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EXHIBIT 2.3
AGREEMENT
This AGREEMENT dated December 31, 1997 (the "Agreement"), by and
between Criterion Health Strategies, Inc. (f/k/a Alpha Development Corp.), a
Tennessee corporation ("CHS"), Healthdyne Information Enterprises, Inc., a
Georgia corporation ("HIE"), and The Southern Venture Fund II, L.P., a Delaware
limited partnership ("SVFII").
WITNESSETH:
WHEREAS, on October 21, 1994, CHS, Healthdyne, Inc. ("Healthdyne"),
Xxxxxxx X. Xxxxxx ("Teveit") and J. Xxxxxx Xxxxxxx, Xx. ("Pearson") (Teveit and
Pearson, collectively, the "Former Investors" and, individually, a "Former
Investor") entered into an Incorporation Agreement (as hereinafter defined) to
incorporate CHS and sell to Healthdyne 10 shares of the common stock, no par
value, of CHS ("CHS Common Stock") and a debenture due June 30, 2004 in the
principal amount of $4,000,000 and convertible into 639,990 shares of CHS Common
Stock; and
WHEREAS, on December 4, 1995, CHS, Healthdyne, HIE, SVFII and the
Former Investors entered into an Investment Agreement (as hereinafter defined)
which amended the Incorporation Agreement to acknowledge transfer of
Healthdyne's interest in CHS to HIE and to transfer half of such interest to
SVFII such that each of HIE and SVFII owned 5 shares of CHS Common Stock and a
debenture due June 30, 2004 in the principal amount of $2,000,000 and
convertible into 319,995 shares of CHS Common Stock; and
WHEREAS, on November 1, 1996, the Board of Directors of CHS approved a
5-for-1 split (the "Stock Split") of the CHS Common Stock, which was effected in
the form of a 500% stock dividend paid to shareholders of record on November 1,
1996; and
WHEREAS, each of HIE and SVFII currently has a 50% equity ownership
interest in CHS, with the following respective interests in CHS after the Stock
Split: each of HIE and SVFII owns 25 shares of CHS Common Stock, and a debenture
due June 30, 2004 in the principal amount of $2,000,000 and convertible into
1,599,975 shares of CHS Common Stock; and
WHEREAS, each of HIE and SVFII has fully funded its $2,000,000
commitment to CHS under the Amended Loan Agreement (as hereinafter defined)
entered into in connection with the convertible debentures; and
WHEREAS, pursuant to the Option Agreement (as hereinafter defined),
SVFII granted to HIE an option (the "Option") to purchase SVFII's entire
interest in CHS for 416,666 shares of HIE common stock, par value $.01 per share
("HIE Common Stock"), subject to adjustment if the HIE Common Stock is less than
$4.80 per share on the date of the notice of exercise; and
WHEREAS, in connection with the Option, HIE granted SVFII the Warrant
(as hereinafter defined) to purchase 50,000 shares of HIE Common Stock with a
per share exercise price of $4.5625; and
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WHEREAS, in connection with the Option Agreement, CHS, HIE, SVFII and
the Former Investors entered into a Consent (as hereinafter defined), pursuant
to which the parties consented to the execution and entry by HIE and SVFII into
the Option Agreement and the Warrant and the consummation of the transactions
contemplated thereby, subject, in the case of the Former Investors and CHS, to
the execution and consummation of definitive agreements between HIE and the
Former Investors as contemplated by the AIP (as hereinafter defined); and
WHEREAS, CHS, HIE, SVFII and each of the Former Investors entered into
agreements on June 13, 1997 to effectuate the transactions contemplated by the
AIP as set forth in the Restructuring Agreements (as hereinafter defined) which
provided for, among other things, (i) the acquisition by CHS of the interests of
the Former Investors in CHS and (ii) the conversion of all of the employee
options to purchase CHS Common Stock into options to purchase HIE Common Stock;
and
WHEREAS, in connection with the Restructuring Agreements, CHS, HIE,
SVFII and the Former Investors amended the Incorporation Agreement on June 13,
1997 as appropriate in order to effectuate the acquisition by CHS of the
interests of the Former Investors in CHS; and
WHEREAS, HIE and SVFII have agreed to amend the Option Agreement and
the Warrant to provide that (i) the exercise price of the Option will not be
subject to adjustment and (ii) the per share exercise price of the Warrant will
be adjusted from $4.5625 to the fair market value of the HIE Common Stock as of
the closing date for the Option exercise; and
WHEREAS, the parties hereto desire to terminate and/or otherwise amend
the various agreements and arrangements between such parties relative to their
respective investments in CHS (as herein described, the "Ancillary Agreements")
in order to effectuate the acquisition by HIE of a 100% equity interest in CHS
pursuant to HIE's exercise of the Option;
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, CHS, HIE and SVFII
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 Former Investors.
"Amended Loan Agreement" -- the Loan Agreement dated October
21, 1994 between Healthdyne and CHS, as amended by the First Amendment thereto
dated December 4, 1995 between Healthdyne, HIE, SVFII and CHS.
"Amended Security Agreement" -- the Security Agreement dated
October 21, 1994 between Healthdyne and CHS, as amended by the First Amendment
thereto dated December 4, 1995 between Healthdyne, HIE, SVFII and CHS.
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"Amended Shareholders' Agreement" -- the Shareholders'
Agreement dated October 21, 1994 between Healthdyne, CHS and the Former
Investors, as amended by the Waiver and Second Amendment to Shareholders'
Agreement dated December 4, 1995 between Healthdyne, CHS, HIE, SVFII and the
Former Investors.
"Consent"-- the Consent dated December 18, 1996 between CHS,
HIE, SVFII and the Former Investors.
"Incorporation Agreement -- the Incorporation Agreement dated
October 21, 1994, as amended by the Investment Agreement and First Amendment to
Incorporation Agreement dated December 4, 1995, as further amended by the Second
Amendment to Incorporation Agreement and Termination of Pledge Agreement dated
as of June 13, 1997.
"Intercreditor Agreement" -- the Intercreditor Agreement dated
December 4, 1995 between HIE and SVFII.
"Investment Agreement" -- the Investment Agreement and First
Amendment to Incorporation Agreement dated December 4, 1995 among Healthdyne,
CHS, HIE, SVFII and the Former Investors.
"Letter Agreement" -- the Letter Agreement dated December 4,
1995 between CHS, HIE, SVFII and the Former Investors.
"Option Agreement" -- Option Agreement dated December 18, 1996
between the HIE and SVFII, as amended by that certain letter agreement between
HIE and SVFII dated May 16, 1997 and as further amended as of December 31, 1997.
"Restructuring Agreements" -- the Agreement dated June 13,
1997 between CHS, HIE and Teveit and the Agreement dated June 13, 1997 between
CHS, HIE and Pearson.
"Warrant" -- Stock Purchase Warrant dated December 18, 1996
between HIE and SVFII.
2. Amendment or Termination of Ancillary Agreements.
Subject to the exercise by HIE of its Option to acquire SVFII's entire
investment in CHS pursuant to the Option Agreement, the Ancillary Agreements
shall be deemed amended or terminated, as the case may be, as follows (all such
amendments or terminations to be effective simultaneously with the Option
closing):
(a) Termination of the Incorporation Agreement. The Incorporation
Agreement shall be terminated, and each of HIE and SVFII hereby waive any
registration right pursuant to Section 7 of the Incorporation Agreement.
(b) Termination of the Investment Agreement. The Investment
Agreement shall be terminated and any obligation of CHS to issue warrants
pursuant to Section VI of the Investment Agreement which provides for the
issuance of warrants by CHS in event of the closing of the
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first firm commitment underwritten sale of CHS Common Stock to the general
public eliminated, and each of HIE and SVFII hereby waive any such warrant
right.
(c) Termination of Shareholders' Agreement and Intercreditor
Agreement. CHS, HIE and SVFII hereby acknowledge that, upon consummation of the
transactions contemplated by the Option Agreement, (i) the Amended Shareholders'
Agreement will automatically terminate in accordance with Section 6.3(a)(2)
thereof and (ii) the Intercreditor Agreement shall terminate.
(d) Amendment to Amended Loan Agreement and Amended Security
Agreement.
SVFII shall not be deemed a party to the Amended Loan Agreement or the Amended
Security Agreement and the security interests granted to SVFII under the Amended
Security Agreement are hereby assigned to HIE.
(e) Amendment of Letter Agreement. SVFII shall not be deemed a
party to the Letter Agreement, and all references to SVFII shall be deleted, so
that SVFII shall no longer have rights or obligations thereto.
3. Consents to Transfers. Each of CHS, HIE and SVFII hereby (i)
consents to and approves the consummation of the transactions contemplated by
the Investment Agreement, the Restructuring Agreements and the Option Agreement
(and each amendment thereto), and (ii) waives its/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 interests in CHS pursuant to the Investment
Agreement, the Restructuring Agreements and the Option Agreement (and each
amendment thereto).
4. 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.
(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:
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(i) to CHS: 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
Attention; General Partner
Telephone: (000) 000-0000
Facsimile: (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.
(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/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Assistant Secretary
HEALTHDYNE INFORMATION ENTERPRISES, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President and
Chief Financial Officer
THE SOUTHERN VENTURE FUND II, L.P.
By: Its General Partner
SV Partners II, L.P.
By: /s/ J. Xxxxxx XxXxxxxx, Xx.
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Name: J. Xxxxxx XxXxxxxx, Xx.
Title: Partner
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