Document:

Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of June 25, 2014, is by and among Adeptus Health Inc., a Delaware corporation (the “Company”), and each Stockholder party hereto as listed on the signature pages to this Agreement or becomes a party hereto pursuant to Section 12(c) (each, individually, a “Stockholder” and together, the “Stockholders.”

 

WHEREAS, in connection with the initial public offering of Class A Common Stock (as defined below) of the Company (the “IPO”), the parties hereto desire to enter into this Agreement to provide the Stockholders with certain registration rights with respect to the Common Stock (as defined below).

 

NOW, THEREFORE, for and in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

 

Section 1.                                     Definitions.  As used in this Agreement, the following terms shall have the following meanings:

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person.  For the purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“Class A Common Stock” means the shares of Class A common stock, par value $0.01 per share, of the Company.

 

“Class B Common Stock” means the shares of Class B common stock, par value $0.01 per share, of the Company.

 

“Common Stock” shall mean all shares hereafter authorized of any class of common stock of the Company which has the right to participate in the election of directors of the Company.

 

“Company/Holder Indemnitees” shall have the meaning set forth in Section 8(b) hereof.

 

“Demand Notice” shall have the meaning set forth in Section 2(a) hereof.

 

“Demand Registration” shall have the meaning set forth in Section 2(a) hereof.

 

“DTC” shall have the meaning set forth in Section 7 hereof.

 

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.

 

“Exchange Registration Statement” shall have the meaning set forth in Section 3(d).

 

“FINRA” shall mean the Financial Industry Regulatory Authority and any successor thereto.

 

“Holder Indemnitees” shall have the meaning set forth in Section 8(a) hereof.

 

“indemnified party” shall have the meaning set forth in Section 8(c) hereof.

 

“indemnifying party” shall have the meaning set forth in Section 8(c) hereof.

 

“IPO” shall have the meaning set forth in the recitals.

 

“Losses” shall have the meaning set forth in Section 8(a) hereof.

 

“Maximum Offering Size” shall have the meaning set forth in Section 2(b) hereof.

 

“Notice” shall have the meaning set forth in Section 2(a) hereof.

 

“Operating Agreement” shall mean the Amended and Restated Limited Liability Company Agreement of Adeptus Health LLC, dated on or about the date of the closing of the IPO, among the Company and the parties designated as Members therein, as amended or supplemented.

 

“Other Securities” shall mean securities of the Company sought to be included in a Registration Statement other than Registrable Securities and that are held by any holder thereof with a contractual right to include such securities in such Registration Statement.

 

“Person” shall mean any natural person, corporation, limited partnership, general partnership, limited liability company, joint stock company, joint venture, association, company, estate, trust, bank trust company, land trust, business trust, or other organization, whether or not a legal entity, custodian, trustee-executor, administrator, nominee or entity in a representative capacity and any government or agency or political subdivision thereof.

 

“Piggyback Notice” shall have the meaning set forth in Section 4(a) hereof.

 

“Piggyback Registration” shall have the meaning set forth in Section 4(a) hereof.

 

“Proceeding” shall mean an action, claim, suit, arbitration or proceeding (including an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Prospectus” shall mean any prospectus included in, or relating to, any Registration Statement (including any preliminary prospectus, any prospectus that discloses

 

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information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A or Rule 430B promulgated under the Securities Act and any “issuer free writing prospectus” (as defined in Rule 433 under the Securities Act)), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus.

 

“Registrable Securities” shall mean (a) all shares of Class A Common Stock held directly or indirectly by a Stockholder, including any shares of Class A Common Stock issuable or issued upon conversion, exercise or exchange of other securities of the Company or any of its subsidiaries (including, for the avoidance of doubt, any shares of Class A Common Stock issuable upon exchange of Units and the corresponding shares of Class B Common Stock), and (b) any shares of capital stock of the Company issued or issuable with respect to any such shares of Class A Common Stock as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise.  As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (i) they are sold pursuant to an effective Registration Statement under the Securities Act, (ii) they are sold pursuant to Rule 144, (iii) they are (A) able to be sold without restriction or limitation of any kind, and without any public information or other requirement, pursuant to Rule 144, (B) not covered by, or subject to, any restrictive legend or any other restriction or limitation on transfer of any kind imposed by or on behalf of the Company or the transfer agent for the securities of the class of such Registrable Securities, and (C) not held by any Stockholder that, together with its Affiliates, holds more than five percent (5%) of the outstanding shares of Common Stock, (iv) they shall have ceased to be outstanding or (v) they have been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of the securities.

 

“Registration Statement” shall mean any registration statement of the Company under the Securities Act which permits the public offering of any of the Registrable Securities in accordance with the intended methods of distribution thereof pursuant to the provisions of this Agreement, including any related Prospectus, amendments and supplements to such registration statement or Prospectus, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

 

“Rule 144” shall mean Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the SEC.

 

“Rule 144A” shall have the meaning set forth in Section 9(b) hereof.

 

“SEC” shall mean the Securities and Exchange Commission or any successor agency having jurisdiction under the Securities Act.

 

“Securities Act” shall mean the Securities Act of 1933, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.

 

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“Shelf Notice” shall have the meaning set forth in Section 3(a) hereof.

 

“Shelf Registration Statement” shall mean a Registration Statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act and registering the resale from time to time of Registrable Securities by the holders thereof.

 

“Shelf Underwritten Offering” shall have the meaning set forth in Section 4(c) hereof.

 

“Take-Down Notice” shall have the meaning set forth in Section 4(c) hereof.

 

“underwritten registration or underwritten offering” shall mean a registration in which securities of the Company are offered for sale (and, as applicable, sold) to the public in a firm commitment underwritten offering.

 

“Unit” means the units of Adeptus Health LLC and shall also include any equity security issued in respect of or in exchange for Units, whether by way of dividend or other distribution, split, recapitalization, merger, rollup transaction, consolidation, conversion or reorganization.

 

Section 2.                                     Demand Registrations.

 

(a)                                 Requests for Registration.  Subject to the following paragraphs of this Section 2(a), each holder (or group of holders) of Registrable Securities shall have the right from time to time by delivering a written notice to the Company (a “Demand Notice”) to require the Company to register, pursuant to the terms of this Agreement under and in accordance with the provisions of the Securities Act, the number of Registrable Securities requested to be so registered pursuant to the terms of this Agreement (a “Demand Registration”); provided, however, that (i) a Demand Notice may only be made if the sale of the Registrable Securities requested to be registered by the participating holders of Registrable Securities is reasonably expected by such holders of Registrable Securities to result in aggregate gross cash proceeds in excess of $50 million (before deducting any underwriting discount or commission) and (ii) the Company shall not be obligated to effect more than one such Demand Registration in any 180-day period without the consent of a majority of the board of directors of the Company.

 

Following receipt of a Demand Notice, the Company shall file a Registration Statement with respect to the Registrable Securities covered in such Demand Notice and otherwise requested to be included in such Registration Statement in accordance with this Section 2(a), as promptly as practicable, but not later than 45 days after receipt of such Demand Notice, and shall use its reasonable best efforts to cause such Registration Statement to be declared effective under the Securities Act as promptly as practicable after the filing thereof.  Any Demand Registration may be required by the holder(s) of Registrable Securities making such demand to be on an appropriate form under the Securities Act (including Form S-3ASR or any successor form that becomes effective upon filing with the SEC if the Company is then eligible to use such form) in accordance with such holder(s) intended methods of distribution, as shall be set forth in the Registration Statement, and Rule 415 under the Securities Act.

 

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Within 10 days after receipt by the Company of a Demand Notice, the Company shall give written notice (the “Notice”) of such Demand Notice to all other holders of Registrable Securities and shall, subject to the provisions of Section 2(b) hereof, include in such registration all Registrable Securities with respect to which the Company received written requests for inclusion therein within 15 days after such Notice is given by the Company to such holders.

 

All requests made pursuant to this Section 2 will specify the number of Registrable Securities to be registered and the intended methods of disposition thereof.  Each holder of Registrable Securities which has requested to include Registrable Securities in any Registration Statement pursuant to this Section 2(a) shall furnish to the Company in writing such other information regarding such holder and the distribution proposed by such holder as the Company reasonably requests specifically for use in connection with such Registration Statement.

 

The Company shall be required to maintain the effectiveness of the Registration Statement with respect to any Demand Registration for a period of at least 180 days after the effective date thereof or such shorter period in which all Registrable Securities included in such Registration Statement have actually been sold pursuant to such Registration Statement.

 

Notwithstanding the foregoing, no Stockholder shall be entitled to include its Registrable Securities in any Shelf Registration Statement filed pursuant to this Section 2, if and to the extent such Registrable Securities are then registered under an effective and available Shelf Registration Statement or Exchange Registration Statement filed pursuant to Section 3 (nor, for the avoidance of doubt, shall any Stockholder be entitled to deliver any Demand Notice for the filing of a Shelf Registration Statement pursuant to this Section 2 with respect to any Registrable Securities so registered).

 

(b)                                 Priority on Demand Registration.  If any of the Registrable Securities registered pursuant to a Demand Registration are to be sold in an underwritten offering, and the managing underwriter or underwriters of such underwritten offering advise the holders of such securities in writing that in its view the total number or dollar amount of Registrable Securities proposed to be sold in such offering is such as to adversely affect the success of such offering (including securities proposed to be included by other holders of securities entitled to include securities in such Registration Statement pursuant to incidental or piggyback registration rights), then there shall be included in such underwritten offering the number of Registrable Securities, Other Securities, if any, and other securities, if any, that in the opinion of such managing underwriter can be sold without adversely affecting such offering (the “Maximum Offering Size”), and such number of Registrable Securities and Other Securities, if any, shall be allocated as follows:

 

(i)                                     first, Registrable Securities that are requested to be included in such Registration Statement, allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata on the basis of the relative number of such Registrable Securities requested for inclusion;

 

(ii)                                  second, Other Securities, if any, that are requested to be included in such Registration Statement, allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata on the basis of the relative number of such

 

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Other Securities requested for inclusion; and

 

(iii)                               third, the securities, if any, for which inclusion in such Demand Registration was requested by the Company.

 

No securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration.

 

(c)                                  Postponement of Demand Registration.  The Company shall be entitled to postpone (but not more than once in any 12-month period), for a reasonable period of time not in excess of 60 days, the filing of a Registration Statement if the Company delivers to the holders requesting registration a certificate signed by the chief executive officer or president of the Company certifying that, in the good faith judgment of the board of directors of the Company, based on the advice of counsel, such registration and offering would reasonably be expected to materially adversely affect, or materially interfere with, any bona fide material financing of the Company or any material transaction under consideration by the Company or would require disclosure of information that has not been, and is not otherwise required to be, disclosed to the public, the premature disclosure of which would materially adversely affect the Company.  Such certificate shall contain a statement of the reasons for such postponement and an approximation of the anticipated delay.  The holders receiving such certificate shall keep the information contained in such certificate confidential subject to the same terms set forth in Section 6(p).  If the Company shall so postpone the filing of a Registration Statement, each of the Stockholders shall have the right to withdraw its request for registration by giving written notice to the Company within 20 days of the anticipated termination date of the postponement period, as provided in the certificate delivered to the holders.

 

(d)                                 Cancellation of Demand Registration.  Each Stockholder that delivered the Demand Notice pursuant to this Section 2 shall have the right to withdraw from such registration by a written notice to the Company, in which event the Company shall abandon or withdraw such registration statement; provided, however, that if the Company and the other Stockholders participating in such registration have requested to be included in such registration Registrable Securities in the aggregate amount of at least $50 million, then the Company and such other Stockholders shall have the right to continue with such registration regardless of the withdrawal of the Stockholder(s) that initially delivered the Demand Notice.

 

Section 3.                                     Mandatory Shelf and Exchange Registration.

 

(a)                                 Initial Mandatory Shelf Registration.  The Company shall prepare and, as promptly as practicable after the first anniversary of the effective date of the Company’s registration statement on Form S-1 relating to the IPO, and in any event within 30 days thereafter, file with the SEC a Shelf Registration Statement covering the resale of all of the Registrable Securities requested to be included in such Shelf Registration Statement pursuant to this Section 3(a).  The Company shall give prompt written notice of such proposed filing at least 20 days before the anticipated filing date (the “Shelf Notice”) to all of the holders of Registrable Securities (including the holders of Units exchangeable into shares of Class A Common Stock).  The Shelf Notice shall offer such holders the opportunity to include in such registration statement the number of Registrable Securities as each such holder may request.  Subject to

 

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Section 4(b) hereof, the Company shall include in such Shelf Registration Statement all Registrable Securities (other than Registrable Securities that (i) are registered under an effective and available Exchange Registration Statement pursuant to Section 3(d) below and (ii) upon delivery pursuant to the Exchange Registration Statement would not constitute Registrable Securities (assuming for this purpose that such delivery were to occur at the time of the initial filing of the Shelf Registration Statement pursuant to this Section 3(a))) with respect to which the Company has received written requests for inclusion therein within 15 days after notice has been given to the applicable holder.

 

(b)                                 Maintenance of Mandatory Shelf Registration.  In the event the number of shares available under any Shelf Registration Statement previously filed pursuant to this Section 3 is at any time insufficient to cover all of the Registrable Securities required to be covered by such Registration Statement, the Company shall, as soon as practicable, but in any event not later than the later of (i) thirty (30) days after the Company becomes aware of the necessity therefor and (ii) the earliest date that the Company is permitted by the SEC to file the new Registration Statement as required hereby, file a new Shelf Registration Statement or a post-effective amendment to the initial Shelf Registration Statement so as to register for resale all of the Registrable Securities not so covered.

 

(c)                                  Form and Effectiveness of Shelf Registration Statement.  The Company shall use its reasonable best efforts to cause any Shelf Registration Statement filed pursuant to this Section 3 to be declared effective under the Securities Act as promptly as practicable after the filing thereof.  Subject to Section 4(d), the Company shall be required to maintain the effectiveness pursuant to Rule 415 of any Shelf Registration Statement filed pursuant to this Section 3 until the earlier of the date on which all securities that constituted Registrable Securities when initially included in such Shelf Registration Statement have actually been sold pursuant to such Shelf Registration Statement or otherwise no longer constitute Registrable Securities; provided, however, that the Company shall not be required to maintain the effectiveness of any Registration Statement filed pursuant to this Section 3 after the sixth anniversary of the effective date of the Company’s registration statement on Form S-1 relating to the IPO.  Any Shelf Registration Statement filed pursuant to this Section 3 shall include a “plan of distribution” section approved by the Stockholders and shall be on Form S-3 or any successor form (and shall be on Form S-3ASR or any successor form that becomes effective upon filing with the SEC if the Company is then eligible to use such form); provided, however, that in the event that Form S-3 is not available to the Company for any registration of the resale of the Registrable Securities under this Section 3, the Company shall (i) register the resale of such Registrable Securities on Form S-1 or another appropriate form reasonably acceptable to the Stockholders and (ii) undertake to register such Registrable Securities on Form S-3 (by post-effective amendment to the existing Shelf Registration Statement or otherwise) as soon as such form is available; provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering such Registrable Securities has been declared effective by the SEC.  The Company shall use its reasonable best efforts to become and remain eligible to use Form S-3 for registration of the Registrable Securities pursuant to Rule 415 at all times on and after the first anniversary of the effective date of the Company’s registration statement on Form S-1 relating to the IPO until the earlier of (i) the date upon which there ceases to be outstanding any Registrable Securities or (ii) the fourth anniversary of the IPO.

 

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(d)                                 Exchange Registration.  As soon as possible after the first year anniversary of the closing date of the IPO and in any event prior to the 15-month anniversary of the closing date of the IPO, to the extent then permissible in the opinion of counsel to the Company based upon SEC rules and staff interpretations thereof, the Company shall file with the SEC one or more registration statements (the “Exchange Registration Statement”) covering the delivery of all Class A Common Stock by the Company, in exchange for Units and shares of Common Stock pursuant to Section 3.6 of the Operating Agreement.  The Company shall use its commercially reasonable efforts, prior to the 15-month anniversary of the closing date of the IPO and in any event as soon as possible after the first anniversary of the closing date of the IPO, to cause such Exchange Registration Statement, if filed, to be declared effective under the Securities Act by the SEC.  The Company shall use its commercially reasonable efforts to keep the Exchange Registration Statement, if filed and declared effective, to be continuously effective, subject to Section 4(d), until all of the Units of the Stockholders included in any such registration statement shall have actually been exchanged thereunder.

 

Section 4.                                     Piggyback Registration.

 

(a)                                 Right to Piggyback.  Except with respect to a Demand Registration, the procedures for which are addressed in Section 2, if the Company at any time following the completion of the IPO proposes to file a registration statement under the Securities Act with respect to an offering of Common Stock, whether on behalf of itself or holders of Other Securities or otherwise (other than a Shelf Registration Statement or Exchange Registration Statement pursuant to Section 3 or a registration statement on Form S-4, Form S-8 or any successor forms thereto relating to shares of Common Stock to be issued by the Company solely in connection with (i) any acquisition of another entity or business or (ii) a stock option or any other employee benefit or dividend reinvestment plan), then, each such time, the Company shall give prompt written notice of such proposed filing at least 20 days before the anticipated filing date (the “Piggyback Notice”) to all of the holders of Registrable Securities.  The Piggyback Notice shall offer such holders the opportunity to include in such registration statement the number of Registrable Securities as each such holder may request (a “Piggyback Registration”).  Subject to Section 4(b) hereof, the Company shall include in each such Piggyback Registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after notice has been given to the applicable holder.  Each holder of Registrable Securities which has requested to include Registrable Securities in any Registration Statement pursuant to this Section 4(a) shall furnish to the Company in writing such other information regarding such holder and the distribution proposed by such holder as the Company reasonably requests specifically for use in connection with such Registration Statement.  The eligible holders of Registrable Securities shall be permitted to withdraw all or part of the Registrable Securities from a Piggyback Registration at any time at least two business days prior to the effective date of such Piggyback Registration.  The Company shall not be required to maintain the effectiveness of a Registration Statement for a Piggyback Registration beyond the earlier to occur of (i) 180 days after the effective date thereof and (ii) consummation of the distribution by the holders of the Registrable Securities included in such Registration Statement.

 

If at any time after giving such Piggyback Notice and prior to the effective date of the registration statement filed in connection with such registration the Company shall determine for

 

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any reason not to register the securities originally intended to be included in such registration, the Company may, at its election, give written notice of such determination to the Stockholders and thereupon the Company shall be relieved of its obligation to register such Registrable Securities in connection with the registration of securities originally intended to be included in such registration, without prejudice, however, to the right of a Stockholder immediately to request that such registration be effected as a registration under Section 2 or Section 4(c) to the extent permitted thereunder.

 

(b)                                 Priority on Piggyback Registrations.  The Company shall use reasonable efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit holders of Registrable Securities requested to be included in the registration for such offering to include all such Registrable Securities on the same terms and conditions as any other shares of capital stock, if any, of the Company included therein.  Notwithstanding the foregoing, if the managing underwriter or underwriters of such underwritten offering have informed the Company in writing that it is their good faith opinion that the total number or dollar amount of securities that such holders, the Company and any other Persons having rights to participate in such registration, intend to include in such offering is such as to adversely affect the success of such offering, then there shall be included in such underwritten offering the number or dollar amount of Registrable Securities that in the opinion of such managing underwriter or underwriters can be sold without adversely affecting such offering, and such number of Registrable Securities shall be allocated as follows:

 

(i)                                     If the underwritten offering is a primary offering on behalf of the Company:

 

(A)                         first, the number of shares of Common Stock proposed to be registered for sale by the Company;

 

(B)                         second, Registrable Securities that are requested to be included in such registration, pro rata among the holders of such Registrable Securities on the basis of the relative number of such Registrable Securities requested for inclusion thereby; and

 

(C)                         third, Other Securities, if any, that are requested to be included in such registration.

 

(ii)                                  if the underwritten offering is on behalf of holders of Other Securities:

 

(A)                         first, such Other Securities and Registrable Securities that are requested to be included in such registration, pro rata among the holders of such Other Securities and Registrable Securities on the basis of the relative number of such Registrable Securities requested for inclusion thereby; and

 

(B)                         second, any securities requested to be included for sale by the Company.

 

No securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration.

 

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(c)                                  Shelf Take-Downs.  At any time that a Shelf Registration Statement covering Registrable Securities pursuant to Section 2, Section 3 or this Section 4 is effective, if any holder or group of holders of Registrable Securities delivers a notice to the Company (a “Take-Down Notice”) stating that it intends to effect an underwritten offering of all or part of its Registrable Securities included by it on the Shelf Registration Statement (a “Shelf Underwritten Offering”) and stating the number of the Registrable Securities to be included in the Shelf Underwritten Offering and confirming that such sale of Registrable Securities is reasonably expected to result in aggregate gross proceeds in excess of $25 million, then, the Company shall amend or supplement the shelf registration statement as may be necessary in order to enable such Registrable Securities to be distributed pursuant to the Shelf Underwritten Offering (taking into account the inclusion of Registrable Securities by any other holders pursuant to this Section 4(c)).  In connection with any Shelf Underwritten Offering:

 

(i)                                     the Company shall promptly deliver the Take-Down Notice to all other Stockholders included on such Shelf Registration Statement and any other Shelf Registration Statement covering Registrable Securities then in effect and permit each such Stockholder to include its Registrable Securities included on any Shelf Registration Statement in the Shelf Underwritten Offering if such Stockholder notifies the Company within five business days after delivery of the Take-Down Notice to such holder; and

 

(ii)                                  in the event that the managing underwriter(s) determines that marketing factors (including an adverse effect on the per share offering price) require a limitation on the number of shares which would otherwise be included in the Shelf Underwritten Offering, the managing underwriter(s) may limit the number of shares which would otherwise be included in such take-down offering in the same manner as is described in Section 2(b) with respect to a limitation of shares to be included in an underwritten offering.

 

(d)                                 Postponement of Registrations.  The Company shall be entitled to postpone (but not more than once in any 12-month period), for a reasonable period of time not in excess of 60 days, the filing of any Registration Statement or any offering pursuant to Section 3 or this Section 4 if the Company delivers to the holders participating in any such registration or offering a certificate signed by the chief executive officer or president of the Company certifying that, in the good faith judgment of the board of directors of the Company, based on the advice of counsel, such registration or offering would reasonably be expected to materially adversely affect or materially interfere with any bona fide material financing of the Company or any material transaction under consideration by the Company or would require disclosure of information that has not been, and is not otherwise required to be, disclosed to the public, the premature disclosure of which would materially adversely affect the Company.  Such certificate shall contain a statement of the reasons for such postponement and an approximation of the anticipated delay.  The holders receiving such certificate shall keep the information contained in such certificate confidential subject to the same terms set forth in Section 6(p).  If the Company shall so postpone any registration or offering, each of the holders of Registrable Securities participating in such registration or offering shall have the right to withdraw its request for registration by giving written notice to the Company within 20 days of the anticipated termination date of the postponement period, as provided in the certificate delivered to the

 

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holders.

 

Section 5.                                     Restrictions on Public Sale by Holders of Registrable Securities; Restrictions on the Company.  Each holder of Registrable Securities agrees, in connection with any underwritten offering made pursuant to a Registration Statement filed pursuant to Section 2, Section 3 or Section 4 (whether or not such holder elected to include Registrable Securities in such Registration Statement), if requested (pursuant to a written notice) by the managing underwriter or underwriters in an underwritten offering, not to effect any public sale or distribution of any of the Company’s common equity (or securities convertible into or exchangeable or exercisable for common equity) (except as part of such underwritten offering), including a sale pursuant to Rule 144 or any swap or other economic arrangement that transfers to another any of the economic consequences of owning the Common Stock, or to give any Demand Notice during the period beginning seven days prior to the launch of the underwritten offering and ending no later than the earlier of (i) 90 days following the closing date of such offering and (ii) such day (if any) as the holder(s) of Registrable Securities and the managing underwriter or underwriters for such offering shall agree to designate for this purpose (which shall apply equally to all Stockholders).  The foregoing provisions of this Section 5 shall be applicable to any Stockholder that requested to include Registrable Securities in such underwritten offering only if the number of Registrable Securities of such Stockholder actually included in such underwritten offering is at least the lesser of (I) the number of Registrable Securities requested to be included in such underwritten offering by such Stockholder, and (II) the product of the number of Registrable Securities that would be expected to result in aggregate gross cash proceeds in excess of $50 million (before deducting any underwriting discount or commission) in such underwritten offering, multiplied by a fraction, the numerator of which is the number of Registrable Securities requested to be included in such underwritten offering by such Stockholder and the denominator of which is the aggregate number of Registrable Securities requested to be included in such underwritten offering by all Stockholders.  No holder of Registrable Securities that did not request Registrable Securities to be included in such underwritten offering shall be subject to the provisions of this Section 5 if any other holder of Registrable Securities shall not be subject to the provisions of this Section 5 pursuant to the immediately preceding sentence.

 

Notwithstanding the foregoing, any discretionary waiver or termination of this lock-up provision by the Company or the underwriters with respect to any of the Stockholders shall apply to the other Stockholders as well, pro rata based upon the number of shares subject to such obligations.

 

The Company agrees, in connection with any underwritten offering made pursuant to a Registration Statement filed pursuant to Section 2, Section 3 or Section 4 not to effect any public sale or distribution of any common equity (or securities convertible into or exchangeable or exercisable for common equity) (other than pursuant to a registration statement on Form S-4, Form S-8 or any successor forms thereto relating to shares of Common Stock to be issued solely by the Company in connection with (i) any acquisition of another entity or business or (ii) a stock option or any other employee benefit or dividend reinvestment plan) for its own account, during the period beginning seven days prior to the launch of the underwritten offering and ending no later than the earlier of (i) 90 days following the closing date of such offering and (ii) such day (if any) as the Company and the managing underwriter or underwriters for such

 

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offering shall agree to designate for this purpose (which shall also apply equally to all Stockholders).

 

Notwithstanding the foregoing, any discretionary waiver or termination of this lock-up provision by the Company or the underwriters with respect to any of the Stockholders shall apply to the other Stockholders as well.

 

Section 6.                                     Registration Procedures.  If and whenever the Company is required to use its reasonable best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Section 2, Section 3 and Section 4 hereof, the Company shall effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall cooperate in the sale of the securities and shall, as expeditiously as possible:

 

(a)                                 Prepare and file with the SEC a Registration Statement or Registration Statements on such form which shall be available for the sale of the Registrable Securities by the holders thereof or the Company in accordance with the intended method or methods of distribution thereof, and use its reasonable best efforts to cause such Registration Statement to become effective and to remain effective as provided herein (including by means of a shelf registration pursuant to Rule 415 under the Securities Act if so requested and if the Company is then eligible to use such registration); provided, however, that before filing a Registration Statement or Prospectus or any amendments or supplements thereto (including documents that would be incorporated or deemed to be incorporated therein by reference), the Company shall furnish or otherwise make available to the Stockholders who are including Registrable Securities in such Registration Statement, their counsel and the managing underwriters, if any, copies of all such documents proposed to be filed, which documents will be subject to the reasonable review and comment of such counsel, and such other documents reasonably requested by such counsel, including any comment letter from the SEC, and, if requested by such counsel, provide such counsel reasonable opportunity to participate in the preparation of such Registration Statement and each Prospectus included therein and such other opportunities to conduct a reasonable investigation within the meaning of the Securities Act, including reasonable access to the Company’s books and records, officers, accountants and other advisors.  The Company shall not include any information relating to a Stockholder in any such Registration Statement or Prospectus or any amendments or supplements thereto (including such documents that, upon filing, would be incorporated or deemed to be incorporated by reference therein) to which the Stockholder (if such Registration Statement includes Registrable Securities of such Stockholder) shall object, in writing, on a timely basis, unless, in the opinion of the Company, the inclusion of such information is necessary to comply with applicable law.  No later than the second business day following the effective date of any Registration Statement, the Company shall file with the SEC, in accordance with Rule 424(b)(4) under the Securities Act, the final prospectus to be used in connection with sales pursuant to such Registration Statement. The Company shall use its reasonable best efforts to confirm that (i) no Registration Statement or Prospectus (nor any amendment or supplement to any Registration Statement or Prospectus) shall, upon filing with the SEC, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make any statements therein (in the case any Prospectus or any amendment or supplement thereto, in light of the circumstances under which they were made) not misleading and (ii) no issuer free writing prospectus relating to any Registration

 

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Statement shall include any information that conflicts with the information in such Registration Statement.

 

(b)                                 Prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective during the period provided herein and comply in all material respects with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; and cause the related Prospectus to be supplemented by any Prospectus supplement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of the securities covered by such Registration Statement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act.

 

(c)                                  Notify each selling holder of Registrable Securities and the managing underwriters, if any, promptly, and (if requested by any such Person) confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, and (v) of the happening of any event that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(d)                                 Use its reasonable best efforts to avoid the issuance of any order suspending the effectiveness of a Registration Statement or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, or, if issued, to obtain the withdrawal or lifting of any such order or suspension as promptly as practicable.

 

(e)                                  If requested by the managing underwriters, if any, or any of the holders of any Registrable Securities included in a Registration Statement, promptly include in a Prospectus supplement or post-effective amendment such information as the managing underwriters, if any, or such holder may reasonably request in order to permit the intended method of distribution of such securities (including information to reflect any transfer by such holder of any Registrable Securities, or of any securities convertible into (or exercisable or exchangeable for) any Registrable Securities, to any other Person that is (or in connection with such transfer, pursuant

 

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to Section 12(c), becomes) a Stockholder and to permit the sale by such transferee of such Registrable Securities pursuant to such Registration Statement) and make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received such request; provided, however, that the Company shall not be required to take any actions under this Section 6(e) that are not, in the opinion of counsel for the Company, in compliance with applicable law.

 

(f)                                   Furnish or make available to each selling holder of Registrable Securities, and each managing underwriter, if any, without charge, at least one conformed copy of the Registration Statement, the Prospectus and Prospectus supplements, if applicable, and each post-effective amendment thereto, including financial statements (but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits, unless requested in writing by such holder, counsel or underwriter).

 

(g)                                  Deliver to each selling holder of Registrable Securities, and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of Prospectus) and each amendment or supplement thereto as such Persons may reasonably request in connection with the distribution of the Registrable Securities; and the Company, subject to the last paragraph of this Section 6, hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any such amendment or supplement thereto.

 

(h)                                 Prior to any public offering of Registrable Securities, use its reasonable best efforts to register or qualify or cooperate with the selling holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or “Blue Sky” laws of such jurisdictions within the United States as any seller or underwriter reasonably requests in writing and to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and to take any other action that may be necessary or advisable to enable such holders of Registrable Securities to consummate the disposition of such Registrable Securities in such jurisdiction; provided, however, that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject.

 

(i)                                     Cooperate with the selling holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any legends) or issuance of Registrable Securities in book-entry form (not being subject to any legends) representing Registrable Securities to be sold after receiving written representations from each holder of such Registrable Securities that the Registrable Securities represented by the certificates so delivered by such holder will be transferred in accordance with the Registration Statement, and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, or holders may request at least two business days prior to any sale of Registrable Securities in a firm commitment public offering, but in any other such sale, within 10 business days prior to having to issue the securities.

 

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(j)                                    Use its reasonable best efforts to cause the Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities within the United States, except as may be required solely as a consequence of the nature of any selling holder’s business, in which case the Company will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals, as may be necessary to enable such selling holder or the underwriters, if any, to consummate the disposition of such Registrable Securities.

 

(k)                                 Upon the occurrence of any event contemplated by Section 6(c)(ii), Section 6(c)(iii), Section 6(c)(iv) or Section 6(c)(v) above, prepare as promptly as practicable a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(l)                                     Prior to the effective date of the Registration Statement relating to the Registrable Securities, provide a CUSIP number for the Registrable Securities.

 

(m)                             Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such Registration Statement from and after a date not later than the effective date of such Registration Statement.

 

(n)                                 Cause all shares of Registrable Securities covered by such Registration Statement to be authorized to be listed on any national securities exchange if any other shares of the particular class of Registrable Securities are at that time, or will be immediately following the offering, listed on such exchange.

 

(o)                                 Enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other actions reasonably requested by the holders of a majority of the Registrable Securities being sold in connection therewith (including those reasonably requested by the managing underwriters, if any) to expedite or facilitate the disposition of such Registrable Securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, (i) make such representations and warranties to the holders of such Registrable Securities and the underwriters, if any, with respect to the business of the Company and its subsidiaries, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers in underwritten offerings, and, if true, confirm the same if and when requested, (ii) use its reasonable best efforts to furnish to the holders of such Registrable Securities and the underwriters, if any, opinions and “negative assurance letters” of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and counsels to the selling holders of the Registrable Securities), addressed to each selling holder of Registrable Securities and each of the underwriters, if any, covering the matters

 

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customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such counsel and underwriters, (iii) use its reasonable best efforts to obtain “comfort” letters and updates thereof from the independent registered public accounting firm of the Company (and, if necessary, any other independent registered public accounting firms of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement) who have certified the financial statements included in such Registration Statement, addressed to each selling holder of Registrable Securities (unless such accountants shall be prohibited from so addressing such letters by applicable standards of the accounting profession) and each of the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in “comfort” letters in connection with underwritten offerings, (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures substantially to the effect set forth in Section 8 hereof with respect to all parties to be indemnified pursuant to said Section except as otherwise agreed by the Stockholders and (v) deliver such documents and certificates as may be reasonably requested by the holders of a majority of the Registrable Securities being sold, their counsel and the managing underwriters, if any, to evidence the continued validity of the representations and warranties made pursuant to Section 6(o)(i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company.  The above shall be done at each closing under such underwriting or similar agreement, or as and to the extent required thereunder.

 

(p)                                 Make available for inspection by a representative of the selling holders of Registrable Securities, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorneys or accountants retained by such selling holders or underwriter, at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such representative, underwriter, attorney or accountant in connection with such Registration Statement; provided, however, that any information that is determined in good faith by the Company in writing to be not generally publicly available at the time of delivery of such information shall be kept confidential by such Persons unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (ii) disclosure of such information, in the opinion of counsel to such Person, is required by law or required to correct a material misstatement in, or omission from, any Registration Statement or Prospectus that is not corrected by the Company as required hereby, (iii) disclosure of such information, in the opinion of counsel to such Person, is necessary or advisable to defend such Person in any litigation relating to any such disposition or proposed disposition of Registrable Securities, (iv) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Person or (v) such information becomes available to such Person from a source other than the Company and such source is not known by such Person to be bound by a confidentiality agreement with the Company.  In the case of a proposed disclosure pursuant to (i), (ii) or (iii) above, such Person shall use its reasonable best efforts to give the Company written notice of the proposed disclosure prior to such disclosure and, if requested by the Company, assist the Company in seeking to prevent or limit the proposed disclosure.  Without limiting the foregoing, no such information shall be used by such Person as

 

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the basis for any market transactions in securities of the Company or its subsidiaries in violation of law.

 

(q)                                 Cause its officers to use their reasonable best efforts to support the marketing of the Registrable Securities covered by the Registration Statement (including participation in “road shows”), taking into account the Company’s business needs.

 

(r)                                    Cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA; and

 

(s)                                   Otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, as soon as reasonably practicable, but not more than 45 days after the end of any 12-month period (or 90 days, if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in an underwritten public offering or (ii) if not sold to underwriters in such an offering, commencing on the first day of the Company’s first fiscal quarter commencing after the effective date of the Registration Statement, which statements shall cover said 12-month periods.

 

The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company in writing such information required in connection with such registration regarding such seller and the distribution of such Registrable Securities as the Company may, from time to time, reasonably request in writing and the Company may exclude from such registration the Registrable Securities of any seller who unreasonably fails to furnish such information within a reasonable time after receiving such request.

 

Each holder of Registrable Securities agrees if such holder has Registrable Securities covered by such Registration Statement that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 6(c)(ii), Section 6(c)(iii), Section 6(c)(iv) or Section 6(c)(v) hereof, such holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(k) hereof, or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus; provided, however that the Company shall extend the time periods under Section 2, Section 3 and Section 4 with respect to the length of time that the effectiveness of a Registration Statement must be maintained by the amount of time the holder is required to discontinue disposition of such securities.

 

Section 7.                                     Registration Expenses.  All fees and expenses incident to the performance of or compliance with this Agreement by the Company (including (i) all registration and filing fees (including fees and expenses (A) with respect to filings required to be made with FINRA and (B) of compliance with securities or Blue Sky laws, including any fees and disbursements of

 

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counsel for the underwriters in connection with Blue Sky qualifications of the Registrable Securities pursuant to Section 6(h), (ii) printing expenses (including, if applicable, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company (“DTC”) and of printing Prospectuses if the printing of Prospectuses is requested by the managing underwriters, if any, or by the holders of a majority of the Registrable Securities included in any Registration Statement), (iii) messenger, telephone and delivery expenses of the Company, (iv) fees and disbursements of counsel for the Company (including the expenses of any opinions required by this Agreement), (v) expenses of the Company incurred in connection with any road show, (vi) fees and disbursements of all independent registered public accounting firms referred to in Section 6(o)(iii) hereof (including the expenses of any “cold comfort” letters required by this Agreement) and any other persons, including special experts retained by the Company and (vii) reasonable fees of not more than one counsel for all of the holders participating in the offering; provided, however, that the Company shall be entitled to reimbursement for any registration and filing fees incurred by the Company in connection with the registration of Registrable Securities withdrawn by a Stockholder pursuant to Section 2(d) (unless such registration fees can be used in connection with the registration of other securities by the Company, including in connection with a future registration).  In addition, the Company shall bear all of its internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange on which similar securities issued by the Company are then listed and rating agency fees and the fees and expenses of any Person, including special experts, retained by the Company.

 

The Company shall not be required to pay (i) fees and disbursements of any counsel retained by any holder of Registrable Securities or by any underwriter (except as set forth in clauses Section 7(i)(B) and Section 7(vii)), (ii) any underwriter’s fees (including discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals) relating to the distribution of the Registrable Securities (other than with respect to Registrable Securities sold by the Company), or (iii) any other expenses of the holders of Registrable Securities not specifically required to be paid by the Company pursuant to the first paragraph of this Section 7.

 

Section 8.                                     Indemnification.

 

(a)                                 Indemnification by the Company.  The Company shall, and shall cause each of its subsidiaries to, without limitation as to time, indemnify and hold harmless, to the fullest extent permitted by law and on a joint and several basis, each holder of Registrable Securities whose Registrable Securities are covered by a Registration Statement or Prospectus, the officers, directors, partners, members, managers, shareholders, affiliates, accountants, attorneys, agents and employees of each of them, each Person who controls each such holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees of each such controlling person, each underwriter, if any, the officers, directors, partners, members, managers, shareholders, affiliates, accountants, attorneys, agents and employees of such underwriter and each Person who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) such underwriter (collectively, “Holder Indemnitees”),

 

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from and against any and all losses, claims, damages, liabilities, costs (including costs of preparation and reasonable attorneys’ fees and any legal or other fees or expenses incurred by such party in connection with any investigation or Proceeding), expenses, judgments, fines, penalties, charges and amounts paid in settlement (collectively, “Losses”), as incurred, arising out of or based upon any untrue statement (or alleged untrue statement) of a material fact contained in any Registration Statement, Prospectus, any amendment (including any post-effective amendment) or supplement to any Registration Statement or Prospectus, any filing made in connection with the qualification of the offering under the securities or other Blue Sky laws of any jurisdiction in which Registrable Securities are offered, or any other offering document (including any related 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 (in the case of any Prospectus, in light of the circumstances under which they were made) not misleading, or any violation by the Company of the Securities Act or of the Exchange Act, or any violation by the Company of this Agreement, and will reimburse each Holder Indemnitee 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 the Company 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 by any holder or underwriter, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such Registration Statement, Prospectus or other offering document in reliance upon and in conformity with written information furnished to the Company by such holder or underwriter expressly for inclusion in such Registration Statement, Prospectus or other offering document.  It is agreed that the indemnity agreement contained in this Section 8(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 the Company (which consent shall not be unreasonably withheld or delayed).  Such indemnity agreement shall remain in full force and effect regardless of any investigation made by or on behalf of any Holder Indemnitee and shall survive the transfer of Registrable Securities by any such Holder Indemnitee.

 

(b)                                 Indemnification by Holder of Registrable Securities.  In connection with any Registration Statement in which a holder of Registrable Securities includes Registrable Securities, such holder of Registrable Securities agrees to indemnify, to the fullest extent permitted by law, severally and not jointly, the Company, each other holder of Registrable Securities which includes Registrable Securities in such Registration Statement, their respective directors and officers and each Person who controls the Company and such holders (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) (collectively, “Company/Holder Indemnitees”), from and against all Losses arising out of or based on any untrue statement of a material fact contained in any such Registration Statement, Prospectus, or other offering document, or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, in light of the circumstances under which they were made) not misleading, and will reimburse each Company/Holder Indemnitee 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 extent, but only to the extent, that such untrue statement or omission is made in such Registration Statement, Prospectus, or other offering document in reliance upon and in conformity with written information furnished to the Company by such holder expressly for

 

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inclusion in such Registration Statement, Prospectus, or other offering document; provided, however, that the obligations of such holder 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); and provided, further, that the liability of each selling holder of Registrable Securities hereunder shall be limited to the net proceeds received by such selling holder from the sale of Registrable Securities giving rise to such indemnification obligation.  In addition, insofar as the foregoing indemnity relates to any such untrue statement or omission made in a preliminary Prospectus but eliminated or remedied in an amended or supplemented preliminary Prospectus on file with the SEC at the time the Registration Statement becomes effective, or in any amendment or supplement thereto at or prior to the pricing of the sale of the Registrable Securities giving rise to the indemnification obligation, and such new preliminary Prospectus or amendment or supplement thereto is delivered to the underwriter, the indemnity agreement in this Section 8(b) shall not inure to the benefit of any Person if a copy of such amended or supplemented preliminary Prospectus was not furnished to the Person asserting the Loss at or prior to the pricing of the sale of the Registrable Securities giving rise to the indemnification obligation.

 

(c)                                  Conduct of Indemnification Proceedings.  If any Person shall be entitled to indemnity hereunder (an “indemnified party”), such indemnified party shall give prompt notice to the party from which such indemnity is sought (the “indemnifying party”) of any claim or of the commencement of any Proceeding with respect to which such indemnified party seeks indemnification or contribution pursuant hereto; provided, however, that the delay or failure to so notify the indemnifying party shall not relieve the indemnifying party from any obligation or liability except (and only) to the extent that the indemnifying party has been prejudiced in defending the claim by such delay or failure.  The indemnifying party shall have the right, exercisable by giving written notice to an indemnified party promptly after the receipt of written notice from such indemnified party of such claim or Proceeding, to, unless in the indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, assume, at the indemnifying party’s expense, the defense of any such claim or Proceeding, with counsel reasonably satisfactory to such indemnified party; provided, however, that an indemnified party shall have the right to employ separate counsel in any such claim or Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless: (i) the indemnifying party agrees to pay such fees and expenses; or (ii) the indemnifying party fails promptly to assume, or in the event of a conflict of interest cannot assume, the defense of such claim or Proceeding or fails to employ counsel reasonably satisfactory to such indemnified party, in which case the indemnified party shall have the right to employ counsel and to assume the defense of such claim or proceeding; provided, further, however, that the indemnifying party shall not, in connection with any one such claim or Proceeding or separate but substantially similar or related claims or Proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one firm of attorneys (in addition to appropriate local counsel) at any time for all of the indemnified parties, or for fees and expenses that are not reasonable.  If, and so long as, the defense is assumed by the indemnifying party, such indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld, conditioned or delayed).  The indemnifying party shall not consent to entry of any judgment or

 

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enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release, in form and substance reasonably satisfactory to the indemnified party, from all liability in respect of such claim or litigation for which such indemnified party would be entitled to indemnification hereunder or that includes any admission of fault or culpability of such indemnified party.

 

(d)                                 Contribution.  If the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any Losses (other than in accordance with its terms), then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations.  The relative fault of such indemnifying party, on the one hand, and indemnified party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been taken by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 8(d), an indemnifying party that is a holder of Registrable Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds to the indemnifying party from the sale of the Registrable Securities sold in a transaction that resulted in Losses in respect of which contribution is sought in such proceeding pursuant to this Section 8(d), exceed the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission (including as a result of any indemnification obligation hereunder).  No person guilty of fraudulent misrepresentation (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.

 

(e)                                  The indemnity and contribution agreements contained in this Section 8 are in addition to any other liability that the indemnifying parties may otherwise have to the indemnified parties; provided that in no event shall any holder of Registrable Securities be liable to any indemnified parties with respect to any untrue statement or alleged untrue statement or omission or alleged omission in any Registration Statement, Prospectus or other offering document for any amount in excess of the amount by which the net proceeds to the indemnifying party from the sale of the Registrable Securities sold in the transaction that resulted in any liability, exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission (including as a result of any indemnification or contribution obligation hereunder).  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

 

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underwriting agreement shall control.

 

Section 9.                                     Rule 144; Rule 144A; Restriction Removal.

 

(a)                                 At all times after the effective date of the first registration statement filed by the Company under the Securities Act or the Exchange Act, the Company shall (i) file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner, (ii) take such further action as any holder of Registrable Securities may reasonably request, and (iii) furnish to each holder of Registrable Securities forthwith upon written request, (x) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (y) a copy of the most recent annual or quarterly report of the Company, and (z) such other reports and documents so filed by the Company as such holder may reasonably request in availing itself of Rule 144, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144.  Upon the request of any holder of Registrable Securities, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements.

 

(b)                                 At any time that the Company is not subject to the reporting requirements of the Exchange Act, each holder of Registrable Securities and each prospective holder of Registrable Securities that may consider acquiring Registrable Securities in reliance upon Rule 144A under the Securities Act (or any successor or similar rule then in force) (“Rule 144A”) shall have the right to request from the Company, and the Company will provide upon such request, such information regarding the Company and its business, assets and properties, if any, as is at the time required to be made available by the Company under the Rule 144A so as to enable such holder to transfer Registrable Securities to such prospective holder in reliance upon Rule 144A.

 

(c)                                  The Company shall, promptly upon the request of any holder of Registrable Securities (and, to the extent necessary, the delivery of such Registrable Securities to the transfer agent therefor), cause any legend or stop-transfer instructions with respect to restrictions on transfer under the Securities Act of such Registrable Securities to be removed or otherwise eliminated if (i) such Registrable Securities are registered pursuant to an effective Registration Statement, (ii) in connection with a sale transaction, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Securities may be made without registration under the Securities Act, (iii) such holder provides the Company reasonable assurances that the Securities have been or are being sold pursuant to, or can then be sold by such holder without restriction or limitation under, Rule 144, or (iv) such holder certifies in writing that such holder is not an Affiliate of the Company and either (A) a holding period (determined as provided in Rule 144(d)) of at least six months has elapsed since the acquisition of such Registrable Securities from the Company or an Affiliate of the Company and such holder will only sell the Registrable Securities in accordance with Rule 144 (including, as applicable the, public information requirement thereof) or pursuant to an effective Registration Statement, or (B) a holding period (determined as provided in Rule 144(d)) of at least one year has elapsed since the acquisition of such Registrable Securities from the Company or an Affiliate of the Company.  The Company shall be responsible for the fees and expenses of its transfer agent and DTC associated with the issuance of the Registrable Securities to the Stockholder and any legend or stop-transfer instruction removal or elimination in

 

22

 

accordance herewith.

 

Section 10.                              Underwritten Registrations.  If any offering pursuant to a Registration Statement filed pursuant to Section 2 or Section 3 is an underwritten offering, the Stockholders whose Registrable Securities are included in such underwritten offering shall have the right to jointly select the managing and other underwriters to administer the offering, subject to approval by the Company, not to be unreasonably withheld, conditioned or delayed.  The Company shall have the right to select the managing and other underwriters to administer any underwritten offering in connection with any Piggyback Registration.

 

No Person may participate in any underwritten offering hereunder unless such Person (i) agrees to sell the Registrable Securities it desires to have covered by the registration on the basis provided in any underwriting arrangements in customary form and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such customary underwriting arrangements; provided that such Person shall not be required to make any representations or warranties other than those related to title and ownership of shares and as to the accuracy and completeness of statements made in a Registration Statement, Prospectus or other offering document in reliance upon and in conformity with written information furnished to the Company or the managing underwriter by such Person expressly for inclusion therein or to undertake any indemnification or contribution obligations to the Company or the underwriters with respect thereto, except as otherwise provided in Section 8; provided, further, that such Person’s aggregate liability in respect of such representations and warranties, indemnification and contribution shall not exceed such Person’s net proceeds from the offering.

 

Section 11.                              Third Party Registration Rights.  The Company shall not grant any Person any registration rights with respect to shares of Common Stock or any other securities of the Company other than registration rights that will not adversely affect the rights of the Stockholders hereunder (including by limiting in any way the number of Registrable Securities that could be included in any Registration Statement pursuant to Rule 415), and shall not otherwise enter into any agreement that is inconsistent with the rights and priorities granted to the Stockholders hereunder.  Subject to the foregoing, nothing in this Agreement shall be deemed to prevent the Company from providing registration rights to any other Person on such terms as the board of directors of the Company deems desirable in its sole discretion.  The Company shall at no time register any shares of Common Stock or other securities held by any Person that do not constitute Registrable Securities or Other Securities.

 

Section 12.                              Miscellaneous.

 

(a)                                 Amendments, Waivers, Approvals and Consents.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Company and the holders of at least two-thirds of the Registrable Securities; provided, however, that any modification or amendment of this Agreement that would subject any Stockholder to differential treatment relative to the other Stockholders or that would in any manner impair or diminish, or otherwise have any adverse effect on, any of the rights or priorities of any Stockholder shall require the agreement of the

 

23

 

differentially treated or affected Stockholder.  Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by holders of at least a majority of the Registrable Securities being sold by such holders pursuant to such Registration Statement may not be given without the written consent of the Company and the holders of at least a majority of the Registrable Securities; provided, however, that any modification or amendment of this Agreement that would subject any Stockholder to adverse differential treatment relative to the other Stockholders shall require the agreement of the differentially treated Stockholder.  Any matter that hereunder expressly requires the approval, consent, agreement or request of, or selection by, the holders of Registrable Securities (or the holders of Registrable Securities included (or to be included) in a particular Registration Statement, Prospectus or underwritten offering) generally, as opposed to a matter that requires the approval, consent, agreement or request of, or selection by, a holder of Registrable Securities individually, shall require the approval, consent, agreement or request of, or selection by, as applicable, at least a majority of such Registrable Securities; provided that no such approval, consent, agreement, request or selection shall subject any Stockholder to differential treatment relative to the other Stockholders.  For purposes of this Section 12(a), whether the written consent of holders of at least a majority of the Registrable Securities has been obtained shall be calculated assuming the full exchange of Units and the corresponding shares of Class B Common Stock for Class A Common Stock.

 

(b)                                 Notices.  All notices required to be given hereunder shall be in writing and (a) shall be personally delivered, (b) transmitted by facsimile or telecommunications mechanism; provided that any notice so given is also mailed as provided in clause (c), or (c) mailed by certified mail, return receipt requested, or overnight delivery service with proof of receipt maintained, at the following address (or any other address that any such party may designate by written notice to the other parties):

 

If to the Company, addressed to:

 

Adeptus Health Inc.

2941 Lake Vista, Suite 200

Lewisville, Texas 75067
 Telephone: (972) 899-6666

Attention: Chief Financial Officer

 

With a copy (which shall not constitute notice) to:

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017
 Telephone: 212-455-2948

Facsimile:  212-455-2502
 Attention: Joseph H. Kaufman

 

24

 

If to the other Stockholders, to the address or facsimile number set forth on the signatures pages hereto.

 

Any such notice shall be deemed effective (i) if given by telecommunication, when transmitted to the applicable number or e-mail so specified in (or pursuant to) this Section 12(b) and an appropriate answerback is received or, if transmitted after 4:00 p.m. local time on a business day in the jurisdiction to which such notice is sent or at any time on a day that is not a business day in the jurisdiction to which such notice is sent, then on the immediately following business day, (ii) if given by mail, on the first business day in the jurisdiction to which such notice is sent following the date three days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, on the business day when actually received at such address or, if not received on a business day, on the business day immediately following such actual receipt.

 

(c)           Successors and Assigns; Stockholder Status.  This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties, including subsequent holders of Registrable Securities acquired, directly or indirectly, from the Stockholders.  The rights of each Stockholder hereunder, including the right to have the Company register Registrable Securities in accordance with the terms hereof, shall be automatically assignable by each Stockholder to any Person who is the transferee of such Registrable Securities, or the securities convertible into (or exercisable or exchangeable for) such Registrable Securities, to which such rights relate; provided, however, that such successor or assign shall not be entitled to such rights unless the successor or assign shall have executed and delivered to the Company an Addendum Agreement substantially in the form of Exhibit A hereto promptly following the acquisition of such Registrable Securities, in which event such successor or assign shall be deemed a Stockholder for purposes of this Agreement.  Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any Person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, remedy or claim under, in or in respect of this Agreement or any provision herein contained.

 

(d)           Counterparts.  This Agreement may be executed in two or more counterparts (which may be delivered by facsimile or other form of electronic transmission), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

(e)           Headings.  The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

(f)            Governing Law.  The provisions of this Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.

 

(g)           Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or

 

25

 

substantially the same result as that contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(h)           Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein, with respect to the registration rights granted by the Company with respect to Registrable Securities.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

(i)            Securities Held by the Company or its Subsidiaries.  Whenever the consent or approval of holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its subsidiaries shall not be counted in determining whether such consent or approval was given by the holders of such required percentage.

 

(j)            Term of Registration Rights.  The registration rights granted pursuant to this Agreement shall terminate with respect to a Stockholder on the date on which such Stockholder ceases to own Registrable Securities or securities which are convertible into or exchangeable for Registrable Securities, and upon such termination, the obligations of such Stockholder hereunder shall terminate; provided, however, that, as to such Stockholder, the indemnities, agreements, representations and warranties of the Company with respect to any registration effected hereunder prior to such termination will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of such Stockholder, or any representatives, officers, directors, partners managers, members or controlling persons thereof; and provided, further, that for the avoidance of doubt, any underwriter lock-up that a Stockholder has executed prior to a Stockholder’s termination in accordance with this clause shall remain in effect in accordance with its terms. With respect to any Stockholder that holds only Class B Common Stock, (A) such Stockholder shall have registration rights only under Section 3 of this Agreement (and not under Section 2 or Section 4) if, and so long as, (i) such Stockholder is not an Affiliate of the Company, (ii) such Stockholder, together with its Affiliates, holds less than one percent (1%) of the outstanding shares of Common Stock, and (iii) a Shelf Registration Statement or an Exchange Registration Statement is effective and available relating to the resale or delivery, as the case may be, of Class A Common Stock issuable upon the exchange of all of the Units and shares of Class B Common Stock held by such Stockholder, and (B) no such Stockholder that meets the requirements of clauses (i) and (ii) of this sentence shall be subject to Section 5 of this Agreement on or after the first year anniversary of the closing date of the IPO; provided, that, for the avoidance of doubt, any underwriter lock-up that such Stockholder has executed prior to such first year anniversary shall remain in effect in accordance with its terms.

 

(k)           Specific Performance.  The parties hereto recognize and agree that money damages may be insufficient to compensate the holders of any Registrable Securities for breaches by the Company of the terms hereof and, consequently, that the equitable remedy of specific performance of the terms hereof (without the necessity of posting a bond or other

 

26

 

security or proving actual damages) will be available in the event of any such breach.

 

(l)            Consent to Jurisdiction.  The parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in New York, and appropriate appellate courts therefrom, over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby, and each party hereby irrevocably agrees that all claims in respect of such dispute or proceeding may be heard and determined in such courts.  The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby brought in such court or any defense of inconvenient forum for the maintenance of such dispute.  Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  This consent to jurisdiction is being given solely for purposes of this Agreement and is not intended to, and shall not, confer consent to jurisdiction with respect to any other dispute in which a party to this Agreement may become involved.

 

Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action, or proceeding of the nature specified in the paragraph above by the mailing of a copy thereof in the manner specified by Section 12(b).

 

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

(m)          Rules of Construction.  Unless the context otherwise requires, (a) all references to Sections, Exhibits or Annexes are to Sections, Exhibits or Annexes contained in or attached to this Agreement, (b) words in the singular or plural include the singular and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include the masculine, feminine and neuter and (c) the use of the word “including” in this Agreement shall be by way of example rather than limitation.

 

27

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

 

	
 
    	
ADEPTUS   HEALTH INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Timothy L. Fielding
    
	
 
    	
Name:
    	
Timothy   L. Fielding
    
	
 
    	
Title:
    	
Chief   Financial Officer
    

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

STERLING PARTNERS:

 

SCP III AIV THREE-FCER, L.P.

By: SC Partners III, L.P., its general partner

 

 

	
By:
    	
 /s/ M. Avi Epstein
    	
 
    
	
Name:   M. Avi Epstein
    	
 
    
	
Title:   Authorized Signatory
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
SCP   III AIV THREE-FCER Conduit, L.P.
    	
 
    
	
By:   SC Partners III, L.P., its general partner
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   M. Avi Epstein
    	
 
    
	
Name:   M. Avi Epstein
    	
 
    
	
Title:   Authorized Signatory
    	
 
    

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
THOMAS   S. HALL
    
	
 
    
	
 
    
	
By:
    	
/s/   Thomas S. Hall
    	
 
    
	
Name:   Thomas S. Hall
    	
 
    

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
GRAHAM   B. CHERRINGTON
    
	
 
    
	
 
    
	
By:
    	
/s/   Graham B. Cherrington
    	
 
    
	
Name:   Graham B. Cherrington
    	
 
    

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
TIMOTHY   L. FIELDING
    
	
 
    
	
 
    
	
By:
    	
/s/   Timothy L. Fielding
    	
 
    
	
Name:   Timothy L. Fielding
    	
 
    

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
ANDREW   M. JORDAN
    
	
 
    
	
 
    
	
By:
    	
/s/   Andrew M. Jordan
    	
 
    
	
Name:   Andrew M. Jordan
    	
 
    

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
TRACI   A. BOWEN
    
	
 
    
	
 
    
	
By:
    	
/s/   Traci A. Bowen
    	
 
    
	
Name:   Traci A. Bowen
    	
 
    

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
JAMES   M MUZZARELLI
    
	
 
    
	
 
    
	
By:
    	
/s/   James M. Muzzarelli
    	
 
    
	
Name:   James M. Muzzarelli
    	
 
    

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
GREGORY   W. SCOTT
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Gregory W. Scott
    	
 
    
	
Name:   Gregory W. Scott
    	
 
    
			

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
RONALD   L. TAYLOR
    
	
 
    
	
 
    
	
By:   
    	
/s/   Ronald L. Taylor
    	
 
    
	
Name:   Ronald L. Taylor
    	
 
    

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
JEFFREY   S. VENDER
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Jeffrey S. Vender
    	
 
    
	
Name:   Jeffrey S. Vender
    	
 
    
			

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
LAWRENCE   BUCKELEW
    
	
 
    
	
 
    
	
By:
    	
/s/   Lawrence Buckelew
    	
 
    
	
Name:   Lawrence Buckelew
    	
 
    

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
MICHAEL   R. COREY
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Michael R. Corey
    	
 
    
	
Name:   Michael R. Corey
    	
 
    
			

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
TIMOTHY   M. MUELLER
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Timothy M. Mueller
    	
 
    
	
Name:   Timothy M. Mueller
    	
 
    
			

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
DAVID   PYLE
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:   
    	
/s/   David Pyle
    	
 
    
	
Name:   David Pyle
    	
 
    
			

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
HEATHER L. WEIMER
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Heather L. Weimer
    	
 
    
	
Name:   Heather L. Weimer
    	
 
    
			

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
LAWRENCE   J. WORLEY
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Lawrence J. Worley
    	
 
    
	
Name:   Lawrence J. Worley
    	
 
    
			

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
STEPHEN   D. FARBER TRUST UTD AUGUST 18, 2000
    
	
 
    
	
 
    
	
By:
    	
/s/   Stephen D. Farber
    	
 
    
	
Name:   Stephen D. Farber
    	
 
    
	
Time:   Trustee
    	
 
    

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
COVERT   FAMILY LIMITED PARTNERSHIP,
    	
 
    
	
A   Texas limited partnership
    	
 
    
	
 
    	
 
    
	
By:
    	
Covert   Operations, LLC
    	
 
    
	
 
    	
A   Texas Limited liability company
    	
 
    
	
 
    	
Its   General Partner
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Larry Richard Covert
    	
 
    
	
Name:   Larry Richard Covert, Manager
    	
 
    
				

 

[Adeptus — Signature Page to the Registration Rights Agreement]

 

 

	
5-N   INVESTMENTS, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   John Novak
    	
 
    
	
Name:   John Novak
    	
 
    
	
Time:   Manager
    	
 
    
			

 

 

EXHIBIT A

ADDENDUM AGREEMENT

 

This Addendum Agreement is made this        day of            , 20      , by and between                                                                    (the “New Stockholder”) and Adeptus Health Inc. (the “Company”), pursuant to a Registration Rights Agreement dated as of [·], 2014 (as the same may be amended from time to time, the “Agreement”), between and among the Company and the Stockholders. Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

 

WITNESSETH:

 

WHEREAS, the Company has agreed to provide registration rights with respect to the Registrable Securities as set forth in the Agreement; and

 

WHEREAS, the New Stockholder has acquired Registrable Securities directly or indirectly from a Stockholder; and

 

WHEREAS, the Company and the Stockholders have required in the Agreement that all persons desiring registration rights must enter into an Addendum Agreement binding the New Stockholder to the Agreement to the same extent as if it were an original party thereto;

 

NOW, THEREFORE, in consideration of the mutual promises of the parties, the New Stockholder acknowledges that it has received and read the Agreement and that the New Stockholder shall be bound by, and shall have the benefit of, all of the terms and conditions set out in the Agreement to the same extent as if it were an original party to the Agreement and shall be deemed to be a Stockholder thereunder.

 

	
 
    	
 
    
	
 
    	
New   Stockholder
    

 

 

Address (for notices pursuant to Section 12(b) of the Agreement):

 

 

 

AGREED TO on behalf of ADEPTUS HEALTH INC. pursuant to Section 12(c) of the Agreement.

 

	
 
    	
ADEPTUS   HEALTH INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:Exhibit 10.3

 

TAX RECEIVABLE AGREEMENT

 

among

 

ADEPTUS HEALTH INC.

 

and

 

THE PERSONS NAMED HEREIN

 

Dated as of June 25, 2014

 

 

TABLE OF CONTENTS

 

	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE I DEFINITIONS
    	
4
    
	
 
    	
 
    
	
Section 1.1
    	
Definitions
    	
4
    
	
 
    	
 
    
	
ARTICLE II DETERMINATION OF   CERTAIN REALIZED TAX BENEFIT
    	
10
    
	
 
    	
 
    
	
Section 2.1
    	
Basis Adjustment
    	
10
    
	
Section 2.2
    	
Tax Benefit Schedule
    	
11
    
	
Section 2.3
    	
Procedures, Amendments
    	
11
    
	
 
    	
 
    
	
ARTICLE III TAX BENEFIT   PAYMENTS
    	
13
    
	
 
    	
 
    
	
Section 3.1
    	
Payments
    	
13
    
	
Section 3.2
    	
No Duplicative Payments
    	
13
    
	
Section 3.3
    	
Pro Rata Payments; Coordination of Benefits
    	
14
    
	
 
    	
 
    
	
ARTICLE IV TERMINATION
    	
14
    
	
 
    	
 
    
	
Section 4.1
    	
Early Termination and Breach of Agreement
    	
14
    
	
Section 4.2
    	
Early Termination Notice
    	
15
    
	
Section 4.3
    	
Payment upon Early Termination
    	
15
    
	
 
    	
 
    
	
ARTICLE V SUBORDINATION AND   LATE PAYMENTS
    	
16
    
	
 
    	
 
    
	
Section 5.1
    	
Subordination
    	
16
    
	
Section 5.2
    	
Late Payments by the Corporate Taxpayer
    	
16
    
	
 
    	
 
    
	
ARTICLE VI NO DISPUTES;   CONSISTENCY; COOPERATION
    	
16
    
	
 
    	
 
    
	
Section 6.1
    	
Participation in the Corporate Taxpayer’s and AHLLC’s Tax   Matters
    	
16
    
	
Section 6.2
    	
Consistency
    	
16
    
	
Section 6.3
    	
Cooperation
    	
17
    
	
 
    	
 
    
	
ARTICLE VII MISCELLANEOUS
    	
17
    
	
 
    	
 
    
	
Section 7.1
    	
Notices
    	
17
    
	
Section 7.2
    	
Counterparts
    	
18
    
	
Section 7.3
    	
Entire Agreement; No Third Party Beneficiaries
    	
18
    
	
Section 7.4
    	
Governing Law
    	
18
    
	
Section 7.5
    	
Severability
    	
18
    
	
Section 7.6
    	
Successors; Assignment; Amendments; Waivers
    	
19
    
	
Section 7.7
    	
Titles and Subtitles
    	
19
    
	
Section 7.8
    	
Resolution of Disputes
    	
19
    
	
Section 7.9
    	
Reconciliation
    	
20
    
	
Section 7.10
    	
Withholding
    	
21
    
	
Section 7.11
    	
Admission of the Corporate Taxpayer into a Consolidated
    	
 
    

 

i

 

	
 
    	
Group; Transfers of Corporate Assets
    	
21
    
	
Section 7.12
    	
Confidentiality
    	
22
    
	
Section 7.13
    	
Change in Law
    	
22
    
	
Section 7.14
    	
LLC Agreement
    	
23
    

 

ii

 

TAX RECEIVABLE AGREEMENT (EXCHANGES)

 

This TAX RECEIVABLE AGREEMENT (EXCHANGES) (this “Agreement”), dated as of June 25, 2014, is hereby entered into by and among Adeptus Health Inc., a Delaware corporation (the “Corporate Taxpayer”) and each of the persons from time to time party hereto (the “TRA Parties”).

 

RECITALS

 

WHEREAS, certain TRA Parties directly or indirectly hold limited liability company units (the “Units”) in Adeptus Health, LLC, a Delaware limited liability company (“AHLLC”), which is classified as a partnership for United States federal income tax purposes;

 

WHEREAS, the Corporate Taxpayer is the managing member of AHLLC, and holds and will hold, directly and/or indirectly, Units;

 

WHEREAS, a TRA Party holds stock of SCP III AIV Three-FCER Blocker, Inc., a Delaware corporation (the “Sterling Corporate Member”), which is classified as a corporation for United States federal income tax purposes;

 

WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated as of June 24, 2014, among the Corporate Taxpayer and the parties named therein, the Sterling Corporate Member will merge with and into the Corporate Taxpayer (the “Merger”);

 

WHEREAS, the Units held by the TRA Parties may be exchanged for Class A common stock (the “Class A Shares”) of the Corporate Taxpayer, subject to the provisions of the LLC Agreement (as defined below);

 

WHEREAS, AHLLC and each of its direct and indirect Subsidiaries (as defined below) treated as a partnership for United States federal income tax purposes currently have and will have in effect an election under Section 754 of the United States Internal Revenue Code of 1986, as amended (the “Code”), for each Taxable Year (as defined below) in which (i) a transfer (including a transfer by merger or otherwise by operation of law) or (ii) a deemed transfer for U.S. federal income tax purposes (including pursuant to Section 707(a) of the Code) of Units to the Corporate Taxpayer from the TRA Parties or the Sterling Corporate Member (any such transfer, an “Exchange”) occurs;

 

WHEREAS, the income, gain, loss, expense and other Tax (as defined below) items of the Corporate Taxpayer may be affected by (i) the Basis Adjustments (as defined below) and (ii) the Imputed Interest (as defined below);

 

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the effect of the Basis Adjustments and Imputed Interest on the liability for Taxes of the Corporate Taxpayer;

 

WHEREAS, Exchanges by the TRA Parties and by the Sterling Corporate Member, and payments in respect of Tax savings related to such Exchanges, will result in Tax savings for the Corporate Taxpayer;

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1                                    Definitions. As used in this Agreement, the terms set forth in this Article I shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).

 

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.

 

“Agreed Rate” means LIBOR plus 100 basis points.

 

“Agreement” is defined in the Recitals of this Agreement.

 

“Amended Schedule” is defined in Section 2.3(b) of this Agreement.

 

“Basis Adjustment” means the adjustment to the tax basis of a Reference Asset under Sections 732, 734(b) and 1012 of the Code (in situations where, as a result of one or more Exchanges, AHLLC becomes an entity that is disregarded as separate from its owner for United States federal income tax purposes) or under Sections 734(b), 743(b) and 754 of the Code (in situations where, following an Exchange, AHLLC remains in existence as an entity for United States federal income tax purposes) and, in each case, comparable sections of state and local tax laws, as a result of an Exchange and the payments made pursuant to this Agreement.  The amount of any Basis Adjustment resulting from an Exchange of one or more Units shall be determined without regard to any Pre-Exchange Transfer of such Units (or interests in a predecessor of AHLLC) and as if any such Pre-Exchange Transfer had not occurred.

 

A “Beneficial Owner” of a security is a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares: (i) voting power, which includes the power to vote, or to direct the voting of, such security and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security.  The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings.

 

“Board” means the Board of Directors of the Corporate Taxpayer.

 

“Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of New York shall not be regarded as a Business Day.

 

“Change of Control” means the occurrence of any of the following events:

 

 

(i)                                     any Person or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Securities and Exchange Act of 1934, or any successor provisions thereto (excluding a group of Persons which includes one or more Affiliates of Sterling Partners), is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporate Taxpayer representing more than 50% of the combined voting power of the Corporate Taxpayer’s then outstanding voting securities; or

 

(ii)                                  the following individuals cease for any reason to constitute a majority of the number of directors of the Corporate Taxpayer then serving: individuals who, on the IPO Date, constitute the Board and any new director whose appointment or election by the Board or nomination for election by the Corporate Taxpayer’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the IPO Date or whose appointment, election or nomination for election was previously so approved or recommended by the directors referred to in this clause (ii); or

 

(iii)                               there is consummated a merger or consolidation of the Corporate Taxpayer with any other corporation or other entity, and, immediately after the consummation of such merger or consolidation, either (x) the Board immediately prior to the merger or consolidation does not constitute at least a majority of the board of directors of the company surviving the merger or, if the surviving company is a Subsidiary, the ultimate parent thereof, or (y) the voting securities of the Corporate Taxpayer immediately prior to such merger or consolidation do not continue to represent or are not converted into more than 50% of the combined voting power of the then outstanding voting securities of the Person resulting from such merger or consolidation or, if the surviving company is a Subsidiary, the ultimate parent thereof; or

 

(iv)                              the shareholders of the Corporate Taxpayer approve a plan of complete liquidation or dissolution of the Corporate Taxpayer or there is consummated an agreement or series of related agreements for the sale, lease or other disposition, directly or indirectly, by the Corporate Taxpayer of all or substantially all of the Corporate Taxpayer’s assets, other than such sale or other disposition by the Corporate Taxpayer of all or substantially all of the Corporate Taxpayer’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by shareholders of the Corporate Taxpayer in substantially the same proportions as their ownership of the Corporate Taxpayer immediately prior to such sale.

 

Notwithstanding the foregoing, except with respect to clause (ii) and clause (iii)(x) above, a “Change of Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of

 

 

the shares of the Corporate Taxpayer immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in, and own substantially all of the shares of, an entity which owns all or substantially all of the assets of the Corporate Taxpayer immediately following such transaction or series of transactions.

 

“Class A Shares” is defined in the Recitals of this Agreement.

 

“Code” is defined in the Recitals of this Agreement.

 

“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

“Corporate Taxpayer” is defined in the Recitals of this Agreement.

 

“Corporate Taxpayer Return” means the federal and/or state and/or local Tax Return, as applicable, of the Corporate Taxpayer filed with respect to Taxes of any Taxable Year.

 

“Cumulative Net Realized Tax Benefit” for a Taxable Year means the cumulative amount of Realized Tax Benefits for all Taxable Years of the Corporate Taxpayer, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period.  The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined based on the most recent Tax Benefit Schedules or Amended Schedules, if any, in existence at the time of such determination.

 

“Default Rate” means LIBOR plus 500 basis points.

 

“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state, foreign or local tax law, as applicable, or any other event (including the execution of IRS Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax.

 

“Dispute” has the meaning set forth in Section 7.8(a) of this Agreement.

 

“Early Termination Date” means the date of an Early Termination Notice for purposes of determining the Early Termination Payment.

 

“Early Termination Effective Date” is defined in Section 4.2 of this Agreement.

 

“Early Termination Notice” is defined in Section 4.2 of this Agreement.

 

“Early Termination Schedule” is defined in Section 4.2 of this Agreement.

 

“Early Termination Payment” is defined in Section 4.3(b) of this Agreement.

 

“Early Termination Rate” means the lesser of (i) 6.5% per annum, compounded annually, and (ii) LIBOR plus 100 basis points.

 

 

“Exchange” is defined in the Recitals of this Agreement. For the avoidance of doubt, the following transactions shall be treated as Exchanges: (i) the transfer of Units from the Sterling Corporate Member to the Corporate Taxpayer by reason of the Merger and (ii) the distribution of cash to the members of AHLLC on or around the date of the IPO, which will be treated for U.S. federal income tax purposes, in whole or in part, as a deemed sale of partnership interests in AHLLC to the Corporate Taxpayer pursuant to Section 707(a) of the Code.

 

“Exchange Basis Schedule” is defined in Section 2.1 of this Agreement.

 

“Exchange Date” means the date of any Exchange, including the date of the Merger.

 

“Exchange Notice” shall have the meaning set forth in the LLC Agreement.

 

“Expert” is defined in Section 7.9 of this Agreement.

 

“Hypothetical Tax Liability”  means, with respect to any Taxable Year, the liability for Taxes of (i) the Corporate Taxpayer and (ii) without duplication, AHLLC, but only with respect to Taxes imposed on AHLLC and allocable to the Corporate Taxpayer or to the other members of the consolidated group of which the Corporate Taxpayer is the parent, in each case using the same methods, elections, conventions and similar practices used on the relevant Corporate Taxpayer Return, but (a) using the Non-Stepped Up Tax Basis as reflected on the Exchange Basis Schedule including amendments thereto for the Taxable Year and (b) excluding any deduction attributable to Imputed Interest for the Taxable Year.  For the avoidance of doubt, Hypothetical Tax Liability shall be determined without taking into account the carryover or carryback of any Tax item (or portions thereof) that is attributable to the Basis Adjustment or Imputed Interest, as applicable.

 

“Imputed Interest” in respect of a TRA Party shall mean any interest imputed under Section 1272, 1274 or 483 or other provision of the Code and any similar provision of state and local tax law with respect to the Corporate Taxpayer’s payment obligations in respect of such TRA Party under this Agreement.

 

“IPO” means the initial public offering of Class A Shares by the Corporate Taxpayer.

 

“IPO Date” means the closing date of the IPO.

 

“IRS” means the United States Internal Revenue Service.

 

“LIBOR” means during any period, an interest rate per annum equal to the one-year LIBOR reported, on the date two days prior to the first day of such period, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBOR01” or by any other publicly available source of such market rate) for London interbank offered rates for United States dollar deposits for such period.

 

“LLC Agreement” means, with respect to AHLLC, the Amended and Restated Limited Liability Company Agreement of AHLLC, dated on or about the date hereof.

 

 

“Market Value” shall mean the closing price of the Class A Shares on the applicable Exchange Date on the national securities exchange or interdealer quotation system on which such Class A Shares are then traded or listed, as reported by the Wall Street Journal; provided, that if the closing price is not reported by the Wall Street Journal for the applicable Exchange Date, then the Market Value shall mean the closing price of the Class A Shares on the Business Day immediately preceding such Exchange Date on the national securities exchange or interdealer quotation system on which such Class A Shares are then traded or listed, as reported by the Wall Street Journal; provided, further, that if the Class A Shares are not then listed on a national securities exchange or interdealer quotation system, “Market Value” shall mean the cash consideration paid for Class A Shares, or the fair market value of the other property delivered for Class A Shares, as determined by the Board in good faith.

 

“Material Objection Notice” has the meaning set forth in Section 4.2 of this Agreement.

 

“Non-Stepped Up Tax Basis” means, with respect to any Reference Asset at any time, the Tax basis that such asset would have had at such time if no Basis Adjustments had been made.

 

“Objection Notice” has the meaning set forth in Section 2.3(a) of this Agreement.

 

“Payment Date” means any date on which a payment is required to be made pursuant to this Agreement.

 

“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

 

“Pre-Exchange Transfer” means any transfer (including upon the death of a Member) or distribution (or deemed distribution) in respect of one or more Units (or interests in a predecessor of AHLLC) (i) that occurs prior to an Exchange of such Units, and (ii) to which Section 743(b) or 734(b) of the Code applies.  Pre-Exchange Transfers include, but are not limited to, (i) the acquisition of interests in the predecessor of AHLLC by First Choice AIV Holding LLC pursuant to the Securities Purchase Agreement dated September 30, 2011, (ii) the transfers or distributions of Units on or around the date hereof among First Choice AIV Holding LLC, SCP III AIV THREE-FCER, LP and the Sterling Corporate Member and (iii) the transfer of Units from the Sterling Corporate Member to the Corporate Taxpayer pursuant to the Merger.

 

“Realized Tax Benefit” means, for a Taxable Year, the excess, if any, of the Hypothetical Tax Liability over the actual liability for Taxes of (i) the Corporate Taxpayer and (ii) without duplication, AHLLC, but only with respect to Taxes imposed on AHLLC and allocable to the Corporate Taxpayer or to the other members of the consolidated group of which the Corporate Taxpayer is the parent for such Taxable Year.  If all or a portion of the actual liability for such Taxes for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

 

 

“Realized Tax Detriment” means, for a Taxable Year, the excess, if any, of the actual liability for Taxes of (i) the Corporate Taxpayer and (ii) without duplication, AHLLC, but only with respect to Taxes imposed on AHLLC and allocable to the Corporate Taxpayer or to the other members of the consolidated group of which the Corporate Taxpayer is the parent for such Taxable Year, over the Hypothetical Tax Liability for such Taxable Year.  If all or a portion of the actual liability for such Taxes for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Detriment unless and until there has been a Determination.

 

“Reconciliation Dispute” has the meaning set forth in Section 7.9 of this Agreement.

 

“Reconciliation Procedures” has the meaning set forth in Section 2.3(a) of this Agreement.

 

“Reference Asset” means an asset that is held by AHLLC, or by any of its direct or indirect Subsidiaries treated as a partnership or disregarded entity (but only if such indirect Subsidiaries are held only through Subsidiaries treated as partnerships or disregarded entities) for purposes of the applicable Tax, at the time of an Exchange.  A Reference Asset also includes any asset that is “substituted basis property” under Section 7701(a)(42) of the Code with respect to a Reference Asset.

 

“Schedule” means any of the following: (i) an Exchange Basis Schedule, (ii) a Tax Benefit Schedule, or (iii) the Early Termination Schedule.

 

“Senior Obligations” is defined in Section 5.1 of this Agreement.

 

“Sterling Corporate Member” is defined in the Recitals of this Agreement.

 

“Subsidiaries” means, with respect to any Person, as of any date of determination, any other Person as to which such Person, owns, directly or indirectly, or otherwise controls more than 50% of the voting power or other similar interests or the sole general partner interest or managing member or similar interest of such Person.

 

“Subsidiary Stock” means any stock or other equity interest in any subsidiary entity of AHLLC that is treated as a corporation for United States federal income tax purposes.

 

“Tax Benefit Payment” is defined in Section 3.1(b) of this Agreement.

 

“Tax Benefit Schedule” is defined in Section 2.2 of this Agreement.

 

“Tax Return” means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.

 

“Taxable Year” means a taxable year of the Corporate Taxpayer as defined in Section 441(b) of the Code or comparable section of state or local tax law, as applicable (and,

 

 

therefore, for the avoidance of doubt, may include a period of less than 12 months for which a Tax Return is made), ending on or after the IPO Date.

 

“Taxes” means any and all United States federal, state, local and foreign taxes, assessments or similar charges that are based on or measured with respect to net income or profits, and any interest related to such Tax.

 

“Taxing Authority” shall mean any domestic, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.

 

“TRA Party” is defined in the Recitals of this Agreement.

 

“Treasury Regulations” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.

 

“Units” is defined in the Recitals of this Agreement.

 

“Valuation Assumptions” shall mean, as of an Early Termination Date, the assumptions that in each Taxable Year ending on or after such Early Termination Date, (1) the Corporate Taxpayer will have taxable income sufficient to fully utilize (i) the deductions arising from the Basis Adjustments and the Imputed Interest during such Taxable Year or future Taxable Years (including, for the avoidance of doubt, Basis Adjustments and Imputed Interest that would result from future Tax Benefit Payments that would be paid in accordance with the Valuation Assumptions) in which such deductions would become available and (ii) any loss carryovers generated by deductions arising from Basis Adjustments or Imputed Interest that are available as of the date of such Early Termination Date, subject to all applicable limitations on the use of such loss carryovers, (2) the United States federal, state and local income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law as in effect on the Early Termination Date, (3) any non-amortizable assets (other than any Subsidiary Stock) will be disposed of on the fifteenth anniversary of the applicable Basis Adjustment and any short-term investments will be disposed of 12 months following the Early Termination Date; provided, that in the event of a Change of Control, such non-amortizable assets shall be deemed disposed of at the time of sale of the relevant asset (if earlier than such fifteenth anniversary), (4) any Subsidiary Stock will never be disposed of and (5) if, at the Early Termination Date, there are Units that have not been Exchanged, then each such Unit is Exchanged for the Market Value of the Class A Shares and the amount of cash that would be transferred if the Exchange occurred on the Early Termination Date.

 

ARTICLE II

 

DETERMINATION OF CERTAIN REALIZED TAX BENEFIT

 

Section 2.1                                    Basis Adjustment. Within ninety (90) calendar days after the filing of the United States federal income tax return of the Corporate Taxpayer for each Taxable Year

 

 

in which any Exchange has been effected (including the Taxable Year of the Merger), the Corporate Taxpayer shall deliver to each TRA Party a schedule (the “Exchange Basis Schedule”) that shows, in reasonable detail necessary to perform the calculations required by this Agreement (i) the Non-Stepped Up Tax Basis of the Reference Assets in respect of such TRA Party as of each applicable Exchange Date, (ii) the Basis Adjustment with respect to the Reference Assets in respect of such TRA Party as a result of the Exchanges effected in such Taxable Year by such TRA Party, calculated in the aggregate, (iii) the period (or periods) over which the Reference Assets in respect of such TRA Party are amortizable and/or depreciable and (iv) the period (or periods) over which each Basis Adjustment in respect of such TRA Party is amortizable and/or depreciable.

 

Section 2.2                                    Tax Benefit Schedule.

 

(a)                                 Tax Benefit Schedule.  Within ninety (90) calendar days after the filing of the United States federal income tax return of the Corporate Taxpayer for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment in respect of such TRA Party, the Corporate Taxpayer shall provide to such TRA Party a schedule showing, in reasonable detail, the calculation of the Tax Benefit Payment in respect of such TRA Party for such Taxable Year (a “Tax Benefit Schedule”).  Each Tax Benefit Schedule will become final as provided in Section 2.3(a) and may be amended as provided in Section 2.3(b) (subject to the procedures set forth in Section 2.3(b)).

 

(b)                                 Applicable Principles.  Subject to Section 3.3(a), the Realized Tax Benefit or Realized Tax Detriment for each Taxable Year is intended to measure the decrease or increase in the actual liability for Taxes of the Corporate Taxpayer for such Taxable Year attributable to the Basis Adjustments and Imputed Interest, determined using a “with and without” methodology. For the avoidance of doubt, the actual liability for Taxes will take into account the deduction of the portion of the Tax Benefit Payment that must be accounted for as interest under the Code.  Carryovers or carrybacks of any Tax item attributable to the Basis Adjustments and Imputed Interest shall be considered to be subject to the rules of the Code and the Treasury Regulations or the appropriate provisions of U.S. state and local income and franchise tax law, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type.  If a carryover or carryback of any Tax item includes a portion that is attributable to the Basis Adjustment or Imputed Interest and another portion that is not, such portions shall be considered to be used in accordance with the “with and without” methodology.  The parties agree that (i) all Tax Benefit Payments attributable to the Basis Adjustments in respect of a taxable Exchange (other than amounts accounted for as interest under the Code) will be treated as subsequent upward purchase price adjustments that have the effect of creating additional Basis Adjustments to Reference Assets for the Corporate Taxpayer in the year of payment, and (ii) as a result, such additional Basis Adjustments will be incorporated into the current year calculation and into future year calculations, as appropriate.

 

Section 2.3                                    Procedures, Amendments.

 

(a)                                  Procedure. Every time the Corporate Taxpayer delivers to a TRA Party an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.3(b), and any Early Termination Schedule or amended Early Termination Schedule,

 

 

the Corporate Taxpayer shall also (x) deliver to such TRA Party schedules, valuation reports, if any, and work papers, as determined by the Corporate Taxpayer or requested by such TRA Party,  providing reasonable detail regarding the preparation of the Schedule and (y) allow such TRA Party reasonable access at no cost to the appropriate representatives at the Corporate Taxpayer, as determined by the Corporate Taxpayer or requested by such TRA Party, in connection with a review of such Schedule.  Without limiting the application of the preceding sentence, each time the Corporate Taxpayer delivers to a TRA Party a Tax Benefit Schedule, in addition to the Tax Benefit Schedule duly completed, the Corporate Taxpayer shall deliver to such TRA Party the Corporate Taxpayer Return, the reasonably detailed calculation by the Corporate Taxpayer of the applicable Hypothetical Tax Liability in respect of such TRA Party, the reasonably detailed calculation by the Corporate Taxpayer of the actual Tax liability, as well as any other work papers as determined by the Corporate Taxpayer or requested by such TRA Party, provided that the Corporate Taxpayer shall be entitled to redact any information that it reasonably believes is unnecessary for purposes of determining the items in the applicable Schedule or amendment thereto.  An applicable Schedule or amendment thereto shall become final and binding on all parties thirty (30) calendar days from the first date on which the TRA Party has received the applicable Schedule or amendment thereto unless such TRA Party (i) within thirty (30) calendar days after receiving an applicable Schedule or amendment thereto, provides the Corporate Taxpayer with notice of a material objection to such Schedule (“Objection Notice”) made in good faith or (ii) provides a written waiver of such right of any Objection Notice within the period described in clause (i) above, in which case such Schedule or amendment thereto becomes binding on the date the waiver is received by the Corporate Taxpayer.  If the Corporate Taxpayer and any objecting TRA Party, for any reason, are unable to successfully resolve the issues raised in the Objection Notice within thirty (30) calendar days after receipt by the Corporate Taxpayer of an Objection Notice, the Corporate Taxpayer and such TRA Party shall employ the reconciliation procedures as described in Section 7.9 of this Agreement (the “Reconciliation Procedures”).

 

(b)                                 Amended Schedule. The applicable Schedule for any Taxable Year may be amended from time to time by the Corporate Taxpayer (i) in connection with a Determination affecting such Schedule, (ii) to correct inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to a TRA Party, (iii) to comply with the Expert’s determination under the Reconciliation Procedures, (iv) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or carryforward of a loss or other tax item to such Taxable Year, (v) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year, or (vi) to adjust an applicable Exchange Basis Schedule to take into account payments made pursuant to this Agreement (any such Schedule, an “Amended Schedule”).  The Corporate Taxpayer shall provide an Amended Schedule to each TRA Party within thirty (30) calendar days of the occurrence of an event referenced in clauses (i) through (vi) of the preceding sentence.

 

 

ARTICLE III

 

TAX BENEFIT PAYMENTS

 

Section 3.1                                    Payments.

 

(a)                                 Payments. Within five (5) calendar days after a Tax Benefit Schedule delivered to a TRA Party becomes final in accordance with Section 2.3(a), the Corporate Taxpayer shall pay such TRA Party for such Taxable Year the Tax Benefit Payment determined pursuant to Section 3.1(b).  Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to the bank account previously designated by such TRA Party to the Corporate Taxpayer or as otherwise agreed by the Corporate Taxpayer and such TRA Party.  For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including, without limitation, federal estimated income tax payments.  Notwithstanding anything herein to the contrary, at the election of a TRA Party specified in the Exchange Notice for the applicable Exchange, the aggregate Tax Benefit Payments in respect of such Exchange (other than amounts accounted for as interest under the Code) shall not exceed 50% of the fair market value of the Class A Shares received on such Exchange.

 

(b)                                 A “Tax Benefit Payment” in respect of a TRA Party for a Taxable Year means an amount, not less than zero, equal to the sum of the portion of the Net Tax Benefit that is allocable to such TRA Party and the Interest Amount with respect thereto.  For the avoidance of doubt, for Tax purposes, the Interest Amount shall not be treated as interest but instead shall be treated as additional consideration for the acquisition of Units in Exchanges, unless otherwise required by law.  Subject to Section 3.3(a), the “Net Tax Benefit” for a Taxable Year shall be an amount equal to the excess, if any, of 85% of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year, over the total amount of payments previously made under this Section 3.1 (excluding payments attributable to Interest Amounts); provided, for the avoidance of doubt, that no such recipient shall be required to return any portion of any previously made Tax Benefit Payment.  The “Interest Amount” shall equal the interest on the Net Tax Benefit calculated at the Agreed Rate from the due date (without extensions) for filing the Corporate Taxpayer Return with respect to Taxes for such Taxable Year until the payment date under Section 3.1(a).  Notwithstanding the foregoing, for each Taxable Year ending on or after the date of a Change of Control that occurs after the IPO Date, all Tax Benefit Payments, whether paid with respect to the Units that were Exchanged (i) prior to the date of such Change of Control or (ii) on or after the date of such Change of Control, shall be calculated by utilizing Valuation Assumptions (1), (3) and (4), substituting in each case the terms “the closing date of a Change of Control” for an “Early Termination Date.”

 

Section 3.2                                    No Duplicative Payments. It is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement.  The provisions of this Agreement shall be construed in the appropriate manner to ensure such intentions are realized.

 

 

Section 3.3                                    Pro Rata Payments; Coordination of Benefits.

 

(a)                                 Notwithstanding anything in Section 3.1 to the contrary, to the extent that the aggregate tax benefit of the Corporate Taxpayer’s deduction with respect to the Basis Adjustments or Imputed Interest under this Agreement is limited in a particular Taxable Year because the Corporate Taxpayer does not have sufficient taxable income, the Net Tax Benefit for the Corporate Taxpayer shall be allocated among all parties eligible for payments hereunder in proportion to the respective amounts of Net Tax Benefit that would have been allocated to each such party if the Corporate Taxpayer had sufficient taxable income so that there were no such limitation.

 

(b)                                 After taking into account Section 3.3(a), if for any reason the Corporate Taxpayer does not fully satisfy its payment obligations to make all Tax Benefit Payments due under this Agreement in respect of a particular Taxable Year, then the Corporate Taxpayer and the TRA Parties agree that no Tax Benefit Payment shall be made in respect of any Taxable Year until all Tax Benefit Payments in respect of prior Taxable Years have been made in full.

 

ARTICLE IV

 

TERMINATION

 

Section 4.1                                    Early Termination and Breach of Agreement.

 

(a)                                 The Corporate Taxpayer may terminate this Agreement with respect to all amounts payable to the TRA Parties and with respect to all of the Units held by the TRA Parties at any time by paying to each TRA Party the Early Termination Payment in respect of such TRA Party; provided, however, that this Agreement shall only terminate upon the receipt of the Early Termination Payment by all TRA Parties, and provided, further, that the Corporate Taxpayer may withdraw any notice to execute its termination rights under this Section 4.1(a) prior to the time at which any Early Termination Payment has been paid.  Upon payment of the Early Termination Payment by the Corporate Taxpayer, none of the TRA Parties or the Corporate Taxpayer shall have any further payment obligations under this Agreement, other than for any (a) Tax Benefit Payment agreed to by the Corporate Taxpayer, on one hand, and the TRA Party, on the other, as due and payable but unpaid as of the Early Termination Notice and (b) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (b) is included in the Early Termination Payment).  If an Exchange occurs after the Corporate Taxpayer makes the Early Termination Payments with respect to all applicable TRA Parties, the Corporate Taxpayer shall have no obligations under this Agreement with respect to such Exchange.

 

(b)                                 In the event that the Corporate Taxpayer breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due, failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and shall include, but not be limited to, (1) the Early Termination Payments calculated as if an Early

 

 

Termination Notice had been delivered on the date of a breach, (2) any Tax Benefit Payment in respect of a TRA Party agreed to by the Corporate Taxpayer and such TRA Party as due and payable but unpaid as of the date of a breach, and (3) any Tax Benefit Payment in respect of any TRA Party due for the Taxable Year ending with or including the date of a breach.  Notwithstanding the foregoing, in the event that the Corporate Taxpayer breaches this Agreement, each TRA Party shall be entitled to elect to receive the amounts set forth in clauses (1), (2) and (3) above or to seek specific performance of the terms hereof.  The parties agree that the failure to make any payment due pursuant to this Agreement within three months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three months of the date such payment is due.   Notwithstanding anything in this Agreement to the contrary, it shall not be a breach of this Agreement if the Corporate Taxpayer fails to make any Tax Benefit Payment when due to the extent that the Corporate Taxpayer has insufficient funds to make such payment in the Corporate Taxpayer’s sole judgment exercised in good faith; provided that the interest provisions of Section 5.2 shall apply to such late payment (unless the Corporate Taxpayer does not have sufficient cash to make such payment as a result of limitations imposed by existing credit agreements to which AHLLC is a party, in which case Section 5.2 shall apply, but the Default Rate shall be replaced by the Agreed Rate).

 

Section 4.2                                    Early Termination Notice. If the Corporate Taxpayer chooses to exercise its right of early termination under Section 4.1 above, the Corporate Taxpayer shall deliver to each TRA Party notice of such intention to exercise such right (“Early Termination Notice”) and a schedule (the “Early Termination Schedule”) specifying the Corporate Taxpayer’s intention to exercise such right and showing in reasonable detail the calculation of the Early Termination Payment(s) due for each TRA Party. Each Early Termination Schedule shall become final and binding on all parties thirty (30) calendar days from the first date on which the TRA Party has received such Schedule or amendment thereto unless the TRA Party (i) within thirty (30) calendar days after receiving the Early Termination Schedule, provides the Corporate Taxpayer with notice of a material objection to such Schedule made in good faith (“Material Objection Notice”) or (ii) provides a written waiver of such right of a Material Objection Notice within the period described in clause (i) above, in which case such Schedule becomes binding on the date the waiver is received by the Corporate Taxpayer (the “Early Termination Effective Date”).  If the Corporate Taxpayer and the TRA Party, for any reason, are unable to successfully resolve the issues raised in such notice within thirty (30) calendar days after receipt by the Corporate Taxpayer of the Material Objection Notice, the Corporate Taxpayer and the objecting TRA Party shall employ the Reconciliation Procedures in which case such Schedule becomes binding ten (10) days after the conclusion of the Reconciliation Procedures.

 

Section 4.3                                    Payment upon Early Termination.

 

(a)                                 Within three (3) calendar days after an Early Termination Effective Date, the Corporate Taxpayer shall pay to the TRA Party an amount equal to the Early Termination Payment in respect of such TRA Party.  Such payment shall be made by wire transfer of immediately available funds to a bank account or accounts designated by the TRA Party or as otherwise agreed by the Corporate Taxpayer and such TRA Party.

 

 

(b)                                 “Early Termination Payment” in respect of a TRA Party shall equal the present value, discounted at the Early Termination Rate as of the applicable Early Termination Effective Date, of all Tax Benefit Payments in respect of such TRA Party that would be required to be paid by the Corporate Taxpayer beginning from the Early Termination Date and assuming that the Valuation Assumptions in respect of such TRA Party are applied.

 

ARTICLE V

 

SUBORDINATION AND LATE PAYMENTS

 

Section 5.1                                    Subordination.  Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment or Early Termination Payment required to be made by the Corporate Taxpayer to the TRA Parties under this Agreement shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of the Corporate Taxpayer and its Subsidiaries (“Senior Obligations”) and shall rank pari passu with all current or future unsecured obligations of the Corporate Taxpayer that are not Senior Obligations.

 

Section 5.2                                     Late Payments by the Corporate Taxpayer. The amount of all or any portion of any Tax Benefit Payment or Early Termination Payment not made to the TRA Parties when due under the terms of this Agreement shall be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such Tax Benefit Payment or Early Termination Payment was due and payable.

 

ARTICLE VI

 

NO DISPUTES; CONSISTENCY; COOPERATION

 

Section 6.1                                    Participation in the Corporate Taxpayer’s and AHLLC’s Tax Matters.  Except as otherwise provided herein, the Corporate Taxpayer shall have full responsibility for, and sole discretion over, all Tax matters concerning the Corporate Taxpayer and AHLLC, including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes. Notwithstanding the foregoing, the Corporate Taxpayer shall notify a TRA Party of, and keep the TRA Party reasonably informed with respect to, the portion of any audit of the Corporate Taxpayer and AHLLC by a Taxing Authority the outcome of which is reasonably expected to affect the rights and obligations of such TRA Party under this Agreement, and shall provide to each such TRA Party reasonable opportunity to provide information and other input to the Corporate Taxpayer, AHLLC and their respective advisors concerning the conduct of any such portion of such audit; provided, however, that the Corporate Taxpayer and AHLLC shall not be required to take any action that is inconsistent with any provision of the LLC Agreement.

 

Section 6.2                                    Consistency.  The Corporate Taxpayer and the TRA Parties agree to report and cause to be reported for all purposes, including federal, state and local Tax purposes and financial reporting purposes, all Tax-related items (including, without limitation, the Basis Adjustments and each Tax Benefit Payment) in a manner consistent with that specified by the

 

 

Corporate Taxpayer in any Schedule required to be provided by or on behalf of the Corporate Taxpayer under this Agreement unless otherwise required by law.

 

Section 6.3                                    Cooperation. Each of the TRA Parties shall (a) furnish to the Corporate Taxpayer in a timely manner such information, documents and other materials as the Corporate Taxpayer may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority and (b) make itself available to the Corporate Taxpayer and its representatives to provide explanations of documents and materials and such other information as the Corporate Taxpayer or its representatives may reasonably request in connection with any of the matters described in clause (a) above.  The TRA Parties and the Corporate Taxpayer shall reasonably cooperate in connection with any such matter, and the Corporate Taxpayer shall reimburse each such TRA Party for any reasonable third-party costs and expenses incurred pursuant to this Section.

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.1                                    Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed duly given and received (a) on the date of delivery if delivered personally, or by facsimile or email with confirmation of transmission by the transmitting equipment or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

If to the Corporate Taxpayer, to:

 

Adeptus Health Inc.

2941 South Lake Vista, Suite 200

Lewisville, Texas 75067

Telephone:                                   (972) 899-6666

Email:                                                    tim.fielding@adhc.com

Attention:                                         Chief Financial Officer

 

with a copy (which shall not constitute notice to the Corporate Taxpayer) to:

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

Telephone:                                   ( 212)455-2948

Email:                                                    jkaufman@stblaw.com

Attention:                                         Joseph H. Kaufman

 

 

If to the TRA Parties, to:

 

Adeptus Health Inc.

2941 South Lake Vista, Suite 200

Lewisville, Texas 75067

Telephone:                                   (972) 899-6666

Email:                                                    tim.fielding@adhc.com

Attention:                                         Chief Financial Officer

 

The address, fax number and email address set forth in the records of AHLLC.

 

Any party may change its address, fax number or email by giving the other party written notice of its new address, fax number or email in the manner set forth above.

 

Section 7.2                                    Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

Section 7.3                                    Entire Agreement; No Third Party Beneficiaries. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. Except to the extent provided under Section 3.3, this Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 7.4                                    Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, without regard to the conflicts of laws principles thereof that would mandate the application of the laws of another jurisdiction.

 

Section 7.5                                    Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

 

 

Section 7.6                                    Successors; Assignment; Amendments; Waivers.

 

(a)                                 Each TRA Party may assign any of its rights under this Agreement to any Person as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, in form and substance reasonably satisfactory to the Corporate Taxpayer, agreeing to become a TRA Party for all purposes of this Agreement, except as otherwise provided in such joinder.

 

(b)                                 No provision of this Agreement may be amended unless such amendment is approved in writing by each of the Corporate Taxpayer and by the TRA Parties who would be entitled to receive at least two-thirds of the Early Termination Payments payable to all TRA Parties hereunder if the Corporate Taxpayer had exercised its right of early termination on the date of the most recent Exchange prior to such amendment (excluding, for purposes of this sentence, all payments made to any TRA Party pursuant to this Agreement since the date of such most recent Exchange); provided, that no such amendment shall be effective if such amendment will have a disproportionate effect on the payments certain TRA Parties will or may receive under this Agreement unless such amendment is consented in writing by the TRA Parties disproportionately affected who would be entitled to receive at least two-thirds of the Early Termination Payments payable to all TRA Parties disproportionately affected hereunder if the Corporate Taxpayer had exercised its right of early termination on the date of the most recent Exchange prior to such amendment (excluding, for purposes of this sentence, all payments made to any TRA Party pursuant to this Agreement since the date of such most recent Exchange).  No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.

 

(c)                                  All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. The Corporate Taxpayer shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporate Taxpayer, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporate Taxpayer would be required to perform if no such succession had taken place.

 

Section 7.7                                    Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

Section 7.8                                    Resolution of Disputes.

 

(a)                                  Any and all disputes which are not governed by Section 7.9 and cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) (each a “Dispute”) shall be finally settled by arbitration conducted by a single arbitrator in New York in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the Dispute fail to agree on the selection of

 

 

an arbitrator within ten (10) calendar days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer admitted to the practice of law in the State of New York and shall conduct the proceedings in the English language.  Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

 

(b)                                  Notwithstanding the provisions of paragraph (a), the Corporate Taxpayer may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), the TRA Party (i) expressly consents to the application of paragraph (c) of this Section 7.8 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints the Corporate Taxpayer as agent of the TRA Party for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise the TRA Party of any such service of process, shall be deemed in every respect effective service of process upon the TRA Party in any such action or proceeding.

 

(c)                                  (i)  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.8, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the for a designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another; and

 

(ii)  The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in the preceding paragraph of this Section 7.8 and such parties agree not to plead or claim the same.

 

Section 7.9                                    Reconciliation. In the event that the Corporate Taxpayer and a TRA Party are unable to resolve a disagreement with respect to the matters governed by Sections 2.3, 4.2 and 6.2 within the relevant period designated in this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner or principal in a nationally recognized accounting or law firm, and unless the Corporate Taxpayer and the TRA Party agree otherwise, the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with the Corporate Taxpayer or the TRA Party or other actual or potential conflict of interest.  If the Corporate Taxpayer and the TRA Party are unable to agree on an Expert within fifteen (15) calendar days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise. The

 

 

Expert shall resolve any matter relating to the Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within thirty (30) calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within fifteen (15) calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution.  Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, the undisputed amount shall be paid on the date prescribed by this Agreement and such Tax Return may be filed as prepared by the Corporate Taxpayer, subject to adjustment or amendment upon resolution.  The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne by the Corporate Taxpayer except as provided in the next sentence.  The Corporate Taxpayer and the TRA Party shall bear their own costs and expenses of such proceeding, unless (i) the Expert adopts the TRA Party’s position, in which case the Corporate Taxpayer shall reimburse the TRA Party for any reasonable out-of-pocket costs and expenses in such proceeding, or (ii) the Expert adopts the Corporate Taxpayer’s position, in which case the TRA Party shall reimburse the Corporate Taxpayer for any reasonable out-of-pocket costs and expenses in such proceeding.  Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.9 shall be decided by the Expert.  The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.9 shall be binding on the Corporate Taxpayer and the TRA Party and may be entered and enforced in any court having jurisdiction.

 

Section 7.10                             Withholding. The Corporate Taxpayer shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as the Corporate Taxpayer is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by the Corporate Taxpayer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such withholding was made.

 

Section 7.11                             Admission of the Corporate Taxpayer into a Consolidated Group; Transfers of Corporate Assets.

 

(a)                                  If the Corporate Taxpayer is or becomes a member of an affiliated or consolidated group of corporations that files a consolidated income tax return pursuant to Sections 1501 et seq. of the Code or any corresponding provisions of state or local law, then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole; and (ii) Tax Benefit Payments, Early Termination Payments and other applicable items hereunder shall be computed with reference to the consolidated taxable income of the group as a whole.

 

(b)                                 If AHLLC or any of its Subsidiaries, or any entity that is obligated to make a Tax Benefit Payment or Early Termination Payment hereunder, transfers one or more assets to a corporation (or a Person classified as a corporation for United States federal income tax purposes) with which such entity obligated to make a Tax Benefit Payment or Early Termination Payment does not file a consolidated tax return pursuant to Section 1501 of the Code, such entity, for purposes of calculating the amount of any Tax Benefit Payment or Early Termination Payment (e.g., calculating the gross income of the entity and determining the

 

 

Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such contribution.  The consideration deemed to be received by such entity shall be equal to the gross fair market value of the contributed asset.  For purposes of this Section 7.11, a transfer of a partnership interest shall be treated as a transfer of the transferring partner’s share of each of the assets and liabilities of that partnership allocated to such partner.

 

Section 7.12                             Confidentiality.

 

(a)                                 Each TRA Party and each of their assignees acknowledge and agree that the information of the Corporate Taxpayer is confidential and, except in the course of performing any duties as necessary for the Corporate Taxpayer and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such person shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters, acquired pursuant to this Agreement, of the Corporate Taxpayer and its Affiliates and successors, concerning AHLLC and its Affiliates and successors or the Members, learned by the TRA Party heretofore or hereafter.  This Section 7.12 shall not apply to (i) any information that has been made publicly available by the Corporate Taxpayer or any of its Affiliates, becomes public knowledge (except as a result of an act of the TRA Party in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for the TRA Party to prepare and file its Tax Returns, to respond to any inquiries regarding the same from any taxing authority or to prosecute or defend any action, proceeding or audit by any taxing authority with respect to such returns.  Notwithstanding anything to the contrary herein, each TRA Party and each of their assignees (and each employee, representative or other agent of the TRA Party or its assignees, as applicable) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the Corporate Taxpayer, AHLLC and their Affiliates, and any of their transactions, and all materials of any kind (including opinions or other tax analyses) that are provided to the TRA Party relating to such tax treatment and tax structure.

 

(b)                                 If a TRA Party or an assignee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.12, the Corporate Taxpayer shall have the right and remedy to have the provisions of this Section 7.12 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Corporate Taxpayer or any of its Subsidiaries or the TRA Parties and the accounts and funds managed by the Corporate Taxpayer and that money damages alone shall not provide an adequate remedy to such Persons.  Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.

 

Section 7.13                             Change in Law.  Notwithstanding anything herein to the contrary, if, in connection with an actual or proposed change in law, a TRA Party reasonably believes that the existence of this Agreement could cause income (other than income arising from receipt of a payment under this Agreement) recognized by the TRA Party upon any Exchange by such TRA Party to be treated as ordinary income rather than capital gain (or otherwise taxed at ordinary income rates) for United States federal income tax purposes or would have other material adverse tax consequences to such TRA Party, then at the election of such TRA Party and to the extent specified by such TRA Party, this Agreement (i) shall cease to have further effect with

 

 

respect to such TRA Party, (ii) shall not apply to an Exchange by such TRA Party occurring after a date specified by such TRA Party, or (iii) shall otherwise be amended in a manner determined by such TRA Party, provided that such amendment shall not result in an increase in payments under this Agreement at any time as compared to the amounts and times of payments that would have been due in the absence of such amendment.

 

Section 7.14                             LLC Agreement.  This Agreement shall be treated as part of the partnership agreement of AHLLC as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.

 

[The remainder of this page is intentionally blank]

 

 

IN WITNESS WHEREOF, the Corporate Taxpayer and each TRA Party have duly executed this Agreement as of the date first written above.

 

 

	
 
    	
ADEPTUS   HEALTH INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Timothy L. Fielding
    
	
 
    	
Name:
    	
Timothy   L. Fielding
    
	
 
    	
Title:
    	
Chief   Financial Officer
    

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
STERLING PARTNERS:
    	
 
    
	
 
    	
 
    
	
SCP III AIV THREE-FCER, L.P.
    	
 
    
	
By: SC Partners III, L.P., its general   partner
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ M. Avi Epstein
    	
 
    
	
Name: M. Avi   Epstein
    	
 
    
	
Title: Authorized Signatory
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
SCP III AIV THREE-FCER Conduit, L.P.
    	
 
    
	
By: SC Partners III, L.P., its general   partner
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ M. Avi Epstein
    	
 
    
	
Name: M. Avi   Epstein
    	
 
    
	
Title: Authorized Signatory
    	
 
    

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
THOMAS S. HALL
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Thomas S. Hall
    	
 
    
	
Name: Thomas   S. Hall
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
GRAHAM B. CHERRINGTON
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Graham B. Cherrington
    	
 
    
	
Name: Graham   B. Cherrington
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
TIMOTHY L. FIELDING
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Timothy L. Fielding
    	
 
    
	
Name: Timothy   L. Fielding
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
ANDREW M. JORDAN
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Andrew M. Jordan
    	
 
    
	
Name: Andrew   M. Jordan
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
TRACI A. BOWEN
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Traci A. Bowen
    	
 
    
	
Name: Traci A.   Bowen
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
JAMES M MUZZARELLI
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ James M. Muzzarelli
    	
 
    
	
Name: James M.   Muzzarelli
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
GREGORY W. SCOTT
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Gregory W. Scott
    	
 
    
	
Name: Gregory   W. Scott
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
RONALD L. TAYLOR
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Ronald L. Taylor
    	
 
    
	
Name: Ronald   L. Taylor
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
JEFFREY S. VENDER
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Jeffrey S. Vender
    	
 
    
	
Name: Jeffrey   S. Vender
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
LAWRENCE BUCKELEW
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Lawrence Buckelew
    	
 
    
	
Name: Lawrence   Buckelew
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
MICHAEL R. COREY
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Michael R. Corey
    	
 
    
	
Name: Michael   R. Corey
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
TIMOTHY M. MUELLER
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Timothy M. Mueller
    	
 
    
	
Name: Timothy   M. Mueller
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
DAVID PYLE
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ David Pyle
    	
 
    
	
Name: David   Pyle
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
HEATHER L. WEIMER
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Heather L. Weimer
    	
 
    
	
Name: Heather   L. Weimer
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
LAWRENCE J. WORLEY
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Lawrence J. Worley
    	
 
    
	
Name: Lawrence   J. Worley
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
STEPHEN D. FARBER TRUST UTD AUGUST 18,   2000
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Stephen D. Farber
    	
 
    
	
Name: Stephen   D. Farber
    	
 
    
	
Time: Trustee
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
COVERT FAMILY LIMITED PARTNERSHIP
    	
 
    
	
A Texas limited partnership
    	
 
    
	
 
    	
 
    
	
By:
    	
Covert Operations, LLC
    	
 
    
	
 
    	
A Texas limited liability company
    	
 
    
	
 
    	
Its General Partner
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Larry Richard Covert
    	
 
    
	
 
    	
Name: Larry Richard Covert, Manager
    	
 
    
	
Time:
    	
 
    	
 
    
				

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

 

 

	
5-N INVESTMENTS, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ John Novak
    	
 
    
	
Name: John   Novak
    	
 
    
	
Time: Manager
    	
 
    
			

 

[Adeptus — Signature Page to the Tax Receivable Agreement]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00232-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00232-of-00352.parquet"}]]