Option and Put Agreement - Empower Health Corp. and Superior Consultant Holdings Corp.
OPTION AND PUT AGREEMENT
This Option and Put Agreement is made this 28th day of April, 1998 between
EMPOWER HEALTH CORPORATION, a Texas corporation ("Empower") and SUPERIOR
CONSULTANT HOLDINGS CORPORATION, a Delaware corporation ("Superior").
A. Empower and Superior are parties to a Agreement for the Issuance and
Sale of Stock of even date herewith (the "Sale Agreement") pursuant to which
Superior has agreed to purchase, and Empower has agreed to issue and sell, on
the terms and conditions set forth therein, certain shares of Empower's Series B
Convertible Preferred Stock.
B. Pursuant to the Sale Agreement, Empower has agreed to grant Superior the
right to cause the shares acquired thereunder to be repurchased by Empower under
certain terms and conditions and also has agreed to grant Superior the right to
acquire additional shares of Empower's capital stock under certain terms and
conditions. This Agreement is intended to create such rights and to set forth
the terms and conditions under which they may be exercised.
NOW THEREFORE, in consideration of the mutual agreements, covenants and
provisions herein contained, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement and not otherwise
defined herein have the meaning ascribed to them in the Sale Agreement. In
addition, the following terms when capitalized have the following meanings:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "EXERCISE PRICE" means the price payable upon exercise of the
Purchase Option, which shall be (i) if the Purchase Option is exercised to
purchase Common Stock, a price per share equal to 70% of the Fair Market Value
Per Share of the shares of Common Stock being purchased and/or (ii) if shares of
Preferred Stock are being purchased, a price per share equal to 70% of the Fair
Market Value Per Share of the shares of Common Stock into which each share of
Preferred Stock is convertible.
(c) "EXERCISE NOTICE" means a written notice from Superior to Empower
exercising the Purchase Option, which specifies the number of shares with
respect to which the Purchase Option is being exercised.
(d) "FINANCIAL STATEMENTS" as of any date means a consolidated (with all
subsidiaries, if any) balance sheet and statement of shareholders' equity of
Empower as of the date specified and consolidated (with all subsidiaries, if
any) statements of Empower's income and cash flows for the fiscal year then
ended (in the case of annual audited statements) or the fiscal quarter and year-
to-date period then ended (in the case of unaudited quarterly statements).
(e) "FIRST PUT PERIOD" means the 90 day period following the second
anniversary of the Closing Date.
(f) "NEW SECURITIES" means any capital stock, any rights, options or
warrants to purchase or subscribe for capital stock, and any securities or other
instruments of any type whatsoever that are, or may become, convertible into or
exchangeable for capital stock, which are issued for cash; provided, however,
that New Securities shall not include: (i) securities offered and sold by
Empower pursuant to a Public Equity Offering; (ii) shares of Empower's Common
Stock (or related options or rights) issued to Empower's employees and directors
pursuant to a plan adopted by the Board of Directors; (iii) shares of Empower's
capital stock issued in connection with any warrant, option or right listed on
Schedule 4.3(b) to the Sale Agreement; and (iv) shares issued pursuant to a
stock split or stock dividend. The exclusion of the foregoing items from the
definition of New Securities shall not affect the operation of Section 3(f),
relating to the adjustment of the number of shares covered by the Purchase
Option under certain circumstances, or Section 3(g), relating to the adjustment
of the Exercise Price under certain circumstances.
(g) "PRO RATA SHARE" means with respect to Superior, that portion of the
number of shares of New Securities proposed to be issued that equals the
proportion that (i) the number of shares of Common Stock held by Superior
immediately prior to the proposed issuance, plus the number of shares of Common
Stock that would then be issuable to Superior assuming that all securities of
Empower convertible into or exchangeable for Common Stock had been converted or
exchanged, bears to (fi) the total number of shares of equity securities issued
and outstanding on a Fully Diluted Basis immediately prior to the proposed
(h) "PUBLIC EQUITY OFFERING" means a firm commitment underwritten sale of
Empower common stock to the public by Empower pursuant to an effective
registration statement under the 1933 Act (a) of a number of shares of its
common stock which, when added to any other outstanding shares then eligible for
public trading without registration or other restriction under the 1933 Act,
constitute at least 20% of the number of shares of common stock outstanding, on
a Fully-Diluted Basis, after completion of such offering and (b) for an
aggregate offering price (before payment of underwriters, or brokers,
commissions or discounts and the expenses of the offering)which, when added to
the aggregate offering price received by Empower from all other offerings of its
common stock pursuant to effective 1933 Act registration statements, equals not
less than $10 million.
(i) "PURCHASE PRICE" means a price equal to the Fair Market Value Per
Share as of the date of delivery of the Put Notice, multiplied by O) the number
of shares of Common Stock to be purchased and/or (ii) to the extent that Shares
are to be purchased prior to conversion into Common Stock, the number of shares
of Common Stock into which the Shares to be purchased are convertible.
(j) "PURCHASE OPTION" means Superior's right to acquire (i) up to 513,413
shares of Common Stock, constituting 19% of the issued and outstanding equity
securities of Empower outstanding on a Fully Diluted Basis on the date of this
Agreement and/or (ii) shares of
Preferred Stock convertible into shares of Common Stock constituting up to 19%
of the issued and outstanding equity securities of Empower outstanding on a
Fully Diluted Basis on the date of this Agreement, in each case at the Exercise
Price. The Purchase Option shall entitle Superior to purchase Common Stock and
Preferred Stock in any combination so long as the number of shares of Common
Stock purchased thereunder, together with the number of shares of Common Stock
into which shares of Preferred Stock purchased thereunder are convertible, does
not exceed 19% of the issued and outstanding equity securities of Empower
outstanding on a Fully Diluted Basis on the date of this Agreement.
(k) "PUT OPTION" means Superior's right to require Empower, on the terms
and conditions set forth herein, to repurchase the Shares and/or shares of
Common Stock into which Shares may have been converted, in whole or in part.
(l) "PUT NOTICE" means a written notice from Superior to Empower
demanding that Empower purchase the number of Shares specified in the Put
(m) "SALE AGREEMENT" means the Agreement for the Issuance and Sale of
Stock of even date herewith between Superior and Empower.
(n) "SECOND PUT PERIOD" means the 90 day period following the third
anniversary of the Closing provided
2. RIGHT TO PUT SHARES
(a) GRANT OF RIGHT. Empower hereby grants Superior the Put Option.
(b) TIME OF EXERCISE. Superior may exercise the Put Option only during
the First Put Period or the Second Put Period.
(c) LIMITATION ON EXERCISE. The Put Option may not be exercised if, prior
to such exercise, Empower has filed a registration statement for a Public Equity
Offering; provided, however, that if a registration statement for a Public
Equity Offering has been filed but has been withdrawn, has become subject to any
stop order issued by the Securities and Exchange Commission which has not been
lifted, or has failed to become effective within 180 days after its initial
filing, Superior's right to exercise the Put Option shall be reinstated and the
Put Option shall be exercisable during each of the periods specified in Section
2(b) or, if any such period has lapsed, for a period of 90 days following the
occurrence of the event giving rise to the reinstatement.
(d) MANNER OF EXERCISE. Superior may exercise the Put Option by
delivering to Empower a Put Notice. Any Put Notice will be effective only if
delivered during the First Put Period, the Second Put Period or the additional
period specified in Section 2(c).
(e) CLOSING OF PURCHASE. The closing of any purchase by Empower of Shares
pursuant to any exercise of the Put Option shall be held at the offices of
Empower on a date agreed to by Empower and Superior, but not later than the
later of (1) thirty days after delivery by Superior to Empower of the Put Notice
relating to the Shares to be purchased or (2) ten days after the determination
of the Fair Market Value Per Share pursuant to Article 4. At the closing:
(i) Superior will deliver to Empower the certificates representing
the Shares to be purchased, duly endorsed for transfer or accompanied by
(ii) Superior will provide Empower with certification in a form
acceptable to Empower's counsel that the Shares conveyed are free and clear
of all liens, encumbrances, charges and other claims.
(iii) Empower will deliver to Superior a certificate of an officer
certifying to Superior that immediately following the closing and the
payment of the purchase price, (i) Empower will not be insolvent and its
assets will exceed its liabilities, (ii) the Purchase Price does not exceed
Empower's surplus, (iii) Empower will be able to pay its debts as they
become due in the ordinary course and (iv) Empower will not have an
unreasonably small capital for the business intended to be conducted by it.
(iv) Empower will deliver the Purchase Price to Superior in
immediately available funds.
(f) CORPORATE ACTION. If Empower is unable to complete any purchase of
Shares in connection with any exercise of the Put Option because of restrictions
in its Articles of Incorporation or Bylaws, in agreements to which it is a party
or in applicable statutes, then Empower shall take such action as may be
necessary to permit it to make such purchases, including soliciting shareholder
approval of such action to the extent required under applicable law or Empower's
Articles of Incorporation or Bylaws.
(g) INABILITY TO COMPLETE PURCHASE. If Empower is legally prohibited at
the time of any sale by any statute, contract or otherwise from paying the full
Purchase Price for Shares specified in a Put Notice and such prohibition cannot
be removed by action pursuant to Section 2(f), then
(i) Superior may elect to rescind the sale and retain the Shares
specified in the Put Notice; or
(ii) Superior may elect, or have elected, nominees representing a
majority of the Empower Board of Directors.
3. PURCHASE OPTION.
(a) GRANT OF OPTION. Empower hereby grants to Superior the Purchase
(b) TIME OF EXERCISE OF OPTION. The Purchase Option may be exercised in
whole or in part by Superior at any time or times through and including the
second anniversary of the date of this Agreement.
(c) METHOD OF EXERCISE. The Purchase Option shall be exercised by
delivery of an Exercise Notice to the Secretary of Empower-at its principal
place of business.
(d) CLOSING OF PURCHASE The closing of any purchase of shares pursuant to
exercise of the Purchase Option shall be held at the offices of Empower on a
date agreed to by Empower and Superior, but not later than the later of (1)
thirty days after delivery by Superior to Empower of the Exercise Notice
relating to the Shares to be purchased or (2) ten clays after the determination
of the Fair Market Value Per Share as set forth in Section 40 At the closing:
(i) Empower will deliver to Superior certificates representing the
Shares to be purchased, bearing (if applicable) the legend specified in
(ii) Superior will deliver the Exercise Price to Empower immediately
(iii) If requested by Empower with respect to any shares which have
not been registered under the 1933 Act, Superior will deliver a written
statement that (A) it is purchasing the shares for investment and not with a
view toward its distribution or sale, (B) it is aware that the shares have not
been registered under Federal or state securities laws, and will constitute
"restricted stock" as that term is defined under Rule 144 promulgated under
the 1933 Act, and (C) it is aware that any restricted stock may not be sold,
transferred or otherwise disposed of by Superior without registration unless,
in the opinion of counsel acceptable to Empower, such registration is not
required under the 1933 Act or applicable state securities laws.
(e) RIGHTS AS SHAREHOLDER. Superior shall not be, or have any of the
fights or privileges of a shareholder of Empower in respect of any shares
issuable on exercise of the Purchase Option, unless and until the Exercise Price
for such shares shall have been paid in full and such shares shall have been
issued in accordance herewith.
(f) ADJUSTMENT PROVISIONS. The aggregate number of shares with respect to
which the Purchase Option may be exercised will be appropriately adjusted for
any increase or decrease in the number of issued shares representing an equity
interest in Empower resulting from any merger, reorganization, consolidation,
recapitalization, liquidation stock dividend, stock split, reverse stock split
or other change in the corporate structure of Empower affecting its equity
securities. Such adjustment shall be made in the number of shares which may be
issued upon exercise of the Purchase Option and in the Exercise Price, to the
extent appropriate to prevent dilution or enlargement of Superior's rights.
(g) EXERCISE PRICE ADJUSTMENT FORMULA. If Empower shall issue or sell any
shares of Common Stock of any class, for a consideration per share which (X) is
less than the per share value paid by Superior in the acquisition of the Shares
under the Sale Agreement, if the issue or sale occurs within 90 days after the
date of this Agreement, or (Y) is less than the Fair
Market Value Per Share in effect at the time of such issue or sale, for all
other issues or sales, then the Exercise Price shall automatically be adjusted
and immediately be deemed to equal the following:
(i) the number of shared of Common Stock outstanding on a Fully
Diluted Basis immediately prior to such issue and sale
(ii) the Exercise Price in effect at the time of such issuance or
(iii) the total consideration received and to be received by the
Company upon such issue and sale
(iv) the total number of shares of Common Stock outstanding on a
Fully Diluted Basis immediately after such issue or sale.
(h) LEGEND. The parties agree that certificates evidencing any Shares
which, when acquired hereunder, constitute "restricted stock" as that term is
defined under Rule 144 promulgated under the 1933 Act, as mended, shall bear the
THESE SECURITIES ARE NOT REGISTERED UNDER THE 1933 ACT OR ANY STATE
SECURITIES ACT. THEY MAY NOT BE TRANSFERRED FOR VALUE UNLESS AND UNTIL THEY
ARE REGISTERED UNDER ALL SUCH APPLICABLE ACTS OR SUCH TRANSFBR SATISFIES
APPLICABLE REGISTRATION EXEMPTIONS THEREUNDER. THE COMPANY WILL NOT
TRANSFER THESE SECURITIES ON ITS BOOKS AND RECORDS WITHOUT AN OPINION OF
COUNSEL, SATISFACTORY IN FORM AND SUBSTANCE TO COUNSEL FOR THE COMPANY,
THAT SUCH TRANSFER DOES NOT VIOLATE THE 1933 ACT OR ANY STATE SECURITIES
4. DETERMINATION OF PURCHASE PRICE. Promptly following delivery of a Put
Notice or an Exercise Notice, Empower and Superior shall determine the Fair
Market Value Per Share in accordance with Section 1.14 of the Sale Agreement,
for computation of the Purchase Price or the Exercise Price, as the case may be.
Following determination of the Fair Market Value Per Share, the Purchase Price
or the Exercise Price as the case may be, shall be promptly determined.
5. COVENANTS. Empower covenants that:
(a) Empower and its subsidiaries shall keep true books of record and
account in accordance with GAAP and fix which full, tree and correct entries in
accordance with sound accounting practice will be made of all income, expenses,
dealings and transactions fix relation to their business activities.
(b) Empower shall deliver to Superior as soon as practicable and in any
event within ninety (90) calendar days after the close of each fiscal year of
Empower commencing with. the fiscal year ending December 31, 1998, consolidated
audited Financial Statements prepared -m accordance with GAAP, all in reasonable
detail and with an unqualified opinion expressed by independent public
accountants selected by Empower. Empower shall further deliver to Superior as
soon as practicable and in any event within forty-five (45) calendar days after
the close of each fiscal quarter of Empower commencing with the first fiscal
quarter ending after the date of this Agreement, unaudited Financial Statements
prepared in accordance with GAAP (subject to normal year end adjustments which
are not material individually or in the aggregate), in reasonable detail.
(c) Empower will retain independent public accountants of recognized
national or regional standing who shall certify the audited Financial
(d) Empower will, at all times prior to expiration or exercise in full of
the Purchase Option (whichever is earlier), reserve from its authorized but
unissued shares a number of shares adequate to satisfy the exercise in full of
the Purchase Option (to the extent not theretofore exercised).
6. RIGHT TO PURCHASE ADDITIONAL SECURITIES.
(a) FIRST REFUSAL RIGHTS. Subject to the terms and conditions of this
Article 6, Empower hereby grants to Superior a right of first refusal to
purchase all or any part of its Pro Rata Share of any issue of New Securities
that Empower (or any subsidiary whose capital stock will not be wholly owned,
directly or indirectly, by Empower upon completion of any such issuance) may
propose to issue from time to time after the date of this Agreement.
(b) NOTICE AND ALLOCATION PERIODS. If Empower or, when applicable, its
subsidiary, proposes to undertake a bona fide issuance of New Securities, then
it shall give Superior written notice of its intention, describing the type of
New Securities, the price, the number of shares to be offered, and the general
terms upon which such securities are proposed to be offered. Superior shall be
given at least 15 days' prior written notice within which to agree to purchase
all or any part of its Pro Rata Share of such issuance of New Securities for the
price and upon the general terms specified in the notice by giving written
notice to the issuer within such period and stating therein the quantity of New
Securities to be purchased by it. The closing of any purchase of securities by
Superior pursuant to the exercise of its right of first refusal shall be held
simultaneously with the closing of the sale of the balance of the sale or
issuance of New Securities to which the exercise relates.
(c) RIGHT OF COMPANY TO SELL NEW SECURITIES If Superior fails to exercise
in full its right of first refusal within the applicable period set forth above,
then Empower or, when applicable, its subsidiary shall have 120 days thereafter
to sell the New Securities with respect to which the right of first refusal was
not exercised, at a price and upon general terms no more favorable to the
purchaser thereof than specified in the notice to Superior. If such New
Securities have not been sold within such 120-day period, then Empower or, when
applicable, its subsidiary
shall not thereafter issue or sell any New Securities without first offering
them to Superior in the manner provided in this Article 6.
(d) TERMINATION. This Article 6 shall continue in effect from the date of
this Agreement until Empower has completed a Public Equity Offering.
(a) NO INCONSISTENT AGREEMENTS. If Empower enters into any agreement
which grants to any holders rights to purchase securities, or to require
repurchase by Empower of securities, during the term of this Agreement which
rights conflict directly with those of Superior under this Agreement, the terms
of this Agreement shall be superior in resolving such conflicts.
(b) REMEDIES. Superior shall be entitled to specific enforcement of its
this Agreement, to recover damages caused by reason of any breach of any
provision of this Agreement and to exercise all other fights granted by law. The
parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that Superior may
in its sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive or equitable relief in order to enforce or
prevent violation of the provisions of this Agreement.
(c) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of Empower and Superior.
(d) SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and permitted assigns.
(e) SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
(f) COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(g) DESCRIPTIVE HEADINGS. The captions and descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
(h) GOVERNING LAW. The corporate law of Texas will govern all issues
concerning the internal governance of Empower and the relative rights of Empower
and its shareholders in connection therewith. All other questions concerning the
construction, validity and interpretation of this Agreement and the exhibits and
schedules hereto will be governed by the laws of
Michigan without regard to choice of law principles which would require the
application of the laws of any other jurisdiction.
(i) ENTIRE AGREEMENT. This Agreement, together with the Sale Agreement
and the Schedules, Exhibits and Annexes thereto, constitutes the entire
agreement between the parties hereto and supersedes all prior agreements,
representations, warranties, statements, promises, information, arrangements and
understandings, whether oral or written, express or implied, with respect to the
subject matter hereof.
(j) NOTICES. Any and all notices and other communications hereunder shall
be in writing addressed to the parties at the addresses specified below or such
other addresses as either party may direct by notice given in accordance with
this section, and shall be delivered in one of the following manners (i) by
personal delivery, in which case notice shall be deemed to have been duly given
when delivered; (ii) by certified mail, return receipt requested, with postage
prepaid, in which case notice shall be deemed to have been duly given on the
date indicated on the return receipt; (iii) by reputable delivery service
(including, by way of example and not limitation, Federal Express, UPS and DHL)
which makes a record of the date and time of delivery, in which case notice
shall be deemed to have been duly given on the date indicated on the delivery
service's record of delivery; or (iv) by fax transmission to the fax numbers
given below, with confirmation of good receipt and confirmed by letter to the
addresses set forth below, in which case notice shall be deemed to have been
duly given on the date indicated fix the confirmation of fax transmission (or
the next Business Day if such date is not a Business Day or the transmission is
made after business hours):
if to Superior, to
Superior Consultant Holdings Corporation
4000 Town Center, Suite 1100
Southfield, Michigan 48075
Attention: Richard P. Saslow, Vice President and General Counsel
Fax: (248) 386-8459
If to Empower to
Empower Health Corporation
4008 River Place Boulevard
Austin, Texas 78730
Attention: Donald W. Hackett, President and CEO
Fax: (512) 832,0752
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, TX 78205
Fax: (210) 224,2035 .
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
EMPOWER HEALTH CORPORATION, SUPERIOR CONSULTANT HOLDINGS CORPORATION,
a Texas corporation a Delaware corporation
By: /s/ David W. Hackett By: /s/ James T. House
Its: President & CEO Its: CFO