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EXHIBIT 10.18
DEBT SUBORDINATION AGREEMENT
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DEBT SUBORDINATION AGREEMENT
THIS DEBT Subordination AGREEMENT dated this ____ day of December, 1996 by
and between NationsBank N.A. (South), ("Bank"), Medirisk, Inc., a Florida
Corporation ("Borrower") and Healthplan Services Corporation, a Delaware
Corporation (the "Subordinated Lender").
W I T N E S S E T H:
WHEREAS, contemporaneously with the execution hereof, the Bank has
extended to Borrower a loan in the principal amount of $850,000 (the "Bank
Loan") pursuant to that certain Promissory Note dated December ___, 1996 (the
"Note") between Bank and Borrower (the obligations of Borrower under the Note
together with all renewals, modifications and extensions thereof collectively,
together with all other liabilities, indebtedness or obligations of Borrower to
Bank, whether now existing or hereafter arising, however evidenced or incurred,
whether direct or indirect, absolute or contingent, or due or to become due and
all renewals, modifications and extensions thereof hereinafter collectively
referred to as the "Senior Debt");
WHEREAS, Borrower and Subordinated Lender entered into a Securities
Purchase Agreement (the "SPA") dated January 8, 1996, pursuant to which
Subordinated Lender will purchase Senior Subordinated Notes (as defined in the
SPA) from Borrower from time to time (the obligations of Borrower to
Subordinated Lender thereunder, and under the Senior Subordinated Notes,
together with all renewals, modifications and extensions thereof collectively,
together with all other liabilities, indebtedness or obligations of Borrower to
Subordinated Lender, whether now existing or hereafter arising, however
evidenced or incurred, whether direct or indirect, absolute or contingent, or
due or to become due and all renewals, modifications and extensions thereof
hereinafter collectively referred to as the "Subordinated Debt");
WHEREAS, Subordinated Lender acknowledges that it will benefit from the
Bank having made the Bank Loan to the Borrower as such loan will enhance the
creditworthiness of the Borrower and the Borrower's ability to pay the
Subordinated Debt; and
WHEREAS, it is a condition precedent to the making of the Bank Loan that
this Agreement be executed and delivered by the parties hereto;
NOW, THEREFORE, and in consideration of the premises and the mutual
benefits to be derived from this Agreement and in order to determine the
relative priorities of repayment of the Senior Debt and the Subordinated Debt,
the parties hereto agree as follows:
1. Subordination of Subordinated Debt.
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(a) Subordinated Lender hereby subordinates the payment of any
indebtedness, whether principal, interest or other amounts owing to Subordinated
Lender by Borrower, arising under or in connection with the Subordinated Debt,
to the prior payment of the Senior Debt.
(b) Subject to Section 1(c) below, so long as there shall remain
any indebtedness, whether principal, interest or other amounts owing to Bank by
Borrower arising under or in connection with the Senior Debt, Subordinated
Lender shall not receive or accept, directly or indirectly, by set-off,
redemption, purchase or in any other manner, any payment from Borrower or any
other person in respect of the Subordinated Debt.
(c) Borrower may pay, and Subordinated Lender may receive and
accept, regular scheduled payments of principal or interest pursuant to
Subordinate Debt Instrument so long as no Default or Event of Default under the
Note has occurred and is continuing and has not been waived by the Bank and the
making of such payment would not constitute a Default or Event of Default under
the Note.
2. No Commencement of Actions. Unless and until the Senior Debt shall be
paid in full, Subordinated Lender (except as provided in Section 3(a)) shall
not commence any action or proceeding against Borrower in any court or other
tribunal to recover all or any part of the Subordinated Debt without prior
written consent of Bank.
3. Liquidation; Dissolution; Payment on Subordinated Debt; Bankruptcy of
Borrower. Upon any distribution of the assets of Borrower, or in the event of
any liquidation, dissolution or other winding up of Borrower or of its business
or the commencement by or against Borrower of any receivership, insolvency,
bankruptcy or reorganization proceeding under the Bankruptcy Code of 1978, as
amended or any successor thereto or other bankruptcy or reorganization law,
assignment for the benefit of creditors, reorganization or other arrangement
with creditors, sale of all or substantially all of the assets of Borrower, or
any other marshaling of the assets or liabilities of Borrower (each a
"Bankruptcy Proceeding") then, and in any such event:
(a) Subordinated Lender will at the request of the Bank, (i)
declare all indebtedness of Borrower under the Subordinated Debt to be due and
payable, (ii) file any claim, proof of claim, or other instrument of similar
character and (iii) duly and promptly take such action as may be necessary to
enforce the obligations of Borrower in respect of the Subordinated Debt; and
(b) in the event that Subordinated Lender shall fail to take such
action requested by Bank, Bank may, as attorney-in-fact for Subordinated
Lender, take such action on behalf of Subordinated Lender, and Subordinated
Lender hereby appoints Bank and any of its officers as attorney-in-fact for
Subordinated Lender to demand, xxx for, collect and receive any and all
such monies, dividends or other assets and give acquittance therefor and to file
any claim, proof of claim or other instrument of similar character and to take
any such action in any Bankruptcy Proceeding in Bank's own name or in the name
of Subordinated Lender as Bank may deem necessary or advisable for the
enforcement of this Agreement; and Subordinated Lender will execute and deliver
to Bank such other and further powers of attorney or other instruments as Bank
may request
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in order to accomplish the foregoing. All actions taken by such
attorney-in-fact are hereby ratified and confirmed.
(c) Except as provided in Section 1(c), Bank shall first be
entitled to receive payment in full of the Senior Debt (whenever arising)
before Subordinated Lender shall be entitled to receive any payment on account
of the Subordinated Debt, whether on account principal, interest, or otherwise.
Any payment by, or distribution of the assets of, Borrower of
any kind or character, whether in cash, property or securities, to which
Subordinated Lender would be entitled except for the provisions of this
Agreement shall be paid or delivered by the person making such payment or
distribution (whether Borrower, a trustee in bankruptcy, receiver, custodian or
liquidating trustee or otherwise) directly to Bank, to the extent necessary to
make payment in full of all Senior Debt.
Notwithstanding the foregoing, in the event that Borrower or
any other person or entity shall offer any payment with respect to the
Subordinated Debt, Subordinated Lender will direct that the same be made or
delivered to Bank. In the event that any payment by, or distribution of the
assets of, Borrower of any kind or character, whether in cash, property or
securities, shall be received by Subordinated Lender before all Senior Debt is
paid in full, such payment or distribution shall be held in trust for the
benefit of, and shall be paid over to, Bank, to the extent necessary to make
payment in full of all Senior Debt remaining unpaid.
If Subordinated Lender shall fail to endorse any such
instrument for the payment of money payable to Subordinated Lender or to the
order of Subordinated Lender, which has been turned over to Bank, Bank and any
of its officers are each hereby irrevocably constituted and appointed
attorney-in-fact for Subordinated Lender with full power to make any such
endorsement and with full power of substitution. All actions taken by such
attorney-in-fact are hereby ratified and approved.
4. Security, etc.
(a) Subordinated Lender further agrees, without first
obtaining the written consent of the Bank (which shall not be unreasonably
withheld) not to sell, assign, transfer, pledge or give a security interest in
the Subordinated Debt (except expressly subject to this Agreement), nor to join
in any Bankruptcy Proceeding, nor to accelerate the maturity of the Subordinated
Debt nor to take any action or proceeding to enforce the same until the Senior
Debt has been paid in full. Any such assignee or transferee shall agree, as a
condition to transfer, to enter into this Agreement.
(b) Subordinated Lender further agrees that in case it should
take or receive any security interest in, or lien by way of attachment,
execution or otherwise on any of the property, real or personal of, Borrower
or should take or join in any other measure of advantage contrary to this
Agreement, while any claim exists on Bank's part against Borrower with respect
to Senior Debt, Bank shall be entitled to have the same vacated, dissolved and
set aside by such proceedings at law, or otherwise, as Bank may deem proper;
and this Agreement shall be and constitute full and sufficient grounds therefor
and shall entitle Bank to be and become a party to any proceedings at law, or
otherwise, initiated by Bank or by any other party, in or by which Bank may
deem it proper to protect Bank's interest hereunder; and the party so violating
this Agreement
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shall be liable to Bank for all loss and damage sustained by Bank by reason of
such breach, including reasonable attorneys' fees.
5. Actions with Respect to Senior Debt/Subordinated Debt.
(a) Bank may, at any time and from time to time, without the
consent of or notice to Subordinated Lender and without incurring responsibility
to Subordinated Lender, and without impairing or releasing the obligations of
Subordinated Lender hereunder take or omit to take any action, including but not
limited to the following:
(1) change the manner, place or terms of payment or
change or extend the time of payment of or renew or alter the Senior Debt or any
portion thereof;
(2) sell, exchange, release or otherwise deal with
any collateral or any other property by whomsoever at any time pledged or
mortgaged to secure, or however securing the Senior Debt or any portion thereof;
(3) release anyone liable in any manner for the
payment or collection of the Senior Debt or any portion thereof;
(4) exercise or refrain from exercising any rights
against Borrower and others; or
(5) apply any sums by whomsoever paid or however
realized to the Senior Debt or any portion thereof.
(b) The Subordinated Lender may not amend, modify or
otherwise change the manner, place or terms of the Subordinated Debt without the
prior written notice to the Bank.
6. Consent to Senior Debt. The Subordinated Lender hereby consents
to the making of the Bank Loan and other financial accommodations by Bank to
Borrower under the Note; hereby acknowledges that Bank in entering into the Note
and in making the Bank Loan and other financial accommodations thereunder has
relied upon the terms of this Agreement; and hereby agrees that such Bank Loan,
and such other financial accommodations and the entering into and performance of
this Agreement, do not and will not create an Event of Default under the SPA.
The Bank shall have no liability to Subordinated Lender and Subordinated Lender
hereby waives any claim which it may have now or hereafter against Bank arising
from any and all actions which Bank may take or omit to take with regard to the
Note.
7. Consent to Subordinate Debt; no Default; Funding
(a) Subordinated Lender represents and warrants that no event
constituting an Event of Default under the SPA has occurred. Borrower
represents and warrants to Bank that no event constituting an Event of Default
under the SPA has occurred.
(b) Borrower and Subordinated Lender agree that they will take such
actions as are necessary and desirable under the SPA to cause the Note to be
paid at its Maturity Date and Subordinated Lender hereby waives any Event of
Default which might occur
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as a result of purchasing additional Senior Subordinated Notes at a Subsequent
Closing Date to effect the repayment of the principal interest and other
amounts due on the Note. Borrower and Subordinated Lender hereby waive any
provisions of the SPA which would otherwise restrict Borrower, and selling
Subordinated Lender buying a Senior Subordinated Note in an amount sufficient
to pay all amounts outstanding on the Note at the Maturity Date.
(c) Borrower and Subordinated Lender agree that their obligations
under this Section 7 shall be specifically enforceable and hereby consent to the
exclusive jurisdiction, venue and forming of any state or Federal court in
Atlanta, Xxxxxx County, Georgia, with respect to any action for specific
performance, or damages, which the Bank might bring arising out of this Section
7 and the obligations of Borrower and Subordinated Lender hereunder.
8. Representations and Warranties of Subordinated Lender and
Borrower. Subordinated Lender and Borrower, respectively, represent and warrant
to the Bank that: (a) it has the legal right, power and authority to execute,
deliver and perform this Agreement; and the execution, delivery and performance
of this Agreement (i) does not require any approval or consent that has not been
obtained and is in full force and effect and (ii) will not violate any provision
of law, governmental regulation, order or decree or any indenture, mortgage,
contract or other agreement to which it is a party or by which it is bound; (b)
this Agreement has been duly executed and delivered by it and constitutes a
legal, valid and binding obligation enforceable against it in accordance with
its terms; and (c) no subordination of the Subordinated Debt has previously been
executed by Subordinated Lender.
9. ADEQUATE ASSURANCES. Subordinated Lender and Borrower,
respectively, agrees to execute any further documents or amendments and take
such other actions as may be reasonably necessary to effect the purposes of this
Agreement, all as directed by Bank.
The Subordinated Lender agrees that it shall cause to be added to each
document evidencing the Subordinated Debt the following legend:
"The rights and remedies of a holder under this instrument are subject
to the terms and conditions of that certain Debt Subordination Agreement
dated as of December, 1996 between Medirisk, Inc., Healthplan Services
Corporation and NationsBank N.A. (South), as it may be amended from time
to time, which is incorporated herein by specific reference thereto to
the same extent as if fully set forth herein."
10. Continuing Agreement. This Agreement shall be continuing in
effect, shall not be canceled or otherwise rendered ineffective by the payment
or discharge at any time of all of Borrower's debts or obligations to Bank, and
shall apply to any and all financial accommodations subsequently granted,
renewed or extended by Bank to Borrower unless Subordinated Lender shall
deliver to Bank written notice of revocation as to future transactions, at a
time when Borrower is no longer obligated to Bank, and while Bank is not
committed or otherwise obligated to make any loans to, or grant any credit to,
Borrower.
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11. Successors and Assigns; Amendments. The terms and conditions
hereof shall be binding upon the heirs, representatives, successors and assigns
of Subordinated Lender and Borrower and shall inure to the benefit of the
successors and assigns of Bank. Nor amendment, modification or waiver of any
provision of this Agreement shall in any event be effective unless the same
shall be in writing and signed by each of the parties hereto.
12. Governing Laws. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Georgia.
13. Terms Defined. Terms used herein and not defined herein have
their respective meanings as set forth in the Note or the SPA, respectively.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of December____, 1996.
BORROWER: Medirisk, Inc.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
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Title: Executive Vice President and Chief
Financial Officer
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SUBORDINATED LENDER: Healthplan Services
Corporation
By: /s/ Xxxxx X. Xxxxxx, III
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Title: Executive Vice President
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BANK: NationsBank N.A. (South)
By: /s/ Xxxxx Xxxxx
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Title: Senior Vice President
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