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EXHIBIT 2.3
SECOND AMENDMENT TO INCORPORATION AGREEMENT AND
TERMINATION OF PLEDGE AGREEMENT
This SECOND AMENDMENT TO INCORPORATION AGREEMENT AND TERMINATION OF
PLEDGE AGREEMENT dated as of June 13, 1997 (the "Agreement"), by and between
Criterion Health Strategies, Inc. (f/k/a Alpha Development Corp.), a Tennessee
corporation (the "Company"), Healthdyne Information Enterprises, Inc., a Georgia
corporation ("HIE"), The Southern Venture Fund II, L.P., a Delaware limited
partnership ("SVFII") (HIE and SVFII, collectively, the "Investors" and,
individually, an "Investor"), Xxxxxxx X. Xxxxxx ("Teveit") and J. Xxxxxx
Xxxxxxx, Xx. ("Pearson") (Teveit and Pearson, collectively, the "Incorporators"
and, individually, an "Incorporator").
WITNESSETH:
WHEREAS, on November 1, 1996, the Board of Directors of the Company
approved a 5-for-1 split (the "Stock Split") of the Company's common stock, no
par value ("Criterion Common Stock"), to be effected in the form of a 500% stock
dividend, which dividend was paid to shareholders of record on November 1, 1996;
and
WHEREAS, each of HIE, SVFII, Teveit and Pearson are investors in the
Company, with the following respective interests in the Company after the Stock
Split:
(i) each of the Investors owning twenty-five (25) shares of
Criterion Common Stock and a Convertible Debenture of the Company due June 30,
2004, dated October 21, 1994, in the principal amount of up to $2,000,000
(individually, a "Criterion Debenture" and, collectively, the "Criterion
Debentures"), pursuant to the terms of the Investment Agreement (as hereinafter
defined) among the Company, Healthdyne, Inc., a Georgia corporation
("Healthdyne"), HIE, SVFII, and the Incorporators; and
(ii) each of the Incorporators owning 650,000 shares of
Criterion Common Stock (as to each Incorporator, the "Incorporator's Criterion
Shares" and, collectively, the "Incorporators' Criterion Shares"); and
WHEREAS, the Investors are parties to the SVFII Agreements (as
hereinafter defined), pursuant to which SVFII has granted to HIE an option to
purchase SVFII's entire investment in the Company; and
WHEREAS, the Company, the Investors and the Incorporators have
previously entered into a Consent (as hereinafter defined), pursuant to which
the parties consented to the execution and entry into the SVFII Agreements and
the consummation of the transactions contemplated thereby, subject, in the case
of the Incorporators and the Company, to the execution and consummation of
definitive agreements between HIE and the Incorporators as contemplated by the
AIP (as hereinafter defined); and
WHEREAS, the Company, HIE and each of the Incorporators desires to
restructure the transactions contemplated by the AIP as set forth in the
agreement of even date herewith among the Company, HIE and Teveit (the "Teveit
Agreement") and in the agreement of even date
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herewith among the Company, HIE and Pearson (the "Pearson Agreement") (the
Teveit Agreement and the Pearson Agreement, collectively, the "Restructuring
Agreements"); and
WHEREAS, pursuant to the Restructuring Agreements, Teveit and Pearson
will no longer hold any equity interest in the Company and will resign as
directors of the Company;
NOW, THEREFORE, in consideration of the premises hereof and the mutual
benefits to be derived hereunder and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company, HIE,
SVFII, Teveit and Pearson agree as follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the respective meanings indicated below:
"AIP" -- Agreement in principle dated November 6, 1996 among
HIE and the Incorporators.
"Amended Pledge Agreement" -- the Pledge Agreement dated as of
October 21, 1994 between Healthdyne and the Incorporators, as amended by the
First Amendment thereto, dated as of December 4, 1995 between Healthdyne, HIE,
SVFII and the Incorporators.
"Amended Shareholders Agreement" -- the Shareholders'
Agreement dated as of October 21, 1994 between Healthdyne, the Company and the
Incorporators, as amended by the Waiver and Second Amendment to Shareholders'
Agreement dated as of December 4, 1995 between Healthdyne, the Company, HIE,
SVFII and the Incorporators.
"Consent"-- the Consent dated as of December 18, 1996 between
the Company, HIE, SVFII, Teveit and Pearson.
"Incorporation Agreement" -- the Incorporation Agreement dated
as of October 21, 1994 between Healthdyne, the Company and the Incorporators, as
amended.
"Investment Agreement" -- the Investment Agreement and First
Amendment to Incorporation Agreement dated as of December 4, 1995 among
Healthdyne, the Company, HIE, SVFII and the Incorporators.
"SVFII Agreements" -- the Option Agreement dated as of
December 18, 1996 between HIE and SVFII, as amended by that certain letter
agreement between HIE and SVFII dated May 16, 1997, and related Stock Purchase
Warrant.
2. Second Amendment to Incorporation Agreement.
(a) Registration Rights. The Incorporation Agreement is hereby
amended to terminate the Incorporators' registration rights pursuant to Section
7, and Section 7.1(d) is hereby deleted and restated in its entirety as follows:
the term "Holder" means the Investor and/or any Authorized
Assignee to the extent such person holds Registerable Securities; and
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Accordingly, Section 7.9 relating to the "Assignment of Registration
Rights" is hereby amended to delete all references to the Incorporators.
(b) Redemption Option Upon Termination of Employment. Each of the
Company, the Investors and the Incorporators acknowledges that the redemption
option pursuant to Section 8.1 of the Incorporation Agreement is inapplicable to
the transactions contemplated by the Restructuring Agreements and agrees that
the Incorporators' Criterion Shares are currently without value.
(c) Board of Directors. The Incorporation Agreement is hereby amended
to terminate the Incorporators' rights to serve on the Board of Directors of the
Company, and Section 8.5 of the Incorporation Agreement is hereby deleted and
restated in its entirety as follows:
Board of Directors. Immediately upon the Closing and at all
times thereafter prior to the earlier of either Investor's exercise of
its conversion rights under the Convertible Debenture, the Company's
redemption of Incorporator's shares as provided in Section 8.1 hereof,
or either Investor's exercise of the Purchase Option in full pursuant
to the Shareholders' Agreement, the Company, HIE and SVFII shall take
all necessary action, including, without limitation, voting shares held
by them to maintain a three (3) member Board of Directors, which shall
consist of one nominee of HIE, one nominee of SVFII and one mutually
agreeable nominee. In the event the parties desire to increase the size
of the Board of Directors during such period, the parties agree to
increase the size of the Board of Directors and elect such persons as
designated by HIE and SVFII so as to maintain the relative
representation on the Board of Directors set forth above. In addition,
upon death or resignation of a member of the Board of Directors, HIE
and SVFII shall cause the Company's shareholders or Board of Directors,
as the case may be, to fill such vacant seat(s) on the Board of
Directors so as to maintain the relative representation set forth
above. Neither HIE nor SVFII shall sell, assign or otherwise transfer
any of such voting securities without obtaining from the transferee
thereof such transferee's agreement to vote such securities in
accordance with the provisions of this Section 8.5 and then only in
accordance with the provisions of this Agreement and the Shareholders'
Agreement. The covenants in Section 8.5 hereof shall continue until the
closing of a firm commitment underwritten public offering of Common
Stock pursuant to a registration statement filed with and declared
effective by the SEC pursuant to the Securities Act in which the
aggregate net cash proceeds to the Company exceed Four Million Dollars
($4,000,000.00) or such time as either Investor disposes of its entire
interest in the Company to the other Investor.
(d) Extraordinary Corporate Transactions. The Incorporation Agreement
is hereby amended to delete the requirement for the Incorporators' approval of
Material Corporate Transactions (as defined therein), and, accordingly, Section
8.6(ii) is hereby deleted and restated in its entirety as follows:
If shareholder approval is required, each of HIE and SVFII
approves such Material Corporate Transaction.
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3. Termination of Pledge Agreement. The Amended Pledge Agreement is
hereby terminated, and the shares subject to the Amended Pledge Agreement are
released in order for the Company to purchase the Incorporators' Criterion
Shares pursuant to the Restructuring Agreements.
4. Consent to SVFII Agreements. Each of Teveit and Pearson hereby
(i) consents to and approves the execution of and entry by HIE and SVFII into
the SVFII Agreements and the consummation of the transactions contemplated
thereby, (ii) waives his right of first refusal under the Amended Shareholders'
Agreement and any requirements under the Investment Agreement and the
Incorporation Agreement which may be applicable with respect to any transfer of
SVFII's interest in the Company to HIE pursuant to the SVFII Agreements and
(iii) agrees to execute and deliver such instruments as shall be reasonably
necessary to consummate the transactions contemplated by the SVFII Agreements.
5. Consent to Restructuring Agreements. SVFII consents to and
approves the execution of and entry by the Company, HIE, Teveit and Pearson into
the Restructuring Agreements and the consummation of the transactions
contemplated thereby, and waives his or its right of first refusal under the
Amended Shareholders' Agreement and any requirements under the Investment
Agreement and the Incorporation Agreement which may be applicable with respect
to any transfer of Teveit's and Xxxxxxx'x interests in the Company to the
Company pursuant to the Restructuring Agreements.
6. Acknowledgment of Stock Split. SVFII hereby acknowledges that the
Option Agreement is an option to purchase SVFII's entire investment in the
Company, notwithstanding the fact that the recital in the Option Agreement
states SVFII's equity ownership without accounting for the Stock Split.
Moreover, if SVFII should convert its Criterion Debenture, the Option Agreement
would include an option to purchase the shares underlying such Criterion
Debenture.
7. Miscellaneous.
(a) Governing Law; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the State of Georgia.
Whenever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but 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 the
remaining provisions of this Agreement.
(b) Successor and Assigns. This Agreement shall inure to the
benefit of and shall be binding upon the parties, their legal representatives
and permitted assigns, subject to the limitations otherwise set forth in this
Agreement.
(c) Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed and all such
counterparts or facsimile copy thereof shall be deemed to be an original
instrument.
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(d) Notices. Any notice or other communication by any party hereto to
the other parties shall be in writing and shall be given, and be deemed to have
been given, if either delivered personally, by overnight delivery service or
mail, postage prepaid, registered or certified mail, return receipt requested,
addressed as follows:
(i) to the Company: Criterion Health Strategies, Inc.
000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
(ii) to HIE: Healthdyne Information Enterprises, Inc .
0000 Xxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President and CEO
(iii) to SVFII: The Southern Venture Fund II, L.P.
000 00xx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(iv) to Teveit: Xxxxxxx X. Xxxxxx
0000 Xxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
(v) to Pearson: J. Xxxxxx Xxxxxxx, Xx.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Any party may change the address for notice by notifying the other
parties in writing of the new address.
(e) Specific Performance. The parties hereto acknowledge and agree
that the benefits to them under this Agreement are unique, that they are willing
to enter into this Agreement only upon performance by each other of all of their
obligations hereunder and that they will not have an adequate remedy at law if
the other fails to perform any of its obligations hereunder. Accordingly, the
parties hereby agree that each shall have the right, in addition to any other
rights or remedies it may have at law or in equity, to specific performance or
equitable relief by way of injunction if the other party fails to perform any of
its obligations hereunder.
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(f) Modification or Waiver. No change, modification or waiver of any
term of this Agreement shall be valid or binding upon the parties hereto unless
such change, modification or waiver shall be in writing signed by all parties
hereto.
(g) Headings. The headings and captions used in this Agreement are
used for convenience of reference only and shall not be considered in construing
or interpreting this Agreement. All references in this Agreement to sections,
paragraphs and exhibits shall, unless otherwise provided, refer to sections and
paragraphs hereof and exhibits attached hereto, all of which are incorporated
herein by this reference.
(h) Entire Agreement. This Agreement and the other instruments
specified herein constitute the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and supersede all prior
discussions, understandings and agreements with respect thereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.
CRITERION HEALTH STRATEGIES, INC.
By: /s/ H. Xxxxxxx Xxxxx
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Name: H. Xxxxxxx Xxxxx
Title: Chairman and Chief Executive
Officer
HEALTHDYNE INFORMATION ENTERPRISES, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Vice President and Chief
Financial Officer
THE SOUTHERN VENTURE FUND II, L.P.
By: Its General Partner
SV Partners II, L.P.
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
Title: Partner
XXXXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
J. XXXXXX XXXXXXX, XX.
/s/ J. Xxxxxx Xxxxxxx, Xx.
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J. Xxxxxx Xxxxxxx, Xx.
