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Exhibit 10.19
AGREEMENT
THIS AGREEMENT, made and entered into this day of April, 1996, is
between National Benefit Resources, Inc. ("NBR") and Birman Managed Care, Inc.
(the "Company").
R E C I T A L S
A. Pursuant to that certain Subscription Agreement of even date
herewith (the "Subscription Agreement"), between the Company and NBR, NBR has
agreed to acquire newly issued shares (the "Acquired Shares") of the common
stock of the Company ("Common Stock").
B. By letter dated April 4, 1996 (the "April 4 Letter") incorporated
herewith as Exhibit "A" and made a part hereof as though fully set forth herein
from BMC Health Plans, Inc., a wholly-owned subsidiary of the Company ("BMC"),
NBR and BMC have agreed that NBR would seek to manage and provide fronting
carriers which would issue excess risk, fully-insured, provider excess and other
ancillary insurance products, including group life and accidental death and
disability (collectively "Covered Products") to managed care plans and/or their
respective participants (collectively "Covered Plans") as to which BMC has
provided services with respect to plan delivery, system formation, development
or implementation, or ongoing operations, marketing and management services
(collectively "Covered Services").
C. As a condition to its execution and performance of the Subscription
Agreement, incorporated herewith as Exhibit "B" and made a part hereof as though
fully set forth herein NBR requires that the Company enter into this Agreement,
and the Company is willing to do so.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties to this Agreement agree as follows:
ARTICLE I
DIRECTOR DESIGNATION AND OTHER RIGHTS
1.1 BOARD DESIGNEES. Throughout the five (5) year term of the April 4
Letter (the "Term"), the Company agrees that it shall cause:
(a) one or more individuals designated by NBR to be elected to
serve as a director of each affiliate of the Company which is engaged
in the provision of Covered Services (each an "Affiliated Service
Provider"), it being agreed that NBR shall be entitled to designate no
more than one director for each Affiliated Service Provider;
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(b) the maintenance in office of each such designee until such
designee is removed pursuant to this Section 1.1 or shall no longer be
serving by reason of resignation, incapacity, retirement, or death; and
(c) the removal from office of any such designee upon the written
request of NBR.
1.2 DIRECTORS AND OFFICERS LIABILITY COVERAGE. Company shall use its
reasonable efforts to acquire and maintain or cause its Affiliated Service
Provider(s) to use reasonable efforts to acquire and maintain directors and
officers liability insurance at all times while an NBR designee is serving as a
director of Affiliated Service Provider(s) written on a claims occurrence basis
with a single occurrence limit of not less than one million dollars ($1,000,000)
and a general aggregate limit of not less than one million dollars ($1,000,000).
1.3 COVERED PRODUCTS. Throughout the Term, if any Covered Plan shall
desire to obtain any Covered Product, the Company agrees to cause each
Affiliated Service Provider to use its best efforts and relationships to cause
such Covered Plan to obtain such Covered Product through NBR on terms
substantially similar to those contemplated by the April 4 Letter; provided that
the Covered Products to which NBR has access and which are available to such
Covered Plan are reasonably responsive to the requirements of the Covered Plan
and reasonably price competitive.
1.4 FINANCIAL INFORMATION. Throughout the Term, the Company shall
deliver to NBR each of the following:
(a) within fifteen (15) days after the end of each calendar month
such regular monthly consolidated financial information as is prepared
for review by management of the Company;
(b) within forty-five (45) days after the end of each calendar
quarter (except for the last quarter of each fiscal year), an unaudited
consolidated balance sheet of the Company as of the end of such quarter
and related unaudited consolidated statement of operations, statement
of cash flow, and statement of changes in stockholders' equity, setting
forth in each case in comparative form the consolidated figures for the
corresponding period in the previous fiscal year;
(c) within fifteen (15) days after it files them with the
Securities and Exchange Commission (the "Commission") copies of the
annual report and of information, documents and other reports which the
Company is required to file with the Commission pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 as amended (the "SEA");
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(d) within ninety (90) days after the end of each fiscal year, an
audited consolidated balance sheet of the Company as of the end of such
fiscal year and related audited consolidated statement of operations,
statement of cash flow, and statement of changes in stockholders'
equity for such fiscal year, setting forth in each case in comparative
form the consolidated figures for the corresponding period in the
previous fiscal year accompanied by the report thereon prepared by
independent auditors selected by the Company's board of directors; and
(e) with reasonable promptness, such other available financial
reports, information, and data with respect to the Company, any of its
affiliates as NBR may reasonably request from time to time, including
without limitation budgets, forecasts, cash flow projections and
statements and information relative thereto.
All such statements, reports, forms, information and data shall be provided
without cost to NBR and all such financial statements shall be prepared in
accordance with GAAP and shall fairly present the information contained therein,
subject, in the case of financial information other than that set forth in
Section 1.4(d) above, to normal year-end audit adjustments.
ARTICLE II
CONFIDENTIALITY, RESTRICTIONS ON ACCESS
2.1 USE OF COMPANY CONFIDENTIAL INFORMATION. NBR shall use commercially
reasonable efforts to maintain in confidence from other than its agents and
employees and to refrain, and to cause its agents and its employees to refrain,
from disclosing any information obtained by it pursuant to Section 1.4 hereof
which is proprietary to the Company ("Company Confidential Information") without
the prior written consent of the Company. NBR shall exercise the same degree of
care to safeguard the secrecy and prevent the unauthorized disclosure of Company
Confidential Information as it uses with respect to its own proprietary
information, but in no event less than reasonable care.
2.2 EXCEPTIONS. The obligations of confidentiality set forth in Section
2.1 above shall not apply to Company Confidential Information which NBR can
reasonably demonstrate:
(a) was already known to NBR prior to receipt thereof from the
Company;
(b) was developed by employees of NBR having no access to such
Company Confidential Information;
(c) has become public knowledge through no breach of this
Agreement;
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(d) has been made available to NBR by a third party without any
breach of confidence on its part;
(e) is material to any litigation or arbitration proceeding
initiated by any party to this Agreement in connection with a dispute
arising out of this Agreement; or
(f) is required to be disclosed by order of a governmental agency
or court having jurisdiction over such Holder or by any law, rule or
regulation or pursuant to any listing agreement with or the rules of
any stock exchange or upon the request of any stock exchange.
2.3 RESTRICTIONS ON ACCESS. The Company shall not be obligated to
prepare or furnish any document or report which would disclose any information
that the Company is at that time precluded from disclosing to NBR by reason of
government regulation, contractual obligation, or other restrictions arising by
operation of law. During the Term, the Company shall not enter into any
contractual obligation (other than a contractual obligation concerning
information which is the subject of the immediately following sentence) that
limits the Company's freedom to disclose Company Confidential Information to
NOR; provided, however, that the Company may enter into any initial
confidentiality agreements as it may reasonably determine are necessary to
evaluate a potential transactions with third parties and which precludes it from
disclosing to those not having a need to know information and data concerning
such third party.
ARTICLE III
REGISTRATION RIGHTS
3.1 PIGGYBACK REGISTRATIONS RIGHT TO PIGGYBACK. If at any time (whether
or not during the Term), prior to the expiration of the Company's holding period
under 144(k), the Company proposes to cause a registration statement (a
"Registration") under the Securities Act of 1933 as amended (the "Securities
Act") to become effective with respect to any shares of its Common Stock (other
than a Registration statement on Form S-4 or S-8 or any successor or similar
forms), and the Registration form to be used may be used for a secondary
offering of Common Stock (a "Piggyback Registration") and at the time thereof
NBR or any transferee thereof which has acquired all of the Acquired Shares
(herein a "Holder") continues to hold any Acquired Shares which have not then
previously been the subject of a Registration, the Company will give written
notice of such determination to the Holder, not less than ten (10) business days
prior to the projected filing of a Registration statement with the Commission,
and if a Piggyback Registration is requested by written notice from the Holder
to the Company within ten (10) business days after receipt of the aforesaid
notice, the Company, to the extent permitted by law,
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and subject to any underwriter cutbacks which will be enforced pro rata against
all persons holding piggyback rights shall include in such Registration all
Acquired Shares held thereby.
3.2 REGISTRATION PROCEDURES. If and whenever the Company effects a
Registration which is to include a Piggyback Registration, the Company will as
expeditiously as reasonably possible:
(a) prepare and file with the Commission a registration statement
on the appropriate form with respect to the shares proposed to be
registered and use its reasonable commercial efforts to cause such
registration statement to become effective (provided that before filing
a registration statement or prospectus or any amendments or supplements
thereto, the Company shall furnish to the counsel selected by Holder
copies of all such documents proposed to be filed including all drafts
thereof, which documents shall be subject to the prior review of such
counsel reasonably prior to such filing);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of the lesser of sixty (60) calendar
days or the completion of the plan of distribution described in such
prospectus and comply with the provisions of the Securities Act with
respect to the disposition of all shares covered by such registration
statement during such period in accordance with the intended methods of
disposition set forth in such registration statement;
(c) furnish to the Holder such number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as the Holder may
reasonably request in order to facilitate the disposition of the
Acquired Shares;
(d) use its reasonable commercial efforts to register or qualify
the Acquired Shares under such other securities or blue sky laws of
such jurisdictions as the Holder reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to
enable the Holder to consummate the disposition of the Acquired Shares
in such jurisdictions (provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subsection,
(ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction, if in
the opinion of counsel reasonably acceptable to the Holder, any of such
actions in this clause (iv) would occur or result);
(e) notify the Holder, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event or the
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receipt of any information as a result of which the prospectus included
in such registration statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements
therein not misleading, and prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
shares of Common Stock, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(f) enter into such customary agreements (including underwriting
agreements in customary form) and use its reasonable best efforts to
take all such other actions in order to expedite or facilitate the
disposition of the Acquired Shares;
(g) 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 beginning with the first day of the Company's first
full calendar quarter after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(h) permit the Holder to participate in the preparation of such
registration statement and to require the insertion therein of written
material concerning the Holder (and any person included therein) and
the intended method of distribution, furnished to the Company in
writing, which in the reasonable judgment of the Holder and its counsel
should be included;
(i) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending
or preventing the use of any related prospectus or suspending the
qualification of any shares of Common Stock included in such
registration statement for sale in any jurisdiction, use its reasonable
best efforts to promptly obtain the withdrawal of such order;
(j) cause, subject to applicable law and regulations, the Acquired
Shares to be listed on each securities exchange on which shares of
Common Stock are then listed and, if not so listed, to be listed on the
NASD automated quotation system; and
(k) use its best efforts to deliver an opinion of counsel to the
Company and a cold comfort letter from Company's independent public
accountants each in customary form and covering such matters of the
type customarily covered by such opinions and letters in an
underwritten offering.
3.3 REGISTRATION EXPENSES. All expenses to the Company or the Holder,
including reasonable attorneys fees, in connection with any Registration in
which any Acquired Shares are included will be paid by the Company
("Registration Expenses"); provided however, that the
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Holder will pay its attorney's fees and other expenses it incurs in connection
with the Piggyback Registration and shall be responsible for its pro rata share
of underwriters compensation. In addition, the Company will pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, and the expense of any liability
insurance.
3.4 INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
the Holder, its officers and directors, each person who controls the Holder
(within the meaning of the Securities Act) and each underwriter for any
Registration against all loss, liability, claim, obligation, damage or
deficiency (including reasonably attorney's fees and all other expenses incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened) caused by any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by or on behalf
of the Holder expressly for use therein or arises out of such the Holder's
failure to deliver a copy of the final prospectus to the person asserting such
claim or loss at or prior to the written confirmation of the sale of Acquired
Shares by the Holder to such person, provided the untrue statement or omission
was corrected in the final prospectus and the Company furnished such person with
sufficient copies of the final prospectus for delivery to such person.
(b) Each Holder, by availing itself of registration pursuant to the
terms hereof, agrees to indemnify the Company, its directors and officers, each
person who controls the Company (within the meaning of the Securities Act) and
each underwriter for any Registration against any loss, liability, claim,
obligation, damage or deficiency (including reasonably attorney's fees and all
other expenses incurred in investigating, preparing or defending any litigation
or proceeding, commenced or threatened) resulting from any untrue or alleged
untrue statement of material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only if, and to the extent that, such statement or omission was in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Holder specifically for use in the preparation of such
Registration statement.
(c) Any person entitled to indemnification hereunder will:
(i) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification and
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(ii) unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties
may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory
to the indemnified party.
If such defense is assumed, the indemnifying party will not be
subject to any liability for any settlement made by the indemnified
party without its consent (but such consent will not be reasonably
withheld).
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and will survive the transfer of the Acquired Shares.
(e) In the event the indemnification provided for under this Agreement
is unavailable for any reason other than the exceptions to indemnification
contained herein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such Damages in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on one hand and the indemnified party on the other hand in connection with
the statements or omissions that resulted in such Damages, as well as any other
relevant equitable considerations. Notwithstanding the foregoing, no person
guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
3.5 SELECTION OF UNDERWRITERS. The Company will have the right to
select the investment banker(s) and manager(s) to administer the offering
pursuant to any Registration.
3.6 SEC FILINGS; PUBLIC INFORMATION. So long as NBR or its affiliates
holds unregistered Acquired Shares, the Company shall use commercially
reasonable efforts to file on a timely basis all reports required to be filed
pursuant to the SEA.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.1 EXPENSES. Each of the parties hereto shall bear its own costs, fees
and expenses in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, including without limitation fees, commissions
and expenses payable to brokers, finders, investment bankers, consultants,
exchange or transfer agents, attorneys, accountants and other professionals,
whether
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or not the transactions contemplated herein is consummated, except as may be
contemplated by Section 3 hereof.
4.2 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended or modified by the parties hereto; provided, however,
that all such amendments and modifications must be in writing duly executed by
the parties hereto.
4.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of a party to comply
with any obligation, covenant, agreement or condition herein may be expressly
waived in writing by the party entitled hereby to such compliance, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No single or partial exercise
of a right or remedy shall preclude any other or further exercise thereof or of
any other right or remedy hereunder. Whenever this Agreement requires or permits
the consent by or on behalf of a party, such consent shall be given in writing
in the same manner as for waivers of compliance.
4.4 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall
entitle any person or entity (other than a party hereto and his, her or its
respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind.
4.5 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be made in writing and shall be deemed to
have been duly given and effective: (i) on the date of delivery, if delivered
personally; (ii) on the earlier of the fourth (4th) day after mailing or the
date of the return receipt acknowledgement, if mailed, postage prepaid, by
certified or registered mail, return receipt requested; or (iii) on the date of
transmission, if sent by facsimile, telecopy, telegraph, telex or other similar
telegraphic communications equipment:
If to the Company: Birman Managed Care, Inc.
502 Gould Drive
Cookeville, TN 38506
If to NBR: National Benefit Resources, Inc.
Suite 300
5402 Parkdale Drive
Minneapolis, MN 55416
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With a copy to: Oppenheimer Wolff & Donnelly
First Bank Building
Suite 1700
St. Paul, MN 55101
Attn: Dennis Whelpley
or to such other person or address as a party shall furnish to the other parties
hereto in writing in accordance with this subsection.
4.6 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned (whether voluntarily, involuntarily, by operation of law or
otherwise) by any of the parties hereto without the prior written consent of the
other parties.
4.7 GOVERNING LAW. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the
internal substantive laws of the State of Tennessee (without regard to the laws
of conflict that might otherwise apply) as to all matters, including without
limitation matters of validity, construction, effect, performance and remedies.
4.8 COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
4.9 HEADINGS. The table of contents and the headings of the sections
and subsections of this Agreement are inserted for convenience only and shall
not constitute a part hereof.
4.10 ENTIRE AGREEMENT. This Agreement and all Exhibits hereto embody
the entire agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement and together they are referred to as
"this Agreement" or the "Agreement". There are no restrictions, promises,
warranties, agreements, covenants or undertakings, other than those expressly
set forth or referred to in this Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the
transaction or transactions contemplated by this Agreement.
4.11 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, or the making, performance or interpretation thereof,
including without limitation alleged fraudulent inducement thereof, shall be
settled by binding arbitration in Minneapolis, Minnesota by one arbitrator
appointed in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. Judgment upon any arbitration award may be entered in
any court having jurisdiction thereof.
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4.12 FURTHER ASSURANCES. Each party hereto shall, before, at and after
Closing, execute and deliver such instruments and take such other actions as the
other party or parties, as the case may be, may reasonably require in order to
carry out the intent of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BIRMAN MANAGED CARE,INC.
- -------------------------------- By:
Attest: -----------------------------------
Its:
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NATIONAL BENEFIT RESOURCES,
INC.
- -------------------------------- By:
Attest: ----------------------------------
Its:
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