S-1: General form of registration statement for all companies including face-amount certificate companies

Published on October 9, 2001



Exhibit 4.2


AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
-----------------------



September 23, 1998


TABLE OF CONTENTS
-----------------




1. Restrictions on Transfer ................................................. 2
1.1 General Prohibitions .......................................... 2
1.2 Notice of Transfer ............................................ 3
1.3 Right of First Offer .......................................... 3
1.4 Certain Permitted Transfers ................................... 4
1.5 Exchange of Shares ............................................ 5

2. Tag-Along Rights ......................................................... 5
2.1 Right to Sell Proportionate Number of Shares of Securities .... 5
2.2 Notifications ................................................. 6
2.3 Selling a Proportionate Number of Securities .................. 6
2.4 Purchase Price ................................................ 6
2.5 Closing of Sale ............................................... 6

3. Drag-Along Right ......................................................... 7
3.1 Sale of the Company ........................................... 7
3.2 Sale Notice ................................................... 7
3.3 Purchase of Drag-Along Amount ................................. 7

4. Directors ................................................................ 8
4.1 Initial Board ................................................. 8
4.2 Voting Agreement .............................................. 8
4.3 Compensation .................................................. 8
4.4 Insurance ..................................................... 8

5. Covenants ................................................................ 9
5.1 Affirmative Covenants ......................................... 9
5.2 Negative Covenants ............................................ 11

6. Endorsement on Certificates .............................................. 12

7. Registration Rights ...................................................... 12
7.1 Certain Definitions ........................................... 12
7.2 Demand Registrations .......................................... 13
7.3 Incidental Registrations ...................................... 14
7.4 Expenses of Registration ...................................... 16
7.5 Registration Procedures ....................................... 16
7.6 Indemnification ............................................... 17
7.7 Other Registration Rights ..................................... 19
7.8 Information by Holders ........................................ 19



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7.9 Rule 144 Reporting ............................. 19
7.10 Market Stand-off Agreement ..................... 19
7.11 Transfer Restrictions .......................... 20

8. Future Financings ......................................... 20
8.1 Right of First Refusal ......................... 20
8.2 Notice ......................................... 20
8.3 Exceptions ..................................... 21

9. Standstill Agreement ...................................... 21

10. Specific Performance ...................................... 21

11. Notices ................................................... 21

12. Effect of Invalid Provision: Governing Law ................ 22

13. Benefit, Subsequent Shareholders .......................... 22

14. Spouses ................................................... 22

15. Counterparts .............................................. 22

16. Termination ............................................... 22

17. Amendment ................................................. 23

18. Series D Class Vote ....................................... 23

19. Conflicting Provisions .................................... 23

20. Severability .............................................. 23

21. Amendment to 1993 Securities Purchase Agreement ........... 23

22. Termination of 1993 Shareholder Agreement ................. 23

23. Amendment to Certain Subordinated Note Agreements ......... 23



ii


AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
-----------------------


This Amended and Restated Shareholders' Agreement (the "Agreement") is
---------
made as of this 23rd day of September, 1998, by and among CENTENE CORPORATION, a
Wisconsin corporation (the "Company"), and those persons or entities whose
-------
signatures are affixed on Exhibit A attached hereto (collectively, the
"Shareholders," individually, a "Shareholder"). This Agreement amends, restates
------------ -----------
and supersedes the Shareholder Agreement, dated as of July 29, 1993, as amended
by an Amendment, dated as of October 1, 1994, and as further amended by a Second
Amendment, dated as of October 1997 (the "1993 Shareholder Agreement"). The 1993
--------------------------
Shareholder Agreement is hereby amended, restated and superseded with respect to
each party as of the date such party executes this Agreement.


RECITALS
--------

WHEREAS, the Company and certain Shareholders are parties to the 1993
Shareholder Agreement;

WHEREAS, whenever the Company issues shares of Capital Stock (as such
term is defined below) to a person not previously an owner of the Company's
Capital Stock, it requires such person to execute an agreement by which such
person assumes and agrees to become bound by the Shareholders' Agreement; and

WHEREAS, Strategic Investment Partners Ltd. ("SIP'), Greylock Limited
---
Partnership ("Greylock") and Cahill, Warnock Strategic Partners Fund, L.P.,
--------
Strategic Associates, L.P. (Cahill Wamock Strategic Partners Fund, L.P. and
Strategic Associates, L.P. are defined as "Cahill") and certain individual
------
investors (collectively, the "Series D Preferred Stock Holders") are parties to
--------------------------------
that certain Securities Purchase Agreement dated the same date hereof (the
"Securities Purchase Agreement") pursuant to which the Company issued Series D
Preferred Stock, par value $0.1666 to the Series D Preferred Stock Holders;

WHEREAS, the Company and the Shareholders listed on Schedule A to this
Agreement desire to become parties to this Agreement and to amend and restate
the terms and conditions of the Shareholder Agreement as set forth herein; and

WHEREAS, certain of the parties hereto are parties to a Securities
Purchase Agreement, dated as of October 1,1993 (the "1993 Securities Purchase
------------------------
Agreement") and/or certain Agreements dated as of or about September 7, 1997
---------
(the "Sub Debt Agreements"), and desire to amend certain of the provisions
-------------------
thereof;

NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the receipt and sufficiency of which are acknowledged;


IT IS HEREBY AGREED AS FOLLOWS:



AGREEMENT
---------


1. Restrictions on Transfer.
-------------------------

1.1 General Prohibitions.
---------------------

(a) No Shareholder may sell, transfer, assign,
pledge (except with the approval of the Board of Directors of the Company) or
otherwise dispose of, whether voluntarily or involuntarily (a "Transfer"), any
--------
interest in any Capital Stock (which is defined as all the capital stock
authorized by the Company, including the Series A Common Stock, Series B Common
Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock or any additional series of Preferred Stock)
or subordinated notes issued on or about September 7, 1997 ("Subordinated Debt"
-----------------
and together with Capital Stock, "Securities"), whether now owned or hereafter
----------
acquired, except after compliance with the provisions of this Section 1. In any
------
event, any Shareholder who owns both Capital Stock and Subordinated Debt shall
not transfer either without similarly transferring a proportionate amount of the
other security (as such proportionate amount shall be reasonably determined in
the discretion of the Company's Board of Directors). Notwithstanding the
foregoing, the parties aclmowledge and agree that Richard P. Wiederhold has
pledged his initial unit purchase of preferred stock and subordinated debt to
fund his investment in the Company. To the extent such pledge is enforced, the
parties agree that the Company will have a right of first refusal subject to
Section 1.3 of this Agreement.

(b) No Securities shall be transferred except on the
books of the Company by the respective holders of record thereof or by their
legal representatives who shall furnish proper evidence of authority to
transfer, or by their attorney thereunto authorized by power of attorney duly
executed and filed with the secretary of the Company, subject to the
restrictions, if any, set forth in the By-Laws and this Agreement. The holder in
whose name Securities stand on the books of the Company shall be deemed by the
Company to be owner thereof for all purposes.

(c) No Shareholder shall transfer any Securities
until such Shareholder has first given written notice to the Company describing
briefly the manner of any such proposed transfer and until (i) the Company has
received, if requested, from the Shareholders counsel an opinion (reasonably
satisfactory in form and substance to the Company's counsel) that such transfer
can be made without compliance with the registration provisions of the
Securities Act or any applicable state securities laws or (ii) the Company and
the Shareholder shall have complied with Rule 144 promulgated by the Commission
and applicable state securities laws requirements, or (iii) a registration
statement filed by the Company is declared effective by the Securities and
Exchange Commission and governing state securities act authorities or steps
necessary to perfect exemptions from such registration are completed with
respect to the Securities to be so transferred.

2


1.2 Notice Of Transfer. Prior to making any Transfer (other than as
------------------
permitted pursuant to Section 1.4 hereof), the transferring Shareholder shall
give written notice (the "Sale Notice") to the Company and the Company shall
-----------
promptly deliver a copy thereof to all Shareholders. The Sale Notice shall
disclose in reasonable detail the number and kind of Securities to be
Transferred (the "Transfer Securities"), the identity of the proposed transferee
-------------------
(if known) and the terms and conditions of the proposed Transfer, and shall
offer to sell the Securities to the Company, and/or any person or entity
designated by the Company by action of its Board of Directors (collectively
referred to in this Section as the "Company") and the Shareholders at the price
-------
and upon the terms set forth in the Sale Notice, and subject to the terms and
conditions herein.

1.3 Right of First Offer.
--------------------

(a) For all Transfers, the Company shall have priority on any
exercise of the right of first offer or may assign (by action of the Board of
Directors) such rights to any other person. The Company may elect to purchase
all or any of the Securities proposed to be Transferred upon the same terms and
conditions as those set forth in the Sale Notice by delivering a written notice
of such election to the transferring Shareholder within 45 days after the Sale
Notice has been given to the Company. Any such election so made within said
period shall be binding upon the Company and irrevocable.

(b) In the case the Company does not exercise its right of
first offer in Section 1.3(a) as to all the Transfer Securities proposed to be
transferred, the Shareholders other than the transferring Shareholder (the
"Other Shareholders") shall have the right to exercise the right of first offer
------------------
with respect to the Transfer Securities not purchased by the Company. The Other
Shareholders shall have the right to purchase all or a portion of such Transfer
Securities; provided, however, that except as provided in the last sentence of
-------- -------
this Section 1.3(b), such Other Shareholder shall be entitled to purchase only
up to that number of Transfer Securities as shall be equal to the aggregate
number of Transfer Securities multiplied by a fraction, the numerator of which
is the number of shares of Company Common Stock then held by such Other
Shareholder (assuming the conversion and exercise by such Other Shareholder of
all securities convertible into or exercisable, for Company Common Stock) and
the denominator of which is the total number of shares of Company Common Stock
so held or so obtainable by all Other Shareholders (assuming the conversion and
exercise of all securities convertible into or exercisable for Company Common
Stock). A Shareholder may elect to participate in the purchase of such sale
contemplated by the transferring Shareholder(s) by delivering written notice to
the Company and the transferring Shareholder(s) within 45 days after the giving
of the Sale Notice specifying the number of Transfer Securities as to which such
Shareholder desires to accept. If a Shareholder does not so notify the Company
and the transferring Shareholder on or before the expiration of said 45-day
period, such Shareholder shall be deemed to have elected not to purchase any of
the Transfer Securities. Following the expiration of the 45 day notice period,
the transferring Shareholder and the Company shall calculate the pro rata
portion of Transfer Securities which may be purchased by each Shareholder as
follows:

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i. there shall first be allocated to each electing Shareholder
a number of Transfer Securities equal to the lesser of (A)
the number of Transfer Securities as to which such
Shareholder accepted the Offer or (B) such Shareholder's
pro rata fraction thereof, and

ii. the balance, if any, not allocated under clause (i) above
shall be allocated to those Shareholders who expressed in
their election in response to the Sales Notice a desire to
purchase more than their pro rata fraction, in each case on
a pro rata basis in proportion to the amount of such
excess, or in such other manner as the electing
Shareholders may agree among themselves.

(c) If the Company or any Shareholders elect to exercise their
rights of first offer as provided in Section 1.3(a) or (b) within the 45-day
period provided therein, the transferring Shareholder shall not consummate any
Transfer of Transfer Securities other than pursuant to Section 1.3 unless and to
the extent prior to the expiration of such 45-day period, the Company, in the
case of Section 1.3(a), and the Other Shareholders in the case of Section
1.3(b), shall have relinquished their rights under Section 1.3 hereof and the
transferring Shareholder shall have consented thereto. If less than all of the
Transfer Securities are Transferred to the Company or Shareholders pursuant to
Section 1.3(a) or (b), the Transferring Shareholder, subject to compliance with
the provisions of Section 2.1 hereof, may transfer such Transfer Securities at a
price and on terms no more favorable to the transferee(s) thereof than specified
in the Sale Notice, during the 180-day period immediately following the
Authorization Date (as defined below). Any Securities not transferred within
such 180-day period will again be subject to the provisions of this Article 1
upon subsequent transfer. The date of the first to occur of such events (i.e.,
the (i) expiration of the 45-day period if the Company and other Shareholders do
not elect within such periods to exercise rights of first offer or (ii) the
relinquishment date, as aforesaid) is referred to herein as the "Authorization
-------------
Date."
----

1.4 Certain Permitted Transfers. Notwithstanding the foregoing
---------------------------
provision of this Section 1, the Company and the Shareholders acknowledge and
agree that any of the following Transfers shall be deemed to be "Permitted
---------
Transfers" which shall not be subject to Sections 1.3 or 2.1:
---------

(a) a Transfer in accordance with the provisions of Section
1.3 or 3 hereof or through a sale in a registered offering in accordance with
Section 7 hereof;

(b) a Transfer from any Shareholder to any Affiliate, or any
of their subsidiaries, partners, limited partners or employees;

(c) a Transfer upon the death of a Shareholder to his
executors, administrators and testamentary trustees;

4


(d) a Transfer to the Shareholder's spouse, parents, siblings or
issue (whether natural or adopted) or to a trust, the beneficiaries of which, or
to a corporation or partnership the stockholders or partners of which, include
only the Shareholders and such Shareholder's spouse, parents, sibling or issue;
and

(e) Transfers between Shareholders or to the Company.

(f) "Affiliate" means, with respect to any Person, (i) any
---------
Person in which such Person holds direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person; and (ii) an entity that shares common control,
whether direct or indirectly, and common ultimate beneficial ownership.

As a condition to effectuating any Transfer hereunder, the transferee must agree
to be bound by this Agreement and all of the terms and conditions hereunder.

1.5 Exchange of Shares. Any purchaser who acquires shares of
------------------
non-voting Capital Stock from a Shareholder in accordance with this Agreement
(other than a Purchaser who is an affiliate of such Shareholder) may at any time
by written notice to the Company elect to exchange each share so acquired for a
share of voting Capital Stock of the same class. Solely for purposes of this
Section 1.5, the term "affiliate" of a Shareholder means (a) the Shareholder is
---------
a legal entity, (i) any purchaser who directly or indirectly controls, is
controlled by or is under common control with such Shareholder, (ii) any
purchaser who is an officer of, partner in or trustee of, or who serves in a
similar capacity with respect to, such Shareholder, or (iii) any purchaser who
directly or indirectly is the beneficial owner of 10% or more or any securities
of such Shareholder; or (b) if the Shareholder is an individual, any
corporation, partnership or other entity of which the Shareholder serves as an
officer, director, managing partner or similar capacity or any family member of
such Shareholder. Control means the ownership of or right to vote more than
fifty percent (50%) of the voting stock of an entity or the legal or contractual
right to elect a majority of an entity's Board of Directors or other supervisory
body.

2. Tag-Along Rights.
----------------

2.1 Right to Sell Proportionate Number of Shares of Securities. The
----------------------------------------------------------
Shareholders agree that if any Shareholder of an Applicable Securities Class (as
defined below) (a "Seller") shall receive and determine to accept any bona fide
------ ---- ----
written offer (a "Notice of Offer") from a Buyer (as defined below) to purchase
---------------
or otherwise acquire for value, in one transaction or a series of related
transactions, Securities of such Applicable Securities Class (the "Offer
-----
Securities") beneficially owned by him and representing 10% or more of all
----------
Securities of such Applicable Securities Class beneficially owned by him, each
of the other Shareholders owning Securities of the same Applicable Securities
Class shall have the right to participate in such transaction in the manner set
forth in this


5


Agreement. The term "Buyer," as used herein, means a person or entity, other
-----
than the Company, a Shareholder or their Permitted Transferees, that has offered
to purchase or otherwise acquire for value Securities (other than in connection
with a registered public offering).

2.2 Notifications. The Seller shall deliver a copy of the Notice of
-------------
Offer to the Company, and the Company shall deliver a copy thereof to all
Shareholders. The delivery of such Notice of Offer shall be effected not less
than 30 days prior to the closing of such proposed sale or other acquisition.
Upon receipt of a Notice of Offer, each of the Shareholders shall have 15 days
to deliver a written notice of its election to participate in such sale or other
acquisition and of the number of shares of Capital Stock and principal amount of
Subordinated Debt to be included in such sale or other acquisition, subject to
and effective upon the closing of such sale or other acquisition. If such
written notice of election is not received from the other parties within the
15-day period specified above, then the Seller shall have the right to sell or
otherwise transfer the aforesaid Securities specified in the Notice of Offer to
the Buyer without any participation by such other parties, but only (a) on the
terms and conditions stated in the Notice of Offer and (b) if the sale or other
transfer is consummated not later than 30 days after the end of the aforesaid
15-day period.

2.3 Selling a Proportionate Number of Securities. In the event the
--------------------------------------------
number of shares (or principal amount of Subordinated Debt) for which a party
elects to sell pursuant to a Notice of Offer exceeds the number of shares (or
principal amount of Subordinated Debt) which the Buyer is willing to purchase,
the number of shares (or principal amount of Subordinated Debt) to be sold or
transferred to the Buyer by each transferor shall be reduced so that each
transferor is entitled to sell or transfer the same percentage of its shares (or
principal amount of Subordinated Debt) as each other transferor.

2.4 Purchase Price. The purchase price and the terms and conditions
--------------
of the purchase or other acquisition for each transferor shall be the same as
the purchase price and terms and conditions set forth in such Notice of Offer.

2.5 Closing of Sale. Each party in respect of a Notice of Offer shall
---------------
deliver to the Buyer in respect of such Notice of Offer, against payment of the
total purchase price, on the closing date specified in such Notice of Offer, a
certificate or certificates representing the number of such shares (or
principal amount of Subordinated Debt) which he or it has elected to sell
pursuant to this Agreement, together with appropriate instruments of transfer
duly endorsed in blank.

2.6 Applicable Securities Class. For purpose of the Article 2,
---------------------------
holders of the following Securities shall be deemed to be holders of the same
"Applicable Securities Class": (i) Holders of Company Common Stock (regardless
of its series) including any series of Preferred Stock which may be converted
into such Common Stock; (ii) Holders of Series A, B or C Preferred Stock, (iii)
Holders of Series D Preferred Stock; (iv) Holders of any subsequent Series of
Preferred Stock; or (v) Holders of Subordinated Debt.


6


3. Drag-Along Right.
----------------

3.1 Sale of the Company. In the event any two or more of SIP,
-------------------
Greylock or Cahill (the "Initiating Seller") propose a Transfer of their Capital
Stock (other than pursuant to Section 1.4) in such amount as shall constitute
50% or more of the Capital Stock (calculated on a fully diluted, as converted
basis) of the Company in one or more related transactions, including without
limitation, a merger or consolidation (a "Sale of the Company") to a bona fide
-------------------
third party purchaser which is not a Permitted Transferee of the Initiating
Seller (the "Proposed Transferee") on an arm's length basis, the Initiating
-------------------
Seller shall have the right (the "Drag-Along Right") to require all (but not
----------------
less than all) the other Shareholders (each a "Drag-Along Seller" and
-----------------
collectively the "Drag-Along Sellers") to sell, and each Drag-Along Seller
------------------
hereby agrees to sell, to the Proposed Transferee that number of shares (but not
less than such number of shares) which is equal to the product of (x) the number
of shares of Capital Stock (calculated on a fully diluted as converted basis)
owned by such Drag-Along Seller and (y) a fraction (A) the numerator of which is
the number of shares of Capital Stock (calculated on a fully diluted as
converted basis) proposed to be sold by the Initiating Seller and (B) the
denominator of which is the number of shares of Capital Stock (calculated on a
fully diluted, as converted, basis) owned by the Initiating Seller (such amount
for the Drag-Along Sellers in the aggregate being herein referred to as the
"Drag-Along Amount").
-----------------

3.2 Sale Notice. The Initiating Seller shall notify the Company, and
-----------
the Company shall promptly notify the Drag-Along Sellers in writing of such
proposed Transfer (the "Sale Notice"). The Sale Notice shall set forth (a) the
-----------
name and address of the Proposed Transferee and (b) a copy of the written
proposal pursuant to which the Sale of the Company will be effected containing
all of the material terms and conditions thereof, including (i) the number of
shares of Capital Stock (calculated on a fully diluted, as converted, basis)
proposed to be transferred by the initiating Seller, (ii) the Drag-Along Amount,
(iii) the price per share of Capital Stock (per series) to be paid, (iv) the
terms and conditions of payment offered by the Proposed Transferee and, in the
case of consideration in whole or in part other than cash, the fair market value
thereof as determined in good faith by the Board, which determination shall be
evidenced by a Board resolution filed with the minutes of the Company, (v)
whether the Initiating Seller has determined to exercise the Drag-Along Right,
(vi) in the event the Initiating Seller has determined to exercise the
Drag-Along Right, that the Proposed Transferee has been informed of the
Drag-Along Right provided for in this Article 3 and has agreed to purchase the
Drag-Along Amount in accordance with the terms hereof and to be bound by such
terms subsequent to such purchase to the same extent as the Drag-Along Seller
immediately prior to that sale and (vii) the date and location of and procedures
for selling shares of Capital Stock to the Proposed Transferee.

3.3 Purchase of Drag-Along Amount. The shares purchased from each
-----------------------------
Drag-Along Seller by the Proposed Transferee pursuant to this Article 3 or
Article 1 shall be paid for at the same price per share (per series) and upon
the same terms and conditions as the Shares to be sold by the initiating Seller.


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4. Directors.
---------

4.1 Initial Board. The initial Board shall consist of Howard Cox,
-------------
Michael Neidorff, S.E. Bradt, Claire Johnson, Robert K. Ditmore, Richard
Wiederhold, Edward L. Cahill and Walter Burlock, Jr. (collectively the
"Individual Investor Directors".
-----------------------------

4.2 Voting Agreement. At each election of directors, each Shareholder
----------------
shall vote all of the shares of Capital Stock held by such Shareholder to cause
the authorized number of members of the Board of Directors of the Company to be
at least eight (8) and the following persons to be elected to the Board of
Directors:

(a) The chief executive officer of the Company;

(b) One (1) person designated by Greylock Limited Partnership
("Greylock");
--------

(c) So long as at least 25% of the Series D Preferred Stock
issued on the date hereof remains outstanding, two (2) persons designated by the
holders of the Series D Preferred Stock, one of whom shall be Edward L. Cahill
and the second designee shall be an individual who is acceptable to the
Company's President and Chief Executive Officer (the "Preferred Stock
---------------
Directors"); and
---------

(d) The party or parties electing a director under (b) or (c)
above, shall have the power to remove and replace such director.

Notwithstanding any of the above, this paragraph 4.1 shall terminate
and thereafter be of no force and effect upon the effectiveness of a
registration statement on Form S-1, Form S-2 or Form S-3 of shares of capital
stock of the Company.

4.3 Compensation. Each non-employee Director shall be reimbursed by
------------
the Company for all direct out-of-pocket expenses reasonably incurred in
connection with his services as a director and shall receive from the Company an
annual fee of $20,000 or such level of compensation as may be adjusted by the
Board of Directors from time to time. Such director's fee shall be paid in cash
or securities as determined by the Board of Directors.

4.4 Insurance. The Company agrees to obtain and maintain insurance,
---------
in an amount determined by the Board of Directors, to indemnify each Director
against any liability incurred by him arising as a result of his acting as a
director of the Company.


8


5. Covenants.
---------

5.1 Affirmative Covenants. The Company, and the Shareholders in the
---------------------
case of Section 5.1(c), hereby covenant and agree as follows:

(a) Information Rights. The Company will furnish the following
------------------
information to each person who holds 500,000 or more shares of Capital Stock and
is not a member of the Board of Directors

i. Annual Financial Statements. As soon as practicable, but in
---------------------------
any event within 90 days after the end of each fiscal year
of the Company, a statement of earnings for such fiscal
year, a balance sheet of the Company as of the end of such
year, and a statement of cash flows for such year, such
year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting
principles, and audited and certified by an independent
public accounting firm of nationally recognized standing
selected by the Company and reasonably acceptable to the
Shareholders.

ii. Audit Reports. As soon as available, copies of all other
-------------
financial reports submitted to the Company or any of its
Subsidiaries by independent public accountants, relating to
any annual or interim audit of the books of the Company.

iii. Quarterly Financial Statements. Within 45 days after the end
------------------------------
of each quarter, an unaudited statement of earnings, balance
sheet and statement of cash flow for or as of the end of
such quarter in reasonable detail. All such reports shall be
prepared from the books and records of the Company in
accordance with generally accepted accounting principles
consistently applied.

iv. Summary Operating Plan. Promptly after management presents
----------------------
an operating plan to the Board of Directors, a summary
operating plan of the Company for such fiscal year, with
quarterly breakdowns (the "Operating Plan") and within 10
--------------
days of any revision thereof, a copy of such revision.

v. Regulatory Filings. Within 10 days after filing, copies of
------------------
all reports filed by the Company pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 shall
be furnished and, promptly upon request by any Shareholder,
the Company shall furnish to such

9


Shareholder copies of press releases and other documents
that the Company shall have released to the press during the
preceding 90 days.

vi. Other Information. Promptly following a request therefor,
-----------------
the Company agrees to deliver (i) all management letters of
accountants; (ii) notification of defaults under material
agreements; (iii) notification of material litigation; (iv)
all federal and state tax and material regulatory filings,
and (v) such other information relating to the financial
condition, business, prospects or corporate affairs of the
Company, including without limitation a current statement of
the nature of the business of the Company and the products
and services it offers.

(b) Inspection. The Company shall permit each Shareholder, at
----------
such Shareholder's expense, to visit and inspect the Company's properties, to
examine its books of account and records, including the Company's monthly
financial statements and Operating Plan (which shall be available for inspection
promptly after preparation of such materials), and to discuss the Company's
affairs, finances and accounts with its officers, all at such reasonable times
as may be requested by such Shareholder upon reasonable notice to the Company.

(c) Confidentiality of Information. Each Shareholder (whether or
------------------------------
not a holder of 500,000 shares of Capital Stock) agrees to maintain the
confidentiality of any information obtained by such Shareholder pursuant to
Sections 5.1(a) or 5.1(b) hereof, or otherwise, which may be proprietary to the
Company or otherwise confidential and which has not been made available by the
Company to the public or to any other third party on a non-confidential basis.
Each Shareholder further agrees to use such proprietary and confidential
information only to benefit the Company or to monitor such Shareholder's
investment in the Company and to make no disclosure thereof to a transferee or
prospective transferee without the Company's prior written consent (which may be
conditioned upon receipt of a similar undertaking by the transferee or
prospective transferee but otherwise shall not be unreasonably withheld).

(d) Certain Transactions. The Company agrees that it will not
--------------------
enter into any transaction or agreement (other than normal compensation
arrangements, which are subject to Section 5.1(e) hereof) including without
limitation any lease or other rental or purchase agreement (as used for purposes
of this Section 5.1(d), "Contract"), with any "person or entity associated with
-------- --------------------------------
the Company," or with respect to which any such person or entity has or is to
-----------
have a direct or indirect material interest, unless such Contract has been
approved by not less than a majority of the number of directors constituting the
whole Board (excluding any such person associated with the Company, if a
director) or unless such contract was in effect on the date hereof or unless
such Contract is non-material and in the ordinary course of business. For
purposes hereof, a Contract shall be deemed to be non-material if it and all
other Contracts (excluding, for this purpose, compensation under employment
contracts and other compensation arrangements) between the Company and the

10


person or entity in question do not involve payment by or to the Company during
any fiscal year of more than $5,000.

(e) Management Compensation. Compensation (including salary,
-----------------------
bonuses, fringe benefits and stock awards) paid by the Company to its officers
shall be established by a compensation committee of the Board of Directors, a
majority of the members of which shall be directors who are not employed by the
Company in any capacity and which shall initially include at least one member of
the Board of Directors specified in sections 4.2(b) or (c).

(f) FIRPTA. The Company shall promptly inform the Shareholders if
------
there is any change in the representation in the Securities Purchase Agreement
to the effect that the Company is not a United States Real Property Holding
Corporation within the meaning of Section 897(c)(2) of the Code.

(g) Reincorporation. The Company shall reincorporate in the State
---------------
of Delaware within three months following the date of this Agreement, unless
otherwise determined by the Board of Directors.

5.2 Negative Covenants. The Company shall not, without the prior
------------------
written consent or approval of (i) so long as any shares of Series D Preferred
Stock are outstanding, any two or more of Greylock, Cahill and SIP and (ii) with
respect solely to (a) and (b), at least 60% of the holders of all other
Preferred Stock:

(a) engage in any business other than the managed health care
business and any business incidental thereto;

(b) purchase, redeem or otherwise acquire any shares of capital
stock of the Company, other than upon the exercise, approved by the Board
(excluding the seller, if a director) or as required by law, of repurchase
rights with respect to shares owned by any employee, director, or consultant of
the Company;

(c) increase the size of the Board of Directors of the Company;

(d) merge or consolidate with any other entity (except if the
sole purpose and effect of such merger is to change the Company's State of
incorporation) or sell all or substantially all of its assets;

(e) issue or guarantee senior debt with the exception of debt
issued by a commercial lender;

(f) liquidate or dissolve;

11


(g) enter into any agreement or arrangement of any kind that
would restrict the Company's ability to perform its obligations under this
Agreement or the Securities Purchase Agreement; or

(h) issue a press release which mentions the name of a Series D
Preferred Stock Holder without the prior approval of such Holder; provided,
--------
however, that if a Series D Preferred Stock Holder does not respond within three
-------
(3) days of receipt of the draft press release, then the Series D Preferred
Stock Holder shall be deemed to approve such press release.

6. Endorsement on Certificates. Certificates representing Securities now
---------------------------
or hereafter outstanding and owned by the Shareholders shall be stamped with the
following legend:

"This security has not been registered under the Securities Act of
1933, as amended (the "Act") or any state securities laws, and has
been acquired for investment and not with a view to, or for sale in
connection with, any distribution thereof within the meaning of the
Act. This security is subject to transfer restrictions contained in a
certain Subordination Agreement [as applicable for Subordinated Debt]
and a certain Amended and Restated Shareholders' Agreement, and no
transfer of the security shall be made unless the conditions specified
in said [Agreements] have been fulfilled. Copies of said [Agreements]
are on file and available for inspection at the principal offices of
the Company."

7. Registration Rights.
-------------------

7.1 Certain Definitions. As used in this Section 7.1, the following
-------------------
terms shall have the following respective meanings:

"Commission" shall mean the Securities and Exchange Commission or any
----------
other federal agency at the time administering the Securities Act.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.

"Holders" shall mean any Shareholder so long as such Shareholder holds
-------
at least 3% of the outstanding Capital Stock; provided, however, any original
-------- -------
signatory to this Agreement shall be deemed a Holder for a period of two years
after the Company's initial public offering (whether or not such signatory holds
3% or more of the outstanding Capital Stock).

"Registrable Securities" shall mean (i) the shares of Class A Common
----------------------
Stock issued and outstanding, including for this purpose any series of Preferred
Stock which may be converted into Class A Common Stock and (ii) any securities
issued as a dividend or other distribution with

12


respect to, or in exchange or in replacement of, the securities referred to in
the above subsection (i).

"Registration Expenses" shall mean all expenses (except for "Selling
--------------------- -------
Expenses" as defined below) incurred by the Company in complying with Section
--------
7.2 or 7.3 of this Agreement, including, without limitation, all registration
and filing fees, printing expenses, reasonable fees and disbursements of counsel
for the Company and, reasonable fees (not exceeding $30,000 unless changed by
the Board of Directors) and disbursements of one counsel for the selling
Shareholders in each of the two (2) registrations referred to in Section 7.2 and
in the first incidental registration referred to in Section 7.3.

The terms "register", "registered" and "registration" shall refer to a
-------- ---------- ------------
registration to a registration effected by preparing and filing a Registration
Statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such Registration Statement.

"Registration Statement" shall mean a registration statement on Form
----------------------
S-1, Form S-2 or Form S-3 filed by the Company with the Commission for a public
offering and sale of securities of the Company.

"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.

"Selling Expenses" shall mean all underwriting discounts and selling
----------------
commissions applicable to the sale of Registrable Securities pursuant to Section
7.2 or 7.3 and all fees and disbursements of counsel for the selling
Shareholders not included in Registration Expenses.

7.2 Demand Registrations.
--------------------

(a) If, at any time on or after September 23, 200l and following
an initial public offering, the Company shall be requested in writing by the
Holders of not less than 50% of the Registrable Securities (treating for this
purpose all other securities of the company then held by Holders as having been
converted into Registrable Securities on a common equivalent basis) to effect
the registration under the Securities Act of outstanding shares of Registrable
Securities, the Company shall promptly give written notice of such proposed
registration to all Holders. Such Holders shall have the right, by giving
written notice to the Company within 30 days from receipt of the Company's
notice, to elect to have included in such registration such of their Registrable
Securities as such Holders may request in such notice of election. Thereupon,
the Company shall, as expeditiously as practicable, use its best efforts to
effect the registration, on a form of general use under the Securities Act, of
all shares of Registrable Securities which the Company has been requested to
register. The Company shall not be obligated to cause to become effective more
than two registration statements pursuant to which Registrable Securities are
sold under this Section 7.2(a); provided, however, that if the Holders desiring
-------- -------
to participate in such registration are unable to sell at least 75% of the
Registrable Securities they desire to sell, then such Holders shall be

13


entitled to one additional demand registration pursuant to this subsection
7.2(a).

Notwithstanding the foregoing, if the Company shall furnish to
the Holders of Registrable Securities requesting registration pursuant to this
Section 7.2(a) a certificate signed by the President of the Company stating that
the Board of Directors of the Company has made the good faith judgment that it
would be seriously detrimental to the Company and its Shareholders for such
registration statement to be filed in the near future, then the Company's
obligation to use its best efforts to file and cause to become effective such
registration statement may be deferred for a period which shall not exceed 180
days. This right may not be exercised by the Company on more than one occasion
for each registration pursuant to this Section 7.2(a).

(b) The Company may include in a registration requested under
this Section 7.2(a) any authorized but unissued shares of Capital Stock for sale
by the Company; provided, however, that such shares shall not be included to the
-------- -------
extent that the underwriter of the shares so proposed to be registered (if the
offering is underwritten) or, if the offering is not underwritten, the holders
of a majority of the shares of Registrable Securities included therein determine
in good faith that the inclusion of such shares will interfere with the
successful marketing of the shares of Registrable Securities to be included
therein. If the offering to which a registration statement under this Section
7.2(a) relates is an underwritten offering, and if, after all shares of Capital
Stock proposed to be offered by the Company have been excluded from such
registration, a greater number of shares of Registrable Securities is offered
for participation in such underwriting than in the opinion of the managing
underwriter can be accommodated without adversely affecting the underwriting,
the amount of Registrable Securities proposed to be offered in the underwriting
shall be reduced, pro-rata (based upon the amount of Registrable Securities
owned) among all Holders participating in such registration, to a number deemed
satisfactory by the managing underwriter; provided, however, that for purposes
-------- -------
of making any such reduction, any Holders' family group, partners or affiliates
shall be deemed to be a single "holder" of Registrable Securities, and any
------
pro-rata reduction with respect to such "holder" shall be based upon the
aggregate amount of shares of Registrable Securities owned by all entities and
individuals included in such "holder," as defined in this provision; and further
------ -------
provided that the Series D Preferred Stock Holders along with the Holders shall
--------
have priority rights to registration over any and all other persons.

7.3 Incidental Registrations.
------------------------

(a) If at any time or from time to time the Company shall
determine to register any of its Capital Stock for its own account (other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction or any Rule adopted by the
Commission in substitution therefor or in amendment thereto, or a registration
on any registration form which does not include substantially the same
information as would be required to be included in a Registration Statement
covering the sale of Registrable Securities), the Company shall:

i. promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the
Company intends to attempt to

14


qualify such Registrable Securities under the applicable
Blue Sky or other state securities laws); and

ii. include in such registration (and any related qualification
under Blue Sky laws or other compliance), and in any
underwriting involved therein, all of the Registrable
Securities specified in a written request or requests
received by the Company within twenty (20) days after the
giving of such written notice by the Company, by any Holder,
subject to the limitations set forth in Section 7.3(b).

(b) If the registration of which the Company gives notice is for
a registered public offering involving an underwritten public offering, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 7.3(a). In such event, the right of any Holder to register
Registrable Securities pursuant to this Section 7.3 shall be conditioned upon
such Holders' participation in such underwritten public offering and the
inclusion of such Holders' Registrable Securities in the underwritten public
offering to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwritten public offering shall
(together with the Company and the other Holders distributing their securities
through such underwritten public offering) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwritten public offering by the Company. Notwithstanding any other provision
of this Section 7.3, if the underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, all shares to
be sold by the Company shall be included in such offering before any Registrable
Securities are so included, and further, the underwriter otherwise may limit the
number of Registrable Securities to be included in the registration and
underwritten public offering. The Company shall so advise all Holders (except
those Holders who have not elected to distribute any of their Registrable
Securities through such underwritten public offering), and the number of shares
of Registrable Securities that may be included in the registration and
underwritten public offering shall be allocated among such Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities owned by such Holders at the time of filing the Registration
Statement, except that the shares to be registered by the Series D Preferred
------
Stock Holders along with the Holders shall have priority over all other shares
to be registered. No Registrable Securities excluded from the underwritten
public offering by reason of the underwriter's marketing limitation shall be
included in such registration. If any Holder disapproves of the terms of any
such underwritten public offering, such person may elect to withdraw therefrom
by written notice to the Company and the underwriter, which notice, to be
effective, must be received by the Company at least two (2) business days before
the anticipated effective date of the Registration Statement. The Registrable
Securities so withdrawn from such underwritten public offering shall also be
withdrawn from such registration; provided, however, that if by the withdrawal
-------- -------
of such Registrable Securities a greater number of Registrable Securities held
by other selling Holders may be included in such registration (up to the maximum
of any limitation imposed by the underwriters then the Company shall include in
such registration in place of such withdrawn Registrable Securities such
additional Registrable Securities held by other selling Holders whose
Registrable Securities were excluded pursuant to limitation by the underwriter
pursuant to

15


this Section 7.3 in the same proportion as such Registrable Securities were
excluded pursuant to such underwriter limitation (with no more Registrable
Securities being so included than were withdrawn). In the event that the
contemplated sale does not involve an underwritten public offering, a
determination that the inclusion of the Registrable Securities adversely affects
the marketing of the shares shall be made by the Board of Directors of the
Company in its good faith discretion.

(c) The Company may at any time withdraw or abandon any
Registration Statement which triggers the provisions of this Section 7.3 without
any liability to the Holders; provided, however, that the Company shall (A)
-------- -------
provide prompt notice of its withdrawal or abandonment to each Holder; and (B)
pay all reasonable expenses not to exceed $10,000 (unless changed by the Board
of Directors).

7.4 Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration pursuant to Section 7.2 and Section 7.3 shall
be borne by the Company. All Selling Expenses incurred in connection with any
such registration shall be borne by the selling Holders on a pro rata basis. If,
notwithstanding this Agreement, applicable authorities in any state wherein
Registrable Securities are to be sold require an allocation of Registration
Expenses, each Holders agrees to pay its apportioned share thereof.

7.5 Registration Procedures. In the case of each registration
-----------------------
effected by the Company pursuant to this Agreement, the Company will keep each
Holder advised in writing as to the initiation of each registration and as to
the completion thereof. Before filing any registration statement, the Company
must provide to each of the Series D Preferred Stock Holders a copy of the "Plan
----
of Distribution" section of such registration statement. At its expense the
---------------
Company will:

(a) Keep such registration effective for a period of 120 days or
until the selling Holders have completed the distribution described in the
Registration Statement relating thereto, whichever first occurs; and

(b) Furnish such number of prospectus and other documents
incident thereto as a selling Holders may from time to time reasonably request.

(c) Notify the Holders at any time when a Prospectus relating to
the Shares is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the Prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and prepare and furnish to the Holders
one copy of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities,
such Prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made.

16


(d) Make available for inspection by the Holders, and any one
attorney, accountant or other agent retained by the Holders of Registered
Shares, as a group, (the "Inspector"), all financial and other records,
---------
pertinent corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably necessary to enable them to exercise their
-------
due diligence responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such Inspector
in connection with such registration statement; provided that records which the
Company determines, in good faith, to be confidential and which it notifies the
Inspector are confidential shall not be disclosed by the Inspector unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the Registration Statement or (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction; provided, further, the Holders agree that they will, upon leaning
that disclosure of such Records is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at its expense, to undertake
appropriate action and to prevent disclosure of the Records deemed confidential.

7.6 Indemnification.
---------------

(a) The Company will indemnify each Holder, each of the
officers, directors and partners of such Holder, and each person controlling
such Holder, if Registrable Securities held by such Holder are included in the
securities with respect to which registration has been effected pursuant to this
Agreement, and each underwriter of such Registrable Securities, if any, and each
person who controls such underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on (A) any
untrue statement (or alleged untrue statement) or a material fact contained in
any prospectus, offering circular or other similar document (including any
related Registration Statement, notification or the like) incident to any such
registration, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, or (B) any violation by the Company of any federal, state or common law
rule or regulation applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration and will
reimburse such Holder, each of the officers, directors and partners of such
Holder, and each person controlling such Holder, such under-writer and each
person who controls such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; provided that the Company will not be
liable to a Holder or underwriter in any such case to the extent that such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission made in reliance upon and in conformance with
written information furnished to the Company by or on behalf of such Holder or
underwriter and which was furnished specifically for the purpose of being used
therein.

(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such registration,
qualification or compliance, each person who controls the Company or such

17


underwriter within the meaning of the Securities Act, and each other Holder,
each of the officers, directors and partners of each such other Holder and each
person controlling such other Holder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement of a material fact contained in any such Registration
Statement, prospectus, offering circular or other similar document, or any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and will reimburse the Company, such
other Hoiders, such directors, officers, partners, persons, undeiwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement or omission is made in such Registration Statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder and which was furnished specifically for the purpose of being used
therein; provided, however, that the liability of such Holder under this Section
-------- -------
4(f) shall be limited to an amount equal to the proceeds to such Holder of
Registrable Securities sold as contemplated herein.

(c) Each party entitled to indemnification under this Section 7.6 (the
"Indemnified Party") shall give notice to the party required to provide
-----------------
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
------------------
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party, at such party's expense, to assume the defense of
any such claim or any litigation resulting therefrom; provided that counsel for
--------
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the indemnified Party may participate in such
defense at such party's expense (except for the payment of fees, costs and
expenses provided for below); provided further that the failure of any
-------- -------
Indemnified Party to give as provided herein shall not relieve the Indemnifying
Party of its obligations under this Agreement, unless such failure to give
notice shall materially adversely affect the Indemnifying Party in the defense
of any such claim or any such litigation. No Indemnifying Party, in the defense
of any such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Notwithstanding the election of the
Indemnifying Party to assume the defense of any such claim or litigation, the
Indemnified Party shall have the right to employ separate counsel and to
participate in the defense of such claim or litigation, and the Indemnifying
Party shall bear the reasonable fees, costs and expenses of such separate
counsel if (A) the use of the counsel chosen by the Indemnifying Party to
represent the Indemnified Party would present such counsel with a conflict of
interest; (B) the defendants in, or targets of, any such claim or litigation
include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably concluded that there may be legal
defenses available to it or to other Indemnified Parties which are different
from or additional to those available to the Indemnifying Party (in which case
the Indemnifying Party shall not have the right to direct the defense of such
action on behalf of the Indemnified Party); (C) in the exercise of the
Indemnified Party's reasonable

18


judgment, the Indemnifying Party shall not have employed satisfactory counsel to
represent the Indemnified Party within a reasonable time after notice of the
institution of such claim or litigation; or (D) the Indemnifying Party shall
authorize the Indemnified Party to employ separate counsel at the expense of the
Indemnifying Party. The Indemnified Party shall not settle any such claim or
litigation without the consent of the Indemnifying Party, which consent shall
not be unreasonably withheld.

7.7 Other Registration Rights. Nothing herein contained shall
-------------------------
prohibit or affect the Company's right to grant registration on a parity with or
rights junior to the registration rights herein contained to any other persons.

7.8 Information by Holders. The Holders of Registrable Securities
----------------------
included in any registration shall furnish to the Company in writing such
information regarding such Holders and the distribution proposed by such Holders
as the Company may reasonably request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.

7.9 Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may at any time permit
the sale of the Capital Stock to the public without registration, at all times
after 90 days after the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public, the Company agrees to:

(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;

(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and

(c) Furnish to each Holder forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements of
such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as a Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing that Holder to sell
any such securities without registration.

7.10 Market Stand-off Agreement. The Holders, if requested by the
--------------------------
Company and an underwriter of the Company's securities, shall agree not to sell
or otherwise transfer or dispose of any Capital Stock during the 120-day period
following the effective date of the first Registration Statement (except for any
securities of the Company sold pursuant to such Registration Statement) of the
Company filed under the Securities Act; provided, that all Holders holding more
--------
than three percent (3%) of the outstanding Capital Stock enters into similar
agreements. Such agreement shall

19


be in writing in form satisfactory to the Company and such underwriter. The
Company may impose stop-transfer instructions with respect to the shares (or
securities) subject to the foregoing restriction until the end of this 120-day
period.


7.11 Transfer Restrictions. The transfer restrictions contained in
---------------------
Section 1 of this Agreement shall not apply to any offering of Shares pursuant
to this Section 7.

8. Future Financings.
-----------------

8.1 Right of First Refusal. The Company grants to each of the
-----------------------
Shareholders the right of first refusal to purchase its pro-rata share (as
defined below) of any equity securities of the Company, including shares of
Capital Stock or securities of any type convertible into, or entitling the
holder thereof to purchase shares of, Capital Stock, proposed to be issued by
the Company subsequent to the date hereof (such securities being hereafter
referred to in this Section 8 only as the "Proposed Securities"). A
-------------------
Shareholder's "pro-rata share" shall be that portion of the Proposed Securities
--------------
proposed to be issued which bears the same relation to all of the Proposed
Securities proposed to be issued as the shares of Capital Stock held by such
Shareholder bear to all the outstanding shares of the Capital Stock (assuming
the conversion of all outstanding securities which are convertible into Capital
Stock), all determined immediately prior to the offering of the Proposed
Securities. For purposes of computing a Shareholder's pro-rata share, each
Shareholder shall be deemed to be the owner of all Securities transferred to any
person or entity pursuant to Section 1.4 hereof.

8.2 Notice. In the event that the Company proposes to undertake an
------
issue of Proposed Securities, it shall deliver to each Shareholder written
notice of its intention, describing such, Securities, specifying such
Shareholder's pro-rata share and stating the purchase price and other terms upon
which it proposes to issue the same (the "Option Notice"). For a period of 15
-------------
days from the receipt of the Option Notice, each Shareholder (or any affiliate,
of such Shareholder to whom such Shareholder has assigned such right) shall have
the right to elect, by written notice to the Company, to purchase (i) all or any
portion of such Shareholder's pro-rata share of the Proposed Securities
described in the Option Notice and (ii) all or any part of the pro-rata share of
any other Shareholder to the extent that such other Shareholder (and its
assignee affiliates) do not elect to purchase such Shareholder's full pro-rata
share, upon the terms and conditions specified in the option Notice. If the
Shareholders (and such affiliates) who elect to purchase their full pro-rata
shares also elect to purchase in the aggregate more than 100% of the Proposed
Securities referred to in clause (ii) of the preceding sentence, the Proposed
Securities referred to in clause (ii) of the preceding sentence will be sold to
such Shareholders (and such affiliates) in accordance with such Shareholders'
respective pro-rata shares; provided, however that no such Shareholder (or
-------- -------
affiliate) may purchase a greater number of such Proposed Securities than the
amount which such Shareholder (or affiliate) elects to purchase pursuant to
clause (ii) of the preceding sentence. In the event the Shareholders (and such
affiliates) fail to exercise their rights of first refusal within the specified
period, or the Shareholders (and such affiliates) elect to acquire less than
their aggregate pro-rata shares pursuant to the exercise of such right, then,
during the 180 day period following the expiration

20


of such 15 day period, the Company may sell, free of any right of first refusal
on the Shareholders' part, the portion of the Shareholders' pro-rata shares not
purchased pursuant to such right of first refusal, upon the same terms specified
in the option Notice. Any Proposed Securities purchased by an affiliate of such
Shareholder to whom such Shareholder has assigned rights pursuant to this
Section 9 shall be deemed to have been purchased by, and to be held by, such
Shareholder.

8.3 Exceptions. The right of first refusal granted under this Section
----------
8 shall not apply to (i) the issuance of Capital Stock pursuant to an employee
benefit plan approved by the Company's Board of Directors; (ii) any Proposed
Securities issued pursuant to a resolution duly adopted by the Company's Board
of Directors (or pursuant to a written consent to action in lieu of a meeting)
stating substantially to the effect that the right of first refusal provisions
contained in this Agreement shall be inapplicable to such issuance; (iii) any
Proposed Securities offered in an underwritten public offering; (iv) any
Proposed Securities issued pursuant to the acquisition by the Company of another
corporation, business entity or assets thereof which has been approved by the
Board of Directors; (v) the issuance of Proposed Securities upon a stock split
or stock dividend with respect to the Capital Stock; and (vi) any Proposed
Securities issued pursuant to employment agreements with executive officers of
the Company, so long as such Proposed Securities do not have a value exceeding
$50,000. Such right of first refusal shall expire and thereafter be of no force
and effect as to any Shareholder which shall not have purchased its pro rata
share of the next prior issue of Securities as to which this Section 8 applied.

9. Standstill Agreement No Shareholder shall acquire an amount of Equity
--------------------
Securities of the Company which, on an as-converted basis, would result in such
Shareholder owning 50% or more of the Series A Common Stock of the Company or
any other series of voting common stock of the Company. For purposes of this
Section 9, the term Shareholder shall include any equity interest in the Company
held by the Shareholder, an Affiliate, spouse and his or her descendants. The
term "Equity Securities" shall mean (i) any series of Common Stock, Preferred
-----------------
Stock or other equity security of the Company, (ii) any security convertible,
with or without consideration, into any series of Common Stock, Preferred Stock
or other security (including any option to purchase such a convertible
security), (iii) any security carrying any warrant or right to subscribe to or
purchase any Common Stock, Preferred Stock or other security or (iv) any such
warrant or right.

10. Specific Performance. The parties hereto hereby declare that it is
--------------------
impossible to measure in money the damages which will accrue to a party hereto
by reason of a failure to perform any of the obligations under this Agreement.
Therefore, if any party hereto shall institute any action or proceeding to
enforce the provisions hereof, any person (including the Company) against whom
such action or proceeding is brought hereby waives all claims or defenses
therein that such party has an adequate remedy at law and such person shall not
urge in any such action or proceeding the claim or defense that such remedy at
law exists.

11. Notices. Any and all notices, designations, consents offers,
-------
acceptances, or any other communication provided for herein shall be given in
writing by personal delivery to the person entitled to receive said notice, or
by certified mail or overnight courier service., and shall be

21


addressed, in the care of the Company, to its office at 7711 Carondelet Avenue,
St. Louis, MO 63105; and, in the case of any Shareholder, to such Shareholder's
address set forth in the stock records of the Company, or to such other address
as may be designated in writing by such Shareholder. Any such notice shall be
deemed effective when personally delivered, if delivered personally, or three
(3) business days after mailing, if mailed, or one business day after delivery
to the courier, if delivered by overnight courier service.

12. Effect of Invalid Provision; Governing Law. The invalidity or
------------------------------------------
unenforceability of any particuiar provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision was omitted. This
Agreement shall be governed under the internal laws of the State of Delaware
regardless of such State's conflict of law provisions or principles.


13. Benefit, Subsequent Shareholders. This Agreement shall be binding upon
--------------------------------
and shall operate for the benefit of the parties hereto, and their respective
successors, assigns, executors and administrators. The Company shall not
hereafter issue any Securities unless the proposed transferee executes a
counterpart of this Agreement. Each party hereto agrees and consents to extend
the benefits of this Agreement to any person (not presently a party hereto) to
whom Securities are proposed to be transferred and who agrees to execute a
counterpart of this Agreement.

14. Spouses. This Agreement shall be binding upon the spouse of any
-------
Shareholder and any interest in the Securities which said spouse may possess.
Such spouse has read this Agreement and consulted with counsel of his or her own
choice regarding the effect of this Agreement upon the community or marital
property rights of such spouse in the Securities. By executing this Agreement,
such spouse agrees that his or her interest in the Securities shall be subject
to this Agreement and, further, that no such spouse shall: (i) transfer any
interest in the Securities separate or apart from a transfer by his or her
spouse of his or her interest in the Securities; or (ii) be entitled to receive
any notice required or permitted to be given hereunder separate or apart from
such notice given to his or her spouse. Any Shareholder unmarried on the date
hereof shall obtain from his or her spouse prior to marriage an executed
counterpart of this Agreement.

15. Counterparts. This Agreement may be executed in one or more
------------
Counterparts no one of which need contain the signatures of all parties hereto,
and, each of which shall be deemed an original; provided, however, that the
total of such counterparts shall contain the signatures of all parties hereto.

16. Termination. This Agreement (except Sections 1.5 and 7 hereof) shall
-----------
terminate and thereafter be of no force and effect (i) at such time as there is
only one (1) Shareholder, (ii) upon the occurrence of the consummation of a sale
to the public pursuant to an effective Registration Statement under the
Securities Act covering any of the Company's Capital Stock or (iii) with the
approval of (a) the Company and (b) Shareholders owning 80% or more of the
outstanding capital stock of the Company; provided, however, that any two or
-------- -------
more of SIP, Greylock and Cahill shall determine the approval for such purposes
of SIP, Greylock and Cahill with respect to their Series

22


D Preferred Stock. Section 7 shall terminate upon the registration of all
Registrable Securities.

17. Amendment. Neither this Agreement nor any provision hereof may be
---------
amended, modified, supplemented or waived, except by a written instrument
executed by (i) the Company and (ii) Shareholders owning 80% or more of the
outstanding capital stock of the Company; provided, however, that any two or
-------- -------
more of SIP, Greylock and Cahill shall determine the concurrence for such
purposes of SIP, Greylock and Cahill with respect to their Series D Preferred
Stock.

18. Series D Class Vote. Any matter that requires a vote of the Series D
-------------------
Holders as a class shall be determined as to such Series D Holders' class vote
solely by the Series D Holders, and any two or more of SIP, Greylock and Cahill
shall determine the vote of SIP, Greylock and Cahill with respect to their
Series D Preferred Stock.

19. Conflicting Provisions. Except for Sections 1.5 and 4 hereof, any
----------------------
provision contained in the Company's Articles of Incorporation or By-laws which
conflicts with any provisions of this Agreement, shall govern and control.

20. Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provisions shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance here from. Furthermore,
in lieu of such illegal, invalid or unenforceable provision, there shall be
added automatically as part of this Agreement, a provision as similar in its
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable.

21. Amendment to 1993 Securities Purchase Agreement. The 1993 Securities
-----------------------------------------------
Purchase Agreement is hereby amended as follows: Section 7.1, 7.2, 7.5, 7.7,
7.8, 7.9 and 7.10 are hereby deleted in their entirety.

22. Termination of 1993 Shareholder Agreement. The 1993 Shareholder
-----------------------------------------
Agreement is hereby terminated and superseded by this Agreement with respect to
each party as of the date such party executes this Agreement.

23. Amendment to Certain Subordinated Note Agreements. Each of those Sub
-------------------------------------------------
Debt Agreements executed by the Company and the holders of Subordinated Debt is
hereby amended by deleting the words "as part of the unit in which they are
purchased hereunder and then" from the first sentence of Section 7(a) thereof.


[Signature pages follow]

23



AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT SIGNATURE PAGE


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
hereinabove set forth.

THE COMPANY:

CENTENE CORPORATION

By: /s/ Michael F. Neidorff
--------------------------
Name: Michael F. Neidorff
Title: Chief Executive Officer and President





[Shareholder signatures appear on subsequent pages]


SHAREHOLDERS:

CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P.,
its General Partner


By: /s/ Edward Cahill
-----------------------------------
Name: Edward Cahill
Title: a General Partner


STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY, LLC, its
General Partner


By: /s/ Edward Cahill
-----------------------------------
Name: Edward Cahill
Title: Managing Member


STRATEGIC INVESTMENT PARTNERS LTD.


By: /s/ Michael Neus
------------------------------------
Name: Michael Neus
Title: Attorney-in-Fact

GREYLOCK LIMITED PARTNERSHIP


By: ____________________________________
Name: Howard E. Cox, Jr.
Title: a General Partner


SHAREHOLDERS:

CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P.,
its General Partner


By: ___________________________________
Name: Edward Cahill
Title: a General Partner

STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY, LLC, its
General Partner

By: ___________________________________
Name: Edward Cahill
Title: Managing Member

STRATEGIC INVESTMENT PARTNERS LTD.


By: ___________________________________
Name: Michael Neus
Title: Attorney-in-Fact

GREYLOCK LIMITED PARTNERSHIP


By: /s/ Howard E. Cox, Jr.
-----------------------------------
Name: Howard E. Cox, Jr.
Title: a General Partner


/s/ Samuel E. Bradt /s/ Nancy B. Bradt
---------------------------------- ------------------------------------
Samuel E. Bradt Nancy B. Bradt,
his spouse

/s/ Raymond C. Brinn /s/ Charlotte Brinn
---------------------------------- ------------------------------------
Raymond C. Brinn Charlotte Brinn,
his spouse


D.L. ASSOCIATES

By: /s/ Illegible
------------------------------
authorized officer

/s/ Patrick T. Flanagan /s/ Karen Flanagan
---------------------------------- ------------------------------------
Patrick T. Flanagan Karen Flanagan,
his spouse

/s/ Jerome M. Fritsch /s/ Jane Ann Fritsch
---------------------------------- ------------------------------------
Jerome M. Fritsch Jane Ann Fritsch,
his spouse

/s/ Thomas M. Gazzana /s/ Nancy A. Gazzana
---------------------------------- ------------------------------------
Thomas M. Gazzana Nancy A. Gazzana,
his spouse

/s/ Michael H. Guns
----------------------------------
Michael H. Guns

/s/ Dr. Edward Hutt /s/ Diane Hutt
---------------------------------- ------------------------------------
Dr. Edward Hutt Diane Hutt,
his spouse

/s/ Robert J. Johannes /s/ Christine J. Johannes
---------------------------------- ------------------------------------
Robert J. Johannes Christine J. Johannes
his spouse

/s/ Claire W. Johnson /s/ Majorie Johnson
---------------------------------- ------------------------------------
Claire W. Johnson Majorie Johnson,
his spouse


/s/ William P. Jollie /s/ Joanie Ouellette,
------------------------------------ ------------------------------------
William P. Jollie Joanie Ouellette,
his spouse



Marshall & Ilsley Trust Company for
Michael, Best & Friedrich Retirement
Plan, F/B/O
Tracey L. Klein

By: /s/ Illegible
--------------------------------
authorized officer

/s/ Elaine E. Laverenz /s/ Mark Laverenz
------------------------------------ ------------------------------------
Elaine E. Laverenz Mark Laverenz,
her spouse


MANAGED HEALTH SERVICES, INC.


By: /s/ Richard Weiderhold, President
--------------------------------
authorized officer

/s/ Michael F. Neidorff /s/ Noemi K. Neidorff
------------------------------------ ------------------------------------
Michael F. Neidorff Noemi K. Neidorff,
his spouse

/s/ Thomas 0. Pyle
------------------------------------
Thomas 0. Pyle

/s/ Suzanne Ring-Wagner /s/ Leo Wagner
------------------------------------ ------------------------------------
Suzanne Ring-Wagner Leo Wagner,
her spouse

/s/ Leon K. Rusch /s/ Constance Bliss-Rusch
------------------------------------ ------------------------------------
Leon K. Rusch Constance Bliss-Rusch,
his spouse

/s/ Kathleen A. Tordik /s/ Christopher J. Tordik
------------------------------------ ------------------------------------
Kathleen A. Tordik Christopher J. Tordik,
her spouse


/s/Sandra S. Tunis /s/Ronald E. Tunis,
---------------------------------- ---------------------------------------
Sandra S. Tunis Ronald E. Tunis,
her spouse

/s/ Richard P. Weiderhold /s/ Barbra A. Weiderhold
---------------------------------- ---------------------------------------
Richard P. Weiderhold Barbra A. Weiderhold,
his spouse