth the reasons for the termination of their services.
In the event of such termination, IMS will promptly thereafter engage another
firm of independent public accountants of recognized national standing. In its
notice to the Holders IMS shall state whether the change of accountants was
recommended or approved by the Board of Directors of IMS or any committee
thereof.
2.15. COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. IMS and
--------------------------------------------------------
all its subsidiaries shall duly observe and conform to all valid requirements of
governmental authorities relating to the conduct of their businesses or to their
properties or assets.
2.16. MAINTENANCE OF CORPORATE EXISTENCE, ETC. IMS shall maintain in full
---------------------------------------
force and effect its corporate existence, rights and franchises and all licenses
and other rights in or to use patents, processes, licenses, trademarks, trade
names or copyrights owned or
-43-
possessed by it or any subsidiary and deemed by IMS to be necessary to the
conduct of their business.
2.17. PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. IMS will cause
-------------------------------------------------
each person now or hereafter employed by it or any subsidiary with access to
confidential information to enter into a proprietary information and inventions
agreement substantially in the form approved by the Board of Directors.
2.18. EMPLOYEE AND OTHER STOCK ARRANGEMENTS. IMS will not, without the
-------------------------------------
approval of the Board of Directors, issue any of its capital stock, or grant an
option or rights to subscribe for, purchase or acquire any of its capital stock,
to any employee, consultant, officer or director of IMS or a subsidiary except
for the issuance of shares of Common Stock pursuant to outstanding stock
options. Each acquisition of any shares of capital stock of IMS or any option or
right to acquire any shares of capital stock of IMS by an employee, officer or
director of IMS will be conditioned upon the execution and delivery by IMS and
such employee, officer or director of an agreement substantially in a form
approved by the Board of Directors of IMS.
2.19. INDEBTEDNESS. IMS shall not, without the prior approval of the
------------
Board of Directors of IMS, incur any indebtedness in excess of $____________,
other than trade credit incurred in the ordinary course of business.
-44-
2.20. EXTENSION OF CREDIT. IMS shall not, without the prior approval of
-------------------
the Board of Directors of IMS, extend credit by any method or in any form or
manner other than open account credit extended to customers in the ordinary
course of business.
2.21. COMPENSATION OF EMPLOYEES. IMS shall not, without the prior
-------------------------
approval of the Board of Directors of IMS, compensate any of its employees,
including officers, in an amount greater than $160,000.
2.22. TRANSACTIONS WITH AFFILIATES. IMS shall not, without the approval
----------------------------
of the disinterested members of IMS's Board of Directors, engage in any loans,
leases, contracts or other transactions with any director, officer or key
employee of IMS, or any member of any such person's immediate family, including
the parents, spouse, children and other relatives of any such person, on terms
less favorable than IMS would obtain in a transaction with an unrelated party,
as determined in good faith by the Board of Directors.
2.23 Application of Certain Covenants. IMS' obligations under Section 2.1
--------------------------------
through 2.8 shall be only to McKesson and shall not bind IMS with respect to any
other Holder. All other obligations of IMS under this Agreement shall apply to
all Holders.
2.23. TERMINATION OF COVENANTS. The covenants set forth in this Section 2
------------------------
shall terminate and be of no further force and effect after the time of
effectiveness of IMS' first firm commitment underwritten public offering
registered under the Securities Act,
-45-
provided, however, that such termination shall not apply to the covenants set
forth in Section 2.2 through 2.7.
3. COVENANTS OF MCKESSON.
---------------------
Throughout the period that McKesson owns any registrable securities,
McKesson covenants and agrees as follows:
3.1 Right of First Offer.
---------------------
(a) McKesson hereby grants to each IMS right of first offer to
purchase all or a portion of any shares of Common Stock issued upon
conversion of Common Shares or any Shares of common stock issued upon
exercise of the warrants (the "Securities"). That McKesson may offer to
IMS competitor, as defined below:
This right of first offer shall be subject to the following provisions:
(i) In the event McKesson proposes to undertake a sale of
securities to an IMS competitor, as defined below, it shall give IMS
written notice of its intention, describing the Securities, and the
general terms upon which McKesson proposes to sell the same. IMS
shall have thirty (30) days after any such notice is effective to
purchase such Securities from McKesson for the price and upon the
terms specified in the notice by giving written notice.
(ii) In the event IMS fails to exercise fully the right of first
offer within said thirty (30)-day period, McKesson shall have one
hundred twenty (120) days thereafter to sell the Securities respecting
which the right of first offer option was not exercised, at a price
and upon terms no more favorable to the purchasers thereof than
specified in McKesson's notice to IMS. In the
-46-
event McKesson has not sold within said 120-day period, McKesson shall
not thereafter sell any Securities, without first again offering any
securities to IMS in the manner provided in Section (i) above.
(b) McKesson hereby grants to IMS the right of first offer to
purchase all or a portion of Securities which a prospective investor who is
an IMS competitor proposes to purchase from McKesson. This right of first
offer shall be subject to the following provisions:
(i) In the event a prospective investor who is an IMS
competitor expresses interest in purchasing Securities from McKesson,
McKesson shall give IMS written notice of such expression of interest,
describing the type of Securities, and their price and the general
terms upon which the prospective investor proposes to purchase the
same. IMS shall have thirty (30) days after any such notice is
effective to agree to purchase such Securities for the price and upon
the terms specified in the notice.
(ii) In the event IMS fail to exercise fully the right of first
offer within said thirty (30)-day period, McKesson shall have one
hundred twenty (120) days thereafter to sell the Securities respecting
which IMS' right of first offer option was not exercised, at a price
and upon terms no more favorable to such prospective investor than
specified in McKesson's notice
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to IMS. IMS shall have thirty (30) days after any such notice is
effective to agree to purchase such Securities for the price and upon
the terms specified in the notice.
(c) The right of first offer granted under this Section shall expire
upon the first sale of Common Stock of IMS to the public effected pursuant to a
Registration Statement filed with, and declared effective by the Commission
under the Securities Act, involving at least fifteen percent (15%) of IMS'
aggregate outstanding shares after giving effect to the public offering and
resulting in gross proceeds of at least Fifteen Million Dollars ($15,000,000).
3.2 IMS COMPETITOR. For purposes of this Section 3, an "IMS Competitor"
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shall mean a company which derives the majority of its revenues from the
operation of regional medical information networks operating on-line links
between hospitals and clinical laboratories and physicians' offices for the
transmission of laboratory and radiology reports and other non-voice data.
4 MISCELLANEOUS.
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4.1 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
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4.2 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement (including the
-----------------------------------
Exhibits hereto) together with the Stock Purchase Agreement (including any
Exhibits thereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by IMS and the holders of at least fifty
percent (50%) of the Registrable Shares and any such amendment, waiver,
discharge or termination shall be binding on all the Holders, but in no event
shall the obligation of any Holder hereunder be materially increased, except
upon the written consent of such Holder.
4.3 NOTICES, ETC. Any notice given hereunder shall be in writing and
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shall be deemed effective upon the earlier of personal delivery (including
personal delivery by facsimile) or the third day after mailing by certified or
registered mail, postage prepaid, as follows:
To McKesson:
McKesson Corporation
One Post Street
San Francisco, California 94104
Facsimile No. 415-983-8826
Attention: General Counsel
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To IMS:
Integrated Medical Systems, Inc.
11975 El Camino Real #300
San Diego, CA 92130
Facsimile No. 619-755-5637
Attention: John McChesney
or to such other address as any party may have furnished in writing to the other
parties in the manner provided above.
4.4 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any Holder, upon any breach or default of IMS under
this Agreement shall impair any such right, power or remedy of such Holder nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
Holder of any breach or default under this Agreement or any waiver on the part
of any Holder of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any Holder, shall be cumulative and not alternative.
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4.5 RIGHTS; SEPARABILITY. Unless otherwise expressly provided herein, a
--------------------
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
4.6 TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
--------------------
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.7 COUNTERPARTS. This Agreement may be executed in any number of counter
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parts, each of which shall be an original, but all of which together shall
constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Stockholder's
Rights Agreement effective as of the day and year first above written.
IMS: INTEGRATED MEDICAL SYSTEMS, INC.
By: /s/ John A. McChesney
Title: John A. McChesney, Chairman/CEO
MCKESSON: MCKESSON CORPORATION
By: /s/ David L. Mahoney
Title: David L. Mahoney, President
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