1
EXHIBIT 1.1
EXECUTION COPY
================================================================================
SECURITIES PURCHASE AGREEMENT
DATED
JANUARY 8, 1996
BETWEEN
MEDIRISK, INC.,
AND
HEALTHPLAN SERVICES CORPORATION
================================================================================
2
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT is entered into on this 8th
day of January 1996, by and among MEDIRISK, INC., a Florida corporation (the
"Company"), and HEALTHPLAN SERVICES CORPORATION, a Delaware corporation
("Purchaser").
BACKGROUND
WHEREAS, Purchaser desires to purchase 280,623 shares of
Series B Convertible Preferred Stock of the Company and to purchase up to
$10,000,000.00 in original principal amount of Senior Subordinated Notes, for
the purposes of financing the Company's ongoing acquisition program and for
working capital purposes, and in connection therewith, the Company will issue
to Purchaser warrants to purchase shares of Series A Common Stock of the
Company, as more fully described herein and in the Warrant Agreement; and
WHEREAS, capitalized terms used in this Agreement have the
meanings specified on Appendix A.
AGREEMENT
NOW, THEREFORE, Purchaser and the Company hereby agree as
follows:
SECTION 1
PURCHASE AND SALE OF SECURITIES
1.1 Purchase and Sale of Convertible Preferred Stock. The Company
agrees to use its best efforts to cause its shareholders to approve an
amendment to and restatement of its Articles of Incorporation in the form set
forth on EXHIBIT A attached hereto. Purchaser agrees to purchase from the
Company, and the Company agrees to issue and sell to Purchaser, 280,623 shares
of Series B Convertible Preferred Stock (the "Preferred Stock") at the Closing.
Purchaser agrees to pay the Company the sum of $2,000,000 in consideration of
such shares. On the Closing Date, Purchaser shall deliver $2,000,000 to the
Company by wire transfer or bank cashier's check against delivery by the
Company to the Purchaser of a certificate for the shares of Preferred Stock
purchased hereunder.
1.2 Purchase and Sale of Senior Subordinated Notes.
1.2.1 Purchase and Sale. Purchaser agrees to purchase from
the Company Senior Subordinated Notes in an aggregate original principal amount
equal to up to $10,000,000, upon and subject to the provisions of this Section
1.2. The Senior Subordinated Notes shall be purchased at par, and on each
occasion on which the Company issues Senior Subordinated Notes to Purchaser
hereunder, it shall also issue and
3
deliver a warrant certificate to Purchaser in accordance with the Warrant
Agreement. The Company shall sell not less than $6,500,000 of Senior
Subordinated Notes to Purchaser on or before the third anniversary of the
Closing Date (the "Third Anniversary"), unless the Purchaser's commitment has,
pursuant to Section 1.3, been terminated prior to the Company's sale of such
amount. Purchaser's obligation to purchase Senior Subordinated Notes shall be
reduced on each Subsequent Closing Date by an amount equal to the original
principal amount of the Senior Subordinated Notes purchased on such Subsequent
Closing Date, and such obligation shall not be increased or restored in any way
by any payment on or in respect of the Senior Subordinated Notes. Purchaser
and the Company acknowledge and agree that the execution and delivery of this
Agreement has taken place in the State of Georgia and that the execution and
delivery of the Senior Subordinated Notes will take place in the State of
Georgia or such other state as the Company may have its principal place of
business.
1.2.2 Form and Terms of Notes. The Senior Subordinated
Notes shall be substantially in the form of EXHIBIT B attached hereto. The
Senior Subordinated Notes shall be payable in Dollars, and all interest shall
be computed in and based upon Dollars. The Senior Subordinated Notes shall
bear interest at a rate of 10% per annum. Interest payable under the Senior
Subordinated Notes outstanding from time to time shall be computed on the basis
of a 365-day year, actual days elapsed, from the date of disbursement until
repayment. The Company shall pay all documentary stamp and other taxes, if
any, related to the issuance of the Senior Subordinated Notes.
1.2.3 Subsequent Closings. From time to time after the
Closing Date and before the Third Anniversary or the earlier termination of
Purchaser's commitment to purchase Senior Subordinated Notes hereunder as
provided in Section 1.3, the Company may deliver to the Purchaser a notice of
borrowing (a "Notice of Borrowing"), which notice shall set forth the original
principal amount of Senior Subordinated Notes to be sold to Purchaser, the use
for which such funds are being requested, the closing date for such purchase
and a statement that such notice is given under this Agreement. The closing
date (a "Subsequent Closing Date") set forth in such notice shall be not less
than 20 days after the date such notice is given to the Purchaser, and the
Company shall use its reasonable best efforts to provide Purchaser with the
maximum amount of notice of a sale of Senior Subordinated Notes as is possible
under the circumstances. The minimum amount of Senior Subordinated Notes to be
sold at any subsequent closing under this Section 1.2.3 (a "Subsequent
Closing") shall be $1,000,000, and shall be in increments of $100,000 above
such amount. The purchase price for the Senior Subordinated Notes shall be the
original principal amount thereof, and, subject to the satisfaction of the
terms and conditions of this Agreement, such purchase price shall be paid by
Purchaser to the Company on each Subsequent Closing Date by wire transfer or
bank cashier's check against delivery by the Company to Purchaser of the Senior
Subordinated Notes issued on such Subsequent Closing Date. The parties agree
that a Subsequent Closing may occur on the Closing Date, if the Company gives
Purchaser a Notice of Borrowing with respect thereto at least five Business
Days prior to the Closing Date.
- 2 -
4
1.2.4 Right of Prepayment. The Company may prepay the
Senior Subordinated Notes in whole or in part at any time and from time to time
without penalty or premium; provided, however, that the Company shall not be
entitled to reborrow any such amount prepaid.
1.3 Termination of Commitment to Purchase Notes. Purchaser's
obligation to purchase Senior Subordinated Notes hereunder shall, except as
provided below, terminate automatically upon the earliest to occur of (i) the
Company's Initial Public Offering, (ii) a Change of Control of the Company,
(iii) an Event of Default, (iii) the Third Anniversary or (iv) the death of
Xxxx Xxxxxx or the termination of Xxxx Xxxxxx'x employment with the Company;
provided, however, that (i) in the event of the death of Xxxx Xxxxxx on or
before December 31, 1996 if Purchaser desires to terminate its commitment
thereafter as a result of such death, Purchaser must give notice to the Company
of its termination of the commitment to purchase Senior Subordinated Notes and
the termination of Purchaser's obligation shall not occur until such notice is
given to the Company in writing by Purchaser, and (ii) in the event of an Event
of Default, Purchaser's obligation to purchase Senior Subordinated Notes shall
resume upon its waiver, if given, of such Event of Default..
1.4 Mandatory Repayment
1.4.1 Scheduled Repayments. Subject to the acceleration
provisions of Section 6, the Company shall repay all principal and interest
remaining outstanding on the Senior Subordinated Notes at maturity on January
8, 2003. The principal payment hereunder shall be paid by wire transfer or
bank cashier's check.
1.4.2 Mandatory Prepayment. Notwithstanding the provisions
of Section 1.4.1, all outstanding principal and interest relating to the Senior
Subordinated Notes shall be due and payable within 15 Business Days after the
earlier to occur of (i) the Company's Initial Public Offering and (ii) a Change
of Control of the Company.
SECTION 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Purchaser. Purchaser
represents and warrants to the Company that:
2.1.1 Investment. The Preferred Stock and the Senior
Subordinated Notes to be purchased by Purchaser hereunder are being acquired
for investment purposes only for Purchaser's own account, not as a nominee or
agent, and not with a view to the distribution or resale of any part thereof.
2.1.2 Sophistication. Purchaser has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of Purchaser's investment in the Preferred Stock and the
Senior Subordinated Notes;
- 3 -
5
Purchaser has the ability to bear the economic risks of such investment;
Purchaser has the capacity to protect Purchaser's own interests in connection
with the transactions contemplated by this Agreement; and Purchaser has had an
opportunity to obtain such financial and other information from the Company as
Purchaser deems necessary or appropriate in connection with evaluating the
merits of the investment in the Preferred Stock and the Senior Subordinated
Note; provided, however, that none of the Purchaser's representations hereunder
are intended in any way to limit the scope or applicability of the Company's
representations and warranties in this Agreement, the truth, accuracy and
completeness of which Purchaser has relied upon in its investment in the
Preferred Stock and the Senior Subordinated Note.
2.2 Representations and Warranties of the Company. The Company
represents and warrants to Purchaser that:
2.2.1 Capitalization; Legal Status; Qualification. The
authorized capitalization and all outstanding shares of capital stock and
options, warrants and similar rights to subscribe to or purchase capital stock
of the Company are set forth on EXHIBIT C. Except as described in SCHEDULE
2.2.1, as of the date of this Agreement, the Company has no Subsidiaries and
has not operated, and does not operate, under any fictitious name. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Florida. The Company is duly qualified or licensed to
do business and in good standing as a foreign corporation in all jurisdictions
where the nature or conduct of its business as now conducted requires such
qualification. Except as described in SCHEDULE 2.2.1, there are no preemptive
rights to purchase capital stock of the Company except those contained in the
Investment Documents. The Company has furnished to Purchaser a complete and
correct copy of the Company's Articles of Incorporation and Bylaws, each as
amended or restated and currently in effect. The Company is not in violation
of any of the provisions of its Articles of Incorporation or Bylaws, which
violation has not been waived in the Consent and Modification Agreement. The
minute books of the Company contain complete and accurate records of all
actions taken and resolutions adopted by the Company's board of directors and
any committees thereof and by its shareholders since the Company's
organization. The stock transfer ledger of the Company accurately reflects the
ownership of the capital stock of the Company. Access to complete and accurate
copies of all such minute books and the stock transfer ledger has been provided
by the Company to Purchaser.
2.2.2 No Violation. Except as reflected on SCHEDULE 2.2.2,
the execution, delivery and performance by the Company of the Investment
Documents to which it is a party, and any other instruments or documents it
executed and delivered hereunder: (a) do not conflict with its articles of
incorporation or bylaws, (b) do not violate any provision of any law, rule,
regulation or ordinance, or any order or ruling of any court or governmental
entity, and (c) do not result in a breach of or constitute a default (or an
event which with the passage of time or giving of notice, or both, would
constitute a default) under, or cause or permit the acceleration of the
maturity of or give rise to any right of termination, cancellation, imposition
of fees or penalties under, any
- 4 -
6
contract, obligation, debt, note, bond, lease, mortgage, license, indenture or
other instrument to which the Company is a party or by which the Company, or
any of its properties or assets, may be bound.
2.2.3 Corporate Power and Authority; Governmental or Other
Consents. The Company has all requisite corporate power and authority to carry
on its business as presently conducted and as currently proposed to be
conducted, and to own, lease, sell or operate its properties. The Company has
the requisite corporate power and authority to execute, deliver and perform its
obligations under the Investment Documents to which it is a party, and any
other instruments or documents executed and delivered by it hereunder. No
governmental or other consents, approvals, authorizations, registrations,
declarations or filings are required for the execution, delivery and
performance of the Investment Documents by the Company. The Company is not
subject to any law, rule or regulation restricting in any way its ability to
incur indebtedness or to issue shares of its capital stock or rights to acquire
such shares. Neither the execution and delivery of this Agreement or the other
Investment Documents nor the fulfillment of or compliance with their respective
provisions and terms will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a violation of or default under any
applicable law, regulation, order, writ or decree, or any Material Agreement or
create any security interest, chattel mortgage, lien or other encumbrance upon
any of the property or assets of the Company pursuant to the terms of any
agreement or instrument to which the Company is a party or by the Company or
its assets are bound, except those in favor of the Purchaser expressly created
by the Investment Documents.
2.2.4 Due Authorization; Validity; Enforceability. The
Investment Documents and all other instruments or documents executed by the
Company in connection with the Investment Documents (including the Senior
Subordinated Notes when executed and delivered in accordance with this
Agreement) have been duly authorized, executed and delivered, and constitute
legal, valid and binding obligations of the Company, enforceable in accordance
with their respective terms except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (whether considered in an action at law or in equity).
2.2.5 Ownership of Assets. The Company (i) is the owner or
has the lawful right to use in the manner currently used by the Company all of
the assets used in its business or currently reflected as assets of the Company
on the financial statements of the Company and (ii) has good title (and with
respect to leased property, a leasehold interest in accordance with the terms
of the lease relating to such property) to its interest in such assets free and
clear of all claims, Liens, title defects and objections, easements, equities,
rights of way, covenants, restrictions, security interests or other
encumbrances except for Liens permitted to exist pursuant to Section 5.5 and
involuntary Liens arising in the ordinary course of business and securing sums
not yet due.
- 5 -
7
2.2.6 Financial Statements; Other Information. (a) The
Company has delivered to Purchaser copies of the Financial Statements, attached
as EXHIBIT D. The Financial Statements present fairly in all material respects
in accordance with GAAP consistently applied with prior periods the financial
condition, results of operations, earnings, shareholder's equity and cash flows
of the Company as of the dates and for the periods covered thereby and disclose
all material Liabilities of the Company of a nature required to be disclosed in
financial statements in accordance with GAAP, whether liquidated or
unliquidated, fixed, contingent or inchoate.
(b) The information contained in that certain
Medirisk, Inc. Confidential Information Memorandum, dated October 19, 1995,
provided to Purchaser on behalf of the Company was true and correct in all
material respects as of the date thereof; provided, however, that such
Confidential Information Memorandum is subject to the disclosures contained
therein and no representation or warranty is made hereunder with respect to any
projections or projected consolidated financial statements included in such
Confidential Information Memorandum or the assumptions used to prepare such
projections or projected consolidated financial statements; provided, further,
that the Company believes such assumptions to be reasonable as of the date of
this Agreement, except as disclosed on SCHEDULE 2.2.6.1. Purchaser
acknowledges and agrees that, as set forth on SCHEDULE 2.2.6.1, the Company has
informed Purchaser that some of the assumptions used to prepare such
projections or projected financial statements are not correct as of the date of
this Agreement.
(c) The pro forma balance sheet as of November
30, 1995 and the related pro forma statements of income attached hereto as
SCHEDULE 2.2.6.2 for the eleven-month period ending November 30, 1995
reflecting the pro forma combined results of operations for the Company and
Formations In Health Care, Inc. for such period were prepared in good faith,
and such pro forma statements present fairly in all material respects in
accordance with GAAP the financial condition, results of operations, earnings
and shareholder's equity of the Company and Formations In Health Care, Inc. as
of the dates and for the periods covered thereby (except that such pro forma
statements (i) do not contain notes thereto or statements of cash flows and are
subject to customary year-end audit adjustments, (ii) assume that the Company's
acquisition of Formations In Health Care, Inc. was closed effective January 1,
1995, (iii) reflect information based upon the financial statements of
Formations In Health Care, Inc., which are prepared upon the cash basis, rather
than the accrual basis, (iv) assume that such acquisition will be accounted for
by the Company as a "pooling of interests" when such acquisition will, in fact,
be accounted for by the Company as a purchase, and (v) were prepared in part
based upon financial information provided to the Company by Formations In
Health Care, Inc., which information the Company has not independently
verified). Purchaser acknowledges and agrees that such pro forma statements
are based in part upon information prepared by the management of Formations In
Health Care, Inc. and furnished to the Company, which information the Company
believes to be correct but is unable independently to verify.
- 6 -
8
2.2.7 Absence of Undisclosed Liabilities. The Company has
no material Liabilities except (i) Liabilities that are reflected or reserved
against in the Financial Statements, or (ii) Liabilities incurred in the
ordinary course of business since September 30, 1995. Except for information
concerning Formations In Health Care, Inc. and its business and operations,
all information provided to Purchaser in or as part of the Schedules to this
Agreement, or that is set forth or described in any such Schedule, is true and
correct in all material respects, and with respect to information concerning
Formations In Health Care, Inc. and its business and operations, to the
knowledge of the Company, all such information that has been provided to
Purchaser in or as part of the Schedules to this Agreement is true and correct
in all material respects.
2.2.8 Absence of Certain Changes. Except as set forth on
SCHEDULE 2.2.8, since September 30, 1995, the Company has not:
(a) suffered any material adverse change in its
financial condition, working capital, assets, Liabilities, earnings, reserves,
business, operations or prospects;
(b) suffered any loss, damage, destruction or
other casualty materially and adversely affecting any of its properties, assets
or business whether or not covered by insurance;
(c) borrowed or agreed to borrow any funds except
pursuant to this Agreement and except for the incurrence of trade accounts
payable in the ordinary course of business and consistent with past practice;
(d) sold, transferred, assigned or otherwise
disposed of any of its property or assets in excess individually or in the
aggregate of $50,000 or permitted, or allowed, any of its property or assets to
be subjected to any Lien or restriction of any kind, except for properties and
assets sold or encumbered since September 30, 1995 in the ordinary course of
business and consistent with past practice;
(e) declared, paid or set aside for payment any
dividend or other distribution in respect of its capital stock or other
securities or equity interests or, directly or indirectly, redeemed, purchased
or otherwise acquired any shares of its capital stock or other securities or
equity interests; or
(f) made any change in any method of accounting
or accounting practice or any change in depreciation or amortization policies
or rates theretofore adopted.
2.2.9 Regulatory Compliance. The Company possesses all
permits and other authorizations from federal, foreign, state and local
governmental authorities required by applicable provisions of law to permit it
to operate the Business, except where
- 7 -
9
the failure to have such a permit or authorization would not have a Material
Adverse Effect.
2.2.10 Litigation. There is no (a) legal, administrative,
arbitration or other proceeding, suit, claim or action of any nature,
investigation or controversy, pending or, to the knowledge of the Company,
threatened against the Company, whether at law or in equity, or before or by
any arbitrator or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality and the
Company has no knowledge of any facts or circumstances that reasonably could be
expected to result in such a procedure, suit, claim, action, investigation or
controversy; or (b) judgment, decree, injunction or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
against the Company.
2.2.11 Taxes. Except as set forth in SCHEDULE 2.2.11, the
Company has duly and timely filed all federal, state, local and foreign tax
reports and returns required to be filed on or before the Closing Date with
respect to all federal, state, local and foreign taxes, including, but not
limited to, all income, ad valorem, property, and value added sales and use
taxes, except where the failure to so file has subsequently been corrected or
would not have a Material Adverse Effect. All taxes and other related charges
due or claimed to be due from the Company by federal, state, local or foreign
taxing authorities have been paid, or are being contested in good faith by
appropriate proceedings and, as of the respective dates thereof, were
adequately reserved for on the Financial Statements. There are no pending
audits of any tax return of the Company filed with any governmental agency, and
there are no outstanding agreements or waivers extending the statutory period
of limitation applicable to any federal, state, local or foreign income tax
return or report for any period.
2.2.12 Insurance. The Company has obtained insurance in
such amounts and covering such risks as is usually carried by companies engaged
in similar businesses in the relevant jurisdiction and owning or leasing
similar properties. All such policies are in full force and effect, and all
premiums with respect thereto are currently paid. A complete list of all such
policies is contained in SCHEDULE 2.2.12.
2.2.13 Debt Instruments. SCHEDULE 2.2.13 contains a
complete list of all loan agreements, promissory notes, letters of credit,
security agreements or other financing documents to which the Company is a
party or by which the Company or any of its properties or assets (including,
without limitation, equipment subject to any equipment lease), is bound which
individually or in the aggregate involve an obligation of $50,000 or more (the
"Debt Instruments"), together with a description of the term and amount owing
in respect thereof. There are no existing material defaults by the Company or
any other obligor under or party to any such Debt Instrument, and no event has
occurred which (whether with notice, lapse of time, or both, or the happening
or occurrence of any other event) would constitute a material default by the
Company or give rise to the right of any holder to accelerate the indebtedness
represented thereby.
- 8 -
10
2.2.14 Benefit Plans.
(a) Except as set forth in SCHEDULE 2.2.14(A),
the Company does not maintain or contribute to any "employee pension benefit
plan," as such term is defined in Section 3(2) of ERISA; and each such
"employee pension benefit plan" set forth in SCHEDULE 2.2.14(A) ("Pension
Plan") is in compliance with the applicable provisions of ERISA, the Code, and
all other law, except where the failure to be in such compliance can be cured
within applicable statutory or regulatory cure periods and such failures would
not in the aggregate result in a fine, penalty or excise tax in excess of
$5,000. Complete copies of all Pension Plans and all summary plan descriptions
of Pension Plans, as in effect on the date hereof, have been delivered to
Purchaser;
(b) Except as set forth in SCHEDULE 2.2.14(B), no
Pension Plan, fiduciary thereof or trust created thereunder has engaged in a
transaction that might reasonably be expected to subject the Company, directly
or indirectly, to any tax on prohibited transactions imposed by Section 4975 of
the Code or to any civil penalty imposed by Section 502 of ERISA;
(c) Except as set forth in SCHEDULE 2.2.14(C),
the Company does not maintain or contribute to any "employee welfare benefit
plan," as such term is defined in Section 3(1) of ERISA; and each such
"employee welfare benefit plan" set forth in SCHEDULE 2.2.14(C) ("Welfare
Plan") is in compliance with the applicable provisions of ERISA, the Code, and
all other law, except where the failure to be in such compliance can be cured
within applicable statutory or regulatory cure periods and such failures would
not in the aggregate result in a fine, penalty or excise tax in excess of
$5,000. Complete copies of all Welfare Plans and all summary plan
descriptions of Welfare Plans, as in effect on the date hereof, have been
provided to Purchaser;
(d) Except as set forth in SCHEDULE 2.2.14(D),
the Company does not maintain or contribute to any bonus, incentive
compensation, stock option, stock purchase, or other fringe benefit plan or
program, whether or not reflected in a written document;
(e) Except as set forth in SCHEDULE 2.2.14(E), no
Pension Plan (either currently sponsored by the Company or terminated by the
Company within the past six years) has (i) incurred an "accumulated funding
deficiency" (within the meaning of Section 412(a) of the Code), whether or not
waived; (ii) been a plan with respect to which a Reportable Event has occurred
within six (6) years prior to the Closing Date; or (iii) been a plan with
respect to which any termination liability to the PBGC has been or is expected
to be incurred or with respect to which there exist conditions or events that
have occurred presenting a risk of termination by the PBGC; and
(f) The Company: (i) has not incurred a partial
or complete withdrawal from a "multiemployer plan" within the meaning of
Section 3(37) of ERISA to which the Company has been obligated to contribute
("Multiemployer Plan") which
- 9 -
11
resulted in the imposition of withdrawal liability under the Multiemployer
Pension Plan Amendments Act of 1980, as amended, that has not been assessed and
paid in full on the date hereof, or which could result in the imposition of
withdrawal liability under such act; and (ii) does not participate in any
Multiemployer Plan with respect to which the Company or its ERISA Affiliates
would have withdrawal liability in the event of a complete withdrawal on the
Closing Date.
2.2.15 Certain Contracts and Commitments. Except as set
forth in SCHEDULE 2.2.15:
(a) The Company has no collective bargaining or
union contracts or agreements;
(b) The Company has not entered into any written
agreement restricting it from carrying on its business within the United
States or any subdivision thereof;
(c) The Company is not a party to any "safe
harbor lease" as defined in Section 168(f)(8) of the Internal Revenue Code of
1954 as in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982;
(d) The Company is not in default on any
Indebtedness, or on any material lease, commitment, contract, instrument or
obligation by which it or its properties or assets is bound (collectively the
"Material Agreements" and individually a "Material Agreement"), and, to the
knowledge of the Company, no other party to any of the Material Agreements is
in default of any material provision of such Material Agreement; and
(e) The Company is not a party to any
shareholders agreement, registration rights agreement or other currently
effective agreement with any of its shareholders with respect to the stock or
operations of the Company.
2.2.16 Labor Matters. Except to the extent set forth in
SCHEDULE 2.2.16: (a) the Company is and has been in material compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation,
any such laws respecting employment discrimination, occupational safety and
health, and unfair labor practices; (b) there is no unfair labor practice
complaint against the Company pending or, to the knowledge of the Company,
threatened before the National Labor Relations Board or any comparable state,
local or foreign agency nor are any disputes, claims or legal proceedings
pending or threatened before any court or tribunal arising under contract,
common law or pursuant to any employment legislation, and no liability has been
incurred by the Company that remains undischarged in respect of any unfair
labor practice complaint or any breach of contract claim or any award under
employment legislation or for wrongful dismissal, and no order has been made
for reinstatement or re-engagement of any former employee; (c)
- 10 -
12
there is no labor strike, dispute, slowdown or stoppage or other industrial
action actually pending or, to the knowledge of the Company, threatened against
or directly affecting the employees of the Company; (d) to the knowledge of the
Company, no union representation question exists and no union or other
organization of employees are recognized for collective bargaining purposes,
and no union organization effort is underway, respecting the employees of the
Company; (e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending, and, to the knowledge of the
Company, no claims therefor exist, except where such grievance or claim would
not have a Material Adverse Effect; (f) the Company is not delinquent in
payments to any of its employees for any wages, salaries, commissions, bonuses
or other direct compensation for any services performed by them to the Closing
Date or amounts required to be reimbursed to such employees, and the Company is
not otherwise in breach of any contract of employment of any employee; or (g)
upon termination of the employment of any of the employees of the Company, the
Company will not be liable to any of its employees for severance pay.
2.2.17 Compliance with Law. The Company is in material
compliance with all laws, regulations and orders applicable to the Business,
including, without limitation, applicable building, planning, zoning or health
laws, ordinances and regulations. The Company has not received any
notification that it is in violation of any such laws, regulations or orders,
and neither the Company nor, to the knowledge of the Company, any employee
thereof (while acting in such capacity), has made any payment or gift to or for
the benefit of any Person, which payment or gift violates any statute or law.
2.2.18 No Subordination. Other than the obligation of
Purchaser to enter into a subordination agreement with respect to the Senior
Debt as contemplated by Section 4.1, there is no agreement, indenture, contract
or instrument to which the Company is a party or by which it may be bound that
requires the subordination in right of payment of any of the Obligations to the
repayment of any other obligation of the Company.
2.2.19 Solvency. The Company is Solvent prior to, and after
giving effect to, the transactions contemplated by the Investment Documents.
No transfer of property is being made and no obligation is being incurred in
connection with the transactions contemplated by the Investment Documents with
the intent to hinder, delay or defraud either present or future creditors of
the Company.
2.2.20 Valid Issuance. All of the outstanding capital stock
of the Company has been duly authorized and validly issued and is fully paid
and non-assessable and has been issued in material compliance with applicable
securities and other similar laws. When issued after the amendment of the
Articles of Incorporation of the Company contemplated by Section 3.1.4 in
accordance with, and for the consideration specified in, this Agreement, the
Preferred Stock will have been duly authorized and validly issued and will be
fully paid and non-assessable, and Purchaser will receive title to such
Preferred Stock free and clear of any lien, charge or encumbrance created by
the action or inaction
- 11 -
13
of the Company. When issued after such amendment upon exercise of the warrants
issued pursuant to the Warrant Agreement in accordance with, and for the
consideration specified in, the Warrant Agreement, the Series A Common Stock
will have been duly authorized and validly issued and will be fully paid and
non-assessable, and Purchaser will receive title to such Series A Common Stock
free and clear of any lien, charge or encumbrance created by the action or
inaction of the Company.
2.2.21 Proprietary Rights. The Company owns or has the
right to use all patents, trademarks, trade names, service marks, service
names, trade secrets, copyrights and other proprietary intellectual property
rights and applications therefor, and any corporate or other name,
(collectively, "Proprietary Rights") as are used or held for use in the
Company's business free and clear of any encumbrance other than the rights of
licensors of Proprietary Rights licensed to the Company and other than the
rights of licensees of Proprietary Rights licensed by the Company to others.
SCHEDULE 2.2.21 sets forth a list of all Proprietary Rights that are owned by
or licensed to the Company and that are not readily commercially available and
sets forth a list of any licenses or other agreements related thereto.
SCHEDULE 2.2.21 indicates whether and where any such Proprietary Right has been
registered or filed by the Company with the United States Patent and Trademark
Office or the corresponding office of any other jurisdiction. Except as set
forth in SCHEDULE 2.2.21: (i) no Person has a right to receive a royalty or
similar payment from the Company in respect of any Proprietary Rights, whether
pursuant to any contractual arrangements entered into by the Company or
otherwise; (ii) the Company does not have any licenses granted by or to it or
any other agreements to which it is a party relating in whole or in part to any
of the Proprietary Rights owned by the Company; (iii) neither any of the
Proprietary Rights nor the use thereof by the Company infringes upon or
otherwise violates any intellectual property rights of a third party; (iv)
there are no proceedings instituted against or written notices received by the
Company that are presently outstanding that allege that the use by the Company
of the Proprietary Rights infringes upon or otherwise violates any intellectual
property rights of a third party; (v) the Company has no knowledge of any
infringement or violation of the rights of the Company in or to the Proprietary
Rights by any third party; (vi) no claim has been asserted in writing to the
Company or, to the knowledge of the Company, threatened by any Person with
respect to the ownership, validity, license or use of, or any infringement
resulting from, any of the Proprietary Rights used by the Company or the
provision or sale of any services or products of the Company; (vii) the Company
has the right to provide and sell the services and products provided and sold
by it and to conduct its business as heretofore conducted using the Proprietary
Rights, and the consummation of the transactions contemplated hereby will not
alter or impair any such rights; and (viii) no officer, director or employee of
the Company owns or has any interest in any Proprietary Rights or any secret,
invention or process used by the Company in connection with its business.
- 12 -
14
2.2.22 Environmental Matters. Except as set forth in
SCHEDULE 2.2.22:
(a) The Company is in compliance with all
material provisions of the Environmental Laws, except where the failure to so
be in compliance will not result in a Material Adverse Effect.
(b) The Company has not received any assessment,
notice of liability or notice of financial responsibility, and the Company has
not received any notice of any action, claim or proceeding to determine such
liability or responsibility, or the amount thereof, or to impose civil
penalties, with respect to a site listed on any federal or state listing of
sites containing or believed to contain Hazardous Wastes. The Company has not
received notification that any Hazardous Wastes that it has disposed of have
been found in any site at which any governmental agency is conducting an
investigation or other proceeding under any Environmental Law.
(c) To the knowledge of the Company no property,
and no portion of any building, structure, facility or improvement located on
such property, that is used or occupied by the Company in its business (i)
contains friable asbestos or polychlorinated byphenyls ("PCBs"); (ii) has
electrical transformers, fluorescent light fixture ballasts or other equipment
containing PCBs installed thereon or therein; (iii) is used for the handling,
processing, storage or disposal or Hazardous Wastes; or (iv) contains
above-ground or underground storage tanks or other storage facilities for
Hazardous Wastes.
(d) No excise taxes have been imposed on the
Company pursuant to Sections 4611, 4661 or 4681 of the Code.
2.2.23 Collection of Accounts Receivable. Except as set
forth in the columns labeled "ADJ" and "OUTSTANDING 04-Jan-96" on attached
SCHEDULE 2.2.23, the Company has collected all receivables shown on the balance
sheet of the Company as of September 30, 1995 included in the Financial
Statements attached hereto as EXHIBIT D..
SECTION 3
CONDITIONS PRECEDENT
3.1 Purchaser's Conditions to Initial Closing. The obligation of
Purchaser to purchase the Preferred Stock, as well as the binding nature of
Purchaser's obligation to purchase Senior Subordinated Notes, is subject to the
fulfillment or waiver of all of the following conditions prior to, or
contemporaneously with, the closing of the purchase and sale of the Preferred
Stock (the "Closing"); from and after the Closing, the obligation of Purchaser
to purchase Senior Subordinated Notes is subject only to the conditions set
forth in Section 3.2:
- 13 -
15
3.1.1 Representations and Warranties. The representations
and warranties of the Company contained herein shall be true and correct in all
material respects on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date; and as of the Closing Date, no Event of
Default shall have occurred and be continuing and no Event of Default shall
occur upon the consummation of the transactions contemplated by the Investment
Documents. Purchaser shall have received a certificate of an officer of the
Company certifying the provisions of this Section 3.1.1.
3.1.2 Executed Documents. The Company shall have
delivered, or shall have caused to be delivered, to Purchaser, the following
documents, duly executed by all parties thereto:
(a) this Agreement;
(b) a certificate representing the Preferred
Stock purchased hereunder;
(c) a Senior Subordinated Note, if any, in the
principal amount of any Senior Subordinated
Note to be sold on the Closing Date;
(d) the Warrant Agreement and certificates
representing the warrants, if any, issued
pursuant thereto;
(e) the Shareholders Agreement;
(f) the Registration Rights Agreement;
(g) the Consent and Modification Agreement; and
(g) the legal opinion of Xxxxxx & Bird
substantially in the form attached hereto as
EXHIBIT H.
3.1.3 Certified Documents, Etc. The Company shall have
delivered, or shall have caused to be delivered, to Purchaser copies of the
following documents, duly certified, or the following certificates, as
applicable:
(a) Resolutions of the Board of Directors of the
Company authorizing (1) the execution, delivery and performance of the
Investment Documents, (2) the consummation of the transactions contemplated by
the Investment Documents, (3) the reservation of the shares to be issued upon
exercise of the warrants issued under the Warrant Agreement or conversion of
the Preferred Stock, and (4) all other actions to be taken by the Company in
connection with the Investment Documents;
- 14 -
16
(b) Certificates, signed by the Secretary of the
Company dated as of the Closing Date, as to the incumbency, and containing the
specimen signature or signatures, of the Person or Persons authorized to
execute the Investment Documents on behalf of the Company, together with
evidence of the incumbency of such company officer;
(c) The articles of incorporation of the Company,
certified as of a recent date by the Secretary of State of the state under the
laws of which the Company is incorporated and copies of the bylaws of the
Company, certified as of the Closing Date by the Secretary of the Company; and
(d) A certificate of status, good standing or
existence with respect the Company from the Secretary of State of the state
under the laws of which the Company is incorporated, dated as of a recent date.
3.1.4 Amendment of Articles of Incorporation. The Company
shall have amended and restated its Articles of Incorporation, in form and
substance acceptable to Purchaser, and the Amended and Restated Articles of
Incorporation so adopted shall have the Preferred Stock as part of the
Company's authorized capitalization.
3.1.5 Other Acts, Conditions, Etc.. All acts, conditions
and things (including, without limitation, the obtaining of any necessary
regulatory approvals and the making of any required filings, recordings or
registrations) required to be done and performed and to have happened precedent
to the execution, delivery and performance of the Investment Documents and to
constitute the same legal, valid and binding obligations of the parties
thereto, enforceable in accordance with their respective terms, shall have been
done and performed and shall have happened in due and strict compliance with
all applicable laws.
3.1.6 Documents in Satisfactory Form. All documentation,
including, without limitation, documentation for corporate and legal
proceedings, and all instruments in connection with the transactions
contemplated by the Investment Documents and all documents executed and
delivered in connection with the Investment Documents shall be reasonably
satisfactory in form and substance to Purchaser (including without limitation
all disclosure schedules prepared in connection with the Investment Documents),
and Purchaser shall have received all further information and documents that
Purchaser may have reasonable requested, such documents where appropriate to be
certified by proper authorities and corporate officials and parties.
3.2 Purchaser's Conditions to Subsequent Closings. The obligation
of Purchaser to purchase Senior Subordinated Notes on the Subsequent Closing
Dates is subject to the fulfillment of all of the following conditions prior
to, or contemporaneously with, the Subsequent Closing:
- 15 -
17
3.2.1 Representations and Warranties. The representations
and warranties of the Company contained herein shall be true and correct in all
material respects on and as of such Subsequent Closing Date, with the same
effect as though made on and as of such Subsequent Closing Date, except for
changes (i) occurring in the ordinary course of the Company's business; (ii)
occurring in connection with the incurrence of Senior Debt and Other Credit
Facilities, (iii) occurring in connection with acquisitions permitted under
Sections 5.6 and 5.8 and (iv) disclosed in updated disclosure schedules to this
Agreement (including disclosure schedules with respect to Sections of this
Agreement that do not currently refer to a SCHEDULE for an exception to the
representation and warranty made in such Section) delivered by the Company to
Purchaser not less than five Business Days prior to the Subsequent Closing
Date, all of which changes do not, individually or in the aggregate, represent
a Material Adverse Effect; and as of such Subsequent Closing Date, the Company
shall not have violated or be in violation of any covenant or agreement to be
performed by the Company under any of the Investment Documents, and no Event of
Default shall have occurred and be continuing and no Event of Default shall
occur upon the consummation of the transactions contemplated by the Investment
Documents. Purchaser shall have received a certificate of an officer of the
Company, dated as of such Subsequent Closing Date, certifying the provisions of
this Section 3.2.1.
3.2.2 Executed Documents. The Company shall have
delivered, or shall have caused to be delivered, to Purchaser, the following
documents, duly executed by all parties thereto:
(a) a Senior Subordinated Note in the principal
amount of the Senior Subordinated Note to be
sold on such Subsequent Closing Date, as such
principal amount is specified in the Notice
of Borrowing delivered by the Company to
Purchaser with respect to such sale pursuant
to Section 1.2(a); and
(b) a certificate representing the warrants
issued pursuant to the Warrant Agreement upon
such sale of Senior Subordinated Notes.
3.2.3 Certified Documents, Etc. The Company shall have
delivered, or shall have caused to be delivered, to Purchaser copies of the
following documents, duly certified, or the following certificates, as
applicable:
(a) A certificate of the Secretary of the Company
to the effect that the resolutions of the Board of Directors of the Company
authorizing (1) the execution, delivery and performance of the Investment
Documents; (2) the consummation of the transactions contemplated by the
Investment Documents, (3) the reservation of the shares to be issued upon
exercise of the Warrants or conversion of the Preferred Stock, and (4) all
other actions to be taken by the Company in connection with the Investment
- 16 -
18
Documents, delivered at the initial Closing have not been amended, modified or
revoked in any respect;
(b) Certificates, signed by the Secretary of the
Company dated as of the Subsequent Closing Date, as to the incumbency, and
containing the specimen signature or signatures, of the Person or Persons
authorized to execute the Investment Documents on behalf of the Company,
together with evidence of the incumbency of such company officer; and
(c) A certificate of status, good standing or
existence with respect the Company from the Secretary of State of the state
under the laws of which the Company is incorporated, dated as of a recent date.
3.2.4 Key Man Insurance. The "key man" life insurance on
the life of Xxxx Xxxxxx described in Section 4.2.6 shall be in full force and
effect, and Purchaser shall, as required by such Section 4.2.6, be named as the
beneficiary thereof as provided in such Section 4.2.6.
3.3 The Company's Conditions to Initial Closing. The obligation
of the Company to sell the Preferred Stock, as well as the binding nature of
the Company's obligation to sell Senior Subordinated Notes, is subject to the
fulfillment or waiver of all of the following conditions prior to, or
contemporaneously with, the Closing; from and after the Closing, the obligation
of the Company to sell Senior Subordinated Notes is subject only to the
conditions set forth in Section 3.4:
3.3.1 Representations and Warranties. The representations
and warranties of Purchaser contained herein shall be true and correct in all
material respects on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date. The Company shall have received a
certificate of an officer of Purchaser certifying the provisions of this
Section 3.3.1.
3.3.2 Executed Documents. Purchaser shall have delivered,
or shall have caused to be delivered, to the Company, the following documents,
duly executed by all parties thereto:
(a) this Agreement;
(b) the Warrant Agreement;
(c) the Shareholders Agreement;
(d) the Registration Rights Agreement; and
- 17 -
19
(e) the legal opinion of Fowler, White, Gillen,
Boggs, Xxxxxxxxx and Banker, P.A.
substantially in the form attached hereto as
EXHIBIT I.
3.3.3 Certified Documents, Etc. Purchaser shall have
delivered, or shall have caused to be delivered, to the Company copies of the
following documents, duly certified, or the following certificates, as
applicable:
(a) Resolutions of the Board of Directors or
Executive Committee of the Board of Directors of Purchaser authorizing (1) the
execution, delivery and performance of the Investment Documents, (2) the
consummation of the transactions contemplated by the Investment Documents, and
(3) all other actions to be taken by Purchaser in connection with the
Investment Documents;
(b) Certificates, signed by the Secretary or an
Assistant Secretary of Purchaser dated as of the Closing Date, as to the
incumbency, and containing the specimen signature or signatures, of the Person
or Persons authorized to execute the Investment Documents on behalf of
Purchaser, together with evidence of the incumbency of such company officer;
and
(c) A certificate of status, good standing or
existence with respect Purchaser from the Secretary of State of the state under
the laws of which Purchaser is incorporated, dated as of a recent date.
3.4 The Company's Conditions to Subsequent Closings. The
obligation of the Company to sell Senior Subordinated Notes on the Subsequent
Closing Dates is subject to the fulfillment of all of the following conditions
prior to, or contemporaneously with, the Subsequent Closing:
3.4.1 Representations and Warranties. The representations
and warranties of Purchaser contained herein shall be true and correct in all
material respects on and as of such Subsequent Closing Date, with the same
effect as though made on and as of such Subsequent Closing Date. The Company
shall have received a certificate of an officer of Purchaser, dated as of such
Subsequent Closing Date, certifying the provisions of this Section 3.4.1.
3.4.2 Certified Documents, Etc. Purchaser shall have
delivered, or shall have caused to be delivered, to the Company copies of the
following documents, duly certified, or the following certificates, as
applicable:
(a) A certificate of the Secretary or an
Assistant Secretary of Purchaser to the effect that the resolutions of the
Board of Directors or Executive Committee of the Board of Directors of
Purchaser authorizing (1) the execution, delivery and performance of the
Investment Documents; (2) the consummation of the transactions contemplated by
the Investment Documents, and (3) all other actions to be taken by
- 18 -
20
Purchaser in connection with the Investment Documents, delivered at the initial
Closing have not been amended, modified or revoked in any respect; and
(b) Certificates, signed by the Secretary or an
Assistant Secretary of Purchaser dated as of the Subsequent Closing Date, as to
the incumbency, and containing the specimen signature or signatures, of the
Person or Persons authorized to execute the Investment Documents on behalf of
Purchaser, together with evidence of the incumbency of such company officer.
SECTION 4
AFFIRMATIVE COVENANTS
4.1 Subordination by Purchaser. Purchaser agrees that the
indebtedness represented by the Senior Subordinated Notes is to be subordinate
to one or more secured credit facilities in an aggregate original principal
amount not to exceed $2,000,000 obtained by the Company subsequent to the
Closing Date for the purposes of financing working capital requirements in the
ordinary course of business and/or financing equipment purchases (the "Senior
Debt"). Purchaser agrees to enter into a subordination agreement on
commercially reasonable terms with the Bank or Banks providing such secured
credit facilities to the Company, the terms of which subordination agreement
will not unreasonably restrict Purchaser's rights to accelerate the maturity of
the Senior Subordinated Notes or to pursue its remedies upon an Event of
Default; provided, however, that Purchaser shall not be required to subordinate
the indebtedness represented by the Senior Subordinated Notes to more than
$2,000,000 in aggregate original principal amount of Senior Debt; provided,
further, that such Senior Debt shall be on terms and conditions reasonably
customary for secured working capital or equipment financing credit
transactions.
4.2 Covenants of the Company. The Company covenants that so long
as any of the Obligations of the Company to Purchaser hereunder or under any of
the other Investment Documents remains outstanding, and until final payment in
full of the Senior Subordinated Notes, the Company shall, and shall cause each
Affiliated Company of the Company to:
4.2.1 Punctual Payments. Pay when due: (a) the interest
and principal on the Senior Subordinated Notes, at the times and place and in
the manner specified therein, (b) any fees or other liabilities due hereunder
at the times and place and in the manner specified herein, (c) any taxes,
assessments or governmental charges of any governmental authority, and (d) any
other obligation of the Company for or in respect of Indebtedness, unless in
the cases of (c) and (d), the same (i) is being contested by the Company in
good faith and (ii) does not result in (A) any Lien upon any material asset of
the Company or upon any substantial portion of the Company's assets, (B) an
acceleration of any other material obligation of the Company or (C) the loss of
any material right under or the material breach of any agreement that is
material to the Company. Pay within 30
- 19 -
21
days after the scheduled due date, or such later date as may be possible
without the incurrence of a material penalty, any and all obligations of the
Company not described in the immediately preceding sentence, unless any of the
same is being contested by the Company in good faith.
4.2.2 Accounting Records. Maintain adequate books and
records in accordance with GAAP, and permit any representative of Purchaser,
during the Company's regular business hours upon reasonable notice, to inspect,
copy, audit and examine such books and records and inspect the properties of
the Company and its Affiliated Companies.
4.2.3 Reporting Requirements. (a) Provide Purchaser with
copies of all notices of meeting delivered to the members of the Board of
Directors of the Company and of all other materials delivered to the members of
the Board of Directors in their capacity as such or to the Investors (as
defined in the Consent and Modification Agreement) in their capacity as such.
(b) In addition, the Company will provide
Purchaser with:
(i) as soon as available and in any
event within 120 days after the end of each Fiscal Year (other than the Fiscal
Year ended December 31, 1995, in which event on or before June 30, 1996),
audited consolidated financial statements of the Company and its Affiliated
Companies as of the end of and for such Fiscal Year, together with an
unqualified report thereon of the Company's independent certified public
accounting firm, such financial statements to include a balance sheet,
statements of income, shareholders' equity and cash flows, and footnotes, all
prepared in accordance with GAAP;
(ii) as soon as available and in any
event within 30 days after the end of each month, a consolidated balance sheet
of the Company and its Affiliated Companies as of the end of such month and
statements of income, retained earnings and cash flows of the Company and its
Affiliated Companies for such month and for the Fiscal Year to date, prepared
in accordance with GAAP subject to normal year-end audit adjustments applied on
a basis consistent with prior years;
(iii) as soon as possible and in any event
within ten Business Days after the Company has knowledge of the occurrence of
any Event of Default or Potential Default, a statement of the chief executive
officer, chief financial officer or chief operating officer of the Company
setting forth details of such event and the action that the Company and its
Affiliated Companies propose to take with respect thereto;
(iv) as soon as possible and in any event
within ten Business Days after acquiring knowledge thereof, written notice of
all litigation, actions, suits or proceedings threatened or commenced affecting
the Company or any of its
- 20 -
22
Affiliated Companies or the properties or business of the Company or any of its
Affiliated Companies if the relief sought thereunder is either unspecified as
to amount, or is for damages in excess of $10,000 or, if awarded, could
reasonably be expected to materially and adversely affect the business,
properties, condition (financial or otherwise), or operations of the Company or
any of its Affiliated Companies; and as soon as possible and in any event
within five Business Days after any material development or change in the
status of any such litigation, action, suit or proceeding, notice of such
development or change;
(v) promptly after the furnishing
thereof, copies of any statement or report furnished to any other holder of the
debt or equity securities of the Company or any of its Affiliated Companies,
including without limitation any statement or report furnished pursuant to the
terms of any stock purchase, indenture, loan or credit or similar agreement and
not otherwise required to be furnished to Purchaser pursuant to any other
clause of this Section 4.2.3, but excluding (i) any statement or request
delivered to any holder of the debt or equity securities of the Company or any
of its Affiliated Companies other than in such Person's capacity as a holder of
such debt or equity and (ii) routine correspondence between the Bank and the
Company; and
(vi) prompt written notice of the
occurrence of any event that has had, or that could reasonably be expected to
have, a Material Adverse Effect on the Company.
4.2.4 Existence; Compliance With Law and Material
Agreements. Preserve and maintain its corporate existence, and all of its
licenses, permits, governmental approvals, rights, privileges and franchises
necessary or desirable in the normal conduct of its business as now conducted
or presently proposed to be conducted; conduct its business in an orderly and
regular manner; comply with the provisions of all material agreements to which
the Company is a party, except where such failure to comply will not cause a
Material Adverse Effect on the Company or cause the Company to lose any of its
material rights under such agreements, comply with the provisions of all
documents pursuant to which it is organized or which govern its continued
existence; and comply with the requirements of all applicable laws, rules,
regulations, ordinances, orders of any governmental authority, including,
without limitation, all applicable Environmental Laws and ERISA, and
requirements for the maintenance of its insurance, licenses, permits,
governmental approvals, rights, privileges and franchises, including, but not
limited to, all applicable federal, state, regional or local environmental
laws, rules, regulations, ordinances and orders.
4.2.5 Insurance. Maintain and keep in force with insurers
reasonably acceptable to Purchaser insurance of the types and in amounts
customarily carried in lines of business similar to its line of business in the
relevant jurisdiction, including without limitation fire, extended coverage,
public liability, property damage, business interruption, and workers'
compensation, and deliver to Purchaser, from time to time, at Purchaser's
- 21 -
23
request, schedules setting forth all insurance then in effect. All premiums on
insurance policies required under this Section shall be paid by the Company.
4.2.6 Key Man Insurance. Within 180 days after Closing,
the Company shall obtain from an insurer reasonably acceptable to Purchaser,
and thereafter shall maintain until the Senior Subordinated Notes are repaid in
full, a policy of "key man" life insurance insuring the life of Xxxx X. Xxxxxx
in an amount equal to $2,000,000, and naming the Purchaser the beneficiary
thereof up to the principal amount of the Senior Subordinated Notes held by
Purchaser at any time. In the event of the death of Xx. Xxxxxx, the Purchaser
shall credit toward the prepayment of the Senior Subordinated Notes, as and
when received by Purchaser, the proceeds of such policy up to the aggregate
amount of the Senior Subordinated Notes and all interest accrued thereunder
outstanding at such time. The Company shall not change such beneficiary of, or
pledge or otherwise grant a security interest in, such "key man" life insurance
policy, to secure the Senior Debt or otherwise. Notwithstanding the foregoing
provisions of this Section 4.2.6, until January 1, 1997, Purchaser shall be
named the beneficiary the entire face amount of such policy without limitation
as to the principal amount of the Senior Subordinated Notes; and if Xx. Xxxxxx
dies on or prior to December 31, 1996, the Company shall, unless otherwise
directed by Purchaser, deliver all of the proceeds of such policy, if, as and
when received, to Purchaser (and Purchaser shall be entitled to retain all such
proceeds delivered to Purchaser), which proceeds shall first be applied toward
the prepayment of the Senior Subordinated Notes and shall, if such proceeds are
greater that the then-outstanding amount of the Senior Subordinated Notes, then
be retained by Purchaser without further obligation hereunder as a reduction of
the purchase price paid by Purchaser for the Preferred Stock.
4.2.7 Notice to Purchaser. Promptly (but in no event more
than five Business Days after the occurrence of each such event or matter) the
Company shall give notice in writing to Purchaser of: (a) any change in its
name, state of incorporation, organizational structure or composition; (b) any
termination or cancellation of any insurance policy which it is required to
maintain and which it does not replace with substantially similar coverage; (c)
any warranty claim or uninsured or partially uninsured loss or liability
through liability or property damage, or through fire, theft or any other cause
affecting its property in excess of an aggregate of $250,000; (d) any loss of a
customer from which the Company received more than 5% of its revenues during
the previous year; (e) any Event of Default or Potential Default; or (f) any
event proposed in writing by, or under active discussions with, any Person
that, if consummated, could result in a Change of Control.
4.2.8 Purchaser's Designee. As promptly as reasonably
practicable after the Closing Date, the Company shall cause one vacancy to be
created on the Board of Directors of the Company (by increasing the number of
members of the Board of Directors or otherwise) and shall, with respect to such
vacancy, thereafter immediately cause a person designated by Purchaser to be
elected to the Board of Directors. Each designee of the Purchaser shall serve
until his successor is duly elected and qualified. The
- 22 -
24
Company shall include one designee of Purchaser in the slate of nominees
recommended by the Board of Directors or the Company's management to
shareholders for election as directors at each annual meeting of shareholders
of the Company, commencing with the first annual meeting of shareholders after
the Closing Date and so long as Purchaser owns Preferred Stock, common stock of
the Company and Warrants representing, in the aggregate, ownership of or the
right to acquire at least 250,000 shares of Series A Common Stock of the
Company (as adjusted for stock splits, stock dividends and similar events
occurring after the date of this Agreement). The Company shall vote all shares
for which the Company's management or Board of Directors holds proxies or is
otherwise entitled to vote in favor of the election of such designee. The
Company's management shall in all respects use its best efforts to cause the
election of such designee. In the event that such designee shall cease to
serve as a director for any reason, the resulting vacancy shall be filled by a
designee of Purchaser. Any such designee of Purchaser must be reasonably
acceptable to the Company; provided that the Company shall not unreasonably
withhold its approval of any such designee. In the event that Purchaser ceases
to own Preferred Stock, common stock of the Company and Warrants representing,
in the aggregate, ownership of or the right to acquire at least 250,000 shares
of Series A Common Stock of the Company (as adjusted for stock splits, stock
dividends and similar events occurring after the date of this Agreement) for a
period of 90 consecutive days, Purchaser shall cause its designee to resign
from the Board of Directors. The Company's obligations under this Section
4.2.8 shall terminate at such time as Purchaser continues to beneficially own
Preferred Stock, common stock of the Company and Warrants representing, in the
aggregate, ownership of or the right to acquire less than 250,000 shares of
Series A Common Stock of the Company (as adjusted for stock splits, stock
dividends and similar events occurring after the date of this Agreement) for a
period of 180 days. Purchaser and the Company acknowledge and agree that the
Shareholders Agreement contains provisions that require the Purchaser to vote
to elect certain designees of other shareholders to the Board of Directors and
provisions that require other shareholders to vote to elect Purchaser's
designee to the Board of Directors.
4.2.9 Visitation Rights. The Company shall permit any
representatives designated by Purchaser, upon reasonable written notice and
during normal business hours and such other times as Purchaser may reasonably
request, to (i) visit and inspect any of the properties of the Company, (ii)
examine the corporate and financial records of the Company and make copies
thereof or extracts therefrom, and (iii) discuss the affairs, finances and
accounts of the Company with the directors, officers, key employees and
independent accountants of the Company. The presentation of an executed copy
of this Agreement by Purchaser to the Company's independent accountants shall
constitute the Company's permission to its independent accountants to
participate in discussions with such Persons.
4.2.10 Current Public Information. At all times after the
Company has filed a registration statement with the Securities and Exchange
Commission pursuant to the Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company shall file all reports required to be
filed by it under the Act and the Exchange
- 23 -
25
Act and the rules and regulations adopted by the Securities and Exchange
Commission thereunder and shall take such further action as the Purchaser may
reasonably request, all to the extent required to enable Purchaser or any other
holder, from time to time, of the Preferred Stock or shares of Series A Common
Stock issuable upon conversion of the Preferred Stock or exercise of warrants
issued under the Warrant Agreement to sell the Preferred Stock (or the Series A
Common Stock issuable upon conversion thereof) or such Series A Common Stock
pursuant to (i) Rule 144 adopted by the Securities and Exchange Commission
under the Act (as such rule may be amended from time to time) or any similar
rule or regulation hereafter adopted by the Securities and Exchange Commission
or (ii) as and to the extent set forth in the Registration Rights Agreement, a
registration statement on Forms X-0, X-0 or S-3 or any similar registration
form hereafter adopted by the Securities and Exchange Commission. Upon
request, the Company shall deliver to Purchaser a written statement as to
whether the Company has complied with such requirements.
4.2.11 Public Disclosures. The Company shall not disclose
Purchaser's name or identity as an investor of the Company in any press release
or other public announcement or in any document or material filed with any
governmental entity, without the prior written consent of Purchaser, unless
such disclosure (i) does nothing more than identify Purchaser as an investor in
the Company in a format previously approved by Purchaser or (ii) is required by
applicable law or governmental regulations or by order of a court of competent
jurisdiction, in which case prior to making such disclosure the Company shall
give written notice to Purchaser describing in reasonable detail the proposed
content of such disclosure and shall permit Purchaser to review and comment
upon the form and substance of such disclosure.
SECTION 5
NEGATIVE COVENANTS
The Company further covenants that, so long as any of the
Obligations of the Company to Purchaser hereunder remain outstanding and until
final payment in full of the Senior Subordinated Notes, without the prior
written consent of Purchaser, the Company shall not, and the Company shall not
allow any of its Affiliated Companies to:
5.1 Use of Funds. Use the proceeds of the purchase and sale of
Senior Subordinated Notes for any purpose other than financing the acquisition
of businesses in the same general line of business as that engaged in by the
Company (as described in Section 5.3) and for ordinary course of business
working capital purposes (other than payments of interest or principal due on
the Senior Subordinated Notes or the Senior Debt).
5.2 Dividends, Distributions. Except for dividends payable in
respect of the Company's Series A Convertible Preferred Stock and the Preferred
Stock, declare or pay any dividend or distribution either in cash, stock or any
other property on its capital stock now or hereafter outstanding or on any
warrant, option or other right to acquire capital
- 24 -
26
stock now or hereafter outstanding (except for the securities issued or
issuable under the Warrant Agreement) or redeem, retire, purchase or otherwise
acquire any shares of any class of its capital stock now or hereafter
outstanding or any warrant, option or other right to acquire capital stock now
or hereafter outstanding (except for the securities issued or issuable under
the Warrant Agreement), including without limitation any put, call or other
right to payment under any warrant, option or other right to acquire capital
stock now or hereafter outstanding (other than the securities issued or
issuable under the Warrant Agreement); provided, that any Affiliated Company
may pay dividends and distributions to the Company for reasonable and customary
administrative expenses of the Company, and (ii) the Company may purchase from
any of its current or former employees or officers the shares of Series A
Common Stock of the Company owned by any such current or former employee or
officer on the terms and conditions set forth in the shareholder agreements
between the Company and each such current or former employee or officer with
respect to such Series A Common Stock if (A) no Event of Default or Potential
Default has occurred at the time of payment for such shares, and (B) purchase
of such shares would not create an Event of Default or Potential Default.
5.3 Business. Discontinue the Business or engage in any business
activities or operations substantially different from or unrelated to the
development, implementation, sale, marketing and servicing of computer
databases, software, information products and other tools (and support services
related to such databases, software, information products and tools) to
measure, track, report on, and manipulate and analyze healthcare or insurance
industry information, including, without limitation, information concerning
costs, procedures, treatments, practitioners and protocols.
5.4 Indebtedness. Create, incur, assume or permit to exist any
Indebtedness (other than the Obligations); provided, however, that this Section
5.4 shall not prohibit:
(a) the incurrence of Senior Debt (as defined in
Section 4.1) or Other Credit Facilities (as defined in Section 1.1(b) of the
Warrant Agreement);
(b) the incurrence in the ordinary course of
business or trade accounts payable;
(c) Indebtedness for taxes, assessments,
governmental charges or levies;
(d) Indebtedness of the Company existing as of
the Closing Date and disclosed in the Financial Statements or in SCHEDULE 2.2.8
and indebtedness of any business acquired by the Company, which indebtedness
was outstanding immediately prior to the acquisition of such business and was
fully disclosed to the Company prior to acquiring such business;
- 25 -
27
(e) purchase money Indebtedness incurred in
connection with the acquisition of equipment and not in excess of $250,000 in
the aggregate at any time outstanding;
(f) debt to insurance or bonding companies in
connection with the performance or payment bonds obtained by the Company to
secure its performance under contracts entered into in the ordinary course of
its business;
(g) debt issued to sellers of businesses acquired
by the Company in full or partial consideration of the purchase of such
businesses; and
(i) Indebtedness between the Company and any
wholly-owned Subsidiary so long as it is evidenced by a note or other
instrument reasonably satisfactory to Purchaser.
5.5 Liens. Create or suffer to exist any Lien or any other type
of preferential arrangement, upon or with respect to any of its assets or
properties, whether now owned or hereafter acquired, or assign any right to
receive income to secure any Indebtedness of any Person except:
(a) Liens securing the Senior Debt;
(b) Leases and lessor interests in security
deposits given pursuant to leases of real property entered into by the Company
or any of its Affiliated Companies, as lessee, in the ordinary course of
business;
(c) Liens for current taxes, assessments or other
governmental charges (i) which are not delinquent, or (ii) the validity of
which is contested in good faith by appropriate proceedings upon stay of
execution of the enforcement thereof and which are in respect of claims for
current taxes, assessments or other governmental charges not exceeding an
aggregate amount of $100,000;
(d) Liens, for charges incurred in the ordinary
course of business in connection with worker's compensation, unemployment
insurance or other forms of governmental insurance or benefits, or to secure
performance of statutory obligations entered into in the ordinary course of
business;
(e) Liens of attachment and judgment respecting
claims, the validity of which is being contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof (i) in an
aggregate amount not exceeding $100,000, or (ii) which shall be vacated within
10 days after the creation thereof;
(f) Mechanics', materialmen's or other similar
Liens arising in the ordinary course of business which either (i) are inchoate
and relate to an obligation which is not yet due and payable or (ii) are being
contested in good faith by appropriate
- 26 -
28
proceedings upon stay of execution of the enforcement thereof and are in an
aggregate amount not exceeding $100,000;
(g) Liens incurred in connection with purchase
money Indebtedness permitted under Section 5.5(f);
(h) Liens securing Indebtedness permitted under
subsections (a), (c), (d), and (f), Section 5.4; and
(i) Liens incurred in replacement of Liens
permitted under Section 5.5(a) through (h).
5.6 Subsidiaries; Investments. Create any Subsidiary, make any
capital contribution to or other investment in any Affiliated Company or make
any Investment, except for Permitted Investments. Notwithstanding the
provisions of the preceding sentence, the Company may, with the prior written
consent of Purchaser, which consent will not be unreasonably withheld, create a
Subsidiary provided that (i) the Company shall not make any capital
contribution to or other investment in excess of $500,000 in any such
Subsidiary unless such contribution or investment is approved in advance by
Purchaser, (ii) the Company may purchase stock of another corporation in an
acquisition transaction (not described in Section 5.8 below) in which the
Company becomes the owner of 80% or more of the equity of such corporation;
(iii) each of the terms, covenants and conditions of the Investment Documents
applicable to the business and operations of the Company shall be applicable to
the business and operations of such Subsidiary, including without limitation
all financial covenants and reporting requirements which, unless otherwise
required by Purchaser, shall be applied on a consolidated basis, (iv) all
financial statements shall be prepared on a consolidated basis and (iv) the
Company shall own, directly or indirectly, 100% of the capital stock of such a
Subsidiary that is newly created and 80% of the capital stock of an acquired
Subsidiary. Purchaser acknowledges and agrees that the Company may acquire all
of the outstanding capital stock of Formations in Health Care, Inc. from
Xxxxxxx Xxxxxx for consideration consisting of cash, stock and options to
purchase stock.
5.7 Guaranteed Indebtedness. Create, assume, incur, or be or
become liable for any Guaranteed Indebtedness except: (a) it may endorse
negotiable instruments for deposit or collection in the ordinary course of
business; (b) any Affiliated Company of the Company may guaranty or become
jointly liable with respect to the Obligations; and (c) it may guaranty or
become jointly liable on any Indebtedness or Lien which such guarantor would
have been permitted to incur under Sections 5.4 and 5.5; (d) guarantees of the
Senior Debt or an Other Credit Facility; and (e) guarantees of the Obligations.
5.8 Mergers. Merge with or into, consolidate with or into, or
enter into a statutory share exchange with another Person or acquire all or
substantially all of the assets or capital stock of any Person, provided,
however, that (i) the Company may acquire all of the outstanding capital stock
of Formations in Health Care, Inc. from
- 27 -
29
Xxxxxxx Xxxxxx as permitted in Section 5.6 hereof, (ii) the Company may make
acquisitions at fair market value in arm's- length transactions, which do not
individually or when taken together with all other acquisitions after the date
of this Agreement result in a Change of Control; and (iii) in either event each
of the terms covenants and conditions of the Investment Documents applicable to
the business and operations of the Company shall be applicable to the business
and operations of the acquired company, including without limitation all
financial covenants and reporting requirements which, unless otherwise required
by Purchaser, shall be applied on a consolidated basis.
5.9 Restrictions on Sales of Assets. Sell or otherwise dispose of
any property except:
(a) sales, leases, rentals or dispositions of
property as a result of a constructive loss or similar loss of the property or
a decision to dispose under a fix/sell analysis;
(b) sales, leases, rentals or dispositions of
property in the ordinary course of business and for consideration not less than
the fair market value;
(c) sales, leases, rentals or dispositions of
property not in excess of $200,000 in the aggregate during any Fiscal Year; and
(d) the disposition of any obsolete or retired
property not used or useful in its business the fair market value of which
obsolete or retired property, singly or when aggregated with all other such
assets sold pursuant to this clause (e) over the original term of the Senior
Subordinated Notes does not exceed $500,000.
5.10 Financial Covenants.
5.10.1 Consolidated EBITDA. Permit the Consolidated EBITDA
determined at the end of each Fiscal Year to be less than the amount specified
below:
Fiscal Year Ending Amount
------------------ ------
December 31, 1996 $ 1,800,000
December 31, 1997 $ 3,900,000
December 31, 1998 $ 5,900,000
December 31, 1999 $ 8,800,000
December 31, 2000 and thereafter $ 13,000,000
5.10.2 Minimum Consolidated Net Worth. Permit Consolidated
Net Worth determined at the end of each Fiscal Year specified below to be less
than the amount specified below:
- 28 -
30
Fiscal Year Ending Amount
------------------ ------
December 31, 1995 $ 300,000
December 31, 1996 $ 3,500,000
December 31, 1997 $ 5,000,000
December 31, 1998 $ 8,000,000
December 31, 1999 $12,000,000
December 31, 2000 and thereafter $16,000,000
5.10.3 Consolidated Debt to Consolidated EBITDA. Permit the
ratio of Consolidated Debt to Consolidated EBITDA determined at the end of each
Fiscal Year to exceed the ratio specified below:
Fiscal Year Ending Amount
------------------ ------
December 31, 1996 4.0:1.0
December 31, 1997 3.0:1.0
December 31, 1998 2.0:1.0
December 31, 1999 1.0:1.0
December 31, 2000 and thereafter 1.0:1.0
(C) Fixed Charge Coverage. Permit the Fixed Charge
Coverage Ratio determined at the end of each Fiscal Year to be less than the
ratio specified below:
Fiscal Year Ending Amount
------------------ ------
December 31, 1996 2.0:1.0
December 31, 1997 4.0:1.0
December 31, 1998 and thereafter 6.0:1.0
5.11 Prepayment of Indebtedness. Prepay Indebtedness, other than
the Senior Debt and the Obligations, before the stated maturity thereof.
5.12 Executive Compensation. Allow any of its officers, directors
or employees to use any assets or property of the Company or any of its
Affiliated Companies for personal purposes. Neither the Company nor any of its
Affiliated Companies shall increase the salary or other compensation or
benefits paid or provided to any officer or director of the Company or such
Affiliated Company except to the extent that such increase (a) is commercially
reasonable and in accordance with industry standards and (b) is approved by the
Compensation Committee (composed entirely of directors who are not employees of
the Company or any Affiliate of the Company) of the Board of Directors of the
Company or such Affiliated Company, as the case may be, provided that in no
event will any option plan or option agreement be amended or instituted which
causes the total
- 29 -
31
of all options available for grant to employees, directors and sellers of
businesses acquired by the Company, outstanding options issued to employees,
directors and sellers of businesses acquired by the Company, and stock issued
under any employee benefit plan or otherwise to any employee or director (in
his or her capacity as such) to exceed 493,850 shares of Series A Common Stock
(as adjusted for stock splits, stock dividends and similar events occurring
after the date of this Agreement).
5.13 Series of Common Stock. Amend the Articles of Incorporation
of the Company or otherwise adopt any class or series of common stock of the
Company other than the Series A Common Stock or issue any shares of capital
stock of the Company or any options, rights or warrants convertible into or
exercisable or exchangeable for any such capital stock, except for Excluded
Shares (as defined in the Amended and Restated Articles of Incorporation of the
Company attached hereto as EXHIBIT A).
SECTION 6
EVENTS OF DEFAULT
6.1 Events of Default. The occurrence of any of the following
shall constitute an "Event of Default" under this Agreement:
(a) the Company shall fail to pay when due any
principal, interest, premium or other amount payable under the Senior
Subordinated Notes;
(b) the Company shall fail to observe or perform,
or shall fail to cause any of its Affiliated Companies to observe or perform,
any obligation, covenant or other provision contained in any of the Investment
Documents (other than a failure to pay when due principal, interest, premium or
other amounts payable under the Senior Subordinated Notes), or in the Consent
and Modification Agreement (whether or not such failure is consented to or
waived by the shareholders who are parties to the Consent and Modification
Agreement), which failure, if susceptible of cure, is not cured prior to the
later of 30 days after the occurrence of such failure or the expiration of any
applicable grace period for performance of such obligation, covenant or other
provision, or which failure is not waived by Purchaser in writing;
(c) any representation or warranty made by the
Company herein or in any of the Investment Documents shall be false or
misleading in any material respect on the date upon which such representation
or warranty is made or deemed made;
(d) acceleration of any Indebtedness of the
Company or any of its Affiliated Companies, which Indebtedness in the aggregate
principal amount exceeds $100,000;
(e) any material default under the Senior Debt,
an Other Credit Facility or any other indebtedness of the Company for borrowed
money owed to a bank, insurance company, venture capital firm or other
financial institution;
- 30 -
32
(f) the entry of any judgment, order or decree
against a the Company or any of its Affiliated Companies; or the filing of a
notice of judgment lien against the Company or any of its Affiliated Companies;
or the recording of any abstract of judgment against the Company or any of its
Affiliated Companies in any county in which the Company or such Affiliated
Company has an interest in real property; or the service of a notice of levy or
of a writ of attachment or execution, or other like process, against the assets
of the Company or any of its Affiliated Companies; and such judgment, judgment
lien, levy, attachment or execution shall not have been vacated, discharged or
stayed within 30 days from the entry thereof;
(g) the Company or any of its Affiliated
Companies shall cease to be Solvent, or shall suffer or consent to or apply for
the appointment of a receiver or administrative receiver, trustee, custodian or
liquidator of itself or any of its property, or shall generally fail to pay its
debts as they become due, or shall make a general assignment for the benefit of
creditors; the Company or any of its Affiliated Companies shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Code, or under any state or federal law granting relief to debtors,
whether now or hereafter in effect; or any involuntary petition or proceeding
pursuant to the Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for debtors is filed or
commenced against the Company or any of its Affiliated Companies, which
petition or proceeding (i) results in the entry of an order for relief or any
such adjudication of relief, or (ii) remains unreleased or undischarged for a
period of 60 days, or (iii) the Company or such Affiliated Company files an
answer admitting jurisdiction of the court and the material allegations of the
petition; or the Company or any of its Affiliated Companies shall be
adjudicated a bankrupt, or an order for relief shall be entered by any court of
competent jurisdiction under the Bankruptcy Code or any other applicable state
or federal law relating to bankruptcy, reorganization or other relief for
debtors;
(h) the dissolution of, the liquidation of, or
the suspension of business by, the Company, or any of the directors or
shareholders of the Company shall take action seeking to effect the dissolution
or liquidation of the Company;
(i) any of the Investment Documents shall, at any
time, cease to be in full force and effect except in accordance with its terms
or shall be declared null and void pursuant to a judicial or other governmental
act, or the validity or enforceability thereof shall be contested by any party
thereto; and
(j) any financial statement, report or other
document to be delivered by or on behalf of the Company to the Purchaser after
the Closing Date pursuant to the Investment Documents is false or misleading in
any material respect when made or delivered.
6.2 Remedies.
- 31 -
33
6.2.1 Termination of Advances; Acceleration. Upon the
occurrence of any Event of Default, and at any time thereafter as long as the
Event of Default is continuing, (i) Purchaser may, by notice to the Company,
declare the Purchaser's obligation to purchase Senior Subordinated Notes under
Section 1.2 of this Agreement to be terminated, whereupon the same shall
forthwith terminate and (ii) the holders of a majority of the then-outstanding
principal amount of the Senior Subordinated Notes may, by notice to the
Company, declare the Senior Subordinated Notes and all interest thereon and all
other amounts payable under this Agreement and the Investment Documents to be
forthwith due and payable, whereupon the Senior Subordinated Notes, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Company; provided, however, that in
the event of an actual or deemed entry of an order for relief with respect to
the Company or any of its Subsidiaries under the Federal Bankruptcy Code, then,
unless any such Event of Default is waived in writing by Purchaser, (x) the
obligation of the Purchaser to purchase Senior Subordinated Notes under Section
1.2 of this Agreement shall automatically be terminated and (y) the Senior
Subordinated Notes, and all such interest and all such amounts shall
automatically become and be due and payable without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Company. In addition, without limiting any other rights of Purchaser or a
holder of Senior Subordinated Notes, whenever the holders of a majority of the
outstanding amount of the Senior Subordinated Notes have the right to declare
any indebtedness to be immediately due and payable and have so declared and
whenever the Senior Subordinated notes shall become automatically due and
payable as provided in the immediately preceding sentence, Purchaser and any
such holder may set off against the indebtedness without notice any amounts
then owed to the Company by Purchaser or such holder in any capacity.
6.2.2 Cumulative Remedies. All rights, remedies or
recourse of the holders of the Senior Subordinated Notes under this Agreement,
the Senior Subordinated Notes, or any other Investment Documents, under the
Uniform Commercial Code or other law, in equity or otherwise, are cumulative,
and exercisable concurrently and may be pursued singularly, successively or
together and may be exercised as often as occasion therefor shall arise. No
act of commission or omission by a holder of the Senior Subordinated Notes,
including, but not limited to, any failure to exercise, or any delay,
forbearance or indulgence in the exercise of any right, remedy or recourse
hereunder or under any Investment Document shall be deemed a waiver, release or
modification of that or any other right, remedy or recourse, and no single or
partial exercise of any right, remedy or recourse shall preclude the Purchaser
from any other or future exercise of the right, remedy or recourse or the
exercise of any other right, remedy or recourse. No waiver or release of any
such rights, remedies and recourse shall be effective against Purchaser or any
holder of the Senior Subordinated Notes unless in writing and manually signed
by an authorized officer of Purchaser or such holder, and then only to the
extent therein recited. A waiver, release or modification with reference to
any one event shall not be construed as continuing or constituting a course of
dealing, and no such waiver, release
- 32 -
34
or modification shall be construed as a bar to, or as a waiver, release or
modification of, any subsequent right, remedy or recourse as to a subsequent
event.
6.2.3 No Liability. Whether or not the holders of the
Senior Subordinated Notes elect to employ any or all remedies available in the
event of the occurrence of any Event of Default, such holders shall not be
liable for the payment of any expenses incurred by the Company in connection
with the exercise of any remedy available or for the performance or
non-performance of any obligation of the Company.
6.2.4 Waiver of Default. Purchaser or any other holder of
Senior Subordinated Notes may, by written notice to the Company, at any time
and from time to time, waive any Event of Default that has occurred hereunder
and its consequences. Any such waiver shall be for such period and subject to
such conditions as shall be specified in any such notice. In the case of any
such waiver, the Company shall be restored to its former position hereunder and
under the Investment Documents, and any Event of Default so waived shall be
deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Event of Default.
6.2.5 No Waiver. No failure to exercise and no delay in
exercising, on the part of any holder of Senior Subordinated Notes, any right,
power or privilege hereunder or under any of the other Investment Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.
6.2.6 Right to Damages. Without limiting the foregoing,
the Purchaser shall be entitled to recover damages (including, without
limitation, reasonable attorneys' fees and expenses of any suit to enforce this
Agreement or recover damages hereunder) from the Company by reason of any
breach by the Company of any provision of this Agreement, any Investment
Document (including, without limitation, the representations, warranties and
covenants of the Company contained therein and herein), the Company's Articles
of Incorporation or Bylaws or any other document delivered at the same time as
the execution and delivery of this Agreement or related thereto.
SECTION 7
MISCELLANEOUS
7.1 Transfers. Prior to the earlier to occur of (i) an Initial
Public Offering by the Company or (ii) December 31, 2002, Purchaser may not
assign this Agreement or make a transfer of the Preferred Stock, except to an
Affiliate of Purchaser, the obligations of which Affiliate the Purchaser
unconditionally guarantees. The Purchaser may transfer the Senior Subordinated
Notes issued hereunder to any party that is not a competitor of the Company.
7.2 Termination.
- 33 -
35
7.2.1 Method of Termination. This Agreement and the
transactions contemplated by it may be terminated at any time prior to the
Closing:
(a) By the mutual consent of Seller and Purchaser;
(b) By the Company after January 8, 1996 if the
transactions contemplated hereby have not been closed or if any of the
conditions to the Company's obligations set forth in Section 3.3 have not been
satisfied or waived by the Company, unless the failure to close such
transactions is due to any failure by the Company to perform in any material
respect its agreements contained herein required to be performed by it on or
prior to the Closing Date, or a material breach any of the Company's
representations, warranties or covenants contained herein;
(c) By Purchaser after January 31, 1996, if the
transactions contemplated hereby have not been closed or if any of the
conditions to Purchaser's obligations set forth in Section 3.1 have not been
satisfied or waived by Purchaser, unless the failure to close such transactions
is due to any failure by Purchaser to perform in any material respect its
agreements contained herein required to be performed by it on or prior to the
Closing Date, or a material breach any of Purchaser's representations,
warranties or covenants contained herein;
(d) By the Company or Purchaser at any time after
February 15, 1996, if the Closing shall not have occurred for any reason on or
prior to February 15, 1996;
(e) By either Purchaser or the Company if there shall be
any order, writ, injunction or decree of any court or governmental or
regulatory agency binding on Purchaser or the Company, which prohibits or
restrains Purchaser and/or the Company from consummating the transactions
contemplated by this Agreement, provided that Purchaser and the Company shall
have used their reasonable best efforts to have any such order, writ,
injunction or decree lifted and the same shall not have been lifted within 30
days after entry, by any such court or governmental or regulatory agency.
7.2.2 Notice of Termination. Notice of termination of this
Agreement, as provided for in this Section 7.2, shall be given by the party so
terminating to the other party hereto in accordance with Section 7.3 of this
Agreement.
7.2.3 Effect of Termination. If this Agreement terminates
pursuant to Section 7.2, this Agreement shall become void and of no further
force and effect, and each party shall pay the costs and expenses incurred by
it in connection with this Agreement and, provided the Agreement was not
terminated as a result of a breach of this Agreement, no party (or any of its
officers, directors, employees, agents, representatives or shareholders) shall
be liable to any other party for any costs, expenses, damages (direct or
indirect) or loss of anticipated profits. If, however, this Agreement is
terminated as a
- 34 -
36
result of a breach, this Section 7.2.3 shall not relieve a breaching or
defaulting party from any liability to the other party.
7.2.4 Termination of Covenants. If the transactions
contemplated by this Agreement are consummated, all of the covenants set forth
in Sections 4 and 5 (except for the covenants set forth in Section 4.2.8) shall
remain in force until no Obligations of the Company to Purchaser hereunder or
of Purchaser to the Company hereunder remain outstanding and until payment in
full of the Senior Subordinated Notes, and when there are no such Obligations
and the Senior Subordinated Notes have been paid in full, the covenants set
forth in Sections 4 and 5 (except for the covenants set forth in Section 4.2.8)
shall terminate and be of no further force and effect. The covenant set forth
in Section 4.2.8 shall remain in force as provided in such covenant.
7.3 Notices. In order to be effective, any notice or other
communication required or permitted hereunder, shall, unless otherwise stated
herein, be in writing and shall be transmitted by messenger, delivery service,
mail, telecopy, as specified below:
If to Purchaser:
HealthPlan Services Corporation
X.X. Xxx 00000
Xxxxx, Xxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Xx. Xxxxx X. Xxxxxx III, Chief Financial
Officer and Xxxx Xxxx, General Counsel
with a copy (which shall not constitute notice) to:
Fowler, White, Gillen, Boggs, Xxxxxxxxx and Banker, P.A.
000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxx
If to the Company:
Medirisk, Inc.
Two Piedmont Center, Suite 400
0000 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Chairman and Chief
Executive Officer
- 35 -
37
With a copy (which shall not constitute notice) to:
Xxxxxx & Bird
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxx
or at such other address as a party shall designate in a written notice to the
other parties hereto given in accordance with this Section 7.3. All notices
and other communications shall be effective (i) if sent by messenger or
delivery service, when delivered, (ii) if sent by mail, five days after having
been sent by certified mail, with return receipt requested, or (iii) if sent by
telecopier with receipt acknowledged, when sent.
7.3 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, except that Purchaser may not assign this Agreement or any rights
hereunder except as provided in Section 7.1, and except that Purchaser may not,
even if assignment is permitted under Section 7.1, assign its right to
designate a member of the Board of Directors of the Company pursuant to Section
4.2.8, except to an Affiliate of Purchaser.
7.4 Entire Agreement, Amendment. The Investment Documents
(including the Exhibits and Schedules thereto) executed by the Company in
connection with, or as required by, this Agreement constitute the entire
agreement between the Company and Purchaser with respect to the transactions
contemplated by this Agreement; supersede all prior or contemporaneous
negotiations, communications, discussions and correspondence concerning the
subject matter hereof; and may be amended or modified only with the written
consent of the holders of a majority in principal amount of the Senior
Subordinated Notes then outstanding, except that no such amendment or
modification shall become effective if it extends the maturity or reduces the
rate of interest payable with respect to the Senior Subordinated Notes, alters
the terms of payment of the principal and interest under the Senior
Subordinated Notes, or reduces the percentage of holders of principal amount of
the Senior Subordinated Notes necessary to approve modifications or amendments
to this Agreement without the consent of each holder of the Senior Subordinated
Notes affected thereby. Whenever the consent or approval of Purchaser is
required, such consent or approval must be given in writing by the holders of a
majority in principal amount of the Senior Subordinated Notes then outstanding.
7.5 Severability of Provisions. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or any
remaining provisions of this Agreement, and the parties shall use their
respective best efforts to negotiate and enter into an amendment to this
Agreement whereby such provision will be modified in a manner that is
consistent with the intended
- 36 -
38
economic consequences of the invalid provision and that, as modified, is legal
and enforceable.
7.6 GOVERNING LAW. THIS AGREEMENT AND THE SENIOR SUBORDINATED
NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF GEORGIA.
7.7 CONSENT TO EXCLUSIVE JURISDICTION, VENUE AND FORUM. THE
COMPANY HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION, VENUE AND FORUM OF ANY
STATE OR FEDERAL COURT IN TAMPA, FLORIDA WITH RESPECT TO ANY ACTION, WHETHER
COMMENCED BY PURCHASER OR ANY OTHER PERSON, WHICH, IN WHOLE OR IN PART, IN ANY
WAY ARISES UNDER OR RELATES TO THE INVESTMENT DOCUMENTS, AND THE COMPANY AGREES
THAT ANY SUCH ACTION FILED BY IT WILL BE FILED IN SUCH A COURT.
7.8 Incorporation of Exhibits and Schedules by Reference. All
Appendices, Exhibits and Schedules to this Agreement are incorporated herein by
this reference.
7.9 Counterparts. This Agreement may be executed in separate
counterparts, each of which, when so executed, shall be deemed to be an
original and all of which, when taken together, shall constitute but one and
the same agreement.
7.10 Survival. The representations, warranties, covenants and
agreements made herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
notwithstanding any investigation made by Purchaser or its agents or
representatives.
7.11 Interest. The Company and Purchaser agree that in no event
shall the amount of interest or other consideration due to Purchaser with
respect to the making of the loans evidenced by the Senior Subordinated Notes
exceed the maximum rate of interest allowed by applicable law, and in the event
any such payment is inadvertently paid by the Company or inadvertently received
by the Purchaser, then such excess sum shall be credited as a payment of
principal to be applied to the principal, unless the Company shall notify
Purchaser in writing that the Company elects to have such excess sum returned
to it forthwith. It is the express intent of the parties hereto that the
Company not pay and Purchaser not receive, directly or indirectly, in any
manner whatsoever, interest in excess of that which may be lawfully paid by the
Company under applicable law.
(remainder of page intentionally left blank, signatures follow)
- 37 -
39
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed the day and year first written above.
MEDIRISK, INC.
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Xxxx X. Xxxxxx, Chairman and Chief
Executive Officer
HEALTHPLAN SERVICES CORPORATION
By: /s/ Xxxxx X. Xxxxxx, III
-------------------------------------
Xxxxx X. Xxxxxx III, Executive Vice
President and Chief Financial Officer
40
EXHIBITS
Exhibit A: Form of Amended and Restated Articles of Incorporation
Exhibit B: Form of Senior Subordinated Promissory Note
Exhibit C: Capitalization
Exhibit D: Financial Statements
Exhibit E: Form of Shareholders Agreement
Exhibit F: Form of Registration Rights Agreement
Exhibit G: Form of Warrant Agreement
Exhibit H Form of Opinion of Xxxxxx & Bird
Exhibit I Form of Opinion of Fowler, White, Gillen, Boggs, Xxxxxxxxx and
Xxxxx P.A.
Exhibit J Form of Consent and Modification Agreement
SCHEDULES
Schedule 2.2.1 Existing Preemptive Rights
Schedule 2.2.2 Required Consents
Schedule 2.2.6.1 Variations from Assumptions
Schedule 2.2.6.2 Pro Forma Financial Statements
Schedule 2.2.8 Absence of Certain Changes
Schedule 2.2.11 Tax Matters
Schedule 2.2.12 Insurance Policies
Schedule 2.2.13 Debt Instruments
Schedule 2.2.14 Benefit Plans
Schedule 2.2.15 Contracts and Commitments
Schedule 2.2.16 Labor Matters
Schedule 2.2.21 Proprietary Rights
Schedule 2.2.22 Envrironmental Matters
Schedule 2.2.23 Accounts Receivable
41
APPENDIX A
DEFINITIONS
A. Certain Defined Terms.
The following terms used in this Agreement have the following
meanings:
"Act" means the Securities Act of 1933, as amended from time
to time, or any successor statute.
"Affiliate" means, as to any Person, any other Person that
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
means possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities,
or partnership or other ownership interests, by contract or otherwise),
provided that, in any event: (a) any Person that owns directly or indirectly
fifty percent (50%) or more of the securities having ordinary voting power for
the election of directors or other members of the governing body of a
corporation or fifty percent (50%) or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of
such other Person) will be deemed to control such corporation or other Person;
and (b) each director or officer of such Person shall be deemed to be an
Affiliate of such Person.
"Affiliated Company" means any Subsidiary of the Company.
"Agreement" means this Securities Purchase Agreement, as it
may be amended from time to time.
"Bank" means the lender or lenders chosen by the Company to
provide up to $2,000,000 in secured working capital and/or equipment financing
indebtedness, and any successor, assign or subsequent holder of the Senior
Debt.
"Bankruptcy Code" means the Bankruptcy Reform Act, Title 11 of
the United States Code, as amended or recodified from time to time, or any
successor statute.
"Business" means the business of the Company as presently
conducted and as proposed to be conducted.
"Business Day" means any day on which commercial banks in
Tampa, Florida are required to be open for business.
"Capital Lease" means a lease giving rise to a Capitalized
Lease Obligation.
42
"Capitalized Lease Obligation" means indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
"Change of Control" means, with respect to the Company, a sale
of all or substantially all of the Company's assets; a merger, statutory share
exchange or consolidation in which the Persons holding the Company's voting
securities as of the Closing Date (and assuming (i) the grant to and exercise
by the Purchaser of the greater of (A) 68.15% of the maximum number of warrants
to be issued to the Purchaser under the Warrant Agreement and (B) the number of
Warrants actually issued to Purchaser under the Warrant Agreement, and (ii) the
exercise of all warrants and options of the Company outstanding on the Closing
Date by the holders thereof) cease to hold more than 50% of the Outstanding
Voting Power of the surviving or resulting corporation; or a transaction or
series of transactions in which a Person or group (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934), (i) who did not hold voting
securities of the Company as of the date of this Agreement, acquires beneficial
ownership of more than 50% of the Outstanding Voting Power of the Company or
(ii) increased its ownership of voting securities of the Company from the
number beneficially owned by such Person or group as of the Closing Date to
more than 50% of the Outstanding Voting Power of the Company.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" means January 8, 1996.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
"Company" has the meaning set forth in the first paragraph
of this Agreement.
"Consent and Modification Agreement" means that certain
Consent and Modification Agreement, of even date herewith, by and among the
Company, Sears Pension Trust, Xxxxxxxx Investment Partners II, L.P. and
Xxxxxxxx X. Xxxxxx, substantially in the form of EXHIBIT J attached hereto.
"Consolidated Amortization" means, for any period, the
aggregate amount of all amortization expense of the Company as shown on the
consolidated financial statements of the Company in accordance with GAAP.
"Consolidated Debt" means the sum of all Indebtedness of the
Company as determined in accordance with GAAP, after elimination of all
intercompany items.
- 2 -
43
"Consolidated Depreciation" means, for any period, the
aggregate amount of all depreciation expense of the Company as shown on the
consolidated financial statements of the Company in accordance with GAAP.
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for the Company for such period as determined in accordance with GAAP,
plus all amounts deducted therefrom for such period, if any, in respect of (i)
Consolidated Interest Charges, (ii) Consolidated Depreciation, (iii)
Consolidated Taxes and (iv) Consolidated Amortization.
"Consolidated Interest Charges" means, for any period, the
aggregate amount of all interest on Indebtedness (including payments in the
nature of interest under Capital Leases) that would, in accordance with GAAP,
be deducted in determining Consolidated Net Income for such period.
"Consolidated Net Income," for any period, means the amount of
net income or net loss of the Company, for such period (taken as a cumulative
whole) determined on a consolidated basis in accordance with GAAP after
elimination of intercompany items and portions of income attributable to
minority interests in Subsidiaries (until such earnings are received by the
Company), provided, that there shall be excluded:
(i) any gains or losses on the sale or other disposition
of investments or of fixed or capital assets, and any taxes on such
excluded gains and any tax deductions or tax credits on account of any
such excluded losses;
(ii) the proceeds of any life insurance policy;
(iii) net earnings and losses of any Subsidiary accrued
prior to the date it became a Subsidiary;
(iv) net earnings and losses of any entity, substantially
all the assets of which have been acquired in any manner, that were
realized by such entity prior to the date of such acquisition;
(v) net earnings and losses of any entity (i) with which
the Company shall have consolidated, (ii) that shall have merged into
or with the Company, or (iii) that shall have acquired or been
acquired by the Company through a statutory share exchange, which
earnings and losses were realized by such entity prior to the date of
such consolidation or merger;
(vi) net earnings of any business entity (other than a
Subsidiary) in which the Company has an ownership interest unless such
net earnings shall have actually been received by the Company in the
form of cash distributions; and
- 3 -
44
(vii) earnings resulting from any reappraisal, reevaluation
or write-up of assets.
"Consolidated Net Worth" means at any time the consolidated
stockholders' equity of the Company as of such time as determined in accordance
with GAAP.
"Consolidated Taxes" means, for any period, the aggregate
amount of all Taxes paid by the Company during such period, as determined in
accordance with GAAP.
"Debt Instruments" has the meaning set forth in Section 2.2.13.
"Dollars" and "$" mean the lawful money of the United States
of America.
"Environmental Law" means any statute, law, ordinance,
regulation, order or rule of any federal or state governmental agency or body
that relates to pollution or protection of the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq. and other statutes, laws, ordinances,
regulations, orders or rules relating to emissions, discharges, releases or
threatened releases of Hazardous Wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute.
"ERISA Affiliate" means any company which, as of a given
moment, is a member of a "controlled group of corporations" or a group of
"trades or businesses (whether or not incorporated) which are under common
control" (as defined in Sections 414(b) and (c) of the Code, respectively) of
which Borrower or any of its Affiliated Companies is a member.
"Events of Default" means each of the events set forth in
Section 6.1.
"Exchange Act" has the meaning set forth in Section 4.2.10.
"Financial Statements" means balance sheet and statements of
income and cash flows for the Company for the Fiscal Years ending December 31,
1993 and December 31, 1994 and the balance sheet and statement of income and
cash flows for the Company for the nine-month period ending September 30, 1995.
"Fiscal Year" means the fiscal year of the Company, which
shall be the twelve-month period ending on the last day in the month of
December.
- 4 -
45
"Fixed Charge Coverage Ratio" means (i) Consolidated EBITDA
divided by (ii) scheduled payments of principal on Consolidated Debt plus cash
payments of Consolidated Interested Charges.
"GAAP" means generally accepted accounting principles and
practices, consistently applied, as promulgated in (i) the documents of Rule
203 of the Code of Professional Conduct of the American Institute of Certified
Public Accountants, (ii) Statement of Accounting Standards No. 43 "Omnibus
Statement on Auditing Standards" of the Auditing Standards Board of the
American Institute of Certified Public Accountants and (iii) any superseding or
supplemental documentation of equal authority promulgating generally accepted
accounting principles and practices, all as in effect from time to time.
"Guaranteed Indebtedness" of any Person means all Indebtedness
(x) of any Person other than such Person and either (y) guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (a) to pay or purchase such
Indebtedness or to advance or supply funds for the payment or purchase of such
Indebtedness, (b) to purchase, sell or lease (as lessee or lessor) property, or
to purchase or sell services, primarily for the purpose of enabling the debtor
to make payment of such Indebtedness or to assure the holder of such
Indebtedness against loss, (c) to supply funds to or in any other manner invest
in the debtor (including any agreement to pay for property or services
irrespective of whether or not such property is received or such services are
rendered and any agreement to maintain working capital or other balance sheet
condition) or (d) otherwise to assure the holder of such Indebtedness against
loss, or (z) secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any lien, security
interest or other charge or encumbrance upon or in property (including without
limitation accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness.
"Hazardous Wastes" means any substance or waste that is
defined as hazardous or toxic in any in any Environmental Law.
"Indebtedness" means, for any Person without double counting,
(i) all indebtedness or other obligations of such Person for borrowed money or
for the deferred purchase price of property or services, (ii) all indebtedness
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property), (iii) all
obligations under leases that are or should be, in accordance with GAAP,
recorded as Capital Leases in respect of which such Person is liable as lessee,
(iv) liabilities in respect of unfunded vested benefits under any Plan, (v) all
obligations owed pursuant to any interest rate hedging arrangement or in
respect of any letter of credit established for the account of such Person
(including without limitation all obligations to reimburse the
- 5 -
46
issuer thereof in respect of amounts drawn thereunder), and (vi) all Guaranteed
Indebtedness.
"Initial Public Offering" means the Company's first offering
of Common Stock of the Company that is registered under the Act, which offering
is underwritten on a firm commitment basis and produces gross proceeds in
excess of $10,000,000.
"Investment" as applied to any Person, means any direct or
indirect purchase or other acquisition by that Person of stock or other
securities, or of a beneficial interest in stock or other securities, of any
other Person (other than a Subsidiary), or any direct or indirect loan, advance
(other than advances to employees for moving and travel expenses, drawing
accounts, and similar expenditures in the ordinary course of business) or
capital contribution by that Person to any other Person, including all
Indebtedness and accounts receivable from that other Person which are not
current assets or did not arise from sales of goods or services to that other
Person in the ordinary course of business. The amount of any Investment (other
than loans, advances and accounts receivable) shall be the original cost of
such Investment plus the cost of all additions thereto, and the amount of any
Investment shall be without any adjustments for increases or decreases in
value, or write-ups, write-downs, or write-offs with respect to such
Investment.
"Investment Documents" means this Agreement, the Senior
Subordinated Notes, the Warrant Agreement, the Registration Rights Agreement
and the Shareholders Agreement.
"Liabilities" means obligations of any nature, whether
absolute, accrued, contingent or otherwise, whether due or to become due and
whether or not required to be reflected or reserved against on a balance sheet
under GAAP.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, whether voluntary or involuntary,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code of any jurisdiction.
"Material Adverse Effect" means any circumstances, change in,
or effect on the Company or its business that, individually or when taken
together with all other circumstances, changes in or effects on the Company or
its business is or is reasonably likely to be materially adverse to the
condition (financial or otherwise), results of operations, earnings, business,
assets (including intangible assets) or prospects of the Company or a material
and adverse effect on the Company's ability to perform its obligations under
any of the Investment Documents or Material Agreements or under any other
document, investment or agreement issued in connection herewith or therewith to
which the Company is a party or any adverse effect whether or not material,
upon the binding nature, validity or enforceability of any material provision
of any Investment Document or Material Agreement.
- 6 -
47
"Material Agreement" has the meaning set forth in Section
2.2.15.
"Multiemployer Plan" has the meaning set forth in Section
2.2.14.
"Notice of Borrowing" has the meaning set forth in Section
1.2.3.
"Obligations" means all obligations of every nature of the
Company from time to time owed to Purchaser under any of the Senior
Subordinated Notes.
"Other Credit Facility" has the meaning set forth in Section
1.1(b) of the Warrant Agreement attached hereto as EXHIBIT G.
"Outstanding Voting Power of the Company" means the total
number of votes which may be cast in the election of directors of the Company
at any meeting of shareholders of the Company if all securities (and all such
securities issuable upon the exercise or conversion of options, warrants or
other convertible or exercisable securities) entitled to vote at such meeting
were present and voted at such meeting.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor to its functions.
"PCBs" has the meaning set forth in Section 2.2.22.
"Pension Plan" has the meaning set forth in Section 2.2.14.
"Permitted Investments" means with respect to all the Company,
Investments in: (i) obligations issued or guaranteed by the United States of
America; (ii) certificates of deposit, demand deposits, bankers acceptances,
disbursement or time deposits of the Company and other "money market
instruments" issued by the Bank or any bank or trust company organized under
the laws of the United States of America or any state thereof and having
capital and surplus in an aggregate amount not less than $100,000,000; (iii)
open market commercial paper bearing the highest credit rating issued by
Standard & Poor's Corp. or by another nationally recognized credit rating firm;
(iv) repurchase agreements entered into with the Bank or any bank or trust
company organized under the laws of the United States of America or any state
thereof having capital and surplus in an aggregate amount not less than
$100,000,000; (v) shares of "money market funds", each having net assets of not
less than $100,000,000; in each case maturing or being due or payable in full
not more than one hundred eighty (180) days after the Company's acquisition
thereof; and (vi) certificates of deposit of, or demand or time deposits in,
the Bank.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts and other
- 7 -
48
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Plan" means an "employee benefit plan" (as defined in Section
3(3) of ERISA) maintained or contributed to by the Company or any of its
Affiliated Companies.
"Potential Default" means any condition, event or act that,
with the giving of notice, passage of time or both, would constitute an Event
of Default.
"Preferred Stock" has the meaning set forth in Section 1.1.
"Purchaser" has the meaning set forth in the first paragraph
of this Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement to be entered into between the Company and Purchaser substantially in
the form attached hereto as EXHIBIT F.
"Reportable Event" means a "reportable event" (as defined in
Section 4043(b) of ERISA) with respect to which reporting to the PBGC within
thirty (30) days of occurrence has not been waived.
"Senior Debt" has the meaning set forth in Section 4.1.
"Senior Debt Documents" means the Credit Agreement and any
document or agreement executed in connection with the Senior Debt.
"Senior Subordinated Notes" means the promissory notes issued
pursuant to Section 1.2 to Purchaser in aggregate principal amounts equal to up
to $10,000,000, and any note or notes subsequently issued in place of such
notes.
"Shareholders Agreement" means the Shareholders Agreement to
be entered into among the Company, Purchaser, Xxxxxxxx Venture Partners II,
L.P., Sears Pension Trust and Xxxxxxxx X. Xxxxxx substantially in the form
attached hereto as EXHIBIT E.
"Solvent" means that: (a) the fair valuation of all of its
property is in excess of the total amount of its debts (including contingent
liabilities as properly valued) as of the date solvency is determined under the
Bankruptcy Code or any applicable enactment of the Uniform Fraudulent Transfer
Act or similar statute; (b) the present fair salable value of all of its
property is more than the amount that will be required to pay the Person's
existing debts (including contingent liabilities as properly valued) as they
become absolute and matured, as determined in accordance with any applicable
enactment of the Uniform Fraudulent Conveyance Act or similar statute; (c) it
does not intend to incur, nor believe that it will incur, nor reasonably should
believe that it will incur, debts beyond its
- 8 -
49
ability to pay as they mature, as determined in accordance with the Bankruptcy
Code, any applicable enactment of the Uniform Fraudulent Conveyance Act, any
applicable enactment of the Uniform Fraudulent Transfer Act or any similar
statute; and (d) is not engaged in a business or a transaction or about to be
engaged in a business or a transaction for which its property constitutes (i)
unreasonably small capital, for purposes of the Bankruptcy Code and any
applicable enactment of the Uniform Fraudulent Conveyance Act, or similar
statute, or (ii) unreasonably small assets, for purposes of any applicable
enactment of the Uniform Fraudulent Transfer Act, or similar statute.
"Subsequent Closing" has the meaning set forth in Section
1.2.3.
"Subsequent Closing Date" has the meaning set forth in Section
1.2.3.
"Subsidiary" of any Person means a corporation of which more
than fifty percent (50%) of the outstanding shares of capital stock of each
class having ordinary voting power is owned by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries or which is controlled directly or indirectly by the first person.
"Third Anniversary" has the meaning set forth in Section
1.2.1.
"Transfer" means the sale, pledge, assignment or other
transfer of the Senior Subordinated Notes or Preferred Stock, in whole or in
part, and of the rights of the holders thereof under this Agreement.
"Warrant Agreement" means the Warrant Agreement to be entered
into by and between the Company and Purchaser substantially in the form
attached hereto as EXHIBIT G.
"Welfare Plan" has the meaning set forth in Section 2.2.14.
B. Accounting Terms. For purposes of this Agreement, all
accounting terms not otherwise defined herein have the meanings assigned to
them in conformity with GAAP.
C. Other Definitional Provisions.
(1) Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, to the singular
include the plural, and to the part include the whole. The term "including" is
not limiting and the term "or" has the inclusive meaning represented by the
term "and/or." The words "hereof," "herein," "hereunder," and similar terms
in this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to "Sections," "Appendices,"
"Exhibits" and "Schedules" are to Sections, Appendices, Exhibits and
- 9 -
50
Schedules, respectively, of this Agreement, unless otherwise specifically
provided. Terms defined herein may be used in the singular or the plural.
(2) Accounting principles and practices are "consistently
applied" when the accounting principles and practices observed in a current
period are comparable in all material respects to the accounting principles and
practices applied in the preceding period.
- 10 -
51
As filed January 8, 1996 at 3:04 p.m.
with the Secretary of State of Florida
Tallahassee, Florida
EXHIBIT A
FORM OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
MEDIRISK, INC.
WHEREAS, the name of the corporation is Medirisk, Inc.;
WHEREAS, the corporation was incorporated pursuant to the laws of the
State of Florida on June 17, 1983;
WHEREAS, the corporation's registered agent and registered office are as
follows:
Registered Agent: CT Corporation System
Registered Office: 0000 Xxxxx Xxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
WHEREAS, the undersigned corporation, by and through its shareholders, and
pursuant to the provisions of Sections 607.1003 and 607.1007, Florida Business
Corporation Act, desires to amend and restate its Articles of Incorporation in
their entirety; and
WHEREAS, the corporation's shareholders, on January 8, 1996, by written
consent in lieu of meeting approved and adopted the amendment and restatement
of the corporation's Articles of Incorporation in the manner hereinafter set
forth;
The address of the principal office and the mailing address of the
corporation is: Two Piedmont Center, Suite 400, 0000 Xxxxxxxx Xxxx,
Xxxxxxx, Xxxxxxx 00000
NOW, THEREFORE, the undersigned hereby certifies that the Articles of
Incorporation are hereby amended and restated in their entirety as follows:
"AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
MEDIRISK, INC.
FIRST: The name of the corporation is MEDIRISK, INC.
52
SECOND: The registered agent of the corporation is CT Corporation System,
and the address of the corporation's agent is 0000 Xxxxx Xxxx Xxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxx 00000.
THIRD: The purpose of the corporation is to engage in and transact any
business, lawful act or activity for which a corporation may be organized under
Section 607.0101 to 607.1907, inclusive, of the Florida Business Corporation
Act.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is TWENTY THREE MILLION FOUR HUNDRED
THOUSAND (23,400,000), divided into classes as follows:
THREE MILLION (3,000,000) shares shall be Series A Convertible Preferred
Stock, $.001 par value per share (the "Series A Preferred Shares"),
FOUR HUNDRED THOUSAND (400,000) shall be Series B Convertible Preferred
Stock, $.001 par value per share (the "Series B Preferred Shares"), and
TWENTY MILLION (20,000,000) shares shall be Series A Common Stock, $.001
par value per share ("Common Shares").
The following are statements of the relative powers, preferences, rights
and the qualifications, limitations or restrictions of the Series A Preferred
Shares, the Series B Preferred Shares and the Common Shares.
SECTION I.
Series A Preferred Shares
1. Definitions.
For purposes of this Section I of Article FOURTH, the following
definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean Medirisk, Inc.
(c) "Original Issue Date" for the Series A Preferred Shares shall
mean the date on which the first share of such Series A Preferred Shares
was originally issued.
(d) "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting shares shall at the time be owned directly or
indirectly by the Company or by one or more subsidiaries.
- 2 -
53
2. Dividends.
(a) The holders of record of the then outstanding Series A Preferred
Shares shall be entitled to receive when, as and if declared by the Board, but
in any event not prior to the third anniversary of the Original Issue Date, out
of the funds legally available therefor, cumulative dividends at the annual
rate of 8% per share. Such dividends shall accrue on each Series A Preferred
Share from and after the third anniversary of the Original Issue Date, shall
accrue from day to day, whether or not earned or declared, and shall be payable
in cash. Such dividends will in no event be declared or paid by the Company
prior to the payment in full of those certain Senior Subordinated Promissory
Notes issued by the Company pursuant to that certain Securities Purchase
Agreement, dated January 8, 1996, by and between the Company and HealthPlan
Services Corporation (the "Securities Purchase Agreement").
(b) Subject to the provisions of this paragraph 2 of this Section I, the
provisions of the Securities Purchase Agreement and the provisions of a
Shareholders Agreement among the Company and certain shareholders of the
Company, as the same may be amended from time to time, the Company may, in the
Board's discretion, declare and pay dividends or distributions, or make
provision for the payment thereof, on any equity security of the Company, but
only if all accrued dividends and distributions on the Series A Preferred
Shares and the Series B Preferred Shares shall have been paid and made in full
prior to the date of any such declaration, payment, provision or distribution.
(c) Notwithstanding anything in the foregoing to the contrary, no
dividends shall be declared, paid or distributed, or provision therefor made,
on any Common Shares, unless simultaneously therewith there also shall be
declared, paid or distributed, or provision therefor made, as the case may be,
a dividend or distribution pro rata on each then outstanding Series A Preferred
Share to each holder thereof. For purposes of the foregoing, the number of
Series A Preferred Shares deemed to be outstanding with respect to each such
holder shall be equal to the maximum number of Common Shares into which such
holder's Series A Preferred Shares would then be convertible upon exercise of
the Conversion Rights described in paragraph 5 of this Section I.
3. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities and obligations of the
Company, each holder of Series A Preferred Shares then outstanding shall be
entitled to be paid out of the net assets of the Company available for
distribution to its shareholders prior and in preference to any payment or
declaration and setting apart for payment of any amount in respect of the
Common Shares, an amount equal to the sum of the following: (i) $1.95 per
Series A Preferred Share held by such holder, (ii) an amount equal to all
accrued and unpaid dividends thereon, whether or not earned or declared, to and
including the date full payment shall be tendered to the holders of the Series
A Preferred Share with respect to
- 3 -
54
such liquidation, dissolution or winding up, and (iii) the fair market value,
reasonably determined in good faith by the Board, of the evidences of
indebtedness, assets and securities referred to in paragraph 5(f) of this
Section I to which such holders would have been entitled to receive upon
conversion of their Series A Preferred Shares (clauses (i) through (iii),
collectively the "Series A Liquidation Preference"); if upon any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
assets to be distributed to the holders of the Series A Preferred Shares and
the Series B Preferred Shares shall be insufficient to permit the payment to
such holders of the full aggregate amount of the Series A Liquidation
Preference plus the Series B Liquidation Preference (as defined below), then
all of the net assets of the Company available for distribution to its
shareholders shall be distributed ratably among the holders of the Series A
Preferred Shares and the Series B Preferred Shares in proportion to the then
applicable Series A Liquidation Preference with respect to each Series A
Preferred Share and the then applicable Series B Liquidation Preference with
respect to each Series B Preferred Share.
(b) Upon the completion of the distribution required by subparagraph (a),
if assets of the Company remain to be distributed, each holder of Series A
Preferred Shares shall be entitled to be paid out of the remaining assets of
the Company, as and when distributed, pro rata with the holders of Common
Shares on each Series A Preferred Share deemed to be outstanding. For purposes
of the foregoing, the number of Series A Preferred Shares deemed to be
outstanding with respect to each such holder shall be equal to the maximum
number of Common Shares into which such holder's Series A Preferred Shares
would then be convertible upon exercise of the Conversion Rights described in
paragraph 5 of this Section I.
(c) Written notice of any such liquidation, dissolution or winding up,
stating a payment date, the place where such payment shall be made, an estimate
of the net value that would be received by each such holder if all such holders
converted all of their Series A Preferred Shares immediately prior to such
liquidation, dissolution or winding up of the Company, and containing a
statement of or reference to applicable conversion rights, shall be given by
first class mail, postage prepaid, not less than 30 days prior to the payment
day stated therein, to each holder of record of the Series A Preferred Shares
at such holder's address as shown in the records of the Company.
(d) Whenever the distribution provided for in this paragraph 3 of this
Section I shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as determined in
good faith by the Board.
4. Voting Rights. Except as otherwise expressly provided herein or as
required by law, the holders of Series A Preferred Shares shall be entitled to
vote on all matters upon which holders of Common Shares have the right to vote
and, with respect to such vote, shall be entitled to notice of any
shareholders' meeting in accordance with the bylaws of the Company, and shall
be entitled to a number of votes equal to the number of Common Shares into
which such Series A Preferred Shares could then be converted, upon conversion
pursuant to the Conversion Rights described in paragraph 5 of this Section I,
- 4 -
55
at the record date for the determination of shareholders entitled to vote on
such matters or, if no such record date is established, at the date such vote
is taken or any written consent of shareholders is solicited. Except as
otherwise expressly provided herein, or to the extent class or series voting is
otherwise required by law or agreement, the holders of Series A Preferred
Shares and Common Shares shall vote together as a single class and not as
separate classes.
5. Conversion. The holders of the Series A Preferred Shares shall have
the following conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each Series A Preferred Share shall be convertible,
at the option of the holder thereof, at any time after the date of issuance of
such shares, at the office of the Company or any transfer agent for the Series
A Preferred Shares or Common Shares, into fully paid and nonassessable Common
Shares, at the Conversion Price (as hereafter defined) therefor in effect at
the time of conversion determined as provided herein, and prior to the closing
date for any underwritten public offering of Common Shares conducted on a firm
commitment basis and registered under the Securities Act of 1933, as amended,
the gross proceeds of which to the Company and/or selling shareholders (if any)
are at least $10 million (a "Public Offering") (but the right to convert shall
not expire upon such occurrence unless an automatic conversion shall have
occurred as set forth in paragraph 5(c) of this Section I).
(b) Conversion Price. Each Series A Preferred Share shall be convertible
into the number of Common Shares that results from dividing $1.95 by the
conversion price per share (the "Conversion Price") in effect at the time of
conversion of such Series A Preferred Share. The Conversion Price for each
Series A Preferred Share at the Original Issue Date shall be $1.95 and shall be
subject to adjustment from time to time as provided herein.
(c) Automatic Conversion. Each Series A Preferred Share which remains
outstanding on the closing date for a Public Offering (the "Registration Date")
shall automatically and without any action on the part of the holder thereof or
the Company, except as provided in clause (i) below, be converted on the same
basis and at the same Conversion Price as if each holder thereof had properly
exercised his right to convert on the date next preceding the Registration
Date; provided, that (i) each holder of Series A Preferred Shares shall have
received written notice of the proposed Public Offering at least 30 days prior
to the date the registration statement relating to that Public Offering becomes
effective, (ii) such conversion shall be effective at the close of business on
the Registration Date, and (iii) the Company shall have no obligation to issue
and deliver to any such holder of Series A Preferred Shares on such date a
certificate for the number of Common Shares to which such holder shall be
entitled until such time as such holder has surrendered his certificate or
certificates for his Series A Preferred Shares, duly endorsed, at the office of
the Company or any transfer agent for the Common Shares, or the holder notifies
the Company that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any
- 5 -
56
loss incurred by it in connection therewith. All rights with respect to Series
A Preferred Shares outstanding on the Registration Date shall terminate on such
Registration Date, except only the right of the holders of such shares to
receive Common Shares upon surrender of their certificates for the Series A
Preferred Shares and their rights with respect to unpaid dividends described in
paragraph 5(d) of this Section I.
(d) Mechanics of Conversion; Unpaid Dividends. Before any holder of
Series A Preferred Shares shall be entitled to convert the same into Common
Shares, such holder shall either (i) surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or of any transfer agent
for the Series A Preferred Shares or Common Shares, or (ii) deliver an
affidavit in favor of the Company stating that such certificates have been
lost, stolen or destroyed and containing an agreement satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection
therewith, and shall give written notice by mail, postage prepaid, to the
Company at such office that such holder elects to convert the same and shall
state therein the number of Series A Preferred Shares being converted and the
name or names in which the certificate or certificates for Common Shares to
which such holder shall be entitled. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the Series A Preferred Shares to be converted, and the person or
persons entitled to receive the Common Shares issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
Common Shares issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such Common Shares on such date. All
dividends accrued and unpaid prior to surrender of Series A Preferred Shares
surrendered for conversion shall at the option of the holders of Series A
Preferred Shares, either (i) be subtracted from the aggregate Conversion Price
as in effect at the time of conversion or (ii) constitute a debt of the Company
payable to the converting shareholder, and no dividend or other distribution
shall be paid on, declared or set apart for any Common Shares until such debt
is fully paid or sufficient funds set apart for the payment thereof.
(e) Adjustment for Stock Splits and Combinations. If the Company shall at
any time or from time to time after the Original Issue Date effect a
subdivision or combination of any outstanding Common Shares, the Conversion
Price then in effect immediately before that subdivision or combination shall
be proportionately adjusted by multiplying the then effective Conversion Price
by a fraction, (i) the numerator of which shall be the number of Common Shares
issued and outstanding immediately prior to such subdivision or combination,
and (ii) the denominator of which shall be the number of Common Shares issued
and outstanding immediately after such subdivision or combination. The number
of Common Shares outstanding at any time shall, for the purposes of this
paragraph 5(e) of this Section I, include the number of Common Shares into
which any convertible securities of the Company may be converted, or for which
any warrant, option or rights of the Company may be exchanged. Any adjustment
under this paragraph 5(e) of this Section I shall become effective at the close
of business on the date the subdivision or combination becomes effective.
- 6 -
57
(f) Adjustments for Other Dividends and Distributions. In the event the
Company at any time or from time to time after the Original Issue Date shall
make or issue, or fix a record date for the determination of holders of Common
Shares entitled to receive, a dividend or other distribution payable in (i)
evidences of indebtedness of the Company, (ii) assets of the Company (other
than cash), or (iii) securities of the Company other than Common Shares, then
and in each such event provision shall be made so that the holders of Series A
Preferred Shares shall receive upon conversion thereof, in addition to the
number of Common Shares receivable thereupon, the amount of such evidences,
assets or securities that they would have received had they held, on such
record date, the maximum number of Common Shares into which their Series A
Preferred Shares could then have been converted.
(g) Adjustment for Reclassification, Exchange or Substitution. If the
Common Shares issuable upon the conversion of the Series A Preferred Shares
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this paragraph 5 of this Section I), then and
in each such event the holder of each Series A Preferred Share shall have the
right thereafter to convert each such share into the kind and amount of shares
of stock and other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the maximum number of Common
Shares into which such Series A Preferred Shares could have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
(h) Reorganization, Mergers, Consolidations or Sales of Assets or Capital
Stock. If at any time or from time to time there shall be (i) a capital
reorganization of the Common Shares (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this paragraph
5 of this Section I) or (ii) a merger, consolidation or statutory share
exchange of the Company with or into another corporation in which
consolidation, merger or statutory share exchange persons owning capital stock
of the Company immediately prior to the consolidation, merger or share exchange
own less than a majority of the voting stock of the resulting, surviving or
exchanging corporation, or (iii) the sale of all or substantially all the
Company's properties and assets or capital stock to any other person, then, as
a part of such reorganization, merger, share exchange, consolidation or sale,
provision shall be made so that the holders of the Series A Preferred Shares
shall thereafter be entitled to receive, upon conversion of the Series A
Preferred Shares, the number of shares of stock or other securities or property
of the Company, or of the successor corporation resulting from such merger or
consolidation, share exchange or sale, to which a holder of the maximum number
of Common Shares into which such Series A Preferred Shares would then be
converted would have been entitled on such capital, reorganization, merger,
share exchange, consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions of this paragraph
5 of this Section I with respect to the rights
- 7 -
58
of the holders of the Series A Preferred Shares after the reorganization,
merger, share exchange, consolidation or sale to the end that the provisions of
this paragraph 5 of this Section I (including adjustment of the Conversion
Price then in effect and the number of shares purchasable upon conversion of
the Series A Preferred Shares) shall be applicable after that event as nearly
equivalent as may be practicable.
(i) Sale of Shares Below Conversion Price.
(i) If, at any time or from time to time after the Original Issue
Date, the Company shall issue or sell Additional Common Shares (as
hereinafter defined), other than as a dividend and other than upon a
subdivision or combination of Common Shares as provided in paragraph 5(e)
of this Section I, for a consideration per share less than the then
existing Conversion Price for the Series A Preferred Shares (or, if an
adjusted Conversion Price shall be in effect by reason of one or more
previous adjustments, then less than such adjusted Conversion Price), then
in each case the then Conversion Price for the Series A Preferred Shares
shall be reduced, as of the opening of business on the date of such
issue or sale, to a price equal to such consideration per share.
(ii) For the purpose of making any adjustment in the Conversion
Price or number of Common Shares deliverable on conversion of Series A
Preferred Shares as provided above, the consideration received by the
Company for any issue or sale of securities shall,
(A) to the extent it consists of cash, be computed at the net amount
of cash receivable by the Company after deduction of any
underwriting or similar commissions, concessions or compensation
paid or allowed by the Company in connection with such issue or
sale,
(B) to the extent it consists of services or property other than
cash, be computed at the fair market value of such services or
property as reasonably determined in good faith by the Board; and
(C) if Additional Common Shares, Convertible Securities (as
hereinafter defined), or rights or options to purchase either
Additional Common Shares or Convertible Securities are issued or
sold together with other shares or securities or other assets of the
Company for a consideration that covers both, be computed as the
portion of the consideration so received that may be reasonably
determined in good faith by the Board to be allocable to such
Additional Common Shares, Convertible Securities or rights or
options.
(iii) For the purpose of the adjustment provided in subsection (i)
of this paragraph 5(i) of this Section I, if at any time or from time to
time after the Original Issue Date the Company shall issue any rights or
options for the purchase
- 8 -
59
of, or stock or other securities convertible into, Additional Common
Shares (such convertible stock or securities being hereinafter referred to
as "Convertible Securities"), then, in each case, if the Effective Price
(as hereinafter defined in this subsection (iii) of this paragraph 5(i) of
this Section I) of such rights, options or Convertible Securities shall be
less than the then existing Conversion Price for the Series A Preferred
Shares, the Company shall be deemed to have issued at the time of the
issuance of such rights or options or Convertible Securities the maximum
number of Additional Common Shares issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such
shares an amount equal to the total amount of the consideration, if any,
received by the Company for the issuance of such rights or options or
Convertible Securities, plus, in the case of such options or rights, the
minimum amounts of consideration, if any, payable to the Company upon
exercise or conversion of such options or rights. For purposes of this
subsection (iii) of this paragraph 5(i) of this Section I, "Effective
Price" shall mean the quotient determined by dividing the total of all
such minimum amounts of consideration by such maximum number of Additional
Common Shares. No further adjustment of the Conversion Price adjusted
upon the issuance of such rights, options, or Convertible Securities shall
be made as a result of the actual issuance of Additional Common Shares on
the exercise of any such rights or options or the conversion of any such
Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire
without having been exercised, the Conversion Price adjusted upon the
issuance of such rights, options or Convertible Securities shall be
readjusted to the Conversion Price that would have been in effect had an
adjustment been made on the basis that the only Additional Common Shares
so issued were the Additional Common Shares, if any, actually issued or
sold on the exercise of such rights or options or rights of conversion of
such Convertible Securities, and such Additional Common Shares, if any,
were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether or not
exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted plus the consideration, if any,
actually received by the Company on the conversion of such Convertible
Securities.
(iv) For the purpose of the adjustment provided for in subsection
(i) of this paragraph 5(i) of this Section I, if at any time or from time
to time after the Original Issue Date the Company shall issue any rights
or options for the purchase of Convertible Securities, then, in each such
case, if the Effective Price (as hereinafter defined in this subsection
(iv) of this paragraph 5(i) of this Section I) thereof is less than the
then current Conversion Price, the Company shall be deemed to have issued
at the time of the issuance of such rights or options the maximum number
of Additional Common Shares issuable upon conversion of the total amount
of Convertible Securities covered by such rights or options and to have
received as consideration for the issuance of such Additional Common
Shares
- 9 -
60
an amount equal to the amount of consideration, if any, payable to the
Company upon the conversion of such Convertible Securities plus the
consideration, if any, received by the Company upon the issuance of such
Convertible Securities. For purposes of the foregoing "Effective Price"
for purposes of this subsection (iv) of paragraph 5(i) of this Section I
shall mean the quotient determined by dividing the total amount of such
consideration by such maximum number of Additional Common Shares. No
further adjustment of such Conversion Price adjusted upon the issuance of
such rights or options shall be made as a result of the actual issuance of
the Convertible Securities upon the exercise of such rights or options or
upon the actual issuance of Additional Common Shares upon the
conversion of such Convertible Securities.
The provisions of subsection (iii) above for the readjustment of
such Conversion Price upon the expiration of rights or options or the
rights of conversion of Convertible Securities, shall apply mutatis
mutandis to the rights, options and Convertible Securities referred to in
this subsection (iv).
(j) Definition. The term "Additional Common Shares" as used herein shall
mean all Common Shares issued or deemed issued by the Company after the
Original Issue Date, whether or not subsequently reacquired or retired by the
Company, other than (i) Common Shares issued upon conversion of the Series A
Preferred Stock, (ii) Common Shares issued upon conversion of the Series B
Preferred Stock, (iii) any Common Shares, Convertible Securities, options or
rights (as adjusted for all stock dividends, stock splits, subdivisions and
combinations) issued to employees, officers, directors, consultants or other
persons performing services for the Company or any Subsidiary (if so issued
solely because of any such person's status as an officer, director, employee,
consultant or other person performing services for the Company or any
Subsidiary and not as part of any offering of the Company's securities)
pursuant to any stock option plan, stock purchase plan or management incentive
plan, agreement or arrangement approved by a majority of the members of the
Board of Directors who are not employees of the Company or any subsidiary of
the Company, (iv) as to each holder of Series A Preferred Shares, Common Shares
which are purchased by such holder, (v) up to 300,000 Common Shares (as
adjusted for all stock dividends, stock splits and combinations) issued upon
the exercise of stock purchase warrants originally granted in connection with
sales or issuances of Series A Preferred Shares or debt or other securities
which are convertible into Series A Preferred Shares, (v) any Common Shares
issued upon the exercise of up to 605,314 stock purchase warrants granted in
connection with sales or issuances of Senior Subordinated Promissory Notes by
the Company to HealthPlan Services Corporation or any assignee or successor of
HealthPlan Services Corporation, (vi) any Common Shares (as adjusted for all
stock dividends, stock splits, subdivisions and combinations) issued to sellers
of businesses acquired by the Company as full or partial consideration of such
acquisition, or (vii) Common Shares issued or issuable with respect to the
securities referred to in (i), (ii), (iii), (iv), (v) or (vi) by way of stock
split or stock dividend or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
- 10 -
61
(k) Accountants' Certificate of Adjustment. In each case of an adjustment
or readjustment of the Conversion Price for the number of Common Shares or
other securities issuable upon conversion of the Series A Preferred Shares, the
Company, at its expense, shall cause independent certified public accountants
of recognized standing selected by the Company (who may be the independent
certified public accounts then auditing the books of the Company) to compute
such adjustment or readjustment in accordance herewith and prepare a
certificate showing such adjustment or readjustment, and shall mail such
certificate, by first-class mail, postage prepaid, to each registered holder of
the Series A Preferred Shares at the holder's address as shown in the Company's
books. The certificate shall set forth such adjustment or readjustment,
showing in detail the facts upon which such adjustment or readjustment is based
including a statement of (i) the consideration received or to be received by
the Company for any Additional Common Shares issued or sold or deemed to have
been issued or sold, (ii) the Conversion Price at the time in effect for each
series of the Series A Preferred Shares, and (iii) the number of Common Shares
and the type and amount, if any, of other property which at the time would be
received upon conversion of the Series A Preferred Shares.
(l) Notices of Record Date. In the event of (i) any taking by the company
of a record of the holders of any class or series of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any reclassification or recapitalization of the
capital stock of the Company, any merger or consolidation of the Company, or
any transfer of all or substantially all of the assets or capital stock of the
company to any other corporation, entity or person, or any voluntary of
involuntary dissolution, liquidation or winding up of the affairs of the
Company, the Company shall mail to each holder of Series A Preferred Shares at
least 30 days prior to the record date specified therein, a notice specifying
(A) the date of on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution,
(B) the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective, and (C) the time, if any is to be fixed, as to when the
holders of record of Common Shares (or other securities) shall be entitled to
exchange their shares of Common Shares (or other securities) for securities or
other property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up.
(m) Fractional Shares. No fractional Common Shares shall be issued upon
conversion of Series A Preferred Shares. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Company shall pay cash equal
to the product of such fraction multiplied by the fair market value of one
Common Share on the date of conversion, as reasonably determined in good faith
by the Board. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of Series A
Preferred Shares the holder is at the time converting into Common Shares and
the number of Common Shares issuable upon such aggregate conversion.
- 11 -
62
(n) Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued Common
Shares, solely for the following purposes, (i) such number of Common Shares
required to pay all dividends payable in Common Shares which the Company by
agreement is obligated, or may choose, to pay, (ii) such number of Common
Shares as may from time to time be required, at such time, to be issued by the
Company upon exercise of all then-exercisable warrants and options to purchase
Common Shares or the right to convert other convertible securities into Common
Shares, and (iii) such number of its Common Shares as shall from time to time
be sufficient to effect the Conversion of all outstanding Series A Preferred
Shares. As a condition precedent to the taking of any action which would cause
an adjustment to the Conversion Price, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued Common Shares to such number of shares as shall be
sufficient in order that it may be validly and legally issue the Common Shares
issuable based upon such adjusted Conversion Price.
(o) Notices. Any notice required by the provisions of this paragraph 5 of
this Section I to be given to the holder of the Series A Preferred Shares shall
be deemed given when personally delivered to such holder or five business days
after the same has been deposited in the United States mail, certified or
registered mail, return receipt requested, postage prepaid, and addressed to
each holder of record at this address appearing on the books of the Company.
(p) Payment of Taxes. The Company will pay all taxes and other
governmental charges (other than taxes measured by the revenue or income of the
holders of the Series A Preferred Shares) that may be imposed in respect of the
issue or delivery of Common Shares upon conversion of the Series A Preferred
Shares.
(q) No Dilution or Impairment. The Company shall not amend these Articles
of Incorporation or participate in any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, for the purpose of avoiding or
seeking to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred Shares against dilution or other impairment.
6. Status of Preferred Shares. No Series A Preferred Shares acquired by
the Company by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from
the shares which the Company shall be authorized to issue, except for the
pledge of such shares upon redemption thereof pursuant to an agreement to which
the Company is a party for the purpose of securing repayment of amounts owing
with respect to such redemption.
SECTION II.
- 12 -
63
Series B Preferred Shares
1. Definitions.
For purposes of this Section II of Article FOURTH, the following
definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Common Stock Outstanding" means the number of Common Shares
outstanding plus the number of Common Shares issuable upon exercise of all
outstanding Options and upon conversion of all outstanding Convertible
Securities, including the Series B Preferred Shares.
(c) "Company" shall mean Medirisk, Inc.
(d) "Convertible Securities" means any indebtedness or shares of
capital stock convertible into or exchangeable for Common Shares.
(e) "Excluded Shares" means (i) Common Shares issued upon conversion
of the Series A Preferred Shares, (ii) Common Shares issued upon
conversion of the Series B Preferred Shares, (iii) the Common Shares
issuable upon the exercise of warrants granted in connection with the
issuance and sale by the Company of Senior Subordinated Notes to
HealthPlan Services Corporation or its successors or assigns, (iv) Common
Shares, Options or Convertible Securities issued to employees, officers,
directors or consultants of the Company or its Subsidiaries in
transactions approved or pursuant to a plan approved by a majority of the
members of the Board of Directors of the Company who are not employees of
the Company or any subsidiary of the Company, (v) as to each holder of
Series B Preferred Shares, Common Shares which are purchased by such
holder, (vi) up to 300,000 Common Shares (as adjusted for all stock
dividends, stock splits and combinations) issued upon the exercise of
stock purchase warrants originally granted in connection with sales or
issuances of Series A Preferred Shares or debt or other securities which
are convertible into Series A Preferred Shares, (vii) Common Shares,
Options or Convertible Securities issued to sellers of businesses acquired
by the Company as full or partial consideration of such acquisition, or
(viii) Common Shares issued or issuable with respect to the securities
referred to in (i), (ii), (iii), (iv), (v), (vi) or (vii) by way of stock
split or stock dividend or in connection with a combination of shares,
recapitalization, merger, consolidation, share exchange or other
reorganization.
(f) "Fair Value" of a Common Share on any specified date means:
(i) If Common Shares are then listed or admitted to trading on any
national securities exchange or traded on any national market system, the
average
- 13 -
64
of the daily closing prices for the thirty (30) trading days
before such date, excluding any trades which are not bona fide, arm's
length transactions. The closing price for each day shall be the last
sale price on such date or, if no such sale takes place on such date, the
average of the closing bid and asked prices on such date, in each case as
officially reported on the principal national securities exchange or
national market system on which such shares are then listed, admitted to
trading or traded.
(ii) If no Common Shares are then listed or admitted to trading on
any national securities exchange or traded on any national market system,
the average of the reported closing bid and asked prices thereof on such
date in the over-the-counter market as shown by the National Association
of Securities Dealers automated quotation system or, if such shares are
not then quoted in such system, as published by the National Quotation
Bureau, Incorporated or any similar successor organization, and in either
case as reported by any member firm of the New York Stock Exchange
selected by the holders of a majority of the outstanding Series B
Preferred Shares.
(iii) If no Common Shares are then listed or admitted to trading on
any national exchange or traded on any national market system, and if no
closing bid and asked prices thereof are then so quoted or published in
the over-the-counter market, the fair value of a Common Share shall be as
mutually agreed by the Company and holders of a majority of the
outstanding Series B Preferred Shares; provided, however that if the
Company and such holders are unable to mutually agree upon the fair value,
the Company and such holders shall, within five days from the date that
either party determines that they cannot agree, jointly retain an
investment banking firm, or a nationally recognized accounting firm or
other firm providing similar valuation services, satisfactory to each of
them. If the Company and such holders are unable to agree on the
selection of such a firm within such five day period, the Company and such
holders shall, within twenty days after expiration of such five day
period, each retain a separate independent investment banking firm (which
firm, in either case, shall not be the investment banking firm regularly
retained by the Company). If either the Company or such holders fail to
retain such an investment banking firm during such twenty day period, then
the independent investment banking firm retained by such holders or the
Company, as the case may be, shall alone take the actions described below.
Such firms shall determine within 30 days of being retained the fair value
of a Common Share and deliver their opinion in writing to the Company and
to such holders as to the fair value. If such firms cannot jointly agree
upon the fair value, then, unless otherwise directed in writing by both
the Company and such holders, such firms, in their sole discretion, shall
choose another investment banking firm independent of the Company, which
firm shall make such determination and render such an opinion as promptly
as practicable. In either case, the determination so made shall be
conclusive and binding on the Company and the holders of the Series B
Preferred Shares. The fees and expenses for such determination made by
any and all such
- 14 -
65
investment banking or other firms shall be paid one-half by the Company
and one-half by such holders. In the determination of the fair value of a
Common Share, there shall not be taken into consideration any premium for
shares representing control of the Company.
(g) "Option" means any right, warrant or option to subscribe for or
purchase Common Shares or Convertible Securities.
(h) "Original Issue Date" for the Series B Preferred Shares shall
mean the date on which the first share of such Series B Preferred Shares
was originally issued.
(i) "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting shares shall at the time be owned directly or
indirectly by the Company or by one or more subsidiaries.
2. Dividends.
(a) The holders of record of the then outstanding Series B Preferred
Shares shall be entitled to receive when, as and if declared by the Board, but
in any event not prior to the first anniversary of the Original Issue Date, out
of the funds legally available therefor, cumulative dividends at the annual
rate of 8% per share. Such dividends shall accrue on each Series B Preferred
Share from and after the first anniversary of the Original Issue Date, shall
accrue from day to day, whether or not earned or declared, and shall be payable
in cash. Such dividends will in no event be declared or paid by the Company
prior to the payment in full of those certain senior subordinated Promissory
Notes issued by the Company pursuant to the Securities Purchase Agreement.
(b) Subject to the provisions of this paragraph 2 of this Section II, the
provisions of the Securities Purchase Agreement and the provisions of a
Shareholders Agreement among the Company and certain shareholders of the
Company, as the same may be amended from time to time, the Company may, in the
Board's discretion, declare and pay dividends or distributions, or make
provision for the payment thereof, on any equity security of the Company, but
only if all accrued dividends and distributions on the Series A Preferred
Shares and the Series B Preferred Shares shall have been paid and made in full
prior to the date of any such declaration, payment, provision or distribution.
(c) Notwithstanding anything in the foregoing to the contrary, no
dividends shall be declared, paid or distributed, or provision therefor made,
on any Common Shares, unless simultaneously therewith there also shall be
declared, paid or distributed, or provision therefor made, as the case may be,
a dividend or distribution pro rata on each then outstanding Series B Preferred
Share to each holder thereof. For purposes of the foregoing, the number of
Series B Preferred Shares deemed to be outstanding with respect to each such
holder shall be equal to the maximum number of Common Shares into which
- 15 -
66
such holder's Series B Preferred Shares would then be convertible upon exercise
of the Conversion Rights described in paragraph 5 of this Section II.
3. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities and obligations of the
Company, each holder of Series B Preferred Shares then outstanding shall be
entitled to be paid out of the net assets of the Company available for
distribution to its shareholders prior and in preference to any payment or
declaration and setting apart for payment of any amount in respect of the
Common Shares, an amount equal to the sum of the following: (i) $7.13 per
Series B Preferred Share held by such holder, and (ii) the fair market value,
reasonably determined in good faith by the Board, of the evidences of
indebtedness, assets and securities referred to in paragraph 5(e) hereof to
which such holders would have been entitled to receive upon conversion of their
Series B Preferred Shares (clauses (i) and (ii), collectively the "Series B
Liquidation Preference"); if upon any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, the assets to be distributed to
the holders of the Series A Preferred Shares and the Series B Preferred Shares
shall be insufficient to permit the payment to such holders of the full
aggregate amount of the Series A Liquidation Preference plus the Series B
Liquidation Preference, then all of the net assets of the Company available for
distribution to its shareholders shall be distributed ratably among the holders
of the Series A Preferred Shares and the Series B Preferred Shares in
proportion to the then applicable Series A Liquidation Preference with respect
to each Series A Preferred Share and the then applicable Series B Liquidation
Preference with respect to each Series B Preferred Share.
(b) Upon the completion of the distribution required by subparagraph (a),
if assets of the Company remain to be distributed, each holder of Series B
Preferred Shares shall be entitled to be paid out of the remaining assets of
the Company, as and when distributed, pro rata with the holders of Common
Shares on each Series B Preferred Share deemed to be outstanding. For purposes
of the foregoing, the number of Series B Preferred Shares deemed to be
outstanding with respect to each such holder shall be equal to the maximum
number of Common Shares into which such holder's Series B Preferred Shares
would then be convertible upon exercise of the Conversion Rights described in
paragraph 5 of this Section II.
(c) Written notice of any such liquidation, dissolution or winding up,
stating a payment date, the place where such payment shall be made, an estimate
of the net value that would be received by each such holder if all such holders
converted all of their Series B Preferred Shares immediately prior to such
liquidation, dissolution or winding up of the Company, and containing a
statement of or reference to applicable conversion rights, shall be given by
first class mail, postage prepaid, not less than 30 days prior to the payment
day stated therein, to each holder of record of the Series B Preferred Shares
at such holder's address as shown in the records of the Company.
- 16 -
67
(d) Whenever the distribution provided for in this paragraph 3 of this
Section II shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as determined in
good faith by the Board.
4. Voting Rights. Except as otherwise expressly provided herein or as
required by law, the holders of Series B Preferred Shares shall be entitled to
vote on all matters upon which holders of Common Shares have the right to vote
and, with respect to such vote, shall be entitled to notice of any
shareholders' meeting in accordance with the bylaws of the Company, and shall
be entitled to a number of votes equal to the number of Common Shares into
which such Series B Preferred Shares could then be converted, upon conversion
pursuant to the Conversion Rights described in paragraph 5 of this Section II,
at the record date for the determination of shareholders entitled to vote on
such matters or, if no such record date is established, at the date such vote
is taken or any written consent of shareholders is solicited. Except as
otherwise expressly provided herein, or to the extent class or series voting is
otherwise required by law or agreement, the holders of Series B Preferred
Shares and Common Shares shall vote together as a single class and not as
separate classes.
5. Conversion. The holders of the Series B Preferred Shares shall have
the following conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each Series B Preferred Share shall be convertible,
at the option of the holder thereof, at any time after the date of issuance of
such shares, and prior to the closing date for any Public Offering giving rise
to an automatic conversion as provided in paragraph 5(c) of this Section II, at
the office of the Company or any transfer agent for the Series B Preferred
Shares or Common Shares, into fully paid and nonassessable Common Shares, at
the Conversion Price (as hereafter defined) therefor in effect at the time of
conversion determined as provided herein.
(b) Conversion Price. Each Series B Preferred Share shall be convertible
into the number of Common Shares that results from dividing $7.13 by the
conversion price per share (the "Series B Conversion Price") in effect at the
time of conversion of such Series B Preferred Share. The Series B Conversion
Price for each Series B Preferred Share at the Original Issue Date shall be
$7.13 and shall be subject to adjustment from time to time as provided herein.
(c) Automatic Conversion. Each Series A Preferred Share which remains
outstanding on the closing date for a Public Offering (the "Registration Date")
shall automatically and without any action on the part of the holder thereof or
the Company, except as provided in clause (i) below, be converted on the same
basis and at the same Conversion Price as if each holder thereof had properly
exercised his right to convert on the date next preceding the Registration
Date; provided, that (i) each holder of Series A Preferred Shares shall have
received written notice of the proposed Public Offering at least 30 days prior
to the date the registration statement relating to that Public Offering
- 17 -
68
becomes effective, (ii) such conversion shall be effective at the close of
business on the Registration Date, and (iii) the Company shall have no
obligation to issue and deliver to any such holder of Series A Preferred Shares
on such date a certificate for the number of Common Shares to which such holder
shall be entitled until such time as such holder has surrendered his
certificate or certificates for his Series A Preferred Shares, duly endorsed,
at the office of the Company or any transfer agent for the Common Shares, or
the holder notifies the Company that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. All rights
with respect to Series A Preferred Shares outstanding on the Registration Date
shall terminate on such Registration Date, except only the right of the holders
of such shares to receive Common Shares upon surrender of their certificates
for the Series A Preferred Shares and their rights with respect to unpaid
dividends described in paragraph 5(d) of this Section I.
(d) Mechanics of Conversion; Unpaid Dividends. Before any holder of
Series B Preferred Shares shall be entitled to convert the same into Common
Shares, such holder shall either (i) surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or of any transfer agent
for the Series B Preferred Shares or Common Shares, or (ii) deliver an
affidavit in favor of the Company stating that such certificates have been
lost, stolen or destroyed and containing an agreement satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection
therewith, and shall give written notice by mail, postage prepaid, to the
Company at such office that such holder elects to convert the same and shall
state therein the number of Series B Preferred Shares being converted and the
name or names in which the certificate or certificates for Common Shares to
which such holder shall be entitled. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the Series B Preferred Shares to be converted, and the person or
persons entitled to receive the Common Shares issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
Common Shares issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such Common Shares on such date. All
dividends accrued and unpaid prior to surrender of Series B Preferred Shares
surrendered for conversion shall at the option of the holders of Series B
Preferred Shares, either (i) be subtracted from the aggregate Series B
Conversion Price as in effect at the time of conversion or (ii) constitute a
debt of the Company payable to the converting shareholder, and no dividend or
other distribution shall be paid on, declared or set apart for any Common
Shares until such debt is fully paid or sufficient funds set apart for the
payment thereof.
(e) Adjustment for Stock Splits and Combinations. If the Company shall at
any time or from time to time after the Original Issue Date effect a
subdivision or combination of any outstanding Common Shares, the Series B
Conversion Price then in effect immediately before that subdivision or
combination shall be proportionately adjusted by multiplying the then effective
Series B Conversion Price by a fraction, (i) the numerator of which shall be
the number
- 18 -
69
of Common Shares issued and outstanding immediately prior to such subdivision
or combination, and (ii) the denominator of which shall be the number of Common
Shares issued and outstanding immediately after such subdivision or
combination. The number of Common Shares outstanding at any time shall, for
the purposes of this paragraph 5(e) of this Section II, include the number of
Common Shares into which any convertible securities of the Company may be
converted, or for which any warrant, option or rights of the Company may be
exchanged. Any adjustment under this paragraph 5(e) of this Section II shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(f) Adjustments for Other Dividends and Distributions. In the event the
Company at any time or from time to time after the Original Issue Date shall
make or issue, or fix a record date for the determination of holders of Common
Shares entitled to receive, a dividend or other distribution payable in (i)
evidences of indebtedness of the Company, (ii) assets of the Company (other
than cash), or (iii) securities of the Company other than Common Shares, then
and in each such event provision shall be made so that the holders of Series B
Preferred Shares shall receive upon conversion thereof, in addition to the
number of Common Shares receivable thereupon, the amount of such evidences,
assets or securities that they would have received had they held, on such
record date, the maximum number of Common Shares into which their Series B
Preferred Shares could then have been converted.
(g) Adjustment for Reclassification, Exchange or Substitution. If the
Common Shares issuable upon the conversion of the Series B Preferred Shares
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this paragraph 5 of this Section II), then and
in each such event the holder of each Series B Preferred Share shall have the
right thereafter to convert each such share into the kind and amount of shares
of stock and other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the maximum number of Common
Shares into which such Series B Preferred Shares could have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
(h) Reorganization, Mergers, Consolidations or Sales of Assets or Capital
Stock. If at any time or from time to time there shall be (i) a capital
reorganization of the Common Shares (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this paragraph
5 of this Section II) or (ii) a merger, consolidation or statutory share
exchange of the Company with or into another corporation in which
consolidation, merger or statutory share exchange persons owning capital stock
of the Company immediately prior to the consolidation, merger or share exchange
own less than a majority of the voting stock of the resulting, surviving or
exchanging corporation, or (iii) the sale of all or substantially all the
Company's properties and assets or capital stock to any other person, then, as
a part of such reorganization, merger, consolidation, share exchange or sale,
provision shall be made so that the holders
- 19 -
70
of the Series B Preferred Shares shall thereafter be entitled to
receive, upon conversion of the Series B Preferred Shares, the number of shares
of stock or other securities or property of the Company, or of the successor
corporation resulting from such merger or consolidation, share exchange or
sale, to which a holder of the maximum number of Common Shares into which such
Series B Preferred Shares would then be converted would have been entitled on
such capital, reorganization, merger, share exchange, consolidation, or sale.
In any such case, appropriate adjustment shall be made in the application of
the provisions of this paragraph 5 of this Section II with respect to the
rights of the holders of the Series B Preferred Shares after the
reorganization, merger, share exchange, consolidation or sale to the end that
the provisions of this paragraph 5 of this Section II (including adjustment of
the Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series B Preferred Shares) shall be applicable after that
event as nearly equivalent as may be practicable.
(i) Change in Series B Conversion Price Upon Issuance of Securities. If
the Company issues or sells any Common Shares, other than Common Shares
Outstanding on the Original Issue Date of the Series B Preferred Shares and
Excluded Shares, or issues any Convertible Security or Option entitling the
issuee to acquire Common Shares for a consideration per share less than the
Fair Value in effect immediately prior to the time of such issuance or sale,
then the Series B Conversion Price shall be reduced to the lower of the
following:
(I) the price determined by dividing (i) an amount equal to the sum of (x)
the Common Shares Outstanding immediately prior to such issuance or sale
multiplied by the then current Series B Conversion Price, plus (y) the
aggregate consideration, if any, received by the Company upon such issuance or
sale, by (ii) the Common Shares Outstanding immediately after such issuance or
sale; or
(II) the price determined by multiplying the then current Series B
Conversion Price by a fraction (i) the numerator of which shall be the sum of
(A) the Common Shares Outstanding immediately prior to such issuance or sale,
plus (B) the number of Common Shares that the aggregate consideration, if any,
received by the Company upon such issuance or sale would purchase at the Fair
Value on the date of such issuance or sale and (ii) the denominator of which
shall be the Common Shares Outstanding immediately after and giving effect to
such issuance or sale.
For the purposes of this paragraph 5(i) of this Section II, the following
provisions shall also be applicable:
(i) Cash Consideration. If the Company issues the Common Shares, Option
or Convertible Security for cash, the consideration received by the Company
therefor (or, if such shares are offered by the Company for subscription, the
subscription price, or, if such shares are sold to underwriters or dealers for
public offering without a subscription offering, the initial public offering
price), after deducting therefrom any
- 20 -
71
reasonable compensation or discount paid or allowed to underwriters or dealers
or others performing similar services but without deducting therefrom any
reasonable expenses incurred in connection therewith, shall be deemed to be the
consideration received by the Company for such shares.
(ii) Non-Cash Consideration. If the Company issues (other than upon
conversion or issuance of a Convertible Security) the Common Shares, Option or
Convertible Security for a consideration wholly or partially other than cash,
including services rendered, the fair value of such consideration, as
determined by the Board of Directors of the Company in good faith shall be
deemed to be the value, for purposes of this Section 5(i) of this Section II,
of the consideration other than cash received by the Company for such
securities except that any Common Share, Option or Convertible Security issued
for services shall be deemed to be issued for no consideration.
(iii) Options and Convertible Securities. If the Company issues or grants
any Option or any Convertible Security, and the inclusion thereof in the
calculation of an adjusted Series B Conversion Price pursuant to this paragraph
5(i) of this Section II would result in a Series B Conversion Exercise Price
lower than if excluded, the total maximum number of Common Shares issuable upon
the exercise of such Option or upon conversion or exchange of the total maximum
amount of such Convertible Security outstanding at the time such Convertible
Security first becomes convertible or exchangeable shall be deemed to be issued
and to be outstanding for the purposes of this paragraph 5(i) of this Section
II as of the date of issue or grant of such Option or, in the case of the issue
or sale of a Convertible Security other than where the same is issuable upon
the exercise of an Option, as of the date of such issue or sale and to have
been issued for the sum of the amount (if any) paid for such Option or
Convertible Security and the amount (if any) payable upon the exercise of such
Option or upon conversion or exchange of such Convertible Security at the time
such Convertible Security becomes convertible or exchangeable. If the
inclusion thereof would not result in a Series B Conversion Price lower than if
excluded, or if, at the time of exercise, the Series B Conversion Price which
would result from deeming such an Option or Convertible Security to have been
issued on the date of exercise is lower than that which resulted from
adjustment of the Exercise Price at the time of issuance, such Option or
Convertible Security shall not be deemed to be issued until the close of
business on the date of exercise, conversion or exchange and issuance of Common
Shares pursuant thereto.
(iv) Reclassification. The reclassification of securities other than
Common Shares into securities including Common Shares shall be deemed to
involve the issuance for a consideration other than cash of such Common Shares
at the close of business on the date fixed for the determination of
stockholders entitled to receive such Common Shares.
(j) Change in Exercise Price or Conversion Rate of Option or Convertible
Securities.
- 21 -
72
(i) Not Due to Dilution. If the purchase price provided for in any
Option, or the additional consideration (if any) payable upon the conversion or
exchange of any Convertible Security, or the rate at which any Convertible
Security is convertible into or exchangeable for Common Shares changes at any
time (other than under or by reason of provisions designed to protect against
dilution), the Series B Conversion Price in effect at the time of the change
shall be readjusted to the Series B Conversion Price that would have been in
effect at such time had such Option or Convertible Security still outstanding
provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted, issued or
sold.
(ii) Due to Dilution. If the purchase price provided for in any Option,
or the additional consideration (if any) payable upon the conversion or
exchange of any Convertible Security, or the rate at which any Convertible
Security is convertible into or exchangeable for Common Shares is reduced at
any time under or by reason of provisions with respect thereto designed to
protect against dilution, then in case of the delivery of Common Shares upon
the exercise of any such Option or upon conversion or exchange of any such
Convertible Security, the Series B Conversion Price then in effect hereunder
shall, upon issuance of such Common Shares, be adjusted to such amount as would
have obtained had such Option or Convertible Security never been issued and had
adjustments been made only upon the issuance of the Common Shares delivered as
aforesaid and for the consideration actually received for such Option or
Convertible Security and Common Shares.
(k) Termination of Option or Conversion Rights. If any right to purchase
Common Shares under any Option or any right to convert or exchange any
Convertible Security terminates or expires, the Series B Conversion Price then
in effect shall, upon such termination, be changed to the Series B Conversion
Price that would have been in effect at the time of such expiration or
termination had such Option or Convertible Security to the extent outstanding
immediately prior to such expiration or termination, never been issued, and the
Common Shares thereunder shall no longer be deemed to be Common Shares
Outstanding.
(l) Successive Changes. The provisions of this paragraph 5 of this
Section II shall apply to successive issuances, dividends or other
Distributions, subdivisions and combinations on or of Common Shares after the
Original Issue Date of the Series B Preferred Shares.
(m) Accountants' Certificate of Adjustment. In each case of an adjustment
or readjustment of the Series B Conversion Price for the number of Common
Shares or other securities issuable upon conversion of the Series B Preferred
Shares, the Company, at its expense, shall cause independent certified public
accountants of recognized standing selected by the Company (who may be the
independent certified public accounts then auditing the books of the Company)
to compute such adjustment or readjustment in accordance herewith and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first-class mail, postage prepaid, to each registered
- 22 -
73
holder of the Series B Preferred Shares at the holder's address as shown in the
Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (i) the consideration received
or to be received by the Company for any Common Shares issued or sold or deemed
to have been issued or sold after the Original Issue Date of the Series B
Preferred Shares that are not Excluded Shares, (ii) the Series B Conversion
Price at the time in effect for each series of the Series B Preferred Shares,
and (iii) the number of Common Shares and the type and amount, if any, of other
property which at the time would be received upon conversion of the Series B
Preferred Shares.
(n) Certain Other Actions Prohibited. The Company shall not by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Series B Preferred Shares set forth in
this Section II, but shall at all times in good faith assist in the carrying
out of all of the such terms and shall take all such reasonable action as
required to protect the conversion privilege of the holders of Series B
Preferred Shares against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (i) shall not increase the par value
of the Common Share above the Series B Conversion Price, (ii) shall take all
such actions as may be necessary or appropriate under local, state or federal
laws of the United States of America in order that the Company may validly and
legally issue fully paid and nonassessable Common Shares upon the conversion
exercise of all Series B Preferred Shares from time to time outstanding and
(iii) shall not take any action which results in any adjustment of the Series B
Conversion Price if the total number of Common Shares or other securities
issuable after the action upon the conversion of all of the Series B Preferred
Shares would exceed the total number of Common Shares or other securities then
authorized by the Company's Articles of Incorporation and available for the
purpose of issue upon such exercise.
(o) Notices of Record Date. In the event of (i) any taking by the company
of a record of the holders of any class or series of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any reclassification or recapitalization of the
capital stock of the Company, any merger or consolidation of the Company, or
any transfer of all or substantially all of the assets or capital stock of the
company to any other corporation, entity or person, or any voluntary of
involuntary dissolution, liquidation or winding up of the affairs of the
Company, the Company shall mail to each holder of Series B Preferred Shares at
least 30 days prior to the record date specified therein, a notice specifying
(A) the date of on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution,
(B) the date on which any such reorganization, reclassification, transfer,
consolidation, merger, share exchange, dissolution, liquidation or winding up
is expected to become effective, and (C) the time, if any is to be fixed, as to
when the holders of record of Common Shares (or other securities) shall be
entitled to exchange their shares of Common Shares (or other securities) for
securities or other
- 23 -
74
property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, share exchange, dissolution, liquidation or winding up.
(p) Fractional Shares. No fractional Common Shares shall be issued upon
conversion of Series B Preferred Shares. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Company shall pay cash equal
to the product of such fraction multiplied by the Fair Value of one Common
Share on the date of conversion. Whether or not fractional shares are issuable
upon such conversion shall be determined on the basis of the total number of
Series B Preferred Shares the holder is at the time converting into Common
Shares and the number of Common Shares issuable upon such aggregate conversion.
(q) Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued Common
Shares, solely for the following purposes, (i) such number of Common Shares
required to pay all dividends payable in Common Shares which the Company by
agreement is obligated, or may choose, to pay, (ii) such number of Common
Shares as may from time to time be required, at such time, to be issued by the
Company upon exercise of all then-exercisable warrants and options to purchase
Common Shares or the right to convert other convertible securities into Common
Shares, and (iii) such number of its Common Shares as shall from time to time
be sufficient to effect the Conversion of all outstanding Series B Preferred
Shares. As a condition precedent to the taking of any action which would cause
an adjustment to the Conversion Price, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued Common Shares to such number of shares as shall be
sufficient in order that it may be validly and legally issue the Common Shares
issuable based upon such adjusted Conversion Price.
(r) Notices. Any notice required by the provisions of this paragraph 5 to
be given to the holder of the Series B Preferred Shares shall be deemed given
when personally delivered to such holder or five business days after the same
has been deposited in the United States mail, certified or registered mail,
return receipt requested, postage prepaid, and addressed to each holder of
record at this address appearing on the books of the Company.
(s) Payment of Taxes. The Company will pay all taxes and other
governmental charges (other than taxes measured by the revenue or income of the
holders of the Series B Preferred Shares) that may be imposed in respect of the
issue or delivery of Common Shares upon conversion of the Series B Preferred
Shares.
6. Status of Preferred Shares. No Series B Preferred Shares acquired by
the Company by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from
the shares which the Company shall be authorized to issue, except for the
pledge of such shares upon
- 24 -
75
redemption thereof pursuant to an agreement to which the Company is a party for
the purpose of securing repayment of amounts owing with respect to such
redemption.
SECTION III.
Common Shares
Each Common Share shall have one vote upon all matters to be voted on by
the holders of Common Shares. Each Common Share shall be entitled to
participate equally in all dividends payable with respect to the Common Shares
and to share ratably, subject to the rights and preferences of any series of
Preferred Shares, in all assets of the corporation in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the corporation, or upon any distribution of the asset of the corporation.
FIFTH: No holder of shares of the corporation of any class shall be
entitled as such, as a matter of right, to subscribe for or purchase shares of
any class, now or hereafter authorized, or to subscribe for or purchase
securities convertible into or exchangeable for shares of the corporation or to
which shall be attached or appertain any warrants or rights entitling the
holder thereof to subscribe for or purchase shares, except such rights of
subscription or purchase, if any, for such considerations and upon such terms
and conditions as its Board of Directors from time to time may determine.
SIXTH: Notwithstanding any provision of Sections 607.0101 to 607.1907,
inclusive, of the Florida General Corporation Act, or any successor statutes
now or hereafter in force, requiring for the authorization or taking of any
action the vote or consent of the holders of shares entitling them to exercise
two-thirds or any other proportion of the voting power of the corporation or of
any class or classes of shares thereof, such action, unless otherwise expressly
required by law or these Articles of Incorporation, may be authorized or taken
by the vote or consent of the holders of shares entitling them to exercise a
majority of the voting power of the corporation or of such class or classes of
shares thereof.
SEVENTH: To the extent permitted by law, the corporation, by action of
its Board of Directors, may purchase or otherwise acquire shares of any class
issued by it at such times, for such considerations and upon such terms and
conditions as its Board of Directors may determine.
EIGHTH: No person who is serving or has served as a director of the
corporation shall be personally liable to the corporation or any of its
shareholders for monetary damages for breach of any fiduciary duty of such
person as a director by reason of any act or omission of such person as a
director; provided, however, that the foregoing provision shall not eliminate
or limit the liability of any person (a) for any breach of such person's duty
of loyalty as a director to the corporation or its shareholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 607.0834 of the Florida Business
Corporation Act, (d)
- 25 -
76
for any transaction from which such person derived any improper personal
benefit, or (e) to the extent that such liability may not be limited to
eliminated by virtue of the provisions of Section 607.0850 of the Florida
Business Corporation Act or any successor section or statute. Any repeal or
modification of this Article EIGHTH by the shareholders of the corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director or the corporation existing at the time of
such repeal or modification.
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in these Restated Articles of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred
upon shareholders herein are granted subject to this reservation.
TENTH: The provisions of Section 607.0902 of the Florida Business
Corporation Act shall not apply to control share acquisitions (as defined in
such Section 607.0902) of shares of the corporation.
IN WITNESS WHEREOF, the undersigned has set its hand hereto as of the
_____ day of ________________, 199__.
MEDIRISK, INC., a Florida corporation
By:
------------------------------------
- 26 -
77
EXHIBIT B
FORM OF SENIOR SUBORDINATED NOTE
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER
AND ANY APPLICABLE STATE SECURITIES LAWS.
SENIOR SUBORDINATED PROMISSORY NOTE
$________________ ______________, 199__
FOR VALUE RECEIVED, the undersigned MEDIRISK, INC., a Florida corporation
(the "Company"), hereby promises to pay to the order of HealthPlan Services
Corporation, a Delaware corporation ("Holder"), or its assigns, the principal
sum of _________________ Dollars ($_____________) and accrued interest thereon,
which shall be due and payable to Holder as provided below.
This Note is one of the Senior Subordinated Notes referred to in, and is
entitled to the benefits of, the Securities Purchase Agreement, dated January
8, 1996, among the Company and Holder (the "Securities Purchase Agreement").
Capitalized terms used without definition herein shall have the meanings given
to them in the Securities Purchase Agreement.
Subject to the provisions of Section 1.4 of the Securities Purchase
Agreement and to the acceleration provisions of Section 6 of the Securities
Purchase Agreement, the Company shall repay all principal and interest
outstanding in respect of this Note as follows on the earliest to occur of (i)
an Initial Public Offering by the Company; (ii) a Change of Control of the
Company; or (iii) at maturity on January 8, 2003.
Interest on the unpaid principal amount outstanding hereunder shall accrue
from the date hereof until maturity at the rate of 10% per annum. Interest
shall be computed on the basis of a 365-day year, actual days elapsed. The
first payment of interest on the outstanding principal amount of this Note
shall be due and payable by Borrowers to Lender in arrears on
____________________, 199___, for the period from the Subsequent Closing Date
on which this Note was issued until ________________, 199__, and thereafter
such interest shall be due and payable quarterly in arrears. The interest
payment for each such quarterly term shall be made on the last day of the term,
with such quarterly payments to be made on March 31, June 30, September 30 and
December 31 of each year.
Payment of principal and interest shall be made in lawful money of the
United States of America (by wire transfer or immediately available funds) to
the Holder at P.O.
78
Xxx 00000, Xxxxx, Xxxxxxx 00000-0000 or at any other place of payment that may
be designated by the Holder in writing prior to the date upon which such
payment is due.
In the event that any payment of principal, interest or any other sum
required to be paid under this Note or the Securities Purchase Agreement is not
made when due or that any other Event of Default occurs and is not cured within
the applicable period, if any, provided for in the Securities Purchase
Agreement, all principal and accrued interest shall, at the option of the
holders of a majority in principal amount outstanding of the Senior
Subordinated Notes unless otherwise provided in the Securities Purchase
Agreement, become immediately due and payable. In the event that any payment
of principal, interest or any other sum required to be paid under this Note or
the Securities Purchase Agreement is not made when due, interest on all such
principal, interest or other sum shall accrue from the due date (not giving
effect to any grace or cure period) at the rate of 18% per annum, compounded
quarterly, calculated on the basis of a 365-day year, actual days elapsed, or
at the maximum rate permitted by law, whichever is less.
This Note may be prepaid in whole or in part without premium or penalty.
The Company waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note.
The Company agrees to pay all costs and expenses, including, without
limitation, reasonable attorneys' fees and expenses, expended or incurred by
the Holder in connection with the enforcement of this Note or the collection of
any sums due hereunder
The Company and the Holder agree that in no event shall the amount of
interest or other consideration due to the Holder with respect to the making of
the loans evidenced by the Senior Subordinated Notes shall exceed the maximum
rate of interest allowed by applicable law, and in the event any such payment
is inadvertently paid by the Company or inadvertently received by the
Purchaser, then such excess sum shall be credited as a payment of principal to
be applied to the principal, unless the Company shall notify the Holder in
writing that the Company elects to have such excess sum returned to it
forthwith. It is the express intent of the parties hereto that the Company not
pay and the Holder not receive, directly or indirectly, in any manner
whatsoever, interest in excess of that which may be lawfully paid by the
Company under applicable law.
MEDIRISK, INC.
By:
------------------------------------
Xxxx X. Xxxxxx
Chairman and Chief Executive Officer
- 2 -
79
EXHIBIT I
ALSTON&BIRD
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
000-000-0000
Fax: 000-000-0000
January 8,1996
HealthPlan Services Corporation
X.X. Xxx 00000
Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx III, Chief Financial Officer
Re: Securities Purchase Agreement, dated January 8, 1996, between
Medirisk, Inc. and HealthPlan Services Corporation
Ladies and Gentlemen:
We are counsel to Medirisk, Inc. (the "Company") in connection with the
execution and delivery of that certain Securities Purchase Agreement (the
"Agreement") dated as of January 8, 1996 by and between the Company and
HealthPlan Services Corporation ("Purchaser").
This opinion is delivered pursuant to Section 3.1.2(h) of the Agreement.
This opinion is governed by, and shall be interpreted in accordance with, the
Legal Opinion Accord (the "Accord") of the ABA Section of Business Law (1991).
As a consequence it is subject to a number of qualifications, exceptions,
definitions, limitations on coverage and other limitations, all as more
particularly described in the Accord, and this opinion should be read in
conjunction with the Accord. The Law covered by the opinions expressed herein
is limited to the Federal Law of the United States and the Law of the State of
Georgia. Capitalized terms used and not otherwise defined in this opinion
shall have the meanings assigned to such terms in the Accord or the Agreement.
We have participated in the preparation of the Agreement and the Exhibits
and Schedules thereto, and we have examined such other documents, certificates,
and instruments as we have deemed necessary or appropriate for the purposes of
this opinion. As to factual matters material to our opinion, we have relied
upon the representations made by the Company in the Agreement and upon
certificates of officers of the Company and public officials.
000 Xxxxxxxxxxxx Xxxxxx, X.X.
North Building, Suite 250
Washington, D.C. 20004-2601
80
HealthPlan Services Corporation
January 8, 1996
Page 2
As to the opinions in paragraphs 2, 3, 4, 5 and 6 hereof, we have reviewed
the following agreements (collectively, the "Investment Documents"):
a. the Agreement;
b. the Registration Rights Agreement;
c. the Shareholders Agreement;
d. the Warrant Agreement; and
e. the form of Senior Subordinated Note.
Based upon the foregoing and such investigation as we have deemed
necessary, we are of the opinion that:
1. The Company is validly existing as a corporation under the laws of the
State of Florida.
2. The Company has twenty million (20,000,000) authorized shares of Class
A Common Stock, $.001 par value per share; three million (3,000,000) authorized
shares of Series A Convertible Preferred Stock, $.001 par value per share; and
four hundred thousand (400,000) authorized shares of Class B Preferred Stock,
$.001 par value per share. Based solely upon our review of the Company's stock
transfer ledger and a certificate of an officer of the Company that such ledger
is accurate, of such authorized capital, there are 910,200 shares of Series A
Common Stock and 1,292,359 shares of Series A Convertible Preferred Stock
issued and outstanding; and, upon Closing of the transactions contemplated by
the Securities Purchase Agreement and payment of the consideration specified
therein by the Purchaser, on the Closing Date there shall be 280,623 shares of
Series B Convertible Preferred Stock issued and outstanding. Subject to the
understanding, with your permission, that no opinion is given herein as to the
effect of any nonpayment of applicable stamp taxes with respect to the issuance
and transfer of stock of the Company, the outstanding shares of Series A Common
Stock and Series B Convertible Preferred Stock are, and upon payment therefor
in accordance with the agreement the shares of Preferred Stock issuable to
Purchaser under the Agreement will be, validly issued and are fully paid and
nonassessable, and together all such shares comprise the totality of the
Company's outstanding capitalization as of the date hereof. 665,180 shares of
the authorized Series A Common Stock have been reserved for issuance pursuant
to the terms of the Warrant Agreement, and 280,623 shares of the authorized
Series A Common Stock have been reserved by the Company for issuance upon
the conversion of the Preferred Stock.
81
HealthPlan Services Corporation
January 8, 1996
Page 3
3. The Company has the corporate power to execute and deliver the
Investment Documents to which it is a party and any other instruments or
documents executed and delivered by it under the Agreement, to perform its
obligations thereunder, to own and use its assets and to conduct its business.
No governmental or other consents, approvals, authorizations, registrations,
declarations or filings with any governmental authority of the United States or
the State of Georgia are required for the execution, delivery and performance
of the Investment Documents by the Company. The Company is not subject to any
law, rule or regulation of the United States or the State of Georgia
restricting in any way its ability to incur indebtedness or to issue shares of
its capital stock or rights to acquire such shares as contemplated by the
Investment Documents.
4. The Company has duly authorized the execution and delivery of the
Investment Documents and all other instruments or documents executed by the
Company in connection with the Investment Documents, and the Company has duly
executed and delivered the Investment Documents and such other instruments and
documents. Each of the Investment Documents is a valid and binding obligation
of the Company enforceable against the Company in accordance with its
respective terms. With your consent, the opinions set forth in this paragraph
4 are subject to the limitations and qualifications set forth in Appendix A as
well as the qualifications of the Accord to which this entire opinion is
subject.
5. The issuance of the Senior Subordinated Notes pursuant to the
Securities Purchase Agreement and payment of such notes in accordance with
their terms, and the related issuance of warrant certificates pursuant to the
Warrant Agreement and exercise of such warrants in accordance with their terms,
do not violate any law of the State of Georgia relating to interest and usury.
6. The execution and delivery of the Investment Documents by the Company
and the consummation of the transactions contemplated thereby, if the Company
were now to perform its obligations under the Investment Documents, will not
(a) conflict with any provisions of the Company's articles of incorporation or
bylaws, (b) violate any provisions of any existing federal or state
constitution, statute, law, rule, regulation or order to which the Company or
its assets are subject, or (c) result in a breach of or constitute a default
(or an event of default which with the passage of time or giving of notice, or
both, would constitute a default) under, or cause or permit the acceleration of
the maturity of or give rise to any right of termination, cancellation,
imposition of fees or penalties under, any material written agreement, which
breach or default has not been waived. With your permission we have assumed
that the term "material written agreement" used in clause (c) above includes
only those agreements listed on SCHEDULES 2.2.13, 2.2.14 and 2.2.15 to the
Agreement and those agreements that are Exhibits to the Agreement.
82
HealthPlan Services Corporation
January 8, 1996
Page 4
Based upon the limitations and qualifications set forth above, we confirm
to you that:
1. To our knowledge, there is no litigation or other proceeding that is
pending, threatened or contemplated which would restrain, invalidate or
challenge, or would seek to restrain, invalidate or challenge or would seek
damages in connection with, the transactions contemplated by the Investment
Documents.
2. The Company is qualified to transact business as a foreign corporation
in the State of Georgia. The foregoing statement is based solely upon a
certificate provided by the Secretary of State of the State of Georgia, a copy
of which the Company has delivered to you, and is limited to the meaning
ascribed to such certificate by such state agency.
Assumptions and Qualifications
In addition to the assumptions and qualifications set forth specifically
above, this opinion letter is subject to the following assumptions and
qualifications:
1. With your permission, the General Qualifications, specifically
including, without limitation, the Bankruptcy and Insolvency Exception, the
Equitable Principles Exception and the Other Common Qualifications, apply to
the opinions set forth above; provided that the opinion expressed in paragraph
5 is not subject to any of the General Qualifications relating to laws relating
to interest or usury.
2. With respect to paragraph 4 above, we express no opinion as to whether
Section 7.11 of the Securities Purchase Agreement is enforceable.
3. With respect to paragraph 5 above, we express no opinion as to whether
the interest and other consideration received by Purchaser in connection with
its purchase of Senior Subordinated Notes is usurious in the event Section 7.11
of the Securities Purchase Agreement is not enforceable, and such Senior
Subordinated Notes are required to be prepaid prior to April 8, 1997 by reason
of (i) acceleration following the occurrence of an Event of Default or (ii) an
event giving rise to a mandatory prepayment beyond the control of the Company.
Furthermore, for the purposes of the prior sentence, we have assumed that the
only interest paid or deemed paid on the notes is interest calculated at the
rate of 18% per annum plus the value of the Warrants issued pursuant to the
Warrant Agreement, and that the only effect of such a required prepayment prior
to April 8, 1997 is to truncate or shorten the period of time over which the
rate of interest on the notes is calculated.
83
HealthPlan Services Corporation
January 8, 1996
Page 5
4. For purposes of paragraph 5 hereof, we have assumed that the right of
Purchaser to purchase shares of the Company pursuant to the Warrant Agreement
has a fair market value as of the date hereof of not greater than $7.13 for
each such share of Series A Common Stock issuable thereunder.
The opinions expressed in this opinion letter are based upon the law as
currently in effect and currently existing interpretations thereof. Insofar as
our opinions relate to future events or circumstances, the opinions expressed
herein are based upon the assumption that such laws and prevailing
interpretations thereof will remain unchanged. We assume no obligation to
advise you of any changes in the foregoing subsequent to the delivery of this
opinion letter. This opinion letter is rendered solely for your information in
connection with the transactions described above and is not to be used,
circulated, quoted or otherwise referred to for any purpose whatsoever, except
to the extent authorized in the Accord, without in each instance our prior
written consent.
Very truly yours,
XXXXXX & BIRD
By:
--------------------------
Xxxxx X. Xxxxx, Partner
