<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 2000
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
REALMED CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
INDIANA 35-1970389 7371
(State or other Jurisdiction of (IRS Employer (Primary Standard Industrial
Incorporation or Organization) Identification Number) Classification Code Number)
</TABLE>
--------------------------
510 E. 96(TH) STREET, SUITE 400
INDIANAPOLIS, INDIANA 46240
(317) 580-0658
(Address, including zip code, and telephone number, including area code,
of Registrant's Principal Executive Office)
--------------------------
ROBERT J. HICKS
REALMED CORPORATION
510 E. 96(TH) STREET, SUITE 400
INDIANAPOLIS, IN 46240
(317) 580-0658
(Name, address, including zip code, and telephone number,
including area code, of Agent for Service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES A. STRAIN ROBERT F. WALL
SOMMER & BARNARD, PC WINSTON & STRAWN
4000 BANK ONE TOWER 35 WEST WACKER DRIVE
111 MONUMENT CIRCLE CHICAGO, ILLINOIS 60601
INDIANAPOLIS, INDIANA 46204 (312) 558-5600
(317) 630-4000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES OF THE
PUBLIC: as soon as practicable after the effective date of the Registration
Statement.
--------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE (1)(2) AMOUNT OF REGISTRATION FEE
<S> <C> <C>
Common Shares, No Par Value........................ $60,000,000 $15,840
Common Share Purchase Rights....................... (3) (3)
</TABLE>
(1) Includes Common Shares that may be purchased by the Underwriters to cover
over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
(3) No additional consideration will be paid for the Common Share Purchase
Rights.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY U.S. FEDERAL SECURITIES LAW TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE>
SUBJECT TO COMPLETION--APRIL 6, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
, 2000
[LOGO]
COMMON SHARES
-------------------------------------------------------------------------
REALMED CORPORATION:
- We own and operate the RealMed Network, an Internet-based, business-
to-business healthcare connectivity solution for payers and
providers.
- Our Network fully automates the healthcare claims process.
PROPOSED SYMBOL AND MARKET:
- We have applied to list our common shares on the Nasdaq National
Market under the symbol "RMED."
THE OFFERING:
- We are offering common shares.
- This prospectus relates to an underwritten offering of common
shares in the United States. In addition, we are directly offering
common shares to certain payers in a concurrent offering under
a separate prospectus.
- This is our initial public offering and no public market currently
exists for our shares. We anticipate that the initial public
offering price will be between $ and $ per share.
- The underwriters have an option to purchase an additional
common shares to cover over-allotments.
<TABLE>
- -------------------------------------------------------------------------------------
PER
SHARE TOTAL
- -------------------------------------------------------------------------------------
<S> <C> <C>
Public offering price:...................................... $ $
Underwriting fees:..........................................
Proceeds to RealMed Corporation:............................
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</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
- --------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
J.P. MORGAN & CO.
SG COWEN
WILLIAM BLAIR & COMPANY
DLJDIRECT INC.
<PAGE>
Inside front cover
In the upper left hand corner is the company logo.
Centered horizontally across the top of the page is the caption, "We own and
operate the RealMed Network, an Internet-based, business-to-business solution
for payers and providers."
Below the caption is a screen shot of the RealMed Network claim entry screen. To
the right of the screen shot is text describing the screen shot as follows:
"RealMed for Healthcare Providers claim entry screen as viewed on the provider
desktop with electronic linkage to the specific payer's legacy computer system."
Below the first screen shot is a second screen shot of the RealMed Network
explanation of benefits screen. To the right of the screen shot is text
describing the screen shot as follows: "Explanation of Benefits generated by the
specific payer's legacy computer system and delivered across the RealMed Network
to the provider's office while the patient is at the point of care."
Inside back cover
In the upper right hand corner is the company logo.
Below the logo is a screen shot of the RealMed Network entry screen. To the
right of the screen shot is text describing the screen shot as follows: "Entry
screen to the RealMed Network as viewed on the provider desktop providing recent
news on RealMed and the Network as well as on-line system compatability check."
Below the first screen shot is a second screen shot of the RealMed Network
provider and patient entry screen. To the right of the screen shot is text
describing the screen shot as follows: "Provider and patient information screen
on the RealMed Network as viewed on the provider desktop detailing provider and
patient information as well as patient eligibility, deductible and co-payment
status via realtime link to the payer's legacy computer system."
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary................. 1
Risk Factors....................... 5
Forward-Looking Statements......... 13
Concurrent Offering................ 13
Use of Proceeds.................... 14
Dividend Policy.................... 14
Capitalization..................... 15
Dilution........................... 16
Selected Consolidated Financial
Data............................. 17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 18
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Business........................... 23
Management......................... 36
Certain Transactions............... 46
Principal Shareholders............. 48
Description of Capital Stock....... 50
Shares Eligible for Future Sale.... 52
Underwriting....................... 54
Where You Can Find More
Information...................... 57
Legal Matters...................... 57
Experts............................ 57
Index to Financial Statements...... F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION ABOUT REALMED AND THE COMMON SHARES BEING SOLD IN THIS OFFERING IN
OUR CONSOLIDATED FINANCIAL STATEMENTS AND NOTES APPEARING ELSEWHERE IN THIS
PROSPECTUS AND OUR RISK FACTORS BEGINNING ON PAGE 5.
REALMED CORPORATION
We own and operate the RealMed Network, an Internet-based,
business-to-business healthcare connectivity solution for payers and providers.
The RealMed Network fully automates the healthcare claims process from
downloading patient information to resolving payments owed to providers. As a
result, claims resolution can be achieved in seconds, at the point of care in an
efficient and cost-effective manner. We believe that by re-engineering this
process, we can reduce the processing cost per claim by more than 50% for both
payers and providers.
To accomplish process automation and claims resolution, we provide a secure,
two-way link between the provider's desktop and the payer's legacy computer
system. The RealMed Network directly accesses the payer's claims adjudication
logic and customer database. Through our Network we provide:
- eligibility verification;
- deductible and co-payment status;
- claims error correction requests;
- claims submission;
- auto adjudication;
- delivery of an explanation of benefits, or EOB, at the point of care; and
- certainty of payment for providers through electronic funds transfer.
We have received initial commitments from five regionally dominant payers to
integrate the RealMed Network with these payers in selected markets: (1) Anthem
Insurance Companies, Inc; (2) WellPoint Health Networks, Inc.; (3) Blue
Cross/Blue Shield of North Carolina; (4) CareFirst Blue Cross; and (5) Blue
Cross/Blue Shield of Illinois. These payers collectively represent a potential
market of 13 states and the District of Columbia, 22 million covered lives and
128 million annual private physician claims, which is approximately 13% of the
U.S. private physician claims market.
While the RealMed Network is presently built to resolve private physician
claims, we are actively working to expand the functionality of the Network to
include Medicare and pharmaceuticals claims processing. We estimate the Medicare
annual claims market to be approximately 350 million physician claims and the
pharmaceuticals annual claims market to be approximately 1.6 billion physician
and Medicare claims. In total, approximately 4.7 billion healthcare claims were
processed in the United States in 1999.
In April 2000, we launched the RealMed Network with Anthem of Indiana. We
are currently in various stages of integration with our other payers. We will
earn transaction-based revenues from our payers, monthly subscription fees from
our providers and revenues from other related opportunities.
The U.S. healthcare system is generally regarded as expensive, fragmented
and inefficient. The U.S. Healthcare Financing Administration, or HCFA,
estimates that in 1999, healthcare expenditures represented approximately $1.2
trillion, or 13.3%, of the U.S. Gross Domestic Product. An estimated
$210 billion, or 17.5%, of healthcare expenditures are related to
administration. Included in administration are claims submission processing and
settlement expenses. The settlement of healthcare claims is a complex process,
involving detailed contractual, legal and regulatory relationships between
payers, providers and patients. Payers and providers must also contend with
continually evolving
1
<PAGE>
healthcare regulation. HCFA recently proposed new regulations under the Health
Insurance Portability and Accountability Act, or HIPAA. These regulations would
impose stringent privacy and security standards on the storage and transfer of
healthcare information.
Healthcare claims are typically submitted to a payer through a clearinghouse
or other third party via electronic data interchange, or EDI, regular mail, or
fax. These traditional processes are inefficient, time intensive and costly, due
to their inability to automatically process and adjudicate claims. In addition
to slow turnaround times for standard claims, the length of time and cost per
claim increases significantly if any information submitted by a provider is
incorrect, incomplete or inconsistent with the policies of a payer. The current
sequential process of submitting, adjudicating and approving the payment of
healthcare claims averages 42 days at an average cost of $19 per claim.
We expect our Internet-based resolution platform to minimize the
inefficiencies of EDI or paper-based claims settlement by re-engineering the
claims process to streamline workflow and enable the resolution of claims in
seconds. The RealMed Network also supports HIPAA compliance by tracking
electronic transactions and assuring the security and privacy of patient
information.
We believe that the rate of adoption of the RealMed Network will be driven
by our ability to significantly improve the efficiency of healthcare claims
resolution and to ultimately reduce the cost of healthcare. As a result, we
believe that the RealMed Network will improve the relationship between
healthcare payers and providers. We believe that we provide our customers with
the following benefits:
- significantly reduced time and expense associated with processing claims;
- accelerated payment and certainty of amounts owed;
- improved accuracy and efficiency of data transfer;
- enhanced management information; and
- increased data security and reduced opportunity for fraud.
Our goal is to become the industry standard for healthcare connectivity. A
significant step toward achieving our goal will be executing the integration and
roll-out process of the Network with our payers and providers. The key elements
of our growth strategy include:
- maximizing our market opportunities with our existing payers and
providers;
- increasing our market penetration on a national level by focusing first on
leading regional payers and providers and then on national payers;
- expanding technological leadership by increasing our portfolio of
applications, services and product offerings; and
- generating additional revenue opportunities using the RealMed Network.
Our executive offices are located at 510 East 96th Street, Suite 400,
Indianapolis, Indiana, 46240. Our telephone number is (317) 580-0658. Our
corporate Internet address is WWW.REALMED.COM. The information contained on our
website is not part of this prospectus.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common shares offered by RealMed in this public
offering................................................ shares
Common shares offered directly by RealMed in a concurrent
offering to certain payers.............................. shares
Common shares to be outstanding after this offering....... shares
Proposed Nasdaq National Market symbol.................... RMED
Use of proceeds........................................... - integration with payers;
- further research and
development;
- repayment of existing debt; and
- other general corporate
purposes.
</TABLE>
We are directly offering common shares to certain payers under a
separate prospectus. These payers have signed letters of understanding to
utilize the RealMed Network. Although our underwritten initial public offering
is not contingent on our completing the offering to the payers, the completion
of our offering to the payers is contingent on our completing our underwritten
initial public offering. For convenience, we refer to these offerings throughout
this prospectus collectively as this offering.
The number of common shares to be outstanding immediately after the offering
excludes 10,168,168 common shares reserved for issuance under our stock plans,
of which 6,430,934 common shares were subject to outstanding options as of
February 29, 2000, at a weighted average exercise price of $.887 per share.
ASSUMPTIONS THAT APPLY TO THIS PROSPECTUS
Unless we indicate otherwise, all information in this prospectus assumes the
following:
- completion of a for reverse stock split of common shares;
- the conversion of $17.5 million under a line of credit entered into with
The CIT Group, Inc. (the 1999 CIT Line of Credit) into a total of
19,531,250 common shares at an exercise price of $.896 per share; and
- no exercise by the underwriters of their over-allotment option to purchase
up to additional common shares.
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
This summary historical consolidated financial information below was derived
from the financial statements beginning on page F-1. This summary should be read
together with the financial statements and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" beginning on page .
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 13,
1995
(DATE OF
INCEPTION)
YEAR ENDED DECEMBER 31, THROUGH
--------------------------------------- DECEMBER 31,
1997 1998 1999 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA(1):
Revenues................................ $ 369 $ 509 $ 517 $ 1,395
Total costs and operating expenses...... 5,590 8,151 13,638 27,379
Income (loss) from operations........... (5,221) (7,642) (13,121) (25,984)
Net income (loss)....................... (5,221) (7,709) (15,488) (28,418)
Basic and diluted net income (loss) per
common share(2)....................... $ (0.25) $ (0.24) $ (0.45) $ (0.99)
Weighted-average shares outstanding used
in computing basic and diluted net
income (loss) per common share(2)..... 20,526,112 31,677,289 34,262,007 28,747,716
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
--------------------------
ACTUAL AS ADJUSTED(3)
--------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 1,383
Working capital (deficit)................................... (289)
Total assets................................................ 3,758
Subordinated line of credit to shareholder.................. 7,469
Other long-term obligations, net of current portion......... 4,993
Total shareholders' equity (deficit)........................ (10,765)
</TABLE>
- ------------------------
(1) As a result of completing this offering, we will record in our second
quarter,
- a charge of $ , or $ per share, in connection with a fee on a
$10.0 million line of credit entered into with The CIT Group, Inc. in 2000
(the 2000 CIT Line of Credit); and
- a non-cash charge of $2,001,953, or $ per share, in connection with the
conversion of $17.5 million under the 1999 CIT Line of Credit into a total
of 19,531,250 common shares at an exercise price of $.896 per share.
(2) For a description of the computation of the net income (loss) per share, see
note 11 of the notes to the audited financial statements.
(3) As adjusted to reflect the full conversion of $17.5 million under the 1999
CIT Line of Credit into common shares and the sale by us of common
shares offered by this prospectus and common shares offered in our
concurrent offering, at the public offering price and after deducting the
estimated underwriting discounts and commissions, the placement agent's fee
and offering expenses payable by us.
4
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE BUYING SHARES
IN THIS OFFERING. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY
RISKS WE FACE. THESE RISKS ARE THE ONES WE CONSIDER TO BE SIGNIFICANT TO YOUR
DECISION WHETHER TO INVEST IN OUR COMMON SHARES AT THIS TIME. THERE MAY BE RISKS
THAT YOU, IN PARTICULAR, VIEW DIFFERENTLY THAN WE DO, AND THERE ARE OTHER RISKS
AND UNCERTAINTIES THAT ARE NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY
CONSIDER IMMATERIAL, BUT THAT MAY IN FACT IMPAIR OUR BUSINESS OPERATIONS. IF ANY
OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, RESULTS OF OPERATIONS AND
FINANCIAL CONDITION WOULD LIKELY SUFFER, THE TRADING PRICE OF OUR COMMON SHARES
COULD DECLINE AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO REALMED
OUR NETWORK IS UNPROVEN.
We only recently started implementing the RealMed Network. While we have
tested our solution on a trial basis, we have not had any large-scale field
tests among providers and payers. Our operations are beginning with a proof of
concept phase that is expected to last from 3 to 12 months, depending upon the
payer. Upon completion of the proof of concept phase, we will need to meet
certain performance criteria before payers agree to expand the Network within
their system. Because of our start-up nature and the limited claims testing, it
is inherently difficult to evaluate whether our system will meet the criteria
during the proof of concept phase.
WE HAVE A HISTORY OF NET OPERATING LOSSES AND MAY NOT BE PROFITABLE IN THE
FUTURE.
Failure to achieve or maintain profitability could materially and adversely
affect the market price of our common shares. We have experienced net losses of
approximately $5.2 million in 1997, $7.7 million in 1998, and $15.5 million in
1999. At February 29, 2000, we had a retained deficit of $28.4 million. Our
historical financial information is of limited or no value in projecting our
future operating results because of our limited operating history and the
emerging nature of our operations. Since our inception, we have derived
substantially all of our revenues from processing of medical savings accounts
claims. Currently, we do not expect to continue to generate material revenues
from this business.
We are investing heavily to develop our Network, including paying the costs
of integrating our Network. We are also investing heavily to expand our sales
and marketing capabilities. The healthcare claims processing industry presents
substantial opportunity for creating efficiencies and profitability. However,
our revenue and income potential is unproven. We expect to continue to
experience net losses, and we are not certain when we will become profitable, if
at all. Even if we do achieve profitability, we may not sustain or increase
profitability on a quarterly or annual basis due to a number of factors,
including:
- rapid technological change;
- changing customer needs; and
- evolving industry standards.
We have guaranteed an identified level of savings per claim for our initial
payers. The initial three months of the first subscription period for the
providers are free. As a result, we will not realize any subscription revenue
from these providers during this free trial period.
5
<PAGE>
IF WE DO NOT ACHIEVE BROAD ACCEPTANCE OF OUR NETWORK BY PAYERS, PROVIDERS,
PATIENTS AND OTHER HEALTHCARE STAKEHOLDERS, OUR BUSINESS WILL BE HARMED.
To be successful, our Network must achieve acceptance by both payers and
providers. Because the healthcare market is fragmented, we may face difficulty
in obtaining a commitment from payers and providers to accept new technology. In
addition, we believe that the nature of complexities in processing healthcare
transactions have hindered the development and acceptance of information
technology solutions. While recent trends indicate more willingness to adopt
technology solutions, historically, the healthcare industry has resisted
adopting new information technology solutions. Furthermore, conversion from
traditional methods to e-commerce may not occur as rapidly as we expect it will,
and even if the conversion does occur as rapidly as we expect, healthcare
industry participants may use applications and services which others offer.
Finally, we intend to introduce new products to our Network. Until those
products are tested and used in the field, it is unclear whether they will work
and be accepted, and if they work, whether they will add materially to our
revenue and income.
LENGTHY SALES AND INTEGRATION CYCLES FOR OUR NETWORK COULD ADVERSELY AFFECT OUR
REVENUE GROWTH.
A key element of our strategy is to market our Network directly to payers.
Even though we have developed a geographically diverse business development
pipeline, we are unable to control many of the factors that will influence the
decision of payers as to the adoption or integration of our Network. We expect
that the sales and implementation process will be lengthy and will involve a
significant technical evaluation and commitment of resources by our customers.
The sale and integration of our Network to payers could be subject to delay as a
result of their ability to commit resources to the project and deployment of new
technologies within a payer's network.
We will need to expend substantial resources to integrate our Network with
the existing legacy computer systems of payers. We have limited experience in
integrating our applications with large, complex computer systems, and we may
experience delays in the integration process. These delays could, in turn, delay
our ability to generate revenue and could adversely affect our results of
operations.
IF WE CANNOT EXPAND OUR MANAGEMENT SYSTEMS AND NETWORK INFRASTRUCTURE, WE MAY
EXPERIENCE DELAYS IN THE GROWTH OF OUR BUSINESS.
In order to grow, we intend to expand our product development and strategic
relationships. This growth has and will continue to place significant strain on
our managerial, operational, financial and information systems resources. We may
not be able to effectively manage expansion of our operations, and our
facilities, systems, procedures or controls may not be adequate to support our
operations.
FAILURE TO RESPOND TO TECHNOLOGICAL DEVELOPMENTS AND CHANGING CUSTOMER NEEDS
COULD ADVERSELY AFFECT OUR BUSINESS.
As the communications, computer software and healthcare information
technology industries continue to experience rapid technological change, we must
be able to modify our products quickly to adapt to such changes. In particular,
the Internet is rapidly evolving and the technology used in Internet related
products is subject to rapid change and early obsolescence. The demands of
operating in such an environment may delay or prevent our development and
introduction of new healthcare connectivity solutions that continually meet
changing market demands and that keep pace with evolving industry standards. In
addition, our applications and services offerings may become obsolete due to the
adoption of new technologies or standards.
6
<PAGE>
OUR REVENUES ARE CONCENTRATED IN A FEW PAYERS AND THE LOSS OF ANY OF THOSE
PAYERS AND THEIR PROVIDERS COULD HARM OUR BUSINESS.
We anticipate generating a significant portion of our revenues from a small
number of payers and their providers. Currently, we have five payers who have
signed letters of understanding with us. These letters of understanding provide
for a proof of concept period and are terminable by the payers. We do not
currently anticipate having either legally binding contracts with payers or
exclusive arrangements even after this proof of concept phase. If we lose any of
these payers and their providers, our revenue could be significantly reduced and
our business could be harmed.
WE HAVE LIMITED EXPERIENCE ESTABLISHING AND MAINTAINING STRATEGIC RELATIONSHIPS
WITHOUT WHICH WE MAY NOT SUSTAIN OR GROW OUR BUSINESS.
If we lose any of our existing strategic relationships or fail to establish
additional strategic relationships, or if our strategic relationships fail to
benefit us as expected, we may not sustain or grow our business. We will depend
upon our strategic relationships to extend the reach of our Network to a larger
number of participants in the healthcare industry, develop and deploy new
products and generate additional revenue. We will also depend upon strategic
relationships with Bell Industries, a technology systems integrator, to provide
customer support, MarketSource, a marketing company, for a provider marketing
program, V(4) Consulting, a large provider practice consultant, for large
provider practice re-engineering and certain other organizations involved with
integrating the payers. To the extent these companies do not perform as
expected, our business could suffer. Entering into strategic relationships is
complicated by the following factors:
- current or future strategic partners may decide to compete with us in some
or all of our markets;
- key participants in the healthcare industry may refuse to establish
strategic relationships with us if we have entered into relationships with
their competitors; and
- potential strategic partners may be reluctant to work with us until our
Network has obtained widespread market acceptance.
INTENSE COMPETITION IN OUR MARKETS MAY LEAD TO REDUCED SALES OF OUR NETWORK.
Our industry is intensely competitive and subject to fragmentation, high
growth and rapid technological change. We may face significant competition from
traditional healthcare information system vendors and Internet healthcare
companies as they expand their product offerings or form joint ventures. Many of
these companies have significantly greater financial resources, well-established
brand names and large installed customer bases. We may be unable to compete
successfully against these organizations.
IF WE FAIL TO ACHIEVE A SIGNIFICANT MARKET SHARE, WE MAY BE UNABLE TO COMPETE
SUCCESSFULLY.
We believe that, to be successful, we must gain significant market share
with our Network before our competitors introduce alternative products and
services with features similar to ours. Failure to achieve a significant market
share may materially reduce our ability to compete successfully, if at all, with
other market participants and may lead to reduced sales of the RealMed Network.
OUR ABILITY TO SCALE THE NETWORK IS UNPROVEN AND INABILITY TO SCALE COULD HAVE A
SIGNIFICANT NEGATIVE IMPACT ON OUR BUSINESS OPERATIONS.
Our Network may be unable to accommodate increased use while maintaining
acceptable overall performance. We must continue to expand and adapt our Network
infrastructure to accommodate additional users, increased transaction volumes
and changing customer requirements. We may be
7
<PAGE>
unable to expand or adapt our Network infrastructure to meet additional demand
or our customers' changing needs on a timely basis and at a commercially
reasonable cost.
OUR FAILURE TO RETAIN AND ATTRACT KEY PERSONNEL COULD SIGNIFICANTLY HINDER THE
EXECUTION OF OUR BUSINESS STRATEGY.
Our success will depend significantly on our current senior management team
and other key employees. We need to attract and retain additional highly skilled
technical personnel capable of developing, selling or installing complex
healthcare information technology systems. We face intense competition for these
personnel. Recruiting qualified personnel could prove expensive and problematic.
We do not maintain key person life insurance for anyone.
WE MAY NEED ADDITIONAL CAPITAL TO ACHIEVE PROFITABLE OPERATIONS.
As we expand operations, we will require additional capital. We cannot be
certain that funds will be available on terms satisfactory to us when needed. To
the extent that we raise additional equity capital, it may have a dilutive
effect on our existing shareholders.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, OUR COMPETITIVE
POSITION MAY BE ADVERSELY AFFECTED.
Our future success will depend on our ability to protect and maintain the
proprietary rights to the RealMed Network. To protect our intellectual property
rights, we currently rely on a combination of copyright, trademark and trade
secret laws, noncompetition agreements and restrictions on disclosure. We also
expect to rely on patents to protect some of our proprietary technology and have
filed three patents with respect to that technology. Our patent applications may
not be approved or, if approved, our patents may not be effective in protecting
our proprietary technology.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US CAN BE COSTLY AND RESULT IN
THE LOSS OF SIGNIFICANT RIGHTS.
We could be subject to intellectual property infringement claims as the
number of our competitors grows and the functionality of our products and
services overlaps with competing products. We could incur substantial costs and
diversion of management resources defending any infringement claims. In
addition, a party making a claim against us could secure a judgement awarding
substantial damages, as well as injunctive or other equitable relief that could
effectively block our ability to provide products or services. Licenses for
intellectual property of third parties that might be required for our products
or services may not be available on commercially reasonable terms, or at all.
IF WE ARE HELD LIABLE FOR USE OF DATA WE PROVIDE, WE COULD BE REQUIRED TO PAY
MATERIAL DAMAGES TO INJURED THIRD PARTIES.
We provide data for use by payers and providers and other healthcare
stakeholders. Claims for injuries related to the use of this data may be made in
the future, and we may not be able to insure adequately against these claims. A
claim brought against us that is uninsured or under-insured could lead to
material damages against us.
OUR INABILITY TO PREVENT SECURITY BREACHES COULD DETER PEOPLE FROM USING THE
REALMED NETWORK, AND COULD EXPOSE US TO CLAIMS FOR DAMAGES.
Any well-publicized compromise of Internet security could deter people from
using the RealMed Network to conduct transactions that involve transmitting
confidential healthcare information. We rely on encryption and authentication
technology to provide the security and authentication necessary for secure
transmission of confidential information. A security breach could occur if a
third party was able
8
<PAGE>
to penetrate our Network security and misappropriate our patient and other
information. If this happened, we could also be subject to liability and
litigation. The difficulty of securely transmitting confidential information
over the Internet has been a significant barrier to conducting e-commerce. We
may have to devote significant financial and other resources to protect against
security breaches or to alleviate problems caused by breaches. Advances in
computer capabilities, new discoveries in the field of cryptography or other
developments could result in a compromise or breach of the algorithms we use to
protect customer transaction data.
UNDETECTED SOFTWARE ERRORS MAY HARM OUR BUSINESS.
Complex software programs such as those comprising the RealMed Network could
contain undetected errors. We have, from time to time, found errors in our
products, and in the future we may find additional errors in our existing, new
or enhanced solutions. In addition, our software is combined with the software
products of payers and providers. As a result, it may be difficult to identify
the source of the problem, should one occur. The occurrence of software errors,
whether caused by our software or another party's products, could harm sales of
our Network, divert the attention of our technical personnel away from product
development efforts and cause significant customer relations problems. Due to
the sensitivity of patient medical information, software errors may expose us to
particularly significant liability relative to other businesses offering
Internet-based products.
WE CURRENTLY DO NOT HAVE AN OFF-SITE BACK-UP DATA CENTER.
While we do not have an off-site back-up data center, we are actively
considering various off-site facility alternatives. If we experience a disaster,
we will face delays in restoring complete Network functionality, which could be
substantial.
BECAUSE WE ARE DEPENDENT ON PAYERS' AND PROVIDERS' COMPUTER SYSTEMS, DELAYS OR
FAILURES IN ANY OF THOSE SYSTEMS COULD AFFECT OUR ABILITY TO SUCCESSFULLY
OPERATE OUR BUSINESS.
Since our Network is linked to the legacy computer system of each payer, we
must continually maintain our interface with payers as they change and improve
their systems. Additionally, any error in the entry of a particular payer's
rules in the software code, or data entry errors, will result in delays and
adjudication errors, and could harm perceptions about the effectiveness of the
RealMed Network. Any prolonged interruption in Internet services could affect
our ability to provide our service and affect our relationships with our payers
and providers. Failures or delays in providing our services caused by problems
interfacing with payers' or providers' systems, through no fault of ours, could
nevertheless affect our relationships with our customers and harm our business.
RISKS RELATED TO THE HEALTHCARE INDUSTRY AND THE INTERNET
FEDERAL AND STATE LEGISLATION AND REGULATION AFFECTING THE HEALTHCARE INDUSTRY
COULD SEVERELY RESTRICT OUR ABILITY TO OPERATE OUR BUSINESS.
We are subject to federal and state legislation and regulation affecting the
healthcare industry. Existing and proposed laws and regulations applicable to
the healthcare industry could have a material adverse effect on our ability to
operate our business. State governments extensively regulate the confidentiality
and release of patient records. Additional legislation governing the
distribution of medical records has been proposed at both the state and federal
level. It may be expensive to implement security or other measures designed to
comply with any new legislation. Future legislation could place restrictions on
the electronic delivery of certain patient records to some healthcare
participants. If enacted, these restrictions would most likely place the burden
on healthcare participants to obtain patient consent in order to overcome the
restrictions.
9
<PAGE>
Federal and state legislatures have periodically considered programs to
reform or amend the U.S. healthcare system at both the federal and state level.
These programs may contain proposals to increase governmental involvement in
healthcare or otherwise change the environment in which healthcare industry
participants operate. Healthcare industry participants may respond by reducing
their investments or postponing investment decisions, including investments in
our products and services. We do not know what effect any proposals would have
on our business.
Regulations currently being considered at the federal level could also
negatively affect our business. For example, HIPAA mandates the use of standard
transactions and identifiers, prescribed security measures and other provisions
within two years after the adoption of final regulations by the United States
Department of Health and Human Services. It is not certain when the Department
will adopt final HIPAA regulations, and the final regulations are subject to
change. Compliance with HIPAA over time is likely to require additional expense.
In addition, our success depends on other healthcare participants complying with
these regulations.
If United States Food and Drug Administration, or FDA, regulations were
applicable to any of our products and services, we believe that complying with
those regulations would be time consuming, burdensome and expensive and could
delay our introduction of new products or services. Some computer applications
and software are considered medical devices and are subject to regulation or
validation by the FDA. We do not believe that our current products or services
are subject to FDA regulation. We may, however, expand our product and service
offerings into areas that subject us to FDA regulation.
A federal law commonly known as the Medicare/Medicaid anti-kickback law, and
several similar state laws, prohibit payments that are intended to induce
providers or others to acquire, arrange for or recommend the acquisition of
healthcare products or services. Another federal law, commonly known as the
Stark law, prohibits providers from referring Medicare and Medicaid patients for
designated health services to entities with which they have a financial
relationship, unless that relationship qualifies for an explicit exception to
the referral ban. The application and interpretation of these laws are complex
and difficult to predict and could constrain our financial and marketing
relationships.
CHANGES IN THE HEALTHCARE INDUSTRY COULD ADVERSELY AFFECT OUR BUSINESS.
The healthcare industry is highly regulated and is subject to changing
political, economic and regulatory influences. These factors affect the
purchasing decisions and operations of healthcare organizations. Changes in
current healthcare financing and reimbursement systems could cause us to make
unplanned enhancements to our Network, or result in delays or loss of payers.
IF USE OF THE INTERNET DOES NOT CONTINUE TO GROW, OUR BUSINESS COULD BE
ADVERSELY AFFECTED.
The Internet is a relatively new commercial marketplace and may not continue
to grow. If Internet use does not continue to grow, our business, financial
condition, results of operations and cash flows could be materially adversely
affected.
Additionally, to the extent the Internet's technical infrastructure or
security concerns adversely affect its growth, our business, financial
condition, results of operations and cash flows could be materially adversely
affected. The Internet may prove to be problematic for the following reasons:
- if the number of Internet users and the level of use continues to grow,
the Internet's technical infrastructure may become unable to support the
demands placed upon it;
- third-party vendors might not be able to timely and adequately develop the
necessary technical infrastructure for significant increases in
e-commerce, such as a reliable network backbone, or to introduce
performance improvements, such as high-speed modems;
10
<PAGE>
- delays in the development or adoption of new standards and protocols
required to handle increased levels of activity or increased governmental
regulation could cause the Internet to lose its commercial viability;
- changes in or insufficient availability of telecommunication services
could produce slower response times and adversely affect use of the
Internet; and
- the general public's security concerns could lead to resistance against
widespread acceptance of the Internet as a viable commercial marketplace.
GOVERNMENT REGULATION OF THE INTERNET COULD SEVERELY RESTRICT OUR ABILITY TO
OPERATE OUR BUSINESS.
Our business is subject to evolving government regulation of the Internet.
Existing as well as new laws and regulations could severely restrict our ability
to operate our business. Laws and regulations may be adopted to govern the
Internet or other on-line services covering issues such as:
- user privacy;
- pricing;
- content;
- taxes; and
- copyrights.
The applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes, libel and
personal privacy is uncertain and may take years to resolve. Demand for our
applications and services may be affected by additional regulation of the
Internet.
CONSOLIDATION IN THE HEALTHCARE INDUSTRY COULD HAVE AN ADVERSE EFFECT ON OUR
REVENUES AND RESULTS OF OPERATIONS.
If we were forced to reduce our prices because of consolidation in the
healthcare industry, our revenues and results of operations could suffer. Many
healthcare industry participants are consolidating to create greater market
power. As the healthcare industry consolidates, competition to provide products
and services to industry participants will become more intense. These industry
participants may try to use their market power to negotiate price reductions for
our products and services.
RISKS RELATED TO THIS OFFERING AND OUR COMMON SHARES
OUR STOCK PRICE MAY BE VOLATILE AND COULD DECLINE SIGNIFICANTLY.
The market price of our common shares could decline significantly in
response to a number of factors, including:
- actual or anticipated quarterly variations in our operating results;
- changes in expectations of future financial performance or failure to meet
market expectations;
- announcements of technological innovations or new services or products by
us or our competitors;
- announcements relating to payer/provider integrations;
- customer relationship developments;
- conditions affecting healthcare and Internet industries in general; and
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<PAGE>
- changes in the recommendations of securities analysts.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted. If this were to happen to RealMed, litigation would be expensive and
could divert management's attention.
OUR COMMON SHARES HAVE NO PRIOR PUBLIC MARKET.
Before this offering, there was no public market for our common shares. In
addition, an active public market for our shares may not develop or be sustained
after this offering. The initial public offering price has been determined by
negotiations between us and the representatives of the underwriters. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price.
OFFICERS, DIRECTORS AND CERTAIN SHAREHOLDERS WILL HAVE SIGNIFICANT CONTROL OF
REALMED.
After this offering, our directors and management (including our founders)
will own or control approximately % of our common shares. In addition, The CIT
Group, Inc. will beneficially own % of our common shares, GemPlus SA will
beneficially own % of our common shares and JLT, L.P. will beneficially own
% of our common shares. If these people act together, they will be able to
significantly influence the management and affairs of RealMed and will have the
ability to control all matters requiring shareholder approval. This
concentration of ownership may have the affect of delaying, deferring or
preventing an acquisition of RealMed and may adversely affect the market price
of our common shares.
Our Articles of Incorporation provide for a classified board of directors
consisting of three classes. As a result, shareholders desiring to replace a
majority of our board could only do so through two annual meetings of RealMed.
Each of the following shareholders has agreed to vote at the 2001 and 2002
annual meetings of shareholders for the re-election to a full three-year term of
certain of the directors whose terms expire at that meeting: Robert J. Hicks,
Mark A. Morris, Robert B. Peterson, GemPlus SA and The CIT Group, Inc. As a
result, the re-election of Messrs. Hicks, Morris, Peterson, a representative of
GemPlus SA and up to two representatives of The CIT Group, Inc., as directors in
2001 and 2002 is virtually assured. Presently, only one representative of The
CIT Group, Inc., Mr. Bradley D. Nullmeyer, is serving as a director.
CURRENT SHAREHOLDERS WILL BENEFIT FROM THIS OFFERING AND YOU WILL EXPERIENCE
IMMEDIATE DILUTION.
Based on the number of common shares outstanding as of February 29, 2000,
existing shareholders have paid an average of $.61 per share for their common
shares, including the full exercise of the warrants related to the 1999 CIT Line
of Credit, which is considerably less than the amount to be paid by investors
who purchase in this offering. New investors in this offering will experience an
immediate dilution of $ per share, also based on the number of outstanding
shares as of February 29, 2000, including the exercise of the warrants related
to the 1999 CIT Line of Credit. This offering will also create a public market
for the resale of shares held by existing investors, and substantially increase
the market value of those shares.
WE HAVE CERTAIN ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN
ACQUISITION OF OUR COMPANY.
Our Articles of Incorporation and Bylaws contain provisions that may deter
an attempt to change or gain control of RealMed. As a result, you may be
deprived of opportunities to sell some or all of your common shares at prices
that represent a premium over market prices. These provisions include the
existence of blank check preferred stock, staggered terms for the directors,
restrictions on the
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<PAGE>
ability to change the number of directors or to remove a director and certain
supermajority voting requirements. Additionally, the board has implemented a
rights plan.
FUTURE SALES OF OUR COMMON SHARES COULD AFFECT OUR STOCK PRICE.
After the completion of this offering, we will have a large number of common
shares outstanding and available for resale beginning at various points of time
in the future. Sales of substantial amounts of our common shares in the public
market following this offering, or the perception that those sales will occur,
could cause the market price of our common shares to decline. Those sales also
might make it more difficult for us to sell equity securities in the future at a
time and at a price that we deem appropriate. Some of the holders of our common
shares also have demand and piggyback registration rights enabling them to
register their shares under the Securities Act for sale. For more detailed
information, see "Shares Eligible for Future Sale."
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties, including those discussed in "Risk Factors" and other sections of
this prospectus. These statements often contain statements like believe, expect,
anticipate, intend, contemplate, seek, plan, estimate or similar expressions.
Forward-looking statements do not guarantee future performance. Because we
cannot predict all of the risks and uncertainties that may affect us, or control
the ones we do predict, these risks and uncertainties can cause our results to
differ materially from the results we express in our forward-looking statements.
Recognize these statements for what they are and do not rely on them as facts.
We are not obligated to update forward-looking statements.
CONCURRENT OFFERING
We are directly offering common shares to certain payers at a price
equal to the public offering price in a concurrent offering under a separate
prospectus. These payers have signed letters of understanding to utilize the
RealMed Network. Although our underwritten initial public offering is not
contingent on our completing the offering to the payers, the completion of our
offering to the payers is contingent on our completing our underwritten initial
public offering. We will receive all proceeds from the concurrent offering.
Donaldson, Lufkin & Jenrette Securities Corporation is acting as the placement
agent in connection with the concurrent offering. The placement agent will
receive a fee of $ per share sold in the concurrent offering. We will indemnify
the placement agent against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
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<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of
common shares we are offering, consisting of shares offered in our initial
public offering and shares offered in our concurrent offering, will be
approximately million, or approximately $ million if the underwriters
fully exercise their over-allotment option at the assumed offering price of $
per share, in each case after deducting the estimated underwriting discounts and
commissions, the placement agent's fee and estimated offering expenses.
We will use the net proceeds from this offering for the following:
- integration with payers;
- further research and development;
- repayment of existing debt; and
- other general corporate purposes.
The exact amounts we actually expend for each of the categories above will
vary significantly depending on a number of factors, including revenue growth,
if any, the amount of cash we generate from operations and the number of
contracts for the RealMed Network. As a result, we will retain broad discretion
in the allocation and use of the net proceeds from this offering. Pending the
uses described above, we intend to invest the net proceeds from this offering in
short-term, interest-bearing, investment grade securities.
The existing debt to be repaid with proceeds from the offering consists of:
- a $4,285,798 secured note payable with GemPlus SA, a shareholder, with an
annual interest rate of 12.0% maturing on December 15, 2002;
- a $150,000 demand note with Robert B. Peterson, a founder and shareholder,
at 4.0% interest; and
- a $19,000 noninterest-bearing advance from Robert B. Peterson and Mark A.
Morris, the founders, payable upon demand.
We borrowed funds under the 1999 CIT Line of Credit and entered into the
GemPlus SA secured note in 1999. We used proceeds from these borrowings for
general corporate purposes.
The 1999 CIT Line of Credit bears interest at an annual rate of 8.0% and
matures the earlier of (1) demand by the lender following an initial public
offering or (2) June 15, 2003. The CIT Group, Inc. will convert $17.5 million
under the 1999 CIT Line of Credit into 19,531,250 common shares at an exercise
price of $.896 per share at the initial public offering. Such exercise will
offset the $17,500,000 due under the 1999 CIT Line of Credit.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common shares and
do not intend to pay any cash dividends with respect to our common shares in the
foreseeable future. We intend to retain any earnings for use in the operation of
our business and to fund future growth.
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<PAGE>
CAPITALIZATION
The table below presents our capitalization as of December 31, 1999 (1) on
an actual basis, and (2) as adjusted to reflect:
- the conversion of $17.5 million under the 1999 CIT Line of Credit into
19,531,250 common shares; and
- our receipt of the estimated net proceeds from the sale of the
common shares in this offering and shares in our
concurrent offering at an assumed initial public offering price of $
per share and after deducting underwriting discounts and commissions, the
placement agent's fee and our estimated offering expenses payable by us.
You should read this table together with the consolidated financial
statements and related notes and other information included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Cash and cash equivalents................................... $ 1,383 $
======== ========
Long-term debt:
Secured note payable to shareholder....................... 4,286
Subordinated line of credit to shareholder................ 7,469
Capital lease obligations, related parties, net of current
portion................................................. 452
Accrued interest, related parties......................... 255
-------- --------
Total long-term debt.................................... 12,462
-------- --------
Shareholders' equity (deficit):
Common shares, 200,000,000 shares authorized, 36,967,605
shares issued; 36,921,938 shares outstanding ( as
adjusted)............................................... 16,818
Stock options outstanding................................... 1,524
Unamortized restricted stock................................ (493)
Receivables from issuance of restricted stock............... (155)
Accumulated deficit......................................... (28,418)
Treasury stock, at cost--45,667 shares...................... (41)
-------- --------
Total shareholders' equity (deficit)...................... (10,765)
-------- --------
Total capitalization...................................... $ 1,697 $
======== ========
</TABLE>
The actual and as adjusted information set forth in the table excludes:
- 6,406,104 shares issuable on the exercise of outstanding options granted
under our option plans, as follows: (1) 796,715 shares issuable on
exercise of outstanding options granted under our 1997 Employee Stock
Option and Incentive Plan (the 1997 Plan); and (2) 5,609,389 shares
issuable on exercise of outstanding options granted under our 1999
Employee Stock Option and Incentive Plan (the 1999 Plan);
- an additional 3,765,611 shares which are reserved for issuance under the
1999 Plan;
- the board has authorized the adoption of the 2000 Employee Stock Option
and Incentive Plan (the 2000 Plan) and the reservation of 5,600,000 shares
for issuance under the 2000 Plan. The board has granted the executive
officers and directors options to purchase 4,989,000 shares under the 2000
Plan for executive officers and directors; and
- our payment of a fee for the 2000 CIT Line of Credit, equal to the greater
of 0.5% of our market capitalization at the initial public offering date
or $1,000,000, which is payable in stock or cash at the option of The CIT
Group, Inc.
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<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $(10,765,000) or $(.29) per share. Our pro forma net tangible book
value per share represents
- our total tangible assets minus total liabilities, divided by
- the total pro forma number of common shares on that date, after giving
effect to the conversion of $17.5 million under the 1999 CIT Line of
Credit into 19,531,250 common shares.
Dilution in net tangible book value per share represents the difference
between
- the amount per share paid by purchasers of common shares in this offering,
and
- the net tangible book value per common share immediately after the
offering.
After giving effect to the conversion of $17.5 million under the 1999 CIT
Line of Credit into 19,531,250 common shares, the sale of common shares
offered by this prospectus and the sale of common shares in our
concurrent offering and after deducting underwriting discounts and commissions,
the placement agent's fee and estimated offering expenses payable by us, and the
application of the estimated net proceeds, our pro forma net tangible book value
at December 31, 1999 would have been approximately $ , or approximately $
per share. This represents an immediate increase in pro forma tangible book
value of $ per share to existing shareholders and an immediate dilution in pro
forma net tangible book value of $ per share to new investors, as
illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of December
31, 1999.................................................. $
Increase per share attributable to this offering............
------------------------
Pro forma net tangible book value per share after this
offering..................................................
------------------------
Dilution to new public investors............................ $
========================
</TABLE>
The following table summarizes, as of December 31, 1999, on a pro forma
basis described above, the total number of common shares purchased from us, the
total consideration paid and the average price paid per share by the existing
shareholders and by the new investors based upon an initial public offering
price of $ per share before deducting the estimated underwriting discounts and
commissions, the placement agent's fee and offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders, including
conversion of the $17.5 million under
the 1999 CIT Line of Credit............ 56,453,188 % $34,276,758 % $0.61
New public investors.....................
---------- ----- ----------- -----
Total.................................... 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
The tables exclude options outstanding to purchase a total of 6,406,104
common shares, with a weighted average exercise price of $.842 per share, as of
December 31, 1999. To the extent that any of the outstanding options are
exercised for less than the offering price, there will be further dilution to
new public investors. If all options outstanding as of December 31, 1999 were
exercised in full, the dilution per share to new public investors would be
.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the financial statements and notes that are
included in this prospectus and audited by Ernst & Young LLP. The following
information has been derived from the audited financial statements beginning on
page F-1:
- statements of operations data for the one-year periods ended December 31,
1997, 1998 and 1999 and the date of inception through December 31, 1999;
and
- the balance sheet data as of December 31, 1997, 1998 and 1999.
We encourage you to read the financial statements included in this
prospectus because they contain the complete audited financial statements of
RealMed for the periods presented. See Note 11 of notes to financial statements
for an explanation of the determination of the shares used in computing basic
and diluted net loss per common share. Historical operating results are not
necessarily indicative of results in the future.
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 13,
1995 (DATE OF
INCEPTION)
YEAR ENDED DECEMBER 31, THROUGH
--------------------------------------- DECEMBER 31,
1997 1998 1999 1999
----------- ----------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.................................. $ 369 $ 509 $ 517 $ 1,395
----------- ----------- ----------- -----------
Costs and operating expenses:
Research and development................ 2,584 3,026 3,872 9,482
Business development, sales and
marketing............................. 514 967 1,378 2,859
Payer integration....................... -- -- 585 585
General and administrative.............. 2,060 2,007 2,108 6,175
Inventory writedown..................... -- -- 4,181 4,181
Stock based compensation................ -- 1,705 852 2,557
Depreciation and amortization........... 432 446 662 1,540
----------- ----------- ----------- -----------
Total costs and operating expenses........ 5,590 8,151 13,638 27,379
----------- ----------- ----------- -----------
Operating income (loss)................... (5,221) $ (7,642) (13,121) (25,984)
Interest expense.......................... -- 67 2,367 2,434
----------- ----------- ----------- -----------
Net income (loss) attributed to common
shareholders............................ $ (5,221) $ (7,709) $ (15,488) $ (28,418)
=========== =========== =========== ===========
Net income (loss) per common share, basic
and diluted............................. $ (0.25) $ (0.24) $ (0.45) $ (0.99)
=========== =========== =========== ===========
Weighted-average shares outstanding, basic
and diluted............................. 20,526,112 31,677,289 34,262,007 28,747,716
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 41 $ 131 $ 1,383
Working capital (deficit)................................... (1,043) (2,964) (289)
Total assets................................................ 1,182 5,157 3,758
Subordinated line of credit to shareholder.................. -- -- 7,469
Other long-term obligations, net of current portion......... 304 5,229 4,993
</TABLE>
<TABLE>
<S> <C> <C> <C>
Total shareholders' equity (deficit)........................ (220) (3,212) (10,765)
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND NOTES THERETO. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING
STATEMENTS THAT REFLECT OUR PLANS, ESTIMATES AND BELIEFS. OUR ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN FORWARD-LOOKING STATEMENTS. SEE
"RISK FACTORS."
OVERVIEW
We operate the RealMed Network, an Internet-based business-to-business
connectivity solution for healthcare providers and payers. The RealMed Network
offers complete claims resolution in seconds at the point of care. We have
received initial commitments for the roll out of the RealMed Network from five
regionally dominant payers: (1) Anthem Insurance Companies, Inc.; (2) WellPoint
Health Networks, Inc.; (3) Blue Cross/Blue Shield of North Carolina;
(4) CareFirst Blue Cross; and (5) Blue Cross/Blue Shield of Illinois. In
April 2000, we launched the RealMed Network with Anthem of Indiana. We are in
various stages of integration with our other payers.
We were incorporated in November 1995 and commenced operations in
January 1997. Since our inception, we have derived substantially all of our
revenues from processing of medical savings accounts claims. Currently, we do
not expect to continue to generate material revenues from this business. Due to
our limited operating history with our Network, it is difficult for us to
predict with any accuracy our future results of operations. As of December 31,
1999, we had net operating loss carryforwards for tax reporting purposes of
approximately $22 million, which begin to expire in 2018. We believe that
period-to-period comparison of our financial results is not necessarily
meaningful and you should not rely upon them as an indication of our future
performance.
Following the launch of the RealMed Network, we expect our revenues to be
derived from our payers and providers. Payer revenues will be based on the
number of claims processed through the RealMed Network. To encourage payer
adoption of the RealMed Network, we have guaranteed an identified level of
savings per claim for our initial payer partners and have incurred the cost of
Network integration. Payer revenues will be recognized as transactions are
completed. To the extent any saving guarantees are owed to payer, we expect to
settle with the payer on a quarterly basis to mitigate the risk of revenue
adjustments.
Provider revenues will be generated on a monthly subscription basis pursuant
to a 12-month subscription agreement with monthly renewals at the end of the
first subscription period. To encourage provider adoption of the RealMed
Network, the initial three months of the first subscription period for the
providers are free. The subscription is cancelable with thirty days notice.
Provider revenues will be recognized when the provider is billed for the monthly
subscription. No subscription revenues will be realized during the free trial
period of three months.
We do not expect to have a material amount, if any, of capitalized software
development costs. We expect to expense significant portions of the payer
integration costs.
To date, we have incurred substantial costs to design, build and enhance the
RealMed Network, integrate with our payers, develop our infrastructure, and grow
our business. We have yet to generate revenues from the RealMed Network. We have
incurred operating losses in each fiscal quarter since we were formed. We expect
operating losses and negative cash flow to continue for the foreseeable future
as we intend to significantly increase our operating expenses to integrate the
RealMed Network. These costs could have an adverse effect on our future
financial condition or operating results.
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REVENUE AND EXPENSE COMPONENTS
The following descriptions of the components of revenues and expenses apply
to the Comparison of Results of Operations:
REVENUES. Historically, revenues consisted of fees received relating to the
processing of medical savings accounts. In the future, we expect revenues to be
derived almost exclusively from the RealMed Network.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of employee compensation, the cost of outside technology consultants
and other direct expenses incurred in the development of our product.
BUSINESS DEVELOPMENT, SALES AND MARKETING. Sales and marketing expenses
consist primarily of employee compensation, the cost of outside consultants and
other direct expenses incurred in securing payer proof of concepts and other
sales and marketing efforts for the RealMed Network.
PAYER INTEGRATION COSTS. Payer integration costs include internal salary
and salary-related costs of technical, strategic, operational and financial
integration personnel and the cost of outside consultants utilized in the
integration process.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of compensation and other costs for legal, finance, management and
administrative personnel as well as facility and other operating costs.
STOCK BASED COMPENSATION. Stock based compensation expense includes costs
for vesting of in-the-money option grants, vesting of restricted share grants
and the total value of unrestricted share grants.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization includes
depreciation on property and equipment and amortization of purchased software
primarily related to the medical savings account administration process.
INTEREST EXPENSE. Interest expense includes debt-related interest, a loan
commitment fee paid to a shareholder in the form of common shares and expense
related to warrants issued with the 1999 CIT Line of Credit.
INCOME TAXES. As a result of our net operating losses, as well as net
operating loss carryforwards, no net provisions for income taxes have been
recorded.
COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998
REVENUES. Revenues were derived from the processing of medical savings
accounts in the years ended December 31, 1998 and 1999. There will be a minimal
amount of revenue derived from these contracts on an ongoing basis.
RESEARCH AND DEVELOPMENT. Research and development costs increased 28.0%
from $3,026,000 in the year ended December 31, 1998 to $3,872,000 in the year
ended December 31, 1999. This increase reflects the growth in technical
personnel and other expenses required for the development of the RealMed
Network.
BUSINESS DEVELOPMENT, SALES AND MARKETING. Business development, sales and
marketing costs increased 42.5% from $967,000 in the year ended December 31,
1998 to $1,378,000 in the year ended December 31, 1999. This increase reflects
the growth in marketing expenses as we approached product rollout. In
particular, we have established a dedicated sales force and formed strategic
alliances with MarketSource for the development of a provider marketing program.
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PAYER INTEGRATION COSTS. Payer integration costs of $585,000 were incurred
in the year ended December 31, 1999, relating to the initiation of our
integration with one payer.
INVENTORY WRITEDOWN. In the year ended December 31, 1999, we incurred a
$4,181,000 inventory writedown. This resulted from a change in our technology
strategy following the determination that we would not be using our card reader
inventory, with the disposal of this inventory in March, 2000.
STOCK BASED COMPENSATION. The decrease of 50.0% in stock based compensation
expense from $1,705,000 in the year ended December 31, 1998 to $852,000 in the
year ended December 31, 1999 was due to unrestricted share grants to officers
who are no longer with us in the year ended December 31, 1998 totaling $965,000.
There were no unrestricted share grants in the year ended December 31, 1999.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
48.4% from $446,000 in the year ended December 31, 1998 to $662,000 in the year
ended December 31, 1999. Included in depreciation and amortization was the
amortization of purchased medical account processing software of $416,667 in the
years ended December 31, 1998 and 1999. This asset was fully amortized in 1999.
INTEREST EXPENSE. Interest expense increased from $67,000 in the year ended
December 31, 1998 to $2,367,000 in the year ended December 31, 1999. The
increase in interest expense is related to a $1,293,000 loan commitment fee paid
to a shareholder in April, 1999 in the form of 1,375,000 common shares, an
increase in long-term debt outstanding and accretion of the warrant related to
the 1999 CIT Line of Credit.
INCOME TAXES. As a result of our net operating losses, no net provision for
income taxes during the year ended December 31, 1999 was recorded. As of
December 31, 1999, we had net operating loss carryforwards for tax reporting
purposes of approximately $22 million, which begin to expire in 2018.
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997
REVENUES. Revenues, which were derived from the processing of medical
savings accounts, increased 37.9% from $369,000 for the year ended December 31,
1997 to $509,000 for the year ended December 31, 1998. This increase reflects an
increase in covered lives under medical savings accounts.
RESEARCH AND DEVELOPMENT. Research and development costs increased 17.1%
from $2,584,000 in the year ended December 31, 1997 to $3,026,000 in the year
ended December 31, 1998. This increase reflects the growth in technical
personnel and other expenses required for the development of the RealMed
Network.
BUSINESS DEVELOPMENT, SALES AND MARKETING. Business development, sales and
marking costs increased 88.1% from $514,000 in the year ended December 31, 1997
to $967,000 in the year ended December 31, 1998. This increase reflects
increased personnel and other expenses of the RealMed Network and an increase in
our marketing resources.
STOCK BASED COMPENSATION. Stock based compensation expense was $1,705,000
in the year ended December 31, 1998 and includes the cost for vesting of
in-the-money option grants and the total value of unrestricted share grants to
officers who are no longer with RealMed. No stock based compensation was
recognized in the year ended December 31, 1997.
INTEREST EXPENSE. Interest expense was $67,000 in the year ended
December 31, 1998. We had no interest expense in the year ended December 31,
1997.
INCOME TAXES. As a result of our net operating loss in 1998 and prior
years, no net provision or benefit for income taxes was recorded.
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LIQUIDITY AND CAPITAL RESOURCES
Since our inception in November 1995, we have primarily financed our
operations through private placements of equity and debt securities. As of
December 31, 1999, net proceeds available from these financings totaled
$29.3 million.
As of December 31, 1999, we had cash and cash equivalents of $1.4 million
and a $17,500,000 line of credit from The CIT Group, Inc., a shareholder, of
which $8.0 million was available. In January, 2000, we entered into a
$10,000,000 line of credit with The CIT Group, Inc. The line can be drawn in
increments between $1.0 million and $2.5 million, subject to our execution of a
new commitment for a proof of concept to provide the RealMed Network to a
significant payer and our use of all other sources of available liquidity. A
significant payer is defined as an insurer, which processes in excess of
10.0 million claims annually. We have signed commitments from five payers who
meet these criteria. The line is due in full upon the earlier of an initial
public offering or December 31, 2002, and bears interest at 15.0%, payable
quarterly in arrears, carries a 2.0% unused commitment fee payable quarterly and
a fee of the greater of 0.5% of our total market capitalization at the initial
public offering date or $1.0 million (payable in stock or cash). Upon completion
of this offering we will incur a charge of $ in connection with a fee on
the 2000 CIT Line of Credit and will incur a noncash charge of $2,001,953 in
connection with the conversion of $17,500,000 under the 1999 CIT Line of Credit
into 19,531,250 common shares. Also, in March and April 2000, we completed the
sale of approximately $7.5 million of our common shares to three accredited
institutional investors. These investors include AC Ventures, part of the
worldwide Andersen Consulting organization, ($4.5 million) and two
Indianapolis-based investors, including a general partnership comprising 27
accredited investors.
Our operating activities resulted in cash outflows of $8,311,000 for the
year ended December 31, 1999, $5,516,000 for the year ended December 31, 1998
and $3,403,000 for the year ended December 31, 1997. The cash used during these
periods was primarily attributable to the expenses associated with the
development of the RealMed Network, building our infrastructure, commencement of
integration activities and preparation for product rollout.
Investing activities used cash of $1,004,000 for the year ended
December 31, 1999, $121,000 for the year ended December 31, 1998 and $1,558,000
for the year ended December 31, 1997 and primarily related to capital
expenditures.
Financing activities provided cash of $10,568,000 for the year ended
December 31, 1999, $5,728,000 for the year ended December 31, 1998 and
$5,001,000 for the year ended December 31, 1997 and primarily related to private
placements of equity and debt securities.
We currently anticipate that we will continue to experience significant
growth in our operating expenses as we:
- fund the integration with our payers;
- enter new markets;
- increase marketing activities; and
- expand our infrastructure.
These operating expenses will consume a material amount of our cash
resources, including a large portion of the proceeds from this offering. We
believe that our existing available capital will cover a majority of our capital
needs for 2000. We believe the net proceeds from this offering, together with
our existing cash and cash equivalents, and available borrowings, will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least the next 18 months.
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However, if during or following that period we are not successful in
generating sufficient cash flow from operations or in raising additional capital
when required in sufficient amounts and on terms acceptable to us, these
failures could have a material adverse effect on our business, results of
operations and financial condition. If we raise additional funds through the
issuance of equity securities the percentage ownership of our then current
stockholders would be reduced.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial
position, operating results or cash flows due to adverse changes in financial
markets and interest rates. Although changes in interest rates and financial
markets could affect our customers and our effective realization, we believe
such changes will have no impact on our notes payable and capital lease
obligations because they are at fixed interest rates. Historically and as of
February 29, 2000, we have not used derivative instruments or engaged in hedging
activities.
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BUSINESS
OVERVIEW
We own and operate the RealMed Network, an Internet-based,
business-to-business healthcare connectivity solution for payers and providers.
Payers include insurers, health maintenance organizations, third-party
administrators and preferred provider organizations, and providers include
physicians, physician practice groups and hospitals. The RealMed Network
provides a secure, two-way link between the provider's desktop and the payer's
legacy computer system. We offer our customers resolution of healthcare claims
in seconds, at the point of care in an efficient and cost-effective manner. To
accomplish the resolution of claims, we access the payer's adjudication logic
and customer database.
We have received initial commitments from five regionally dominant payers to
integrate the RealMed Network in selected markets: (1) Anthem Insurance
Companies, Inc.; (2) WellPoint Health Networks, Inc.; (3) Blue Cross/Blue Shield
of North Carolina; (4) CareFirst Blue Cross; and (5) Blue Cross/Blue Shield of
Illinois. These payers collectively represent a potential market of 13 states
and the District of Columbia, 22 million covered lives and 128 million annual
private physician claims, which is approximately 13% of the U.S. private
physician claims market. These numbers do not include two additional states
representing 2.0 million covered lives and 20 million private physician claims
related to acquisitions by two of our payers. These acquisitions are currently
in the regulatory approval process.
While the RealMed Network is presently built to resolve private physician
claims, we are actively working to expand the functionality of the Network to
include Medicare and pharmaceuticals claims processing. We estimate the Medicare
annual claims market to be approximately 350 million physician claims. We
estimate the pharmaceuticals annual claims market to be approximately 1.6
billion physician and Medicare claims. In total, approximately 4.7 billion
healthcare claims were processed in the United States in 1999.
In April 2000, we launched the RealMed Network with Anthem of Indiana. We
are currently in various stages of integration with our other payers. We believe
that the successful execution of our Network with these payers and their
providers will be key to our ability to attract new customers. The development
of an expanded Network will enable us to add more customers and launch new
products and services.
Currently, healthcare claims are generally submitted to a payer through a
clearinghouse or other third party via electronic data interchange, or EDI,
regular mail, or fax. These traditional processes are inefficient, time
intensive and costly, due to their inability to automatically process and
adjudicate claims. In addition to slow turnaround times for standard claims, the
length of time and cost per claim increases significantly if any information
submitted by a provider is incorrect, incomplete or inconsistent with the
policies of a payer. The current sequential process of submitting, adjudicating
and approving the payment of healthcare claims averages 42 days at an average
cost of $19 per claim.
The RealMed Network re-engineers the claims process to streamline workflow
and improve cost efficiency. The RealMed Network also supports HIPAA compliance
by tracking electronic transactions and assuring the security and privacy of
patient information. We expect our Internet-based platform to minimize the
inefficiencies of EDI or paper-based claims settlement by enabling the provider
to resolve claims in seconds through direct access to the payer's legacy
computer system.
INDUSTRY
The U.S. healthcare system is generally regarded as expensive, fragmented
and inefficient. HCFA estimates that in 1999, healthcare expenditures
represented approximately $1.2 trillion, or 13.3%, of the U.S. Gross Domestic
Product. An estimated $210 billion, or 17.5%, of healthcare expenditures are
related to administration. Included in administration are claims submission
processing and settlement
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expenses. The settlement of healthcare claims is a complex process, involving
detailed contractual, legal and regulatory relationships between payers,
providers and patients.
In an effort to contain increasing healthcare costs, the U.S. healthcare
industry is undergoing dramatic change. Payers have partially reduced the cost
of patient care by lowering reimbursement rates, restricting coverage for
services and limiting patient access to a select group of providers. The
emergence of the Internet as a low cost connectivity platform for business
transactions provides the opportunity to further reduce the cost of healthcare
by improving administrative processes such as the processing of healthcare
claims.
Payers and providers must also contend with continually evolving healthcare
regulation. HCFA recently proposed new regulations under HIPAA. These
regulations would impose stringent privacy and security standards on the storage
and transfer of healthcare information.
Currently, the variety of existing information systems utilized by payers
and providers lacks compatibility. This is primarily due to the complexity, cost
and management challenges associated with designing, building and integrating
such a platform. This incompatibility, combined with distrust among the
healthcare participants, has further complicated and delayed the development of
a universal and highly functional claims management system.
THE INTERNET AND HEALTHCARE
The Internet's open architecture, low cost accessibility and growing
acceptance make it an increasingly important platform for business-to-business
interaction. For many industries, the Internet is connecting previously
disconnected business processes and allowing companies to streamline and
automate workflow, lower distribution and communication costs and extend their
market reach. We believe the healthcare industry, because of its size,
fragmentation and fundamental dependence on accurate and timely information
exchange, is particularly well-suited to benefit from greater use of the
Internet. In addition, we believe the process of claims resolution could be made
less time-consuming and more accurate if an Internet-based application which
completely resolves claims, as opposed to merely electronically delivering
claims, becomes the industry standard. The Internet's usage and effectiveness in
healthcare claims processing, however, will be largely determined by the quality
of the software solutions available in the marketplace and the rate of adoption
by payers and providers.
HEALTHCARE CLAIMS PROCESS
The healthcare claims resolution process involves managing detailed
contractual, legal and regulatory relationships between and among payers,
providers and patients. These inter-relationships are further complicated by the
myriad of benefit plan rules that comprise payers' individual or group health
plans and privacy concerns. The successful resolution of a healthcare claim
requires the step-by-step sequential application and analysis of these numerous
and often detailed rules to determine the level of coverage for medical care and
the related payment (by the payer and the patient) for those services. The steps
necessary to complete the resolution of a healthcare claim are as follows:
ELIGIBILITY VERIFICATION. Before treating a patient, a provider generally
must verify the eligibility of an individual by contacting a payer. This
process, which is traditionally done via telephone, fax or EDI, can often
consume considerable time and entails significant administrative cost for both
the office staff of a provider and the administration personnel of a payer. Some
clearinghouses periodically copy payer's databases and allow simple yes/no
eligibility checks. However, since these solutions do not allow providers access
to up-to-date databases, they could lead to erroneous assumptions regarding
eligibility.
DETERMINATION OF DEDUCTIBLE AND CO-PAY STATUS. In addition to verifying
eligibility, the provider must also confirm the deductible and co-payment status
of the patient in order to settle a patient's account
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at the point of care. Under most current systems, including EDI, deductibles are
not generally available to the provider until the claim is fully adjudicated and
settled by the payer, typically many weeks after the patient receives care.
Consequently, providers incur additional cost to separately bill the patient and
often may be unable to collect the amount owed.
CLAIMS SUBMISSION PROCESS. Providers submit claims to payers via EDI, fax
or by regular mail. Healthcare claims submitted through EDI or paper form are
generally processed by clearinghouses. Healthcare claims clearinghouses accept,
sort, process, edit and then forward the claims to the appropriate payers,
either electronically or on paper, to be adjudicated and paid by the payer.
Currently, approximately 65% of processed claims involve electronic
processing. This relatively high percentage indicates a strong movement away
from the paper-based process. However, current processing techniques, including
EDI, lack the ability for two-way communication and back-end editing
functionality. As a result, these processes address less than 25% of the overall
healthcare claim processing cost. In addition, current solutions using the
Internet or EDI do not access up to date databases.
THE ADJUDICATION PROCESS. The healthcare claims adjudication process begins
when the payer receives a claim from the patient, provider or the clearinghouse.
Typically, the claim is handled by batch or manual processing. The payer first
determines whether the patient and service are covered under the payer's plan.
The payer also determines whether there are errors or internal inconsistencies
in the claim, including incompatible procedures or a misidentification of the
patient. If the patient and service are covered, the payer prices the claim
based on applicable health plan benefits, determines the patient's share of the
cost, and pays its portion of the claim. In the event that there is an error in
the claim at any point in the process, the claim is returned to the provider's
office for correction. Any minor error in the claim adds to the already lengthy
delay between the provision of care and the payment of a claim.
DELIVERY OF THE EXPLANATION OF BENEFITS. The EOB represents the final
accounting for all parties in the claims process. Currently, the EOB is sent via
regular mail an average of 42 days following the provision of care. In the event
the patient has a question or finds an error, the patient has to contact the
payer directly, which can be time consuming and frustrating.
PAYMENT FOR SERVICES. Upon final completion and correction of any errors in
the EOB, the payer runs an additional batch process to either issue a check or
request an electronic funds transfer to the provider, generally several weeks
after the claim has been submitted.
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THE TYPICAL PROCESSING CYCLE
The typical processing cycle is illustrated in the chart below. The process
takes an average of six weeks and does not take into account delays caused by
the re-submission of a claim due to errors.
[CHART]
1. PATIENT NEEDS CARE.
2. CHECK-IN: The patient visits the provider, presents the insurance card and
fills out a check-in form.
3. RECORDS MANAGEMENT: The office staff copies the front and back of the card.
4. RECORDS MANAGEMENT: The office staff files the photocopy of the card in the
patient's record.
5. ELIGIBILITY VERIFICATION: The office staff calls the payer on the phone to
verify the eligibility of the patient.
6. DATA ENTRY: The office staff types the patient's information into the
computer.
7. TREATMENT: The patient sees the provider, after which the provider completes
a superbill or charge ticket indicating diagnosis and treatment codes.
8. CHARGE TICKET: One copy goes to the patient.
9. CHARGE TICKET: One copy goes to the provider's billing office.
10. CLAIM SUBMISSION: The claim form is either: filled out manually and set
aside to be picked up and mailed to the payer (10a), sent via EDI directly to
the payer (10b) or sent through an electronic clearinghouse for editing and
reformatting per specific payer guidelines (10c).
11. THE BOTTOM DRAWER: If the claim presents problems, the office staff may set
it aside to be addressed at a later time.
12. PAPER TO ELECTRONIC CONVERSION: The payer often transfers the claims to
electronic files using optical character recognition (OCR).
13. CLAIM BATCHING, REPRICING & ADJUDICATION: The Payer uses large mainframe
computers to reprice and adjudicate the claim.
14. PERSONAL REVIEW: If the claim cannot be repriced or auto-adjudicated, it is
sent on for personal review by a claims examiner.
15. CLAIM ERROR: If a claim has an error, it is returned to the healthcare
provider's office staff for revision.
16. ACCOUNTING: If the claim is acceptable, it is then eligible for payment.
17. ISSUE CHECK: A check (as necessary) and EOB is mailed to the provider.
18. SEND EOB: An EOB is mailed to the patient.
19. BALANCE BILLING: The provider reconciles the EOB against accounts receivable
and re-bills the patient as necessary.
20. COMPLETE PROCESS: The patient mails the provider a check if co-insurance is
appropriate or if the deductible is not met.
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THE REALMED SOLUTION
The RealMed Network re-engineers the claims process to streamline workflow
and improve cost efficiency. The RealMed Network also supports HIPAA compliance
by tracking electronic transactions and assuring the security and privacy of
patient information. We expect our Internet-based platform to minimize the
inefficiencies of EDI or paper-based claims settlement by enabling the provider
to resolve claims in seconds. The RealMed Network fully automates the claims
process from downloading patient information to resolving payments owed to the
provider. We believe that by re-engineering this process, we can reduce the
processing cost per claim by more than 50% for each of payers and providers. The
claims process is reduced to seven steps with the RealMed Network, as
illustrated in the chart below:
[CHART]
1. PATIENT NEEDS CARE.
2. CHECK-IN: A patient visits the healthcare provider's office and presents a
health insurance smart card or current ID card; an electronic check-in file is
opened using the RealMed Network, which retrieves the precise demographic and
insurance information from the payer's legacy computer system.
3. ELIGIBILITY VERIFICATION: The office staff uses RealMed to verify eligibility
on-line in real time by connecting to the RealMed Network.
4. TREATMENT: The patient sees the provider for diagnosis and treatment.
5. CLAIM SUBMISSION: The office staff uses RealMed to file an electronic claim
form to the payer organization. On-line edits ensure the claim is accurately
completed.
6. REPRICING AND ADJUDICATION: The RealMed Network links with the payer's
existing adjudication engine to reprice and adjudicate the claim and returns the
claim to the healthcare provider for acceptance within seconds. If an error is
found, the office staff receives an on-line notice and may correct the error and
re-submit.
7. RESOLUTION AND PAYMENT: An electronic funds transfer is then ordered from the
payer to cover treatment costs and a customized EOB is printed for both the
provider and patient records before the patient leaves the office. If the
provider chooses, the provider can request the balance due from the patient on
the spot. In addition to knowing the precise amount the provider will receive
from the payer, the RealMed Network also indicates the date on which the payer
will wire the provider funds to settle the claim. Timing of funds transfer is
determined by the specific payer and will typically be completed between one and
7 days and no more than 30 days after the transfer has been ordered.
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BENEFITS OF THE REALMED NETWORK
We believe that we provide our payer and provider customers the following
benefits:
SIGNIFICANT TIME AND EXPENSE REDUCTION ASSOCIATED WITH PROCESSING
CLAIMS. The RealMed Network enables us to fully automate the numerous routine
steps involved in resolving a typical healthcare claim while the patient is
still in the provider's office. This contrasts with EDI or paper-based claims,
which take an average of 42 days to resolve. We believe that use of the RealMed
Network can reduce the processing cost per claim by more than 50% for each of
payers and providers by:
- reducing the steps required to resolve a claim;
- eliminating duplicate claims through immediate detection and notification
of errors;
- reducing costs of delivering EOBs;
- reducing the administrative costs of resolving claims; and
- reducing billing and collection costs.
ACCELERATING PAYMENT AND CERTAINTY OF AMOUNTS OWED. The RealMed Network
provides payers, providers and patients with confirmation regarding their
financial benefits and obligations at the time and point of care. In addition to
receiving the precise amount the payer will pay to the provider, the provider
also receives the date on which the payer will wire the funds. This enables the
provider to better manage its cash position. In addition, we believe that prompt
resolution of claims promotes favorable payer/provider relations.
IMPROVING ACCURACY AND EFFICIENCY OF DATA TRANSFER. The RealMed Network
enhances the accuracy and efficiency of data transfer for payers and providers
through its automation and integration with the payer's legacy computer system.
The RealMed Network streamlines the claims process through the following
features:
- a dedicated, secure communication link with the payer's member database;
- minimization of data entry to reduce the opportunity for error;
- instant notification of errors with ability to resubmit;
- automatic adjudication and settlement notification, including amount and
date of settlement; and
- delivery of the EOB to the patient at the point of care.
ENHANCING MANAGEMENT INFORMATION. In addition to producing a number of
standard reports designed to provide payers and providers with summary data on
their businesses, our proprietary relational databases can be queried to respond
to specific data requests. The searchable nature of the databases enables us to
respond to requests for custom reports quickly and efficiently. This provides
both payers and providers with the opportunity to query, segment and analyze
trends in their business and ultimately develop strategies to promptly respond
to the evolving requirements of their customers.
INCREASING SECURITY AND REDUCING OPPORTUNITY FOR FRAUD. The RealMed Network
significantly reduces a payer's security concerns about outsourcing or
replicating adjudication logic by forming a secure electronic network which
links the payer's claims management databases and claims adjudication systems to
the provider's desktop. Network access controls include:
- password authentication for payers and providers;
- smart card technology for the provider's office;
- data encryption prior to transmission over the Internet; and
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- multi-layered firewall technology.
Our Network and data warehouse are also protected by physical safeguards
including on-site security, restricted access to hardware and remote site data
warehousing and systems back-up. Our Network is also being developed and built
to support government compliance including HIPAA and HCFA compliance standards.
The RealMed Network's functionality allows us to respond rapidly to changing
security and compliance standards and instantly implement system upgrades.
BUSINESS STRATEGY
Our goal is to become the industry standard for healthcare connectivity. The
key elements of our strategy are to:
MAXIMIZE OUR MARKET OPPORTUNITIES WITH OUR EXISTING PAYERS AND
PROVIDERS. We believe that the successful execution of the proof of concept
phase with our existing payers and their providers will be key to our ability to
initiate the roll-out of the RealMed Network across their markets and to attract
new payers and providers. Our existing payer and provider relationships provide
a substantial presence in key geographic areas. These payers collectively
represent a potential market of 13 states and the District of Columbia,
22 million covered lives and 128 million annual private physician claims, which
is approximately 13% of the U.S. private physician claims market. While the
RealMed Network is presently built to resolve private physician claims, we are
actively working to expand the functionality of the Network to include Medicare
and pharmaceuticals claims processing. We estimate the Medicare annual claims
market to be approximately 350 million physician claims. We estimate the
pharmaceuticals annual claims market to be approximately 1.6 billion physician
and Medicare claims. In total, approximately 4.7 billion healthcare claims were
processed in the United States in 1999.
INCREASE OUR MARKET PENETRATION ON A NATIONAL LEVEL BY FOCUSING ON LEADING
REGIONAL PAYERS AND PROVIDERS AND THEN ON NATIONAL PAYERS. We believe that
development of regional markets is essential to increasing the nationwide market
penetration of the RealMed Network and increasing the number of transactions
flowing through our Network. Healthcare is a local business driven by payers and
providers that are dominant in regional markets. We believe that providers will
only be willing to adopt systems that offer a solution for a meaningful portion
of their claims. We believe that by initiating relationships with payers that
have greater than a 20% regional market share, we can maximize provider use and
quickly establish RealMed as the standard for claims resolution. Subsequent to
our roll-out with a dominant regional payer, we intend to add new payers in that
market, including national payers, to increase claims penetration percentages
among the providers in that market.
EXPAND TECHNOLOGICAL LEADERSHIP BY INCREASING OUR PORTFOLIO OF APPLICATIONS,
SERVICES AND PRODUCT OFFERINGS. We believe that the RealMed Network comprises
advanced technology that no other competitor currently offers. We have filed for
three patents on our internally developed processes and products. We believe
that by adding new functionality, applications, services and products to our
Network, we can expand our technology leadership and increase market share,
Network usage and revenues. We have several significant projects currently in
development, including:
- developing an electronic interface between the RealMed Network and the
provider's existing practice management software;
- expanding the types of claims that can be processed by the RealMed Network
to include other claims, such as Medicare and pharmaceutical claims; and
- augmenting our capabilities to include interactive referrals and credit
and debit card processing.
GENERATE ADDITIONAL REVENUE OPPORTUNITIES USING THE REALMED NETWORK. We
believe that the reach of the RealMed Network will be a powerful platform for
the delivery of additional revenue opportunities.
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We may seek to expand existing or acquire new businesses, products and
technologies, or enter into strategic partnerships.
THE REALMED NETWORK
The RealMed Network is a real-time, two-way, Internet based connectivity
solution for healthcare payers and providers. The primary components of the
RealMed Network include:
REALMED DATA CENTER. We have designed and built our Data Center to achieve
the following functionality:
- IMMEDIATE, TWO-WAY EXCHANGE OF PATIENT AND CLAIMS CARE DATA: The Data
Center hosts Internet applications that facilitate high-speed data
communication between payer legacy computer systems and provider personal
computers. Multiple firewalls are incorporated into our applications for
added security.
- PLATFORM FOR CAPTURING AND STORING DATA: We use advanced database
technology to capture and store patient data that can be retrieved,
reviewed and sorted for our customers. The database also enables us to
perform interactive auditing for certain types of fraud.
- ASSURANCE OF FUTURE SCALABILITY AND PRODUCT ENHANCEMENT: We have used a
multi-tiered distributed application hardware configuration that maximizes
the speed and efficiency of the RealMed Network while permitting the
flexibility to add additional storage capacity and processing speed.
Because our application is hosted at our Data Center, we can rapidly
implement any changes without installing additional software on the
provider's desktop.
REALMED PAYER INTERFACE. The key to forming an interface with the payer is
the integration of our Data Center with targeted areas of a payer's legacy
computer system. After a letter of understanding is signed, we work with the
payer to develop a customized framework for the integration of the RealMed
Network. During the integration process, which may take up to six months, we
connect our Data Center to the provider's legacy computer system through the use
of proprietary software and process technology. A secure, dedicated
communications link is also established between our Data Center and the payer
via a private network. Integration of the RealMed Network is designed to have
minimum operational impact on the payer's processes, systems and databases.
We then implement a proof of concept phase during which selected providers
in a targeted geography are connected to the RealMed Network. Our operations
begin with a proof of concept phase that lasts from 3 to 12 months depending
upon the payer. Upon completion of the proof of concept phase, assuming the
meeting of performance criteria, payers agree to an expanded scope of
implementation.
We have engaged several technology consulting services firms. We utilize
Ernst & Young, LLP for subject matter and business process consulting. We
utilize Andersen Consulting as a preferred payer integration partner. These
consultants have extensive backgrounds in the development of the legacy computer
systems of our customers and enable us to accelerate the integration process.
REALMED PROVIDER INTERFACE. The provider's access to the RealMed Network is
achieved through an easy to use, secure Internet based application that is
hosted by our Data Center. This type of system is often referred to as "thin
client" technology. The turn-key nature of the RealMed Network enables rapid
roll-out and installation at a provider's office. Our use of a Internet
browser-based provider interface minimizes training and accelerates adoption.
The provider is identified by a smart card that is provided as part of the
monthly subscription. Patient information is accessed and claims are submitted
by using a patient identification number or a patient smart card provided by the
payer. The RealMed Network also allows the provider to review
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submitted claims and the status of electronic funds transfer. We have
established strategic relationships with Bell Industries, a technology systems
integrator, and V(4) Consulting, a large provider practice consultant, to assist
us in the initial installation of our Network. Bell has extensive experience in
software installation and technology integration, and V(4) has extensive
consulting experience with large provider practices, which should enable us to
accelerate the roll-out of the RealMed Network to providers. We are currently
developing an electronic interface between the RealMed Network and several
practice management software systems. This interface is designed to
substantially improve provider work-flow and efficiency.
SALES & MARKETING
PAYERS. We have a dedicated sales force focusing on marketing to selected
payers. We are targeting payers based on their regional market share. We believe
that developing relationships with the primary payer in a region maximizes our
ability to enroll providers. We have selected each of our targeted payers based
on the following characteristics:
- having between 5% and 25% share in a given geography;
- having processed at least 5,000,000 claims per year;
- having a clearly defined growth strategy; and
- embracing a partnership approach.
Subsequent to our integration with a dominant regional payer, we intend to
add new payers in that market to increase our rate of claims penetration among
the providers in that market.
To encourage adoption of the RealMed Network, we offer our payers a proof of
concept phase during which we integrate the payer's legacy computer system with
our Data Center and roll-out the RealMed Network to their providers. We assume
the full cost of integration and provider roll-out.
Our existing letters of understanding with five payers represent a potential
market of 13 states and the District of Columbia, 22 million covered lives and
128 million annual private physician claims, which is approximately 13% of the
U.S. private physician claims market. While the RealMed Network is presently
built to resolve private physician claims, we are actively working to expand the
functionality of the Network to include Medicare and pharmaceuticals claims
processing. We estimate the Medicare annual claims market to be approximately
350 million physician claims. We estimate the pharmaceuticals annual claims
market to be approximately 1.6 billion physician and Medicare claims. In total,
approximately 4.7 billion healthcare claims were processed in the United States
in 1999. The ultimate roll-out to this market is subject to the number of claims
adjudication systems to be integrated, the timing of the integration process,
the number of provider practices in these geographies and the speed of provider
acceptance and utilization.
For three of our payer relationships we believe there will be one to two
integrations, at a minimum, for each payer. These payer relationships represent
a potential market of 12 million covered lives and 68 million private physician
claims handed annually. The remaining payer relationships may require several
integrations to cover the claim volume depending on the speed with which each
payer is able to consolidate its own internal systems. We have completed the
integration of one of Anthem's claims adjudication systems for the proof of
concept in Indiana. We have completed the integration planning phase of Blue
Cross/Blue Shield of North Carolina and commenced integration of its two primary
claim systems. We have commenced the planning phase for two of our other payers.
The integration process for WellPoint Health Networks, Inc. will commence in the
near future.
During the integration process we identify the major claims submitting
provider practices. Once the integration is complete, we identify a specific
number of provider practices for the proof of concept. We analyze agreed-upon
functionality metrics of the Network with the payer and providers
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during the proof of concept. If the metrics are met, we roll out to all provider
practices in the specific geography. Additionally, large provider practices
represent a substantial portion of an individual payer's claim volume and are
established on the Network in the proof of concept and early stages of roll-out.
We believe our speed of integration and roll-out will improve with each project
and a significant amount of reusable knowledge tools are carried from one
geography to the next.
PROVIDERS. We work with each of our payers to develop a targeted provider
list. These providers generally represent less than 20% of the payer's aggregate
providers but over 80% of total claims. Once these providers have been
identified, a sales representative contacts the provider's primary decision
maker. In addition to targeted provider marketing, we attend and sponsor
selected tradeshows and seminars to increase provider awareness of the benefits
of the RealMed Network. We also utilize direct mail and targeted print
advertising.
A significant part of our marketing strategy is our strategic partnership
with MarketSource, an experienced contract sales force organization with
25 years of experience in marketing to the healthcare and technology industries.
MarketSource recruits, hires and employs a dedicated sales force. We believe
that our relationship with MarketSource increases the scalability of the RealMed
Network and enables us to maximize market penetration.
PROVIDER CUSTOMER SUPPORT
We have established a help desk to assist our providers with installation
and utilization questions. We have formed a strategic partnership with Bell
Industries for the design, construction and staffing of our customer service
center. The provider help desk is not responsible for answering questions that
are specific to payer information such as a patient's eligibility, policy
benefits, or benefit payments. These types of questions are forwarded to the
appropriate payer for resolution.
TECHNOLOGY
We believe that our proprietary technology platform provides us with a
competitive advantage. Our Data Center, utilizes a multi-tiered, object-oriented
environment. Through its open architecture, the Data Center integrates disparate
systems and data with the RealMed provider interface. We currently use Oracle
and SQL server database technology to support our data storage requirements.
We have developed our solutions using an open architecture standard,
allowing separate functional components to interact with several different
hardware platforms. Our provider solution operates on Microsoft Windows 95, 98,
2000 or NT. Additional servers may be placed in the system to ensure scalability
without performance loss. The interaction of this computer software makes the
system truly n-tiered, allowing maximum flexibility for deployment and growth.
We use extensible markup language, or XML, programming to allow the exchange
of data between payers and providers. Our use of XML in our Network provides an
efficient and standardized method of extracting relevant data from a payer.
We have established a plan for disaster recovery in the event of a
catastrophic Data Center disaster. We believe our plan will restore systems
software and data, although we would experience a delay in the functionality of
our Network. While we do not have an off-site back-up data center, we are
actively considering various off-site facility alternatives.
We have a back-up power system, which permits continued operations for a
limited time to avoid short intermittent power failures. In the event of a
complete outage, we have a standby power generator to continue processing.
Our security is based on 128-bit encryption. Access controls utilize
authentication using password IDs, tokens, digital certificates and smart card
technology. Network security is enhanced by advanced
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multi-layered firewall technology and use of switched hubs. We employ extensive
auditing using Oracle database technology. Physical security of the Data Center,
which is located in Indianapolis, Indiana, is tightly-controlled, with physical
isolation of systems and hardware and multiple layers of restricted access. We
will support HIPAA and HCFA security and other standards.
COMPETITION
The market for healthcare claims processing solutions is highly competitive
and is characterized by rapidly changing technology, evolving user needs and the
frequent introduction of new products. Some aspects of our Network compete with
products and services supplied by other Internet healthcare companies. Although
we believe our Network is unique in the industry, we will compete against
traditional EDI and healthcare Internet companies that provide more limited
forms of claims processing services.
We expect that competition will continue to increase as a result of
consolidation in the Internet, information technology and healthcare industries.
We believe that the principal factors affecting competition in our markets
include:
- product functionality;
- speed and performance;
- use of open standards technology;
- accuracy and efficiency;
- quality of service and support;
- cost of solution; and
- security of system.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We rely upon a combination of trade secret, copyright and trademark laws,
license agreements, confidentiality procedures, employee nondisclosure
agreements and technical measures to maintain the secrecy of our intellectual
property. We have filed for three patents in the United States relating to the
RealMed Network.
EMPLOYEES
As of March 31, 2000, we had a total of 98 employees of whom 49 were in
research, development, integration and information technology, 7 were in
customer service, 15 were in business development, sales and marketing, 4 were
in strategic planning and public relations, 7 were in executive management and
16 were in corporate finance and administration. None of our employees are
represented by a labor union, and we have never experienced a work stoppage. We
believe our relationship with our employees is good. Our ability to achieve our
financial and operational objectives depends in large part upon our continuing
ability to attract and retain highly qualified sales, technical and managerial
personnel and upon the continued service of our senior management and key sales
and technical personnel, some of whom are not bound by an employment agreement.
CONTRACT RESOURCES
As of March 31, 2000, we had a total of 27 individuals as contract
resources. We expect the number of contract resources to increase as we roll out
the RealMed Network.
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FACILITIES
Our principal executive and corporate offices are located in Indianapolis,
Indiana in approximately 27,345 square feet of leased office space under a lease
that expires in October 2009. We believe that our facilities are adequate for
our current operations and that we can obtain additional leased space if needed.
LEGAL PROCEEDINGS
A former employee has filed a lawsuit against us claiming that we terminated
him without cause under his employment agreement. He is claiming damages of
$100,000. We believe that this lawsuit is without merit and we are vigorously
defending it. We are not currently subject to any other legal proceeding.
GOVERNMENT REGULATION
As an Internet based healthcare company, we are subject to various federal
and state laws and regulations, including, but not limited to those related to:
- the Internet or other on-line services;
- confidentiality of patient records and the circumstances under which
records may be released;
- the dissemination of medical record information; and
- the imposition of standard transactions, standard identifiers, security
and other provisions implemented by HCFA.
Additional laws and regulations may be adopted with respect to the Internet
or other on-line services covering issues such as use, privacy, pricing,
content, copyrights, distribution and characteristics and quality of products
and services. The adoption of any additional laws or regulations may impede the
growth of the Internet or other on-line services, which could, in turn, decrease
the demand for our applications and services and increase our cost of doing
business, or otherwise have an adverse effect on our business, financial
condition and results of operations. Moreover, the applicability to the Internet
of existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. Any such new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other on-line services could have a material
adverse effect on our business, financial condition and results of operations.
The confidentiality of patient records and the circumstances under which
records may be released for inclusion in our databases are subject to
substantial regulation by state governments. These state laws and regulations
govern both the disclosure and the use of confidential patient medical record
information. Although compliance with these laws and regulations is at present
principally the responsibility of the hospital, physician or other healthcare
provider, regulations governing patient confidentiality rights are evolving
rapidly. Additional legislation governing the dissemination of medical record
information has been proposed at both the state and federal level. This
legislation may require holders of this information to implement security
measures that may require substantial expenditures by us. We cannot assure that
changes to state or federal laws will not materially restrict the ability of
healthcare providers to submit information from patient records using our
applications.
Other legislation currently being considered at the federal level could also
negatively affect our business. For example, HIPAA mandates the use of standard
transactions and identifiers, prescribed security measures and other provisions
within two years after the adoption of final regulations by the
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Department of Health and Human Services. In addition, our success depends on
other healthcare participants complying with these regulations.
If FDA regulations were applicable to any of our products and services, we
believe that complying with those regulations would be time consuming,
burdensome and expensive and could delay our introduction of new products or
services. Some computer applications and software are considered medical devices
and are subject to regulation by the FDA. We do not believe that our current
products or services are subject to FDA regulation. We may, however, expand our
product and service offerings into areas that subject us to FDA regulation.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and some of our other key employees and
their ages as of March 31, 2000, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Robert J. Hicks........................ 39 Chairman of the Board and Chief Executive Officer
Robert B. Peterson..................... 38 President and Director
Mark A. Morris......................... 39 Vice Chairman of the Board
Timothy P. Bird........................ 43 Executive Vice President and Chief Technology Officer
Gary P. Hutchcraft..................... 39 Executive Vice President, Chief Financial Officer and
Treasurer
Keith M. Given......................... 39 Executive Vice President--Strategic Business
Development
Scott E. Herbst........................ 33 Executive Vice President--General Counsel, Secretary
Regina E. Herzlinger................... 56 Director
Jack F. Kemp........................... 64 Director
Dr. Bruno M. Lassus.................... 37 Director
Bradley D. Nullmeyer................... 40 Director
Dr. Ralph Snyderman.................... 59 Director
Robert J. Thompson..................... 51 Director
Randall L. Tobias...................... 57 Director
Joseph R. Wright, Jr. ................. 61 Director
</TABLE>
The Executive Vice Presidents were hired as Senior Vice Presidents.
Effective January 1, 2000, their titles were changed to Executive Vice
Presidents.
ROBERT J. HICKS has served as Chairman of the Board and Chief Executive
Officer since June 1999. His term as a Director expires in 2001. From 1996 to
the present, Mr. Hicks has been employed by The CIT Group, Inc. and its
predecessor by merger, Newcourt Credit Group Inc. Mr. Hicks will resign from The
CIT Group, Inc. effective with this offering. Mr. Hicks is currently Executive
Vice President--Strategic Technology Investments at The CIT Group, Inc. He
previously held the positions of Executive Vice President of Strategic Business
Development, Senior Vice President and General Manager of the U.S. Commercial,
Technology and Healthcare Division, Senior Vice President and General Manager of
the Specialty Finance Division, and U.S. General Counsel. During his tenure at
CIT/Newcourt, Mr. Hicks had primary responsibility for the negotiation and
structuring of Newcourt's major vendor partnership agreements with its largest
customers. From 1994 to 1996, Mr. Hicks was a partner of Sommer & Barnard, PC,
an Indianapolis law firm. Mr. Hicks received a B.S. in Accounting and Business
Administration from Butler University. Mr. Hicks has passed the CPA examination
and received his law degree from the Marshall-Wythe School of Law at the College
of William and Mary.
ROBERT B. PETERSON has served as President since June 1999 and as a Director
since 1995. His term as a Director expires in 2001. From 1995 to June 1999,
Mr. Peterson served as Chairman and Chief Executive Officer until June 1999.
From 1989 to 1995, he served as President of Eclipse America
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Corporation, a software and systems development firm. Mr. Peterson received his
B.S. in Electrical and Computer Engineering from the University of Wisconsin.
MARK A. MORRIS has served as Vice Chairman of the Board since June 1999 and
as Director since 1995. His term as a Director expires in 2002. From 1995 to
1999, Mr. Morris served as Chief Financial Officer. From 1989 to the present,
Mr. Morris has served as Chief Executive Officer of Eclipse America Corporation.
Mr. Morris filed a petition for reorganization under the Bankruptcy Code in 1996
and emerged from reorganization in 1997. Mr. Morris received his B.S. in Finance
from Ball State University.
TIMOTHY P. BIRD has served as Executive Vice President and Chief Technology
Officer since October 1999. From 1998 to 1999, Mr. Bird was employed in the
Indianapolis office of Getronics Wang Global in project consulting, primarily
specializing in N-Tier computing. From 1993 to 1999, Mr. Bird was President of
Integrated Information Service, a document imaging and consulting company. From
1988 to 1993, Mr. Bird worked as director of information technology of Paws, a
company that designs and distributes Garfield products. At Paws, he led the
development of several key business systems and managed a three-year research
and development project with MIT's Media Lab. Also at that time he managed
DataDigm, a private consulting firm. Mr. Bird received his B.S. in Electrical
Engineering Technology from Purdue University.
GARY P. HUTCHCRAFT has served as Executive Vice President, Chief Financial
Officer and Treasurer since August 1999. From 1996 to 1999, Mr. Hutchcraft
served as Vice President and Chief Financial Officer of Symons International
Group, an insurance company based in Indianapolis. From 1983 to 1996,
Mr. Hutchcraft was employed in a variety of positions by KPMG Peat Marwick, LLP,
a firm of certified public accountants. Mr. Hutchcraft received his B.S. in
Accounting from Indiana University. Mr. Hutchcraft is a Certified Public
Accountant.
KEITH M. GIVEN has served as Executive Vice President--Strategic Business
Development since June 1999. From 1998 to January 2000, he served as Vice
President of Corporate Business Development for The CIT Group, Inc. and its
predecessor, Newcourt Credit Group Inc. From 1984 to 1998, he served as a
Strategic and Global Account Manager for Digital Equipment, a computer hardware
and software company. Mr. Given received his B.S. in Business Administration
from Butler University and his MBA from Indiana Wesleyan University.
SCOTT E. HERBST has served as Executive Vice President--General Counsel and
Secretary since June 1999. From 1996 to April 1, 2000, he was employed by The
CIT Group, Inc. and its predecessor, Newcourt Credit Group Inc., as the Chief
Counsel of the Specialty Finance and Strategic Development units. While at
CIT/Newcourt, Mr. Herbst had primary responsibility for drafting and negotiating
Newcourt's major vendor partnership agreements with Newcourt's largest
customers. From 1994 to 1996, Mr. Herbst was an attorney at Sommer & Barnard,
PC. Mr. Herbst earned a B.S. in Finance from Indiana University and his law
degree, MAGNA CUM LAUDE, from Indiana University School of Law.
REGINA E. HERZLINGER became a Director in November 1999. Her term as a
Director expires in 2003. From 1972 to the present, Ms. Herzlinger has served as
a professor at the Harvard Business School. She is the author of "Market-Driven
Health Care," published in 1997. Ms. Herzlinger is a board member of C. R.
Bard, Inc., Cardinal Health, Deere & Company and Schering-Plough Corporation.
Ms. Herzlinger received her B.S. from MIT and her Doctorate from the Harvard
Business School.
JACK F. KEMP became a Director in June 1998. His term as a Director expires
in 2002. From 1994 to the present, Mr. Kemp has been self-employed as a public
speaker. In 1993, Mr. Kemp founded Empower America, a public policy and advocacy
organization. From 1989 to 1993, Mr. Kemp served as United States Secretary of
Housing and Urban Development. From 1971 to 1989, Mr. Kemp was a member of the
United States House of Representatives, representing the Buffalo, New York area.
In
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1996, Mr. Kemp was the Republican candidate for Vice President. Mr. Kemp is a
board member of ezgov.com, Hawk Corporation, IDT, JumpMusic, National Water &
Power, Ntegrity, Oracle Corporation, Planetportal.com, Proxicom, Rapidigm,
SeeItFirst.com, SmartCOP, Speedway Motorsports and ZapMe!. Mr. Kemp received his
B.S. from Occidental College.
DR. BRUNO M. LASSUS became a Director in June 1999. His term as a Director
expires in 2001. From 1989 to the present, Dr. Lassus has been employed by
GemPlus SA, a manufacturer of computer coded cards and readers. He is currently
GemPlus' Vice President of Healthcare and Identity Solutions and from 1989 to
1999 was Manager of Healthcare. Dr. Lassus received a Doctorate in Dentistry
from the Universite Paul Sabatier, Toulouse, France, and a Master's degree in
Computer Science from the Universite Saint Charles, Marseilles, France.
BRADLEY D. NULLMEYER became a Director in June 1999. His term as a Director
expires in 2001. From November 1999 to the present, Mr. Nullmeyer has served as
Chief Executive Officer of CIT Technology Finance. Mr. Nullmeyer was one of
Newcourt Credit Group Inc.'s three founders and served in various roles at
Newcourt Credit Group Inc., and ultimately as its President from 1986 until
November 1999, when The CIT Group, Inc. acquired Newcourt Credit Group Inc. He
received his Bachelor of Commerce degree from McMaster University and he is a
Chartered Accountant (equivalent to a CPA in Ontario).
DR. RALPH SNYDERMAN became a Director in November 1999. His term as a
Director expires in 2003. From 1989 to the present, Dr. Snyderman has served as
President and Chief Executive Officer of Duke University Health System and as
Chancellor for Health Affairs, Dean of the School of Medicine and James B. Duke
Professor of Medicine. From 1987 to 1989, Dr. Snyderman was employed by
Genentech, Inc., a pioneering biomedical technology firm, first as Vice
President for Medical Research and Development and then as Senior Vice
President. Dr. Snyderman is a member of the Board of Directors of Proctor &
Gamble, Inc. and Ariad Inc. Dr. Snyderman received his Doctorate in Medicine
from State University of New York.
ROBERT J. THOMPSON became a Director in June 1998. His term as a Director
expires in 2002. From 1999 to the present, Mr. Thompson has served as Chairman
of Jefferson Consulting Group, a privately held government relations and
consulting firm. From 1997 to 1999, he served as President of Jefferson
Consulting Group. From 1985 to 1997, Mr. Thompson ran his own lobbying company,
Thompson & Company. Mr. Thompson served in the White House in the early years of
the Reagan Administration and acted as Executive Assistant for Congressional
Relations to then Vice President George Bush.
RANDALL L. TOBIAS became a Director in October 1999. His term as a Director
expires in 2003. From 1999 to the present, Mr. Tobias has served as President of
Arcoiris Group, an investment firm. From 1993 to 1999, Mr. Tobias served as
Chairman and Chief Executive Officer of Eli Lilly & Co., a pharmaceutical
research and manufacturing company, and is presently Chairman Emeritus of Lilly.
From 1986 to 1993, Mr. Tobias served as Vice Chairman of the Board of Directors
of AT&T, and Chairman and Chief Executive Officer of AT&T International.
Mr. Tobias is a board member of Agilent Technologies, Kimberly-Clark
Corporation, Knight-Ridder, Inc. and Phillips Petroleum Company. Mr. Tobias
received his B.S. from Indiana University.
JOSEPH R. WRIGHT became a Director in June 1998. His term as a Director
expires in 2002. From 1997 to the present, Mr. Wright has served as Chairman of
GRC International, Inc., a research and technical support provider. From 1996 to
the present, Mr. Wright has also served as Chairman and Chief Executive Officer
of AmTec, Inc., a provider of telecommunications and Internet protocol services.
From 1995 to the present, Mr. Wright served as Co-Chairman for Baker & Taylor
Holdings, Inc., a book and video distribution company, and is Vice Chairman of
Jefferson Consulting Group. From 1989 to 1994, Mr. Wright was Vice Chairman,
Executive Vice President and Director of W.R. Grace & Company, an international
specialty chemicals and healthcare company, Chairman of Grace Energy Company and
President of Grace Environmental Company. From 1982 to 1989, he
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served as the Director and Deputy Director of the Federal Office of Management
and Budget (OMB) during the Reagan Administration, and the Deputy Secretary of
the Department of Commerce from 1981 to 1982. He is a board member of PanAmSat
Corporation, AmTec, Inc., GRC International, Inc. and Cazeus Technology
Partners, Inc. Mr. Wright received his Professional Engineering Degree from the
Colorado School of Mining and his Masters Degree in Industrial Administration
from Yale.
BOARD OF DIRECTORS
Our Bylaws authorize between seven and thirteen directors, the exact number
to be fixed by the board of directors. The size of the board of directors is
currently set at eleven. Our Articles of Incorporation and Bylaws also provide
for a classified board. Under a classified board, each director is elected to
one of three classes. Each year the terms of only one of the three classes
expire. As a result, it would take two years to replace a majority of the board.
COMMITTEES OF THE BOARD OF DIRECTORS
EXECUTIVE COMMITTEE. The Executive Committee currently comprises Robert J.
Hicks, Bradley D. Nullmeyer, Randall L. Tobias and Joseph R. Wright and oversees
the strategic direction of the company while making recommendations to the board
on such matters. The Executive Committee is also charged with recruiting and
nominating board members as well as reviewing board structure and compensation
matters.
AUDIT COMMITTEE. The Audit Committee currently comprises Joseph R. Wright,
Dr. Ralph Snyderman and Robert J. Thompson. The board of directors has adopted a
written charter governing the operation of the Audit Committee. The charter
requires that members of the Audit Committee be independent and prescribes
procedures to be followed by the Audit Committee. The Audit Committee reviews
and recommends to the board our internal accounting and financial controls and
the accounting principles and auditing practices and procedures to be used for
our financial statements. The Audit Committee makes recommendations to the board
concerning the engagement of independent public accountants and the scope of the
audit to be undertaken by such accountants.
COMPENSATION COMMITTEE. The Compensation Committee currently comprises
Randall L. Tobias, Jack F. Kemp, and Dr. Ralph Snyderman, and is charged with
reviewing and making recommendations to the board covering the policies,
practices and procedures relating to the compensation and benefits of officers
and managerial employees.
CORPORATE GOVERNANCE AND ETHICS COMMITTEE. The Corporate Governance and
Ethics Committee currently comprises Regina E. Herzlinger and Dr. Bruno Lassus
and reviews and makes recommendations to the board of directors on our business
practices as they relate to our corporate governance and ethical policies and
our board and senior management.
DIRECTOR COMPENSATION
Generally, upon completion of this offering, directors will receive $1,000
per in person board meeting and $500 per telephonic meeting. They are also
entitled to reimbursement for all reasonable out-of-pocket expenses incurred in
connection with their attendance at board and board committee meetings. Upon
completion of this offering, outside directors generally will receive
compensation aggregating $90,000 annually ($102,500 as the chairperson of a
board committee). This compensation will be paid to the board members as
follows: (1) $50,000 ($62,500 as chairperson of a board committee) in common
shares; and (2) $40,000 in options to purchase common shares. The common shares
will be valued utilizing a trailing 20-day market average. The options will have
an exercise price based on the fair market value on the date of grant and the
number of shares underlying options will be determined using the Black-Scholes
model. Directors will be eligible to defer their common shares
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under a deferred compensation plan, the terms of which will be recommended by
the compensation committee of the board and approved by the board in
April 2000. In the event that a director elects not to receive common shares for
the first component of her or his annual compensation, such director shall only
be entitled to receive $40,000 for service as a director or $50,000 for service
as a chairperson of a board committee.
In June 1998, directors Kemp, Wright and Thompson were granted 250,000
options each at an exercise price of $.125 per share under the 1997 Plan.
Effective June 15, 1999, the unvested portion of these shares (150,000 shares
each) was forfeited. Effective June 15, 1999, each of the aforementioned
directors were granted an option to purchase 150,000 shares under the 1999 Plan
at an exercise price of $.896 per share. The options vest over a three-year
period, with 30,000 shares vesting on June 15, 1999 and the remainder vesting
33 1/3% as of June 15 each year so that options will be fully vested after a
three-year period from date of grant.
In November 1999, directors Herzlinger, Snyderman and Tobias were each
awarded a 50,000 share restricted stock grant valued at $1.50 per share to vest
equally over a three-year period. In early 2000, directors Herzlinger and
Snyderman each received a loan of $37,500 to pay anticipated taxes on their
grant of restricted stock. Those notes bear interest at an annual rate of 6.2%
rate and are payable at the earlier of five years or the date their restricted
shares are sold.
Option grants under the 1999 Plan to Jack F. Kemp, Joseph R. Wright, Jr. and
Robert J. Thompson and restricted share grants to Regina E. Herzlinger,
Dr. Ralph Snyderman and Randall L. Tobias were made at an exercise price or
value reflecting the fair market value of our common shares on that date as
determined by the board of directors after taking into account our financial
results and prospects. Option grants under the 1997 Plan were made at below fair
market value.
In March 2000, Regina E. Herzlinger, Jack F. Kemp, Randall L. Tobias and
Joseph R. Wright received option grants under the 2000 Option Plan for
8,000 shares each at an exercise price equal to the initial public offering
price and 15,625 common shares each. In March 2000, Bradley D. Nullmeyer,
Bruno M. Lassus, Dr. Ralph Snyderman and Robert J. Thompson received option
grants under the 2000 Option Plan for 8,000 shares each at an exercise price
equal to the initial public offering price and 12,500 common shares each. These
options vest over a four-year period beginning January 1, 2000.
All restricted share and option grants to board members fully vest in the
event of a change in control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Before establishing the compensation committee, the board of directors as a
whole performed the functions delegated to the compensation committee. No member
of the board or the compensation committee serves as a member of the board of
directors or compensation committee of any entity that has one or more directors
serving as an executive officer of RealMed.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Articles and Bylaws contain certain indemnification provisions providing
that directors, officers and certain employees and agents will be indemnified
against expenses reasonably incurred by them in a claim or proceeding brought
against them or threatened because of their capacity as such. We will not
indemnify a director, officer, employee or agent if a court or the board of
directors finds that he or she breached his or her duties through recklessness
or willful misconduct. Indiana law also allows a corporation to pay for or
reimburse reasonable expenses a director, officer, employee or agent incurs
defending any action before the final court decision under certain conditions,
including repayment of any amount paid by us if it is ultimately determined that
the director, officer, employee or agent is not entitled to indemnification. The
indemnification authorized by the Articles and Bylaws
40
<PAGE>
is in addition to all rights to indemnification granted by Indiana law, and in
no way limits the indemnification provisions in the statute.
We carry an insurance policy for the protection of our officers and
directors against any liability asserted against them in their official
capacity.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
earned for services to us by our chief executive officer and our four other most
highly compensated executive officers whose salary and bonus exceeded $100,000
during the year ended December 31, 1999 and who were serving as executive
officers at the end of 1999 (collectively, the Named Executive Officers).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
--------------------------
ANNUAL COMPENSATION SECURITIES
----------------------- RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY(1)(2) BONUS STOCK AWARDS OPTIONS/SAR COMPENSATION
- --------------------------- ------------ -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Robert J. Hicks...................... $250,000 $ -- 250,000(3) 1,000,000 --
Chairman and Chief Executive
Officer
Timothy P. Bird...................... 125,000 10,000 N/A 200,000 --
Executive Vice President and Chief
Technology Officer
Gary P. Hutchcraft................... 150,000 22,500 N/A 450,000 --
Executive Vice President, Chief
Financial Officer & Treasurer
Keith M. Given....................... 115,000 20,250 125,000(3) 500,000 --
Executive Vice President, Business
Development
Scott E. Herbst...................... 115,000 8,000 N/A 450,000 --
Executive Vice President, General
Counsel & Secretary
</TABLE>
- ------------------------
(1) Annual salaries are based on a full year's compensation. These executives
began employment with RealMed at various dates during 1999.
(2) The compensation amounts noted above for Robert J. Hicks, Keith M. Given and
Scott E. Herbst were paid by RealMed to The CIT Group, Inc., who was acting
as the employer for these individuals and paying the individuals directly.
Mr. Given resigned from The CIT Group, Inc. on January 1, 2000 and
Mr. Herbst resigned from The CIT Group, Inc. on April 1, 2000. Mr. Hicks
will resign from The CIT Group, Inc. effective with this offering.
(3) These shares were received as restricted stock awards that vest over a
three-year period commencing June 15, 1999.
OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1999
The following table sets forth certain information for the year ended
December 31, 1999 with respect to grants of stock options to each of the Named
Executive Officers. All options granted in 1999 were granted under the 1999
Plan. These options have a term of 10 years. See "--Employee Benefit
41
<PAGE>
Plans" for a description of the material terms of these options. We granted
options to purchase common shares and issued common shares pursuant to
restricted stock awards equal to a total of 6,599,389 shares during 1999. This
amount includes 6,074,389 shares underlying options granted and 525,000 shares
issued pursuant to restricted stock awards. Options were granted at an exercise
price equal to the fair market value of our common shares, as determined in good
faith by the board of directors. The board of directors determined the fair
market value based on our prospects and the share price derived from arms-length
transactions. Potential realizable values are net of exercise price before
taxes, and are based on the assumption that our common shares appreciate at the
annual rate shown, compounded annually, from the date of grant until the
expiration of the ten-year term. These numbers are calculated based on SEC
requirements and do not reflect our projection or estimate of future stock price
growth.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------------
NAME GRANTED IN 1999 PER SHARE DATE 5% 10%
- ---- ---------- ---------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Hicks..................... 1,000,000 16.5% $0.896 06/15/09 $1,459,490 $2,323,993
Timothy P. Bird..................... 200,000 3.3 0.896 10/01/09 291,898 464,799
Gary P. Hutchcraft.................. 450,000 7.4 0.896 07/31/09 656,770 1,045,797
Keith M. Given...................... 500,000 8.2 0.896 06/15/09 729,745 1,161,997
Scott E. Herbst..................... 450,000 7.4 0.896 07/31/09 656,770 1,045,797
</TABLE>
Excluded in the above totals for Mr. Hicks and Mr. Given are 250,000 and 125,000
of restricted stock awards, respectively.
AGGREGATED OPTION EXERCISES IN 1999 AND 1999 YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning the unexercisable options held as of December 31,
1999. The value of in-the-money options is based on an assumed offering price of
per share, net of the option exercise price.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING OPTIONS VALUE OF UNEXERCISED IN-
SHARES UNEXERCISED THE-MONEY OPTIONS
ACQUIRED AT DECEMBER 31, 1999 AT DECEMBER 31, 1999
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Hicks............... -- -- -- 1,000,000 --
Timothy P. Bird............... -- -- -- 200,000 --
Gary P. Hutchcraft............ -- -- -- 450,000 --
Keith M. Given................ -- -- -- 500,000 --
Scott E. Herbst............... -- -- -- 450,000 --
</TABLE>
EMPLOYMENT AGREEMENTS
In 1999, we entered into employment agreements with each of the previously
mentioned Named Executive Officers. Each employment agreement has a five-year
term and provides for an annual salary, option award and severance in the event
of termination without cause, including a change in control of RealMed. Each
employment agreement also contained a non-compete clause following termination
of employment.
Mr. Hicks' employment agreement provides for an annual base salary of
$250,000, an option to purchase 1,000,000 shares under the 1999 Plan at an
exercise price of $.896 vesting equally over a four-year period, 250,000
restricted shares to be earned equally over a three-year period, $1,000,000
42
<PAGE>
lump-sum cash payment and full and immediate vesting of options and restricted
shares in the event of termination without cause or a change in control, and a
two-year covenant not to compete after termination.
Mr. Bird's employment agreement provides for an annual base salary of
$125,000 plus a $60,000 annual bonus, an option to purchase 200,000 shares under
the 1999 Plan at an exercise price of $.896 vesting equally over a four-year
period, 50% of annual base salary and bonus as a lump-sum cash payment and full
and immediate vesting of options in the event of termination without cause or a
change in control, and a two-year covenant not to compete after termination.
Mr. Hutchcraft's employment agreement provides for an annual base salary of
$150,000 plus a $25,000 annual bonus, an option to purchase 450,000 shares under
the 1999 Plan at an exercise price of $.896 vesting equally over a four-year
period, 150% of annual base salary and bonus as a lump-sum cash payment and full
and immediate vesting of options in the event of termination without cause or a
change in control, and a two-year covenant not to compete.
Mr. Given's employment agreement provides for an annual base salary of
$115,000 plus a 50% annual bonus, an option to purchase 500,000 shares under the
1999 Plan at an exercise price of $.896 vesting equally over a four-year period,
125,000 restricted common shares to be earned equally over a three-year period,
$500,000 lump-sum cash payment and full and immediate vesting of options and
restricted shares in the event of termination without cause or a change in
control and a two-year covenant not to compete.
Mr. Herbst's employment agreement provides for an annual base salary
effective April 1, 2000, of $120,750 plus a $36,225 annual bonus, 450,000
options under the 1999 Plan at an exercise price of $.896 vesting over a
four-year period, 150% of annual base salary and bonus as a lump-sum cash
payment and full and immediate vesting of options in the event of termination
without cause or a change in control and a two-year covenant not to compete
after termination.
Upon completion of this offering, Mr. Hicks employment agreement will be
modified to increase his annual base salary to $250,000 with a 100% annual bonus
opportunity. Mr. Hicks termination payment will be changed to 150% of his annual
base salary and bonus. In addition, Mr. Hicks will be granted an option to
purchase 1,250,000 shares at the initial public offering price, with a four-year
vesting schedule beginning January 1, 2000, and full and immediate vesting upon
a change in control.
The board has also authorized modifications to the other Named Executives
Officers' employment agreements, which will provide for a 60% of annual base
salary bonus, a termination payment of 150% of the Named Executive Officer's
annual base salary and bonus, full and immediate vesting of any options or
restricted shares in the event of a change in control and the following salaries
and option grants at the initial public offering price with a four-year vesting
schedule beginning January 1, 2000:
<TABLE>
<CAPTION>
NAME SALARY OPTION TO PURCHASE SHARES
- ---- -------- -------------------------
<S> <C> <C>
Timothy P. Bird............................................. $180,000 1,150,000 shares
Gary P. Hutchcraft.......................................... $165,000 900,000 shares
Keith M. Given.............................................. $145,000 725,000 shares
Scott E. Herbst............................................. $145,000 900,000 shares
</TABLE>
EMPLOYEE BENEFIT PLANS
THE REALMED CORPORATION 1997 EMPLOYEE STOCK OPTION AND INCENTIVE PLAN. In
December 1997 the board adopted, and our shareholders approved, the 1997 Plan.
We reserved for issuance 12,000,000 shares (as adjusted for the 4 for 1 stock
split in May 1998) under the 1997 Plan. As of February 29, 2000, 794,168 shares
were subject to issuance on the exercise of options granted under the 1997 Plan.
The weighted average exercise price per share of the outstanding options was
$.125. The board
43
<PAGE>
discontinued further issuances of stock options under the 1997 Plan in
June 1999 upon adoption of the 1999 Plan. Unless terminated sooner, the 1997
Plan will terminate automatically in December 2007. The 1997 Plan provides for
the discretionary grant of incentive stock options, within the meaning of
Section 422 of the Internal Revenue Code of 1986 (the Code) to employees and for
the grant of nonstatutory stock options to employees, directors, consultants and
independent contractors of RealMed or its affiliated and related companies.
The board or a committee of the board (as applicable, the Administrator)
administers the 1997 Plan. The Administrator has the power to determine the
terms of the options granted, including the exercise price of the options, the
number of shares subject to each option, the exercisability thereof, and the
form of consideration payable upon such exercise. In addition, the Administrator
has the authority to amend, suspend or terminate the 1997 Plan, provided that no
option previously granted under the 1997 Plan is adversely affected without the
optionee's consent.
The exercise price of all incentive stock options granted under the 1997
Plan must be at least equal to the fair market value of the common shares on
date of grant. The exercise price of nonstatutory stock options under the 1997
Plan is determined by the Administrator, but with respect to nonstatutory stock
options intended to qualify as "performance--based compensation" within the
meaning of Section 162(m) of the Code, the exercise price must be at least equal
to the fair market value of the common shares on date of grant. The term of all
options granted under the 1997 Plan may not exceed ten years. Options generally
vest 25% in the first year and 1.5625% each month thereafter so that options are
fully vested after a five-year period from date of employment.
Options granted under the 1997 Plan are generally not transferable by the
optionee, and each option is exercisable during the lifetime of the optionee
only by the optionee. Options granted under the 1997 Plan must generally be
exercised within 90 days after the end of the optionee's status as an employee
within six months after such optionee's termination by disability or one year
after the optionee's death, but in no event later than the expiration of the
option's term.
The 1997 Plan provides that options and restricted stock shall immediately
vest in the event of certain changes in control that are not approved by a
majority of our board of directors, including: (1) an agreement by a third party
to purchase 50% of our voting stock; (2) a transaction which results in the
removal of the majority of the board; or (3) our shareholders approval of a
transaction which results in RealMed no longer being an independent entity. The
1997 Plan allows for RealMed to provide for accelerated vesting in other
circumstances.
In July 1999, we determined that the exercise price of incentive stock
options issued under the 1997 Plan was not at fair market value thus making
these options nonstatutory options. In November 1999, the board approved a plan
whereby participants in the 1997 Plan who had received options intended to
qualify as incentive stock options could forfeit their options under the 1997
Plan for an option to purchase a similar number of shares under the 1999 Plan at
an exercise price of $.896 (considered to be fair market value at date of grant)
and a grant date of September 30, 1999. Vesting of these shares under the 1999
Plan would remain the same as under the 1997 Plan. Any options not forfeited
would remain under the same terms and conditions of the 1997 Plan but would be
considered nonstatutory stock options.
THE REALMED CORPORATION 1999 EMPLOYEE STOCK OPTION AND INCENTIVE PLAN. In
June 1999, the board adopted, and our shareholders approved, the 1999 Plan. We
reserved for issuance 10,000,000 shares under the 1999 Plan. As of February 29,
2000, options to purchase 5,636,766 shares were outstanding under the 1999 Plan.
The weighted average exercise price per share of the outstanding options was
$.994. Unless terminated sooner, the 1999 Plan will terminate automatically in
December 2009. The 1999 Plan provides for the discretionary grant of incentive
stock options, within the meaning of Section 422 of the Code, to employees and
for the grant of nonstatutory stock options
44
<PAGE>
to employees, directors, consultants and independent contractors of RealMed or
its affiliated and related companies.
The Administrator may administer the 1999 Plan. The Administrator has the
power to determine the terms of the options granted, including the exercise
price of the options, the number of shares subject to each option, the
exercisability thereof, and the form of consideration payable upon such
exercise. In addition, the Administrator has the authority to amend, suspend or
terminate the 1999 Plan, provided that no option previously granted under the
1999 Plan is adversely affected without the optionee's consent.
The exercise price of all incentive stock options granted under the 1999
Plan must be at least equal to the fair market value of the common shares on
date of grant. The exercise price of nonstatutory stock options under the 1999
Plan is determined by the Administrator, but with respect to nonstatutory stock
options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the exercise price must be at least equal
to the fair market value of the common shares on date of grant. The term of all
options granted under the 1999 Plan might not exceed ten years. Options
generally vest either 25% each year so that options are fully vested after a
four-year period from date of grant or 20% each year so that options are fully
vested after a five-year period from date of grant.
Options granted under the 1999 Plan are generally not transferable by the
optionee. Options granted under the 1999 Plan must generally be exercised within
90 days after the end of the optionee's status as an employee or within six
months after such optionee's termination by disability or one year after the
optionee's death, but in no event later than the expiration of the option's
term.
The 1999 Plan provides that options and restricted stock shall immediately
vest in the event of certain changes in control that are not approved by a
majority of our board of directors, including: (1) an agreement by a third party
to purchase 50% of our voting stock; (2) a transaction which results in the
removal of the majority of the board; and (3) our shareholders approval of a
transaction which results in RealMed no longer being an independent entity.
THE REALMED CORPORATION 2000 EMPLOYEE STOCK OPTION AND INCENTIVE PLAN. In
March, 2000, the board authorized the compensation committee to develop the 2000
Incentive Plan reserving for issuance 5,600,000 shares. We are seeking
shareholder approval of the 2000 Plan in April, 2000. Terms will be similar to
the 1999 Plan except the initial exercise price will be at the initial public
offering price and thereafter options will be granted at fair market value.
THE REALMED 401(K) SAVINGS AND INVESTMENT PLAN. All of our full time
employees are eligible to participate in the tax-qualified employee savings and
retirement plan (the 401(k) Plan). Under the 401(k) Plan, eligible employees may
defer up to the Internal Revenue Service's annual contribution limit. The 401(k)
Plan permits us to make additional discretionary matching contributions on
behalf of all our employee participants in the 401(k) Plan. The 401(k) Plan is
intended to qualify under Section 401 of the Code, as amended, so that
contributions by employees or by us to the 401(k) Plan, and income earned on
plan contributions, are not taxable to employees until withdrawn from the 401(k)
Plan. Contributions by us, if any, will be deductible by us when made. The
trustee under the 401(k) Plan, at the discretion of each participant, invests
the assets of the 401(k) Plan in any number of investment options.
45
<PAGE>
CERTAIN TRANSACTIONS
The following is a description of material transactions we entered into with
directors, executive officers and holders of 5% or more of our stock or with any
immediate family member of one of those people. We have only listed transactions
with a value in excess of $60,000. This description does not include
compensation agreements and other arrangements, which are described in
"Management."
TRANSACTIONS WITH DIRECTORS AND THEIR AFFILIATES
In January 1997, we sold 9,414,114 shares of stock to Robert B. Peterson,
one of our directors, and 9,414,114 shares to Mark A. Morris, one of our
directors, for $1,000 aggregate consideration. In May 1998, we borrowed from
Robert B. Peterson $150,000 in exchange for a demand note at 4.0% interest,
which remains outstanding. In January 1999, we issued 17,720 shares to Jefferson
Consulting Group and 17,719 shares to Jefferson Government Relations as payment
for consulting services to each of them, for $1.06 per share. Robert J. Thompson
serves as an officer for each of those entities and Joseph R. Wright serves as
an officer of Jefferson Consulting Group. On June 15, 1999, we sold 100 shares
to Newcourt Financial USA Inc. at $.90 per share. Robert Hicks served on
Newcourt Financial USA Inc.'s board and as an executive officer at that time.
From June through October of 1998, we sold a total of 1,590,667 shares to
JLT, L.P., an affiliate of Rollin M. Dick and a 5% shareholder, for $.94 per
share. We borrowed a total of $1,250,000 from JLT, L.P. during early 1999 in
exchange for notes at 10.0% interest. All of the notes were satisfied through
the exercise of warrants in June 1999. We issued a warrant to JLT, L.P. for
1,375,000 shares in April 1999. In 1999, we issued to JLT, L.P., (1) 1,375,000
shares as a loan commitment fee; (2) an additional 1,375,000 shares upon
exercise of the above warrant, and (3) 1,060,455 shares for its payment of a
$1,000,000 bank loan to RealMed, all at $.94 per share.
In April 2000, an Indianapolis-based general partnership purchased
$2.0 million of common shares. Mr. Thomas Hicks, brother of Robert J. Hicks, our
Chief Executive Officer, is one of the general partners of the general
partnership.
TRANSACTIONS WITH EXECUTIVE OFFICERS
Mr. Hicks obtained a loan from us in the amount of $99,709 as of
December 31, 1999, payable at the earlier of five years, an initial public
offering or the sale of his restricted shares. The note bears interest at a 6.2%
annual rate. Mr. Hutchcraft obtained an interest-free loan from us in the amount
of $34,000 on August 17, 1999, payable at the earlier of his termination of
employment or July 31, 2001. Mr. Given obtained a loan from us in the amount of
$49,571 as of December 31, 1999, payable at the earlier of five years, an
initial public offering or the sale of his restricted shares. The note bears
interest at a 6.2% annual rate.
TRANSACTIONS WITH 5% SHAREHOLDERS
FINNO SCA. In April 1997, Finno SCA, a 5% shareholder, subscribed for
3,357,003 shares at $.82 per share which were issued in 1998. In October 1997,
we issued 285,258 shares to an affiliate of Finno SCA for $.88 per share. In
January 1998, we issued 1,711,567 shares to an affiliate of Finno SCA for $.88
per share. In June 1998, we borrowed $160,000 from an affiliate of Finno SCA in
exchange for a note at 4.0%, interest due December 31, 1998. The note was
satisfied in February 1999 through a rollover to a new convertible note at 8.0%
interest in the amount of $164,401, which was due January 12, 2000. In
June 1999, we issued 174,338 shares upon conversion of the convertible note at
$.94 per share.
In June 1998, we borrowed $160,000 from another affiliate of Finno SCA at
4.0% interest, which was due December 31, 1998. In October 1998, we borrowed
$200,000 from an affiliate of Finno SCA at 4.0% interest, which was due
December 31, 1998. These notes were satisfied through a rollover to a
46
<PAGE>
new convertible note in February, 1999, which provided an additional $200,000 in
financing. In June 1999, we issued to affiliate of Finno SCA 601,212 shares upon
conversion of the convertible note.
In February of 1999, we issued a warrant to an affiliate of Finno SCA for
191,489 shares. In June of 1999, this warrant was exercised at $.94 per share.
GEMPLUS SA. In August 1997, we issued 3,200,000 shares to GemPlus SA, a 5%
shareholder, for $.94 per share. In November 1998, we borrowed $4,180,847 from
GemPlus SA in exchange for a convertible secured note at 8.0% interest due
November 13, 2001. In June 1999, the note was satisfied through a rollover to a
new nonconvertible secured note in the amount of $4,285,797 at 12.0% interest
due December 15, 2002. In January, 1999 we borrowed $350,000 from GemPlus SA in
exchange for a convertible note with 4.0% interest, which was due January 12,
2000. In March 1999, we borrowed $100,000 from GemPlus SA in exchange for two
convertible notes for $50,000 each at 8.0% interest, which were due January 12,
2000. In March 1999, we issued two warrants to GemPlus SA for an aggregate of
21,276 shares. In June 1999, GemPlus SA converted the three convertible notes
and exercised the warrants it held at $.94 per share and received 477,200 shares
and 21,276 shares, respectively.
THE CIT GROUP, INC. In June 1999, The CIT Group, Inc. provided us with a
$17.5 million convertible revolving line of credit, earning 8.0% interest per
annum. The principal and interest amount outstanding is due upon the earlier of
the demand of the lender after an initial public offering or June 15, 2003. We
are entitled to draw against the line of credit so long as Robert J. Hicks as
Chief Executive Officer certifies that we are in compliance with regularly
updated business plans. If Mr. Hicks ceases to be chief executive officer of
RealMed, the line is still available, but it is subject to additional
verification procedures. Under the terms of this agreement, we are prohibited
from granting any lien on any of our assets other than purchase money security
interests granted by us. In the event Mr. Hicks ceases to be the Chief Executive
Officer, changes to the business plan are required to be approved by The CIT
Group, Inc. At any time, The CIT Group, Inc. has the right to apply the amount
owed to exercise a warrant for common shares at a price of $.896 per share. In
the event that The CIT Group, Inc. wishes to purchase more than is due under the
line, The CIT Group, Inc. may purchase up to an aggregate amount of
$17.5 million of our common shares at the $.896 per share by simply paying
RealMed in cash for the balance. We expect The CIT Group, Inc. to fully convert
its warrant immediately prior to this offering.
In January 2000, The CIT Group, Inc. provided the 2000 CIT Line of Credit, a
$10,000,000 line of credit at 15.0% interest. The line has a fee equal to the
greater of 0.5% of our market capitalization at the initial public offering date
or $1,000,000, which is payable in stock or cash at the option of The CIT
Group, Inc. The line is due upon the earlier of our initial public offering or
December 31, 2002. No funding has occurred to date through this line.
OTHER RELATED PARTY TRANSACTIONS
RealMed and Eclipse America Corporation are related parties because an
officer and shareholder of RealMed is the owner of Eclipse America. In
January 1997, we purchased from Eclipse America, owned at the time by Mark A.
Morris and Robert B. Peterson, certain intellectual property, including
technology representing the core unit of the RealMed Network, for $1,250,000.
In June 1998, we paid approximately $650,000 to Eclipse America as a
recruiting fee for securing employment of certain Eclipse America employees.
Effective June 15, 1999, we entered into an agreement with Eclipse America
whereby transactions between the parties are limited to a monthly lease
obligation of $14,400, a sublease for office space, and compensation for
contracted services provided by employees of Eclipse America. The $16,000
equipment lease payment obligation terminates upon the earlier of March 31, 2003
or upon an initial public offering.
47
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common shares as of March 31, 2000 and as adjusted
to reflect the sale of the common shares in this offering by:
- each person who is known by us to beneficially own more than 5% of our
common shares;
- each director;
- each of the Named Executive Officers; and
- all directors and executive officers as a group.
Shares that a person or entity has the right to acquire by July 31, 2000 are
considered to be outstanding in calculating the percentage ownership of the
person or entity but are not considered to be outstanding for any other person
or entity.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------
PERCENTAGE
BEFORE PERCENTAGE AFTER
NAME AND ADDRESS(1) NUMBER OFFERING OFFERING
- ------------------- ---------- ---------- ----------------
<S> <C> <C> <C>
The CIT Group, Inc..................................... 19,531,350(2) 34.0% %
Two Gatehall Drive
Parsippany, New Jersey 07054
GemPlus SA............................................. 4,647,000 8.1
Suite 300
3 Lagoon Drive
Redwood City, California 49065-1566
Centro Asset Management, Ltd........................... 5,713,455(3) 10.0
c/o Centro Internationale
Handelsbank AG
P.O Box 272
A1015 Vienna
JLT, L.P............................................... 7,289,344(4) 12.7
9085 East State Road 334
Zionsville, IN 46077
Robert J. Hicks........................................ 532,000(5) 0.9
Robert B. Peterson..................................... 8,391,556(6) 14.6
Mark A. Morris......................................... 8,418,794(7) 14.7
Timothy P. Bird........................................ --(8) --
Gary P. Hutchcraft..................................... 112,500(9) 0.2
Keith M. Given......................................... 166,666(10) 0.3
Scott E. Herbst........................................ 120,833(11) 0.2
Regina E. Herzlinger................................... 15,625(12) --
Jack F. Kemp........................................... 185,625(13) 0.3
Dr. Bruno M. Lassus.................................... 12,500(14) --
Bradley D. Nullmeyer................................... 12,500(14) --
Dr. Ralph Snyderman.................................... 12,500(12) --
Robert J. Thompson..................................... 293,455(13) 0.5
Randall L. Tobias...................................... 15,625(12) --
Joseph R. Wright....................................... 185,625(13) 0.3
All Executive Officers and Directors as a group (17 42,654,154(14) 74.4
persons).............................................
</TABLE>
- ------------------------
(1) Except as otherwise indicated below, the address for each executive officer
and director is 510 E. 96(th) Street, Suite 400, Indianapolis, Indiana
46240.
48
<PAGE>
(2) Represents 19,531,250 shares issuable upon conversion of $17.5 million under
the 1999 CIT Line of Credit.
(3) These shares were formerly held by three affiliated entities represented by
Finno SCA.
(4) Represents shares owned by JLT, L.P. of which Mr. Rollin Dick is the general
partner. Includes shares subject to immediately exercisable options to
purchase 944,111 common shares from each of Mr. Peterson and Mr. Morris.
(5) Includes 250,000 shares issuable upon exercise of vested options and 82,000
restricted shares. Includes 200,000 shares for which Mr. Hicks has an
immediately exercisable option to purchase shares from Messrs. Peterson and
Morris. Does not include 164,000 unvested restricted shares and 2,000,000
common shares issuable upon exercise of options that have not vested.
(6) Does not subtract 1,044,111 common shares owned by Mr. Peterson as to which
he has granted an immediately exercisable option to purchase shares to
Mr. Hicks and JLT, L.P.
(7) Does not subtract 1,044,111 common shares owned by Mr. Morris as to which he
has granted an immediately exercisable option to purchase shares to
Mr. Hicks and JLT, L.P.
(8) Does not include 1,350,000 common shares issuable upon exercise of options
that have not been vested.
(9) Includes 112,500 shares issuable upon exercise of vested options. Does not
include 1,237,500 common shares issuable upon exercise of options that have
not vested.
(10) Includes 125,000 shares issuable upon exercise of vested options and 41,666
restricted shares. Does not include 83,334 unvested restricted shares and
1,100,000 common shares issuable upon exercise of options that have not
vested.
(11) Includes 120,833 shares issuable upon exercise of vested options. Does not
include 1,229,167 common shares issuable upon exercise of options that have
not vested.
(12) Does not include 50,000 unvested restricted shares and 8,000 common shares
issuable upon exercise of options that have not vested.
(13) Includes 170,000 common shares issuable upon exercise of vested options.
Does not include 88,000 common shares issuable upon exercise of options that
have not vested.
(14) Includes shares beneficially owned by The CIT Group, Inc. and GemPlus SA
since Messrs. Nullmeyer and Lassus are their board nominees, respectively.
49
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
We have 450,000,000 common shares and 50,000,000 preferred shares
authorized. The following summary of certain provisions of our capital stock
describes all material provisions of our Amended and Restated Articles of
Incorporation and Bylaws. This summary, however, does not purport to be complete
and is subject to, and qualified in its entirety by, the Articles of
Incorporation and Bylaws, copies of which have been filed as exhibits to the
Registration Statement of which this prospectus is a part and by the provisions
of applicable law.
COMMON SHARES
As of December 31, 1999, there were 56,453,188 common shares outstanding, no
par value, assuming the conversion of $17.5 million under the 1999 CIT Line of
Credit into 19,531,250 common shares. Each outstanding common share is entitled
to one vote on all matters submitted to a vote of the shareholders, including
election of directors. There is no cumulative voting in the election of
directors. The issued and outstanding common shares are, and the common shares
offered by this prospectus will be, validly issued, fully paid and nonassessable
upon payment for the shares. The holders of outstanding common shares are
entitled to receive dividends out of funds legally available therefor at a time
and in amounts as the board may from time to time determine. See "Dividend
Policy." The common shares are not convertible and the holders thereof have no
preemptive or subscription rights to purchase any of our securities. Upon
liquidation, dissolution or winding up of RealMed, the holders of common shares
are entitled to receive on a pro rata basis our assets that are legally
available for distribution, after payment of all debts and other liabilities.
CERTAIN ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR ARTICLES OF INCORPORATION,
BYLAWS AND RIGHTS AGREEMENT
Our Amended and Restated Articles of Incorporation and Bylaws contain
provisions that may deter an attempt to change or gain control of RealMed. As a
result, you may be deprived of opportunities to sell some or all of your common
shares at prices that represent a premium over the market prices. These
provisions include:
- the existence of blank check preferred stock;
- staggered terms for directors;
- restrictions on the ability to change the number of directors;
- restrictions on the ability to remove a director;
- fair price provisions; and
- supermajority voting requirements.
Our board has adopted a Rights Agreement, which is generally designed to
deter coercive takeover tactics and to encourage all persons interested in
potentially acquiring control of RealMed to negotiate with the board of
directors. Under the Rights Agreement, the board has declared a dividend
distribution of one right for each outstanding RealMed common share. A right
will attach to each common share issued. Each right entitles the holder to
purchase from RealMed one common share at a price of $ per share (subject
to adjustment to prevent dilution). Initially, the rights will not be
exercisable. The rights become exercisable 10 days following a public
announcement that a person or group of affiliated or associated persons (a
RealMed Acquiring Person) has acquired beneficial ownership of 15% or more of
the outstanding RealMed common shares (or a 10% acquiror who is determined by
our board to be an adverse person), or 10 days following the announcement of an
intention to make a tender offer or exchange offer, the consummation of which
would result in any person or group becoming a RealMed Acquiring Person. Two of
our largest shareholders who already own more than 15% of our outstanding common
shares, The CIT Group, Inc. and GemPlus SA, are
50
<PAGE>
excluded from the definition of RealMed Acquiring Person under the Rights
Agreement. Therefore, transactions with those shareholders would not trigger the
exercisability of the rights. The RealMed Rights Agreement expires May , 2010.
INDIANA STATUTES
BUSINESS COMBINATION STATUTE. In the event any person acquires 10% of our
common shares, or becomes an "Interested Shareholder," then, for a period of
five years after such acquisition, Indiana law prohibits certain business
combinations between us and that shareholder, with certain exceptions. We can
enter into business combinations with that shareholder if:
- our board approves of the shareholder's acquisition of the shares before
the shareholder acquires the shares; or
- our board approves of the business combination.
After a five-year period, we are permitted to enter into only the following
three types of business combinations with that shareholder:
- a business combination approved by our board before the acquisitions of
common shares by the shareholder;
- a business combination approved by holders of a majority of the common
shares not owned by the shareholder; and
- a business combination in which all our shareholders receive a price for
their common shares at least equal to a formula price based on the highest
price per common share paid by the interested shareholder.
INDIANA CONTROL SHARE ACQUISITION STATUTE. Certain accretions of voting
power may result in an acquiring shareholder losing the right to vote the common
shares acquired. To avoid this loss of voting rights, a majority of the
disinterested common shareholders may approve the exercise of the vote. If
authorized by an appropriate provision of an Indiana corporation's articles of
incorporation or by-laws adopted prior to the time a person becomes an
interested shareholder, the person may be permitted to redeem the acquiring
shareholder's common shares. We have not adopted such redemption provisions.
These provisions of Indiana law discussed above do not apply with respect to
the acquisition of our convertible notes or the acquisition of common shares
upon conversion of the convertible notes.
TRANSFER AGENT AND REGISTRAR
Equiserve Trust Company NA has been appointed as transfer agent and
registrar for our common shares.
LISTING
We are applying to have our common shares listed for quotation on the Nasdaq
National Market under the symbol "RMED."
51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
If our shareholders sell substantial amounts of common shares, including
shares issued upon the exercise of outstanding options, in the public market
following this offering, the market price of our common shares could fall. These
sales also might make it more difficult for us to sell equity or equity-related
securities in the future and at a time and price that we deem appropriate.
Upon completion of this offering, we will have outstanding an aggregate of
common shares, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options. Of these shares, all of the
shares sold in this offering will be freely tradeable without restriction or
further registration under the Securities Act, unless these shares are purchased
by "affiliates" as that term is defined in Rule 144 under the Securities Act.
This leaves shares eligible for sale in the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
<S> <C> <C>
............................... After 90 days from the date of this prospectus.
............................... After 180 days from the date of this prospectus
(subject, in some cases, to volume limitations).
............................... At various times after 180 days from the date of
this prospectus (subject, in some cases, to
volume limitations).
</TABLE>
LOCK-UP AGREEMENTS
Each of our directors and officers and certain other shareholders of RealMed
have agreed with Donaldson, Lufkin & Jenrette Securities Corporation, for a
period of 180 days after the date of this prospectus, not to:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any common shares of any securities convertible
into or exercisable or exchangeable for common shares; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common shares, whether any such transaction described above is to be
settled by delivery of common stock or other securities, in cash or
otherwise.
Donaldson, Lufkin & Jenrette Securities Corporation may choose to release
some of these shares from such restrictions prior to the expiration of the 180-
to 360-day "lock-up" period, although it has no current intention of doing so.
RULE 144
Under Rule 144 as currently in effect, beginning 90 days after the date of
this prospectus, a person who has beneficially owned restricted common shares
for at least one year, including the holding period of any prior owner who is
not an affiliate, would be entitled to sell a number of the shares within any
three-month period equal to the greater of:
- 1% of the then outstanding shares of the common shares; or
- the average weekly reported volume of trading of the common shares on the
Nasdaq National Market during the four calendar weeks preceding such sale.
52
<PAGE>
Immediately after the offering, 1% of our outstanding common shares would
equal approximately shares. Under Rule 144, restricted shares are subject
to manner of sale and notice requirements and requirements as to the
availability of current public information concerning RealMed.
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been an affiliate at
any time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, including the holding period
of any prior owner who is not an affiliate, is entitled to sell such shares
without regard to the volume or other limitations of Rule 144 just described.
RULE 701
Immediately after this offering, there will be options to purchase
approximately 11,419,934 common shares outstanding, based on the number of
options outstanding as of February 29, 2000. Subject to the provisions of the
lock-up agreements described above, holders of these options may rely on the
resale provisions of Rule 701 under the Securities Act. Rule 701 permits
non-affiliates to sell their shares without having to comply with the volume,
holding period or other limitations of Rule 144 and permits affiliates to sell
their shares without having to comply with the holding period limitation of
Rule 144, in each case beginning 90 days after the consummation of this
offering. In addition, shortly after this offering, we intend to file a
registration statement on Form S-8 covering the 15,768,168 common shares
reserved for issuance under the 1997 Plan, the 1999 Plan and the 2000 Plan.
Common shares registered under any registration statement will, subject to
Rule 144 volume limitations applicable to affiliates, be available for sale in
the open market, unless the shares are subject to vesting restrictions with us
or the lock-up agreements described above.
REGISTRATION RIGHTS
After this offering, the holders of approximately 4.0 million common shares
will be entitled to demand that we register these shares under the Securities
Act. Under the terms of the agreements between us and the holders of these
shares, if we propose to register any of our securities under the Securities
Act, either for our own account or for the account of other security holders
exercising registration rights, these holders are entitled to:
- notice of registration;
- include their common shares in the registration; and
- specified demand registration rights under which they may require us to
file a registration statement under the Securities Act at our expense to
register their common shares.
Further, some of the holders of these demand registration rights may require
us to file additional registration statements. All of the registration rights
are subject to conditions and limitations, including:
- the right of the underwriters of an offering to limit the number of shares
included in the registration; and
- our right not to effect a requested registration within sixty days
following the effectiveness of a registration statement in connection with
a public offering of our securities for cash.
After this offering, the holders of approximately common shares may be
entitled to piggy-back registration rights. Generally, these shareholders have
the right, should we propose to register any of our common shares, to request
that we include their common shares in such registration, subject to an
underwriter's right to limit the number of shares included in an underwritten
primary offering.
53
<PAGE>
UNDERWRITING
Under the terms and conditions contained in an underwriting agreement
dated , 2000, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, J.P. Morgan Securities
Inc., SG Cowen Securities Corporation, William Blair & Company, L.L.C. and
DLJDIRECT Inc. have severally agreed to purchase from us the number of common
shares set forth opposite their names below:
<TABLE>
<CAPTION>
UNDERWRITERS: NUMBER OF SHARES
- ------------- ----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
J.P. Morgan Securities Inc. ................................
SG Cowen Securities Corporation.............................
William Blair & Company, L.L.C..............................
DLJDIRECT Inc...............................................
-------
Total.....................................................
=======
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the common shares in this
offering are subject to approval by their counsel of legal matters concerning
this offering and to conditions precedent that must be satisfied by us. The
underwriters are obligated to purchase and accept delivery of all the common
shares in this offering, other than those shares covered by the over-allotment
option described below, if they purchase any of the shares.
The underwriters initially propose to offer some of the common shares
directly to the public at the initial public offering price set forth on the
cover page of this prospectus and some of the shares to dealers at the initial
public offering price less a concession not in excess of $ per share. The
underwriters may allow, and those dealers may re-allow, a concession not in
excess of $ per share on sales to other dealers. After the initial offering
of the common shares to the public, the representatives may change the public
offering price and concessions. The underwriters do not intend to confirm sales
to any accounts over which they exercise discretionary authority.
The following table shows (a) the underwriting fees and (b) the items of
compensation considered to be underwriting compensation under the rules of the
National Association of Securities Dealers, Inc. (NASD), to be paid by us in
connection with this offering. This information is presented assuming both no
exercise and full exercise of the underwriters' option to purchase additional
common shares.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Underwriting fees per share.......................... $ $
Total underwriting fees.............................. $ $
Other amounts considered to be compensation
by the NASD per share.............................. $ $
Total other amounts considered to be compensation
by the NASD........................................ $ $
</TABLE>
The underwriting fee is equal to the public offering price per common share
less the amount paid by the underwriters to us per common share. Certain
partners of Winston & Strawn, counsel to the representatives for the
underwriters, own an aggregate of 22,542 common shares. Employees of Donaldson,
Lufkin & Jenrette Securities Corporation own an aggregate of 69,300 common
shares. Pursuant to NASD rules, the common shares purchased by these individuals
are presumed to be underwriting compensation. The additional deemed compensation
included in the table above was computed in accordance with NASD rules.
54
<PAGE>
We have granted to the underwriters an option, exercisable for 30 days after
the date of this prospectus, to purchase up to additional common shares at the
initial public offering price less the underwriting discounts and commissions
and the placement agent's fee. The underwriters may exercise this option solely
to cover over-allotments, if any, made in connection with this offering. To the
extent the underwriters exercise this option, each underwriter will be
obligated, subject to certain conditions, to purchase a number of additional
common shares approximately proportionate to that underwriter's initial purchase
commitments.
We have requested that the underwriters reserve up to common shares to
be offered at the public offering price to employees, friends and families of
employees, service providers, employees of customers and others. These people
will agree to hold their shares for at least 180 days after the date of this
prospectus. The number of common shares available for sale to the general public
will be reduced to the extent such individuals purchase such reserved shares.
Any reserved shares which are not so purchased will be offered by the
underwriters to the general public on the same basis as the other shares offered
hereby.
We are directly offering common shares to certain payers at a price
equal to the public offering price in a concurrent offering under a separate
prospectus. These payers have signed letters of understanding to utilize the
RealMed Network. The underwriters will not receive underwriting fees with
respect to these shares. Each of these stockholders has agreed not to dispose of
the shares for a period of days. Donaldson, Lufkin & Jenrette Securities
Corporation is acting as the placement agent in connection with the concurrent
offering. The placement agent will receive a fee of $ per share sold in the
concurrent offering. See "Concurrent Offering."
We have agreed to indemnify the underwriters against liabilities, including
liabilities under the Securities Act, or to contribute to payments that the
underwriters may be required to make for these liabilities, if any.
For a period ending 180 days from the date of this prospectus, we and our
shareholders have agreed not to, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation:
- offer, pledge, sell, contract to sell or sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any common shares or any securities convertible into or
exercisable or exchangeable for common shares; or
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
shares, whether any such transaction described above is to be settled by
delivery of common shares or other securities, in cash or otherwise.
In addition, during such lock-up period, we have also agreed not to file any
registration statement with respect to, and each of our executive officers,
directors and shareholders have agreed not to make any demand for, or exercise
any right with respect to, the registration of any common shares or any
securities convertible into or exercisable or exchangeable for common shares
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
Prior to this offering, no public market has existed for our common shares.
We will negotiate the initial public offering price for our common shares with
the underwriters' representatives, but the price may not reflect the market
price for our common shares after this offering. The factors considered in
determining the initial public offering price include:
- the history of and prospects for our industry in which we compete;
- our past and present operations;
55
<PAGE>
- our historical results of operations;
- our prospects for future operations results;
- the recent market prices of securities of generally comparable companies;
and
- the general conditions of the securities market at the time of this
offering.
We are applying to have our common shares listed for quotation on the Nasdaq
National Market under the symbol "RMED."
An electronic prospectus is available on the website maintained by
DLJDIRECT Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation. Other than the prospectus in electronic format, the information on
this website relating to this offering is not a part of this prospectus and has
not been approved and/or endorsed by us or any underwriter, and should not be
relied on by prospective investors. Other than in the United States, neither we
nor the underwriters have taken any action that would permit a public offering
of the common shares included in this offering in any jurisdiction where action
for that purpose is required. The shares included in this offering may not be
offered or sold, directly or indirectly, nor may this prospectus or any other
offering material or advertisements in connection with the offer and sale of any
common shares be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
this offering and the distribution of this prospectus. This prospectus is not an
offer to sell or a solicitation of an offer to buy any common shares in any
jurisdiction where that would not be permitted or legal.
In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common shares. Specifically, the underwriters may over-allot this offering,
creating a syndicate short position. The underwriters may bid for and purchase
common shares in the open market to cover such syndicate short positions or to
stabilize the price of our common shares. In addition, the underwriting
syndicate may reclaim selling concessions from syndicate members and selected
dealers if they repurchase previously distributed common shares in syndicate
covering transactions, in stabilizing transactions or otherwise, or if
Donaldson, Lufkin & Jenrette Securities Corporation receives a report which
indicates that the clients of such syndicate members have "flipped" our common
shares. These activities may stabilize or maintain the market price of the
common shares above independent market levels. The underwriters are not required
to engage in these activities and may end any of these activities at any time.
56
<PAGE>
WHERE CAN YOU FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 for the common shares offered by this prospectus. This
prospectus, which constitutes a part of that registration statement, does not
contain all of the information included in the registration statement or the
exhibits and schedules that are part of the registration statement. For further
information on us and our common shares, you should review the registration
statement and its exhibits and schedules. Any document we file may be read and
copied at the SEC's public reference rooms at the following locations:
<TABLE>
<S> <C> <C>
Room 1024 Seven World Trade Center Citicorp Center
450 Fifth Street, N.W. Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661
</TABLE>
Please call the SEC at 1-800-SEC-0330 for further information about the
public reference rooms. Our filings with the Commission are also available to
the public from the Commission's web site at http://www.sec.gov.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act and will file
periodic reports, proxy statements and other information with the Commission.
These periodic reports, proxy statements and other information will be available
for inspection and copying at the Commission's public reference rooms and the
SEC's website referred to above.
LEGAL MATTERS
The validity of the issuance of the common shares in this offering will be
passed upon for us by Sommer & Barnard, PC, Indianapolis, Indiana. Sommer &
Barnard, PC owns 14,983 RealMed common shares. S&B Investments, LLC, a limited
liability company owned by certain shareholders of Sommer & Barnard, PC, owns
another 85,017 RealMed common shares. Certain principals of the firm own a total
of 57,900 additional common shares. In connection with this offering, Winston &
Strawn is representing the underwriters. Certain partners of Winston & Strawn
own a total of 22,542 common shares.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1999 and 1998, and for each of the three years in the
period ended December 31, 1999, as set forth in their report. We have included
our financial statements in this prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
57
<PAGE>
REALMED CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Auditors.............................. F-2
Balance Sheets as of December 31, 1998 and 1999............. F-3
Statements of Operations for the period from November 13,
1995 (date of inception) through December 31, 1999 and the
years ended December 31, 1997, 1998 and 1999.............. F-4
Statements of Shareholders' Equity (Deficit) for the period
from November 13, 1995 (date of inception) through
December 31, 1999 and the years ended December 31, 1997,
1998 and 1999............................................. F-5
Statements of Cash Flows for the period from November 13,
1995 (date of inception) through December 31, 1999 and the
years ended December 31, 1997, 1998 and 1999.............. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
RealMed Corporation
We have audited the accompanying balance sheets of RealMed Corporation (a
development stage enterprise) as of December 31, 1998 and 1999, and the related
statements of operations, shareholders' equity (deficit) and cash flows for the
period from November 13, 1995 (date of inception) through December 31, 1999 and
for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RealMed Corporation (a
development stage enterprise) at December 31, 1998 and 1999, and the results of
its operations and its cash flows for the period from November 13, 1995 (date of
inception) through December 31, 1999 and for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Indianapolis, Indiana
January 14, 2000,
except for Note 12, as to which the date is
March 15, 2000
F-2
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 130,859 $ 1,383,007
Accounts receivable....................................... 32,896 52,049
Other receivables......................................... -- 286,441
Other..................................................... 12,011 51,325
------------ ------------
Total current assets.................................... 175,766 1,772,822
Inventory................................................... 4,180,847 --
Property and equipment, net................................. 383,769 1,911,709
Intangibles and other assets, net........................... 416,666 73,586
------------ ------------
Total assets............................................ $ 5,157,048 $ 3,758,117
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 598,013 $ 212,185
Accrued interest, shareholder............................. -- 288,006
Accrued expenses.......................................... 523,411 1,226,149
Deferred revenue.......................................... 303,633 --
Current portion of capital lease obligations, related
parties................................................. -- 166,159
Line of credit............................................ 1,000,000 --
Notes payable to shareholders............................. 715,000 169,000
------------ ------------
Total current liabilities............................... 3,140,057 2,061,499
Subordinated line of credit to shareholder.................. -- 7,468,971
Secured note payable to shareholder......................... 4,180,847 4,285,798
Note payable to bank........................................ 1,000,000 --
Capital lease obligations, related parties, less current
portion................................................... -- 452,032
Accrued interest, related parties........................... 47,895 254,817
------------ ------------
Total liabilities....................................... 8,368,799 14,523,117
------------ ------------
Shareholders' equity (deficit):
Common shares, no par value:
Authorized shares--200,000,000 (40,000,000 in 1998);
issued shares--36,967,605 (30,735,366 in 1998);
outstanding shares--36,921,938 (30,735,366 in 1998)... 8,978,218 16,817,676
Stock options outstanding................................. 740,472 1,524,190
Unamortized restricted stock.............................. -- (492,500)
Receivables from issuance of restricted stock............. -- (154,418)
Deficit accumulated during the development stage.......... (12,930,441) (28,419,030)
Treasury shares, at cost--45,667 shares (none in 1998).... -- (40,918)
------------ ------------
Total shareholders' equity (deficit).................... (3,211,751) (10,765,000)
------------ ------------
Total liabilities and shareholders' equity (deficit).... $ 5,157,048 $ 3,758,117
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-3
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 13,
1995
(DATE OF
INCEPTION)
YEAR ENDED DECEMBER 31, THROUGH
---------------------------------------- DECEMBER 31,
1997 1998 1999 1999
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net revenue.............................. $ 369,318 $ 509,281 $ 516,633 $ 1,395,232
Costs and operating expenses:
Research and development............... 2,584,737 3,026,368 3,872,373 9,483,478
Business development sales and
marketing............................ 514,244 966,275 1,377,596 2,858,115
Payer integration...................... -- -- 584,568 584,568
General and administrative............. 2,059,892 2,006,889 2,107,770 6,174,551
Inventory writedown.................... -- -- 4,180,847 4,180,847
Stock based compensation............... -- 1,705,190 852,218 2,557,408
Depreciation and amortization.......... 431,849 446,280 662,509 1,540,638
----------- ----------- ------------ ------------
Total costs and operating expenses... 5,590,722 8,151,002 13,637,881 27,379,605
----------- ----------- ------------ ------------
Operating loss........................... (5,221,404) (7,641,721) (13,121,248) (25,984,373)
Interest expense......................... -- 67,316 2,367,341 2,434,657
----------- ----------- ------------ ------------
Loss before income taxes................. (5,221,404) (7,709,037) (15,488,589) (28,419,030)
Income taxes............................. -- -- -- --
----------- ----------- ------------ ------------
Net loss................................. $(5,221,404) $(7,709,037) $(15,488,589) $(28,419,030)
=========== =========== ============ ============
Basic and diluted net loss per common
share.................................. $ (0.25) $ (0.24) $ (0.45) $ (0.99)
Weighted-average shares outstanding used
in computing basic and diluted net loss
per common share....................... 20,526,112 31,677,289 34,262,007 28,747,716
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-4
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON SHARES STOCK UNAMORTIZED
------------------------ OPTIONS RESTRICTED
SHARES AMOUNT OUTSTANDING STOCK
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at inception.......................... 18,828,228 $ 1,000 $ -- $ --
Issuances of stock in 1997, including
3,357,003 shares subscribed in 1997 and
issued in 1998.............................. 6,842,261 5,000,000 -- --
Net loss...................................... -- -- -- --
---------- ----------- ------------ ------------
Balance at December 31, 1997.................. 25,670,489 5,001,000 -- --
Issuances of stock............................ 3,743,345 3,012,500 -- --
Stock based compensation expense.............. 1,321,532 964,718 740,472 --
Net loss...................................... -- -- -- --
---------- ----------- ------------ ------------
Balance at December 31, 1998.................. 30,735,366 8,978,218 740,472 --
Issuances of stock, including 525,000
restricted shares........................... 2,301,823 2,014,057 -- (561,000)
Issuance of warrant........................... -- 2,343,750 -- --
Stock based compensation expense.............. -- -- 783,718 68,500
Conversions of debt to equity................. 3,930,416 3,481,651 -- --
Purchases of treasury stock................... -- -- -- --
Receivables from restricted stock issuances... -- -- -- --
Net loss...................................... -- -- -- --
---------- ----------- ------------ ------------
Balance at December 31, 1999.................. 36,967,605 $16,817,676 $ 1,524,190 $ (492,500)
========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
RECEIVABLES DEFICIT
FROM ACCUMULATED
TREASURY STOCK ISSUANCES OF DURING THE TOTAL
--------------------- RESTRICTED DEVELOPMENT SHAREHOLDERS'
SHARES AMOUNT STOCK STAGE EQUITY (DEFICIT)
-------- ---------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Balance at inception............... -- $ -- $ -- $ -- $ 1,000
Issuances of stock in 1997,
including 3,357,003 shares
subscribed in 1997 and issued in
1998............................. -- -- -- -- 5,000,000
Net loss........................... -- -- -- (5,221,404) (5,221,404)
-------- ---------- ----------- ------------ ------------
Balance at December 31, 1997....... -- -- -- (5,221,404) (220,404)
Issuances of stock................. -- -- -- -- 3,012,500
Stock based compensation expense... -- -- -- -- 1,705,190
Net loss........................... -- -- -- (7,709,037) (7,709,037)
-------- ---------- ----------- ------------ ------------
Balance at December 31, 1998....... -- -- -- (12,930,441) (3,211,751)
Issuances of stock, including
525,000 restricted shares........ -- -- -- -- 1,453,057
Issuance of warrant................ -- -- -- -- 2,343,750
Stock based compensation expense... -- -- -- -- 852,218
Conversions of debt to equity...... -- -- -- -- 3,481,651
Purchases of treasury stock........ (45,667) (40,918) -- -- (40,918)
Receivables from restricted stock
issuances........................ -- -- (154,418) -- (154,418)
Net loss........................... -- -- -- (15,488,589) (15,488,589)
-------- ---------- ----------- ------------ ------------
Balance at December 31, 1999....... (45,667) $ (40,918) $ (154,418) $(28,419,030) $(10,765,000)
======== ========== =========== ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-5
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 13, 1995
(DATE OF INCEPTION)
YEAR ENDED DECEMBER 31, THROUGH
---------------------------------------- DECEMBER 31,
1997 1998 1999 1999
----------- ----------- ------------ -------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................... $(5,221,404) $(7,709,037) $(15,488,589) $(28,419,030)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation......................................... 15,182 29,613 245,843 290,638
Amortization......................................... 416,667 416,667 416,666 1,250,000
Stock based expenses................................. -- 1,705,190 2,244,040 3,949,230
Inventory writedown.................................. -- -- 4,180,847 4,180,847
Changes in operating assets and liabilities..........
Accounts receivable................................ (11,888) (21,008) (19,153) (52,049)
Accounts payable................................... 596,105 1,908 (385,828) 212,185
Accrued expenses................................... 199,222 324,189 702,738 1,226,149
Deferred revenue................................... 607,266 (303,633) (303,633) --
Accrued interest................................... -- 47,895 494,928 542,823
Other assets....................................... (4,000) (8,011) (399,341) (411,352)
----------- ----------- ------------ ------------
Net cash used in operating activities............ (3,402,850) (5,516,227) (8,311,482) (17,230,559)
----------- ----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of intangible assets.......................... (1,250,000) -- -- (1,250,000)
Purchases of property and equipment.................... (307,644) (120,920) (1,004,358) (1,432,922)
----------- ----------- ------------ ------------
Net cash used in investing activities............ (1,557,644) (120,920) (1,004,358) (2,682,922)
----------- ----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations........ -- -- (151,234) (151,234)
Net proceeds from issuances of common stock............ 5,001,000 3,012,500 122,886 8,136,386
Purchases of treasury stock............................ -- -- (40,918) (40,918)
Proceeds from line of credit........................... -- 1,000,000 -- 1,000,000
Proceeds from notes payable to shareholders............ -- 715,000 1,978,951 2,693,951
Proceeds from subordinated line of credit to
shareholder.......................................... -- -- 7,468,971 7,468,971
Proceeds from warrants issued with subordinated line of
credit to shareholder................................ -- -- 2,343,750 2,343,750
Proceeds from (payments on) notes payable to bank...... -- 1,000,000 (1,000,000) --
Loans for issuances of restricted stock................ -- -- (154,418) (154,418)
----------- ----------- ------------ ------------
Net cash provided by financing activities........ 5,001,000 5,727,500 10,567,988 21,296,488
----------- ----------- ------------ ------------
Net increase in cash and cash equivalents........ 40,506 90,353 1,252,148 1,383,007
Cash and cash equivalents at beginning of period....... -- 40,506 130,859 --
----------- ----------- ------------ ------------
Cash and cash equivalents at end of period............. $ 40,506 $ 130,859 $ 1,383,007 $ 1,383,007
=========== =========== ============ ============
Non-cash financing activity:
Conversion of debt to equity......................... $ 3,481,651
============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-6
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
RealMed Corporation (the Company) was incorporated in Indiana on
November 13, 1995. However, the Company did not begin operations until
January 1, 1997. The Company intends to provide a real-time claims resolution
network (the RealMed Network) that links providers, payers, and patients to
fully settle healthcare claims, allowing users to speed check-in, automatically
verify eligibility, verify deductible and co-payment status, adjudicate claims,
update records, confirm payment, and issue explanation of benefits expeditiously
at the point of care. At December 31, 1999, the Company is devoting
substantially all of its efforts to establishing this business.
Effective January 1, 2000, the Company formed RealMed Holding Company
(RMHC), a wholly owned corporation. In addition, the Company and RMHC formed
RealMed, L.P. (L.P.) a limited partnership in which the Company is the general
partner and RMHC is the limited partner. On January 1, 2000, the Company
transferred all of its assets and a portion of its liabilities to L.P. at
historical cost.
The Company's financial statements have been presented on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. In 1997, 1998 and 1999, the
Company's operating activities have required a net use of cash totaling
$3.4 million, $5.5 million and $8.3 million, respectively. During these years,
sufficient capital in the form of debt or equity was available to fund net cash
needs from operations.
During 2000, the Company anticipates cash used in operating activities will
increase substantially with the planned rollout of the RealMed Network. However,
there are no material payments required on existing debt in 2000.
At December 31, 1999, the Company had $8.0 million available on its existing
line of credit. In January 2000, the Company entered into an additional line of
credit with a shareholder for up to $10.0 million subject to certain conditions
(see Note 12). On March 9, 2000, the Company consummated a $1.0 million sale of
its common shares (see Note 12).
The Company anticipates that this available capital will cover a majority of
its cash flow needs for 2000. However, the Company fully expects the need to
raise additional capital to meet its projected expenditures in 2000.
The Company is in the development stage and plans to continue to expand its
operations considerably in the year 2000 with no significant cash inflows from
operations. The Company plans to continue to finance its growth through
additional equity and debt placements. There can be no assurance that the
Company will be able to raise all funding necessary for operating activities in
2000. If the existing committed funds are not sufficient to cover the Company's
planned expenditures and the Company is unable to raise additional capital, then
the Company will reduce discretionary expenditures (such as salary and benefit
costs for planned hires, research and development expenditures, marketing
expenditures and capital expenditures, among others).
F-7
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with a maturity of
three months or less when purchased.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation, including
amortization on capital leases, is computed using the straight-line method over
the estimated useful life of the assets, generally ranging from three to seven
years.
LONG-LIVED ASSETS
The carrying value of the long-lived assets is periodically reviewed by
management. In the event that a condition is identified which may indicate an
impairment exists, an assessment is performed using a variety of methodologies
including cash flow analysis and estimates of sales proceeds. If this review
indicates that the carrying value may be impaired then the impaired amount will
be written off.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
REVENUE RECOGNITION
In 1997, the Company entered into a software licensing agreement and
services contract to provide administrative and data processing services for a
medical savings account provider. During 1997, the Company sold this future
revenue stream and received the full amount of the contract, less a discount.
The Company recognized revenue, net of the related discount, over the life of
the contract as it had a continuing responsibility to meet the servicing
requirements of the contract. The contract terminated effective December 31,
1999.
PAYER INTEGRATION COSTS
Payer integration costs are composed primarily of fees to external
consultants and contractors engaged by the Company to help integrate the RealMed
Network with payers' legacy systems. Payer integration costs are expensed as
incurred because the agreements are terminable by the payer at any time without
penalty.
STOCK OPTIONS
As permitted under Statement of Financial Accounting Standards No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, (FAS 123) the Company accounts for
stock option grants to employees and
F-8
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
directors using the intrinsic value method in accordance with APB Opinion
No. 25 "Accounting for Stock Issued to Employees." Stock option grants to
non-employees are accounted for using the fair value method in accordance with
FAS 123.
RECENTLY ISSUED ACCOUNTING STANDARDS
In 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5
(SOP 98-5), REPORTING ON THE COSTS OF STARTUP ACTIVITIES, which is required to
be adopted for fiscal years beginning after December 15, 1998. SOP 98-5 requires
all start-up costs to be expensed when incurred. The Company has expensed all
start-up costs as incurred, therefore adoption of SOP 98-5 has had no material
impact on the Company's financial condition or results of operations.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME (SFAS 130).
SFAS 130 establishes new rules for the reporting and the display of
comprehensive income and its components. Comprehensive income is the same as net
income as there are no applicable adjustments reported in shareholders' equity
(deficit).
Effective on January 1, 1998, the Company adopted the Statement of Financial
Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION (SFAS 131). SFAS 131 requires public business enterprises to
report information about operating segments in annual financial statements and
requires those enterprises to report selected information about operating
segments in interim financial reports. The adoption of SFAS 131 did not have a
significant effect on the disclosure of segment information as the Company
continues to consider its business activities as a single segment.
Other recently issued Statements of Financial Accounting Standards up
through and including the most recently issued SFAS 137, are not applicable to
the Company.
3. RELATED PARTY TRANSACTIONS
The Company and Eclipse America Corporation are related parties as an
officer and shareholder of the Company is the sole shareholder of Eclipse
America. The existence of substantial related party activities could influence
operating results and financial position of the Company from those that would
have been obtained if the entities were autonomous.
In 1997, the Company purchased certain intellectual property, including
technology representing the core unit of the RealMed System, from Eclipse
America for $1,250,000. This purchase included all existing related revenue
streams and all copyrights. The value of this asset was fully amortized at
December 31, 1999.
During 1997, 1998 and 1999, the Company shared office space and other
expenses with Eclipse America. The Company reimbursed Eclipse America for its
proportionate share of these costs. Such costs include personnel, rent,
utilities, insurance, supplies and any other costs that are utilized. The
Company reimbursed Eclipse America based upon square footage of space utilized
and a ratio of full-time equivalent personnel. During 1997, 1998, and 1999, the
Company's costs related to these arrangements were $840,783, $1,565,152 and
$502,152, respectively.
F-9
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
In June 1998, the Company paid approximately $650,000 to Eclipse America as
a recruiting fee for securing employment of certain Eclipse America employees.
In June 1999, the Company and Eclipse America entered into an agreement
whereby transactions between parties are limited to a lease obligation (see
Note 7), sublease for office space, and compensation for contracted services
provided by employees of Eclipse America.
In June 1999, the Company contracted with a shareholder for the services of
certain individuals to fill senior management roles including the company's
Chief Executive Officer, Senior Vice President--Corporate Business Development,
and Chief Administrative Officer positions. The shareholder is reimbursed
monthly for actual compensation expenses of these individuals related to their
service to the Company. In November 1999, the Company also filled the Senior
Vice President--General Counsel and Vice President of Human Resources positions
through this arrangement. The Company's costs incurred with respect to these
arrangements were $354,234 in 1999.
4. INVENTORY
In 1998, the Company acquired smart card readers (Readers) from a
shareholder. These Readers were acquired to sell or lease to healthcare
providers in connection with utilizing the RealMed Network. As the Company did
not anticipate beginning to sell the inventory until after December 31, 1999,
the inventory was classified as non-current at December 31, 1998. In 1999, the
Company changed its technology strategy and determined that the Readers would
not be used in the RealMed Network. Accordingly, the Company adjusted this
inventory to net realizable value of zero.
5. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS
Property and equipment is comprised of the following at December 31,
<TABLE>
<CAPTION>
1998 1999
-------- ----------
<S> <C> <C>
Computer equipment and software....................... $133,469 $ 219,118
Furniture and fixtures................................ -- 742,331
Office equipment...................................... -- 911,450
In-process............................................ 338,635 367,358
-------- ----------
472,104 2,240,257
Less accumulated depreciation......................... 88,335 328,548
-------- ----------
$383,869 $1,911,709
======== ==========
</TABLE>
Intangible assets consist of the intellectual property and technology
acquired from Eclipse America. Although this technology did not represent its
ultimate intended use, it did provide an alternative function that generated
some revenue for the Company. Therefore, these costs were capitalized and
amortized over their estimated useful life of three years. Accumulated
amortization was $833,334 and $1,250,000 at December 31, 1998 and 1999,
respectively. At December 31, 1999, intangible assets were fully amortized.
F-10
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT
The Company has a $4,285,798 secured note payable with a shareholder which
was entered into in connection with the purchase of the smart card reader
inventory. The note is secured by the smart card reader inventory. The note
bears interest at 12.0% per annum and provides for four quarterly interest only
payments of $144,003 commencing September 15, 2000 and five quarterly principal
and interest payments of $207,663 commencing September 15, 2001, with the
balance due on December 15, 2002.
The subordinated line of credit (Subordinated Note) is between the Company
and one of its shareholders. The maximum borrowing under the Subordinated Note
is $17,500,000 and $9,470,924 was outstanding at December 31, 1999. In
connection with the issuance of the Subordinated Note, the Company granted the
lender conversion rights that in substance are detachable warrants (Warrants)
(see Note 9). The Warrants were valued at $2,343,750 and an equivalent discount
was recorded as a reduction to the Subordinated Note. The discount is being
accreted over the Subordinated Note's four year term. Interest expense includes
$341,797 related to this accretion for 1999. The note provides for interest at
the rate of 8.0% per annum and for full payment of principal and interest upon
the earlier of demand of the lender following the Company's initial public
offering or June 15, 2003. The effective rate considering the 8.0% stated rate
and the warrant accretion approximates 15.0%. The Subordinated Note may be
prepaid in whole or in part at any time without penalty; however, such
prepayment does not in any way affect the lender's ability to exercise its full
conversion option. The Company had $8,029,076 available under the line of credit
at December 31, 1999. Available borrowings are reduced by amounts converted. No
amounts were converted at December 31, 1999.
Notes payable to shareholders at December 31, 1999 includes $150,000 which
bears interest at 4.0% per annum and is payable on demand. The remaining portion
of notes payable to shareholders represents a $19,000 noninterest-bearing
advance which is also payable on demand.
The Company paid none, $23,386 and $48,391 of interest expense in years
ended December 31, 1997, 1998 and 1999, respectively.
7. LEASES
In June 1999, the Company leased certain furniture and fixtures and other
equipment from Eclipse America (the Eclipse lease). The Eclipse lease requires
monthly payments of $16,000 until the earlier of an initial public offering or
March 31, 2003. Included in the monthly lease payment is $9,215 treated as a
capital lease, and $6,785, which is treated as an operating lease. In the event
of an initial public offering, the Company's remaining capital and operating
lease obligations terminate and the leased items become the property of the
Company. At December 31, 1999, property and equipment includes $259,240 for
amounts capitalized, net of accumulated depreciation of $91,590.
In November 1999, the Company acquired certain furniture and fixtures from a
shareholder. The Company made an initial payment of $104,649 with the remaining
amount of $313,946 to be paid under a capital lease with an option to purchase
for a nominal amount at the end of the lease term. At December 31, 1999,
$413,736 net of accumulated depreciation of $4,859 was included in property and
equipment. Monthly payments under the capital lease are $8,808 from
December 1999 through May 31, 2003.
F-11
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. LEASES (CONTINUED)
Future minimum lease payments for the capital leases at December 31, 1999
are as follows:
<TABLE>
<S> <C>
2000........................................................ $216,276
2001........................................................ 216,276
2002........................................................ 216,276
2003........................................................ 71,685
--------
Total future minimum lease payments......................... 720,513
Less amount representing interest........................... 102,322
--------
Present value of future minimum lease payments.............. 618,191
Less current portion........................................ 166,159
--------
$452,032
========
</TABLE>
In August 1999, the Company entered into an operating lease for its primary
office space commencing November 1, 1999. In November 1999, this lease was
amended to include additional office space that the Company expects to occupy
beginning April 1, 2000. The monthly lease payments for the original space are
$27,679 commencing on November 1, 1999. Monthly lease payments of $21,884 for
the additional office space commence on the expected occupation date. The
amended lease terminates on October 31, 2009 and provides for lease payment
increases beginning in November 2006 based on a published price index. In
addition, the Company leases office equipment under operating leases with
varying terms.
The Company also leases office space under an operating sublease with
Eclipse America, which expires April 2000. Monthly payments under the sublease
are $14,400.
The following table presents the future minimum lease payments under
operating leases:
<TABLE>
<S> <C>
2000........................................................ $ 698,012
2001........................................................ 684,180
2002........................................................ 680,178
2003........................................................ 615,111
2004........................................................ 594,756
Thereafter.................................................. 2,874,654
----------
Total....................................................... $6,146,891
==========
</TABLE>
Expense recorded under operating leases was $16,904, $66,568, and $338,490
for 1997, 1998, and 1999, respectively.
8. INCOME TAXES
The Company terminated its S corporation status on August 21, 1997. There
was no material impact on the financial statements as the Company placed a full
valuation allowance on its deferred tax assets on the S corporation termination
date. The valuation allowance as of the S corporation termination date was not
material.
F-12
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
At December 31, 1999, the Company had net operating loss carryforwards
available of approximately $22,000,000 to offset future federal taxable income.
The carryforward will begin to expire in 2018. Due to the uncertainty of the
realization of the benefits of its favorable tax attributes in the future, the
Company has established a valuation allowance against its deferred tax assets as
of December 31, 1998 and 1999.
Significant components of the Company's net deferred taxes at December 31
are as follows:
<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
Net operating loss.................................. $2,256,000 $ 8,415,000
Intangibles......................................... 668,000 849,000
Stock options....................................... 283,000 395,000
Current liabilities................................. 522,000 660,000
Other............................................... (29,000) (193,000)
Valuation allowance................................. (3,700,000) (10,126,000)
---------- -----------
$ -- $ --
========== ===========
</TABLE>
The Company did not record any current or deferred federal or state income
tax provision or benefit for any of the periods presented due to experiencing
operating losses since inception.
9. SHAREHOLDERS' EQUITY (DEFICIT)
STOCK SPLIT
The Company declared a 4 for 1 stock split effective May 1, 1998.
Accordingly, all references in the financial statements related to share
amounts, including information concerning stock option plans, have been adjusted
retroactively to reflect the stock split.
EQUITY TRANSACTIONS
In 1998, the Company awarded certain officers 1,321,532 unrestricted shares
for employment services. The shares were deemed to have a value of $964,718 at
the date of the award and were expensed upon issuance.
In 1999, the Company issued 35,539 shares to a consultant in exchange for
services received. The shares were deemed to have a value of $37,671 and were
expensed upon issuance. The Company also issued 1,375,000 shares to a
shareholder as a loan commitment fee. These shares were deemed to have a value
of $1,292,500, which was expensed as interest upon issuance. These amounts are
reflected as issuances of stock in the Statements of Shareholders' Equity
(Deficit).
Certain debt of the Company of $3,481,651, including $61,651 of accrued
interest was converted to common shares in 1999. The accrued interest is
reflected as stock based expense in the Statements of Cash Flows.
F-13
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
RESTRICTED SHARES
In August 1999, the Company issued 375,000 restricted shares to certain
officers with a fair market value of $336,000. In November 1999, the Company
issued 150,000 restricted shares to certain directors of the Company at a fair
market value of $225,000. All restricted share grants were recorded at a fair
market value based on the price of the Company's stock at the date of issuance
and vest ratably over a three-year period. The weighted average fair value of
restricted share grants made during 1999 was $1.069 per share. The Company is
amortizing the issuance values to compensation expense over the vesting period.
Expense recognized during 1999 was $68,500.
SHAREHOLDER NOTES RECEIVABLES
In connection with its issuance of restricted stock, the Company issued
notes receivable to certain key employees. The notes are collateralized by the
underlying stock and are due December 31, 2004. The notes bear interest at a
rate of 6.2% per annum, payable at maturity.
STOCK OPTION PLANS
The Company has two employee stock option plans, the 1997 Employee Stock
Option and Incentive Plan (1997 Plan) and the 1999 Employee Stock Option and
Incentive Plan (1999 Plan) (collectively, the Plans) for which 12,000,000 and
10,000,000 common shares are authorized and reserved, respectively. The
Company's Board of Directors has eliminated the issuance of any further options
under the 1997 Plan. The Plans are available to key employees, officers,
directors and certain nonemployee affiliates as determined by the Board of
Directors. Options issued under the 1997 Plan generally vest 25% after one year
and then 1.5625% each month thereafter such that the options are 100% vested at
the end of five years. The 1999 Plan options vest over either a four or five
year period. All option grants have a ten-year life.
Options issued under the Company's 1997 Plan have an exercise price of $.125
per share. The Company has determined that the fair value of these shares at
various grant dates ranged from $.73 to $.94 per share. The Company expenses the
difference between the exercise price and the fair value of the shares of
employee options over the vesting period. The exercise price of the Company's
employee stock options issued under the 1999 Plan equaled the estimated fair
market value of the stock on the dates of grant, no compensation expense has
been recognized. The fair value of options issued to non-employees was expensed
in full on the date of grant. Effective July 1, 1999, all employees elected to
forfeit their existing options under the 1997 Plan and receive a like amount of
options under the 1999 Plan at an exercise price of $.896 per share (the
estimated fair value at July 1, 1999) with vesting provisions comparable to that
of the 1997 Plan.
F-14
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
A summary of the Company's stock option activity, and related information
for the period from inception of the Plans through December 31, 1999 is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1998 1999
-------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- -------- ---------- --------
<S> <C> <C> <C> <C>
Options outstanding, beginning of
period............................. -- $ -- 3,406,574 $.125
Options granted...................... 3,477,526 .125 6,074,389 .941
Options exercised.................... (23,125) .125 (371,087) .333
Options cancelled.................... (47,827) .125 (2,703,772) .229
--------- ----- ---------- -----
Options outstanding, end of period... 3,406,574 $.125 6,406,104 $.842
========= ===== ========== =====
Options available for grant at end of
period............................. 8,570,301 3,765,611
Weighted average fair value of
options granted during the
period............................. $ .75 $ .27
</TABLE>
Options available for grant includes the impact of restricted shares issued
under the Company's stock option plan.
The following table summarizes information about the options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------- -------------------------
NUMBER WEIGHTED
OUTSTANDING AVERAGE WEIGHTED NUMBER WEIGHTED
AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICE 1999 LIFE PRICE 1999 PRICE
- -------- ------------ ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$ .125 796,715 8.24 $ .125 786,293 $ .125
$ .896 5,306,389 9.55 $ .896 565,619 $ .896
$1.500 184,000 9.83 $1.500 -- $1.500
$2.250 119,000 9.92 $2.250 -- $2.250
</TABLE>
Pro forma information regarding net income is required by FAS 123, which
also requires that the information be determined as if the Company has accounted
for its employee stock options granted under the fair value method of that
Statement. The fair value of these options was estimated at the date of grant
using the minimum value pricing model with the following weighted average
assumptions: risk-free interest rate of 5.0%, a dividend yield of 0%, and a
weighted average expected life of 7.5 years. Because the Company's employee
stock options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
F-15
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 13,
1995
(DATE OF INCEPTION)
THROUGH
YEAR ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, 1998 DECEMBER 31, 1999 1999
----------------- ----------------- -------------------
<S> <C> <C> <C>
Pro forma net loss........... $7,768,409 $14,668,701 $27,658,514
========== =========== ===========
</TABLE>
Because the Company's options vest over a 5-year period, the pro forma
effect of FAS 123 will not be fully reflected until future years.
WARRANTS
On June 15, 1999 in connection with the issuance of the $17.5 million
Subordinated Note, the Company issued conversion rights which in substance are
Warrants for 19,531,250 common shares at an exercise price of $.896 per share.
The Warrants had a fair value of $2,343,750, vested immediately, and convert
upon the option of the holder anytime in increments of $3.5 million on or prior
to June 15, 2005. The holder is able to utilize amounts the Company has
outstanding under the Subordinated Note to offset amounts required to exercise
the Warrants.
10. 401(K) PLAN
Effective January 1, 2000, the Company entered into a defined contribution
(401(k) Plan). Under the 401(k) Plan, there is no minimum participation age,
eligibility is immediate, and the Company will match 50% of employees'
contributions up to 6% of their salary.
11. NET LOSS PER COMMON SHARE
Basic and diluted net loss per common share are presented in conformity with
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE,
(FAS 128) from inception and for each of the three years in the period ended
December 31, 1999.
Diluted loss per share is calculated based on the weighted-average number of
outstanding common shares plus the effect of dilutive potential common shares.
The Company's calculation of diluted net loss per share excludes potential
common shares, as the effect would be anti-dilutive. Potential common shares are
composed of common shares issuable upon the exercise of stock options and
warrants.
12. SUBSEQUENT EVENTS
In January 2000, the Company entered into an additional line of credit with
a shareholder for $10,000,000. The line of credit requires the Company to obtain
signed letters of understanding from qualified payers in order for funds to be
made available. For each signed letter of understanding from a qualified payer,
$2,500,000 is made available to the Company. At March 15, 2000 the Company had
obtained the required letters of understanding with qualified payers to fully
draw upon the $10,000,000 available under this line of credit. The Company must
meet certain conditions to draw on the line of
F-16
<PAGE>
REALMED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. SUBSEQUENT EVENTS (CONTINUED)
credit. The line bears an interest rate of 15.0% payable quarterly, an unused
commitment fee of 2.0% and a fee payable upon completion of an initial public
offering of the Company's common shares at 0.5% of the Company's total valuation
payable in cash or stock at the lender's option. This line is due upon the
earlier of the Company's initial public offering or December 31, 2002.
On February 28, 2000 the Company amended its Articles of Incorporation and
Bylaws to contain provisions that may deter an attempt to change or gain control
of the Company. These provisions include:
- the existence of blank check preferred stock;
- staggered terms for directors;
- restrictions on the ability to change the number of directors;
- restrictions on the ability to remove a director;
- fair price provisions; and
- supermajority voting requirements.
The Board adopted a Rights Agreement, which is generally designed to deter
coercive takeover tactics and to encourage all persons interested in potentially
acquiring control of the Company to negotiate with the board of directors. Under
the Rights Agreement, the board has declared a dividend distribution of one
right for each outstanding common share. A right will attach to each common
share issued. Each right entitles the holder to purchase from the Company one
common share at a determined price per share (subject to adjustment to prevent
dilution). Initially, the rights will not be exercisable. The rights become
exercisable 10 days following a public announcement that a person or group of
affiliated or associated persons (a RealMed Acquiring Person) has acquired
beneficial ownership of 15% or more of the outstanding common shares (or a 10%
acquiror who is determined by the board to be an adverse person), or 10 days
following the announcement of an intention to make a tender offer or exchange
offer the consummation of which would result in any person or group becoming a
RealMed Acquiring Person. Two of the Company's largest shareholders who already
own greater than 15% of outstanding shares, are excluded from the definition of
RealMed Acquiring Person under the Rights Agreement. Therefore, transactions
with those shareholders would not trigger the exercisability of the Rights. The
Rights Agreement expires May 2010.
In March 2000 the Company authorized 50,000,000 preferred shares and
increased its authorized common shares to 450,000,000.
On March 9, 2000 the Company received $1,000,000 from the issuance of
307,690 shares at $3.25 per share.
13. SUBSEQUENT INVESTMENTS--UNAUDITED
From March 16, 2000 to April 2000, the Company completed the sale of
additional common shares for approximately $6,500,000.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 2000
[LOGO]
COMMON SHARES
-------------------
PROSPECTUS
-----------------
DONALDSON, LUFKIN & JENRETTE
J.P. MORGAN & CO.
SG COWEN
WILLIAM BLAIR & COMPANY
DLJDIRECT INC.
- -------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of RealMed have
not changed since the date hereof.
- --------------------------------------------------------------------------------
Until , 2000 (25 days after the date of this prospectus) all dealers
that effect transactions in these securities may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as an underwriter in this offering or when selling
previously unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the actual or estimated expenses, other than the
underwriting discounts and commissions and the placement agent's fee, payable by
us in connection with the issuance and distribution of the shares being
registered. All of the amounts shown are estimates except for the Commission
registration fee, the NASD filing fee and the Nasdaq Application Fee:
<TABLE>
<S> <C>
Registration Fee............................................ $15,840.00
Printing of Registration Statement and Prospectus........... *
Accounting Fees and Expenses................................ *
Legal Fees.................................................. *
Transfer Agent Fees and Expenses............................ *
NASD Filing Fees............................................ *
Nasdaq Application Fee...................................... *
Blue Sky Fees and Expenses.................................. *
Miscellaneous............................................... *
----------
Total................................................. $ *
==========
</TABLE>
- ------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles and Bylaws provide that we will indemnify any individual who is
or was a director or officer of RealMed, or is or was serving at our request as
a director, officer, partner or trustee of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise whether or not for profit, against liability and expenses, including
attorneys fees, incurred by him in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, and whether formal or
informal, in which he is made or threatened to be made a party by reason of
being or having been in any such capacity, or arising out of his status as such,
except (i) in the case of any action, suit, or proceeding terminated by
judgment, order, or conviction, in relation to matters as to which he is
adjudged to have breached or failed to perform the duties of his office and the
breach or failure to perform constituted willful misconduct or recklessness; and
(ii) in any other situation, in relation to matters as to which it is found by a
majority of a committee composed of all directors not involved in the matter in
controversy (whether or not a quorum) that the person breached or failed to
perform the duties of his office and the breach or failure to perform
constituted willful misconduct or recklessness. We pay for or reimburse
reasonable expenses incurred by a director or officer in defending any action,
suit, or proceeding in advance of the final disposition thereof upon receipt of
(i) a written affirmation of the director's or officer's good faith belief that
such director or officer has met the standard of conduct prescribed by Indiana
law; and (ii) an undertaking of the director or officer to repay the amount paid
by us if it is ultimately determined that the director or officer is not
entitled to indemnification by us.
Our Articles and Bylaws provide that the indemnification rights described
above are in addition any other indemnification rights a person may have by law.
Section 23-1-37 et seq. of the Indiana Business Corporations Act (the "Act")
provides for "mandatory indemnification," unless limited by the articles, by a
corporation against reasonable expenses incurred by a director who is wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which the director was a party by reason of the director being or having been a
II-1
<PAGE>
director of the corporation. Section 23-1-37-10 of the Act states that a
corporation may, in advance of the final disposition of a proceeding, reimburse
reasonable expenses incurred by a director who is a party to a proceeding if the
director furnishes the corporation with a written affirmation of the director's
good faith belief that the director acted in good faith and reasonably believed
the actions were in the best interest of the corporation if the proceeding is a
civil proceeding. If the proceeding is criminal, the director must furnish a
written affirmation that the director had reasonable cause to believe he or she
was acting lawfully or the director or officer had no reason to believe the
action was unlawful. The director will repay the advance if it is ultimately
determined that such director did not meet the standard of conduct required by
the Act and that those making the decision to reimburse the director determine
that the facts then known would not preclude indemnification under the Act.
The Act permits a corporation to grant indemnification rights in addition to
those provided by statute, limited only by the fiduciary duties of the directors
approving the indemnification and public policies of the State of Indiana.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information is provided with respect to all sales of
securities by RealMed which were not registered under the Securities Act
pursuant to an exemption, within the past three years:
- SALES IN 1997. In January 1997, we sold 18,828,228 shares of stock to two
of our directors for aggregate consideration of $1,000. In April 1997, we
sold 3,357,003 shares to $.82 per share to an accredited investor, but the
shares were not issued until in 1998. In August 1997, we issued 3,200,000
shares to an accredited investor for $.94 per share. In October 1997, we
sold 285,258 shares to an accredited investor for $.88 per share. All of
our sales in 1997 were made in reliance on the exemption provided in Rule
506.
- SALES IN 1998. We sold 1,711,567 shares to an accredited investor for $.88
per share in January 1998. From June through October of 1998, we sold a
total of 1,590,667 shares to an accredited investor for $.94 per share.
All of our sales in 1998 were made in reliance on the exemption provided
in Rule 506.
- SALES IN 1999. In January 1999, we issued 35,439 shares as payment for
consulting services to two related entities who were accredited investors
for $1.06 per share. From April through June 1999, we issued 4,002,750 at
$.94 per share to several accredited investors. We issued 1,060,455 shares
for repayment of a $1,000,000 loan to an accredited investor. We also
issued 212,766 shares to accredited investors upon their exercise of
warrants at $.94 per share. In June, we sold 100 shares to an accredited
investor at $.90 per share. At various dates in 1999, we issued a total of
295,729 common shares to employees upon the exercise of stock options at
$.125 per share. In September 1999, we issued 100,000 shares to Sommer &
Barnard, P.C. upon the exercise of stock options at $.896 per share. Our
sales on exercise of stock options in 1999 were made in reliance on Rule
701. All of our other sales in 1999 were made in reliance on Rule 506.
- SALES IN 2000. We sold 307,690 common shares to Gazelle TechVentures Fund,
L.P. in March, 2000 for $3.25 per share. In March 2000, we sold 7,142
common shares to an accredited investor for $3.50 per share. In April
2000, we completed the sale of approximately $6.5 million of our common
shares for $3.50 per share to two accredited institutional investors,
including a general partnership comprising 27 accredited investors. At
various dates during 2000, we issued 2,547 common shares at $.125 per
share and 2,000 common shares at $.896 per share upon the exercise of
stock options. Our sales on exercise of stock options in 2000 were made in
reliance on Rule 701. All of our other sales in 2000 were made in reliance
on Rule 506.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration Statement
or incorporated by reference herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
1. Form of Underwriting Agreement among Registrant, Donaldson,
Lufkin & Jenrette Securities Corporation, J.P. Morgan
Securities Inc., SG Cowen Securities Corporation, William
Blair & Company, L.L.C. and DLJDIRECT Inc.
3.01 The Registrant's Amended and Restated Articles of
Incorporation.
3.02 The Registrant's Code of Bylaws.
4.01 The Loan Agreement between the Registrant and Newcourt
Financial USA Inc., dated June 15, 1999.
4.02 The Registration Rights Agreement between the Registrant and
Robert B. Peterson, Mark A. Morris, JLT, L.P., GemPlus SA,
GemPlus Corp., West Plains Investment, Inc., Finno SCA,
Candel & Partners, Allan Green and Newcourt Financial USA
Inc., dated June 15, 1999.
4.03 The Shareholder Agreement between the Registrant and Robert
B. Peterson, Mark A. Morris, JLT, L.P., GemPlus SA, GemPlus
Corp., West Plains Investment, Inc., Finno SCA, Candel &
Partners, Allan Green, Rollin Dick and Newcourt Financial
USA Inc., dated June 15, 1999.
4.04 The Release and Termination Agreement between the Registrant
and Robert B. Peterson, Mark A. Morris, JLT, L.P., GemPlus
SA, GemPlus Corp., West Plains Investment, Inc., Finno SCA,
Candel & Partners, Allan Green, Rollin Dick and Newcourt
Financial USA, Inc., dated June 15, 1999.
4.05 The Recapitalization Confirmation Agreement between the
Registrant and Robert B. Peterson, Mark A. Morris, JLT,
L.P., GemPlus SA, GemPlus Corp., West Plains Investment,
Inc., Jefferson Consulting Group, LLC, Jefferson Government
Relations, Inc., Finno SCA, Candel & Partners, Allan Green,
Daniel Perrin, Steven Beck, Dominque Trempont, Joseph
Wright, Robert J. Thompson, Jack F. Kemp, Herbie Pearthree
and Newcourt Financial USA, Inc., dated June 15, 1999.
4.06 The Security Agreement between the Registrant and GemPlus
Corp., dated June 15, 1999.
4.07 The Rights Plan dated , 2000.*
4.08 The Voting Agreement between the Registrant and Robert J.
Hicks, Mark A. Morris, Robert B. Peterson, GemPlus SA, and
The CIT Group, Inc. dated April , 2000.*
5.01 Form of Opinion of Sommer & Barnard, PC as to Legality of
Shares.
10.01 The Registrant's 1997 Stock Option and Incentive Plan.
10.02 The Registrant's 1999 Stock Option and Incentive Plan.
10.03 The Registrant's 2000 Stock Option and Incentive Plan.*
10.04 The Employment Agreement between the Registrant and Robert
J. Hicks dated June 15, 1999.
10.05 The Amended Employment Agreement between the Registrant and
Robert J. Hicks dated .*
10.06 The Employment Agreement between the Registrant and Gary P.
Hutchcraft dated July 31, 1999.
10.07 The Amended Employment Agreement between the Registrant and
Gary P. Hutchcraft dated .*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
10.08 The Employment Agreement between the Registrant and Timothy
P. Bird dated October 1, 1999.
10.09 The Amended Employment Agreement between the Registrant and
Timothy P. Bird dated .*
10.10 The Employment Agreement between the Registrant and Keith M.
Given dated June 15, 1999.
10.11 The Amended Employment Agreement between the Registrant and
Keith M. Given dated .*
10.12 The Employment Agreement between the Registrant and Scott
Herbst dated July 31, 1999.
10.13 The Amended Employment Agreement between the Registrant and
Scott Herbst dated .*
10.14 The Eclipse/RealMed Agreement dated June 15, 1999.
10.15 Office Lease Agreement, as amended, between the Registrant
and Duke-weeks Realty.*
10.16 The Stock Option Agreement between the Registrant and
Robert J. Hicks dated June 15, 1999.*
10.17 The Stock Option Agreement between the Registrant and
Gary P. Hutchcraft dated July 31, 1999.*
10.18 The Stock Option Agreement between the Registrant and
Timothy P. Bird dated October 1, 1999.*
10.19 The Stock Option Agreement between the Registrant and Keith
Given dated June 15, 1999.*
10.20 The Stock Option Agreement between the Registrant and
Scott E. Herbst dated July 31, 1999.*
10.21 The Restricted Stock Agreement between the Registrant and
Robert J. Hicks dated June 15, 1999.*
10.22 The Restricted Stock Agreement between the Registrant and
Keith Given dated June 15, 1999.*
10.23 The Restricted Stock Agreement between the Registrant and
Regina E. Herzlinger dated November 15, 1999.*
10.24 The Restricted Stock Agreement between the Registrant and
Dr. Ralph Snyderman dated November 15, 1999.*
10.25 The Restricted Stock Agreement between the Registrant and
Randall L. Tobias dated November 15, 1999.*
23.01 Consent of Sommer & Barnard (included in Exhibit 5.01).
23.02 Consent of Ernst & Young LLP.
24.01 Power of Attorney (included on signature page of
registration statement).
27.01 Financial data schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as require by
the underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions described under Item 17, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy expressed in the Securities Act,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Indianapolis, State of
Indiana, on the day of April 6, 2000.
<TABLE>
<S> <C> <C>
REALMED CORPORATION
By: /s/ ROBERT J. HICKS
-----------------------------------------
Robert J. Hicks
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert J. Hicks and Gary P. Hutchcraft and each
of them, his or her true and lawful attorney-in-fact and agent with full power
of substitution for him or her in his or her name, place and stead, in any and
all capacities to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto and other documents in connection therewith, including
any Registration Statement filed pursuant to Rule 462(b) under the Securities
Act of 1933, with the Securities and Exchange Commission, grants unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully as to all intents and purposes as he or she might or could do
in person, and hereby ratifies and confirms all that said attorneys-in-fact and
agents or their or his or her substitute or substitutes may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on April 6, 2000 by the following persons
in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ ROBERT J. HICKS Chairman of the Board, Chief
------------------------------------------- Executive Officer (PRINCIPAL
Robert J. Hicks EXECUTIVE OFFICER)
/s/ GARY P. HUTCHCRAFT Chief Financial Officer
------------------------------------------- (PRINCIPAL FINANCIAL AND
Gary P. Hutchcraft ACCOUNTING OFFICER)
/s/ ROBERT B. PETERSON President, Director
-------------------------------------------
Robert B. Peterson
/s/ MARK A. MORRIS Vice Chairman of the Board,
------------------------------------------- Director
Mark A. Morris
/s/ REGINA E. HERZLINGER Director
-------------------------------------------
Regina E. Herzlinger
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ JACK F. KEMP Director
-------------------------------------------
Jack F. Kemp
/s/ BRUNO LASSUS, M.D. Director
-------------------------------------------
Bruno Lassus, M.D.
/s/ BRADLEY D. NULLMEYER Director
-------------------------------------------
Bradley D. Nullmeyer
/s/ RALPH SNYDERMAN, M.D. Director
-------------------------------------------
Ralph Snyderman, M.D.
/s/ ROBERT J. THOMPSON Director
-------------------------------------------
Robert J. Thompson
/s/ RANDALL L. TOBIAS Director
-------------------------------------------
Randall L. Tobias
/s/ JOSEPH R. WRIGHT, JR. Director
-------------------------------------------
Joseph R. Wright, Jr.
</TABLE>
II-7
<PAGE>
EXHIBIT LIST
<TABLE>
<C> <S>
1. Form of Underwriting Agreement among Registrant, Donaldson,
Lufkin & Jenrette Securities Corporation, J.P. Morgan
Securities Inc., SG Cowen Securities Corporation, William
Blair & Company, L.L.C. and DLJDIRECT Inc.
3.01 The Registrant's Amended and Restated Articles of
Incorporation.
3.02 The Registrant's Code of Bylaws.
4.01 The Loan Agreement between the Registrant and Newcourt
Financial USA, Inc., dated June 15, 1999.
4.02 The Registration Rights Agreement between the Registrant and
Robert B. Peterson, Mark A. Morris, JLT, L.P., GemPlus SA,
GemPlus Corp., West Plains Investment, Inc., Finno SCA,
Candel & Partners, Allan Green and Newcourt Financial USA,
Inc., dated June 15, 1999.
4.03 The Shareholder Agreement between the Registrant and Robert
B. Peterson, Mark A. Morris, JLT, L.P., GemPlus SA, GemPlus
Corp., West Plains Investment, Inc., Finno SCA, Candel &
Partners, Allan Green, Rollin Dick and Newcourt Financial
USA Inc., dated June 15, 1999.
4.04 The Release and Termination Agreement between the Registrant
and Robert B. Peterson, Mark A. Morris, JLT, L.P., GemPlus
SA, GemPlus Corp., West Plains Investment, Inc., Finno SCA,
Candel & Partners, Allan Green, Rollin Dick and Newcourt
Financial USA Inc., dated June 15, 1999
4.05 The Recapitalization Agreement between the Registrant and
Robert B. Peterson, Mark A. Morris, JLT, L.P., GemPlus SA,
GemPlus Corp., West Plains Investment, Inc., Jefferson
Consulting Group, LLC, Jefferson Government Relations, Inc.,
Finno SCA, Candel & Partners, Allan Green, Daniel Perrin,
Steven Beck, Dominque Trempont, Joseph Wright, Robert J.
Thompson, Jack F. Kemp, Herbie Pearthree and Newcourt
Financial USA Inc., dated June 15, 1999.
4.06 The Security Agreement between the Registrant and GemPlus
Corp., dated June 15, 1999.
4.07 The Rights Plan dated , 2000.*
4.08 The Voting Agreement between the Registrant and Robert J.
Hicks, Mark A. Morris, Robert B. Peterson, GemPlus SA, and
The CIT Group, Inc. dated April , 2000.*
5.01 Form of Opinion of Sommer & Barnard, PC as to Legality of
Shares.
10.01 The Registrant's 1997 Stock Option and Incentive Plan.
10.02 The Registrant's 1999 Stock Option and Incentive Plan.
10.03 The Registrant's 2000 Stock Option and Incentive Plan.*
10.04 The Employment Agreement between the Registrant and
Robert J. Hicks dated June 15, 1999.
10.05 The Amended Employment Agreement between the Registrant and
Robert J. Hicks dated .*
10.06 The Employment Agreement between the Registrant and Gary P.
Hutchcraft dated July 31, 1999.
10.07 The Amended Employment Agreement between the Registrant and
Gary P. Hutchcraft dated .*
10.08 The Employment Agreement between the Registrant and
Timothy P. Bird dated October 1, 1999.
10.09 The Amended Employment Agreement between the Registrant and
Timothy P. Bird dated .*
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.10 The Employment Agreement between the Registrant and Keith
Given dated June 15, 1999.
10.11 The Amended Employment Agreement between the Registrant and
Keith Given dated .*
10.12 The Employment Agreement between the Registrant and Scott
Herbst dated July 31, 1999.
10.13 The Amended Employment Agreement between the Registrant and
Scott Herbst dated .*
10.14 The Eclipse/RealMed Agreement dated June 15, 1999.
10.15 Office Lease Agreement, as amended, between the Registrant
and Duke-weeks Realty.*
10.16 The Stock Option Agreement between the Registrant and
Robert J. Hicks dated June 15, 1999.*
10.17 The Stock Option Agreement between the Registrant and
Gary P. Hutchcraft dated July 31, 1999.*
10.18 The Stock Option Agreement between the Registrant and
Timothy P. Bird dated October 1, 1999.*
10.19 The Stock Option Agreement between the Registrant and Keith
Given dated June 15, 1999.*
10.20 The Stock Option Agreement between the Registrant and
Scott E. Herbst dated July 31, 1999.*
10.21 The Restricted Stock Agreement between the Registrant and
Robert J. Hicks dated June 15, 1999.*
10.22 The Restricted Stock Agreement between the Registrant and
Keith Given dated June 15, 1999.*
10.23 The Restricted Stock Agreement between the Registrant and
Regina E. Herzlinger dated November 15, 1999.*
10.24 The Restricted Stock Agreement between the Registrant and
Dr. Ralph Snyderman dated November 15, 1999.*
10.25 The Restricted Stock Agreement between the Registrant and
Randall L. Tobias dated November 15, 1999.*
23.01 Consent of Sommer & Barnard (included in Exhibit 5.01).
23.02 Consent of Ernst & Young, LLP.
24.01 Power of Attorney (included on signature page of
registration statement).
27.01 Financial data schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
Exhibit 1.1
__________ Shares
REALMED CORPORATION
Common Stock
UNDERWRITING AGREEMENT
_________, 2000
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.
SG COWEN SECURITIES CORPORATION
WILLIAM BLAIR & COMPANY, L.L.C.
DLJdirect INC.
As representatives of the several Underwriters
named in Schedule I hereto c/o
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
RealMed Corporation, an Indiana corporation (the "COMPANY"), proposes
to issue and sell _______________ shares of its common stock, no par value per
share (the "FIRM SHARES") to the several underwriters named in Schedule I hereto
(the "UNDERWRITERS"). The Company also proposes to issue and sell to the several
Underwriters not more than an additional _______ shares of its common stock, no
par value per share (the "ADDITIONAL SHARES"), if requested by the Underwriters
as provided in Section 2 hereof. The Firm Shares and the Additional Shares are
hereinafter referred to collectively as the "SHARES". The shares of common stock
of the Company to be outstanding after giving effect to the sales contemplated
hereby and in the Concurrent Offering (as defined below) are hereinafter
referred to as the "COMMON STOCK".
It is understood and agreed by the parties hereto that pursuant to the
terms of a placement agency agreement, the Company proposes to issue, offer and
sell ______ shares of its common stock, no par value per share (the "CONCURRENT
SHARES"), in a separate concurrent offering (the "CONCURRENT OFFERING") in the
United States registered with the Commission (as defined below) under the Act
(as defined below). The parties hereto agree that the Underwriters have no
obligation to the Company with respect to the Concurrent Shares or the
Concurrent Offering and
<PAGE>
that other than as specifically set forth herein, the Company has no obligation
to the Underwriters with respect to the Concurrent Shares or the Concurrent
Offering.
SECTION 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "ACT"), a registration statement on Form S-1, including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A under the Act, is hereinafter referred to as the "REGISTRATION STATEMENT";
and the prospectus in the form first used to confirm sales of Shares is
hereinafter referred to as the "PROSPECTUS". If the Company has filed or is
required pursuant to the terms hereof to file a registration statement pursuant
to Rule 462(b) under the Act registering additional shares of Common Stock (a
"RULE 462(b) REGISTRATION STATEMENT"), then, unless otherwise specified, any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462(b) Registration Statement. The Company agrees that the Shares
issued in the Concurrent Offering will be sold at the initial public offering
price listed on the cover page of the Prospectus.
SECTION 2. AGREEMENTS TO SELL AND PURCHASE AND LOCK-UP AGREEMENTS. On
the basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per Share of $______ (the "PURCHASE PRICE") the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to _______ Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Shares. The Underwriters may exercise their right to purchase Additional
Shares in whole or in part from time to time by giving written notice thereof to
the Company within 30 days after the date of this Agreement. You shall give any
such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof, which date shall be a business
day (i) no earlier than two business days after such notice has been given (and,
in any event, no earlier than the Closing Date (as hereinafter defined)) and
(ii) no later than ten business days after such notice has been given. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares to be purchased from the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I bears to the total number of
Firm Shares.
2
<PAGE>
The Company hereby agrees not to (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers all or a portion of
the economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 180 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company may grant stock options
pursuant to the Company's existing stock option plan and (ii) the Company may
issue shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof. The Company also agrees
not to file any registration statement with respect to any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock for a period of 180 days after the date of the Prospectus without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. The Company shall, prior to or concurrently with the execution of
this Agreement, deliver an agreement executed by (i) each of the directors and
officers of the Company and (ii) each stockholder listed on Annex I hereto to
the effect that such person will not, during the period commencing on the date
such person signs such agreement and ending ___ days after the date of the
Prospectus, without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation, (A) engage in any of the transactions described in the
first sentence of this paragraph or (B) make any demand for, or exercise any
right with respect to, the registration of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock.
As part of the offering contemplated by this Agreement, [Donaldson,
Lufkin & Jenrette Securities Corporation] has agreed to reserve out of the
shares set forth opposite its name on Schedule I to this Agreement, up to _____
shares for sale to the Company's employees, officers, and directors and other
parties associated with the Company (collectively, "PARTICIPANTS") (the
"DIRECTED SHARE PROGRAM"), and subject to the terms of this Agreement, the
applicable rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. (the "NASD") and all other applicable laws, rules and
regulations. The Shares to be sold by [Donaldson, Lufkin & Jenrette Securities
Corporation] pursuant to the Directed Share Program (the "DIRECTED SHARES") will
be sold by [Donaldson, Lufkin & Jenrette Securities Corporation] pursuant to
this Agreement at the public offering price. The Company agrees that it will not
direct [Donaldson, Lufkin & Jenrette Securities Corporation] to offer or sell
any Directed Shares to Participants located in or otherwise subject to the
securities laws of any jurisdiction other than the United States. Any Directed
Shares not orally confirmed for purchase by any Participants by the end of the
business day on which this Agreement is executed will be offered to the public
by [Donaldson, Lufkin & Jenrette Securities Corporation] as set forth in the
Prospectus.
SECTION 3. TERMS OF PUBLIC OFFERING. The Company is advised by you that
the
3
<PAGE>
Underwriters propose (i) to make a public offering of their respective portions
of the Shares as soon after the execution and delivery of this Agreement as in
your judgment is advisable and (ii) initially to offer the Shares upon the terms
set forth in the Prospectus.
SECTION 4. DELIVERY AND PAYMENT. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two business days prior to the Closing Date or the
applicable Option Closing Date (as defined below), as the case may be. The
Company shall deliver the Shares, with any transfer taxes thereon duly paid by
the Company, to Donaldson, Lufkin & Jenrette Securities Corporation through the
facilities of The Depository Trust Company ("DTC"), for the respective accounts
of the several Underwriters, against payment to the Company of the Purchase
Price therefore by wire transfer of Federal or other funds immediately available
in New York City. The certificates representing the Shares shall be made
available for inspection not later than 9:30 A.M., New York City time, on the
business day prior to the Closing Date or the applicable Option Closing Date (as
defined below), as the case may be, at the office of DTC or its designated
custodian (the "DESIGNATED OFFICE"). The time and date of delivery and payment
for the Firm Shares shall be 9:00 A.M., New York City time, on ________, 2000 or
such other time on the same or such other date as Donaldson, Lufkin & Jenrette
Securities Corporation and the Company shall agree in writing. The time and date
of delivery and payment for the Firm Shares are hereinafter referred to as the
"CLOSING DATE". The time and date of delivery and payment for any Additional
Shares to be purchased by the Underwriters shall be 9:00 A.M., New York City
time, on the date specified in the applicable exercise notice given by you
pursuant to Section 2 or such other time on the same or such other date as
Donaldson, Lufkin & Jenrette Securities Corporation and the Company shall agree
in writing. The time and date of delivery and payment for any Additional Shares
are hereinafter referred to as THE "OPTION CLOSING DATE".
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 8 of this Agreement
shall be delivered at the offices of Winston & Strawn, 35 West Wacker Drive,
Chicago, Illinois 60601 and the Shares shall be delivered at the Designated
Office, all on the Closing Date or such Option Closing Date, as the case may be.
SECTION 5. AGREEMENTS OF THE COMPANY. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration
4
<PAGE>
Statement has become effective and (v) of the happening of any event during the
period referred to in Section 5(d) below which makes any statement of a material
fact made in the Registration Statement or the Prospectus untrue or which
requires any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at any
time the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, the Company will use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish to you five signed copies of the Registration Statement
as first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the Commission
within the applicable period specified in Rule 424(b) under the Act; during the
period specified in Section 5(d) below, not to file any further amendment to the
Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or amendment or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or a
dealer, to furnish in New York City to each Underwriter and any dealer as many
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of counsel
for the Underwriters, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the circumstances when
the Prospectus is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Underwriters, it is necessary to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare and file with
the Commission an appropriate amendment or supplement to the Prospectus so that
the statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.
5
<PAGE>
(f) Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; PROVIDED, HOWEVER, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Prospectus, the Registration
Statement, any preliminary prospectus or the offering or sale of the Shares, in
any jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending June
30, 2001 that shall satisfy the provisions of Section 11(a) of the Act, and to
advise you in writing when such statement has been so made available.
(h) During the period of three years after the date of this Agreement,
to furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company [and its subsidiaries] as you may reasonably
request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the registration and delivery of
the Shares under the Act and all other fees and expenses in connection with the
preparation, printing, filing and distribution of the Registration Statement
(including financial statements and exhibits), any preliminary prospectus, the
Prospectus and all amendments and supplements to any of the foregoing, including
the mailing and delivering of copies thereof to the Underwriters and dealers in
the quantities specified herein, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) all costs of printing or producing this
Agreement and any other agreements or documents in connection with the offering,
purchase, sale or delivery of the Shares, (iv) all expenses in connection with
the registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any Preliminary and Supplemental Blue Sky Memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Underwriters in connection with such registration or qualification and
memoranda relating thereto), (v) the filing fees and disbursements of counsel
for the Underwriters in connection with the review and clearance of the offering
of the Shares by the National Association of Securities Dealers, Inc., (vi) all
fees and expenses in connection with the preparation and filing of the
registration statement on Form 8-A
6
<PAGE>
relating to the Common Stock and all costs and expenses incident to the listing
of the Shares on the Nasdaq National Market [and other national securities
exchanges and foreign stock exchanges], (vii) the cost of printing certificates
representing the Shares, (viii) the costs and charges of any transfer agent,
registrar and/or depositary, (ix) the reasonable fees and disbursements of
counsel for the Underwriters incurred in connection with the Directed Share
Program and stamp duties, similar taxes or duties or other taxes, if any,
incurred by the Underwriters in connection with the Directed Share Program, and
(x) all other costs and expenses incident to the performance of the obligations
of the Company hereunder for which provision is not otherwise made in this
Section.
(j) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market and to maintain the listing of the Shares on the Nasdaq
National Market for a period of three years after the date of this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so covered
in compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
(m) In connection with the Directed Share Program, the Company will
ensure that the Directed Shares will be restricted to the extent required by the
NASD or the NASD rules from sale, transfer, assignment, pledge or hypothecation
for a period of three months following the date of the effectiveness of the
Registration Statement. [Donaldson, Lufkin & Jenrette Securities Corporation]
will notify the Company as to which Participants will need to be so restricted.
The Company will direct the removal of such transfer restrictions upon the
expiration of such period of time.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement filed
after the effectiveness of this Agreement will become effective no later than
10:00 P.M., New York City time, on the date of this Agreement; and no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
7
<PAGE>
(b) (i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement), when it became effective, did not contain and, as amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement (other than
any Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement) and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the Act,
(iii) if the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement and any amendments thereto, when they become effective (A) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (B) will comply in all material respects with the Act and (iv)
the Prospectus does not contain and, as amended or supplemented, if applicable,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in the Registration Statement or the Prospectus based
upon information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in any
preliminary prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein.
(d) [Each of] the Company [and its subsidiaries] has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Prospectus and to own,
lease and operate its properties, and [each] is duly qualified and is in good
standing as a foreign corporation authorized to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified would
not have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company [and its subsidiaries, taken
as a whole].
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company [or any of its subsidiaries] relating to or entitling any person to
purchase or otherwise to acquire any shares of
8
<PAGE>
the capital stock of the Company [or any of its subsidiaries], except as
otherwise disclosed in the Registration Statement.
(f) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights; and the Shares have been duly
authorized and, when issued and delivered to the Underwriters against payment
therefor as provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.
[(g) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and are owned by the Company, directly or
indirectly through one or more subsidiaries, free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature.]
[(g) The Company has no subsidiaries.]
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(i) [Neither] the Company [nor any of its subsidiaries] is [not] in
violation of its [respective] charter or by-laws or in default in the
performance of any obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or instrument that
is material to the Company [and its subsidiaries, taken as a whole,] to which
the Company [or any of its subsidiaries] is a party or by which the Company [or
any of its subsidiaries] or [its][their respective] property is bound.
(j) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states), (ii) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or by-laws of the Company [or any of its subsidiaries] or any
indenture, loan agreement, mortgage, lease or other agreement or instrument that
is material to the Company [and its subsidiaries, taken as a whole,] to which
the Company [or any of its subsidiaries] is a party or by which the Company [or
any of its subsidiaries] or [its][their respective] property is bound, (iii)
violate or conflict with any applicable law or any rule, regulation, judgment,
order or decree of any court or any governmental body or agency having
jurisdiction over the Company[, any of its subsidiaries] or [its][their
respective] property or (iv) result in the suspension, termination or revocation
of any Authorization (as defined below) of the Company [or any of its
subsidiaries] or any other impairment of the rights of the holder of any such
Authorization.
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(k) There are no legal or governmental proceedings pending or
threatened to which the Company [or any of its subsidiaries] is or could be a
party or to which any of [its][their respective] property is or could be subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described; nor are there any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not so described or filed as required.
(l) [Neither] the Company [nor any of its subsidiaries] has [not]
violated any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), any
provisions of the Employee Retirement Income Security Act of 1974, as amended,
or any provisions of the Foreign Corrupt Practices Act or the rules and
regulations promulgated thereunder, except for such violations which, singly or
in the aggregate, would not have a material adverse effect on the business,
prospects, financial condition or results of operation of the Company [and its
subsidiaries, taken as a whole].
(m) [Each of] the Company [and its subsidiaries] has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "AUTHORIZATION") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate [its]
[their respective] properties and to conduct [its][their respective] business,
except where the failure to have any such Authorization or to make any such
filing or notice would not, singly or in the aggregate, have a material adverse
effect on the business, prospects, financial condition or results of operations
of the Company [and its subsidiaries, taken as a whole]. Each such Authorization
is valid and in full force and effect and [each of] the Company [and its
subsidiaries] is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company [or any of its subsidiaries];
except where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a material adverse
effect on the business, prospects, financial condition or results of operations
of the Company [and its subsidiaries, taken as a whole].
(n) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any Authorization, any related constraints
10
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on operating activities and any potential liabilities to third parties) which
would, singly or in the aggregate, have a material adverse effect on the
business, prospects, financial condition or results of operations of the Company
[and its subsidiaries, taken as a whole].
(o) This Agreement has been duly authorized, executed and delivered by
the Company.
(p) Ernst & Young LLP are independent public accountants with respect
to the Company [and its subsidiaries] as required by the Act.
(q) The consolidated financial statements included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto), together
with related schedules and notes, present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
[and its subsidiaries] on the basis stated therein at the respective dates or
for the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; the supporting schedules, if any, included in the
Registration Statement present fairly in accordance with generally accepted
accounting principles the information required to be stated therein; and the
other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company.
(r) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described in
the Prospectus, will not be, an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
(s) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with the Shares
registered pursuant to the Registration Statement.
(t) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development involving
a prospective material adverse change in the condition, financial or otherwise,
or the earnings, business, management or operations of the Company [and its
subsidiaries, taken as a whole], (ii) there has not been any material adverse
change or any development involving a prospective material adverse change in the
capital stock or in the long-term debt of the Company [or any of its
subsidiaries] and (iii) [neither] the Company [nor any of its subsidiaries] has
[not] incurred any material liability or obligation, direct or contingent.
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(u) [Each of] the Company [and it subsidiaries] owns or leases all such
properties as are necessary to the conduct of [its][their respective] operations
as presently conducted.
(v) [Each of] the Company [and its subsidiaries] maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(w) The Company has not taken, directly or indirectly, any action that
has constituted or that was designed to or might reasonably be expected to cause
or result in, under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), or otherwise, the stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares.
(x) The Company has fulfilled its obligations, if any, under the
minimum funding standards of Section 302 of the United States Employee
Retirement Income Security Act of 1974 ("ERISA") and the regulations and
published interpretations thereunder with respect to each "PLAN" (as defined in
Section 3(3) of ERISA and such regulations and published interpretations) in
which employees of the Company are eligible to participate and each such plan is
in compliance in all material respects with the presently applicable provisions
of ERISA and such regulations and published interpretations.
(y) The Company has implemented a comprehensive, detailed program to
analyze and address the risk that its computer hardware and software may be
unable to recognize and properly execute date-sensitive functions involving any
dates after December 31, 1999 (the "YEAR 2000 PROBLEM") and has determined that
its computer hardware and software are, and will continue to be, able to process
all date information without any errors, aborts, delays or their interruptions
in operations associated with the Year 2000 Problem; and the Company believes,
after due inquiry, that each supplier, vendor, customer or financial service
organization used or serviced by the Company has remedied the Year 2000 Problem,
except to the extent that a failure to remedy by any such supplier, vendor,
customer or financial service organization would not have a material adverse
effect on the Company.
(z) The Company owns, possesses, licenses or has other rights to use,
on reasonable terms, all patents, patent applications, trade and service marks,
trade and service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets, technology, know-how and other intellectual property
(collectively, the "INTELLECTUAL PROPERTY") necessary for the conduct of the
Company's business as now conducted or as proposed in the Prospectus to be
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conducted. [Except as set forth in the Prospectus,] (i) there are no rights of
third parties to any such intellectual property; (ii) there is, to the Company's
best knowledge, no material infringement by third parties of any such
intellectual property; (iii) there is no pending or threatened action, suit,
proceeding or claim by others challenging the Company's rights in or to any such
intellectual property, and the Company is unaware of any facts which would form
a reasonable basis for any such claim; (iv) there is no pending or threatened
action, suit, proceeding or claim by others challenging the validity or scope of
any such intellectual property, and the Company is unaware of any facts which
would form a reasonable basis for any such claim; (v) there is no pending or
threatened action, suit, proceeding or claim by others that the Company
infringes or otherwise violates any patent, trademark, copyright, trade secret
or other proprietary rights of others, and the Company is unaware of any other
fact which would form a reasonable basis for any such claim; (vi) there is no
U.S. patent or published U.S. patent application which contains claims that
dominate or may dominate any intellectual property described in the Prospectus
as being owned by or licensed to the Company or that interferes with the issued
or pending claims of any such intellectual property; and (vii) there is no prior
art of which the Company is aware that may render any U.S. patent held by the
Company invalid or any U.S. patent application held by the Company unpatentable
which has not been disclosed to the U.S. Patent and Trademark Office.
(aa) The Company is in compliance with all applicable federal, state
and local laws and regulations relating to the healthcare industry.
(bb) The Company [and each of its subsidiaries are][is] insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which [it
is][they are] engaged; and [neither] the Company [nor any of its subsidiaries]
(i) has [not] received notice from any insurer or agent of such insurer that
substantial capital improvements or other material expenditures will have to be
made in order to continue such insurance or (ii) has [no][any] reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers at a
cost that would not have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company [and its
subsidiaries, taken as a whole].
(cc) All material tax returns required to be filed by the Company [and
each of its subsidiaries] in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company [or any of its subsidiaries] have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
(dd) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be deemed to
be a representation and warranty by the Company to the Underwriters as to the
matters covered thereby.
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SECTION 7. INDEMNIFICATION. (a) The Company agrees to indemnify and
hold harmless each Underwriter, its directors, its officers and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any legal or
other expenses incurred in connection with investigating or defending any
matter, including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement (or
any amendment thereto), the Prospectus (or any amendment or supplement thereto)
or any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to any Underwriter furnished in writing to the Company by such Underwriter
through you expressly for use therein; PROVIDED, HOWEVER, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter who failed to deliver a Prospectus (as then
amended or supplemented, provided by the Company to the several Underwriters in
the requisite quantity and on a timely basis to permit proper delivery on or
prior to the Closing Date) to the person asserting any losses, claims, damages
and liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
such material misstatement or omission or alleged material misstatement or
omission was cured in such Prospectus and such Prospectus was required by law to
be delivered at or prior to the written confirmation of sale to such person. In
addition to the foregoing, in connection with the offer and sale of the Directed
Shares, the Company agrees, promptly upon a request in writing, to indemnify and
hold harmless the Underwriters for and against any and all losses, liabilities,
claims, damages and expenses incurred by them as a result of (i) the failure of
purchasers of the Directed Shares (including eligible directors, officers,
employees, customers, subscribers and persons having business relationships with
the Company) to pay for and accept delivery of the Directed Shares which, by the
end of the first business day following the date of this Agreement, were subject
to a properly confirmed application to purchase or (ii) any violation or alleged
violation of the Act or any other federal or state law or any liability based on
common law, in each case, arising out of or relating to the manner in which the
Directed Shares are sold and pertaining to any actions or inactions by the
Company (or by the Company jointly with any other person, excluding any
Underwriter) including, without limitation, any e-mails or other communications
by the Company (or by the Company jointly with any other person, excluding any
Underwriter) with customers of the Company relating to the Directed Shares or
possible opportunities to purchase Directed Shares.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the
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<PAGE>
Exchange Act, to the same extent as the foregoing indemnity from the Company to
such Underwriter but only with reference to information relating to such
Underwriter furnished in writing to the Company by such Underwriter through you
expressly for use in the Registration Statement (or any amendment thereto), the
Prospectus (or any amendment or supplement thereto) or any preliminary
prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 7(a) and 7(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 7(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
such Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by Donaldson, Lufkin & Jenrette Securities Corporation, in the case
of parties indemnified pursuant to Section 7(a), and by the Company, in the case
of parties indemnified pursuant to Section 7(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the indemnified
party for reimbursement for the fees and expenses of counsel (in any case where
such fees and expenses are at the expense of the indemnifying party) and, prior
to the date of such settlement, the indemnifying party shall have failed to
comply with such reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any
15
<PAGE>
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 7(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 7(d)(i) above but also the
relative fault of the Company on the one hand and the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (after deducting
underwriting discounts and commissions, but before deducting expenses) received
by the Company, and the total underwriting discounts and commissions received by
the Underwriters, bear to the total price to the public of the Shares, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company on the one hand and the Underwriters on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which
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the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 7(d) are several in proportion to the respective number of Shares
purchased by each of the Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
SECTION 8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by Robert J. Hicks and Gary P. Hutchcraft, in their
respective capacities as the Chief Executive Officer and Chief Financial Officer
of the Company, confirming the matters set forth in Sections 6(t), 8(a) and 8(b)
and that the Company has complied with all of the agreements and satisfied all
of the conditions herein contained and required to be complied with or satisfied
by the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company [and its subsidiaries, taken
as a whole], (ii) there shall not have been any change or any development
involving a prospective change in the capital stock or in the long-term debt of
the Company [or any of its subsidiaries] and (iii) [neither] the Company [nor
any of its subsidiaries] shall [not] have incurred any liability or obligation,
direct or contingent, the effect of which, in any such case described in clause
8(d)(i), 8(d)(ii) or 8(d)(iii), in your judgment, is material and adverse and,
in your judgment,
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makes it impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of Sommer & Barnard, counsel for the Company, to the effect that:
(i) [each of] the Company [and its subsidiaries] has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as described in
the Prospectus and to own, lease and operate its properties;
(ii) [each of] the Company [and its subsidiaries] is duly
qualified and is in good standing as a foreign corporation authorized
to do business in each jurisdiction in which the nature of its business
or its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a material
adverse effect on the business, prospects, financial condition or
results of operations of the Company [and its subsidiaries, taken as a
whole];
(iii) all the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid, non-assessable and not subject to any preemptive or similar
rights;
(iv) the Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by
this Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not be subject to any preemptive
or similar rights;
[(v) all of the outstanding shares of capital stock of each of
the Company's subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable, and are owned by the Company,
directly or indirectly through one or more subsidiaries, free and clear
of any security interest, claim, lien, encumbrance or adverse interest
of any nature;]
[(v) the Company has no subsidiaries;]
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the authorized capital stock of the Company conforms
as to legal matters to the description thereof contained in the
Prospectus;
(viii) the Registration Statement has become effective under
the Act, no stop order suspending its effectiveness has been issued and
no proceedings for that purpose
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are, to the best of such counsel's knowledge after due inquiry, pending
before or contemplated by the Commission;
(ix) the statements under the captions "_________,"
"__________," "__________," "__________," "_________," "Description of
Capital Stock" and "Underwriting" in the Prospectus and Items 14 and 15
of Part II of the Registration Statement, insofar as such statements
constitute a summary of the legal matters, documents or proceedings
referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings;
(x) [neither] the Company [nor any of its subsidiaries] is
[not] in violation of its [respective] charter or by-laws and, to the
best of such counsel's knowledge after due inquiry, [neither] the
Company [nor any of its subsidiaries] is [not] in default in the
performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company [and its
subsidiaries, taken as a whole,] to which the Company [or any of its
subsidiaries] is a party or by which the Company [or any of its
subsidiaries] or [its][their respective] property is bound;
(xi) the execution, delivery and performance of this Agreement
by the Company, the compliance by the Company with all the provisions
hereof and the consummation of the transactions contemplated hereby
will not (A) require any consent, approval, authorization or other
order of, or qualification with, any court or governmental body or
agency (except such as may be required under the securities or Blue Sky
laws of the various states), (B) conflict with or constitute a breach
of any of the terms or provisions of, or a default under, the charter
or by-laws of the Company [or any of its subsidiaries] or any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company [and its subsidiaries, taken
as a whole,] to which the Company [or any of its subsidiaries] is a
party or by which the Company [or any of its subsidiaries] or
[its][their respective] property is bound, (C) violate or conflict with
any applicable law or any rule, regulation, judgment, order or decree
of any court or any governmental body or agency having jurisdiction
over the Company[, any of its subsidiaries] or [its][their respective]
property or (D) result in the suspension, termination or revocation of
any Authorization of the Company [or any of its subsidiaries] or any
other impairment of the rights of the holder of any such Authorization;
(xii) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the
Company [or any of its subsidiaries] is or could be a party or to which
any of [its][their respective] property is or could be subject that are
required to be described in the Registration Statement or the
Prospectus and are not so described, or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not so described or filed as
required;
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(xiii) [neither] the Company [nor any of its subsidiaries] has
[not] violated any Environmental Law, any provisions of the Employee
Retirement Income Security Act of 1974, as amended, or any provisions
of the Foreign Corrupt Practices Act or the rules and regulations
promulgated thereunder, except for such violations which, singly or in
the aggregate, would not have a material adverse effect on the
business, prospects, financial condition or results of operation of the
Company [and its subsidiaries, taken as a whole];
(xiv) [each of] the Company [and its subsidiaries] has such
Authorizations of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws, as are necessary
to own, lease, license and operate its [respective] properties and to
conduct its business, except where the failure to have any such
Authorization or to make any such filing or notice would not, singly or
in the aggregate, have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company
[and its subsidiaries, taken as a whole]; each such Authorization is
valid and in full force and effect and [each of] the Company [and its
subsidiaries] is in compliance with all the terms and conditions
thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event
has occurred (including, without limitation, the receipt of any notice
from any authority or governing body) which allows or, after notice or
lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or
lapse of time or both, would result in any other impairment of the
rights of the holder of any such Authorization; and such Authorizations
contain no restrictions that are burdensome to the Company [or any of
its subsidiaries]; except where such failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction would not, singly or in
the aggregate, have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company
[and its subsidiaries, taken as a whole];
(xv) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be, an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended;
(xvi) to the best of such counsel's knowledge after due
inquiry, there are no contracts, agreements or understandings between
the Company and any person granting such person the right to require
the Company to file a registration statement under the Act with respect
to any securities of the Company or to require the Company to include
such securities with the Shares registered pursuant to the Registration
Statement; and
(xvii) (A) the Registration Statement and the Prospectus and
any supplement or amendment thereto (except for the financial
statements and other financial data included
20
<PAGE>
therein as to which no opinion need be expressed) comply as to form
with the Act, (B) such counsel has no reason to believe that at the
time the Registration Statement became effective or on the date of this
Agreement, the Registration Statement and the prospectus included
therein (except for the financial statements and other financial data
as to which such counsel need not express any belief) contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading and (C) such counsel has no reason to believe
that the Prospectus, as amended or supplemented, if applicable (except
for the financial statements and other financial data, as aforesaid)
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
The opinion of Sommer & Barnard described in Section 8(e) above shall
be rendered to you at the request of the Company and shall so state therein.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Winston & Strawn, counsel for the Underwriters, as to the
matters referred to in Sections 8(e)(iv), 8(e)(vi), 8(e)(ix) (but only with
respect to the statements under the caption "Description of Capital Stock" and
"Underwriting") and 8(e)(xvii).
In giving such opinions with respect to the matters covered by Section
8(e)(xvii), Sommer & Barnard and Winston & Strawn may state that their opinion
and belief are based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or supplements thereto
and review and discussion of the contents thereof, but are without independent
check or verification except as specified.
(g) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from Ernst & Young LLP, independent
public accountants, containing the information and statements of the type
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(h) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
(i) The Shares shall have been duly listed for quotation on the Nasdaq
National Market.
(j) The Company shall not have failed on or prior to the Closing Date
to perform or comply with any of the agreements herein contained and required to
be performed or complied with by the Company on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder
21
<PAGE>
are subject to the delivery to you on the applicable Option Closing Date of such
documents as you may reasonably request with respect to the good standing of the
Company, the due authorization and issuance of such Additional Shares and other
matters related to the issuance of such Additional Shares.
SECTION 9. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus; (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market; (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market; (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company [and its
subsidiaries, taken as a whole]; (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase the
Firm Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion which
the number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; PROVIDED that in no event shall the number of Firm Shares or Additional
Shares, as the case may be, which any Underwriter has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 9 by an
amount in excess of one-ninth of such number of Firm Shares or Additional
22
<PAGE>
Shares, as the case may be, without the written consent of such Underwriter.
If on the Closing Date any Underwriter or Underwriters shall fail or refuse
to purchase Firm Shares and the aggregate number of Firm Shares with respect
to which such default occurs is more than one-tenth of the aggregate number
of Firm Shares to be purchased by all Underwriters and arrangements
satisfactory to you and the Company for purchase of such Firm Shares are not
made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter and the
Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. If, on an Option Closing
Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect
to which such default occurs is more than one-tenth of the aggregate number
of Additional Shares to be purchased on such date, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation
hereunder to purchase such Additional Shares or (ii) purchase not less than
the number of Additional Shares that such non-defaulting Underwriters would
have been obligated to purchase on such date in the absence of such default.
Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of any such Underwriter
under this Agreement.
SECTION 10. MISCELLANEOUS. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to RealMed
Corporation, 510 E. 96th Street, Suite 400, Indianapolis, Indiana 46240 and (ii)
if to any Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette
Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention:
Syndicate Department, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the officers or directors of any
Underwriter, any person controlling any Underwriter, the Company, the officers
or directors of the Company or any person controlling the Company, (ii)
acceptance of the Shares and payment for them hereunder and (iii) termination of
this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the
several Underwriters, their directors and officers and any persons controlling
any of the Underwriters for any and all fees
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<PAGE>
and expenses (including, without limitation, the fees disbursements of counsel)
incurred by them in connection with enforcing their rights hereunder (including,
without limitation, pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Underwriters, the Underwriters' directors and officers, any controlling persons
referred to herein, the Company's directors and the Company's officers who sign
the Registration Statement and their respective successors and assigns, all as
and to the extent provided in this Agreement, and no other person shall acquire
or have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Shares from any of the
several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
[signature page follows]
24
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
Very truly yours,
REALMED CORPORATION
By: ________________________________
Title: ________________________________
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.
SG COWEN SECURITIES CORPORATION
WILLIAM BLAIR & COMPANY, L.L.C.
DLJdirect, INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By __________________________
25
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Underwriters Number of Firm
Shares to be
Purchased
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation
J.P. Morgan Securities Inc.
SG Cowen Securities Corporation
William Blair & Company, L.L.C.
DLJdirect Inc.
Total
</TABLE>
<PAGE>
ANNEX I
[Insert names of stockholders of the Company
who will be required to sign lock ups]
<PAGE>
Exhibit 3.01
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
REALMED CORPORATION
ARTICLE 1
Name
The name of the Corporation is RealMed Corporation.
ARTICLE 2
Registered Office and Registered Agent
The street address of the Corporation's registered office in Indiana
and the name of its registered agent at that office are 510 E. 96th Street,
Suite 400, Indianapolis, IN 46240 and Robert J. Hicks.
ARTICLE 3
Purpose
The Corporation is formed for the purpose of engaging in any lawful
business.
ARTICLE 4
Shares
4.1. Amount. The Corporation has authority to issue Five Hundred
Million (500,000,000) shares of capital stock ("Stock").
4.2. Preferred Stock. The Corporation has the authority to issue up to
Fifty Million (50,000,000) of the initial Five Hundred Million (500,000,000)
shares as a separate and single class of shares known as "Preferred Stock,"
which may be issued in one or more series. The Board of Directors of the
Corporation is vested with authority to determine and state the designations,
preferences, limitations, relative rights and voting rights, if any, of each
such series by the adoption and filing in accordance with the Indiana Business
Corporation Law (the "Act"), before the issuance of any shares of such series,
of an amendment or amendments to these Articles determining the terms of such
series, which amendment need not be approved by the shareholders or the holders
of any class or series of shares except as provided by law. All shares of
Preferred Stock of the same series shall be identical with each other in all
respects and the Board of Directors shall designate each series to distinguish
it from all other series of stock.
4.3. Common Stock. Of the Five Hundred Million (500,000,000) shares the
Corporation has authority to issue, Four Hundred Fifty Million (450,000,000)
shares will constitute a separate class of shares known as Common Stock, which
1
<PAGE>
shall have no par value and may be issued in one or more series. The class of
Common Stock authorized hereby has unlimited voting rights and is entitled to
receive the net assets of the Corporation upon dissolution. The holders of
shares of Common Stock have the right, voting separately by class, to cast one
vote for each duly authorized, issued and outstanding share of Common Stock held
by them upon each question or matter in respect of which, under the Act, such
holders are entitled to vote by class. Such holders also have the right to cast
one vote for each duly authorized, issued and outstanding share of Common Stock
held by them upon each question or matter submitted generally to the holders of
shares of the Corporation in respect of which, under the Act, voting by class or
by series is not required.
4.4. Distributions. The Board of Directors has authority to authorize
and direct in respect of the issued and outstanding shares of Preferred Stock
and Common Stock (i) the payment of dividends and the making of other
distributions by the Corporation at such times, in such amounts and forms, from
such sources and upon such terms and conditions as it may, from time to time
with respect to each class of stock, determine subject only to the restrictions,
limitations, conditions and requirements imposed by the Act, other applicable
laws and these Articles, as the same may, from time to time, be amended, and
(ii) the making by the Corporation of share dividends and share splits, pro rata
and without consideration, in shares of the same class or series or in shares of
any other class or series without obtaining the affirmative vote or the written
consent of the holders of the shares of the class or series in which the payment
or distribution is to be made.
4.5. Acquisition of Shares. The Board of Directors has authority to
authorize and direct the acquisition by the Corporation of the issued and
outstanding shares of Preferred Stock and Common Stock at such times, in such
amounts, from such persons, for such considerations, from such sources and upon
such terms and conditions as it may, from time to time, determine, subject only
to the restrictions, limitations, conditions and requirements imposed by the
Act, other applicable laws and these Articles, as the same may, from time to
time, be amended.
4.6. Record Ownership of Shares or Rights. The Corporation, to the
extent permitted by law, shall be entitled to treat the person in whose name any
share or right of the Corporation is registered on the books of the Corporation
as the owner thereof, for all purposes, and shall not be bound to recognize any
equitable or other claim to, or interest in, such share or right on the part of
any other person, whether or not the Corporation shall have notice thereof.
ARTICLE 5
Board of Directors of Directors
5.1 Number. The number of directors of the Corporation shall not be
fewer than seven (7) nor more than fifteen (15), and shall be fixed, from time
to time, by resolution of the Board of Directors. The Code of Bylaws may provide
for a classified board of directors. Directors need not be shareholders of the
Corporation. Subject to express limitations contained in these Articles, (i) the
business and affairs of the corporation shall be managed under the direction of
2
<PAGE>
the Board of Directors, and (ii) the Board of Directors shall have full,
exclusive and absolute power, control and authority over any and all property of
the Corporation. The Board of Directors may take any action as in its sole
judgment and discretion is necessary or appropriate to conduct the business and
affairs of the Corporation without any action by shareholders of the
Corporation, on behalf of the Corporation.
5.2. Vacancies. Except as may be expressly provided by law, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled by a majority vote of the directors then in office.
5.3. Removal. Subject to the rights, if any, of holders of one or more
classes or series of Preferred Stock to elect one or more directors, any
director, or the entire Board of Directors, may be removed from office at any
time, but only for cause and only by the affirmative vote of the holders of at
least 70% of the voting power of all of the shares of the Corporation entitled
to vote generally in the election of directors, voting together as a single
class. Any director may be removed from office at any time for cause by the
affirmative vote of a majority of the Board.
5.4. Amendment, Repeal. Notwithstanding anything contained in these
Articles of Incorporation to the contrary, the affirmative vote of the holders
of at least 70% of the voting power of all of the shares of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to alter, amend or repeal this Article 5.
ARTICLE 6
Meetings of the Shareholders
6.1. Place of Meetings. All meetings of shareholders of the Corporation
shall be held at such place, within or without the State of Indiana, as may be
specified in the respective notices or waivers of notice thereof.
6.2. Annual Meeting. The annual meeting of shareholders for the purpose
of electing directors and transacting such other business as may properly come
before the meeting shall be set each year by resolution of the Board of
Directors. Failure to hold the annual meeting shall not work any forfeiture or a
dissolution of the Corporation or affect the validity of any corporate action.
6.3. Special Meetings. Special meetings of the shareholders may be
called by the Chief Executive Officer, President or by the Board of Directors,
or, for so long as the Corporation has 50 or fewer shareholders, upon written
demand by the shareholders holding not less than one-fourth of all the
outstanding shares of the Corporation entitled to vote on the business proposed
to be transacted at the meeting.
3
<PAGE>
6.4. Notice of Meetings and Waiver. A written or printed notice,
stating the place, day and hour of the meeting, and in case of a special meeting
the purpose or purposes for which the meeting is called, shall be delivered or
mailed by the Secretary or by the officers or persons calling the meeting, to
each shareholder of the Corporation at the time entitled to vote, at such
address as appears upon the records of the Corporation, no fewer than ten nor
more than sixty days before the date of the meeting. Notice of any such meeting
may be waived in writing by any shareholder, before or after the date and time
stated in the notice, if the waiver is delivered to the Corporation for
inclusion in the minutes for filing with the corporate records. Attendance at a
meeting, in person or by proxy, waives objection to lack of notice or defective
notice of the meeting unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting the business at the meeting.
Further, a shareholder's attendance at a meeting waives objection to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice unless the shareholder
objects to considering the matter when it is presented.
6.5. Voting at Meetings.
(a) Voting Rights. Except as otherwise provided by law or by
the provisions of the Articles of Incorporation, every holder of Common
Stock of the Corporation shall have the right at all meetings of the
shareholders of the Corporation to one vote for each share of Common
Stock standing in his name on the books of the Corporation.
(b) Proxies. A shareholder may vote, either in person or by
proxy executed as provided by the Act by the shareholder or a duly
authorized attorney-in-fact. No proxy shall be valid after eleven (11)
months, unless a shorter or longer time is expressly provided in the
appointment form.
(c) Quorum. At any meeting of shareholders, a majority of the
shares outstanding and entitled to vote on the business to be
transacted at such meeting, represented in person or by proxy, shall
constitute a quorum.
6.6. Action by Shareholders Without Meeting. Any action required or
permitted to be taken at any meeting of the shareholders may be taken without a
meeting if the action is taken by all shareholders entitled to vote on the
action and is evidenced by one or more written consents describing the action
taken, signed by all shareholders entitled to vote on the action and delivered
to the Corporation for inclusion in the minutes for filing with the
Corporation's records.
6.7. Participation in Meetings by Means of Conference or Other
Similar Communications Equipment. Any shareholder may participate in an annual
or special meeting of the shareholders by, or through the use of, any means of
communication by which all shareholders participating may simultaneously hear
each other during the meeting. A shareholder participating in such a meeting by
this means is deemed to be present in person at the meeting.
4
<PAGE>
6.8. Amendment, Repeal. Notwithstanding anything contained in these
Articles of Incorporation to the contrary, the affirmative vote of the holders
of at least 70% of the voting power of all of the shares of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to alter, amend or repeal this Article 6.
ARTICLE 7
Indemnification
7.1. Definitions. Terms defined in Chapter 37 of the Act (IND.
CODE Sections 23-1-37, et seq.) which are used in this Article 7 shall have the
same definitions for purposes of this Article 7 they have in such chapter of the
Act.
7.2. Indemnification of Directors and Officers. The Corporation shall
indemnify any individual who is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
partner or trustee of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise whether or not
for profit, against liability and expenses, including attorneys fees, incurred
by him in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and whether formal or informal, in which he is
made or threatened to be made a party by reason of being or having been in any
such capacity, or arising out of his status as such, except (i) in the case of
any action, suit, or proceeding terminated by judgment, order, or conviction, in
relation to matters as to which he is adjudged to have breached or failed to
perform the duties of his office and the breach or failure to perform
constituted willful misconduct or recklessness; and (ii) in any other situation,
in relation to matters as to which it is found by a majority of a committee
composed of all directors not involved in the matter in controversy (whether or
not a quorum) that the person breached or failed to perform the duties of his
office and the breach or failure to perform constituted willful misconduct or
recklessness. The Corporation may pay for or reimburse reasonable expenses
incurred by a director or officer in defending any action, suit, or proceeding
in advance of the final disposition thereof upon receipt of (i) a written
affirmation of the director's or officer's good faith belief that such director
or officer has met the standard of conduct prescribed by Indiana law; and (ii)
an undertaking of the director or officer to repay the amount paid by the
Corporation if it is ultimately determined that the director or officer is not
entitled to indemnification by the Corporation.
7.3. Other Employees or Agents of the Corporation. The Corporation may,
in the discretion of the Board of Directors, fully or partially provide the same
rights of indemnification and reimbursement as hereinabove provided for
directors and officers of the Corporation to other individuals who are or were
employees or agents of the Corporation or who are or were serving at the request
of the Corporation as employees or agents of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise whether or not for profit.
5
<PAGE>
7.4. Nonexclusive Provision. The indemnification authorized
under this Article 7 is in addition to all rights to indemnification granted by
Chapter 37 of the Act (IND. CODE Sections 23-1-37, et seq.) and in no way limits
the indemnification provisions of such Chapter.
ARTICLE 8
Provisions for Certain Business Combinations
8.1. Vote Required.
(a) Higher Vote for Certain Business Combinations. In
addition to any affirmative vote required by law or these Articles of
Incorporation, and except as otherwise expressly provided in Section 8.2:
(1) Any merger or consolidation or any similar
transaction of the Corporation or any Subsidiary (as
hereinafter defined) with (A) any Interested Shareholder (as
hereinafter defined), or (B) any other corporation (whether or
not itself an Interested Shareholder) which is, or after such
merger or consolidation would be, an Affiliate (as hereinafter
defined) of an Interested Shareholder;
(2) Any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series
of transactions) to or with any Interested Shareholder or any
Affiliate of any Interested Shareholder of any assets of the
Corporation or any Subsidiary having an aggregate Fair Market
Value of Ten Million Dollars ($10,000,000) or more;
(3) The issuance or transfer by the Corporation or
any Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Shareholder or any Affiliate of
any Interested Shareholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate
Fair Market Value of Ten Million Dollars ($10,000,000) or
more;
(4) The adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by
or on behalf of an Interested Shareholder or any Affiliate of
any Interested Shareholder; or
(5) Any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any of
its Subsidiaries or any other transaction (whether or not with
or into or otherwise involving an Interested Shareholder)
which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any
6
<PAGE>
Subsidiary which is directly or indirectly owned by any
Interested Shareholder or any Affiliate of any Interested
Shareholder;
shall require the affirmative vote of the holders of at least 80% of
the voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(the "Voting Stock"), voting together as a single class (it being
understood that for purposes of this Article 8, each share of the
Voting Stock shall have the number of votes granted to it pursuant to
Article 4 of these Articles of Incorporation). Such affirmative vote
shall be required, notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or in
any agreement with any national securities exchange or otherwise.
(b) Definition of "Business Combination." The term "Business
Combination" as used in this Article 8 shall mean any transaction that
is referred to in any one or more of paragraphs (1) through (5) of
clause (a) of this Section 8.1.
8.2. When Higher Vote is Not Required. The provisions of Section 8.1
shall not be applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative vote as is required by
law and any other provision of these Articles of Incorporation, if all of the
conditions specified in either of the following clauses (a) or (b) are met:
(a) Approval by Continuing Directors. The Business
Combination shall have been approved by a majority of the
Continuing Directors (as hereinafter defined).
(b) Price and Procedure Requirements. All of the
following conditions shall have been met:
(1) The aggregate amount of the cash and the Fair
Market Value (as hereinafter defined) as of the date of the
consummation of the Business Combination of consideration
other than cash to be received per share by holders of Common
Stock in such Business Combination shall be at least equal to
the highest of the following:
(A) The highest per share price (including
any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested
Shareholders for any shares of Common Stock acquired
by it (i) within the two-year period immediately
prior to the first public announcement of the
proposal of the Business Combination (the
"Announcement Date") or (ii) in the transaction in
which it became an Interested Shareholder, whichever
is higher;
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(B) The Fair Market Value Per Share of
Common Stock on the Announcement Date or on the date
on which the Interested Shareholder became an
Interested Shareholder (such latter date is referred
to in this Article 8 as the "Determination Date"),
whichever is higher; and
(C) The price per share equal to the Fair
Market Value per share of Common Stock determined
pursuant to clause (b)(1)(B) above, multiplied by the
ratio of (i) the highest per share price (including
any brokerage commissions, transfer taxes and
soliciting dealers= fees) paid by the Interested
Shareholder for any shares of Common Stock acquired
by it within the two-year period immediately prior to
the Announcement Date to (ii) the Fair Market Value
per share of Common Stock on the first day in such
two-year period upon which the Interested Shareholder
acquired any shares of Common Stock.
(2) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by holders of shares of any other class or
series of outstanding Voting Stock shall be at least equal to
the highest of the following (it being intended that the
requirements of this clause (b)(2) shall be required to be met
with respect to every class of outstanding Voting Stock
whether or not the Interested Shareholder has previously
acquired any Shares of a particular class of Voting Stock):
(A) The highest per share price (including
any brokerage commissions, transfer taxes and
soliciting dealers= fees) paid by the Interested
Shareholder for any shares of such class of Voting
Stock acquired by it (i) within the two-year period
immediately prior to the Announcement Date or (ii) in
the transaction in which it became an Interested
Shareholder, whichever is higher;
(B) The highest preferential amount per
share to which the holders of shares of such class of
Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or
winding up of the Corporation;
(C) The Fair Market Value per share of such
class of Voting Stock on the Announcement Date or on
the Determination Date, whichever is higher; and
(D) The price per share equal to the Fair
Market Value per share of such class of Voting Stock
determined pursuant to clause (b)(2)(C) above,
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multiplied by the ratio of (i) the highest per share
price (including any brokerage commissions, transfer
taxes and soliciting dealers= fees) paid by the
Interested Shareholder for any shares of such class
of Voting Stock acquired by it within the two-year
period immediately prior to the Announcement Date or
(ii) the Fair Market Value per share of such class of
Voting Stock on the first day in such two-year period
upon which the Interested Shareholder acquired any
shares of such class of Voting Stock.
(3) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common
Stock) shall be in cash or in the same form as the Interested
Shareholder has previously paid for shares of such class of
Voting Stock. If the Interested Shareholder has paid for
shares of any class of Voting Stock with varying forms of
consideration, the form of consideration for such class of
Voting Stock shall be either cash or the form used to acquire
the largest number of shares of such class of Voting Stock
previously acquired by it.
(4) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such
Business Combination:
(A) except as approved by a majority of the
Continuing Directors, there shall have been no
failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or not
cumulative) on any outstanding Preferred Stock;
(B) there shall have been (i) no reduction
in the annual rate of dividends paid on the Common
Stock (except as necessary to reflect any subdivision
of the Common Stock), except as approved by a
majority of the Continuing Directors, and (ii) an
increase in such annual rate of dividends as
necessary to reflect any reclassification (including
any reverse stock split), recapitalization,
reorganization or any similar transaction which has
the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure so to
increase such annual rate is approved by a majority
of the Continuing Directors; and
(C) such Interested Shareholder shall have
not become the beneficial owner of any additional
shares of Voting Stock except as part of the
transaction that results in such Interested
Shareholder becoming an Interested Shareholder.
(5) After such Interested Shareholder has become an
Interested Shareholder, such Interested Shareholder shall not
have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances,
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guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such Business
Combination or otherwise.
(6) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
shareholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions).
8.3. Certain Definitions. For the purposes of this Article 8:
(a) A "person" shall include any individual, firm, corporation
or other entity. When two or more persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of acquiring
voting stock of the Company, such partnership, syndicate or group shall
be deemed a "person."
(b) "Interested Shareholder" shall mean any person (other
than the Corporation or any Subsidiary) who or which:
(1) is the beneficial owner, directly or
indirectly, of more than 10% of the voting power of the
outstanding Voting Stock;
(2) is an Affiliate of the Corporation and at any
time within the two-year period immediately prior to the date
in question was the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the then outstanding
Voting Stock; or
(3) Is an assignee of or has otherwise succeeded to
any shares of Voting Stock which were at any time within the
two-year period immediately prior to the date in question
beneficially owned by any Interested Shareholder, if such
assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(c) A person shall be a "beneficial owner" of any Voting
Stock:
(1) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly;
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(2) which such person or any of its Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding; or
(3) which are beneficially owned, directly or
indirectly, by any other person with which such person or any
of its Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of Voting Stock.
(d) For the purpose of determining whether a person is an
Interested Shareholder pursuant to clause (b) of this Section 8.3, the
number of shares of Voting Stock deemed to be outstanding shall include
shares deemed owned through application of clause (c) of this Section
8.3, but shall not include any other shares of Voting Stock which may
be issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
(e) "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
(f) "Subsidiary" means any corporation or other entity of
which a majority of any class of equity security is owned, directly or
indirectly, by the Corporation or which the Corporation controls
through equity ownership or otherwise; provided, however, that for the
purposes of the definition of Interested Shareholders set forth in
clause (b) of this Section 8.3, the term "Subsidiary" shall mean only a
corporation or other entity of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(g) "Continuing Director" means any member of the Board of
Directors of the Corporation who is unaffiliated with the Interested
Shareholder and was a member of the Board of Directors prior to the
time that the Interested Shareholder became an Interested Shareholder,
and any successor of a Continuing Director who is unaffiliated with the
Interested Shareholder and is recommended to succeed a Continuing
Director by a majority of Continuing Directors then on the Board of
Directors.
(h) "Fair Market Value" means:
(1) In the case of stock, the highest closing sale
price during the 30-day period immediately preceding the date
in question of a share of such stock on the Composite Tape for
New York Stock Exchange listed stock, or if such stock is not
quoted on the Composite Tape, on the New York Stock Exchange,
or, if such stock is not listed on such Exchange, on the
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principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange,
the highest closing bid quotation with respect to a share of
such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers,
Inc. Automated Quotations System or any system then in use, or
if no such quotation of a share of such stock as determined by
the Board of Directors in good faith; and
(2) In the case of property other than cash or stock,
the fair market value of such property on the date in question
as determined by the Board of Directors in good faith.
(i) In the event of any Business Combination in which the
Corporation survives, the phrase "other consideration to be received"
as used in clauses (b)(1) and (2) of Section 8.2 shall include the
shares of Common Stock and/or the shares of any other class of
outstanding Voting Stock by the holders of such shares.
8.4 Powers of the Board. A majority of the directors of the Corporation
shall have the power and duty to determine for the purposes of this Article 8,
on the basis of information known to them after reasonable inquiry, (a) whether
a person is an Interested Shareholder, (b) the number of shares of Voting Stock
beneficially owned by any person, (c) whether a person is an Affiliate or
Associate of another and (d) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of Ten Million Dollars
($10,000,000) or more.
8.5. No Effect on Fiduciary Obligations of Interested Shareholders.
Nothing contained in this Article 8 shall be construed to relieve any Interested
Shareholder from any fiduciary obligation imposed by law.
8.6. Amendment, Repeal, etc. Notwithstanding any other provisions of
these Articles of Incorporation or the Bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage may be specified by law, these
Articles of Incorporation or the Bylaws of the Corporation), the affirmative
vote of the holders of 80% or more of the voting power of the shares of the then
outstanding Voting Stock, voting together as a single class, shall be required
to amend or repeal, or adopt provisions inconsistent with, this Article 8 of
these Articles of Incorporation.
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Exhibit 3.02
CODE OF BYLAWS
OF
REALMED CORPORATION
ARTICLE 1
Identification
1.1. Name. The name of the Corporation is RealMed Corporation (the
"Corporation").
1.2. Fiscal Year. The fiscal year of the Corporation shall begin
at the beginning of the first day of January in each year and end at the close
of the last day of December next succeeding.
ARTICLE 2
Shares
2.1. Certificates for Shares. Pursuant to IND. CODE ss. 23-1-26-7, the
Board of Directors (the "Board") is authorized to issue shares without
certificates. If the Board issues share certificates, such certificates shall be
in such form as the Board may prescribe from time to time signed (either
manually or in facsimile) by the Chief Executive Officer, President or a Vice
President of the Corporation and either the Secretary or an Assistant Secretary
of the Corporation.
2.2. Transfer of Shares. The shares of the Corporation shall be
transferable on the books of the Corporation. If certificates are issued, the
transfer of the shares shall occur upon surrender of the certificate or
certificates representing the same, properly endorsed by the registered holder
or by his duly authorized attorney, such endorsement or endorsements to be
witnessed by one witness. The requirement for such witnessing may be waived in
writing upon the form of endorsement by the Chief Executive Officer or President
of the Corporation.
2.3. Record Ownership of Shares or Rights. The Corporation, to the
extent permitted by law, shall be entitled to treat the person in whose name any
share or right of the Corporation is registered on the books of the Corporation
as the owner thereof, for all purposes, and shall not be bound to recognize any
equitable or other claim to, or interest in, such share or right on the part of
any other person, whether or not the Corporation shall have notice thereof.
ARTICLE 3
Meetings of Shareholders
3.1. Place of Meetings. All meetings of shareholders of the Corporation
shall be held at such place, within or without the State of Indiana, as may be
specified in the respective notices or waivers of notice thereof.
3.2. Annual Meeting. The annual meeting of shareholders for the purpose
of electing directors and transacting such other business as may properly come
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before the meeting shall be set each year by resolution of the Board. Failure to
hold the annual meeting shall not work any forfeiture or a dissolution of the
Corporation or affect the validity of any corporate action. The board of
directors may postpone an annual meeting for which notice has been given in
accordance with Section 3.4 of this Article 3.
3.3. Special Meetings. Special meetings of the shareholders may be
called by the Chief Executive Officer, President or by the Board, or, for so
long as the Corporation has 50 or fewer shareholders, upon written demand by the
shareholders holding not less than one-fourth of all the outstanding shares of
the Corporation entitled to vote on the business proposed to be transacted at
that meeting. The board of directors may postpone a special meeting for which
notice has been given in accordance with Section 3.4 of this Article 3.
3.4. Notice and Waiver. A written or printed notice, stating the place, day
and hour of the annual meeting, and additionally, in case of a special meeting
the purpose or purposes for which the meeting is called, shall be delivered or
mailed by the Secretary or by the officers or persons calling the meeting, to
each shareholder of the Corporation at the time entitled to vote, at such
address as appears upon the records of the Corporation, no fewer than ten nor
more than sixty days before the date of the meeting. Notice of any such meeting
may be waived in writing by any shareholder, before or after the date and time
stated in the notice, if the waiver is delivered to the Corporation for
inclusion in the minutes for filing with the corporate records. Attendance at a
meeting, in person or by proxy, waives objection to lack of notice or defective
notice of the meeting unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting the business at the meeting.
Further, a shareholder's attendance at a meeting waives objection to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice unless the shareholder
objects to considering the matter when it is presented.
3.5. Quorum. Unless otherwise provided by the articles of incorporation or
these bylaws, at any meeting of shareholders the majority of the outstanding
shares entitled to vote at such meeting, represented in person or by proxy,
shall constitute a quorum. If less than a majority of such shares are
represented at a meeting, the person presiding at the meeting may adjourn the
meeting from time to time. At any meeting at which a quorum is present, the
person presiding at the meeting may adjourn the meeting from time to time. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
3.6. Notice of Shareholder Business. At any meeting of the
shareholders, only such business may be conducted as shall have been properly
brought before the meeting, and as shall have been determined to be lawful and
appropriate for consideration by shareholders at the meeting. To be properly
brought before an annual meeting, business must be (a) specified in the notice
of meeting given in accordance with Section 3.4 of this Article 3, (b) otherwise
properly brought before the meeting by or at the direction of the board of
directors or the chief executive officer, or (c) otherwise properly brought
before the meeting by a shareholder. For business to be properly brought before
an annual meeting by a shareholder pursuant to clause (c) above, the shareholder
must have given timely notice thereof in writing to the secretary of the
corporation. To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal office of the corporation, not less than ninety
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days nor more than one hundred twenty days prior to the first anniversary date
of the annual meeting for the preceding year; provided, however, if and only if
the annual meeting is not scheduled to be held within a period that commences
thirty days before such anniversary date and ends thirty days after such
anniversary date (an annual meeting date outside such period being referred to
herein as an "Other Annual Meeting Date"), such shareholder notice shall be
given in the manner provided herein by the close of business on the later of (i)
the date ninety days prior to such Other Annual Meeting Date or (ii) the tenth
day following the date such Other Annual Meeting Date is first publicly
announced or disclosed. A shareholder's notice to the secretary shall set forth
as to each matter the shareholder proposes to bring before the meeting (a) a
brief description of the business desired to be brought before the meeting,
including the text of any proposal to be presented, (b) the name and address, as
they appear on the corporation's stock records, of the shareholder proposing
such business, (c) the class and number of shares of the corporation which are
beneficially owned by the shareholder, and (d) any interest of the shareholder
in such business. Only such business shall be brought before a special meeting
of shareholders as shall have been specified in the notice of meeting given in
accordance with Section 4 of this Article I. In no event shall the adjournment
of an annual meeting or special meeting, or any announcement thereof, commence a
new period for the giving of a shareholder's notice as provided in this Section
10. Notwithstanding anything in these bylaws to the contrary, no business shall
be conducted at a meeting except in accordance with the procedures set forth in
this Section 3.6. The person presiding at the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the bylaws, or that business was
not lawful or appropriate for consideration by shareholders at the meeting, and
if he should so determine, he shall so declare to the meeting and any such
business shall not be transacted.
3.7. Notice of Shareholder Nominees. Nominations of persons for
election to the board of directors of the corporation may be made at any annual
meeting of shareholders by or at the direction of the board of directors or by
any shareholder of the corporation entitled to vote for the election of
directors at the meeting. Such shareholder nominations shall be made pursuant to
timely notice given in writing to the secretary of the corporation in accordance
with Section 3.6 of this Article 3. Such shareholder's notice shall set forth,
in addition to the information required by Section 3.6, as to each person whom
the shareholder proposes to nominate for election or re-election as a director,
(i) the name, age, business address and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) the class and
number of shares of the corporation which are beneficially owned by such person,
(iv) any other information relating to such person that is required to be
disclosed in solicitation of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including without limitation such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected), and (v) the qualifications of the nominee to serve as a
director of the corporation. In the event the board of directors calls a special
meeting of shareholders for the purpose of electing one or more directors to the
board of directors, any shareholder may nominate a person or persons (as the
case may be) for election to such position(s) as specified in the notice of
meeting, if the shareholder's notice of such nomination contains the information
specified in this Section 3.7 and shall be delivered to the secretary of the
corporation not later than the close of business on the tenth day following the
day on which the date of the special meeting and either the names of the
nominees proposed by the board of directors to be elected at such meeting or the
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number of directors to be elected are publicly announced or disclosed. In no
event shall the adjournment of an annual meeting or special meeting, or any
announcement thereof, commence a new period for the giving of a shareholder's
notice as provided in this Section 3.7. No shareholder nomination shall be
effective unless made in accordance with the procedures set forth in this
Section 3.7. The person presiding at the meeting shall, if the facts warrant,
determine and declare to the meeting that a shareholder nomination was not made
in accordance with the bylaws, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
3.8. Voting at Meetings.
(a) Voting Rights. Except as otherwise provided by law or by
the provisions of the Articles of Incorporation, every holder of the
Common Stock of the Corporation shall have the right at all meetings of
the shareholders of the Corporation to one vote for each share of stock
standing in his name on the books of the Corporation.
(b) Proxies. A shareholder may vote, either in person or by
proxy executed as provided by the Indiana Business Corporation Law (the
"Act") by the shareholder or a duly authorized attorney-in-fact. No
proxy shall be valid after eleven (11) months, unless a shorter or
longer time is expressly provided in the appointment form.
3.9. Action By Shareholders Without Meeting. Any action required or
permitted to be taken at any meeting of the shareholders may be taken without a
meeting if the action is taken by all shareholders entitled to vote on the
action and is evidenced by one or more written consents describing the action
taken, signed by all shareholders entitled to vote on the action and delivered
to the Corporation for inclusion in the minutes for filing with the
Corporation's records.
3.10. Participation in Meetings by Means of Conference or Other Similar
Communications Equipment. Any shareholder may participate in an annual or
special meeting of the shareholders by, or through the use of, any means of
communication by which all shareholders participating may simultaneously hear
each other during the meeting or otherwise participate. A shareholder
participating in such a meeting by this means is deemed to be present in person
at the meeting.
ARTICLE 4
Board of Directors
4.1. Number and Election. The Board shall consist of a minimum of
seven (7) and a maximum of thirteen (13) members. The actual number of directors
shall be fixed from time to time by resolution of the Board of Directors. Each
director shall hold office until his successor is elected and qualified.
Directors need not be shareholders.
The Board may elect or appoint, from among its members, a Chairman of
the Board (the "Chairman"), who need not be an officer or employee of the
Corporation. The Chairman shall preside at all shareholder meetings and Board
meetings and shall have such other powers and perform such other duties as are
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incident to such position and as may be assigned by the Board. A decrease in the
number of directors does not shorten an incumbent director's term.
The Board shall be divided into three (3) classes, each class to
consist, as nearly as may be, of one-third of the number of directors then
constituting the whole board of directors, with one class to be elected annually
by shareholders for a term of three years, to hold office until their respective
successors are elected and qualified; except that:
(a) the terms of directors in the first group will expire at
the first annual meeting of shareholders' after their election, the
terms of the second group will expire at the second annual meeting of
shareholders after their election and the terms of the third class, if
any, will expire at the third annual meeting of shareholders after
their election;
(b) the term of office of a director who is elected by either
the directors or shareholders to fill a vacancy in the Board shall
expire at the end of the term of office of the succeeded director's
class or at the end of the term of office of such other class as
determined by the Board to be necessary or desirable to equalize the
number of directors among the classes;
(c) the Board may adopt a policy limiting the time beyond
which certain directors are not to continue to serve, the effect of
which may be to produce classes of unequal size or to cause certain
directors either to be nominated for election for a term of less than
three years or to cease to be a director before expiration of the term
of the director's class.
In case of any increase in the number of directors, the additional
directors shall be distributed among the several classes to make the size of the
classes as equal as possible.
4.2. Annual Meeting. The Board shall meet each year immediately after
the annual meeting of the shareholders at the place where the shareholders
meeting was held, unless a different time and place is established by resolution
of the Board, for the purpose of organization, election of officers, and
consideration of any other business that may be brought before the meeting. No
notice shall be necessary for the holding of this annual meeting. If such
meeting is not held as above provided, the election of officers may be had at
any subsequent meeting of the Board specifically called in the manner provided
in Section 4.3 of this Article.
4.3. Other Meetings. Regular meetings of the Board may be held as
provide for in a Board resolution, without notice of the date, time, place or
purpose of the meeting. Special meetings of the Board may be held upon the call
of the Chief Executive Officer, President or of any member of the Board, at any
place within or without the State of Indiana, upon forty-eight hours' notice,
specifying the time, place and general purposes of the meeting, given to each
director, either personally, by mailing, or by facsimile. Such notice may be
waived in writing by any director, before or after the date stated in the
notice, if the waiver is signed by the director and filed with the Corporation's
minutes or records. In addition, a director's attendance at or participation in
a meeting waives any required notice of the meeting unless the director at the
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beginning of the meeting (or promptly upon his arrival) objects to holding the
meeting or transacting business at the meeting and does not thereafter vote for
or assent to action taken at the meeting.
4.4. Quorum. At any meeting of the Board, the presence of a majority
of the members of the Board shall constitute a quorum for the transaction of any
business except the filling of vacancies in the Board.
4.5. Action By Directors Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if (a) all of the then elected and qualified directors consent
to the action to be taken and such consent is evidenced by one or more written
consents describing the action taken, signed by all of the then elected and
qualified directors, and (b) such consent is included in the minutes or filed
with the corporate records reflecting the action taken.
4.6. Interested Party Transactions; Interested Directors. The
Corporation may not engage in any Interested Party Transaction (as defined
below) except as authorized by the Board of Directors. For purposes of this Code
of Bylaws, the term "Interested Party Transaction" means any transaction or
series of directly related transactions which exceeds $50,000 in value during
any calendar year and is between the Corporation, on the one hand, and a
shareholder of the Corporation, or any person which controls, is controlled by,
or is under common control with, any such shareholder, on the other hand. In the
event that a matter to be voted upon by the Board of Directors involves a
director or a director's employer (other than the Corporation) or former
employer (other than the Corporation) (or any person (other than the
Corporation) which controls, is controlled by, or is under common control with,
any such employer), such director shall be considered an "Interested Director,"
and, unless all other directors agree otherwise, the Interested Director shall
abstain from voting upon such matter. Notwithstanding the foregoing, in the
event that the matter is the issuance of additional capital stock in which all
shareholders may participate on an equitable basis, then all Interested
Directors may participate in such vote.
4.7. Compensation of Directors. The Board is empowered and authorized
to fix and determine the compensation of directors for attendance at meetings of
the Board, and additional compensation for any additional services that the
directors may perform for the Corporation. Each director shall be reimbursed for
reasonable travel and lodging expenses connected with attendance of any duly
called meeting of the Board of Directors.
4.8. Participation in Meetings by Means of Conference or Other Similar
Communications Equipment. A member of the Board or of a committee designated by
the Board may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
participating in such a meeting by this means is deemed to be present in person
at the meeting.
4.9. Resignations. A director may resign at any time by delivering
notice to the Board or the Secretary of the Corporation. A resignation is
effective when the notice is delivered unless the notice specifies a later
effective date. If a resignation is made effective at a later date and the
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Corporation accepts the future effective date, the Board may fill the pending
vacancy before the effective date if the Board provides that the successor does
not take office until the effective date.
ARTICLE 5
Officers
5.1. Number. The officers of the Corporation shall consist of a Chief
Executive Officer, President, Chief Financial Officer, Treasurer and Secretary,
and such other officers, including a Vice Chairman, as may be chosen by the
Board of Directors at such time and in such manner and for such terms as the
Board of Directors may prescribe. The Chief Executive Officer may appoint one or
more officers or assistant officers as he may deem necessary or advisable to
carry on the operations of the Corporation. Such appointed officer(s) or
assistant officer(s) shall hold office until the next annual meeting of the
Board unless removed by resolution of the Board prior to such meeting date. Any
two or more offices may be held by the same person.
5.2. Election and Term of Office. The officers shall be chosen annually
by the Board. Each officer shall hold office until his successor is chosen, or
until his death, or until he shall have resigned or shall have been removed in
the manner hereinafter provided.
5.3. Removal. Any officer may be removed, either with or without
cause, at any time, by a majority vote of the Board.
5.4. Resignations. An officer may resign at any time by delivering
notice to the Board or the Secretary of the Corporation. A resignation is
effective when the notice is delivered unless the notice specifies a later
effective date. If a resignation is made effective at a later date and the
Corporation accepts the future effective date, the Board may fill the pending
vacancy before the effective date if the Board provides that the successor does
not take office until the effective date.
5.5. The Chairman of the Board. The Board of Directors shall choose
from among its members a Chairman of the Board who shall preside at all meetings
of the Board of Directors and of the shareholders of the Corporation and shall
have such other powers and perform such other duties as may, from time to time,
be assigned by the Board of Directors.
5.6. The Chief Executive Officer. The Chief Executive Officer of the
Corporation shall exercise such duties as customarily pertain to the office of
chief executive officer including, without limitation, general and active
supervision and management over the operations, property, business and affairs
of the Corporation; subject, however, to the control of the Board of Directors.
The Chief Executive Officer shall have such additional powers and perform such
additional duties as this Code of Bylaws may provide or as the Board of
Directors may, from time to time, prescribe or delegate to him. If no Chairman
of the Board is elected or appointed, the Chief Executive Officer shall preside
at all meetings of shareholders, discharge all the duties which devolve upon a
presiding officer, and perform such other duties as this Code of Bylaws or the
Board of Directors may prescribe.
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5.7. The Chief Financial Officer. The Chief Financial Officer of the
Corporation (if one be elected or appointed) shall exercise such duties as
customarily pertain to the office of chief financial officer including, without
limitation, general and active supervision over the financial affairs of the
Corporation; subject, however, to the control of the Chief Executive Officer.
The Chief Financial Officer shall have such additional powers and perform such
additional duties as this Code of Bylaws may provide or as the Chief Executive
Officer or the Board of Directors may, from time to time, prescribe or delegate
to him or her.
5.8. The Chief Administrative Officer. The Chief Administrative Officer
(if one be elected or appointed) shall exercise such duties as customarily
pertain to the office of chief administrative officer including, without
limitation, general and active supervision over the administrative affairs of
the Corporation; subject, however, to the control of the Chief Executive
Officer. The Chief Administrative Officer shall have such additional powers and
perform such additional duties as this Code of Bylaws may provide or as the
Chief Executive Officer or the Board of Directors may, from time to time,
prescribe or delegate to him or her.
5.9. The President. The President shall have such powers and perform
such duties as this Code of Bylaws provides or as the Chief Executive Officer or
the Board of Directors may, from time to time, prescribe or delegate to him or
her.
5.10. The Vice Chairman. The Vice Chairman shall have such powers and
perform such duties as this Code of Bylaws provides or as the Chief Executive
Officer or the Board of Directors may, from time to time, prescribe or delegate
to him or her.
5.11. Chief Technical Officer. The Chief Technical Officer shall have
management responsibility of the Corporation with respect to technology,
including, without limitation, research and development of products and
services, subject to the control of the Board. The Chief Technical Officer shall
perform such other duties as the Bylaws, the Chief Executive Officer or the
Board may from time to time prescribe or delegate to him or her.
5.12. General Counsel. The General Counsel (if one is elected or
appointed) shall exercise such duties as customarily pertain to the office of
General Counsel including, without limitation, general and active supervision
over the legal affairs of the Corporation; subject, however, to the control of
the Chief Executive Officer. The General Counsel shall have such additional
powers and perform such additional duties as this Code of Bylaws may provide or
as the Chief Executive Officer or the Board of Directors may, from time to time,
prescribe or delegate to him.
5.13. The Vice Presidents. The Vice President (or if there be more than
one Vice President, the Vice Presidents in the order of their rank, or, if of
equal rank, then in the order designated by the Chief Executive Officer or the
Board of Directors, or in the absence of any designation, then in the order of
their appointment) shall have such powers and perform such duties as this Code
of Bylaws provides or as the Chief Executive Officer or the Board of Directors
may, from time to time, prescribe or delegate to him or her. The rank of Vice
Presidents in descending order shall be Executive Vice President, Senior Vice
President and Vice President.
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5.14. The Secretary. The Secretary shall prepare or cause to be
prepared the minutes of the meetings of the shareholders and of the Board of
Directors; shall see that all notices are duly given in accordance with the
provisions of the Code of Bylaws and as required by law; shall be custodian and
responsible for the authentication of the records; and, in general, shall
perform all duties incident to the office of Secretary and such other duties as
this Code of Bylaws provides or as may, from time to time, be assigned by the
Chief Executive Officer or the Board of Directors.
5.15. The Assistant Secretaries. Each Assistant Secretary (if one or
more Assistant Secretaries be elected or appointed) shall assist the Secretary
in his duties and shall perform such other duties as the Chief Executive
Officer, the Secretary or the Board of Directors may, from time to time,
prescribe or delegate to him or her. At the request of the Secretary, any
Assistant Secretary may, in the case of the absence or inability to act of the
Secretary, temporarily act in the Secretary's place.
5.16. The Treasurer. The Treasurer shall, subject to the control of the
Chief Executive Officer, the Chief Financial Officer and the Board of Directors,
have charge and custody of, and be responsible for, all funds of the
Corporation, and deposit all such funds in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by the Board
of Directors; shall receive, and give receipts for, monies due and payable to
the Corporation from any source whatsoever; and, in general, shall perform all
the duties incident to the office of Treasurer and such other duties as this
Code of Bylaws provides or as may, from time to time, be assigned by the Chief
Executive Officer, the Chief Financial Officer or the Board of Directors.
5.17. The Assistant Treasurers. Each Assistant Treasurer (if one or
more Assistant Treasurers be elected or appointed) shall assist the Treasurer in
his duties, and shall perform such other duties as the Chief Executive Officer,
the Chief Financial Officer, the Treasurer or the Board of Directors may, from
time to time, prescribe or delegate to him or her. At the request of the
Treasurer, the Assistant Treasurer may, in the case of the absence or inability
to act of the Treasurer, temporarily act in the Treasurer's place.
5.18. Delegation of Authority. In case of the absence of any officer of
the Corporation, or for any other reason that the Board may deem sufficient, the
Board may delegate the powers or duties of such officer to any other officer,
for the time being, provided a majority of the entire Board concurs therein.
5.19. Salaries. The salaries of the officers shall be fixed, from
time to time, by the Board. No officer shall be prevented from receiving such
salary by reason of the fact he is also a director of the Corporation.
ARTICLE 6
Negotiable Instruments, Deeds, Contracts and Shares
6.1. Execution of Negotiable Instruments. All checks, drafts, notes,
bonds, bills of exchange and orders for the payment of money of the Corporation
("Negotiable Instruments") shall, unless otherwise directed by the Board of
Directors, or unless otherwise required by law, be signed by the Chief Executive
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Officer, the President, the Chief Financial Officer, Vice Chairman, the Chief
Administrative Officer or the Treasurer, signing singly, or such other officers
or employees as may be directed by the Board of Directors; provided, however,
that if any Negotiable Instrument is for an amount of $10,000 or more ("Large
Expenditure"), such Negotiable Instrument shall require the signature of the
Chief Executive Officer or Chief Financial Officer, signing singly, and no other
person.
6.2. Execution of Deeds, Contracts, Etc. All deeds and mortgages made
by the Corporation and other material written contracts and agreements into
which the Corporation enters other than transactions in the ordinary course of
business ("Material Contracts") shall, unless otherwise directed by the Board of
Directors or required by law, be executed in its name by the Chief Executive
Officer, the President, the Vice Chairman, the Chief Financial Officer, the
Chief Administrative Officer or the Treasurer, signing singly; provided,
however, that if any Material Contract requires a Large Expenditure (as defined
in Section 6.1), the Material Contract and any documents contemplated thereby
shall require the signature of the Chief Executive Officer or Chief Financial
Officer, signing singly, and no other person (except, when necessary or
required, any such document shall be duly attested by the Secretary or Assistant
Secretary). In addition to the above designated officers, written contracts and
agreements in the ordinary course of business operations may be executed by any
other officer or employee of the Corporation designated by the Chief Executive
Officer or Chief Financial Officer to execute such contracts and agreements.
6.3. Endorsement of Stock Certificates. Subject always to the further
orders and directions of the Board of Directors, any share or shares of stock
issued by any other corporation and owned by the Corporation (including retired
shares of stock of the Corporation) may, for sale or transfer, be endorsed in
the name of the Corporation by the Chief Executive Officer and such endorsement
shall be duly attested by the Secretary.
6.4. Voting of Stock Owned by Corporation. Subject always to the
further orders and directions of the Board, any share or shares of stock issued
by any other corporation and owned or controlled by the Corporation may be voted
at any shareholder's meeting of such other corporation by the Chief Executive
Officer of the Corporation or, in his absence, by the Secretary of the
Corporation. Whenever, in the judgment of the Chief Executive Officer, it is
desirable for the Corporation to execute a proxy or give a shareholder's consent
in respect to any share or shares of stock issued by any other corporation and
owned by the Corporation, such proxy or consent shall be executed in the name of
the Corporation and shall be attested by the Secretary of the Corporation. Any
person or persons designated in the manner above stated as the proxy or proxies
of the Corporation shall have the full right, power, and authority to vote the
share or shares of stock issued by such other corporation and owned by the
Corporation the same as such share or shares might be voted by the Corporation.
ARTICLE 7
Provisions for Regulation of Business
and Conduct of Affairs of Corporation
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7.1. Contracts. Any contract or other transaction between the
Corporation and one or more of its directors, or between the Corporation and any
firm of which one or more of its directors are members or employees, or in which
they are interested, or between the Corporation and any corporation or
association of which one or more of its directors are shareholders, members,
directors, officers, or employees, or in which they are interested, shall be
valid for all purposes, notwithstanding the presence of such director or
directors at the meeting of the Board of the Corporation which acts upon, or in
reference to, such contract or transaction, and notwithstanding his or their
participation in such action, if the fact of such interest shall be disclosed or
known to the Board and the Board shall, nevertheless, authorize, approve, and
ratify such contract or transaction by a vote of a majority of the directors on
the Board who have no direct or indirect interest in the contract or transaction
or, if all directors have such an interest, then by a vote of a majority of the
directors. If a majority of such directors vote to authorize, approve or ratify
such contract or transaction, a quorum is deemed to be present for purposes of
taking such action. This Section shall not be construed to invalidate any
contract or other transaction which would otherwise be valid under the common
and statutory law applicable thereto.
7.2. Indemnification.
(a) Definitions. Terms defined in Chapter 37 of the Act (IND.
CODE Sections 23-1-37, et seq.) which are used in this Article 7 shall have the
same definitions for purposes of this Article 7 as they have in such chapter of
the Act.
(b) Indemnification of Directors and Officers. The Corporation
shall indemnify any individual who is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation
as a director, officer, partner or trustee of another foreign or
domestic corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise whether or not for profit, against
liability and expenses, including attorneys fees, incurred by him in
any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and whether formal or informal, in
which he is made or threatened to be made a party by reason of being or
having been in any such capacity, or arising out of his status as such,
except (i) in the case of any action, suit, or proceeding terminated by
judgment, order, or conviction, in relation to matters as to which he
is adjudged to have breached or failed to perform the duties of his
office and the breach or failure to perform constituted willful
misconduct or recklessness; and (ii) in any other situation, in
relation to matters as to which it is found by a majority of a
committee composed of all directors not involved in the matter in
controversy (whether or not a quorum) that the person breached or
failed to perform the duties of his office and the breach or failure to
perform constituted willful misconduct or recklessness. The Corporation
may pay for or reimburse reasonable expenses incurred by a director or
officer in defending any action, suit, or proceeding in advance of the
final disposition thereof upon receipt of (i) a written affirmation of
the director's or officer's good faith belief that such director or
officer has met the standard of conduct prescribed by Indiana law; and
(ii) an undertaking of the director or officer to repay the amount paid
by the Corporation if it is ultimately determined that the director or
officer is not entitled to indemnification by the Corporation.
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(c) Other Employees or Agents of the Corporation. The
Corporation may, in the discretion of the Board, fully or partially
provide the same rights of indemnification and reimbursement as herein
above provided for directors and officers of the Corporation to other
individuals who are or were employees or agents of the Corporation or
who are or were serving at the request of the Corporation as employees
or agents of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise whether
or not for profit.
(d) Non-exclusive Provision. The indemnification authorized
under this Section 7.2 is in addition to all rights to indemnification
granted by Chapter 37 of the Act (IND. CODE Sections 23-1-37, et seq.)
and in no way limits the indemnification provisions of such Chapter.
ARTICLE 8
Amendments
8.1. In General. The powers to make, alter, amend or repeal this Code
of Bylaws is vested exclusively in the Board, but, subject to the affirmative
vote of a majority of the number of directors in office at the time of such vote
shall be necessary to effect any alteration, amendment or repeal of this Code of
Bylaws.
February __, 2000
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Exhibit 4.01
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement"), made as of the 15th day of
June, 1999, by REALMED CORPORATION, an Indiana corporation ("Borrower") in favor
of NEWCOURT FINANCIAL USA INC., a Delaware corporation ("Lender"),
WITNESSETH THAT:
WHEREAS, Borrower has applied to Lender for credit in the aggregate
principal amount of Seventeen Million Five Hundred Thousand Dollars
($17,500,000.00); and,
WHEREAS, Lender is willing to extend such credit to Borrower on the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
AMOUNT AND TERMS OF LOAN
1.1 Agreement to Loan and Repay. Lender hereby agrees to lend the sum
of Seventeen Million Five Hundred Thousand Dollars ($17,500,000.00) (the "Loan")
to Borrower, and Borrower hereby agrees to repay such amount to Lender, upon the
terms and conditions set forth in this Agreement, that certain Subordinated
Convertible Promissory Note of even date herewith (the "Note") and all other
agreements executed in furtherance of this transaction (together with this
Agreement and the Note, the "Loan Documents"). The Loan shall (a) be subordinate
(in priority but not payment) to certain loans of Borrower, (b) be convertible
into Borrower's common shares, (c) bear interest at the rate of Eight Percent
(8%) per annum, and (d) be payable all as specifically described in the Note.
All salaries, wages and expenses of (or relating to) all personnel of Lender
(other than Robert J. Hicks) who perform services for or on behalf of Borrower
will be allocated on any equitable basis between Lender and Borrower ("Allocated
Expenses"), based on the actual time devoted to such services, and that portion
so allocated to Borrower shall be deemed an advance under the Loan; provided,
however, that Allocated Expenses shall not exceed $750,000 per year and
Allocated Expenses shall be made only with respect to those personnel of Lender
(other than Robert J. Hicks) who devote at least 5% of their annual work time to
performing services for or on behalf of Borrower; provided, further, however,
that the restrictions set forth in the foregoing proviso may be waived by the
Board of Directors of Borrower. Borrower and Lender shall agree upon the
personnel who will perform such services and the amount of their compensation.
Subject to Section 2.2, Lender's obligation (but not its right) to lend funds to
<PAGE>
Borrower shall terminate upon the earlier of the following: (i) the full and
complete exercise all of Lender's conversion rights under the Loan Documents; or
(ii) June 15, 2004.
1.2 Use of Loan. Borrower shall use the Loan solely to pay expenses and
existing and future debt incurred in the ordinary course of its business and in
accordance with the business plan of Borrower attached hereto as Exhibit A, as
amended from time to time in accordance with this Agreement (the "Business
Plan"). Commencing July 1, 2000, Borrower shall regularly (but not less
frequently than every six (6) months) revise and update the Business Plan to
accurately and properly reflect Borrower's good faith, reasonable projections of
the future operations of its business. All changes to the Business Plan shall
require approval of Borrower's Board of Directors and, if Robert J. Hicks
("Hicks") is not the Chief Executive Officer of the Borrower at the time,
approval of Lender, which approval Lender shall not unreasonably withhold.
Within five business days after a new Business Plan has been approved by the
Borrower's Board of Directors, Borrower shall notify Lender of such approval and
provide Lender with a copy of such Business Plan. If Hicks is not Chief
Executive Officer of Borrower, then, within fifteen business days after receipt
of a Business Plan, Lender shall notify Borrower of any objections or questions
that it has with respect to the Business Plan. Within fifteen business days
after the receipt by Lender of any responses by Borrower to Lender's objections
or questions regarding the Business Plan, Lender shall notify Borrower that its
responses were satisfactory or provide Borrower with an explanation of why such
responses were not satisfactory. If Borrower fails to revise and update its
Business Plan at the times and in the manner described in this Section 1.2 and
such failure continues for 30 days after notice from Lender, then Borrower's
right to draw any portion of the Loan shall cease during the continuation of
such failure.
ARTICLE 2
CONDITIONS PRECEDENT
2.1 Conditions Precedent of Loan. Lender's obligations to enter into
this Agreement and to advance the funds contemplated by the Note are subject to
the occurrence, prior to or simultaneously with the closing date, of the
following conditions:
(a) Lender shall have received on or before the closing date, in
form and substance satisfactory to Lender:
(i) This Agreement, duly executed by Borrower and delivered
to Lender;
(ii) The Note, duly executed by Borrower;
(iii) Certified copies of Resolutions of the Board of
Directors of Borrower approving the transaction contemplated by the
Loan Documents;
(iv) A certificate of the Secretary or an Assistant
Secretary of Borrower certifying (A) the names and true
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signatures of the officers of Borrower authorized to execute
the Loan Documents to which Borrower is a party, (B) that
attached thereto is a true and accurate copy of the Articles
of Incorporation and By-laws of Borrower, as amended through
the closing date, (C) that attached thereto are true and
accurate copies of the resolutions described in the
immediately preceding subparagraph, and (D) that the Articles
of Incorporation of Borrower have not been amended since the
date of the last amendment thereto indicated on the
Certificate of Existence described in the next succeeding
subparagraph;
(v) A Shareholder Agreement (in form and substance
satisfactory to Lender), duly executed by Borrower, Robert B.
Peterson, Mark A. Morris, JLT, LP, Gemplus SCA, Gemplus Corp.,
Allan Green, West Plains Investment, Inc., Finno SCA, Candel &
Partners, Rollin M. Dick and Lender;
(vi) A Certificate of Existence from the Secretary of State
of Indiana, dated not more than five days before the closing
date, stating that Borrower is duly organized and qualified in
Indiana;
(vii) Copies of all documents evidencing all
necessary corporate action and government approvals, if any, with
respect to each of the Loan Documents;
(viii) Such other information about Borrower and/or its
assets, business and/or financial condition as Lender may
reasonably request;
(ix) A Registration Rights Agreement (in form and
substance satisfactory to Lender), duly executed by Company,
Lender, and certain other shareholders of the Company;
(x) An Eclipse/RealMed Agreement (in form and substance
satisfactory to Lender), duly executed by Company, Robert B.
Peterson, Mark A. Morris, and certain related entities;
(xi) A Release and Termination Agreement (in form and
substance satisfactory to Lender), duly executed by the Company
and certain shareholders of the Company;
(xii) A Recapitalization Confirmation Agreement (in form
and substance satisfactory to Lender), duly executed by Company
and certain shareholders of the Company; and
(b) Articles of Restatement of the Articles of Incorporation of
the Company (in form and substance satisfactory to Lender) shall
have been duly filed with the Indiana Secretary of State.
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2.2 Conditions Precedent of Advances. Lender's obligation to make
any advance to Borrower of the Loan pursuant to the Note is further subject to
(on the date of each such advance):
(a) Borrower having delivered to Lender a written request for
such advance setting forth the amount of the advance requested and a
description of the intended use of such amounts by Borrower and
attaching thereto a copy of Borrower's then current Business Plan (an
"Advance Request");
(b) Borrower having delivered to Lender a certificate of its
Chief Executive Officer (or other officer reasonably acceptable to
Lender) of Borrower certifying that as of such date (i) all
representations and warranties of Borrower made in this Agreement are
true and correct as if made on such date, (ii) no Event of Default has
occurred and is continuing on such date, and (iii) Borrower has
complied with all of the terms and conditions of the Loan Agreements
required to be complied with by Borrower as of such date (a
"Certificate of Performance"); and
(c) If the Certificate of Performance has been executed by
someone other than Hicks as Chief Executive Officer of Borrower, Lender
having satisfied itself, in its reasonable discretion, that the matters
set forth in the Certificate of Performance are true and correct. If
Hicks is not Chief Executive Officer of Borrower, then, within fifteen
business days after receipt of a Certificate of Performance, Lender
shall notify Borrower of any matters in the Certificate of Performance
that Lender believes are not true and correct or that Certificate of
Performance will be deemed true and correct but only with respect to
the request for advance with which it was submitted. Lender and
Borrower shall endeavor to promptly resolve any disputes regarding the
Certificate of Performance.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Lender,
which warranties and representations shall survive closing and distribution of
the Loan and shall remain in full force and effect until released in writing by
Lender:
3.1 Organization and Existence. Borrower is a corporation duly organized
and validly existing under the laws of the State of Indiana, has the power and
authority to own its property and assets and to carry on its business as now
conducted and proposed to be conducted and is qualified to do business in every
jurisdiction where the nature of the business conducted or the property owned or
leased by it requires such qualification.
3.2 Corporate Powers. Borrower has the corporate power and authority to
execute, deliver and perform its obligations under each of the Loan Documents to
which it is a party. Borrower has obtained and maintains all licenses, permits,
franchises, patents, copyrights, trademarks, trade names, consents and approvals
necessary to own its property and assets and to carry on its business as now
conducted.
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3.3 Authorization. The execution, delivery and performance by Borrower
of each Loan Document to which it is or will be a party, the borrowings
hereunder by Borrower, the execution and delivery of the Note by Borrower, and
the use of the Loan in accordance with this Agreement (a) have been duly
authorized by all requisite corporate action and (b) will not (i) require the
consent or approval of any shareholders, directors, members, partners, or other
principals of Borrower which has not been obtained, (ii) violate (A) any
provision of any law, statute, rule or regulation (including, without
limitation, Regulations U and X of the Board of Governors of the Federal Reserve
System) or organizational documents of Borrower, (B) the Articles of
Incorporation or the Bylaws of Borrower, or any order of any court, or any rule,
regulation or order of any other agency or government binding upon Borrower, or
(C) on and after closing, any provision of any indenture, agreement or other
instrument to which Borrower is a party or by which any of Borrower's assets or
properties are or may be bound, (iii) on and after closing, be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under any such indenture, agreement or other instrument, or (iv)
result in the creation or imposition of any liens (other than as contemplated by
this Agreement) upon any property or assets of Borrower.
3.4 Acquisition of Consents. No authorization, consent, approval,
license, exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary to the valid execution and delivery to Lender
or performance by Borrower of the Loan Documents.
3.5 Enforceability. This Agreement is, and each of the other Loan
Documents when delivered hereunder will be, the legal, valid and binding
obligations of Borrower, enforceable in accordance with their respective terms.
3.6 Capitalization. Borrower's authorized capital stock consists of
200,000,000 shares of common stock, no par value. All of Borrower's capital
stock is free of preemptive rights, except to the extent set forth in the
Shareholder Agreement, dated June 15, 1999, among Borrower, Lender and certain
other shareholders of Borrower. Borrower has issued stock and granted warrants,
options and/or conversion rights to additional shares of common stock to the
persons and in the amounts described in Exhibit B hereto and no other options,
warrants or rights to purchase or convert, nor any agreement or commitment for
the subscription, issuance, redemption, transfer, sale, purchase or acquisition
of, any shares of the capital stock of Borrower not disclosed in this Section
3.6 or in Exhibit B hereto exist.
3.7 Financial Information. All financial statements and other
financial data which have been or will be furnished to Lender by Borrower are,
and will be, true and correct and reflect, or will reflect when delivered in the
future, fairly the financial condition of Borrower and have been or will be
prepared in accordance with Generally Accepted Accounting Principles ("GAAP")
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consistently applied. Borrower has no contingent liabilities, material
liabilities for taxes, unusual forward or long term commitments outside the
ordinary course of business, or material unrealized or anticipated losses from
any unfavorable commitments which are material with respect to the financial
condition, affairs, prospects or business of Borrower, except as reflected or
provided for in such financial statements.
3.8 Litigation. There are not any actions, suits or proceedings at law
or in equity or by or before any court or governmental instrumentality or other
agency or regulatory authority now pending or, to the knowledge of Borrower,
threatened against or affecting Borrower or any property or rights of Borrower.
3.9 Compliance with Laws. Borrower is not in violation of any law,
rule or regulation (including, but not limited to, all environmental laws, rules
or regulations), or in default with respect to any judgment, writ, injunction or
decree of any court or governmental agency or instrumentality.
3.10 Agreements. Borrower is not a party to any agreement or instrument
or subject to any corporate restriction that is expected to have a material and
adverse effect on the business, assets, operations or financial condition of
Borrower. Borrower is not in default in any manner with respect to any provision
of any indenture, agreement or other instrument that would materially and
adversely affect the business, assets, operations or financial condition of
Borrower.
3.11 Federal Reserve Regulations. Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR, Part 221), does not own and has no present
intention of acquiring any such margin stock or a "margin security" within the
meaning of Regulation G of the Board of Governors of the Federal Reserve System
(12 CFR, Part 207). None of the Loan proceeds will be used directly or
indirectly by Borrower for the purpose of purchasing or carrying, or for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry, any such margin security or margin stock or for any other
purpose which might constitute the transaction contemplated hereby a "purpose
credit" within the meaning of said Regulation G or Regulation U, or cause this
Agreement to violate any other regulation of the Board of Governors of the
Federal Reserve System or the Securities and Exchange Act of 1934, as amended,
or any rules or regulations promulgated under either such statute.
3.12 Taxes. Borrower has filed or caused to be filed all federal,
state, local and foreign tax returns which are required to be filed by it, and
has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments received by it, other than any taxes or
assessments the validity of which Borrower is contesting in good faith by
appropriate proceedings and with respect to which Borrower shall, to the extent
required by GAAP applied on a consistent basis, have set aside on its books
adequate reserves.
3.13 ERISA. Borrower is in compliance with the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), to the extent to which it is
applicable to Borrower. Borrower has received no notice that it is not in
compliance with ERISA from the Pension Benefit Guaranty Corporation ("PBGC") or
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any other governmental entity or agency. No reportable event, as the same is
defined by ERISA (a "Reportable Event"), has occurred or is continuing which
could result in an accumulated deficiency under ERISA or liability to the PBGC.
3.14 No Misstatements. No report, financial statement, exhibit or
schedule, warranty or representation furnished on or prior to the date hereof by
or on behalf of Borrower contains any misstatement of fact or omits to state any
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3.15 Solvency. After giving effect to the consummation of the
transaction contemplated hereby, Borrower (a) will be able to pay its debts as
they become due, (b) will have funds and capital sufficient to carry on its
business and all businesses in which it is about to engage, and (c) will own
property having a value both at fair valuation and fair saleable value in the
ordinary course of Borrower's business greater than the amount required to pay
its debts, including, for this purpose, unliquidated and disputed claims.
Borrower will not be rendered insolvent by the execution and delivery of this
Agreement and the consummation of the transaction contemplated hereby.
3.16 Licenses and Approvals. Borrower has obtained all permits,
governmental licenses, registrations, and approvals necessary to carrying out
its business as presently conducted and as required by law or the rules and
regulations of any federal, foreign governmental, state, county, or local
association, corporation or governmental agency, body instrumentality or
commission having jurisdiction over Borrower.
3.17 Liabilities. Except as otherwise disclosed in Schedule 3.17
to this Agreement, Borrower has no payables, liabilities or obligations, either
direct or indirect, absolute, contingent or otherwise, including, without
limitation, any direct or indirect indebtedness, guaranty, endorsement, claim,
loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
3.18 Employment Contracts. Except as otherwise disclosed in Schedule
3.18 to this Agreement, (a) Borrower is not a party to any written or oral
agreement, contract or commitment with any present or former employee or
consultant or for the employment of any person, including any consultant; and
(b) Borrower has no liability or obligation to provide any present or former
employee or consultant with any severance or deferred compensation payments or
any other employment-related benefits following a termination of such employee
or consultant's employment with Borrower. A true and complete copy of each
agreement, contract and commitment listed in Schedule 3.18 has previously been
delivered to Lender.
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3.19 Intellectual Property.
(a) Borrower, in the conduct of its business, has not utilized
and does not utilize any patent, trademark, trade name, service mark,
copyright, software, trade secret or know-how except for those listed in
Schedule 3.19 to this Agreement (the "Intellectual Property").
(b) All of the Intellectual Property listed in Schedule 3.19 to
this Agreement (i) is valid and in full force and effect and any
applications for registrations relating thereto are pending and in good
standing, all without challenge of any kind; and (ii) is owned entirely
by Borrower, without qualification, limitation, burden or encumbrance of
any kind.
(c) Borrower does not infringe upon or unlawfully or wrongfully
use any patent, trademark, trade name, service mark, copyright or trade
secret owned or claimed by another. Borrower is not in default under,
and has not received any notice of any claim of infringement or any
other claim or proceeding relating to any such patent, trademark, trade
name, service mark, copyright or trade secret.
ARTICLE 4
COVENANTS OF BORROWER
4.1 Affirmative Covenants. From the date hereof and thereafter for so
long as any portion of the Loan is outstanding or Borrower is indebted to Lender
under any of the Loan Documents, Borrower shall, unless Lender shall consent
otherwise in writing:
(a) Compliance with Laws. Comply with all applicable laws, rules,
regulations and orders (including, but not limited to, all environmental
laws, rules, regulations and orders) by which it or any of its
properties are bound;
(b) Use of Loan Proceeds. Use the Loan Proceeds only in accordance
with Section 1.2 of this Agreement;
(c) Payment of Obligations. Pay all its indebtedness and
obligations promptly and in accordance with their terms and pay
and discharge promptly all taxes, assessments and governmental charges
or levies imposed upon it or in respect of its property, before the
shall become in default, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might become a
lien or charge upon such properties or any part thereof; provided,
however, that Borrower shall not be required to pay and discharge or
cause to be paid or discharged any such indebtedness or obligations
or any such tax, assessment, charge, levy or claim so long as the
applicability, validity or amount thereof shall be contested in good
faith by appropriate proceedings or actions and Borrower shall set aside
on its books, in accordance with GAAP, adequate reserves, with respect
to any such indebtedness or obligations or any such tax, assessment,
charge, levy or claim so contested;
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(d) Preservation of Existence. Preserve and maintain in full
force and effect its legal existence, rights, and privileges in the
jurisdiction of its organization, preserve and maintain all licenses,
governmental approvals, trademarks, patents, trade secrets, copyrights,
and trade names owned or possessed by it which are necessary or,
in its reasonable business judgment, desirable in view of its business
and operations or the ownership of its properties and qualify or remain
qualified as a foreign entity in each jurisdiction in which such
qualification is necessary or, in its reasonable business judgment,
desirable in view of its business and operations and ownership of its
properties;
(e) Preservation of Property. Maintain and preserve all property
used or useful in the conduct of its business and keep the same in good
repair, working order and condition, and from time to time make, or
cause to be made, all needed and proper repairs, renewals and
replacements thereto, so that the business carried on in connection
therewith may be properly conducted at all times in accordance with
customary and prudent business practices for similar businesses;
(f) Maintenance of Insurance. Maintain insurance with responsible
and reputable insurance companies in such amounts and covering such
risks as is usually carried by companies similarly situated;
(g) Giving of Notice. Provide Lender with notice, promptly, of
any (i) default under any agreements by which Borrower has become
indebted to any other party, and (ii) action, suit or proceeding at
law or in equity or by or before any governmental instrumentality or
other agency which might be reasonably expected to materially impair the
right of Borrower to carry on its business substantially as now being
conducted or to affect materially adversely the financial condition of
Borrower, and of any combination of such actions, suits or proceedings
which taken together might be reasonably expected materially to impair
such right or to affect materially adversely such financial condition;
(h) ERISA Compliance. Comply with the applicable provisions of
ERISA where the failure so to comply might reasonably be expected to
impair Borrower's right to carry on business as now being conducted or
to affect adversely Borrower's financial condition and furnish to
Lender (a) as soon as possible, and in any event within ten days
after any officer of Borrower knows or has reason to know that any
Reportable Event with respect to any "plan" has occurred, as
defined in ERISA (a "Plan"), a statement of a financial officer of
Borrower setting forth the details as to such Reportable Event and the
action that Borrower proposes to take with respect thereto, together
with a copy of the notice of such Reportable Event, if any, given by
PBGC, and (b) promptly after the receipt or filing thereof, a copy
of any notice Borrower may receive from PBGC relating to the intention
of PBGC to terminate any Plan or to appoint a trustee to administer
any Plan and all reports and notices relating to any Reportable Event
or "prohibited transaction" (as defined in ERISA) which Borrower files
under ERISA with the Internal Revenue Service, PBGC, or the United
States Department of Labor;
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(i) Books and Records. Keep adequate records and books of account,
in which complete entries will be made in accordance with GAAP and
with applicable requirements of any governmental authority having
jurisdiction over Borrower, reflecting all financial transactions;
(j) Delivery of Financial Information. Furnish to Lender (a)
within ninety days after the end of each fiscal year of Borrower, a
balance sheet as of the close of such fiscal year and statements of
income, retained earnings and changes in financial position of
Borrower for such fiscal year, all of which are to be audited by a
certified public accountant satisfactory to Lender (provided, however,
that such financial statements for 1999 need only be compiled and
reviewed), (b) within forty-five days after the end of each of the
first three fiscal quarters of each fiscal year of Borrower, a balance
sheet and statements of income, retained earnings and changes in
financial position of Borrower as of the end of each such quarter and
for the then elapsed portion of such fiscal year, certified by a
financial officer of Borrower, and (c) when or before the same are first
due, copies of all federal, state and local income tax returns filed by
Borrower;
(k) Inspections and Copying. Permit, at any reasonable time and
from time to time, Lender or any of its agents or representatives, to
examine and make copies of and abstracts from the records and books of
account of Borrower and visit the properties of Borrower to discuss the
affairs, finances, and accounts of Borrower with any of its officers,
employees and/or certified public accountants; provided, that, Lender
agrees that it will not, except to the extent required by law,
disclose such information to any other person and will require its
agents to keep such information confidential; and
(l) Additional Assurances. From time to time hereafter,
execute and deliver, or cause to be executed and delivered, such
additional instruments, certificates and documents and take all such
actions as Lender shall reasonably request for the purpose of
implementing or effectuating the provisions of the Loan Documents and,
upon the exercise by Lender of any power, right, privilege or remedy
pursuant to the Loan Documents which requires any consent, approval,
registration, qualification or authorization of any governmental
authority or instrumentality, exercise and deliver all applications,
certifications, instruments and other documents and papers that Lender
may be so required to obtain.
4.2 Negative Covenant. From the date hereof and thereafter for so long
as any portion of the Loan is outstanding or Borrower is indebted to Lender
under any of the Loan Documents, Borrower shall not, unless Lender shall consent
otherwise in writing:
(a) Apply any of the proceeds of the Loan to the purchase or
carrying of any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, or any
regulations, interpretations or rulings thereunder; and
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(b) Create, incur, assume, or suffer to exist any lien of any
nature, upon or with respect to any of its properties, now owned or
hereafter acquired, or assign as collateral or otherwise convey as
collateral, any right to receive income, except that the foregoing
restrictions shall not apply to (i) any liens granted to Gemplus Corp.
pursuant to the June 15, 1999 Security Agreement between Gemplus Corp.
and Borrower; and/or (ii) any purchase money security interests granted
by Borrower.
ARTICLE 5
EVENTS OF DEFAULT AND REMEDIES
5.1 Events of Default. Borrower shall be in default under this
Agreement, and each of the Loan Documents, upon the occurrence of any one or
more of the following events (each an "Event of Default"):
(a) If any representation or warranty made in connection with
this Agreement, any of the other Loan Documents, or any report,
certificate, financial statement or other instrument furnished by
Borrower pursuant to this Agreement shall prove to have been false or
misleading in any materially adverse respect;
(b) If Borrower shall fail to make when due the payment of
principal or interest as required by the Note, or any other
amount payable hereunder, whether at the due date thereof or by
acceleration thereof or otherwise;
(c) If Borrower shall fail to duly observe or perform any
material covenant, condition or agreement required to be observed or
performed hereunder or in the Note, and such failure remains uncured
for a period of fifteen days after written notice thereof;
(d) A default by Borrower under any other obligation of
Borrower to Lender whether now existing or hereafter created and such
default continues for thirty days after Borrower's receipt of written
notice specifying such default; provided, however, that if Borrower is
unable to cure such default within such thirty day period, despite
using diligent efforts to do so, such cure period shall be extended so
long as Borrower continues to use diligent efforts to cure the default.
(e) If Borrower shall (i) apply for or consent to the
appointment of, or the taking or possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) admit in writing its inability, or be generally unable,
to pay its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary
case under the United States Bankruptcy Code (as now or hereafter in
effect), (v) file a petition seeking to take advantage as debtor of any
other law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, (vi) fail to
controvert in a timely or appropriate manner, or acquiesce in writing
to, any petition filed against Borrower in an involuntary case under
such Bankruptcy Code, or (vii) take any corporate action (other than to
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controvert any such petition) for the purpose of effecting any of the
foregoing;
(f) If any proceeding or case shall be commenced in any court
of competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding-up, or composition or readjustment of debts, of
Borrower, (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of Borrower or of all or any substantial part of
its assets, or (iii) similar relief in respect of Borrower under any
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, without the consent of Borrower,
and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of thirty
days, or an order for relief against Borrower shall be entered in an
involuntary case under such Bankruptcy Code; or
(g) If Borrower is dissolved, either voluntarily or involuntarily.
5.2 Remedies upon Default. If there is an Event of Default, and
such Event of Default has not been cured within any applicable grace or cure
period, then Lender may, at its option, and by or through a trustee, nominee,
assignee or otherwise, to the fullest extent permitted by law, exercise any or
all of the following rights, remedies and recourses, either successively or
concurrently:
(a) Terminate its obligation to make any further advance under the
Loan;
(b) Declare the Note to be forthwith due and payable, whereupon
the Note shall become forthwith due and payable, both as to principal
and interest, without presentment, demand, protest or any other notice
of any kind, all of which are hereby expressly waived by Borrower,
anything contained herein or in the Notes to the contrary
notwithstanding;
(c) Pursue any rights and remedy set forth in any of the other
Loan Documents; or
(d) Pursue any other rights and remedy set forth herein, at law,
or in equity.
5.3 Non-Waiver. No delay in exercising or failure to exercise by Lender
of any right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Agreement or any law
to Lender may be exercised from time to time and as often as may be deemed
expedient by Lender.
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ARTICLE 6
MISCELLANEOUS TERMS AND CONDITIONS
6.1 Time of Essence. Time is of the essence with respect to all
provisions of this Agreement.
6.2 Attorneys' Fees. In the event of any litigation between the parties
to this Agreement regarding the matters governed hereby or by any of the other
Loan Documents or the enforcement hereof or thereof, the losing party shall
pay to the prevailing party all reasonable expenses and court costs,
including reasonable attorneys' fees, incurred by the prevailing party in
connection with such litigation.
6.3 Severability. If any term or provision of this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
each of the parties shall use its reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
6.4 Further Assurances. Subject to the specific terms of this
Agreement, Borrower shall make, execute, acknowledge and deliver such other
instruments and documents, and take all such other actions, as may be reasonably
required in order to effectuate the purposes of this Agreement and to consummate
the transactions contemplated hereby.
6.5 Waivers, etc. No failure or delay on the part of either party in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement nor
consent to any departure therefrom shall in any event be effective unless the
same shall be in writing and signed by an authorized officer of each of the
parties, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given.
6.6 Entire Agreement. This Agreement and the other Loan Documents
contain the final and complete understanding of the parties with respect to
their subject matter. This Agreement supersedes all prior agreements and
understandings between the parties, whether written or oral, with respect to the
subject matter hereof.
6.7 Counterparts. For the convenience of the parties, this Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original but all of which together shall be one and the same instrument.
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6.8 Amendment. This Agreement may be amended only by a written
instrument duly executed by an authorized officer of each of the parties.
6.9 Notices. Unless expressly provided herein, all notices, claims,
certificates, requests, demands and other communications hereunder shall be in
writing and shall be deemed to be duly given (i) when personally delivered or
(ii) if mailed, registered or certified mail, postage prepaid, return receipt
requested, on the date the return receipt is executed or the letter refused by
the addressee or its agent or (iii) if sent by overnight courier which delivers
only upon the signed receipt of the addressee, on the date the receipt
acknowledgment is executed or refused by the addressee or its agent:
(i) if to the Borrower:
RealMed Corporation
Suite 350
10333 N. Meridian Street
Indianapolis, Indiana 46290
Attn: Robert J. Hicks, Chief Executive Officer
Facsimile Number: (317) 580-0027
with copies to:
Robert S. Wynne
Baker & Daniels
Suite 2700
300 N. Meridian Street
Indianapolis, Indiana 46204-1782
Facsimile Number: (317) 237-1000
(ii) if to the Lender:
Newcourt Financial USA Inc.
Two Gatehall Drive
Parsippany, New Jersey 07054-4525
Attn: Bradley D. Nullmeyer
Facsimile Number: (973) 889-5235
with copies to:
Eric R. Johnson
Sommer & Barnard, PC
4000 Bank One Tower
Indianapolis, Indiana 46204
Facsimile Number: (317) 236_9802
or to such other address as may have previously furnished to the other party in
writing in the manner set forth above.
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6.10 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF INDIANA.
6.11 Headings. The headings in this Agreement are for purposes of
convenience of reference, shall not be deemed to constitute a part of this
Agreement and shall not be considered in construing the terms of this Agreement.
6.12 Parties Bound. This Agreement is binding on and shall inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns as permitted by
this Agreement.
6.13 Construction. This Agreement shall not be strictly construed
against any party. This Agreement is executed in conjunction with the other Loan
Documents and is to be construed harmoniously therewith. If there is any
conflict between the terms of this Agreement and any of the other Loan
Documents, the terms selected by Lender in its sole subjective discretion shall
be controlling.
6.14 Gender. Wherever the context shall so require, all words in the
masculine gender shall be deemed to include the feminine or neuter gender; all
singular words shall include the plural; and, all plural words shall include the
singular.
IN WITNESS WHEREOF, Lender and Borrower have caused this Agreement to
be executed by its duly authorized officer as of the date first written above.
LENDER: BORROWER:
NEWCOURT FINANCIAL USA INC. REALMED CORPORATION
By: /s/ Robert J. Hicks By: /s/ Robert B. Peterson
Robert J. Hicks Robert B. Peterson
Title: Executive Vice President Title: President
<PAGE>
Exhibit 4.02
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of June 15,
1999, is among Robert B. Peterson, Mark A. Morris, JLT, LP, Gemplus SCA, Gemplus
Corp., West Plains Investment, Inc., Finno SCA, Candel & Partners, Allan Green
(the preceding nine individuals and entities are hereafter referred to as the
"Non-Newcourt Shareholders"), Newcourt Financial USA Inc., a Delaware
corporation (the "Lender") and RealMed Corporation, an Indiana corporation (the
"Company").
WHEREAS, the Lender has purchased from the Company contemporaneously
with the execution of this Agreement a convertible subordinated promissory note
in a maximum principal amount of $17,500,000 (the "Note");
WHEREAS, the Note is convertible by its terms into common shares of the
Company (the "Company Common Stock");
WHEREAS, the parties hereto desire to enter into this Agreement which
sets forth the terms of certain registration rights applicable to the
Registrable Securities (as defined below).
NOW, THEREFORE, upon the terms and conditions, and the mutual promises
herein contained, and for good and valuable consideration, the receipt and
adequacy of which are acknowledged, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following
initially capitalized terms shall have the following meanings:
(a) "Affiliate" means, with respect to any person, any other person
who, directly or indirectly, is in control of, is controlled by or is under
common control with the former person.
(b) "Holder" and "Holders" means the parties hereto (other than the
Company) or their respective successors, permitted transferees or assignees.
(c) "In Registration" means, with respect to the Company, that there
has been an organizational meeting with underwriters regarding a proposed public
offering of the Company's securities.
(d) "Registrable Securities" means Company Common Stock received upon
conversion of the Note and the Company Common Stock currently owned by the
Non-Newcourt Shareholders and Lender, as shown on the attached Exhibit A, any
stock or other securities into which or for which such Company Common Stock may
hereafter be changed, converted or exchanged, and any other securities issued to
holders of such Company Common Stock (or such shares into which or for which
such shares are so changed, converted or exchanged) upon any reclassification,
<PAGE>
share combination, share subdivision, share dividend, merger, consolidation or
similar transactions or events, provided that any such securities shall cease to
be Registrable Securities (i) if a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities are sold pursuant to such registration statement, or (ii) if
such securities shall have been distributed pursuant to Rule 144, Rule 144A or
Rule 145(d).
(e) "Registration Expenses" means all reasonable expenses in connection
with any registration of securities pursuant to this Agreement including,
without limitation, the following: (i) SEC filing fees; (ii) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Registrable Securities to be disposed of
under the Securities Act; (iii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to any Holders, underwriters and dealers and all
expenses incidental to delivery of the Registrable Securities; (iv) the cost of
producing blue sky or legal investment memoranda; (v) all expenses in connection
with the qualification of the Registrable Securities to be disposed of for
offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters or Holders in connection with such
qualification and in connection with any blue sky and legal investments surveys;
(vi) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Registrable Securities to be disposed of; (vii) transfer agents', depositaries'
and registrars' fees and the fees of any other agent appointed in connection
with such offering; (viii) all security engraving and security printing
expenses; (ix) all fees and expenses payable in connection with the listing of
the Registrable Securities on each securities exchange or inter-dealer quotation
system on which a class of common equity securities of the Company is then
listed; and (x) courier, overnight, and delivery expenses; provided further that
Registration Expenses shall not include any underwriting discounts, commissions
or fees attributable to the sale of the Registrable Securities.
(f) "Restricted Securities" has the same meaning as in Rule 144(a)
(3) (as hereinafter defined).
(g) "Rule 144" means Rule 144 promulgated under the Securities Act,
or any successor rule to similar effect.
(h) "Rule 144A" means Rule 144A promulgated under the Securities Act,
or any successor rule to similar effect.
(i) "Rule 145" means Rule 145 promulgated under the Securities Act,
or any successor rule to similar effect.
(j) "SEC" means the United States Securities and Exchange Commission.
(l) "Securities Act" means the Securities Act of 1933, as amended,
or any successor statute, and the rules and regulations of the SEC promulgated
thereunder.
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2. Piggyback Registration. If the Company at any time proposes to
register any of its Common Stock or any other of its common equity securities,
including any security convertible into or exchangeable for any of its common
equity securities (collectively, "Other Securities") under the Securities Act
(other than a registration described in paragraph (c) of this Section), whether
or not for sale for its own account, in a manner which would permit registration
of Registrable Securities for sale for cash to the public under the Securities
Act, it will each such time give prompt written notice to the Holders of its
intention to do so at least 20 business days prior to the anticipated filing
date of the registration statement relating to such registration. Such notice
shall offer Holders the opportunity to include in such registration statement
any or all of the Registrable Securities owned by each such Holder. Upon the
receipt of the Company's notice (which request shall specify the number of
Registrable Securities intended to be disposed of and the intended method of
disposition thereof), the Company shall effect, in the manner set forth in
Section 4, in connection with the registration of the Other Securities, the
registration under the Securities Act of all Registrable Securities which
Company has been so requested to register, to the extent required to permit the
disposition (in accordance with such intended methods thereof) of the
Registrable Securities so requested to be registered, provided that:
(a) if at any time after giving written notice of its intention to
register other securities and prior to the effective date of such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to the Holders and, thereupon, (A) in the case of a
determination not to register, the Company shall be relieved of its obligation
to register any Registrable Securities in connection with such registration and
(B) in the case of a determination to delay such registration, the Company shall
be permitted to delay registration of any Registrable Securities requested to be
included in such registration for the same period as the delay in registering
such Other Securities;
(b) if the registration referred to in the first sentence of this
Section 2 is to be an underwritten primary registration on behalf of the
Company, and the managing underwriter advises the Company in writing (with a
copy to the Holders) that, in such firm's good faith opinion, such offering
would be materially and adversely affected by the inclusion therein of the
Registrable Securities requested to be included therein, the Company shall
include in such registration: (1) first, all securities Company proposes to sell
for its own account ("Company Securities"), (2) second, up to the full number of
Registrable Securities held by Lender (or its successor, or permitted
transferees or assignees) (the "Newcourt Holders") requested to be included in
such registration, (3) third, up to the full number of Registerable Securities
held by the Non-Newcourt Shareholders requested to be included in such
registration, and (4) fourth, other securities, if any, requested to be included
therein by the holders thereof (the "Other Holders"), in excess of the number or
dollar amount of securities the Company proposes to sell which, in the
good-faith opinion of the managing underwriter, can be so sold without so
materially and adversely affecting such offering (and, if less than the full
number of such Registrable Securities in either clause (2) or clause (3),
allocated pro rata among the Holders of such Registrable Securities subject to
such clause on the basis of the number of securities requested to be registered
in such registration by each such Holder which is subject to such clause); and
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<PAGE>
(c) the Company shall not be required to effect any registration of
Registrable Securities under this Section 2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock option or other
executive or employee benefit or compensation plans.
3. Expenses, Underwriting Discounts, Commissions and Fees. The Company
agrees to pay all Registration Expenses with respect to an offering pursuant to
Section 2 hereof, provided that, the Company shall have no obligation to pay any
underwriting discounts, commissions or fees (including, but not limited to, fees
for Holders' counsel) relating to Registrable Securities. All such underwriting
discounts, commissions and fees of each Holder shall be borne by that Holder.
4. Registration and Qualifications. If and whenever the Company is
required to use its reasonable best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 2 hereof,
the Company shall:
(a) prepare and file a registration statement under the Securities Act
relating to the Registrable Securities to be offered as soon as practicable, but
in no event later than 30 days (45 days if the applicable registration form is
other than Form S-3 or a successor form thereto) after the date notice is given,
and use its reasonable best efforts to cause the same to become effective within
60 days after the date notice is given (90 days if the applicable registration
form is other than Form S-3 or a successor form thereto);
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for 90 days (or,
in the case of an underwritten offering, such shorter time period as the
underwriters may require);
(c) furnish to the Holders and to any underwriter of such Registrable
Securities such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents, as the Holders or such underwriter may reasonably request in order to
facilitate the public sale of the Registrable Securities, and a copy of any and
all transmittal letters or other correspondence to, or received from the SEC or
any other governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange) relating to
such offering;
(d) use its reasonable best efforts to register or qualify all
Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as may be necessary to offer
and sell the Registrable Securities in those jurisdictions, and use its
reasonable best efforts to obtain all appropriate registration, permits and
consents required in connection therewith, and do any and all other acts and
things which may be necessary or advisable to enable the Holders or any such
underwriter to consummate the disposition in such jurisdictions of its
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<PAGE>
Registrable Securities covered by such registration statement; provided that the
Company shall not for any such purpose be required to register or qualify
generally to do business as a foreign corporation in any jurisdiction wherein it
is not so qualified, or to subject itself to taxation in any such jurisdiction,
or to consent to general service of process in any such jurisdiction;
(e) (i) furnish an opinion of counsel for the Company addressed to the
underwriters and the Holders and dated the date of the closing under the
underwriting agreement (if any) (or if such offering is not underwritten, dated
the effective date of the registration statement), and (ii) furnish a letter
addressed to the Holders, if permissible under applicable accounting practices,
and signed by the independent public accountants who have audited the Company's
financial statements included in such registration statement, in each such case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and such other
matters as the Holders may reasonably request and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements;
(f) immediately notify each Holder of Registrable Securities included
in such registration (each a "Selling Holder") in writing (i) at any time when a
prospectus relating to a registration pursuant to Section 2 or 3 hereof is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of any material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) of any request by the SEC or any other regulatory body
or other body having jurisdiction in respect of any amendment of or supplement
to any registration statement or other document relating to such offering, and
in either such case (i) or (ii) at the request of the Holders prepare and
furnish to the Holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading;
(g) furnish unlegended certificates representing ownership of
the Registrable Securities being sold in such denominations as shall be
requested by the Holders or the underwriters; and
(h) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC relating to the registration and
distribution of the Registrable Securities, and take all other reasonable steps
necessary and appropriate to effect all registrations in the manner contemplated
by this Agreement.
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<PAGE>
5. Underwriting; Due Diligence.
(a) If requested by the underwriters for any underwritten offering of
Registrable Securities pursuant to a registration requested under this
Agreement, the Company shall enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such representations
and warranties by the Company and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distribution, including, without limitation, indemnities and contribution
substantially to the effect and to the extent provided in Section 7 hereof and
the provision of opinions of counsel and accountants' letters to the effect and
to the extent provided in Section 5(e) hereof. The Selling Holders on whose
behalf the Registrable Securities are to be distributed by such underwriters
shall be parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters, shall also be made to and for the benefit of
such Selling Holders. Such underwriting agreement shall also contain such
representations and warranties by the Selling Holders on whose behalf the
Registrable Securities are to be distributed as are customarily contained in
underwriting agreements with respect to secondary distributions.
(b) In the event that any registration pursuant to Section 2 shall
involve, in whole or in part, an underwritten offering, Company may require the
Registrable Securities requested to be registered pursuant to Section 2 to be
included in such underwriting on the same terms and conditions as shall be
applicable to the other securities being sold through underwriters under such
registration. If requested by the underwriters for such underwritten offering,
the Selling Holders on whose behalf the Registrable Securities are to be
distributed shall enter into an underwriting agreement with such underwriters,
such agreement to contain such representations and warranties by the Selling
Holders and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including
without limitation, indemnities and contribution substantially to the effect and
to the extent provided in Section 6 hereof. Such underwriting agreement shall
also contain such representations and warranties by Company and such other
person or entity for whose account securities are being sold in such offering as
are customarily contained in underwriting agreements with respect to secondary
distributions.
(c) In connection with the preparation and filing of each registration
statement registering Registrable Securities under the Securities Act, the
Company shall give the Holders and the underwriters, if any, and their
respective counsel and accountants, such reasonable and customary access to its
books and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified the
Company's financial statements as shall be necessary, in the opinion of the
Holders and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
6. Indemnification and Contribution.
(a) In the case of each offering of Registrable Securities made
pursuant to this Agreement, the Company agrees to indemnify and hold harmless
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<PAGE>
each Holder, its officers and directors, each underwriter of Registrable
Securities so offered and each person, if any, who controls any of the foregoing
persons within the meaning of Section 15 of the Securities Act, from and against
any and all claims, liabilities, losses, damages, expenses and judgments, joint
or several, to which they or any of them may become subject, under the
Securities Act or otherwise, including any amount paid in settlement of any
litigation commenced or threatened, and shall promptly reimburse them, as and
when incurred, for any reasonable legal or other expenses incurred by them in
connection with investigating any claims and defending any actions, insofar as
such losses, claims, damages, liabilities or actions shall arise out of, or
shall be based upon, any untrue statement or alleged untrue statement of a
material fact contained in the registration statement (or in any preliminary or
final prospectus included therein, or any amendment thereto or supplement
thereto, or in any document incorporated by reference therein, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading); provided,
however, that the Company shall not be liable to a particular Holder in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue statement, or
any omission, if such statement or omission shall have been made in reliance
upon and in conformity with information relating to such Holder furnished to the
Company in writing by or on behalf of such Holder specifically for use in the
preparation of the registration statement (or in any preliminary or final
prospectus included therein) or any amendment thereof or supplement thereto.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of a Holder and shall survive the transfer of
such securities. The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to each Holder, its officers and
directors, underwriters of the Registrable Securities or any controlling person
of the foregoing; provided, further, that, as to any underwriter or any person
controlling any underwriter, this indemnity does not apply to any loss,
liability, claim, damage or expense arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary prospectus if a copy of a prospectus was not sent or given by or on
behalf of an underwriter to such person asserting such loss, claim, damage,
liability or action at or prior to the written confirmation of the sale of the
Registrable Securities as required by the Securities Act and such untrue
statement or omission had been corrected in such prospectus.
(b) In the case of each offering made pursuant to this Agreement, each
Holder of Registrable Securities included in such offering, by exercising its
registration rights hereunder, agrees to indemnify and hold harmless the
Company, its officers and directors and each person, if any, who controls any of
the foregoing (within the meaning of Section 15 of the Securities Act), from and
against any and all claims, liability, losses, damages, expenses and judgments,
joint or several, to which they or any of them may become subject, under the
Securities Act or otherwise, including any amount paid in settlement of any
litigation commenced, or threatened, and shall promptly reimburse them, as and
when incurred, for any legal or other expenses incurred by them in connection
with investigating any claims and defending any actions, insofar as any such
losses, claims, damages, liabilities or actions shall arise out of, or shall be
based upon, any untrue statement or alleged untrue statement of a material fact
contained in the registration statement (or in any preliminary or final
prospectus included therein) or any amendment thereof or supplement thereto, or
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<PAGE>
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
in each case only to the extent that such untrue statement of a material fact is
contained in, or such material fact is omitted from, information relating to
such Holder furnished in writing to the Company by or on behalf of such Holder
specifically for use in the preparation of such registration statement (or in
any preliminary or final prospectus included therein). The foregoing indemnity
is in addition to any liability which such Holder may otherwise have to the
Company, or any of its directors, officers or controlling persons; provided,
however, that, as to any underwriter or any person controlling any underwriter,
this indemnity does not apply to any loss, liability, claim, damage or expense
arising out of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission in any preliminary prospectus if a copy of a
prospectus was not sent or given by or on behalf of an underwriter to such
person asserting such loss, claim, damage, liability or action at or prior to
the written confirmation of the sale of the Registrable Securities as required
by the Securities Act and such untrue statement or omission had been corrected
in such prospectus. In no event, however, shall a Holder be required to pay
pursuant to this Section 6(b) an amount in the aggregate in excess of the net
proceeds received by such Holder in connection with the sale of Registrable
Securities in the offering which is the subject of such loss, claim, damage or
liability.
(c) Procedure for Indemnification. Each party indemnified under
paragraph (a) or (b) of this Section 6 shall, promptly after receipt of notice
of any claim or the commencement of any action against such indemnified party in
respect of which indemnity may be sought, notify the indemnifying party in
writing of the claim or the commencement thereof; provided that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party on account of the indemnity agreement contained
in paragraph (a) or (b) of this Section 7, except to the extent the indemnifying
party was actually prejudiced by such failure, and in no event shall relieve the
indemnifying party from any other liability which it may have to such
indemnified party. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided that each indemnified party, its officers and
directors, if any, and each person, if any, who controls such indemnified party
within the meaning of the Securities Act, shall have the right to employ
separate counsel reasonably approved by the indemnifying party to represent them
if the named parties to any action (including any impleaded parties) include
both such indemnified party and an indemnifying party or an affiliate of an
indemnifying party, and such indemnified party shall have been advised by
counsel either (i) that there may be one or more legal defenses available to
such indemnified party that are different from or additional to those available
to such indemnifying party or such affiliate or (ii) a conflict may exist
between such indemnified party and such indemnifying party or such affiliate,
and in that event the fees and expenses of one such separate counsel for all
8
<PAGE>
such indemnified parties shall be paid by the indemnifying party. An indemnified
party will not enter into any settlement agreement which is not approved by the
indemnifying party, which approval shall not to be unreasonably withheld. The
indemnifying party may not agree to any settlement of any such claim or action
which provides for any remedy or relief other than monetary damages for which
the indemnifying party shall be responsible hereunder, without the prior written
consent of the indemnified party, which shall not be unreasonably withheld, and
any such settlement agreement shall contain a complete and unconditional release
from liability of each indemnified party. Notwithstanding the foregoing, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by this Section 7, the indemnifying party agrees that it shall be liable for any
settlement effected without its written consent if (i) such settlement is
entered into more than 30 business days after receipt by such indemnifying party
of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of settlement. In any action hereunder as to which the indemnifying party
has assumed the defense thereof with counsel reasonably satisfactory to the
indemnified party, the indemnified party shall continue to be entitled to
participate in the defense thereof, with counsel of its own choice, but, except
as set forth above, the indemnifying party shall not be obligated hereunder to
reimburse the indemnified party for the costs thereof. In all instances, the
indemnified party shall cooperate fully with the indemnifying party or its
counsel in the defense of each claim or action.
If the indemnification provided for in this Section 6 shall for any
reason be unavailable to an indemnified party in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to herein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified party on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party on the one hand or the indemnified party on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission, but not by
reference to any indemnified party's stock ownership in Company. In no event,
however, shall a Holder be required to contribute in excess of the amount of the
net proceeds received by such Holder in connection with the sale of Registrable
Securities in the offering which is the subject of such loss, claim, damage or
liability. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this paragraph shall be deemed to include, for purposes of this
paragraph, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
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<PAGE>
7. Rules 144 and 145. Company shall take such measures and file such
information, documents and reports as shall be required by the SEC as a
condition to the availability of Rules 144 and 145 (or any successor
provisions).
8. No Transfer of Registration Rights.
(a) Holders may not transfer any portion of their rights under this
Agreement except that Holders may transfer such rights to transferees who agree
in writing to the terms and conditions of this Agreement.
(b) No transfer of registration rights pursuant to this Section shall
be effective unless Company has received written notice of an intention to
transfer at least 10 days prior to Holder's successor entering into a binding
agreement to transfer Registrable Securities. Such notice need not contain
proposed terms or name a proposed transferee. On or before the time of the
transfer, Company shall receive a written notice stating the name and address of
any transferee and identifying the amount of Registrable Securities with respect
to which the rights under this Agreement are being transferred and the nature of
the rights to transferred.
(c) After any such transfer, Holder shall retain its rights under this
Agreement with respect to all other Registrable Securities owned by Holder.
(d) Upon the request of Holder's successor, Company shall execute a
Registration Rights Agreement with such transferee or a proposed transferee
substantially similar to this Agreement.
9. Miscellaneous.
(a) Injunctions. Each party acknowledges and agrees that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
Therefore, each party shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court having jurisdiction, such remedy
being in addition to any other remedy to which such party may be entitled at law
or in equity. Each party hereby irrevocably waives trial by jury.
(b) Severability. If any term or provision of this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
each of the parties shall use its reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
(c) Further Assurances. Subject to the specific terms of this
Agreement, each of the parties hereto shall make, execute, acknowledge and
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<PAGE>
deliver such other instruments and documents, and take all such other actions,
as may be reasonably required in order to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.
(d) Waivers, etc. No failure or delay on the part of either party (or
the intended third-party beneficiaries referred to herein) in exercising any
power or right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No
modification or waiver of any provision of this Agreement nor consent to any
departure therefrom shall in any event be effective unless the same shall be in
writing and signed by an authorized officer of each of the parties, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.
(e) Entire Agreement. This Agreement contains the final and complete
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior agreements and understandings between the parties, whether
written or oral, with respect to the subject matter hereof.
(f) Counterparts. For the convenience of the parties, this Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original but all of which together shall be one and the same instrument.
Any facsimile transmission of a signed counterpart of this Agreement shall be
deemed to be an original counterpart and all signatures appearing thereon shall
be deemed to be originals.
(g) Amendment. This Agreement may be amended only by a written
instrument duly executed by an authorized officer of each of the parties.
(h) Notices. Unless expressly provided herein, all notices, claims,
certificates, requests, demands and other communications hereunder shall be in
writing and shall be deemed to be duly given (i) when personally delivered or
(ii) if mailed, registered or certified mail, postage prepaid, return receipt
requested, on the date the return receipt is executed or the letter refused by
the addressee or its agent or (iii) if sent by overnight courier which delivers
only upon the signed receipt of the addressee, on the date the receipt
acknowledgment is executed or refused by the addressee or its agent:
(i) if to Robert B. Peterson:
RealMed Corporation
Suite 350
10333 N. Meridian Street
Indianapolis, Indiana 46290
Attn: Robert B. Peterson
Facsimile Number: (317) 580-0027
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(ii) if to Mark A. Morris:
RealMed Corporation
Suite 350
10333 N. Meridian Street
Indianapolis, Indiana 46290
Attn: Mark A. Morris
Facsimile Number: (317) 580-0027
(iii) if to JLT:
Conseco Companies
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attn: Rollin M. Dick
Facsimile Number: (317) 817-6327
(iv) if to Gemplus SCA:
Avenue du Pic de Bertange
B.P. 100
13881 Gemenos Cedex
France
Attn: Legal Dept.
Facsimile Number: 011-33-4-42-36-59-27
with copies to:
Gemplus Corp.
Suite 300
3 Lagoon Drive
Redwood City, California 94065-1566
Attn: Legal Dept.
Facsimile Number: (650) 654-2920
(v) if to Gemplus Corp.:
Suite 300
3 Lagoon Drive
Redwood City, California 94065-1566
Attn: Legal Dept.
Facsimile Number: (650) 654-2920
(vi) if to West Plains Investment, Inc.:
c/o Candel & Partners
4 Avenue Hoche
75008 Paris, France
Attn: Allan Green
Facsimile Number: 011-331-56-791029
12
<PAGE>
(vii) if to Finno SCA:
c/o Candel & Partners
4 Avenue Hoche
75008 Paris, France
Attn: Allan Green
Facsimile Number: 011-331-56-791029
(viii) If to Candel & Partners:
4 Avenue Hoche
75008 Paris, France
Attn: Allan Green
Facsimile Number: 011-331-56-791029
(ix) if to Allan Green:
4 Avenue Hoche
75008 Paris, France
Facsimile Number: 011-331-56-791029
(x) if to the Lender:
Newcourt Financial USA Inc.
Two Gatehall Drive
Parsippany, New Jersey 07054-4525
Attn: Bradley D. Nullmeyer
Facsimile Number: (973) 889-5235
with copies to:
Eric R. Johnson
Sommer & Barnard, PC
4000 Bank One Tower
Indianapolis, Indiana 46204
Facsimile Number: (317) 236-9802
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<PAGE>
(xi) if to the Company:
RealMed Corporation
Suite 350
10333 N. Meridian Street
Indianapolis, Indiana 46290
Attn: Robert J. Hicks, Chief Executive Officer
Facsimile Number: (317) 580-0027
with copies to:
Robert S. Wynne
Baker & Daniels
Suite 2700
300 N. Meridian Street
Indianapolis, Indiana 46204-1782
Facsimile Number: (317) 237-1000
(vi) if to a successor, transferee or assignee, Holder of
Registrable Securities, to the address provided by such
Holder;
or to such other address as may have previously furnished to the other party in
writing in the manner set forth above.
(i) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF INDIANA.
(j) Assignment; Beneficiaries. Except as provided herein, the parties
may not assign their rights under this Agreement. The Company may not delegate
its obligations under this Agreement. Notwithstanding the foregoing, it is
expressly understood, intended and agreed by the parties hereto that this
Agreement is intended to benefit the Holders and that each of the Holders,
together with such Holder's permitted successors, assigns and transferees, shall
be a beneficiary of the respective rights, obligations, duties, privileges and
responsibilities under this Agreement and shall be entitled to enforce the
provisions hereof as though such Holder were a party hereto.
(k) Headings. The headings in this Agreement are for purposes of
convenience of reference only, shall not be deemed to constitute a part of this
Agreement and shall not be considered in construing the terms of this Agreement.
(l) Gender. Wherever the context shall so require, all words in the
masculine gender shall be deemed to include the feminine or neuter gender; all
singular words shall include the plural; and, all plural words shall include the
singular.
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(m) Construction. This Agreement shall not be strictly construed
against any party.
(n) Attorneys' Fees. In the event of any litigation among any of the
parties to this Agreement regarding the matters governed hereby or the
enforcement hereof, the losing party shall pay to the prevailing party all
reasonably expenses and costs, including reasonable attorneys' fees, incurred by
the prevailing party in connection with such litigation.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
GEMPLUS SCA GEMPLUS CORP.
By: /s/ Patrick Jones By: /s/ Mark McLaughlin
Patrick Jones, CFO Mark McLaughlin, VP and General Counsel
Printed Name, Title Printed Name, Title
WEST PLAINS INVESTMENT, INC. FINNO SCA
By: /s/ Dr. Andreas Renggli By: /s/ Allan Green
Dr. Andreas Renggli, Director Allan Green, General Manager
Printed Name, Title Printed Name, Title
CANDEL & PARTNERS JLT, LP
By: /s/ Allan Green By: /s/ Rollin M. Dick
Allan Green, CEO Rollin M. Dick, General Partner
Printed Name, Title Printed Name, Title
________________________________
Allan Green
(Signatures continued on next page)
<PAGE>
(Signatures continued from preceding page)
/s/ Robert B. Peterson
Robert B. Peterson
/s/ Mark A. Morris
Mark A. Morris
NEWCOURT FINANCIAL USA INC.
By: /s/ Robert J. Hicks
Robert J. Hicks, Executive Vice President
REALMED CORPORATION
By: /s/ Robert B. Peterson
Robert B. Peterson, President
<PAGE>
Exhibit 4.03
SHAREHOLDER AGREEMENT
This Agreement, made as of June 15, 1999, is entered into by and among
RealMed Corporation (the "Company"), an Indiana corporation, Robert B. Peterson
("Peterson"), Mark A. Morris ("Morris"), JLT, LP, an Indiana limited partnership
("JLT"), Gemplus SCA, Gemplus Corp., Allan Green, West Plains Investment, Inc.,
Finno SCA, and Candel & Partners (collectively, the foregoing six persons are
sometimes hereinafter referred to as the "French Shareholders") and Newcourt
Financial USA Inc. ("Newcourt") (individually, each a "Current Shareholder" and
collectively the "Current Shareholders") and Rollin M. Dick.
RECITALS:
A. Immediately upon the closing (the "Closing Time") of the Loan
Agreement described below and the related transactions which are being
consummated contemporaneously therewith, the authorized capital stock of the
Company will consist of 200,000,000 shares of common stock without par value
(the "Common Shares"), of which the Current Shareholders will own, or have the
right to acquire, the number of shares set forth on Exhibit A.
B. The Company and Newcourt intend to enter into a Loan Agreement
pursuant to which, among other things, Newcourt will commit, subject to certain
terms and conditions, to loan up to $17,500,000 to the Company. Newcourt will
not enter into the Loan Agreement unless, among other things, this Agreement is
executed and delivered by the Company and the Current Shareholders.
C. The Company, Peterson, Morris, JLT and the French Shareholders
believe that it is desirable for the Company and Newcourt to enter into the Loan
Agreement and are, therefore, willing to enter into this Agreement in order to
induce Newcourt to enter into the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and promises contained in this Agreement, the parties hereby
agree as follows:
Section 1. Definitions. The following terms and words, as used in
this Agreement, shall have the meanings ascribed to them below:
(a) The term "Affiliate" means, with respect to any specified Person,
any member of the specified Persons family and any other Person controlling,
controlled by, or under common control with, (i) the specified Person, and/or
(ii) any member of the specified Person's family.
(b) The term "Board of Directors" means the Board of Directors of
the Company as such Board shall exist from time to time.
(c) The term "Initial Public Offering" means the initial public
offering of Common Shares of the Company pursuant to an effective registration
statement under the Securities Act of 1933 which generates gross proceeds to the
Company of at least $50,000,000 or involves the issuance of Common Shares of the
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Company at least equal to 20% of the then outstanding Common Shares.
(d) The term "Involuntary Transfer" means any transfer of Shares made
contrary to or without the free will, choice or consent of a Shareholder,
including, without limitation, a transfer to a trustee in bankruptcy, a
receiver, a judgment creditor, a lienholder, the holder of a security interest
or other encumbrance, a transfer pursuant to a divorce decree or other transfer
made pursuant to a judicial order or legal process, and a transfer to a personal
representative or other fiduciary upon the death or incapacity of a Shareholder.
(e) The term "Involuntary Transfer Date" means the date upon which an
Involuntary Transfer of Shares occurs.
(f) The term "Person" includes, but is not limited to, an individual, a
fiduciary, a trust, an estate, a partnership, an association, a corporation, and
any other entity.
(g) The term "Prorata Portion" means, with respect to any Remaining
Shareholder at any point in time, a fraction (i) the numerator of which is equal
to the sum of (A) the Shares then owned by such Remaining Shareholder plus (B)
the number of additional Shares which such Remaining Shareholder would be able
to acquire if it were fully to exercise all of its option, warrant and
conversion rights (such sum being referred to as the "Remaining Shareholder's
Total Shares") and (ii) the denominator of which is the aggregate of all
Remaining Shareholder's Total Shares.
(h) The term "Purchase Price" means the price to be paid for the
purchase of Shares as determined pursuant to Section 6.
(i) The terms "Remaining Shareholder" and "Remaining Shareholders"
mean, in any particular instance, the Shareholder or Shareholders, as
applicable, who is (are), at the relevant time, still holders of Shares and is
(are) not the Shareholder desiring to make a Voluntary Transfer or making an
Involuntary Transfer, as applicable.
(j) The terms "Share" and "Shares" mean (i) capital stock of the
Company now issued and outstanding, (ii) any and all capital stock which may
later be issued, and (iii) any and all shares of stock or other securities into
which the issued and outstanding capital stock may be converted in any corporate
reorganization including, but not limited to, a sale, exchange, recapitalization
or merger, which in any event are at any time owned of record or beneficially by
any of the Current Shareholders.
(k) The terms "Shareholder" and "Shareholders" mean the Current
Shareholders and any and all other persons who, from time to time, own any
Shares.
(l) The term "Special Transaction" means any of the transactions
requiring the approval of the Company's shareholders pursuant to Article V of
the Company's Articles of Incorporation.
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(m) The term "Transferor" means any person(s) who sell(s) Shares
pursuant to this Agreement, whether such person is a Shareholder or the
transferee of an Involuntary Transfer.
(n) The term "Transferee" has the meaning set forth in Section 7.
(o) The term "Voluntary Transfer" means any transfer of Shares
(including, but not limited to, a sale, gift, transfer to a trust, encumbrance,
grant or pledge) which is not an Involuntary Transfer.
Section 2. Representations, Warranties and Covenants.
(a) Each of JLT, Newcourt and the French Shareholders represents and
warrants to the other Current Shareholders that, as of the Closing Time, the
information set forth on Exhibit A to this Agreement with respect to such
Current Shareholder's ownership of, and rights with respect to, Shares is true,
accurate and complete and such Current Shareholder owns no Shares or other
securities of the Company and has no rights with respect thereto, except as
disclosed on Exhibit A. Peterson and Morris, jointly and severally, represent
and warrant to the other Current Shareholders that, as of the Closing Time, the
information on Exhibit A to this Agreement is true, accurate and complete to
within a margin of error equal to 50,000 Shares and no person, other than those
identified on Exhibit A, owns any Shares or other securities of the Company or
has any rights with respect thereto.
(b) The Company, Peterson and Morris, jointly and severally, represent
and warrant to the other Current Shareholders that Schedule 2(b) sets forth a
true, accurate and complete description of all contracts, agreements,
commitments, transactions, transfers, or other arrangements, directly or
indirectly, between the Company and any Affiliate of the Company, Peterson
and/or Morris which currently exist or which took place or were in effect at any
time since January 1, 1997.
(c) The Company represents and warrants to Newcourt, JLT and the French
Shareholders, and Peterson and Morris, jointly and severally, represent and
warrant to Newcourt, JLT and the French Shareholders to the best of their
knowledge (after due inquiry), that, except as otherwise disclosed in Schedule
2(c) to this Agreement, upon the closing of the transactions contemplated in
connection with the closing of the Newcourt Loan Agreement, the Company has no
payables, liabilities or obligations, either direct or indirect, absolute,
contingent or otherwise, including, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured
or unsecured.
(d) The Company represents and warrants to Newcourt, JLT and the French
Shareholders and Peterson and Morris, jointly and severally, represent and
warrant to Newcourt, JLT and the French Shareholders, to the best of their
knowledge, that:
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(i) The Company, in the conduct of its business, has not
utilized and does not utilize any patent, trademark,
trade name, service mark, copyright, software, trade
secret or know-how except for those listed in
Schedule 2(d) to this Agreement (the "Intellectual
Property");
(ii) All of the Intellectual Property listed in Schedule
2(d) to this Agreement (A) is valid and in full force
and effect and any applications for registrations
relating thereto are pending and in good standing,
all without challenge of any kind; and (B) is owned
entirely by the Company, without qualification,
limitation, burden or encumbrance of any kind; and
(iii) The Company does not infringe upon or unlawfully or
wrongfully use any patent, trademark, trade name,
service mark, copyright or trade secret owned or
claimed by another. The Company is not in default
under, and has not received any notice of any claim
of infringement or any other claim or proceeding
relating to any such patent, trademark, trade name,
service mark, copyright or trade secret.
(e) JLT, Rollin M. Dick and the Company hereby acknowledge and agree
that:
(i) In lieu of receiving repayment of the promissory
notes in the original principal amounts of $100,000,
$500,000, $250,000, $250,000 and $150,000, dated
March 19, 1999, April 16, 1999, May 3, 1999, May 19,
1999 and June 7, 1999, respectively, with accrued
collective interest of $15,890.42 as of June 15, 1999
for a total outstanding amount of $1,265,890.42, JLT
hereby applies the amount owed thereunder and agrees
to pay the Company $30,734.58 in order to exercise
the warrant dated April 16, 1999 for 1,375,000
shares. JLT agrees to remit the $30,734.58 within ten
business days of the date of this Agreement.
(ii) The Agreement dated December 17, 1998 by and between
Rollin M. Dick and the Company is hereby canceled.
(iii) Within 15 days of the date of this Agreement, Rollin
M. Dick shall advance the Company One Million Dollars
($1,000,000) to pay off the principal balance of that
certain credit facility (the "Facility") of the
Company with the First National Bank & Trust, Kokomo,
Indiana (the "Bank") and as consideration for such
payment, the Company shall (A) cause the Bank to
release Mr. Dick's guaranty of the Facility, and (B)
issue 1,060,455 Common Shares to JLT.
(f) Each of the French Shareholders and the Company hereby agree as
follows:
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(i) Definitions. For purposes of this Section 2(f), the
following terms have the following meanings:
A. "Notes" shall mean:
(1) Promissory Note dated February 22,
1999 in favor of Allan Green in the
principal amount of $566,943.57 with
accrued interest of $14,041.56
through June 15, 1999;
(2) Promissory Note dated February 23,
1999 in favor of Candel & Partners
in the principal amount of
$164,401.10 with accrued interest of
$4,035.71 through June 15, 1999; and
(3) Promissory Notes in favor of Gemplus
Corp. in the principal amount of
$4,180,187.01 (the "Reader Note"),
$350,000, $50,000 and $50,000 dated
November 13, 1998, January 12, 1999,
March 15, 1999 and March 23, 1999,
respectively, with accrued interest
of $212,533.59 as of June 15, 1999.
B. "Green Agreement" means the Financial Advisor
Agreement dated June 17, 1998 pursuant to which
the Company owed Green $75,000 for services
rendered.
C. "Green Warrant" shall mean the warrant dated
February 23, 1999 executed by the Company in
favor of Allan Green whereby Green can
purchase up to $180,000 of the Company's
Common Shares.
D. "Gemplus Warrants" shall mean the two warrants
dated March 15, 1999 and March 23, 1999 in favor
of Gemplus Corp. whereby Gemplus Corp. has the
option to purchase under each warrant up to
$10,000 of the Company's Common Shares.
(ii) In lieu of receiving repayment of the Notes, any
future rights under the Green Warrant and the Gemplus
Warrants and any amount owing under the Green
Agreement, each French Shareholder hereby applies
such amount in order that the Company shall issue a
promissory note in the principal amount of
$4,287,797.87 to Gemplus Corp., convert the Gemplus
Warrants into 21,276 shares of Stock, convert the
Green Warrant into 191,489 shares of Stock, and
convert the principal balance of all Notes (except
the Reader Note) into 1,252,750 shares of Stock.
(iii) Each French Shareholder by execution of this
Agreement hereby authorizes the Company to transfer
its shares to the other French Shareholders in order
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that each French Shareholder's total equity interest
in the Company corresponds to that set forth opposite
such French Shareholder's name in Exhibit A.
(iv) Each French Shareholder hereby represents and
warrants that all the actions required under this
Section 4(f) of this Agreement by each French
Shareholder have been duly authorized and are valid
and binding on each French Shareholder.
(v) The French Shareholders shall promptly deliver to the
Company the originals of the Notes, Green Warrant and
Gemplus Warrants and they shall indemnify and hold
the Company harmless from and against any and all
claims, demands, actions, costs and expenses
(including, without limitation, reasonable attorneys'
fees) based upon or arising out of the Notes, Green
Warrant and/or Gemplus Warrants.
(g) Rollin M. Dick, JLT, each of the French Shareholders, Peterson
and Morris hereby acknowledge that pursuant to the Newcourt
Loan Agreement and Promissory Note, Newcourt may convert up to
$17,500,000 into 19,530,286 Common Shares and that such
conversion allows Newcourt to purchase Shares for
approximately $.896 per share. Each of the foregoing parties
agree that they have waived any "down round" or similar right,
in converting any warrants, options or convertible notes or
any similar equity anti-dilution rights and that all such
rights have been terminated pursuant to the terms and
conditions of the Release and Termination Agreement of even
date herewith.
(h) Morris and Peterson shall use their best efforts to cause any
employees or former employees who are participants in the 1997
Incentive Stock Option Plan and have granted Morris and/or
Peterson a proxy to vote his shares to transfer the proxy to,
or execute a replacement proxy in favor of, Robert J. Hicks or
such other person who may be Chief Executive Officer of the
Company.
Section 3. Restrictions on Transfer. Except as set forth in Sections 4,
5 and 11, a Shareholder shall not voluntarily or involuntarily, by operation of
law or otherwise, sell, assign, convey, transfer, donate, pledge, encumber or
dispose of any Shares except in accordance with the terms of this Agreement.
Section 4. Voluntary Transfers.
(a) If a Shareholder desires to make a Voluntary Transfer of any of his
Shares, or any interest in his Shares, he shall give notice to the Remaining
Shareholders of his intention to make a Voluntary Transfer (the "Transfer
Notice"). The Transfer Notice shall contain the following information:
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(i) the number of Shares to be transferred (the "Section
4 Shares");
(ii) the name and address of the proposed transferee;
(iii) the terms and conditions, including the purchase
price per Share, of the proposed transfer; and
(iv) a representation and warranty that the proposed
transferee has a bona fide intention to purchase the
Section 4 Shares on such terms and conditions and is
ready, willing and able (financially and otherwise)
to acquire the Section 4 Shares on such terms and
conditions (it being expressly agreed that no
Shareholder may make (or seek to make) a Voluntary
Transfer of any of his Shares to a person or entity
not so qualified).
The Transfer Notice shall constitute an offer to sell the Section 4
Shares to the Remaining Shareholders and each Remaining Shareholder shall have
an option to purchase that number of the Section 4 Shares which is equal to the
product of (a) such Remaining Shareholder's Prorata Portion of such Section 4
Shares, and (b) the total number of Section 4 Shares, at the Purchase Price
specified in Section 6(a) and upon the terms and conditions set forth in this
Agreement. The date upon which the Transfer Notice is mailed or personally
delivered, as applicable, shall be the effective date of the option given to the
Remaining Shareholders.
Each Remaining Shareholder may, but shall not be required to, purchase
any or all of his Prorata Portion of the Section 4 Shares by giving notice
(within one month after the effective date of the option granted under this
Section 4 and in accordance with Sections 9 and 18) to the selling Shareholder
and the Company of his decision to purchase such Shares. Within five days after
the last one-month option period has expired, the Company shall give notice to
each Remaining Shareholder of the option election results (including, but not
limited to, a statement of the number of Section 4 Shares, if any, not being
purchased by the Remaining Shareholders) (the "Section 4 Exercise Notice").
In the event any Remaining Shareholder fails to exercise his option to
purchase his Prorata Portion of the Section 4 Shares, or purchases less than all
of his Prorata Portion of the Section 4 Shares, each other Remaining Shareholder
who has exercised his option to purchase his entire Prorata Portion of the
Section 4 Shares shall have an option to purchase X% of those Section 4 Shares
not purchased, where X equals such Remaining Shareholder's Prorata Portion
expressed as a percentage of the Prorata Portions of all Remaining Shareholders
who have an option to purchase additional Section 4 Shares pursuant to this
sentence. This secondary option may be exercised in the same manner as described
above at any time during a ten-day period beginning on the date on which the
Section 4 Exercise Notice was given. The Company shall provide each Remaining
Shareholder with a Section 4 Exercise Notice, as provided above, with respect to
the secondary option and this procedure for the secondary option shall be
followed in successive turns until all of the Section 4 Shares have been
purchased by Remaining Shareholders or until each Remaining Shareholder has
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<PAGE>
declined to exercise his option to purchase additional Section 4 Shares. The
final date upon which the last Remaining Shareholder provides written notice of
the exercise of his last option to purchase Section 4 Shares or the final date
upon which such Remaining Shareholder is entitled to provide such notice but
fails to do so, as applicable, shall be referred to as the "Section 4 Offer
Termination Date."
In the event that less than all of the Section 4 Shares are purchased
by the Remaining Shareholders, the rights of each of the Remaining Shareholders
under this Section 4(a) with respect to such transfer shall immediately
terminate and the Shareholder desiring to make the transfers may make such
transfer; provided, however, that the transfer only may be made in accordance
with the terms and conditions of the proposed transfer specified in the
applicable Transfer Notice and may be made only if the transferee executes and
delivers to each Remaining Shareholder a written instrument by which the
transferee agrees to be bound by this Agreement.
(b) If a Shareholder desires to acquire, directly or indirectly, any of
the Common Shares owned by Ricardo Richardson (the "Richardson Shares"), such
Shareholders shall give notice to the other Shareholders of his intention to
make such acquisition and each Shareholder may, but shall not be required to,
purchase any or all of his Prorata Portion of the Richardson Shares. The parties
shall follow procedures analogous to those set forth in Section 4(a) in
connection with the exercise of their rights to acquire Richardson Shares;
provided, however, that the "all or nothing" concept set forth in the last
paragraph of Section 4(a) shall not apply.
Section 5. Involuntary Transfers.
Upon a Shareholder's Involuntary Transfer of Shares, the Person(s)
having an interest in those Shares (the "Section 5 Shares") as a result of the
Involuntary Transfer shall be deemed to have made an offer to sell to each
Remaining Shareholder, and each Remaining Shareholder shall be deemed to have an
option to purchase from such person(s), that number of the Section 5 Shares
which is equal to the product of (a) such Remaining Shareholder's Prorata
Portion of the Section 5 Shares, and (b) the total number of Section 5 Shares.
The Shareholder whose Shares are the subject of an Involuntary Transfer shall,
within three days of the Involuntary Transfer Date, give notice to the Remaining
Shareholders and the Company of the Involuntary Transfer (the "Involuntary
Transfer Notice"). The Involuntary Transfer Notice shall contain the following
information:
(a) the number of Shares subject to the Involuntary Transfer;
and
(b) the name and address of the transferee.
The date upon which the Involuntary Transfer Notice is mailed or personally
delivered, as applicable, shall be the effective date of the option given to the
Remaining Shareholders.
Each Remaining Shareholder may, but shall not be required to, purchase
any or all of his Prorata Portion of the Section 5 Shares by giving notice of
his decision to purchase such Shares (within one month after receiving the Fair
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Value Notice (as defined in Section 7) and in accordance with Sections 9 and 18)
to the Person(s) having an interest in the Section 5 Shares as a result of the
Involuntary Transfer and to the Company. Within five days after the last
one-month option period has expired, the Company shall give notice to each
Remaining Shareholder of the option election results (including, but not limited
to, a statement of the number of Section 5 Shares, if any, not being purchased
by the Remaining Shareholders ) (the "Section 5 Exercise Notice").
In the event any Remaining Shareholder fails to exercise his option to
purchase his Prorata Portion of Section 5 Shares, or purchases less than all of
his Prorata Portion of the Section 5 Shares, each other Remaining Shareholder
who has exercised his option to purchase his entire Prorata Portion of the
Section 5 Shares shall have an option to purchase X% of those Section 5 Shares
not purchased, where X equals such Remaining Shareholder's Prorata Portion
expressed as a percentage of the sum of the Prorata Portion of all Remaining
Shareholders who have an option to purchase additional Section 5 Shares pursuant
to this sentence. This secondary option may be exercised in the same manner as
described above at any time during a ten-day period beginning on the date the
Section 5 Exercise Notice was given. The Company shall provide each Remaining
Shareholder with a Section 5 Exercise Notice, as provided above, with respect to
this secondary option and this procedure for the secondary option shall be
followed in successive turns until all of the Section 5 Shares have been
purchased by Remaining Shareholders or until each Remaining Shareholder has
declined to exercise his option to purchase additional Section 5 Shares. The
final date upon which the last Remaining Shareholder provides written notice of
the exercise of his last option to purchase Section 5 Shares or the final date
upon which such Remaining Shareholder is entitled to provide such notice but
fails to do so, as applicable, shall be referred to as the "Section 5 Offer
Termination Date."
Section 6. Purchase Price. The Purchase Price per Share for Shares
sold and purchased pursuant to this Agreement shall be determined as follows:
(a) Voluntary Transfers. With respect to a sale and purchase of Shares
pursuant to Section 4(a), the Purchase Price shall be the price per Share to be
paid by the proposed transferee of the Section 4(a) Shares (as specified in the
applicable Transfer Notice).
(b) Involuntary Transfers. With respect to a purchase of Shares
pursuant to Section 5 the Purchase Price per Share shall be the fair market
value per Share (established pursuant to Section 7) as of the end of the month
immediately prior to the Involuntary Transfer Date.
Section 7. Determination of Fair Value. Upon receipt of an Involuntary
Transfer Notice, the party(s) to whom the Shares would be transferred (the
"Transferee(s)") and the Remaining Shareholders shall attempt to mutually agree
upon a fair market value. In the event the Transferee(s) and the Remaining
Shareholder are unable, within 30 days of the date that the Remaining
Shareholders received the Involuntary Transfer Notice (the "Involuntary Transfer
Notice Date"), to mutually agree upon a fair market value of the Section 5
Shares, the Remaining Shareholders shall engage an appraiser, at the Remaining
Shareholders's expense, to value the Shares of the Company ("First Appraisal").
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The Remaining Shareholder shall forward such report within 60 days after the
date of Involuntary Transfer Notice Date. If the Transferee disagrees with the
determined value which such appraiser establishes, the Transferee shall be
entitled to engage another appraiser within 30 days after receipt of the First
Appraisal, at the Transferee's own expense, to value the Shares of the Company
("Second Appraisal").
If the First Appraisal is obtained and no Second Appraisal is obtained,
the price per Share established pursuant to the First Appraisal shall be the
Purchase Price. If a First Appraisal and a Second Appraisal are both obtained,
the Purchase Price shall be the average of the price per Share established in
the First Appraisal and the price per Share established in the Second Appraisal
unless such Appraisals establish prices per Share which are different by more
than ten percent (10%). If such Appraisals establish prices per Share which are
different by more than ten percent (10%), then the two appraisers selected shall
select a third appraiser (within 15 days after the Second Appraisal is
obtained), who shall determine which of the First Appraisal and the Second
Appraisal is the more reasonable (the "Selected Appraisal"). In such event, the
Determined Value shall be equal to the price per Share established pursuant to
the Selected Appraisal. The costs and expenses of the third appraiser shall be
shared equally between the Remaining Shareholders and the Transferee(s). The
determinations of the appraisers shall be final, binding and conclusive upon the
Transferee(s), the Company and the Remaining Shareholders.
Section 8. Manner of Purchase by Remaining Shareholders. Within sixty
days after the Section 4 Offer Termination Date or Section 5 Offer Termination
Date, as applicable, each Remaining Shareholder purchasing Shares shall tender
to the Secretary of the Company a certified check made payable to the
appropriate Transferor in an amount equal to the number of shares being
purchased by the Remaining Shareholder multiplied by the applicable purchase
price per Share established by this Agreement; provided, however, in the event a
proposed Voluntary Transfer provides that some or all of the aggregate purchase
price of Section 4 Shares will be paid to the Transferor in one or more future
installments ("Deferred Purchase Price"), then each Remaining Shareholder who is
purchasing Section 4 Shares shall tender to the Secretary of the Company (a) a
certified check made payable to the Transferor in an amount equal to that
portion of the aggregate purchase price of the Section 4 Shares being purchased
by him for cash, and (b) a promissory note executed by such Remaining
Shareholder to and in favor of the Transferor, in a principal amount equal to
that portion of the Deferred Purchase Price attributable to the Section 4 Shares
being purchased by such Remaining Shareholders and containing such terms and
conditions as are set forth in the Transfer Notice. Upon receipt of the
foregoing certified check and, if applicable, promissory note from a Remaining
Shareholder, the Secretary of the Company shall: (i) cause such certified check
and, if applicable, promissory note, to be delivered to the Transferor in
exchange for delivery by the Transferor of a certificate or certificates,
endorsed in blank, evidencing the Shares being sold, and (ii) cause the
appropriate certificates evidencing such Shares being sold to be delivered to
the Remaining Shareholder.
Section 9. Notice of Exercise of Option to Purchase Shares. Each notice
of exercise required pursuant to Sections 4 and 5 of this Agreement shall be
written and shall specify the number of Shares which the Remaining Shareholder
is purchasing.
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Section 10. Restrictive Legends. The following restrictive legend
shall be placed upon each certificate evidencing Shares subject to this
Agreement:
The sale, assignment, transfer, encumbrance or other
disposition of the shares of common stock represented by this
certificate are restricted by the terms of a Shareholder
Agreement, dated as of June 15, 1999, among RealMed
Corporation and certain of its shareholders. A copy of that
agreement is on file with, and available for inspection at,
the offices of RealMed Corporation.
Section 11. Permitted Transfers.
(a) Notwithstanding any other provision of this Agreement to the
contrary, Peterson and Morris shall each be entitled to sell, convey, assign and
transfer to JLT up to 944,111 Shares pursuant to the terms of an Option
Agreement, dated June 10, 1996, by and among Peterson, Morris and JLT without
complying with the provisions of this Agreement. Any such Shares transferred to
JLT shall, after such transfer to JLT, be subject to the provisions of this
Agreement.
(b) Notwithstanding any other provision of this Agreement to the
contrary, each of Peterson and Morris shall be entitled to sell, convey, assign
and transfer Shares to members of his family and/or key executive employees of
the Company without complying with the provisions of this Agreement; provided,
however, that each of Peterson and Morris shall be entitled to transfer no more
than a total of 2,500,000 Shares pursuant to this Section 11(b), and any such
transfer shall be null and void unless the transferee of such Shares executes
and delivers a written instrument by which the transferee agrees to be bound by
this Agreement.
(c) Notwithstanding any other provision of this Agreement to the
contrary, Newcourt shall be entitled to sell, convey, assign and transfer any or
all of its Shares to any entity, if Newcourt Credit Group Inc., directly or
indirectly, maintains more than fifty percent of the voting interest in such
entity, without complying with the terms of this Agreement; provided, however,
that any such transfer shall be null and void unless the transferee of such
Shares executes and delivers a written instrument by which such transferee
agrees to be bound by the terms of this Agreement.
(d) Notwithstanding any other provision of this Agreement to the
contrary, the French Shareholders shall be entitled to sell, convey, assign and
transfer all of their respective Shares to Newco 1 and Newco 2 as contemplated
in Section 14 of this Agreement and Newco 1 and Newco 2 shall be entitled to
sell, convey, assign and transfer Shares to other entities, if Gemplus Corp.
and/or Gemplus SCA, directly or indirectly, maintain more than fifty percent of
the voting interest in each such entity (the "Gemplus Affiliates"); provided,
however, that any such transfer shall be null and void unless the transferee of
such Shares executes and delivers a written instrument by which such transferee
agrees to be bound by the terms of this Agreement.
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(e) Notwithstanding any other provision of this Agreement to the
contrary, JLT shall be entitled to sell, convey, assign and transfer its Shares
to other entities, if Rollin M. Dick and/or Helen E. Dick, directly or
indirectly, maintain more than fifty percent of the voting interest in each such
entity ("JLT Affiliates") without complying with the terms of this Agreement;
provided, however, that any such transfer shall be null and void unless the
transferee of such Shares executes and delivers a written instrument by which
such transferee agrees to be bound by the terms of this Agreement.
Section 12. Voting Agreement.
(a) Subject to the conditions set forth in this Section 12(a), each
Shareholder hereby agrees to vote all of the Shares owned or controlled by such
Shareholder to effectuate the election of the following persons to the Board of
Directors: (i) Robert J. Hicks (so long as he is Chief Executive Officer of the
Company); (ii) Rollin M. Dick (so long as JLT owns at least 5% of the issued and
outstanding voting securities of the Company); (iii) Peterson (so long as he,
his wife and/or an entity controlled by he and/or his wife owns at least 10% of
the issued and outstanding voting securities of the Company); (iv) Morris (so
long as he, his wife and/or an entity controlled by he and/or his wife owns at
least 10% of the issued and outstanding voting securities of the Company); (v)
one person designated by Gemplus Corp. (so long as the Gemplus Corp., Gemplus
SCA, Gemplus Affiliates and/or Newco 1 and Newco 2 collectively own at least 10%
of the issued and outstanding voting securities of the Company); and (vi) up to
two persons designated by Newcourt (so long as Newcourt owns at least 10% of the
issued and outstanding voting securities of the Company).
(b) At least two business days prior to a vote by the shareholders of
the Company on any Special Transaction, the Shareholders shall meet in person,
by telephone or by other means by which all Shareholders may simultaneously hear
each other during the meeting, to determine how their Shares will be voted with
respect to such Special Transaction. At such meeting, Newcourt shall be entitled
to a total of two votes, Morris, Peterson and JLT shall each be entitled to a
single vote and the French Shareholders collectively shall be entitled to a
single vote (collectively, the "Special Transaction Votes") for purposes of
determining how the Shares will be voted with respect to such Special
Transaction. Except as set forth in Section 12(c), each Shareholder hereby
agrees to vote all of his Shares against each Special Transaction unless at
least all but two of the Special Transaction Votes eligible to vote have been
cast in favor of such Special Transaction, in which case, each Shareholder
agrees to vote all of his Shares in favor of such Special Transaction; provided,
however, that if any Shareholder (or an Affiliate of any Shareholder) is a party
to or directly interested (other than in its capacity as a Shareholder) in a
Special Transaction, such Shareholder shall not be entitled to its Special
Transaction Vote(s) with respect to such Special Transaction and such vote(s)
shall not be considered to be "eligible to vote" with respect to such Special
Transaction for purposes of this sentence. All parties agree that any Common
Shares which a party may be entitled to vote pursuant to a proxy or otherwise
shall be voted in accordance with the provisions of this Section 12(b).
12
<PAGE>
(c) In the event any person other than Current Shareholders shall
become a Shareholder subject to this Agreement, the following rules shall apply
with respect to the casting of Special Transaction Votes:
(i) in no event shall the total number of Special
Transaction Votes be more than six;
(ii) in the event a Current Shareholder transfers any of
his Shares to a person other than a Current
Shareholder, such other Shareholder shall not be
entitled to an independent Special Transaction Vote,
rather the Special Transaction Vote(s) of the
transferring Current Shareholder shall be cast based
on the majority vote of the Shares then held or
previously transferred by such Current Shareholder.
Thus, for example, if Peterson has transferred 1,000 of his Shares to person A
and 500 of his Shares to person B and person B has in turn transferred 100 of
such Shares to person C, then in the event of a Special Transaction, person A
shall be entitled to vote 1,000 Shares, person B shall be entitled to vote 400
Shares, person C shall be entitled to vote 100 Shares and Peterson shall be
entitled to vote all of his retained Shares (all the foregoing Shares shall be
referred to in this Section as the "Peterson Shares") for purposes of
determining how the "Peterson" Special Transaction Vote shall be cast and such
Special Transaction Vote shall be cast in the manner which receives the vote of
the majority of the Peterson Shares which were voted. The provisions of Sections
12(b) and (c) shall not apply to any Special Transaction which meets each of the
following criteria:
(i) it involves the issuance of Shares; and
(ii) each Shareholder has been granted an enforceable
right to acquire (on the same terms and conditions as
those applicable to the proposed issuance)
proportional amounts of the Shares to be issued .
(d) The voting agreement created by this Section 12 has been created
under and pursuant to Ind. Codess.23-1-31-2.
Section 13. During the term of this Agreement, the Company shall
(a) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP and with applicable requirements of
any governmental authority having jurisdiction over Company reflecting all
financial transactions;
(b) furnish to Shareholders (i) within ninety days after the end of
each fiscal year of Company, a balance sheet as of the close of such fiscal year
and statements of income, retained earnings and changes in financial position of
Company for such fiscal year, all of which are to be audited by a certified
public accountant (provided, however, that such financial statements for 1999
13
<PAGE>
need only be compiled and reviewed), (ii) within forty-five days after the end
of each of the first three fiscal quarters of each fiscal year of Company, a
balance sheet and statements of income, retained earnings and changes in
financial position of Company as of the end of each such quarter and for the
then elapsed portion of such fiscal year, certified by a financial officer of
Company, and (iii) when or before the same are first due, copies of all federal,
state and local income tax returns filed by Company; and
(c) permit, at any reasonable time and from time to time, each
Shareholder or any of its agents or representatives, to examine and make copies
of and abstracts from the records and books of account of Company and visit the
properties of Company to discuss the affairs, finances, and accounts of Company
with any of its officers, employees and/or certified public accountants;
provided, that, each Shareholder agrees that it will not, except to the extent
required by law, disclose such information to any other person and will require
its agents to keep such information confidential.
Section 14. Newco Formation and Newco Transfer.
(a) Within thirteen (13) weeks of the effective date of this Agreement,
each of the French Shareholders agrees to use its commercially reasonable best
efforts to sell, convey, assign, and transfer all of its respective Shares (the
"French Shares") to one of two entities ("Newco 1" and "Newco 2") each of which
shall be owned by some combination of the French Shareholders. If such transfers
are effected, the French Shareholders shall cause Newco 1 and Newco 2 to execute
instruments confirming the transfer of the French Shares and agreeing that it
and such Shares are bound by this Agreement, and Newco 1 and Newco 2 shall then
be considered a "Current Shareholder."
(b) During the term of this Agreement, Gemplus Corp. shall, at all
times, hold an irrevocable proxy to vote, for all purposes, all of the French
Shares and to cast the French Shareholders' Special Transaction Vote. In the
event that the ownership of either Newco 1 or Newco 2 or any Gemplus Affiliate
which owns Shares is directly or indirectly subject to a voluntary or
involuntary transfer in such a manner that the French Shareholders no longer
maintain more than fifty percent (50%) of the voting interest in such entity,
such transfer shall be deemed to be Voluntary of Involuntary Transfer of the
Shares owned by such entity and all such Shares shall be subject to purchase as
provided in Section 4 or Section 5, as applicable.
Section 15. JLT Transfers. In the event that the ownership of JLT or
any JLT Affiliate which owns Shares is directly or indirectly subject to a
voluntary transfer or involuntary transfer in such a manner that Rollin M. Dick
or Helen E. Dick no longer, directly or indirectly, collectively maintain more
than fifty percent (50%) of the voting interest in such entity, such transfer
shall be deemed to be a Voluntary Transfer or Involuntary Transfer of the Shares
owned by such entity and all such Shares shall be subject to purchase as
provided in Section 4 or Section 5, as applicable.
14
<PAGE>
Section 16. Term. This Agreement, and the obligations of the
parties to this Agreement and their respective assigns and successors in
interest, shall terminate upon the happening of any of the following events:
(a) the dissolution or termination of the existence of the Company;
(b) the adjudication of the Company as a bankrupt;
(c) the appointment of a receiver for the Company followed by a
failure to remove the receiver within three months;
(d) whenever there is only one Shareholder still bound by this
Agreement;
(e) the execution and delivery of a termination agreement by the
Company and all Current Shareholders who, at the time of such execution and
delivery, are record owners of Shares subject to the terms of this Agreement;
(f) the closing of the offering of Common Shares pursuant to an
Initial Public Offering; and
(g) Newcourt is in default of any of its material obligations under
this Agreement and such default remains uncured for a period of fifteen business
days after written notice of such default has been delivered to Newcourt.
Upon termination of this Agreement pursuant to this Section 16, each
Shareholder shall promptly surrender the certificate(s) representing his Shares
and the Company shall issue him a new certificate for an equal number of Shares
without the legend required by Section 10. The rights and obligations set forth
in the foregoing sentence shall survive the termination of this Agreement.
Section 17. Disclaimer of Interest. If any Current Shareholder shall be
deemed or determined to have owned (beneficially or of record), as of the
Closing Time, any capital stock of the Company, or any options, warrants, puts,
calls or other rights with respect to the capital stock of the Company not set
forth on Exhibit A, such Current Shareholder hereby disclaims and renounces such
capital stock, options, warrants, puts, calls or other rights and all of same
are hereby terminated and rendered null and void.
Section 18. Parties Bound By This Agreement. This Agreement shall be
binding upon and shall inure to the benefit of all of the parties to this
Agreement and their respective heirs, executors, administrators, assigns and
successors in interest. In the event any Shares or any interest or interests in
any Shares are issued or transferred to any person or entity, such person or
entity shall receive and hold those Shares or interests in Shares subject to the
terms of this Agreement and subject to all obligations and limitations imposed
by this Agreement with respect to any transfer of Shares.
15
<PAGE>
Section 19. Enforcement. It is agreed that there will be irreparable
damage if this Agreement is not specifically enforced or if a breach or
anticipated breach is not enjoined. If any person who is required by this
Agreement to perform, or refrain from performing, an act refuses to perform, or
refrain from performing (as the case may be) that act, one or more of the
parties to this Agreement may institute and maintain proceedings to compel the
specific performance of this Agreement by the person in default. In addition, if
any person breaches this Agreement or if a breach is reasonably anticipated, one
or more parties to this Agreement may institute and maintain proceedings to
enjoin the breach or anticipated breach, and may obtain an injunction against
the breach or anticipated breach. These remedies are cumulative and are in
addition to any rights and remedies otherwise available to any party. The
prevailing party in any litigation brought to enforce this Agreement shall be
entitled to receive from the non-prevailing party all costs, expenses and
reasonable attorney's fees paid or incurred by the prevailing party in
connection with the litigation.
Section 20. Applicable Law and Choice of Forum. The parties affirm that
this Agreement has been entered into in the State of Indiana and shall be
governed by and construed in accordance with the substantive laws of the State
of Indiana, notwithstanding any state's choice of law rules to the contrary.
Further, the parties expressly agree that any and all action concerning any
dispute arising under this Agreement shall be filed and maintained only in a
state or federal court sitting in the State of Indiana or the State of
California, and each party hereby consents and submits to the jurisdiction of
such state or federal court.
Section 21. Applicability to All Shares. All Shares owned by a party to
this Agreement, whether acquired before or after the execution of this
Agreement, as well as all Shares owned from time to time by an other person,
shall be subject to this Agreement.
Section 22. Notices. Unless expressly provided herein, all notices,
claims, certificates, requests, demands and other communications hereunder shall
be in writing and shall be deemed to be duly given (i) when personally delivered
or (ii) if mailed, registered or certified mail, postage prepaid, return receipt
requested, on the date the return receipt is executed or the letter refused by
the addressee or its agent or (iii) if sent by overnight courier which delivers
only upon the signed receipt of the addressee, on the date the receipt
acknowledgment is executed or refused by the addressee or its agent:
(i) if to the Company:
RealMed Corporation
Suite 350
10333 N. Meridian Street
Indianapolis, Indiana 46290
Attn: Robert J. Hicks, Chief Executive Officer
Facsimile Number: (317) 580-0027
16
<PAGE>
with copies to:
Robert S. Wynne
Baker & Daniels
Suite 2700
300 N. Meridian Street
Indianapolis, Indiana 46204-1782
Facsimile Number: (317) 237-1000
(ii) if to Peterson:
RealMed Corporation
Suite 350
10333 N. Meridian Street
Indianapolis, Indiana 46290
Attn: Robert B. Peterson
Facsimile Number: (317) 580-0027
(iii) if to Morris:
RealMed Corporation
Suite 350
10333 N. Meridian Street
Indianapolis, Indiana 46290
Attn: Mark A. Morris
Facsimile Number: (317) 580-0027
(iv) if to JLT:
Conseco Companies
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attn: Rollin M. Dick
Facsimile Number: (317) 817-6327
(v) if to Gemplus SCA:
Avenue du Pic de Bertange
B.P. 100
13881 Gemenos Cedex
France
Attn: Legal Dept.
Facsimile Number: 011-33-4-42-36-59-27
17
<PAGE>
with copies to:
Gemplus Corp.
Suite 300
3 Lagoon Drive
Redwood City, California 94065-1566
Attn: Legal Dept.
Facsimile Number: (650) 654-2920
(vi) if to Gemplus Corp.:
Suite 300
3 Lagoon Drive
Redwood City, California 94065-1566
Attn: Legal Dept.
Facsimile Number: (650) 654-2920
(vii) if to Allan Green:
4 Avenue Hoche
75008 Paris, France
Facsimile Number: 011-331-56-791029
(viii) if to West Plains Investment, Inc.:
c/o Candel & Partners
4 Avenue Hoche
75008 Paris, France
Allan Green
Facsimile Number: 011-331-56-791029
(ix) if to Finno SCA:
c/o Candel & Partners
4 Avenue Hoche
75008 Paris, France
Allan Green
Facsimile Number: 011-331-56-791029
(x) If to Candel & Partners:
4 Avenue Hoche
75008 Paris, France
Allan Green
Facsimile Number: 011-331-56-791029
18
<PAGE>
(xi) if to Newcourt:
Newcourt Financial USA Inc.
Two Gatehall Drive
Parsippany, New Jersey 07054-4525
Attn: Bradley D. Nullmeyer
Facsimile Number: (973) 889-5235
with copies to:
Eric R. Johnson
Sommer & Barnard, PC
4000 Bank One Tower
Indianapolis, Indiana 46204
Facsimile Number: (317) 236-9802
or to such other address as may have previously furnished to the other party in
writing in the manner set forth above.
Section 23. Severability. If any term or provision of this Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
each of the parties shall use its reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
Section 24. Amendments. No change, amendment, modification or
supplement to this Agreement shall be valid or effective unless it is in writing
and is duly executed by each party to this Agreement or its duly authorized
successor or assign.
Section 25. Waivers. The failure of any party to this Agreement to
enforce at any time any provision of this Agreement shall not be construed to be
a waiver of such provision, nor in any way to affect the validity of this
Agreement or any part of it or the right of such party to enforce each and every
provision of this Agreement. Any waiver of any breach or provision of this
Agreement must be in a writing signed by the waiving party in order to be
effective and, except as otherwise clearly expressed in such a writing, no
waiver of any breach or provision of this Agreement shall constitute a waiver of
any other breach or provision or a continuing waiver. The performance by any
party to this Agreement of any act not required of it by the terms of this
Agreement shall not constitute either an agreement that such act is required or
a waiver of the scope of, or limitations on, its obligations under this
Agreement and no such performance shall estop such party from denying any
obligation to perform such act or asserting such scope or limitations with
respect to any further or future acts or failures to act.
Section 26. Singular, Plural and Gender Usage. When used in this
Agreement, words denoting the singular include the plural and vice versa and
words of any gender include all genders.
19
<PAGE>
Section 27. Complete Agreement. This Agreement constitutes a complete
and total integration of the understanding of the parties with respect to the
subject matter of this Agreement and it supersedes all prior and all
contemporaneous agreements and understandings (whether written, oral or implied)
of the parties, or their respective agents, with respect to such subject matter.
Section 28. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute but one agreement. Any facsimile transmission of a
signed counterpart of this Agreement shall be deemed to be an original
counterpart and all signatures appearing thereon shall be deemed to be
originals.
Section 29. References to Sections. Unless otherwise stated, each
reference in this Agreement to a Section is a reference to the specified Section
of this Agreement.
Section 30. Headings. The headings in this Agreement are for purposes
of convenience of reference only, shall not be deemed to constitute a part of
this Agreement and shall not be considered in construing the terms of this
Agreement.
Section 31. Confidential Information. The parties to this Agreement
shall treat in confidence, and not disclose without the prior consent of each
other party hereto, the terms of this Agreement and the information contained on
all Schedules hereto. The obligations of the parties under this Section 31 shall
survive the termination of this Agreement and remain in full force and effect
until released by each party hereto, in writing.
Section 32. Gender. Wherever the context shall so require, all words in
the masculine gender shall be deemed to include the feminine or neuter gender;
all singular words shall include the plural; and, all plural words shall include
the singular.
Section 33. Construction. This Agreement shall not be strictly
construed against any party.
Section 34. Attorneys' Fees. In the event of any litigation among any
of the parties to this Agreement regarding the matters governed hereby or the
enforcement hereof, the losing party shall pay to the prevailing party all
reasonable expenses and costs, including reasonable attorneys' fees, incurred by
the prevailing party in connection with such litigation.
20
<PAGE>
IN WITNESS WHEREOF, the parties of this Agreement have entered into
this Agreement as of the date first written above.
"The French Shareholders"
GEMPLUS SCA GEMPLUS CORP.
By: By:
- ------------------------------
Printed Name, Title Printed Name, Title
WEST PLAINS INVESTMENT, INC. FINNO SCA
By: By:
- -----------------------------
Printed Name, Title Printed Name, Title
CANDEL & PARTNERS
By: Allan Green
Printed Name, Title
JLT, LP
By:
Rollin M. Dick
Rollin M. Dick, General Partner
(Signatures continued on next page)
<PAGE>
(Signatures continued from preceding page)
"Peterson" "Morris"
Robert B. Peterson Mark A. Morris
REALMED CORPORATION
By:
Robert B. Peterson, President
NEWCOURT FINANCIAL USA INC.
By:
Robert J. Hicks, Executive Vice President
<PAGE>
Exhibit 4.04
RELEASE AND TERMINATION AGREEMENT
This Release and Termination Agreement ("Agreement") is dated as of
June 15, 1999 and is by and among RealMed Corporation (the "Company"), Newcourt
Financial USA Inc. ("Newcourt"), Candel & Partners, Gemplus SCA, Gemplus Corp.,
West Plains Investment, Inc., Finno SCA, Allan Green, JLT, LP, Rollin M. Dick,
Robert B. Peterson, and Mark A. Morris, (all parties other than the Company
shall be referred to as the "Interested Parties").
RECITALS
A. Contemporaneously with the execution and delivery of this Agreement,
the Company and Newcourt are entering into a Loan Agreement pursuant to which,
among other things, Newcourt will commit, subject to certain terms and
conditions, to loan up to $17,500,000 to the Company (the "Loan Agreement").
B. In connection with the Loan Agreement and the transactions
contemplated thereby, Newcourt and the other parties to this Agreement desire to
establish with certainty the nature and extent of any and all relationships
between the Company, on the one hand, and the Interested Parties, on the other
hand, and between or among the Interested Parties.
C. Newcourt will not execute and deliver the Loan Agreement or
consummate the transaction contemplated thereby unless, among other things, this
Agreement is executed and delivered by the parties hereto.
D. The parties hereto believe it is desirable for the Company and
Newcourt to enter into the Loan Agreement and are, therefore, willing to enter
into this Agreement in order to induce Newcourt to enter into the Loan
Agreement. Each of the parties also believes it is in its best interest to enter
into this Agreement in order to establish with certainty the matters set forth
in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
1. This Agreement shall become effective when the Loan
Agreement has been executed and delivered and the conditions precedent set forth
in Section 2.1 of the Loan Agreement have been satisfied or have been waived by
Newcourt.
<PAGE>
2. For purposes of this Agreement, the term "Surviving
Agreements" means the agreements listed on Exhibit A.
3. Each of the Interested Parties, on the one hand, and the
Company, on the other hand, agree that, except for the Surviving Agreements,
each and every agreement, commitment, contract and/or understanding, whether
written or oral, entered into on or prior to the date of this Agreement (a)
between or among any of the Interested Parties which relate to the Company
and/or any of the capital stock of the Company, and/or (b) between such
Interested Party and the Company (including, but not limited to each agreement,
commitment, contract and understanding listed on Exhibit B) (collectively, the
"Terminated Agreements") is hereby terminated and rendered null and void and the
Company is hereby released from any and all obligations, covenants and duties
under each of the Terminated Agreements.
4. Each of the Interested Parties absolutely, irrevocably
and unconditionally releases the Company and its officers, directors and
employees from any and all claims, causes of action, demands, and rights, which
he or it has, or may have, whether known or unknown, absolute or contingent,
matured, or unmatured, in connection with or arising under (a) any of the
Terminated Agreements, and/or (b) any transaction, event or occurrence occurring
on or prior to the date of this Agreement; provided, however, that the foregoing
release shall not extend to claims, causes of action, demands or rights arising
under the Surviving Agreements.
5. Each party agrees that, from time to time, it will execute
and deliver, or cause to be executed and delivered, such additional agreements,
instruments, certificates and documents and take all such actions as any other
party to this Agreement may reasonably request for purposes of implementing or
effectuating the provisions of this Agreement.
6. This Agreement shall be binding upon and shall inure to the
benefit of all of the parties to this Agreement and their respective heirs,
executors, administrators, assigns and successors in interest.
7. The parties affirm that this Agreement has been entered
into in the State of Indiana and shall be governed by and construed in
accordance with the substantive laws of the State of Indiana, notwithstanding
any state's choice of law rules to the contrary. Further, the parties expressly
agree that any and all action concerning any dispute arising under this
Agreement shall be filed and maintained only in a state or federal court sitting
in the State of Indiana or the State of California, and each party hereby
consents and submits to the jurisdiction of such state or federal court.
8. If any term or provision of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
each of the parties shall use its reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
2
<PAGE>
9. No change, amendment, modification or supplement to this
Agreement shall be valid or effective unless it is in writing and is duly
executed by each party to this Agreement or its duly authorized successor or
assign.
10. The failure of any party to this Agreement to enforce at
any time any provision of this Agreement shall not be construed to be a waiver
of such provision, nor in any way to affect the validity of this Agreement or
any part of it or the right of such party to enforce each and every provision of
this Agreement. Any waiver of any breach or provision of this Agreement must be
in a writing signed by the waiving party in order to be effective and, except as
otherwise clearly expressed in such a writing, no waiver of any breach or
provision of this Agreement shall constitute a waiver of any other breach or
provision or a continuing waiver. The performance by any party to this Agreement
of any act not required of it by the terms of this Agreement shall not
constitute either an agreement that such act is required or a waiver of the
scope of, or limitations on, its obligations under this Agreement and no such
performance shall estop such party from denying any obligation to perform such
act or asserting such scope or limitations with respect to any further or future
acts or failures to act.
11. When used in this Agreement, words denoting the singular
include the plural and vice versa and words of any gender include all genders.
12. This Agreement constitutes a complete and total
integration of the understanding of the parties with respect to the subject
matter of this Agreement and it supersedes all prior and all contemporaneous
agreements and understandings (whether written, oral or implied) of the parties,
or their respective agents, with respect to such subject matter.
13. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute but one agreement. Any facsimile transmission of a
signed counterpart of this Agreement shall be deemed to be an original
counterpart and all signatures appearing thereon shall be deemed to be
originals.
14. This Agreement shall not be strictly construed against any
party.
15. In the event of any litigation among any of the parties to
this Agreement regarding the matters governed hereby or the enforcement hereof,
the losing party shall pay to the prevailing party all reasonable expenses and
costs, including reasonable attorneys' fees, incurred by the prevailing party in
connection with such litigation.
3
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date set forth at the beginning of this Agreement.
JLT, LP CANDEL & PARTNERS
By: By:
--------------------------
Rollin M. Dick, General Partner
Printed Name, Title
Robert B. Peterson Mark A. Morris
Rollin M. Dick Allan Green
GEMPLUS SCA GEMPLUS CORP.
By: By:
--------------------------
Printed Name, Title Printed Name, Title
West Plains Investment, Inc. Finno SCA
By: By:
--------------------------
Printed Name, Title Printed Name, Title
(Signatures continued on next page)
<PAGE>
(Signatures continued from preceding page)
NEWCOURT FINANCIAL USA INC. REALMED CORPORATION
By: By:
------------------------ -------------------------
Robert J. Hicks, Executive Vice President Robert B. Peterson, President
<PAGE>
Exhibit A
Surviving Agreements
1. Any and all stock option agreements for employees (other than Interested
Parties).
2. Option Agreement, dated June 10, 1998, by and among JLT, LP, Mark A. Morris
and Robert B. Peterson.
3. Memorandum signed by the Company and agreed to by Robert B. Peterson
memorializing the loan on May 4, 1998 made to the Company by Robert B.
Peterson in the principal amount of $150,000 with an interest rate of
4%.
4. Loan Agreement dated June 15, 1999 between the Company and Newcourt.
5. Subordinated Convertible Promissory Note dated June 15, 1999 executed
by the Company in favor of Newcourt in the aggregate principal amount of
$17,500,000.
6. Registration Rights Agreement dated June 15, 1999 among the Company,
Newcourt, Mark A. Morris, Robert B. Peterson, JLT, LP, Gemplus Corp.,
Gemplus SCA, Allan Green, West Plains Investment, Inc., Finno SCA and
Candel & Partners.
7. Shareholder Agreement dated June 15, 1999 among the Company, Newcourt,
Mark A. Morris, Robert B. Peterson, JLT, LP, Gemplus Corp., Gemplus SCA,
Allan Green, West Plains Investment, Inc., Finno SCA, Candel & Partners
and Rollin M. Dick.
8. Employment Agreement dated June 15, 1999 between the Company and Robert J.
Hicks.
9. Employment Agreement dated June 15, 1999 between the Company and Keith
Given.
10. Employment Agreement dated June 15, 1999 between the Company and Mark A.
Morris.
11. Employment Agreement dated June 15, 1999 between the Company and Robert B.
Peterson.
12. Subscription Agreement dated June 15, 1999 executed by Newcourt (for 100
common shares of the Company).
13. 1999 Stock Option and Incentive Plan adopted by the Company as of June
15, 1999 (the "Plan") and the Award of a Non-Qualified Option to Robert
B. Peterson to purchase 250,000 Shares pursuant to the Plan and the
Award of a Non-Qualified Option to Mark A. Morris to purchase 250,000
Shares pursuant to the Plan which Awards are subject to the terms and
conditions approved by the Board of Directors of the Company on June
15, 1999.
Exhibit A, Page 1 of 2
<PAGE>
14. Stock Option Agreement between the Company and Robert J. Hicks.
15. Stock Option Agreement between the Company and Keith Given.
16. Restricted Stock Agreement between the Company and Robert J. Hicks.
17. Restricted Stock Agreement between the Company and Keith Given.
18. Subordinated Secured Promissory Note dated June 15, 1999 executed by the
Company in favor of Gemplus Corp. in the aggregate principal amount of
$4,285,797.87.
19. Security Agreement dated June 15, 1999 signed by the Company in favor of
Gemplus Corp.
20. This Release and Termination Agreement.
21. Recapitalization Confirmation Agreement dated as of June 15, 1999 among
the Company, Mark A. Morris, Robert B. Peterson, Daniel Perrin, Steven
Beck, Dominique Trempont, Joseph Wright, Robert Thompson, Jack Kemp,
Gemplus SCA, JLT, LP, Jefferson Consulting Group, LLC, Jefferson
Government Relations, LLC, West Plains Investment, Inc., Finno SCA,
Herbert Pearthree, Allan Green and Candel & Partners.
22. Eclipse/RealMed Agreement dated June 15, 1999 among the Company,
Mark A. Morris, Robert B. Peterson, RealMed Capital Corporation,
Eclipse Computing, Inc., Eclipse Consulting Group, Inc., Eclipse Powernet,
Inc., Eclipse Financial Corporation, Eclipse Group, Inc. and Eclipse
America Corporation.
23. Master Lease Vendor Agreement dated June 15, 1999 between the Company and
Newcourt.
Exhibit A, 2 of 2
<PAGE>
Exhibit B
Partial List of Terminated Agreements
1. Non_Qualified Stock Option Bonus Agreement for Non_Employee dated June 10,
1998 between the Company and Mark Morris;
2. Non_Qualified Stock Option Bonus Agreement for Non_Employee dated June 10,
1998 between the Company and Mark Morris;
3. Non_Qualified Stock Option Bonus Agreement for Non_Employee dated June 10,
1998 between the Company and Robert Peterson;
4. Non_Qualified Stock Option Bonus Agreement for Non_Employee dated June 10,
1998 between the Company and Robert Peterson;
5. Agreement dated December 17, 1998 between the Company and Rollin M. Dick
regarding the Company's funded debt with First National Bank of Kokomo;
6. Warrant to Purchase Capital Stock of RealMed Corporation, dated April 16,
1999, in favor of JLT, LP;
7. Any and all agreements evidencing or relating to loans by the Company in
favor of JLT, LP of $500,000 and $250,000 commencing on November 25, 1998 and
December 16, 1998, respectively;
8. Proxies of Mark A. Morris and Robert B. Peterson dated December 16, 1998 in
favor of Rollin M. Dick;
9. Subscriptions to Capital Stock of the Company by JLT, LP dated June 18, 1998,
July 27, 1998, August 10, 1998, September 30, 1998 and October 14, 1998;
10. Loan Agreement dated April 16, 1999 between the Company and JLT, LP;
11. Promissory Notes in the original principal amounts of $100,000, $500,000,
$250,000, $250,000 and $150,000 dated March 19, 1999, April 16, 1999, May 3,
1999, May 19, 1999 and June 7, 1999 respectively executed by the Company in
favor of JLT, LP;
12. Employment Agreements dated October 1, 1997 and June 1, 1998 between the
Company and Robert B. Peterson;
13. Employment Agreement dated October 1, 1997 and June 1, 1998 between the
Company and Mark A. Morris;
Exhibit B, Page 1 of 3
<PAGE>
14. Employment Agreement dated October 1, 1997 and June 1, 1998 between the
Company and Mark A. Morris; 14. Note Purchase Agreement between the Company and
Gemplus Corporation dated November 13, 1998;
15. Subordinated Convertible Secured Promissory Note in the original principal
amount of $4,180,187.01, dated November 13, 1998, executed by the Company in
favor of the Gemplus Corporation;
16. Subordinated Convertible Secured Promissory Note in the original principal
amount of $350,000, dated January 12, 1999, executed by the Company in favor of
the Gemplus Corporation;
17. Subordinated Convertible Secured Promissory Note in the original principal
amount of $50,000, dated March 15, 1999,
executed by the Company in favor of the Gemplus Corporation;
18. Subordinated Convertible Secured Promissory Note in the original principal
amount of $50,000, dated March 23, 1999,
executed by the Company in favor of the Gemplus Corporation;
19. Warrant to Purchase Capital Stock of RealMed Corporation, dated March 15,
1999, in favor of Gemplus Corporation;
20. Warrant to Purchase Capital Stock of RealMed Corporation, dated March 23,
1999, in favor of Gemplus Corporation;
21. Financial Advisor Agreement dated June 17, 1998 between the Company and
Candel & Partners;
22. Subordinated Convertible Promissory Note dated February 23, 1999, executed
by the Company in favor of Candel & Partners;
23. Loan Agreement dated June 17, 1998 between the Company and Allan Green;
24. Loan Agreement dated October 30, 1998 between the Company and Allan Green;
25. Subordinated Convertible Promissory Note dated February 23, 1999, executed
by the Company in favor of Allan Green;
26. Note and Warrant Purchase Agreement between the Company and Allan Green
dated February 23, 1999;
27. Warrant to Purchase $180,000 of Capital Stock of RealMed Corporation dated
February 23, 1999, executed by the Company in favor of Allan Green;
Exhibit B, Page 2 of 3
<PAGE>
28. Any and all agreements evidencing or relating to a loan from Robert Peterson
to the Company in the amount of $150,000, maturing on December 31, 1998;
29. Memorandum of Understanding, undated, by and between the Company and Gemplus
SCA regarding investment by the latter in the former;
30. Purchase Agreement dated August 22, 1997 between the Company and Gemplus
SCA;
31. Purchase Agreement dated October 22, 1997 between the Company and West
Plains Investment, Inc.;
32. Purchase Agreement dated January 28, 1998 between the Company and West
Plains Investment, Inc.;
33. Put and Call Agreement, dated January, 1998 between the Company and West
Plains Investment, Inc;
34. Put and Call Termination Agreement dated February 2, 1998 between the
Company and Finno, S[C]A;
35. Put and Call Agreement dated January 28, 1998 between the Company and West
Plains Investment, Inc.;
36. Put and Call Termination Agreement binding as of October 28, 1997 between
the Company and Finno, S[C]A;
37. Stock Option Agreement dated April 11, 1997 among the Company, Gemplus SCA
and Finno;
38. Extension of Stock Option Agreement dated May 23, 1997 among the Company,
Finno and Gemplus SCA;
39. Put and Call Agreement dated October 28, 1997 between the Company and Finno,
SA; and
40. Extension of Stock Option Agreement dated May 23, 1997 among Gemplus SCA,
Finno and the Company.
Exhibit B, Page 3 of 3
<PAGE>
Exhibit 4.05
RECAPITALIZATION CONFIRMATION AGREEMENT
This Recapitalization Confirmation Agreement ("Agreement") is dated and
effective as of June 15, 1999 and is by and among RealMed Corporation (the
"Company"), Newcourt Financial USA Inc. ("Newcourt"), Candel & Partners, Gemplus
Corp., Gemplus, SCA, West Plains Investment, Inc., Jefferson Consulting Group,
LLC, Jefferson Government Relations, Inc., Finno SCA, Allan Green, JLT, LP,
Robert B. Peterson, Mark A. Morris, Daniel Perrin, Steven Beck, Dominque
Trempont, Joseph Wright, Robert Thompson, Jack Kemp and Herbie Pearthree
(collectively the "Existing Shareholders").
RECITALS
A. Contemporaneously with the execution and delivery of this Agreement,
the Company and Newcourt are entering into a Loan Agreement pursuant to which,
among other things, Newcourt will commit, subject to certain terms and
conditions, to loan up to $17,500,000 to the Company.
B. In connection with the Loan Agreement and the transactions
contemplated thereby, Newcourt and the other parties to this Agreement desire to
establish with certainty the share holdings of the Company as they exist
immediately prior to the closing (the "Effective Time") of the Loan Agreement
and the related transactions which are being consummated contemporaneously
therewith (collectively, the "Transactions").
C. Newcourt will not execute and deliver the Loan Agreement or
consummate the Transaction unless, among other things, this Agreement is
executed and delivered by the parties hereto.
D. The parties hereto believe it is desirable for the Company and
Newcourt to enter into the Loan Agreement and are, therefore, willing to enter
into this Agreement in order to induce Newcourt to enter into the Loan
Agreement. Each of the parties also believes it is in its best interest to enter
into this Agreement in order to establish with certainty the matters set forth
in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
1. Each of the parties acknowledges and agrees that effective
as of the Effective Time, (a) the information regarding the ownership of the
capital stock of the Company (and rights to acquire same) which is set forth
opposite such party's name on Exhibit A is true, accurate and complete, (b)
except as set forth on Exhibit A, such party does not own, beneficially or of
record, any capital stock of the Company, or any options, warrants, puts, calls
or other rights with respect to any securities of the Company, and (c) to the
best of such party's knowledge, no persons other than those identified on
Exhibit A own, beneficially or of record, any capital stock of the Company or
any options, warrants, puts, calls, or other rights with respect to any
securities of the Company.
<PAGE>
2. If, notwithstanding the provisions of paragraph 1 of this
Agreement, any Existing Shareholder shall be deemed or determined to have owned
(beneficially or of record), as of the Effective Time, any capital stock of the
Company, or any options, warrants, puts, calls or other rights with respect to
the capital stock of the Company not set forth on Exhibit A, such Existing
Shareholder hereby disclaims and renounces such capital stock, options,
warrants, puts, calls or other rights and all of same are hereby terminated and
rendered null and void.
3. Each party agrees that, from time to time, it will execute
and deliver, or cause to be executed and delivered, such additional agreements,
instruments, certificates and documents and take all such actions as any other
party to this Agreement may reasonably request for purposes of implementing or
effectuating the provisions of this Agreement.
4. This Agreement shall be binding upon and shall inure to the
benefit of all of the parties to this Agreement and their respective heirs,
executors, administrators, assigns and successors in interest.
5. The parties affirm that this Agreement has been entered
into in the State of Indiana and shall be governed by and construed in
accordance with the substantive laws of the State of Indiana, notwithstanding
any state's choice of law rules to the contrary.
6. If any term or provision of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
each of the parties shall use its reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
7. No change, amendment, modification or supplement to this
Agreement shall be valid or effective unless it is in writing and is duly
executed by each party to this Agreement or its duly authorized successor or
assign.
8. The failure of any party to this Agreement to enforce at
any time any provision of this Agreement shall not be construed to be a waiver
of such provision, nor in any way to affect the validity of this Agreement or
any part of it or the right of such party to enforce each and every provision of
this Agreement. Any waiver of any breach or provision of this Agreement must be
in a writing signed by the waiving party in order to be effective and, except as
otherwise clearly expressed in such a writing, no waiver of any breach or
provision of this Agreement shall constitute a waiver of any other breach or
provision or a continuing waiver. The performance by any party to this Agreement
of any act not required of it by the terms of this Agreement shall not
constitute either an agreement that such act is required or a waiver of the
scope of, or limitations on, its obligations under this Agreement and no such
performance shall estop such party from denying any obligation to perform such
act or asserting such scope or limitations with respect to any further or future
acts or failures to act.
<PAGE>
9. When used in this Agreement, words denoting the singular
include the plural and vice versa and words of any gender include all genders.
10. This Agreement constitutes a complete and total
integration of the understanding of the parties with respect to the subject
matter of this Agreement and it supersedes all prior and all contemporaneous
agreements and understandings (whether written, oral or implied) of the parties,
or their respective agents, with respect to such subject matter.
11. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute but one agreement. Any facsimile transmission of a
signed counterpart of this Agreement shall be deemed to be an original
counterpart and all signatures appearing thereon shall be deemed to be
originals.
12. This Agreement shall not be strictly construed against any
party.
13. In the event of any litigation among any of the parties to
this Agreement regarding the matters governed hereby or the enforcement hereof,
the losing party shall pay to the prevailing party all reasonable expenses and
costs, including reasonably attorneys' fees, incurred by the prevailing party in
connection with such litigation.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date set forth at the beginning of this Agreement.
NEWCOURT FINANCIAL USA INC. REALMED CORPORATION
By: By:
- ---------------------------- ------------------------------
Printed Name, Title Printed Name, Title
(Signatures continued on next page)
<PAGE>
(Signatures continued from preceding page)
Gemplus, SCA JLT, LP
By: By:
- ---------------------------- ------------------------------
Printed Name, Title Printed Name, Title
- ---------------------------- ------------------------------
Robert B. Peterson Mark A. Morris
- ---------------------------- ------------------------------
Daniel Perrin Steven Beck
- ---------------------------- ------------------------------
Dominque Trempont Joseph Wright
- ---------------------------- ------------------------------
Robert Thompson Jack Kemp
- ----------------------------
Herbie Pearthree
(Signatures continued on next page)
<PAGE>
(Signatures continued from preceding page)
Candel & Partners Gemplus Corp
By: By:
- ---------------------------- ------------------------------
Printed Name, Title Printed Name, Title
West Plains Investment, Inc. Jefferson Consulting Group, LLC
By: By:
- ---------------------------- ------------------------------
Printed Name, Title Printed Name, Title
Jefferson Government Relations, Inc. Finno SCA
By: By:
- ---------------------------- ------------------------------
Printed Name, Title Printed Name, Title
Allan Green
<PAGE>
Exhibit 4.06
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of June 15, 1999 ("Security
Agreement"), is made by REALMED CORPORATION, an Indiana corporation ("Grantor"),
in favor of GEMPLUS CORP., a Delaware corporation ("Secured Party"').
RECITALS
A. Grantor is indebted to Secured Party pursuant to that certain
Subordinated Secured Promissory Note of even date herewith in the original
principal amount of $4,285,797.87 (the "Note").
B. Secured Party is willing to advance the amounts evidenced by the
Note (the "Loans") to Grantor, but only upon the condition, among others, that
Grantor shall have executed and delivered to Secured Party this Security
Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Secured Party to make the Loans and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, Grantor hereby
represents, warrants, covenants and agrees as follows:
1. DEFINED TERMS. When used in this Security Agreement the following
terms shall have the following meanings (such meanings being equally applicable
to both the singular and plural forms of the terms defined):
"Collateral" shall have the meaning assigned to such term in Section 2
of this Security Agreement.
"Contracts" means with respect to the sale, lease, transfer or other
disposition of the Readers and the Proceeds therefrom, all contracts,
undertakings, franchise agreements or other agreements in or under which Grantor
now holds or hereafter acquires any right, title or interest, including, without
limitation, with respect to an Account, any agreement relating to the terms of
payment or the terms of performance thereof, excepting all transactions for
which Secured Party has been tendered payment for the applicable reader(s) in
the normal course of business.
"Event of Default" means (i) any failure by Grantor forthwith to pay or
perform any of the Secured Obligations (ii) any failure by Grantor to comply
with terms, conditions, covenants or agreements set forth in this Security
Agreement and (iii) any "Event of Default" as defined in the Note not cured
within five (5) business days after notice thereof is tendered in the manner
provided for herein.
<PAGE>
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Payment" has the meaning set forth in Section 2(b).
"Permitted Lien" means any Liens constituting "Senior Indebtedness" as
that term is defined in the Note.
"Readers" means all Smart Card Readers, Part Number #GCR500 US-HC, in
which Grantor now holds any interest, excepting all readers for which Grantor
has tendered the Payment to Secured Party.
"Secured Obligations" means (a) the obligation of Grantor to repay
Secured Party all of the unpaid principal amount of, and accrued interest on
(including any interest that accrues after the commencement of bankruptcy), the
Note, (b) and any obligation of Grantor to pay any fees, costs and expenses of
the Secured Party under Section 6(b) hereof.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Secured Party's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection of priority and for purposes of
definitions related to such provisions.
In addition, the following terms shall be defined terms having the
meaning set forth for such terms in the UCC (definition sections of the UCC are
noted parenthetically): "Account Debtor" (9105(l)(a)); "Accounts" (9106);
"Chattel Paper" (9105(l)(b)); "Documents" (9105(l)(f); "Instruments"
(9105(l)(i); "Proceeds" (9306(l)). Each of the foregoing defined terms shall
include all of such items now owned, or hereafter acquired, by Grantor, as such
relate only to the Readers or the sale, lease, transfer or other disposition
thereof, or the Proceeds therefrom, excepting all transactions for which Secured
Party has tendered payment for the applicable reader(s) in the normal course of
business.
2. GRANT OF SECURITY INTEREST. As collateral security for the prompt
and complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations and in order to induce
Secured Party to cause the Loans to be made, Grantor hereby assigns, conveys,
mortgages, pledges, hypothecates and transfers to Secured Party, and hereby
grants to Secured Party, a security interest in all of Grantor's right, title
and interest in, to and under the following (all of which being collectively
referred to herein as the "Collateral"):
2
<PAGE>
(a) Each Reader for which payment of $135.00 (the "Payment")
to Secured Party has not been tendered; and
(b) To the extent not otherwise included, all proceeds from
the sale or other disposition of each Reader, not to exceed $135.00 per Reader,
to the extent such proceeds have not been tendered to Secured Party.
3. RIGHTS OF SECURED PARTY; COLLECTION OF ACCOUNTS.
(a) Notwithstanding anything contained in this Security
Agreement to the contrary, Grantor expressly agrees that it shall remain liable
under each of its Contracts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder and that it shall
perform all of its duties and obligations thereunder, all in accordance with and
pursuant to the terms and provisions of each such Contract. Secured Party shall
not have any obligation or liability under any Contract by reason of or arising
out of this Security Agreement or the granting to Secured Party of a lien
therein or the receipt by Secured Party of any payment relating to any Contract
pursuant hereto, nor shall Secured Party be required or obligated in any manner
to perform or fulfill any of the obligations of Grantor under or pursuant to any
Contract, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any Contract, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
(b) Secured Party authorizes Grantor to collect its Accounts,
provided that such collection is performed in a prudent and businesslike manner.
Secured Party may, upon the occurrence and during the continuation of
any Event of Default and upon five days written notice to Grantor, limit or
terminate said authority at any time. Upon the occurrence and during the
continuance of any Event of Default, at the reasonable request of Secured Party,
Grantor shall deliver, with respect to all affected Accounts, all original and
other documents evidencing and relating to the performance of labor or service
which created such Accounts, including, without limitation, all original orders,
invoices and shipping receipts.
(c) Secured Party may at any time, upon the occurrence and
during the continuance of any Event of Default, and upon five days written
notice to Grantor, notify affected Account debtors of Grantor, parties to the
Contracts of Grantor, obligors in respect of Instruments of Grantor and obligors
in respect of Chattel Paper of Grantor that the Accounts and the right, title
and interest of Grantor in and under such Contracts, Instruments and Chattel
Paper have been assigned to Secured Party and that payments shall be made
directly to Secured Party. Upon the reasonable request of Secured Party upon the
occurrence and during the continuance of any event of Default, Grantor shall so
notify such Account debtors, parties to such Contracts, obligors in respect of
such Instruments and obligors in respect of such Chattel Paper. Upon the
occurrence and during the continuance of any Event of Default, Secured Party
3
<PAGE>
may, upon five days written notice to Grantor, in its name or in the name of
others, communicate with such Account debtors, parties to such Contracts,
obligors in respect of such Instruments and obligors in respect of such Chattel
Paper to verify with such parties, to Secured Party's reasonable satisfaction,
the existence, amount and terms of any such Accounts, Contracts, Instruments or
Chattel Paper.
(d) Notwithstanding anything in this Agreement, Secured Party's
rights shall be subordinated (i) to the rights of Newcourt Financial USA Inc.
("Newcourt") in any Proceeds (whether constituting Chattel Paper, Instruments or
Accounts) to the extent that such Proceeds were purchased by, or assigned to
Newcourt under that certain Master Vending Program Agreement by and between
Grantor and Newcourt dated of even date herewith, and (ii) to the extent and in
the manner set forth in Section 4 of the Note.
4. REPRESENTATIONS AND WARRANTIES. Grantor hereby represents and
warrants to Secured Party that:
(a) Except for the security interest granted to Secured Party
under this Security Agreement and Permitted Liens, Grantor is the sole legal and
equitable owner of each item of the Collateral in which it purports to grant a
security interest hereunder, having good and marketable title thereto, free and
clear of any and all Liens except for Permitted Liens.
(b) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement covering all or
any part of the Collateral exists, except such as may have been filed by Grantor
in favor of Secured Party pursuant to this Security Agreement except for
Permitted Liens.
(c) This Security Agreement creates a legal and valid
security interest on and in all of the Collateral in which Grantor now has
rights and all filings and other actions necessary or desirable to perfect and
protect such security interest have been duly taken. Accordingly, Secured Party
has a fully perfected subordinated security interest in all of the Collateral to
the extent such security interest may be perfected by filing financing
statements in the State of Indiana.
(d) Grantor's chief executive office, principal place of
business and the place where Grantor maintains its records concerning the
Collateral are presently located at the address set forth on the signature page
hereof. The Collateral is presently located at such address and at such
additional addresses set forth on Schedule A attached hereto.
5. COVENANTS. Grantor covenants and agrees with Secured Party that
from and after the date of this Security Agreement and until the Secured
Obligations have been performed and paid in full:
5.1 Disposition of Collateral. Grantor shall not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so, other than the sale or lease of Readers in the ordinary course of
Grantor's business.
4
<PAGE>
5.2 Relocation of Business or Collateral. Grantor shall not
relocate its chief executive office, principal place of business or its records,
or allow the relocation of any Collateral (except as allowed pursuant to Section
5.1 immediately above) from such address(es) provided to Secured Party pursuant
to Section 4(d) above without twenty (20) days prior written notice to Secured
Party.
5.3 Limitation on Liens on Collateral. Grantor shall not,
directly or indirectly, create, permit or suffer to exist, and shall defend the
Collateral against and take such other action as is necessary to remove, any
Lien on the Collateral, except (a) Permitted Liens and (b) the Lien granted to
Secured Party under this Security Agreement.
5.4 Insurance. Maintain insurance policies insuring the
Collateral against loss or damage from such risks and in such amounts and forms
and with such companies as are customarily maintained by businesses similar to
Grantor.
5.5 Taxes, Assessments, Etc. Grantor shall pay promptly when
due all property and other taxes, assessments and government charges or levies
imposed upon, and all claims (including claims for labor, materials and
supplies) against, Grantor's Equipment, Fixtures or Inventory, except to the
extent the validity thereof is being contested in good faith and adequate
reserves are being maintained in connection therewith.
5.6 Maintenance of Records. Grantor shall keep and
maintain at its own cost and expense satisfactory and complete records of the
Collateral.
5.7 Further Assurances; Pledge of Instruments. At any time and
from time to time, upon the written request of Secured Party, and at the sole
expense of Grantor, Grantor shall promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as
Secured Party may reasonably deem necessary or desirable to obtain the full
benefits of this Security Agreement, including, without limitation, facilitating
the filing of UCC-1 Financing Statements in all applicable jurisdictions.
6. RIGHTS AND REMEDIES UPON DEFAULT.
(a) After any Event of Default shall have occurred and while
such Event of Default is continuing, Secured Party may exercise in addition to
all other rights and remedies granted to it under this Security Agreement, all
rights and remedies of a Secured Party under the UCC.
(b) Grantor also agrees to all fees, costs and expenses of
Secured Party, including, without limitation, reasonable attorneys' fees,
incurred in connection with the enforcement of any of its rights and remedies
hereunder.
5
<PAGE>
(c) The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be distributed by Secured Party in
the following order of priorities:
FIRST, to Secured Party in an amount sufficient to pay in full the
reasonable costs of Secured Party in connection with the sale, disposition or
other realization of the collateral, including all reasonable fees, costs,
expenses, liabilities and advances incurred or made by Secured Party in
connection therewith, including, without limitation, reasonable attorneys' fees;
SECOND, to Secured Party in an amount equal to the then unpaid Secured
Obligations; and
FINALLY, upon payment in full of the Secured Obligations, to Grantor or
its representatives, in accordance with the UCC or as a court of competent
jurisdiction may direct.
7. LIMITATION ON SECURED PARTY'S DUTY IN RESPECT OF COLLATERAL. Secured
Party shall be deemed to have acted reasonably in the custody, preservation and
disposition of any of the Collateral if it takes such action as Grantor requests
in writing, but failure of Secured Party to comply with any such request shall
not in itself be deemed a failure to act reasonably.
8. REINSTATEMENT. This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Grantor's
property and assets and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference," "fraudulent conveyance" or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
9. MISCELLANEOUS.
9.1 No Waiver; Cumulative Remedies.
(a) Except as provided in Subsection (e) of this
Section 9.1, Secured Party shall not by any act, delay, omission or otherwise be
deemed to have waived any of its respective rights or remedies hereunder, nor
shall any single or partial exercise of any right or remedy hereunder on any one
occasion preclude the further exercise thereof or the exercise of any other
right or remedy.
(b) The rights and remedies hereunder provided
are cumulative and may be exercised singly or concurrently and are not exclusive
of any rights and remedies provided by law.
6
<PAGE>
(c) None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Grantor and Secured Party.
9.2 Termination of this Security Agreement. Subject to Section
8 hereof, this Security Agreement shall terminate upon the payment and
performance in full of the Secured Obligations.
9.3 Successor and Assigns. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor, and shall, together with the rights and remedies of Secured
Party hereunder, inure to the benefit of Secured Party, any future holder of any
of the indebtedness and their respective successors and assigns. No sales of
participation, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Secured Obligations or any
portion thereof or interest therein shall in any manner affect the Lien granted
to Secured Party hereunder.
9.4 Governing Law. In all respects, including all matters of
construction, validity and performance, this Security Agreement and the Secured
Obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of California applicable to contracts
made and performed in such State, excluding conflict of laws principles that
would cause the application of laws of any other jurisdiction.
9.5 Notice. All notices under this Security Agreement shall be
in writing and sent by United States mail, postage prepaid, by hand delivery, by
a nationally recognized overnight courier, or by facsimile as follows:
To Grantor: RealMed Corporation
10333 N. Meridian Street
Suite 350
Indianapolis, IN 46290
Attention: Robert J. Hicks, CEO
Facsimile No.: 317/580-0027
With a copy to: Sommer & Barnard, PC
4000 Bank One Tower
111 Monument Circle
Indianapolis, IN 46204
Attention: Eric R. Johnson
Facsimile No.: 317/236-9802
<PAGE>
To Secured Party: Gemplus Corp.
Suite 300
3 Lagoon Drive
Redwood City, California 94065-1566
Attn:Legal Dept.
Facsimile Number: (650) 654-2920
Either party may change its address and/or facsimile number by giving notices as
provided above. Notice shall be considered given and received on the actual
delivery date or, if sent by mail and delivery cannot be made by the postal
service, the last attempted delivery date, as indicated on the postage
receipt(s).
9.6 Counterparts. This Security Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same Security Agreement. Any
facsimile transmission of a signed counterpart of this Agreement shall be deemed
to be an original counterpart and all signatures appearing thereon shall be
deemed to be originals.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
ADDRESS OF GRANTOR REALMED CORPORATION
10333 N. Meridian Street
Suite 350
Indianapolis, IN 46290 By:
Telephone: (317) 580-0658 Printed Name: Robert J. Hicks
FAX: (317) 580-0027 Title: Chief Executive Officer
ACCEPTED AND ACKNOWLEDGED BY:
GEMPLUS CORP.
By:
Printed Name:
Title:
Address of Secured Party:
Gemplus Corp.
Attn:Legal Dept.
Suite 300
3 Lagoon Drive
Redwood City, California 94065-1566
<PAGE>
Schedule A
Location of Collateral
Inventory Warehouse Location:
Langham Logistics
7955 Zionsville Road
Indianapolis, IN 46268
<PAGE>
Exhibit A
to Financing Statement
Between Gemplus Corp. as Secured Party
and RealMed Corporation, as Debtor
This Financing Statement covers all right, title and interest of the
Debtor in, to and under all of the following (collectively, the "Collateral"):
- - each Reader for which payment of $135.00 (the "Payment") to the Secured
Party has not been tendered; and
- - to the extent not otherwise included, all Proceeds from the sale or other
disposition of each Reader, not to exceed $135.00 per Reader, to the extent such
Proceeds have not been tendered to Secured Party; and
"Readers" means all Smart Card Readers, Part Number #GCR500 US-HC, in
which Debtor now holds any interest, excepting all readers for which Debtor has
tendered Payment to Secured Party; and
"Proceeds" shall have the meaning as set forth in Section 9306(l) of
the Uniform Commercial Code ("UCC") as may be in effect from time to time in the
State of California, or the UCC that may apply to this security interest in any
jurisdiction.
<PAGE>
Exhibit 5.01
FORM OF OPINION,
ORIGINAL TO BE FILED BY AMENDMENT
SOMMER & BARNARD
Attorneys at Law, PC
4000 Bank One Tower
111 Monument Circle
Indianapolis, Indiana 46204
April __, 2000
Board of Directors
RealMed Corporation
510 E. 96th Street
Indianapolis, Indiana 46204
RE: Registration Statement on Form S-1 of RealMed Corporation
Lady and Gentlemen:
We have acted as counsel to RealMed Corporation ("RealMed") in
connection with the preparation and filing with the Securities and Exchange
Commission of the Registration Statement on Form S-1 (the "Registration
Statement") which covers the registration under the Securities Act of 1933 of
$60,000,000 in aggregate offering price of RealMed's common shares, no par
value (the "Registered Shares").
We have examined such records and documents, and made such
investigations of law and fact as we have deemed necessary in the
circumstances. The documents we have examined include, without limitation,
the form of Underwriting Agreement among RealMed and the Underwriters
referenced in the Registration Statement (the "Underwriting Agreement").
Based on the examination, investigation and assumption described above,
it is our opinion that, when paid for by the Underwriters, issued and delivered
by RealMed in accordance with the proposed Underwriting Agreement, the
Registered Shares will be duly authorized, validly issued, fully paid and
non-assessable.
We consent to the use of our name under the caption "LEGAL MATTERS" in
the Prospectus included in the Registration Statement and to the filing of
this opinion as Exhibit 5.01 to the Registration Statement.
Very truly yours,
SOMMER & BARNARD, PC
<PAGE>
Exhibit 10.01
REALMED CORPORATION
1997 STOCK OPTION AND INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Company and its shareholders by providing a means for
attracting and retaining officers, key employees, consultants, independent
contractors and Directors of the Company and its Affiliates and Related
Companies.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" -- means any "parent corporation" or "subsidiary corporation"
of the Company as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
"Award" -- means the grant by the Committee of an Incentive Stock Option, a
Non-Qualified Stock Option, or Restricted Stock, or any combination thereof, as
provided in the Plan.
"Board" -- means the Board of Directors of the Company.
"Change in Control" -- means any of the events specified in the following
clauses (i) through (iii): (i) any third person, including a "group" as defined
in Section 13(d)(3) of the Exchange Act shall, after the date of the adoption of
the Plan by the Board, first become the beneficial owner of shares of the
Company with respect to which 50% or more of the total number of votes for the
election of the Board of Directors of the Company may be cast, (ii) as a result
<PAGE>
of, or in connection with, any cash tender offer, exchange offer, merger or
other business combination, sale of assets or contested election, or combination
of the foregoing, the persons who were directors of the Company shall cease to
constitute a majority of the Board of Directors of the Company or (iii) the
shareholders of the Company shall approve an agreement providing either for a
transaction in which the Company will cease to be an independent entity or for a
sale or other disposition of all or substantially all the assets of the Company;
provided, however, that the occurrence of any of such events shall not be deemed
a Change in Control if, prior to such occurrence, a resolution specifically
approving such occurrence shall have been adopted by at least a majority of the
Board of Directors of the Company.
"Code" -- means the Internal Revenue Code of 1986, as amended.
"Committee" -- means the entity referred to in Section 3 hereof responsible
for administering the Plan.
"Company" -- means RealMed Corporation, an Indiana corporation.
"Continuous Service" -- means the absence of any interruption or
termination of service as an employee of the Company or an Affiliate. Service
shall not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Company or in the case of any
transfer between the Company and an Affiliate or any successor to the Company.
In the case of Non-Qualified Stock Options and Restricted Stock service as an
employee of a Related Company shall be treated as service as an employee of the
Company, and service to the Company or an Affiliate as an independent contractor
or consultant without interruption or termination shall qualify as "continuous
service."
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"Employee" -- means any person, including an officer or director, who is
employed by the Company or any Affiliate. In the case of awards of Restricted
Stock and Non-Qualified Stock Options, an Employee also includes a person
employed by a Related Company.
"Exchange Act" -- means the Securities Exchange Act of 1934, as amended.
"Exercise Price" -- means the price per Share at which the Shares subject
to an Option may be purchased upon exercise of such Option.
"Incentive Stock Option" -- means an option to purchase Shares granted by
the Committee pursuant to Section 6 hereof which is subject to the limitations
and restrictions of Section 8 hereof and is intended to qualify under Section
422 of the Code.
"Market Value" -- means the last reported sale price on the date in
question (or, if there is no reported sale on such date, on the last preceding
date on which any reported sale occurred) of one Share on the principal exchange
on which the Shares are listed for trading, or if the Shares are not listed for
trading on any exchange, on the NASDAQ National Market System or any similar
system then in use, or, if the Shares are not listed on the NASDAQ National
Market System, the mean between the closing high bid and low asked quotations of
one Share on the date in question as reported by NASDAQ or any similar system
then in use, or, if no such quotations are available, the fair market value on
such date of one Share as the Committee shall determine.
"Non-Employee Director" -- means any director of the Company who meets the
definition of a "non-employee director" in Rule 16b-3 promulgated under the
Exchange Act.
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"Non-Qualified Stock Option" -- means an option to purchase shares granted
by the Committee pursuant to Section 6 hereof, which option is not intended to
qualify under Section 422 of the Code.
"Option" -- means an Incentive Stock Option or a Non-Qualified Stock
Option.
"Participant" -- means any officer or key employee of the Company or any
Affiliate or Related Company or any person performing services as a consultant,
independent contractor or Director to the Company or any Affiliate or Related
Company who is selected by the Committee to receive an Award.
"Plan" -- means this 1997 Stock Option and Incentive Plan of the Company.
"Related Company" -- means any corporation of which more than fifty percent
of the voting stock is held by persons who hold more than fifty percent of the
voting stock of the Company.
"Reorganization" -- means the liquidation or dissolution of the Company or
any merger, consolidation or combination of the Company (other than a merger,
consolidation or combination in which the Company is the continuing entity and
which does not result in the outstanding Shares being converted into or
exchanged for different securities, cash or other property or any combination
thereof).
"Restricted Period" -- means the period of time selected by the Committee
for the purpose of determining when restrictions are in effect under Section 9
4
<PAGE>
hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" -- means Shares which have been contingently awarded to
a Participant by the Committee subject to the restrictions referred to in
Section 9 hereof, so long as such restrictions are in effect.
"Securities Act" -- means the Securities Act of 1933, as amended. "Shares"
-- means the Common Stock, without par value, of the Company.
3. Administration. Unless and until the Company has a class of equity
securities registered under Section 12 of the Exchange Act, the Plan shall be
administered by and the "Committee" shall mean the Board or any committee
thereof. At such time as the Company has a class of equity securities registered
under Section 12 of the Exchange Act, the Plan shall be administered by and the
"Committee" shall mean the Company's Compensation Committee, which shall consist
of two or more members of the Board, each of whom shall be a Non-Employee
Director. If less than the full Board shall constitute the Committee, the
members of the Committee shall be appointed by the affirmative vote of a
majority of the Board. Except as limited by the express provisions of the Plan,
the Committee shall have sole and complete authority and discretion to (i)
select Participants and grant Awards; (ii) determine the number of Shares to be
subject to types of Awards generally, as well as to individual Awards granted
under the Plan; (iii) determine the terms and conditions upon which Awards shall
be granted under the Plan; (iv) prescribe the form and terms of instruments
evidencing such grants; and (v) establish from time to time regulations for the
administration of the Plan, interpret the Plan, and make all determinations
deemed necessary or advisable for the administration of the Plan. Decisions of
the Committee shall be final and binding on all parties who have an interest in
the Plan.
5
<PAGE>
A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by all members of the Committee without a meeting,
shall be acts of the Committee. Notwithstanding any other provision of this
Agreement, a Non-Employee Director shall not receive an Award without the
approval of a majority of the Board of Directors.
4. Participants. The Committee may select from time to time Participants in
the Plan who, in the opinion of the Committee, have the capacity for
contributing in a substantial measure to the successful performance of the
Company or its Affiliates.
5. Shares Subject to Plan. Subject to adjustment by the operation of Section
10 hereof, the maximum number of Shares with respect to which Awards may be made
under the Plan is 10,000,000 Shares. The Shares with respect to which Awards may
be made under the Plan may either be authorized and unissued shares or unissued
shares heretofore or hereafter reacquired and held as treasury shares. An Award
shall not be considered to have been made under the Plan with respect to any
Option which terminates or is surrendered for cancellation or with respect to
Restricted Stock which is forfeited (so long as any cash dividends paid on such
shares are also forfeited), and new Awards may be granted under the Plan with
respect to the number of Shares as to which such termination or forfeiture has
occurred.
6. General Terms and Conditions of Options. The Committee shall have full and
complete authority and discretion, except as expressly limited by the Plan, to
grant Options and to provide the terms and conditions (which need not be
identical among Participants) thereof. In particular, the Committee shall
6
<PAGE>
prescribe the following terms and conditions: (i) the Exercise Price, (ii) the
number of Shares subject to, and the expiration date of, any Option, (iii) the
manner, time and rate (cumulative or otherwise) of exercise of such Option, (iv)
the restrictions, if any, to be placed upon such Option or upon Shares which may
be issued upon exercise of such Option and (v) the conditions, if any, under
which a Participant may transfer or assign Options. The Committee may, as a
condition of granting any Option, require that a Participant agree to surrender
for cancellation one or more Options previously granted to such Participant.
7. Exercise of Options.
(a) Except as provided in Section 13, an Option granted under the Plan
shall be exercisable during the lifetime of the Participant to whom such
Option was granted only by such Participant, and except as provided in
paragraphs (c), (d) and (e) of this Section 7, no such Option may be exercised
unless at the time such Participant exercises such Option, such Participant
has maintained Continuous Service since the date of the grant of such Option.
(b) To exercise an Option under the Plan, the Participant shall give
written notice to the Company (which shall specify the number of Shares with
respect to which such Participant elects to exercise such Option) together
with full payment of the Exercise Price and the payment required pursuant to
Section 16. The date of exercise shall be the date on which such notice is
received by the Company. Payment shall be made either (i) in cash (including
check, bank draft or money order) or (ii) by delivering (A) Shares already
owned by the Participant and having a Market Value on the date of exercise
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<PAGE>
equal to the applicable Exercise Price, or (B) a combination of cash and such
Shares.
(c) Except as otherwise provided in Section 12 or in the instrument or
agreement evidencing the grant of an Option to a Participant who is an
employee of the Company, an Affiliate or a Related Company, an Option granted
to such Participant shall terminate upon the earlier of the stated expiration
date or as follows:
(i) If the Continuous Service of the Participant is terminated for
cause, (as defined in the Participant's Employment Agreement,
if any) the Option of the Participant shall terminate
immediately upon the cessation of Continuous Service.
(ii) If the Continuous Service of the Participant is terminated
without cause by reason of retirement, or by voluntary
resignation of the Participant, the Option shall terminate
ninety (90) days after the cessation of Continuous Service.
(iii) If the Continuous Service of the Participant is terminated by
reason of the disability of the Participant within the meaning
of Section 22(e)(3) of the Code, the Option shall terminate
six (6) months following the cessation of Continuous Service.
(iv) If the Continuous Service of the Participant is terminated by
reason of his death, the Option shall terminate one year after
the cessation of Continuous Service. During such limited
period, the option may be exercised by the personal
representative of the Participant's estate or by the person or
person to whom the option is transferred pursuant to the
Participant's will or in accordance with the laws of descent
and distribution.
8
<PAGE>
(d) Following the death of any Participant to whom an Option was granted
under the Plan, the Committee, as an alternative means of settlement of such
Option, may elect to pay to the person to whom such Option is transferred the
amount by which the Market Value per Share on the date of exercise of such
Option shall exceed the Exercise Price of such Option, multiplied by the
number of Shares with respect to which such Option is properly exercised. Any
such settlement of an Option shall be considered an exercise of such Option
for all purposes of the Plan.
(e) Notwithstanding the provisions of the foregoing paragraphs of this
Section 7, the Committee may, in its sole discretion, establish different
terms and conditions pertaining to the effect of the cessation of Continuous
Service, to the extent permitted by applicable federal and state law.
8. Incentive Stock Options. Incentive Stock Options may be granted only to
Participants who are Employees. Any provisions of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
years from the date the Plan is adopted by the Board of Directors of the Company
and no Incentive Stock Option shall be exercisable more than ten years from the
date such Incentive Stock Option is granted, (ii) the Exercise Price of any
Incentive Stock Option shall not be less than the Market Value per Share on the
date such Incentive Stock Option is granted, (iii) any Incentive Stock Option
shall not be transferable by the Participant to whom such Incentive Stock Option
is granted other than by will or the laws of descent and distribution and shall
be exercisable during such Participant's lifetime only by such Participant, and
(iv) no Incentive Stock Option shall be granted which would permit a Participant
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<PAGE>
to acquire, through the exercise of Incentive Stock Options in any calendar
year, Shares or shares of any capital stock of the Company or any Affiliate
thereof having an aggregate Market Value (determined as of the time any
Incentive Stock Option is granted) in excess of $100,000. The foregoing
limitation shall be determined by assuming that the Participant will exercise
each Incentive Stock Option on the date that such Option first becomes
exercisable. Notwithstanding the foregoing, in the case of any Participant who,
at the date of grant, owns stock possessing more than 10% of the total combined
voting power of all classes of capital stock of the Company or any Affiliate,
the Exercise Price of any Incentive Stock Option shall not be less than 110% of
the Market Value per Share on the date such Incentive Stock Option is granted
and such Incentive Stock Option shall not be exercisable more than five years
from the date such Incentive Stock Option is granted.
9. Terms and Conditions of Restricted Stock. The Committee shall have full and
complete authority, subject to the limitations of the Plan, to grant awards of
Restricted Stock and, in addition to the terms and conditions contained in
paragraphs (a) through (f) of this Section 9, to provide such other terms and
conditions (which need not be identical among Participants) in respect of such
Awards, and the vesting thereof, as the Committee shall determine and provide in
the agreement referred to in paragraph (d) of this Section 9.
(a) At the time of an award of Restricted Stock, the Committee shall
establish for each Participant a Restricted Period during which or at the
expiration of which, the Shares of Restricted Stock shall vest. The Committee
may also restrict or prohibit the sale, assignment, transfer, pledge or other
encumbrance of the Shares of Restricted Stock by the Participant during the
Restricted Period. Except for such restrictions, and subject to paragraphs (c),
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<PAGE>
(d) and (e) of this Section 9 and Section 10 hereof, the Participant as owner of
such Shares shall have all the rights of a shareholder, including but not
limited to, the right to receive all dividends paid on such Shares and the right
to vote such Shares. The Committee shall have the authority, in its discretion,
to accelerate the time at which any or all of the restrictions shall lapse with
respect to any Shares of Restricted Stock prior to the expiration of the
Restricted Period with respect thereto, or to remove any or all of such
restrictions, whenever it may determine that such action is appropriate by
reason of changes in applicable tax or other laws or other changes in
circumstances occurring after the commencement of such Restricted Period.
(b) Except as provided in Section 12 hereof, if a Participant ceases to
maintain Continuous Service for any reason (other than death, total or partial
disability or normal or early retirement) unless the Committee shall otherwise
determine, all Shares of Restricted Stock theretofore awarded to such
Participant and which at the time of such termination of Continuous Service are
subject to the restrictions imposed by paragraph (a) of this Section 9 shall
upon such termination of Continuous Service be forfeited and returned to the
Company. If a Participant ceases to maintain Continuous Service by reason of
death or total or partial disability, then the restrictions with respect to the
Ratable Portion of the Shares of Restricted Stock shall lapse and such Shares
shall be free of restrictions and shall not be forfeited. The Ratable Portion
shall be determined with respect to each separate Award of Restricted Stock
issued and shall be equal to (i) the number of Shares of Restricted Stock
awarded to the Participant multiplied by the portion of the Restricted Period
that expired at the date of the Participant's death or total or partial
disability reduced by (ii) the number of Shares of Restricted Stock awarded with
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<PAGE>
respect to which the restrictions had lapsed as of the date of the death or
total or partial disability of the Participant.
(c) Each certificate issued in respect of Shares of Restricted Stock
awarded under the Plan shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Company and shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture) contained
in the 1997 Stock Option and Incentive Plan of RealMed Corporation and an
Agreement entered into between the registered owner and RealMed Corporation.
Copies of such Plan and Agreement are on file in the office of the Secretary of
RealMed Corporation.
(d) At the time of an award of Shares of Restricted Stock, the Participant
shall enter into an Agreement with the Company in a form specified by the
Committee, agreeing to the terms and conditions of the award, as the Committee
shall in its sole discretion determine.
(e) At the time of an award of Shares of Restricted Stock, the Committee
may, in its discretion, determine that the payment to the Participant of
dividends declared or paid on such Shares by the Company or a specified portion
thereof, shall be deferred until the lapsing of the restrictions imposed under
paragraph (a) of this Section 9 and shall be held by the Company for the account
of the Participant until such time. In the event of such deferral, there shall
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<PAGE>
be credited at the end of each year (or portion thereof) interest on the amount
of the account at the beginning of the year at a rate per annum as the
Committee, in its discretion, may determine. Payment of deferred dividends,
together with interest accrued thereon as aforesaid, shall be made upon the
lapsing of such restrictions. The dividends shall be forfeited if the Shares
with respect to which the dividends were declared are forfeited.
(f) At the expiration of the restrictions imposed by paragraph (a) of this
Section 9, the Company shall redeliver to the Participant (or where the relevant
provision of paragraph (b) of this Section 9 applies in the case of a deceased
Participant, to his legal representative, beneficiary or heir) the
certificate(s) and stock power deposited with it pursuant to paragraph (c) of
this Section 9 and the Shares represented by such certificate(s) shall be free
of the restrictions referred to in paragraph (a) of this Section 9.
10. Adjustments Upon Changes in Capitalization. In the event of any change
in the outstanding Shares subsequent to the effective date of the Plan by reason
of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Company, the maximum aggregate number and
class of shares as to which Awards may be granted under the Plan and the number
and class of shares with respect to which Awards theretofore have been granted
under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. Any shares of stock or other securities
received, as a result of any of the foregoing, by a Participant with respect to
Restricted Stock shall be subject to the same restrictions and the
certificate(s) or other instruments representing or evidencing such shares or
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securities shall be legended and deposited with the Company in the manner
provided in Section 9 hereof.
11. Effect of Reorganization. Awards will be affected by a Reorganization
as follows:
(a) If the Reorganization is a dissolution or liquidation of the
Company then (i) the restrictions of Section 9(a) on Shares of Restricted
Stock shall lapse and (ii) each outstanding Option shall terminate, but
each Participant to whom the Option was granted shall have the right,
immediately prior to such dissolution or liquidation to exercise his Option
in full, notwithstanding the provisions of Section 8, and the Company shall
notify each Participant of such right within a reasonable period of time
prior to any such dissolution or liquidation.
(b) If the Reorganization is a merger or consolidation, other than a
Change in Control subject to Section 12 of this Agreement, upon the
effective date of such Reorganization (i) each Optionee shall be entitled,
upon exercise of his Option in accordance with all of the terms and
conditions of the Plan, to receive in lieu of Shares, shares of such stock
or other securities or consideration as the holders of Shares shall be
entitled to receive pursuant to the terms of the Reorganization; and (ii)
each holder of Restricted Stock shall receive shares of such stock or other
securities as the holders of Shares received which shall be subject to the
restrictions set forth in Section 9(a), unless the Committee accelerates
the lapse of such restrictions, and the certificate(s) or other instruments
representing or evidencing such shares or securities shall be legended and
deposited with the Company in the manner provided in Section 9 hereof.
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The adjustments contained in this Section and the manner of application of such
provisions shall be determined solely by the Committee.
12. Effect of Change of Control. If the Continuous Service of any
Participant of the Company or any Affiliate is involuntarily terminated, for
whatever reason, at any time within twelve (12) months after a Change in
Control, then (a) unless the Committee shall have otherwise provided in the
agreement referred to in paragraph (d) of Section 9 hereof, any Restricted
Period with respect to Restricted Stock theretofore awarded to such Participant
shall lapse upon such termination and all Shares awarded as Restricted Stock
shall become fully vested in the Participant to whom such Shares were awarded
and (b) all Options shall become exercisable in full and shall remain
exercisable for a period of ninety (90) days thereafter unless the Committee
shall have otherwise provided in the instrument or agreement evidencing the
grant of the Option. If a tender offer or exchange offer for Shares (other than
such an offer by the Company) is commenced, or if the event specified in clause
(iii) of the definition of a Change in Control contained in Section 2 shall
occur, unless the Committee shall have otherwise provided in the instrument
evidencing the grant of an Option, all Options theretofore granted and not fully
exercisable shall (except as otherwise provided in Section 8) become exercisable
in full upon the happening of such event and shall remain so exercisable in
accordance with their terms; provided, however, that no Option shall be
exercisable by a director or officer of the Company if such event would subject
the Participant to liability under Section 16(b) of the Exchange Act.
13. Assignments and Transfers. Except as expressly authorized by the
Committee during the lifetime of a Participant, no Award nor any right or
interest of a Participant under the Plan in any instrument evidencing any Award
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under the Plan may be assigned, encumbered or transferred otherwise than by will
or the laws of descent and distribution, or for Awards other than incentive
stock options, pursuant to a qualified domestic relations order as defined by
(a) the Code or (b) Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules and regulations promulgated thereunder. Except as
otherwise determined by the Committee, Shares awarded pursuant to the Plan or
upon the exercise of an Option shall not be transferred in any public sale or
distribution (including sales pursuant to Rule 144) during seven (7) days
immediately prior to and one hundred eighty (180) days after the effective date
of any registration of any securities of the Company under the Securities Act of
1933.
14. Employee Rights Under the Plan. No officer, employee or other person
shall have a right to be selected as a Participant nor, having been so selected,
to be selected again as a Participant and no officer, employee or other person
shall have any claim or right to be granted an Award under the Plan or under any
other incentive or similar plan of the Company or any Affiliate or Related
Company. Neither the Plan nor any action taken thereunder shall be construed as
giving any employee any right to be retained in the employ of the Company or any
Affiliate or Related Company.
15. Delivery and Registration of Stock. The Company's obligation to deliver
Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Company shall determine to be necessary or advisable to comply with the
provisions of the Securities Act or any other applicable federal or state
securities legislation. It may be provided that any representation requirement
shall become inoperative upon a registration of the Shares or other action
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<PAGE>
eliminating the necessity of such representation under the Securities Act or
other securities legislation.
16. Withholding Tax. Upon the termination of the Restricted Period with
respect to any Shares of Restricted Stock, the Participant or other person
receiving such Shares shall pay the Company the amount of any taxes which the
Company is required to withhold with respect to such Shares, unless the
Committee in its discretion elects to retain a sufficient number of Shares held
by it to cover the amount required to be withheld. The Company shall also have
the right to deduct from all dividends paid with respect to Shares of Restricted
Stock the amount of any taxes which the Company is required to withhold with
respect to such dividend payments.
Where a Participant or other person is entitled to receive Shares pursuant
to the exercise of an Option pursuant to the Plan, the Participant or such other
person shall pay the Company the amount of any taxes which the Company is
required to withhold with respect to such Shares unless the Committee in its
discretion elects to retain a number of such Shares sufficient to cover the
amount required to be withheld.
17. Loans.
(a) The Company may make loans to a Participant in connection with
Restricted Stock or the exercise of Options subject to the following terms
and conditions and such other terms and conditions not inconsistent with
the Plan, including the rate of interest, if any, as the Company shall
impose from time to time.
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(b) No loan made under the Plan shall exceed (i) with respect to
Options, the sum of (A) the aggregate option price payable upon exercise of
the Option in relation to which the loan is made, plus (B) the amount of
the reasonably estimated income taxes payable by the grantee and (ii) with
respect to Restricted Stock, the amount of reasonably estimated income
taxes payable by the grantee. In no event may any such loan exceed the
Market Value of the related Shares at the time of the loan.
(c) No loan shall have an initial term exceeding three years; provided,
that loans under the Plan shall be renewable at the discretion of the
Committee; and provided, further, that the indebtedness under each loan
shall become due and payable on a date no later than (i) one year after
termination of the Participant's employment due to death, retirement or
disability, or (ii) the day of termination of the Participant's employment
for any reason other than death, retirement or disability.
(d) Loans under the Plan may be satisfied by the Participant, as
determined by the Committee, in cash or, with the consent of the Committee,
in whole or in part in Shares at Market Value on the date of such payment.
(e) When a loan shall have been made, Shares having an aggregate Market
Value equal to the amount of the loan may, in the discretion of the
Committee, be required to be pledged by the Participant to the Company as
security for payment of the unpaid balance of the loan. Portions of such
Shares may, in the discretion of the Committee, be released from time to
time as it deems not to be needed as security.
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(f) Every loan shall meet all applicable laws, regulations and rules of
the Federal Reserve Board and any other governmental agency having
jurisdiction.
18. Termination, Amendment and Modification of Plan. The Board may at any
time terminate, and may at any time and from time to time and in any respect
amend or modify, the Plan; provided however, that to the extent necessary and
desirable to comply with Rule 16b-3 under the Exchange Act or Section 422 of the
Code (or any other applicable law or regulation, including requirements of any
stock exchange or NASDAQ system on which the Common Stock is listed or quoted)
shareholder approval of any Plan Amendment shall be obtained in such a manner
and to such a degree as is required by the applicable law or regulation; and
provided further, that no termination, amendment or modification of the Plan
shall in any manner adversely affect any Award theretofore granted pursuant to
the Plan without the consent of the Participant to whom the Award was granted or
transferee of the Award.
19. Effective Date and Term of Plan. The Plan shall become effective upon
its adoption by the Board of Directors of the Company and shall continue in
effect for a term of ten years from the date of adoption by the Board of
Directors unless sooner terminated under Section 18 hereof.
20. Shareholder Approval. The Plan shall be submitted for approval by the
shareholders of Employer within twelve (12) months of the date of its adoption
by the Board of Directors.
Adopted by the Board of Directors of RealMed
Corporation as of December 15, 1997
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Exhibit 10.02
REALMED CORPORATION
1999 STOCK OPTION AND INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Company and its shareholders by providing a means for
attracting and retaining officers, key employees, consultants, independent
contractors and Directors of the Company and its Affiliates and Related
Companies.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" -- means any "parent corporation" or "subsidiary corporation"
of the Company as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
"Award" -- means the grant by the Committee of an Incentive Stock Option, a
Non-Qualified Stock Option, or Restricted Stock, or any combination thereof, as
provided in the Plan.
"Board" -- means the Board of Directors of the Company.
"Change in Control" -- means any of the events specified in the following
clauses (i) through (iii): (i) any third person, including a "group" as defined
in Section 13(d)(3) of the Exchange Act shall, after the date of the adoption of
the Plan by the Board, first become the beneficial owner of shares of the
Company with respect to which 50% or more of the total number of votes for the
election of the Board of Directors of the Company may be cast, (ii) as a result
of, or in connection with, any cash tender offer, exchange offer, merger or
other business combination, sale of assets or contested election, or combination
of the foregoing, the persons who were directors of the Company shall cease to
constitute a majority of the Board of Directors of the Company or (iii) the
shareholders of the Company shall approve an agreement providing either for a
transaction in which the Company will cease to be an independent entity or for a
sale or other disposition of all or substantially all the assets of the Company;
<PAGE>
provided, however, that the occurrence of any of such events shall not be deemed
a Change in Control if, prior to such occurrence, a resolution specifically
approving such occurrence shall have been adopted by at least a majority of the
Board of Directors of the Company.
"Code" -- means the Internal Revenue Code of 1986, as amended.
"Committee" -- means the entity referred to in Section 3 hereof responsible
for administering the Plan.
"Company" -- means RealMed Corporation, an Indiana corporation.
"Continuous Service" -- means the absence of any interruption or
termination of service as an employee of the Company or an Affiliate. Service
shall not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Company or in the case of any
transfer between the Company and an Affiliate or any successor to the Company.
In the case of Non_Qualified Stock Options and Restricted Stock service as an
employee of a Related Company shall be treated as service as an employee of the
Company, and service to the Company or an Affiliate as an independent contractor
or consultant without interruption or termination shall qualify as "continuous
service."
"Employee" -- means any person, including an officer or director, who is
employed by the Company or any Affiliate. In the case of awards of Restricted
Stock and Non-Qualified Stock Options, an Employee also includes a person
employed by a Related Company.
"Exchange Act" -- means the Securities Exchange Act of 1934, as amended.
"Exercise Price" -- means the price per Share at which the Shares subject
to an Option may be purchased upon exercise of such Option.
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"Incentive Stock Option" -- means an option to purchase Shares granted by
the Committee pursuant to Section 6 hereof which is subject to the limitations
and restrictions of Section 8 hereof and is intended to qualify under Section
422 of the Code.
"Market Value" -- means the last reported sale price on the date in
question (or, if there is no reported sale on such date, on the last preceding
date on which any reported sale occurred) of one Share on the principal exchange
on which the Shares are listed for trading, or if the Shares are not listed for
trading on any exchange, on the NASDAQ National Market System or any similar
system then in use, or, if the Shares are not listed on the NASDAQ National
Market System, the mean between the closing high bid and low asked quotations of
one Share on the date in question as reported by NASDAQ or any similar system
then in use, or, if no such quotations are available, the fair market value on
such date of one Share as the Committee shall determine.
"Non-Employee Director" -- means any director of the Company who meets the
definition of a "non-employee director" in Rule 16b-3 promulgated under the
Exchange Act.
"Non-Qualified Stock Option" -- means an option to purchase shares granted
by the Committee pursuant to Section 6 hereof, which option is not intended to
qualify under Section 422 of the Code.
"Option" -- means an Incentive Stock Option or a Non-Qualified Stock
Option.
"Participant" -- means any officer or key employee of the Company or any
Affiliate or Related Company or any person performing services as a consultant,
independent contractor or Director to the Company or any Affiliate or Related
Company who is selected by the Committee to receive an Award.
"Plan" -- means this 1999 Stock Option and Incentive Plan of the Company.
"Related Company" -- means any corporation of which more than fifty percent
of the voting stock is held by persons who hold more than fifty percent of the
voting stock of the Company.
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"Reorganization" -- means the liquidation or dissolution of the Company or
any merger, consolidation or combination of the Company (other than a merger,
consolidation or combination in which the Company is the continuing entity and
which does not result in the outstanding Shares being converted into or
exchanged for different securities, cash or other property or any combination
thereof).
"Restricted Period" -- means the period of time selected by the Committee
for the purpose of determining when restrictions are in effect under Section 9
hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" -- means Shares which have been contingently awarded to
a Participant by the Committee subject to the restrictions referred to in
Section 9 hereof, so long as such restrictions are in effect.
"Securities Act" -- means the Securities Act of 1933, as amended.
"Shares" -- means the Common Stock, without par value, of the Company.
3. Administration. Unless and until the Company has a class of equity
securities registered under Section 12 of the Exchange Act, the Plan shall be
administered by and the "Committee" shall mean the Board or any committee
thereof. At such time as the Company has a class of equity securities registered
under Section 12 of the Exchange Act, the Plan shall be administered by and the
"Committee" shall mean the Company's Compensation Committee, which shall consist
of two or more members of the Board, each of whom shall be a Non-Employee
Director. If less than the full Board shall constitute the Committee, the
members of the Committee shall be appointed by the affirmative vote of a
majority of the Board. Except as limited by the express provisions of the Plan,
the Committee shall have sole and complete authority and discretion to (i)
select Participants and grant Awards; (ii) determine the number of Shares to be
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subject to types of Awards generally, as well as to individual Awards granted
under the Plan; (iii) determine the terms and conditions upon which Awards shall
be granted under the Plan; (iv) prescribe the form and terms of instruments
evidencing such grants; and (v) establish from time to time regulations for the
administration of the Plan, interpret the Plan, and make all determinations
deemed necessary or advisable for the administration of the Plan. Decisions of
the Committee shall be final and binding on all parties who have an interest in
the Plan.
A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by all members of the Committee without a meeting,
shall be acts of the Committee. Notwithstanding any other provision of this
Agreement, a Non-Employee Director shall not receive an Award without the
approval of a majority of the Board of Directors.
4. Participants. The Committee may select from time to time Participants in
the Plan who, in the opinion of the Committee, have the capacity for
contributing in a substantial measure to the successful performance of the
Company or its Affiliates.
5. Shares Subject to Plan. Subject to adjustment by the operation of Section
10 hereof, the maximum number of Shares with respect to which Awards may be made
under the Plan is 10,000,000 Shares. The Shares with respect to which Awards may
be made under the Plan may either be authorized and unissued shares or unissued
shares heretofore or hereafter reacquired and held as treasury shares. An Award
shall not be considered to have been made under the Plan with respect to any
Option which terminates or is surrendered for cancellation or with respect to
Restricted Stock which is forfeited (so long as any cash dividends paid on such
shares are also forfeited), and new Awards may be granted under the Plan with
respect to the number of Shares as to which such termination or forfeiture has
occurred.
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6. General Terms and Conditions of Options. The Committee shall have full and
complete authority and discretion, except as expressly limited by the Plan, to
grant Options and to provide the terms and conditions (which need not be
identical among Participants) thereof. In particular, the Committee shall
prescribe the following terms and conditions: (i) the Exercise Price, (ii) the
number of Shares subject to, and the expiration date of, any Option, (iii) the
manner, time and rate (cumulative or otherwise) of exercise of such Option, (iv)
the restrictions, if any, to be placed upon such Option or upon Shares which may
be issued upon exercise of such Option and (v) the conditions, if any, under
which a Participant may transfer or assign Options. The Committee may, as a
condition of granting any Option, require that a Participant agree to surrender
for cancellation one or more Options previously granted to such Participant.
7. Exercise of Options.
(a) Except as provided in Section 13, an Option granted under the Plan shall
be exercisable during the lifetime of the Participant to whom such Option
was granted only by such Participant, and except as provided in paragraphs
(c), (d) and (e) of this Section 7, no such Option may be exercised unless at
the time such Participant exercises such Option, such Participant has
maintained Continuous Service since the date of the grant of such Option.
(b) To exercise an Option under the Plan, the Participant shall give
written notice to the Company (which shall specify the number of Shares with
respect to which such Participant elects to exercise such Option) together
with full payment of the Exercise Price and the payment required pursuant to
Section 16. The date of exercise shall be the date on which such notice is
received by the Company. Payment shall be made either (i) in cash (including
check, bank draft or money order) or (ii) by delivering (A) Shares already
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owned by the Participant and having a Market Value on the date of exercise
equal to the applicable Exercise Price, or (B) a combination of cash and such
Shares.
(c) Except as otherwise provided in Section 12 or in the instrument or
agreement evidencing the grant of an Option to a Participant who is an
employee of the Company, an Affiliate or a Related Company, an Option granted
to such Participant shall terminate upon the earlier of the stated expiration
date or as follows:
(i) If the Continuous Service of the Participant is terminated for
cause, (as defined in the Participant's Employment Agreement,
if any) the Option of the Participant shall terminate
immediately upon the cessation of Continuous Service.
(ii) If the Continuous Service of the Participant is terminated
without cause by reason of retirement, or by voluntary
resignation of the Participant, the Option shall terminate
ninety (90) days after the cessation of Continuous Service.
(iii) If the Continuous Service of the Participant is terminated by
reason of the disability of the Participant within the meaning
of Section 22(e)(3) of the Code, the Option shall terminate
six (6) months following the cessation of Continuous Service.
(iv) If the Continuous Service of the Participant is terminated by
reason of his death, the Option shall terminate one year after
the cessation of Continuous Service. During such limited
period, the option may be exercised by the personal
representative of the Participant's estate or by the person or
person to whom the option is transferred pursuant to the
Participant's will or in accordance with the laws of descent
and distribution.
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(d) Following the death of any Participant to whom an Option was granted
under the Plan, the Committee, as an alternative means of settlement of such
Option, may elect to pay to the person to whom such Option is transferred the
amount by which the Market Value per Share on the date of exercise of such
Option shall exceed the Exercise Price of such Option, multiplied by the
number of Shares with respect to which such Option is properly exercised. Any
such settlement of an Option shall be considered an exercise of such Option
for all purposes of the Plan.
(e) Notwithstanding the provisions of the foregoing paragraphs of this
Section 7, the Committee may, in its sole discretion, establish different
terms and conditions pertaining to the effect of the cessation of Continuous
Service, to the extent permitted by applicable federal and state law.
8. Incentive Stock Options. Incentive Stock
Options may be granted only to Participants who are Employees. Any provisions of
the Plan to the contrary notwithstanding, (i) no Incentive Stock Option shall be
granted more than ten years from the date the Plan is adopted by the Board of
Directors of the Company and no Incentive Stock Option shall be exercisable more
than ten years from the date such Incentive Stock Option is granted, (ii) the
Exercise Price of any Incentive Stock Option shall not be less than the Market
Value per Share on the date such Incentive Stock Option is granted, (iii) any
Incentive Stock Option shall not be transferable by the Participant to whom such
Incentive Stock Option is granted other than by will or the laws of descent and
distribution and shall be exercisable during such Participant's lifetime only by
such Participant, and (iv) no Incentive Stock Option shall be granted which
would permit a Participant to acquire, through the exercise of Incentive Stock
Options in any calendar year, Shares or shares of any capital stock of the
Company or any Affiliate thereof having an aggregate Market Value (determined as
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<PAGE>
of the time any Incentive Stock Option is granted) in excess of $100,000. The
foregoing limitation shall be determined by assuming that the Participant will
exercise each Incentive Stock Option on the date that such Option first becomes
exercisable. Notwithstanding the foregoing, in the case of any Participant who,
at the date of grant, owns stock possessing more than 10% of the total combined
voting power of all classes of capital stock of the Company or any Affiliate,
the Exercise Price of any Incentive Stock Option shall not be less than 110% of
the Market Value per Share on the date such Incentive Stock Option is granted
and such Incentive Stock Option shall not be exercisable more than five years
from the date such Incentive Stock Option is granted.
9. Terms and Conditions of Restricted Stock. The Committee shall have full and
complete authority, subject to the limitations of the Plan, to grant awards of
Restricted Stock and, in addition to the terms and conditions contained in
paragraphs (a) through (f) of this Section 9, to provide such other terms and
conditions (which need not be identical among Participants) in respect of such
Awards, and the vesting thereof, as the Committee shall determine and provide in
the agreement referred to in paragraph (d) of this Section 9.
(a) At the time of an award of Restricted Stock, the Committee shall
establish for each Participant a Restricted Period during which or at the
expiration of which, the Shares of Restricted Stock shall vest. The Committee
may also restrict or prohibit the sale, assignment, transfer, pledge or other
encumbrance of the Shares of Restricted Stock by the Participant during the
Restricted Period. Except for such restrictions, and subject to paragraphs (c),
(d) and (e) of this Section 9 and Section 10 hereof, the Participant as owner of
such Shares shall have all the rights of a shareholder, including but not
limited to, the right to receive all dividends paid on such Shares and the right
to vote such Shares. The Committee shall have the authority, in its discretion,
to accelerate the time at which any or all of the restrictions shall lapse with
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respect to any Shares of Restricted Stock prior to the expiration of the
Restricted Period with respect thereto, or to remove any or all of such
restrictions, whenever it may determine that such action is appropriate by
reason of changes in applicable tax or other laws or other changes in
circumstances occurring after the commencement of such Restricted Period.
(b) Except as provided in Section 12 hereof, if a Participant ceases to
maintain Continuous Service for any reason (other than death, total or partial
disability or normal or early retirement) unless the Committee shall otherwise
determine, all Shares of Restricted Stock theretofore awarded to such
Participant and which at the time of such termination of Continuous Service are
subject to the restrictions imposed by paragraph (a) of this Section 9 shall
upon such termination of Continuous Service be forfeited and returned to the
Company. If a Participant ceases to maintain Continuous Service by reason of
death or total or partial disability, then the restrictions with respect to the
Ratable Portion of the Shares of Restricted Stock shall lapse and such Shares
shall be free of restrictions and shall not be forfeited. The Ratable Portion
shall be determined with respect to each separate Award of Restricted Stock
issued and shall be equal to (i) the number of Shares of Restricted Stock
awarded to the Participant multiplied by the portion of the Restricted Period
that expired at the date of the Participant's death or total or partial
disability reduced by (ii) the number of Shares of Restricted Stock awarded with
respect to which the restrictions had lapsed as of the date of the death or
total or partial disability of the Participant.
(c) Each certificate issued in respect of Shares of Restricted Stock
awarded under the Plan shall be registered in the name of the Participant and
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deposited by the Participant, together with a stock power endorsed in blank,
with the Company and shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the 1999 Stock Option and Incentive Plan of
RealMed Corporation and an Agreement entered into between the registered
owner and RealMed Corporation. Copies of such Plan and Agreement are on
file in the office of the Secretary of RealMed Corporation.
(d) At the time of an award of Shares of Restricted Stock, the Participant
shall enter into an Agreement with the Company in a form specified by the
Committee, agreeing to the terms and conditions of the award, as the Committee
shall in its sole discretion determine.
(e) At the time of an award of Shares of Restricted Stock, the Committee
may, in its discretion, determine that the payment to the Participant of
dividends declared or paid on such Shares by the Company or a specified portion
thereof, shall be deferred until the lapsing of the restrictions imposed under
paragraph (a) of this Section 9 and shall be held by the Company for the account
of the Participant until such time. In the event of such deferral, there shall
be credited at the end of each year (or portion thereof) interest on the amount
of the account at the beginning of the year at a rate per annum as the
Committee, in its discretion, may determine. Payment of deferred dividends,
together with interest accrued thereon as aforesaid, shall be made upon the
lapsing of such restrictions. The dividends shall be forfeited if the Shares
with respect to which the dividends were declared are forfeited.
(f) At the expiration of the restrictions imposed by paragraph (a) of this
Section 9, the Company shall redeliver to the Participant (or where the relevant
provision of paragraph (b) of this Section 9 applies in the case of a deceased
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Participant, to his legal representative, beneficiary or heir) the
certificate(s) and stock power deposited with it pursuant to paragraph (c) of
this Section 9 and the Shares represented by such certificate(s) shall be free
of the restrictions referred to in paragraph (a) of this Section 9.
10. Adjustments Upon Changes in Capitalization. In the event of any change
in the outstanding Shares subsequent to the effective
date of the Plan by reason of any reorganization, recapitalization, stock split,
stock dividend, combination or exchange of shares, merger, consolidation or any
change in the corporate structure or Shares of the Company, the maximum
aggregate number and class of shares as to which Awards may be granted under the
Plan and the number and class of shares with respect to which Awards theretofore
have been granted under the Plan shall be appropriately adjusted by the
Committee, whose determination shall be conclusive. Any shares of stock or other
securities received, as a result of any of the foregoing, by a Participant with
respect to Restricted Stock shall be subject to the same restrictions and the
certificate(s) or other instruments representing or evidencing such shares or
securities shall be legended and deposited with the Company in the manner
provided in Section 9 hereof.
11. Effect of Reorganization. Awards will be affected by a Reorganization
as follows:
(a) If the Reorganization is a dissolution or liquidation of the
Company then (i) the restrictions of Section 9(a) on Shares of Restricted
Stock shall lapse and (ii) each outstanding Option shall terminate, but
each Participant to whom the Option was granted shall have the right,
immediately prior to such dissolution or liquidation to exercise his Option
in full, notwithstanding the provisions of Section 8, and the Company shall
notify each Participant of such right within a reasonable period of time
prior to any such dissolution or liquidation.
(b) If the Reorganization is a merger or consolidation, other than a
Change in Control subject to Section 12 of this Agreement, upon the
effective date of such Reorganization (i) each Optionee shall be entitled,
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upon exercise of his Option in accordance with all of the terms and
conditions of the Plan, to receive in lieu of Shares, shares of such stock
or other securities or consideration as the holders of Shares shall be
entitled to receive pursuant to the terms of the Reorganization; and (ii)
each holder of Restricted Stock shall receive shares of such stock or other
securities as the holders of Shares received which shall be subject to the
restrictions set forth in Section 9(a), unless the Committee accelerates
the lapse of such restrictions, and the certificate(s) or other instruments
representing or evidencing such shares or securities shall be legended and
deposited with the Company in the manner provided in Section 9 hereof.
The adjustments contained in this Section and the manner of application of
such provisions shall be determined solely by the Committee.
12. Effect of Change of Control. If the Continuous Service of any
Participant of the Company or any Affiliate is involuntarily terminated, for
whatever reason, at any time within twelve (12) months after a Change in
Control, then (a) unless the Committee shall have otherwise provided in the
agreement referred to in paragraph (d) of Section 9 hereof, any Restricted
Period with respect to Restricted Stock theretofore awarded to such Participant
shall lapse upon such termination and all Shares awarded as Restricted Stock
shall become fully vested in the Participant to whom such Shares were awarded
and (b) all Options shall become exercisable in full and shall remain
exercisable for a period of ninety (90) days thereafter unless the Committee
shall have otherwise provided in the instrument or agreement evidencing the
grant of the Option. If a tender offer or exchange offer for Shares (other than
such an offer by the Company) is commenced, or if the event specified in clause
(iii) of the definition of a Change in Control contained in Section 2 shall
occur, unless the Committee shall have otherwise provided in the instrument
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evidencing the grant of an Option, all Options theretofore granted and not fully
exercisable shall (except as otherwise provided in Section 8) become exercisable
in full upon the happening of such event and shall remain so exercisable in
accordance with their terms; provided, however, that no Option shall be
exercisable by a director or officer of the Company if such event would subject
the Participant to liability under Section 16(b) of the Exchange Act.
13. Assignments and Transfers. Except as expressly authorized by the
Committee during the lifetime of a Participant, no Award nor any right or
interest of a Participant under the Plan in any instrument evidencing any Award
under the Plan may be assigned, encumbered or transferred otherwise than by will
or the laws of descent and distribution, or for Awards other than incentive
stock options, pursuant to a qualified domestic relations order as defined by
(a) the Code or (b) Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules and regulations promulgated thereunder. Except as
otherwise determined by the Committee, Shares awarded pursuant to the Plan or
upon the exercise of an Option shall not be transferred in any public sale or
distribution (including sales pursuant to Rule 144) during seven (7) days
immediately prior to and one hundred eighty (180) days after the effective date
of any registration of any securities of the Company under the Securities Act of
1933.
14. Employee Rights Under the Plan. No officer, employee or other person
shall have a right to be selected as a Participant nor, having been so selected,
to be selected again as a Participant and no officer, employee or other person
shall have any claim or right to be granted an Award under the Plan or under any
other incentive or similar plan of the Company or any Affiliate or Related
Company. Neither the Plan nor any action taken thereunder shall be construed as
giving any employee any right to be retained in the employ of the Company or any
Affiliate or Related Company.
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15. Delivery and Registration of Stock. The Company's obligation to deliver
Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Company shall determine to be necessary or advisable to comply with the
provisions of the Securities Act or any other applicable federal or state
securities legislation. It may be provided that any representation requirement
shall become inoperative upon a registration of the Shares or other action
eliminating the necessity of such representation under the Securities Act or
other securities legislation.
16. Withholding Tax. Upon the termination of the Restricted Period with
respect to any Shares of Restricted Stock, the Participant or other person
receiving such Shares shall pay the Company the amount of any taxes which the
Company is required to withhold with respect to such Shares, unless the
Committee in its discretion elects to retain a sufficient number of Shares held
by it to cover the amount required to be withheld. The Company shall also have
the right to deduct from all dividends paid with respect to Shares of Restricted
Stock the amount of any taxes which the Company is required to withhold with
respect to such dividend payments.
Where a Participant or other person is entitled to receive Shares pursuant
to the exercise of an Option pursuant to the Plan, the Participant or such other
person shall pay the Company the amount of any taxes which the Company is
required to withhold with respect to such Shares unless the Committee in its
discretion elects to retain a number of such Shares sufficient to cover the
amount required to be withheld.
17. Loans.
(a) The Company may make loans to a Participant in connection with
Restricted Stock or the exercise of Options subject to the following
terms and conditions and such other terms and conditions not inconsistent
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with the Plan, including the rate of interest, if any, as the Company shall
impose from time to time.
(b) No loan made under the Plan shall exceed (i) with respect to
Options, the sum of (A) the aggregate option price payable upon exercise of
the Option in relation to which the loan is made, plus (B) the amount of
the reasonably estimated income taxes payable by the grantee and (ii) with
respect to Restricted Stock, the amount of reasonably estimated income
taxes payable by the grantee. In no event may any such loan exceed the
Market Value of the related Shares at the time of the loan.
(c) No loan shall have an initial term exceeding three years; provided,
that loans under the Plan shall be renewable at the discretion of the
Committee; and provided, further, that the indebtedness under each loan
shall become due and payable on a date no later than (i) one year after
termination of the Participant's employment due to death, retirement or
disability, or (ii) the day of termination of the Participant's employment
for any reason other than death, retirement or disability.
(d) Loans under the Plan may be satisfied by the Participant, as
determined by the Committee, in cash or, with the consent of the Committee,
in whole or in part in Shares at Market Value on the date of such payment.
(e) When a loan shall have been made, Shares having an aggregate Market
Value equal to the amount of the loan may, in the discretion of the
Committee, be required to be pledged by the Participant to the Company as
security for payment of the unpaid balance of the loan. Portions of such
Shares may, in the discretion of the Committee, be released from time to
time as it deems not to be needed as security.
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<PAGE>
(f) Every loan shall meet all applicable laws, regulations and rules of
the Federal Reserve Board and any other governmental agency having
jurisdiction.
18. Termination, Amendment and Modification of Plan. The Board may at any
time terminate, and may at any time and from time to time and in any respect
amend or modify, the Plan; provided however, that to the extent necessary and
desirable to comply with Rule 16b-3 under the Exchange Act or Section 422 of the
Code (or any other applicable law or regulation, including requirements of any
stock exchange or NASDAQ system on which the Common Stock is listed or quoted)
shareholder approval of any Plan Amendment shall be obtained in such a manner
and to such a degree as is required by the applicable law or regulation; and
provided further, that no termination, amendment or modification of the Plan
shall in any manner adversely affect any Award theretofore granted pursuant to
the Plan without the consent of the Participant to whom the Award was granted or
transferee of the Award.
19. Effective Date and Term of Plan. The Plan shall become effective upon
its adoption by the Board of Directors of the Company and shall continue in
effect for a term of ten years from the date of adoption by the Board of
Directors unless sooner terminated under Section 18 hereof.
20. Shareholder Approval. The Plan shall be submitted for approval by the
shareholders of Employer within twelve (12) months of the date of its adoption
by the Board of Directors.
Adopted by the Board of Directors of RealMed
Corporation as of June 15, 1999
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<PAGE>
Exhibit 10.04
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") , made as of the 15 day of
June, 1999 (the "Effective Date"), by and between REALMED CORPORATION, an
Indiana corporation (the "Company") and Robert J. Hicks, an individual resident
of Indiana ("Executive").
WHEREAS, the Company desires to employ Executive as the Chief Executive
Officer and Executive desires to be so employed on the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Executive and the Company
including, without limitation, the promises and covenants of the parties set
forth herein, the parties hereto, intending to be legally bound, hereby agree to
as follows:
ARTICLE I
EMPLOYMENT
Section 1.1 Term of Employment. The term of Executive's employment
under this Agreement shall commence on June 15, 1999 and continue for a period
of five years, unless earlier terminated as provided in this Agreement. At the
end of the initial five year term, this Agreement shall automatically renew for
consecutive two year terms unless either party hereto gives written notice to
the other of its intent to terminate this Agreement at least sixty days prior to
the end of the initial term or any renewal term (a "Section 1.1 Termination").
Notwithstanding the foregoing, the indemnification provisions of this Agreement
contained in Section 4.2 regarding an Excess Parachute Payment (as defined
below) on account of a Change in Control (as defined below) shall survive until
the expiration of the statute of limitations for assessment of any excise tax
under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code").
Section 1.2 Duties and Responsibilities of Executive. Executive is
hereby employed as the Chief Executive Officer of the Company. The Company
acknowledges that Executive has prior commitments to Newcourt Credit Group,
Inc., its successors and assigns, and any of its affiliates (collectively
"Newcourt"), and, while working as an executive employee for the Company, shall
also remain an employee of Newcourt. Executive may devote whatever time and
attention to Newcourt business that he deems reasonable and proper.
Notwithstanding his commitments to Newcourt, Executive shall devote the majority
of his time, energy, and skill to such office and shall do and perform all
services and acts necessary or advisable to fulfill the duties of such office.
In his capacity as Chief Executive Officer of the Company, Executive shall
report to the Board of Directors of the Company, and shall conduct and perform
such additional services and activities as may be determined from time to time
by the Board of Directors of the Company. Executive's authority from and
responsibility to the Company shall at all times be subject to the review and
discretion of the Board of Directors of the Company. Executive acknowledges that
he has a duty of loyalty to the Company and, except for his commitments to
Newcourt, shall not engage in, directly or indirectly, any other business or
activity that could materially and adversely affect the Company's business or
Executive's ability to perform his duties under this Agreement; provided,
<PAGE>
however, that the Executive shall be free to participate in civic and charitable
activities so long as such activities do not materially interfere with his
duties and responsibilities hereunder.
Section 1.3 Compensation. For services to be rendered by Executive
under this Agreement, the Company shall pay Executive as follows:
(a) Base Salary. Executive shall be paid a
minimum annual gross salary of two hundred fifty
thousand dollars ($250,000), payable biweekly.
Executive's annual gross salary may be upwardly
adjusted from time to time by the Board of Directors
of the Company. At no time during the term of this
Agreement shall Executive's base salary be decreased
from the amount of the base salary then in effect.
Executive's base salary shall be earned and accrued
on a per diem basis.
(b) Pre-IPO Bonus. At any time prior to the
initial public offering of any of the Company's stock
pursuant to an effective registration statement under
the Securities Act of 1933 (an "IPO"), the Executive
shall be part of a bonus pool consisting of senior
management of the Company. Each year, the Company's
Board of Directors, in its discretion, may pay
bonuses to such bonus pool; provided, however, that
any bonus paid to Executive shall be equal to the
bonus paid to Mark A. Morris and Robert B. Peterson.
(c) Post-IPO Bonus. Subsequent to the
closing of an IPO, Executive shall be entitled to
receive annual bonuses pursuant to a bonus
arrangement then in effect, which arrangement shall
be adopted by the Board of Directors of the Company
after consultation with an independent consulting
firm and which arrangement shall provide for bonus
arrangements comparable to those provided to
executives similarly situated to Executive.
Section 1.4 Tax Reimbursement Payment.
(a) Notwithstanding anything to the contrary
contained in this Agreement, or in any plan of the
Company, or in any other agreement or understanding,
the Company will pay to the Executive, at the times
herein specified, an amount (the "Additional Amount")
equal to the excise tax under Section 4999 of the
Code, if any, incurred or to be incurred by the
Executive by reason of the payments under this
Agreement, acceleration of vesting of stock options,
stock appreciation rights or restricted stock granted
under the Company's various stock option, stock
appreciation or other employee incentive plans, or
payments under any other plan, agreement or
understanding between the Executive and the Company,
constituting Excess Parachute Payments (as defined
below), plus all excise taxes and federal, state and
local income taxes incurred or to be incurred by the
Executive with respect to the receipt of the
Additional Amount. For purposes of this Agreement,
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<PAGE>
the term "Excess Parachute Payment" shall mean any
payment or any portion thereof which would be an
"excess parachute payment" within the meaning of
Section 280G(b) of the Code, and which would result
in the imposition of an excise tax on the Executive
under Section 4999 of the Code.
(b) All determinations required to be made
regarding the Additional Amount, including whether
payment of any Additional Amount is required and the
amount of any Additional Amount, shall be made by the
independent accounting firm which is advising the
Company (the "Accounting Firm"), which shall provide
detailed support calculations to the Company and the
Executive on or before the last day of the calendar
year during which occurs the Change in Control (the
"Change in Control Year"). In computing taxes, the
Accounting Firm shall use the highest marginal
federal, state and local income tax rates applicable
to single taxpayers for the year in which the
Additional Amount is to be paid (unless, within
thirty (30) days after the occurrence of the Change
in Control the Executive specifies in writing to the
Company his marginal tax rate) and shall assume the
full deductibility of state and local income taxes
for purposes of calculating federal income tax
liability. The portion of the Additional Amount based
on the excise tax as determined by the Accounting
Firm to be due for the Change in Control Year shall
be paid to the Executive no later than March 1
immediately following the end of the Change in
Control Year. The portion of the Additional Amount
based on the excise tax as determined by the
Accounting Firm to be due for each calendar year
following the Change in Control Year shall be paid to
the Executive on or before March 1 immediately
following the end of each such calendar year. If the
Company determines that the excise tax for any year
will be different from the amount originally
calculated in the report of the Accounting Firm
delivered at the end of the Change in Control Year,
then the Company shall provide to the Executive
detailed support calculations by the Accounting Firm
specifying the basis for the change in the Additional
Amount.
(c) As a result of the uncertainty in the
application of Section 280G of the Code at the time
of the initial determination by the Accounting Firm
of an Additional Amount under Section 1.4(b) hereof,
it is possible that an Additional Amount in excess of
the amount initially determined which will not have
been made by the Company should have been made (an
"Underpayment"). In the event that the Accounting
Firm, based upon controlling precedent, determines
that any Underpayment has occurred, such Underpayment
shall promptly be paid by the Company to or for the
benefit of the Executive, together with interest at
the applicable federal rate provided for in Section
7872(f)(2)(A) of the Code.
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<PAGE>
(d) The Executive shall notify the Company
in writing of any claim by the Internal Revenue
Service that, if successful, would require the
payment by the Executive of any excise tax under
Section 4999 of the Code beyond any amount of such
excise tax for which an Additional Amount had
theretofore been determined by the Accounting Firm
under Section 1.4(b) hereof. Such notification shall
be given as soon as practicable but no later than ten
business days after the Executive is informed in
writing of such claim and shall apprise the Company
of the nature of such claim and the date on which
such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of
the 30_day period following the date on which he
gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes
with respect to such claim is due). If the Company
notifies the Executive in writing prior to the
expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give to the Company any information reasonably
requested by the Company relating to such
claim;
(ii) take such action, at the expense of the
Company, in connection with contesting such
claim as the Company shall reasonably request
in writing from time to time, including,
without limitation, accepting legal
representation with respect to such claim
by an attorney reasonably satisfactory to the
Executive;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and
pay directly all costs and expenses (including
additional interest and penalties) incurred in
connection with such contest and shall
indemnify and hold the Executive harmless, on an
after-tax basis, for any excise tax or federal, state
and local income tax (including interest and
penalties with respect thereto) imposed as a result
of such representation and payment of costs and
expense. Without limitation on the foregoing, the
Company shall control all proceedings taken in
connection with such contest and, at its sole option,
may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with
the Internal Revenue Service or other taxing
authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the
tax (including any penalties or interest) claimed and
pursue a claim for a refund administratively or by
bringing a proceeding in court, and the Executive
agrees to prosecute such contest to a determination
4
<PAGE>
before the Internal Revenue Service or other taxing
authority, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall
determine; provided, however, that if the Company
directs the Executive to pay such claim and seek a
refund, the Company shall advance the amount of such
payment to the Executive, on an interest_free basis
and shall indemnify and hold the Executive harmless,
on an after_tax basis, from any excise tax or
federal, state and local income tax (including
interest and penalties with respect thereto) imposed
with respect to such advance or with respect to any
imputed income with respect to such advance; and
further provided that any extension of the statute of
limitations relating to payment of taxes for the
taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to
issues with respect to which an Additional Amount
would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue
Service or any other taxing authority.
(e) If, after the receipt by the Executive
of an amount advanced by the Company pursuant to the
last sentence of Section 1.4(d), the Executive
receives any refund of any amount paid with the
amount advanced, the Executive shall promptly pay to
the Company the amount of such refund (together with
any interest paid or credited thereon net of any
federal, state, or local income taxes of the
Executive (determined in the manner prescribed by
Section 1.4(b) hereof) with respect to such
interest). If, after the receipt by the Executive of
any amount advanced by the Company pursuant to the
last sentence of Section 1.4(d), a final
determination is made that the Executive is not be
entitled to any refund with respect to such claim,
then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of
any Underpayment otherwise payable under Section
1.4(c).
Section 1.5 Benefits.
(a) Vacation. Executive shall be entitled to
four weeks paid vacation during each calendar year
during the term of this Agreement. Vacation not used
during any calendar year may be carried forward to
the next year; provided, however, that no more than
four weeks of unused vacation time may be carried
forward from one year to the next year.
(b) Life, Disability and Retirement
Programs. Executive shall be entitled to participate
in any life, disability and retirement programs which
may from time to time be offered generally to all of
the other members of the senior management personnel
of the Company.
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<PAGE>
(c) Group Insurance. Executive shall be
entitled to participate in any group health, dental,
and vision insurance programs which may from time to
time be offered generally to all of the other members
of the senior management personnel of the Company.
Section 1.6 Stock Options. Executive shall be granted an option to
purchase one million (1,000,000) shares of the Company pursuant to that certain
1999 Stock Option and Incentive Plan (the "Plan") and that certain Stock Option
Agreement dated as of June 15, 1999 ("SO Agreement") and an additional two
hundred fifty thousand (250,000) restricted shares of the Company pursuant to
the Plan and that certain Restricted Stock Agreement dated as of June 15, 1999
("RS Agreement") (such options and shares to be drawn from the employee option
pool and subject to such terms and conditions as set forth in the SO Agreement
and the RS Agreement). In addition, Executive shall be entitled to participate
in any other incentive and stock option plans which may from time to time be
offered generally to all of the other members of the senior management personnel
of the Company and to members of the Board of Directors.
Section 1.7 Business Expenses. Executive shall be entitled to
reimbursement of all ordinary and necessary business expenses reasonably
incurred by him for business travel (including reasonable moving expenses),
communications, entertainment and meals in connection with the performance of
Executive's duties under this Agreement in accordance with the Company's
policies for reimbursement of business expenses in effect from time to time as
reasonably approved by the Board of Directors of the Company.
ARTICLE II
COVENANTS OF EXECUTIVE
Section 2.1 Confidential Information. Executive acknowledges that in
connection with his employment by the Company, Executive may be given access to,
generate, or otherwise come into contact with or become aware of certain
proprietary, secret and/or confidential information and materials which are the
property of or relate to (a) the Company, and/or (b) the Company's business of
electronic health-care industry claims resolution procedures, customers, clients
or suppliers (collectively, "Confidential Matters"). Confidential Matters shall
include, without limitation, all information and materials created or developed
by, provided to or otherwise disclosed to Executive in connection with
Executive's employment by the Company (excepting only information and materials
already known to the public), including, without limitation, all of the
following:
(a) trade secrets, know-how and all other
business, financial or technical information which
gives or could give the Company a competitive
advantage;
(b) software used by the Company (including
source code and object code) and associated layouts,
templates, processes, documentation, databases,
designs and techniques, and all modifications thereto
(collectively, "Confidential Software");
6
<PAGE>
(c) the names and addresses of the Company's
past, present or prospective customers or clients and
all documents, information and materials which
concern or relate to such customers or clients,
regardless of whether such documents, information and
materials were supplied or produced by the Company or
such customers or clients;
(d) inventions, improvements, innovations,
research and development, software and all other
discoveries or work product created or used by the
Company, including those which are conceived or
developed by Executive alone or with others in
connection with Executive's employment by the
Company, or which are conceived or developed by
Executive after termination of such employment by
using Confidential Matters; and
(e) information concerning the Company's
products, services, systems, methods, employees,
technology, suppliers, licensors, affiliates,
financing sources, profits, revenues, financial
condition and affairs, marketing plans or programs,
and business strategies and practices.
Notwithstanding anything in this Agreement to the contrary, any information or
other matter of or relating to Newcourt's businesses, customers, clients or
suppliers shall not be deemed to be Confidential Matters covered by this
Agreement, including, without limitation, any information relating to potential
financing opportunities which may be discovered by Executive in his capacity as
an employee of the Company.
Executive acknowledges and agrees that Confidential Matters
are the property of the Company and that Executive shall not acquire any
ownership rights in Confidential Matters. Executive shall:
(a) use Confidential Matters solely in
connection with Executive's employment by the
Company; and
(b) hold Confidential Matters in trust and
confidence, and use all reasonable means to assure
that they are not directly or indirectly disclosed to
or copied by unauthorized persons or used in an
unauthorized manner, both during and after
Executive's employment by the Company.
Executive shall not load, install, copy, store or otherwise
retain any Confidential Software on any computer or other device which is not
Company property without first obtaining the Company's written consent.
To the extent that Executive creates or develops any Confidential
Matters, Executive shall:
(a) promptly disclose them to the Company;
and
7
<PAGE>
(b) at the Company's request, assign them to
the Company and execute all documents and do all
things necessary to assist the Company in obtaining
such patent, copyright, trademark, trade secret
and/or other protection as the Company in its sole
discretion deems necessary or appropriate, with the
Company to pay all resulting expenses.
Upon termination of Executive's employment with the Company
for any reason, Executive shall delete all Confidential Matters from the memory
of any computer belonging to Executive and shall turn over to the Company (a)
all documents and other materials (including, without limitation, all tapes,
floppy disks and other forms of electronic storage media) which constitute,
contain or are derived from Confidential Matters; and (b) all other documents,
notes, work product and other materials connected with or arising out of
Executive's employment with the Company.
Section 2.2 Non-solicitation of Customers and Non-Competition. During
the term of his employment with the Company under this Agreement, and for a
period of two years (which shall be extended by the length of any period during
which Executive is in violation of this Section 2.2) after any termination of
the Executive's employment for any reason, Executive shall not (on Executive's
own behalf or that of any other person or entity) directly or indirectly sell or
otherwise provide or solicit the sale or provision of any product, license,
process or service which directly or indirectly competes with any product,
license, process or service of the Company to any person or entity which was, at
the time of termination of Executive's employment, a customer or client of the
Company.
During the term of Executive's employment with the Company under this
Agreement, and for a period of two years (which shall be extended by the length
of any period during which Executive is in violation of this Section 2.2) after
any termination of Executive's employment with the Company for any reason,
Executive shall not (on Executive's own behalf or that of any other person or
entity), without prior written consent of the Board of Directors of the Company,
which consent may be withheld at the sole discretion of the Board of Directors
of the Company, directly or indirectly own, manage, operate, control, invest in,
lend to, acquire an interest in, or otherwise engage or participate in, (whether
as an employee, independent contractor, consultant, partner, shareholder, joint
venturer, investor or any other type of participant), the management or conduct
of any electronic health-care industry claims resolution business or enterprise
that directly or indirectly competes in any Market Area (as defined below) with
any product, license, process or service which the Company sold or provided at
the time of Executive's termination of employment with the Company ("Competitive
Product"). For purposes of this Agreement, Market Area shall mean either (i) the
standard metropolitan statistical area as designated by the federal government
in which the Company sold or provided any Competitive Product or (ii) in all
other cases, the county in which the Company sold or provided any Competitive
Product. Provided, however, that nothing in this Section 2.2 shall prohibit
8
<PAGE>
Executive from acquiring or holding, for investment purposes only, less than
five percent (5%) of the outstanding publicly traded securities of any
corporation which may compete directly or indirectly with the Company or from
engaging in the business of investment banking. Provided, further that nothing
contained in this section 2.2 shall prohibit Executive from continuing his
employment with Newcourt and if necessary financing a Competitive Product in the
Market Area for and on behalf of Newcourt, including, without limitation,
financing Competitive Products for and on behalf of Newcourt in the Market Area
after termination of his employment with the Company.
Section 2.3 Non-Solicitation of Employees. During the term of
Executive's employment with the Company under this Agreement, and for a period
of two years (which shall be extended by the length of any period during which
Executive is in violation of this Section 2.3), after any termination of
Executive's employment with the Company for any reason (the "Non_solicitation
Period"), Executive shall not, directly or indirectly, through one or more
intermediaries or otherwise, hire, employ, induce, solicit for employment, or
assist others in hiring, employing, inducing or soliciting for employment any
individual who is at any time during the Non_solicitation Period an employee of
the Company. Provided, however, that nothing in this section 2.3 shall apply to
Executive hiring any employee of the Company as an employee or consultant of
Newcourt nor shall it apply to Executive hiring any employee of the Company who
was related to or affiliated with Newcourt prior to working for the Company.
Section 2.4 Injunctive Relief. Executive acknowledges that his actual
or threatened breach of any provision of Article II of this Agreement will cause
or threaten irreparable injury to the Company that cannot adequately be measured
in money damages, and that the Company shall be entitled to obtain injunctive
relief with respect to any such actual or threatened breach by Executive.
Injunctive relief shall be in addition to and not in lieu of any other available
remedies.
Section 2.5 Individual Capacity. This Agreement is entered into with
Executive in his individual capacity and not as an agent or employee of
Newcourt. Notwithstanding the fact that Executive shall also remain an employee
of Newcourt, Executive's obligations under this Article II are personal to him
and shall not be imputed to or otherwise effect Newcourt.
ARTICLE III
TERMINATION OF EMPLOYMENT
Section 3.1 Termination by Company. In addition to termination pursuant
to Section 1.1, Executive's employment under this Agreement may be terminated by
the Company by giving notice to Executive during the term of this Agreement as
follows:
(a) upon Executive's death or, subject to
any applicable federal, state or local laws
(including, but not limited to, the Americans With
Disabilities Act), any disability which renders
Executive incapable of performing his duties
hereunder for more than one hundred twenty calendar
days (termination under this Section 3. 1(a) shall be
deemed termination "without Cause");
(b) for any reason not constituting "for
Cause" (as defined below) following a determination
by the Board of Directors of the Company to terminate
Executive's employment (termination under this
Section 3.1(b) shall also be deemed termination
9
<PAGE>
"without Cause"; provided, however, that a Section
1.1 Termination shall not constitute a termination
"without Cause"); or
(c) "for Cause," which for purposes of this
Agreement shall mean that the Executive shall have:
(i) committed an act of fraud,
embezzlement or theft in connection with his
duties under this Agreement at any time
subsequent to the date of this Agreement;
(ii) intentionally inflicted material
damage to any material asset of the
Company or the Company;
(iii) breached any provision of Article
II of this Agreement;
(iv) engaged in the illegal use of
drugs during the term of this Agreement or
been under the influence of alcohol during
the performance of his duties under this
Agreement;
(v) been convicted of any crime
constituting a felony under applicable law,
other than a felony related to the operation
of a motor vehicle;
(vi) committed any act of dishonesty
against the Company;
(vii) committed any intentional tort
against the Company or any employee of the
Company; or
(viii) committed any act of gross
insubordination.
Section 3.2 Termination by Executive. Executive's employment under this
Agreement may be terminated by Executive for "Good Reason" (as defined below) or
otherwise, by giving Company at least 30 days advanced written notice or
termination. For purposes of this Agreement, "Good Reason" shall mean, the
occurrence of any of the following events, unless such event has been consented
to by Executive in writing or such event is fully corrected as provided below:
(a) a material breach by the Company of any
material provision of this Agreement, including, but
not limited to, the assignment to Executive of any
duties materially inconsistent with Executive's
position in the Company or a material adverse
alteration in the nature or status of Executive's
responsibilities; provided, however, that in the
event of this subsection (a) being the sole basis for
termination, Executive shall furnish the Company in
writing a notice of proposed termination setting
forth a specific statement of the Good Cause for
which termination is sought. The Company shall then
have a period of ninety days after the giving of such
notice of proposed termination by Executive in which
to cure the breach specified in such notice. If at
the end of such ninety day period no such cure has
been effected, the Executive's employment shall be
terminated at the end of such ninety day period.
(b) the occurrence of a "Change in Control"
as defined below.
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For purposes of this Agreement a "Change in Control" shall mean an
event as a result of which: (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), is
or becomes the "beneficial owner" (as defined in Rule 13d_3 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total voting power of the voting stock of
the Company; (ii) the Company consolidates with, or merges with or into another
corporation or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any person or any corporation
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding voting stock of the Company
is changed into or exchanged for cash, securities or other property, other than
any such transaction where (A) the outstanding voting stock of the Company is
changed into or exchanged for (x) voting stock of the surviving, or transferee
corporation or (y) cash, securities (whether or not including voting stock) or
other property, and (B) the holders of the voting stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
60% of the voting power of the voting stock of the surviving corporation
immediately after such transaction; or (iii) individuals who at the date of the
Merger constitute the Board of the Company (together with any new directors
whose election by such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of 66 2/3% of the directors
then still in office who are either directors at the date of the Merger or whose
election or nomination for election was previously so approved) ceased for any
reason to constitute a majority of the Board of the Company then in office; or
(iv) the Company is liquidated or dissolved or adopts a plan of liquidation;
provided, however that a Change in Control shall not be deemed to have occurred
if (aa) all of the shares of common stock of the Company owned (legally or
beneficially) by Executive were not voted against the transaction which would,
but for this proviso, constitute a Change in Control, or (bb) such Change in
Control relates to an IPO.
Section 3.3 Severance. For purposes of this Agreement,
Executive's entitlement to any severance payments upon termination of his
employment shall be as set forth below:
(a) If, prior to the closing of an IPO
Executive is terminated without Cause pursuant to
Section 3.1(a) or Section 3.1(b) or resigns for Good
Reason (i) Executive shall be entitled to severance
pay of $1,000,000, payable in a lump sum on the date
of such termination; (ii) all of Executive's rights
to options to purchase common stock of the Company
shall vest, (iii) all of the restrictions on
Executive's restricted stock of the Company granted
to him pursuant to the RS Agreement shall lapse and
become fully vested, and (iv) at the option of
Executive, the Company shall either (A) loan
Executive an amount equal all applicable federal and
state taxes recognized by Executive as a result of
the vesting of such options and restricted stock
pursuant to subsections (ii) and (iii) above (the
"Recognized Taxes"), including, without limitation,
all federal and state income and Medicare taxes,
which loan shall bear interest at the lowest rate at
which interest income shall not be imputed to
Executive for federal income tax purposes, interest
and principal being due and payable at the earlier of
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an IPO or 3 years from the date of Severance, or (B)
purchase from Executive, at such price as Executive
and Company may agree upon, so many shares so vested
as are necessary to pay the Recognized Taxes;
(b) If, after the closing of an IPO,
Executive is terminated without Cause pursuant to
Section 3.1(a) or Section 3.1(b) or resigns for Good
Reason Executive shall be entitled to receive
severance pay pursuant to a severance arrangement
then in effect, adopted by the Board of Directors of
the Company after consultation with an independent
consulting firm and which arrangement shall provide
for severance pay comparable to severance pay
provided to executives similarly situated to
Executive.
(c) In the event of a Section 1.1
Termination, a termination of Executive for Cause, a
termination by Executive for any reason other than
Good Reason, or any other termination of or by
Executive (other than as set forth in Sections 3.3(a)
and 3.3(b)), then Executive shall not receive any
severance pay (and Executive shall forfeit all unused
vacation time and any stock options or restricted
stock which has not then vested), unless, and to the
extent that, some severance pay is approved in
writing by the Board of Directors of the Company in
his sole discretion. In the event the Executive shall
provide thirty days prior written notice of his
intent to resign, the Company may accept such
resignation effective as of any date during such
thirty day period as the Company deems appropriate,
provided that the Executive shall receive from the
Company the per diem portion of his salary and be
entitled to participate at the Company's expense in
any Company sponsored benefit programs in which he
was a participant as of the effective date of his
resignation for the duration of such thirty day
period. Notwithstanding the foregoing, Executive
shall receive the per diem portion of such annual
salary that is accrued but unpaid up to the date of
any termination for Cause.
ARTICLE IV
GENERAL PROVISIONS
Section 4.1 Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes and
withholding as shall be required pursuant to any applicable law, rule or
regulation.
Section 4.2 Attorneys' Fees. If either party shall institute litigation
or arbitration to enforce any of its rights under this Agreement, the prevailing
party shall be entitled to recover from the other party the prevailing party's
reasonable attorneys' fees and costs incurred in any such litigation or
arbitration.
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Section 4.3 Notice. For purposes of this Agreement, all communications
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or five (5) business days after having been
mailed by United States registered mail or certified mail, return receipt
requested, postage prepaid, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office or to Executive at
his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except the notices
of change of address shall be effective only on receipt.
Section 4.4 Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Indiana, without giving effect to the principles of conflict of
laws of such State. Any and all actions concerning any dispute arising under
this Agreement shall be filed and maintained only in a state or federal court
sitting in the State of Indiana, and each party hereby consents and submits to
the jurisdiction of such state or federal court.
Section 4.5 Validity. It is not the intent of any party hereto to
violate any public policy of any jurisdiction in which this Agreement may be
enforced. If any provision of this Agreement or the application of any provision
hereof to any person or circumstances is held invalid, unenforceable or
otherwise illegal, the remainder of this Agreement and the application of such
provision to any other person or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it valid,
enforceable and legal; provided, however, if the provision so held to be
invalid, unenforceable or otherwise illegal constituted a material inducement to
a party's execution and delivery of this Agreement, such provision shall not be
reformed unless prior to any reformation that party agrees to be bound by the
reformation.
Section 4.6 Entire Agreement. This Agreement supersedes any other
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between the
parties with respect to the employment of the Executive by the Company. Any
waiver or modification of any term of this Agreement shall be effective only if
it is set forth in a writing signed by all parties hereto.
Section 4.7 Successors and Binding Agreement.
(a) This Agreement shall be binding upon and
inure to the benefit of the Company and any Successor
of or to the Company, but shall not otherwise be
assignable or delegable by the Company. "Successor"
shall mean any successor in interest, including,
without limitation, any entity, individual or group
of persons acquiring, directly or indirectly all or
substantially all of the business or assets of the
Company, as the case may be, whether by sale, merger,
consolidation, reorganization or otherwise.
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(b) The Company shall require any Successor
to agree at the time of becoming a Successor to
perform this Agreement to the same extent as the
original parties would be required if no succession
had occurred.
(c) This Agreement shall inure to the
benefit of and be enforceable by Executive's personal
or legal representatives, executors, administrators,
heirs, distributes and legatees.
(d) This Agreement is personal in nature and
neither of the parties shall, without the consent of
the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder
except as expressly provided in this Section 4.7.
Section 4.8 Captions. The captions in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
Section 4.9 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and the Company. No waiver by a party
hereto at any time of any breach by another party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provision or conditions at the
same or at any prior or subsequent time.
Section 4.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date first above written.
"Company" "Executive"
RealMed Corporation
By: /s/ Robert B. Peterson By: /s/ Robert J. Hicks
Signature Signature
Robert B. Peterson Robert J. Hicks
Printed Name, Title Printed Name, Title
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Exhibit 10.06
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), made as of the 31st day of
July, 1999 (the "Effective Date"), by and between REALMED CORPORATION, an
Indiana corporation (the "Company") and Gary P. Hutchcraft, an individual
resident of Indiana ("Executive").
WHEREAS, the Company desires to employ Executive as the Chief Financial
Officer and Executive desires to be so employed on the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Executive and the Company
including, without limitation, the promises and covenants of the parties set
forth herein, the parties hereto, intending to be legally bound, hereby agree to
as follows:
ARTICLE I
EMPLOYMENT
Section 1.1 Term of Employment. The term of Executive's employment
under this Agreement shall commence on July 31, 1999 and continue for a period
of five years, unless earlier terminated as provided in this Agreement. At the
end of the initial five year term, this Agreement shall automatically renew for
consecutive two year terms unless either party hereto gives written notice to
the other of its intent to terminate this Agreement at least sixty days prior to
the end of the initial term or any renewal term (a "Section 1.1 Termination").
Notwithstanding the foregoing, the indemnification provisions of this Agreement
contained in Section 1.4 regarding an Excess Parachute Payment (as defined
below) on account of a Change in Control (as defined below in Section 1.4(b))
shall survive until the expiration of the statute of limitations for assessment
of any excise tax under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code").
Section 1.2 Duties and Responsibilities of Executive. Executive is
hereby employed as the Chief Financial Officer of the Company. In his capacity
as Chief Financial Officer of the Company, Executive shall report to the Chief
Executive Officer of the Company, and shall conduct and perform such additional
services and activities as may be determined from time to time by the Chief
Executive Officer and/or the Board of Directors of the Company. Executive's
authority from, and responsibility to, the Company shall at all times be subject
to the review and discretion of the Chief Executive Officer and Board of
Directors of the Company. Executive acknowledges that he has a duty of loyalty
to the Company and that Executive is committing to a full time executive
position. Executive shall not engage in, directly or indirectly, any other
business or activity that could materially and adversely affect the Company's
business or Executive's ability to perform his duties under this Agreement;
provided, however, that the Executive shall be free to participate in civic and
charitable activities so long as such activities do not materially interfere
with his duties and responsibilities hereunder.
<PAGE>
Section 1.3 Compensation. For services to be rendered by
Executive under this Agreement, the Company shall pay Executive as follows:
(a) Base Salary. Executive shall be paid a minimum annual
gross salary of one hundred fifty thousand dollars
($150,000), payable biweekly. Executive's annual
gross salary may be upwardly adjusted from time to
time by the Board of Directors of the Company. At no
time during the term of this Agreement shall
Executive's base salary be decreased from the amount
of the base salary then in effect. Executive's base
salary shall be earned and accrued on a per diem
basis.
(b) Bonus. The Executive shall be eligible for an annual
bonus of $25,000 payable in the discretion of the
Chief Executive Officer. Such bonus shall be payable
by January 1 of the year following the service and
shall be prorated for any partial year.
(c) Bonus Advance. Within ten days of Executive's
request, the Company agrees to advance up to $34,000
of Executive's bonuses. Such loan shall be repaid by
Executive on or prior to the earlier of : (i)
Executive ceasing to be an employee of the Company;
or (ii) July 31, 2001. The loan shall be interest
free and evidenced by a Promissory Note in the form
attached hereto as Exhibit A and shall be subject to
the additional terms and conditions set forth
therein. If requested by the Company, such loan shall
be secured by a pledge of Participant's options or
stock and Participant agrees to execute such pledge
and other agreements as the Company may reasonably
request to effect such pledge.
.
Section 1.4 Tax Reimbursement Payment.
(a) Notwithstanding anything to the contrary contained
in this Agreement, or in any plan of the Company, or
in any other agreement or understanding, the Company
will pay to the Executive, at the times herein
specified, an amount (the "Additional Amount") equal
to the excise tax under Section 4999 of the Code, if
any, incurred or to be incurred by the Executive by
reason of the payments under this Agreement,
acceleration of vesting of stock options, stock
appreciation rights or restricted stock granted under
the Company's various stock option, stock
appreciation or other employee incentive plans, or
payments under any other plan, agreement or
understanding between the Executive and the Company,
constituting Excess Parachute Payments (as defined
below), plus all excise taxes and federal, state and
local income taxes incurred or to be incurred by the
Executive with respect to the receipt of the
Additional Amount. For purposes of this Agreement,
the term "Excess Parachute Payment" shall mean any
payment or any portion thereof which would be an
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"excess parachute payment" within the meaning of
Section 280G(b) of the Code, and which would result
in the imposition of an excise tax on the Executive
under Section 4999 of the Code.
(b) All determinations required to be made regarding the
Additional Amount, including whether payment of any
Additional Amount is required and the amount of any
Additional Amount, shall be made by the independent
accounting firm which is advising the Company (the
"Accounting Firm"), which shall provide detailed
support calculations to the Company and the Executive
on or before the last day of the calendar year during
which occurs the Change in Control (the "Change in
Control Year"). In computing taxes, the Accounting
Firm shall use the highest marginal federal, state
and local income tax rates applicable to single
taxpayers for the year in which the Additional Amount
is to be paid (unless, within thirty (30) days after
the occurrence of the Change in Control the Executive
specifies in writing to the Company his marginal tax
rate) and shall assume the full deductibility of
state and local income taxes for purposes of
calculating federal income tax liability. For
purposes of Article I only, "Change of Control" shall
have the meaning set forth in the Code. The portion
of the Additional Amount based on the excise tax as
determined by the Accounting Firm to be due for the
Change in Control Year shall be paid to the Executive
no later than March 1 immediately following the end
of the Change in Control Year. The portion of the
Additional Amount based on the excise tax as
determined by the Accounting Firm to be due for each
calendar year following the Change in Control Year
shall be paid to the Executive on or before March 1
immediately following the end of each such
calendar year. If the Company determines that the
excise tax for any year will be different from the
amount originally calculated in the report of the
Accounting Firm delivered at the end of the Change in
Control Year, then the Company shall provide to
the Executive detailed support calculations by the
Accounting Firm specifying the basis for the change
in the Additional Amount.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial
determination by the Accounting Firm of an Additional
Amount under Section 1.4(b) hereof, it is possible
that an Additional Amount in excess of the amount
initially determined which will not have been made by
the Company should have been made (an
"Underpayment"). In the event that the Accounting
Firm, based upon controlling precedent, determines
that any Underpayment has occurred, such Underpayment
shall promptly be paid by the Company to or for the
benefit of the Executive, together with interest at
the applicable federal rate provided for in Section
7872(f)(2)(A) of the Code.
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(d) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if
successful, would require the payment by the
Executive of any excise tax under Section 4999 of the
Code beyond any amount of such excise tax for which
an Additional Amount had theretofore been determined
by the Accounting Firm under Section 1.4(b) hereof.
Such notification shall be given as soon as
practicable but no later than ten business days after
the Executive is informed in writing of such claim
and shall apprise the Company of the nature of such
claim and the date on which such claim is requested
to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period
following the date on which he gives such notice to
the Company (or such shorter period ending on the
date that any payment of taxes with respect to such
claim is due). If the Company notifies the
Executive in writing prior to the expiration of such
period that it desires to contest such claim, the
Executive shall:
(i) give to the Company any information reasonably
requested by the Company relating to such
claim;
(ii) take such action, at the expense of the
Company, in connection with contesting such
claim as the Company shall reasonably
request in writing from time to time,
including, without limitation, accepting
legal representation with respect to such
claim by an attorney reasonably satisfactory
to the Executive;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and
pay directly all costs and expenses (including
additional interest and penalties) incurred in
connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis,
for any excise tax or federal, state and local income
tax (including interest and penalties with respect
thereto) imposed as a result of such representation
and payment of costs and expense. Without limitation
on the foregoing, the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and
conferences with the Internal Revenue Service or
other taxing authority in respect of such claim and
may, at its sole option, either direct the Executive
to pay the tax (including any penalties or interest)
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claimed and pursue a claim for a refund
administratively or by bringing a proceeding in
court, and the Executive agrees to prosecute such
contest to a determination before the Internal
Revenue Service or other taxing authority, in a court
of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided,
however, that if the Company directs the Executive to
pay such claim and seek a refund, the Company shall
advance the amount of such payment to the Executive,
on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis,
from any excise tax or federal, state and local
income tax (including interest and penalties with
respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to
such advance; and further provided that any extension
of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to
be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest
shall be limited to issues with respect to which an
Additional Amount would be payable hereunder and the
Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the
Internal Revenue Service or any other taxing
authority.
(e) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to the last sentence
of Section 1.4(d), the Executive receives any
refund of any amount paid with the amount advanced,
the Executive shall promptly pay to the Company the
amount of such refund (together with any interest
paid or credited thereon net of any federal, state,
or local income taxes of the Executive (determined
in the manner prescribed by Section 1.4(b) hereof)
with respect to such interest). If, after the receipt
by the Executive of any amount advanced by the
Company pursuant to the last sentence of Section
1.4(d), a final determination is made that the
Executive is not be entitled to any refund with
respect to such claim, then such advance shall be
forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the
extent thereof, the amount of any Underpayment
otherwise payable under Section 1.4(c).
Section 1.5 Benefits.
(a) Vacation. Executive shall be entitled to four weeks
paid vacation during each calendar year during the
term of this Agreement. Vacation not used during any
calendar year may be carried forward to the next
year; provided, however, that no more than four weeks
of unused vacation time may be carried forward from
one year to the next year.
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(b) Life, Disability and Retirement Programs. Executive
shall be entitled to participate in any life,
disability and retirement programs which may from
time to time be offered generally to all of the other
members of the senior management personnel of the
Company.
(c) Group Insurance. Executive shall be entitled to
participate in any group health, dental, and vision
insurance programs which may from time to time be
offered generally to all of the other members of the
senior management personnel of the Company.
Section 1.6 Stock Options. Executive shall be granted an option to
purchase 450,000 shares of the Company pursuant to that certain 1999 Stock
Option and Incentive Plan (the "Plan") and that certain Stock Option Agreement
dated as of July 31, 1999 ("Option Agreement") (such options and shares to be
drawn from the employee option pool and subject to such terms and conditions as
set forth in the Option Agreement). In addition, Executive shall be entitled to
participate in any other incentive and stock option plans which may from time to
time be offered generally to all of the other members of the senior management
personnel of the Company.
Section 1.7 Business Expenses. Executive shall be entitled to
reimbursement of all ordinary and necessary business expenses reasonably
incurred by him for business travel (including reasonable moving expenses),
communications, entertainment and meals in connection with the performance of
Executive's duties under this Agreement in accordance with the Company's
policies for reimbursement of business expenses in effect from time to time as
reasonably approved by the Board of Directors of the Company.
ARTICLE II
COVENANTS OF EXECUTIVE
Section 2.1 Confidential Information. Executive acknowledges that in
connection with his employment by the Company, Executive may be given access to,
generate, or otherwise come into contact with or become aware of certain
proprietary, secret and/or confidential information and materials which are the
property of or relate to (a) the Company, and/or (b) the Company's business of
electronic health-care industry claims resolution procedures, customers, clients
or suppliers (collectively, "Confidential Matters"). Confidential Matters shall
include, without limitation, all information and materials created or developed
by, provided to or otherwise disclosed to Executive in connection with
Executive's employment by the Company (excepting only information and materials
already known to the public), including, without limitation, all of the
following:
(a) trade secrets, know-how and all other business,
financial or technical information which gives or
could give the Company a competitive advantage;
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(b) software used by the Company (including source code
and object code) and associated layouts, templates,
processes, documentation, databases, designs and
techniques, and all modifications thereto
(collectively, "Confidential Software");
(c) the names and addresses of the Company's past,
present or prospective customers or clients and all
documents, information and materials which concern or
relate to such customers or clients, regardless of
whether such documents, information and materials
were supplied or produced by the Company or such
customers or clients;
(d) inventions, improvements, innovations, research and
development, software and all other discoveries or
work product created or used by the Company,
including those which are conceived or developed by
Executive alone or with others in connection with
Executive's employment by the Company, or which are
conceived or developed by Executive after termination
of such employment by using Confidential Matters; and
(e) information concerning the Company's products,
services, systems, methods, employees, technology,
suppliers, licensors, affiliates, financing sources,
profits, revenues, financial condition and affairs,
marketing plans or programs, and business strategies
and practices.
Executive acknowledges and agrees that Confidential Matters are the
property of the Company and that Executive shall not acquire any ownership
rights in Confidential Matters. Executive shall:
(a) use Confidential Matters solely in connection with
Executive's employment by the Company; and
(b) hold Confidential Matters in trust and confidence,
and use all reasonable means to assure that they are
not directly or indirectly disclosed to or copied by
unauthorized persons or used in an unauthorized
manner, both during and after Executive's employment
by the Company.
Executive shall not load, install, copy, store or otherwise retain any
Confidential Software on any computer or other device which is not Company
property without first obtaining the Company's written consent.
To the extent that Executive creates or develops any Confidential
Matters, Executive shall:
(a) promptly disclose them to the Company; and
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(b) at the Company's request, assign them to the Company
and execute all documents and do all things necessary
to assist the Company in obtaining such patent,
copyright, trademark, trade secret and/or other
protection as the Company in its sole discretion
deems necessary or appropriate, with the Company to
pay all resulting expenses.
Upon termination of Executive's employment with the Company for any
reason, Executive shall delete all Confidential Matters from the memory of any
computer belonging to Executive and shall turn over to the Company (a) all
documents and other materials (including, without limitation, all tapes, floppy
disks and other forms of electronic storage media) which constitute, contain or
are derived from Confidential Matters; and (b) all other documents, notes, work
product and other materials connected with or arising out of Executive's
employment with the Company.
Section 2.2 Non-solicitation of Customers and Non-Competition. During
the term of his employment with the Company under this Agreement, and for a
period of two years (which shall be extended by the length of any period during
which Executive is in violation of this Section 2.2) after any termination of
the Executive's employment for any reason, Executive shall not (on Executive's
own behalf or that of any other person or entity) directly or indirectly sell or
otherwise provide or solicit the sale or provision of any product, license,
process or service which directly or indirectly competes with any product,
license, process or service of the Company to any person or entity which was, at
the time of termination of Executive's employment, a customer or client of the
Company.
During the term of Executive's employment with the Company under this
Agreement, and for a period of two years (which shall be extended by the length
of any period during which Executive is in violation of this Section 2.2) after
any termination of Executive's employment with the Company for any reason,
Executive shall not (on Executive's own behalf or that of any other person or
entity), without prior written consent of the Board of Directors of the Company,
which consent may be withheld at the sole discretion of the Board of Directors
of the Company, directly or indirectly own, manage, operate, control, invest in,
lend to, acquire an interest in, or otherwise engage or participate in, (whether
as an employee, independent contractor, consultant, partner, shareholder, joint
venturer, investor or any other type of participant), the management or conduct
of any electronic health-care industry claims resolution business or enterprise
that directly or indirectly competes in any Market Area (as defined below) with
any product, license, process or service which the Company sold or provided at
the time of Executive's termination of employment with the Company ("Competitive
Product"). For purposes of this Agreement, Market Area shall mean either (i) the
standard metropolitan statistical area as designated by the federal government
in which the Company sold or provided any Competitive Product or (ii) in all
other cases, the county in which the Company sold or provided any Competitive
Product. Provided, however, that nothing in this Section 2.2 shall prohibit
Executive from acquiring or holding, for investment purposes only, less than
five percent (5%) of the outstanding publicly traded securities of any
corporation which may compete directly or indirectly with the Company or from
engaging in the business of investment banking.
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Section 2.3 Non-Solicitation of Employees. During the term of
Executive's employment with the Company under this Agreement, and for a period
of two years (which shall be extended by the length of any period during which
Executive is in violation of this Section 2.3), after any termination of
Executive's employment with the Company for any reason (the "Non-solicitation
Period"), Executive shall not, directly or indirectly, through one or more
intermediaries or otherwise, hire, employ, induce, solicit for employment, or
assist others in hiring, employing, inducing or soliciting for employment any
individual who is at any time during the Non-solicitation Period an employee of
the Company.
Section 2.4 Injunctive Relief. Executive acknowledges that his actual
or threatened breach of any provision of Article II of this Agreement will cause
or threaten irreparable injury to the Company that cannot adequately be measured
in money damages, and that the Company shall be entitled to obtain injunctive
relief with respect to any such actual or threatened breach by Executive.
Injunctive relief shall be in addition to and not in lieu of any other available
remedies.
ARTICLE III
TERMINATION OF EMPLOYMENT
Section 3.1 Termination by Company. In addition to termination pursuant
to Section 1.1, Executive's employment under this Agreement may be terminated by
the Company by giving notice to Executive during the term of this Agreement as
follows:
(a) upon Executive's death or, subject to any applicable
federal, state or local laws (including, but not
limited to, the Americans With Disabilities Act), any
disability which renders Executive incapable of
performing his duties hereunder for more than one
hundred twenty calendar days (termination under this
Section 3.1(a) shall be deemed termination "without
Cause");
(b) for any reason not constituting "for Cause" (as
defined below) following a determination by the Board
of Directors of the Company to terminate Executive's
employment (termination under this Section 3.1(b)
shall also be deemed termination "without Cause";
provided, however, that a Section 1.1 Termination
shall not constitute a termination "without Cause");
or
(c) "for Cause," which for purposes of this Agreement
shall mean that the Executive shall have:
(i) committed an act of fraud, embezzlement
or theft in connection with his duties
under this Agreement at any time subsequent
to the date of this Agreement;
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(ii) intentionally inflicted material damage to
any material asset of the Company;
(iii) breached any provision of Article II of
this Agreement;
(iv) engaged in the illegal use of drugs during
the term of this Agreement or been under the
influence of alcohol during the performance
of his duties under this Agreement, which
has or may have a material adverse effect
on the business or operations of the Company
or on the reputation of the Company or the
Executive provided, however, in the case of
any issues relating to the use of alcohol,
the Company has given Executive written
notice of any conduct and such conduct
thereafter continues;
(v) been convicted of any crime constituting
a felony under applicable law, other than a
felony related to the operation of a motor
vehicle;
(vi) intentionally committed any act of
dishonesty against the Company, which has or
may have a material adverse effect on the
business or operations of the Company or on
the reputation of the Company or the
Executive;
(vii) intentionally committed any intentional tort
against the Company or any employee of the
Company, which has or may have a material
adverse effect on the business or operations
of the Company or on the reputation of the
Company or the Executive; or
(viii) intentionally committed any act of gross
insubordination, which has or may have a
material adverse effect on the business or
operations of the Company or on the
reputation of the Company or the Executive.
Section 3.2 Termination by Executive. Executive's employment under this
Agreement may be terminated by Executive for "Good Reason" (as defined below) or
otherwise, by giving Company at least 30 days advanced written notice or
termination. For purposes of this Agreement, "Good Reason" shall mean, the
occurrence of any of the following events, unless such event has been consented
to by Executive in writing or such event is fully corrected as provided below:
(a) A material breach by the Company of any material
provision of this Agreement, including, but not
limited to, the assignment to Executive of any duties
materially inconsistent with Executive's position
in the Company or a material adverse alteration in
the nature or status of Executive's responsibilities;
provided, however, that in the event of this
subsection (a) being the sole basis for termination,
Executive shall furnish the Company in writing a
notice of proposed termination setting forth a
specific statement of the Good Cause for which
termination is sought. The Company shall then have a
period of ninety days after the giving of such notice
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of proposed termination by Executive in which to cure
the breach specified in such notice. If at the end of
such ninety day period no such cure has been
effected, the Executive's employment shall be
terminated at the end of such ninety day period.
(b) the occurrence of a "Change in Control" as defined
below.
For purposes of this Agreement a "Change in Control" shall mean an
event as a result of which: (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total voting power of the voting stock of
the Company; (ii) (A) the Company consolidates with, or merges with or into
another corporation, and (B) in connection with any such transaction, the
outstanding voting stock of the Company is changed into or exchanged for cash,
securities or other property, other than any such transaction where (x) the
outstanding voting stock of the Company is changed into or exchanged for voting
stock of the surviving, or transferee corporation, or for cash, securities
(whether or not including voting stock) or other property, and (y) the holders
of the voting stock of the Company immediately prior to such transaction own,
directly or indirectly, not less than 60% of the voting power of the voting
stock of the surviving corporation immediately after such transaction; or (iii)
the Company sells, assigns, conveys, transfers, leases or otherwise disposes of
substantially all of its assets, or (iv) individuals who at the date of this
Agreement constitute the Board of the Company (together with any new directors
whose election by such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of 66 2/3% of the directors
then still in office who are either directors at the date of this Agreement or
whose election or nomination for election was previously so approved) ceased for
any reason to constitute a majority of the Board of the Company then in office;
or (v) the Company is liquidated or dissolved or adopts a plan of liquidation;
provided, however that a Change in Control shall not be deemed to have occurred
if (aa) all of the shares of common stock of the Company owned (legally or
beneficially) by Executive were not voted against the transaction which would,
but for this proviso, constitute a Change in Control, or (bb) such Change in
Control relates to an IPO.
(c) Executive provides the Board of Directors or Chief
Executive Officer a written notice that Executive has
been requested to undertake or support an illegal
activity and the Board or Chief Executive Officer
refuses to revoke or withdraw such request within
five days after the Board's or Chief Executive
Officer's receipt of such notice.
Section 3.3 Severance. For purposes of this Agreement,
Executive's entitlement to any severance payments upon termination of his
employment shall be as set forth below:
(a) If Executive is terminated by the Company "without
Cause" pursuant to Section 3.1(a) or Section 3.1(b)
or resigns for Good Reason (i) Executive shall
be entitled to severance pay of 1.5 times the sum of
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Executive's annual rate of base salary then in effect
plus Executive's bonus for the last full fiscal year,
payable in a lump sum on the date of such
termination; (ii) all of Executive's rights to
purchase common stock of the Company, pursuant to
the Option Agreement, or any rights to receive
restricted stock pursuant to any restricted stock
agreement shall vest, and (iii) at the option of
Executive, the Company shall either (A) loan
Executive an amount equal to all applicable federal
and state taxes recognized by Executive as a result
of the vesting of restricted stock pursuant to
subsection (ii) above (the "Recognized Taxes"),
including, without limitation, all federal and state
income and Medicare taxes, which loan shall bear
interest at the lowest rate at which interest
income shall not be imputed to Executive for federal
income tax purposes, interest and principal being
due and payable at the earlier of an IPO or 3 years
from the date of Severance, or (B) purchase from
Executive, at such price as Executive and Company may
agree upon, so many shares so vested as are necessary
to pay the Recognized Taxes;
(b) In the event of a Section 1.1 Termination, a
termination of Executive "for Cause," a termination
by Executive for any reason other than Good Reason,
or any other termination of or by Executive (other
than as set forth in Section 3.3(a)), then Executive
shall not receive any severance pay (and Executive
shall forfeit all unused vacation time and any stock
options or restricted stock which has not then
vested), unless, and to the extent that, some
severance pay is approved in writing by the Board of
Directors of the Company in its sole discretion. In
the event the Executive shall provide thirty days
prior written notice of his intent to resign, the
Company may accept such resignation effective as of
any date during such thirty day period as the Company
deems appropriate, provided that the Executive shall
receive from the Company the per diem portion of his
salary and be entitled to participate at the
Company's expense in any Company sponsored benefit
programs in which he was a participant as of the
effective date of his resignation for the duration
of such thirty day period. Notwithstanding the
foregoing, Executive shall receive the per diem
portion of such annual salary that is accrued
but unpaid up to the date of any termination for
Cause.
Section 3.4 Anticipated Increase in Compensation and Severance. The
Company anticipates that it will make an initial public offering of its stock
pursuant to an effective registration statement under the Securities Act of 1933
(the "IPO"). In conjunction with or shortly after the IPO, the Company will
retain an independent consulting firm to study its executive compensation
arrangements and to recommend to the Board of Directors such changes in base
salaries, annual bonuses, and lump sum severance payments, and such changes in
stock incentive arrangements, as will be needed to attract and retain top flight
senior management executives and to insure that the compensation and incentive
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opportunities provided to such executives will be equal to or better than, in
the aggregate, those provided by other similarly-situated public company
executives having the same title or performing the same duties. Subject to
approval by the Board, the Company and Executive anticipate that such
arrangements will result in an annual salary and bonus in the aggregate of
approximately $350,000.
Section 3.5 Delay of IPO. In the event that the IPO is not closed on or
before July 31, 2001, Company and Executive agree that the Company will either:
(a) retain an independent consulting firm to study its executive compensation
arrangements and to recommend to the Board of Directors such changes in base
salaries, annual bonuses, and lump sum severance payments, and such changes in
stock incentive arrangements, as will be needed to attract and retain top flight
senior management executives and to insure that the compensation and incentive
opportunities provided to such executives will be equal to or better than, in
the aggregate, those provided to executives of public companies which are
similarly situated to the Company; or (b) agree with Executive on a mutually
agreeable revised compensation plan. In the event that on or prior to September
31, 2001, the Board does not either: (i) reach an agreement with Executive
regarding a new compensation plan; or (ii) adopt the recommendations of the
independent consultant, Executive shall give the Board thirty (30) days written
notice of Executive's conclusion that the requirements of this Section 3.5 have
not been satisfied. In the event that the Board does not cure such breach within
thirty (30) days of its receipt of such notice, then Executive may resign and
shall be entitled to a one-time payment equal to 75% of the sum of Executive's
annual rate of base salary then in effect plus Executive's bonus for the last
full fiscal year.
ARTICLE IV
GENERAL PROVISIONS
Section 4.1 Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes and
withholding as shall be required pursuant to any applicable law, rule or
regulation.
Section 4.2 Attorneys' Fees. If either party shall institute litigation
or arbitration to enforce any of its rights under this Agreement, the prevailing
party shall be entitled to recover from the other party the prevailing party's
reasonable attorneys' fees and costs incurred in any such litigation or
arbitration.
Section 4.3 Notice. For purposes of this Agreement, all communications
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or five (5) business days after having been
mailed by United States registered mail or certified mail, return receipt
requested, postage prepaid, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office or to Executive at
his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except the notices
of change of address shall be effective only on receipt.
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Section 4.4 Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Indiana, without giving effect to the principles of conflict of
laws of such State. Any and all actions concerning any dispute arising under
this Agreement shall be filed and maintained only in a state or federal court
sitting in the State of Indiana, and each party hereby consents and submits to
the jurisdiction of such state or federal court.
Section 4.5 Validity. It is not the intent of any party hereto to
violate any public policy of any jurisdiction in which this Agreement may be
enforced. If any provision of this Agreement or the application of any provision
hereof to any person or circumstances is held invalid, unenforceable or
otherwise illegal, the remainder of this Agreement and the application of such
provision to any other person or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it valid,
enforceable and legal; provided, however, if the provision so held to be
invalid, unenforceable or otherwise illegal constituted a material inducement to
a party's execution and delivery of this Agreement, such provision shall not be
reformed unless prior to any reformation that party agrees to be bound by the
reformation.
Section 4.6 Entire Agreement. This Agreement supersedes any other
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between the
parties with respect to the employment of the Executive by the Company. Any
waiver or modification of any term of this Agreement shall be effective only if
it is set forth in a writing signed by all parties hereto.
Section 4.7 Successors and Binding Agreement.
(a) This Agreement shall be binding upon and inure to the
benefit of the Company and any Successor of or to the
Company, but shall not otherwise be assignable or
delegable by the Company. "Successor" shall mean any
successor in interest, including, without limitation,
any entity, individual or group of persons acquiring,
directly or indirectly all or substantially all of
the business or assets of the Company, as the case
may be, whether by sale, merger, consolidation,
reorganization or otherwise.
(b) The Company shall require any Successor to agree at
the time of becoming a Successor to perform this
Agreement to the same extent as the original parties
would be required if no succession had occurred.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal
representatives, executors, administrators, heirs,
distributes and legatees.
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(d) This Agreement is personal in nature and neither of
the parties shall, without the consent of the other,
assign, transfer or delegate this Agreement or any
rights or obligations hereunder except as expressly
provided in this Section 4.7.
Section 4.8 Captions. The captions in this Agreement are solely
for convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement.
Section 4.9 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and the Company. No waiver by a party
hereto at any time of any breach by another party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provision or conditions at the
same or at any prior or subsequent time.
Section 4.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
"Company" "Executive"
RealMed Corporation
/s/ Gary P. Hutchcraft
Gary P. Hutchcraft
By: /s/ Robert J. Hicks
Print Name: Robert J. Hicks
Title: Chief Executive Officer
<PAGE>
Exhibit 10.08
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), made as of the 1st day of
October, 1999 (the "Effective Date"), by and between REALMED CORPORATION, an
Indiana corporation (the "Company") and Tim Bird, an individual resident of
Indiana ("Executive").
WHEREAS, the Company desires to employ Executive as a Vice President
and Chief Technology Officer and Executive desires to be so employed on the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Executive and the Company
including, without limitation, the promises and covenants of the parties set
forth herein, the parties hereto, intending to be legally bound, hereby agree to
as follows:
ARTICLE I
EMPLOYMENT
Section 1.1 Term of Employment. The term of Executive's employment
under this Agreement shall commence on October 1, 1999 and continue through
November 1, 2004, unless earlier terminated as provided in this Agreement. At
the end of the initial five year-one month term, this Agreement shall
automatically renew for consecutive two year terms unless either party hereto
gives written notice to the other of its intent to terminate this Agreement at
least sixty days prior to the end of the initial term or any renewal term (a
"Section 1.1 Termination").
Section 1.2 Duties and Responsibilities of Executive. Executive is
hereby employed as a Vice President and Chief Technology Officer. In his
capacity as a Vice President and Chief Technology Officer, Executive shall
report to the President of the Company, and shall conduct and perform such
additional services and activities as may be determined from time to time by the
President, the Chief Executive Officer and/or the Board of Directors of the
Company. Executive's authority from, and responsibility to, the Company shall at
all times be subject to the review and discretion of the President, Chief
Executive Officer and Board of Directors of the Company. Executive acknowledges
that he has a duty of loyalty to the Company and that Executive is committing to
a full time executive position. Executive shall not engage in, directly or
indirectly, any other business or activity that could materially and adversely
affect the Company's business or Executive's ability to perform his duties under
this Agreement; provided, however, that the Executive shall be free to
participate in civic and charitable activities so long as such activities do not
materially interfere with his duties and responsibilities hereunder.
Section 1.3 Compensation. For services to be rendered by
Executive under this Agreement, the Company shall pay Executive as follows:
(a) Base Salary. For the period beginning on October 1,
1999, and ending October 30, 1999, Executive shall be
paid $1,000 per month. Thereafter, Executive shall be
<PAGE>
paid a minimum annual gross salary of one hundred
twenty-five thousand dollars ($125,000), payable
biweekly. Further, upon the closing of the Company's
initial public offering ("IPO"), Executive's annual
gross salary shall be increased to $150,000. At no
time during the term of this Agreement shall
Executive's base salary be decreased from the amount
of the base salary then in effect. Executive's base
salary shall be earned and accrued on a per diem
basis.
(b) Bonus. The Executive shall be paid a targeted
quarterly bonus of $15,000 on January 31, 2000, April
30, 2000, July 31, 2000 and October 31, 2000.
Commencing upon the IPO, the Executive's bonus target
shall be increased to $20,000 per quarter and shall
be payable on the same dates as set forth above in
this Section 1.3(b). During the first four quarters
of Executive's employment with the Company,
Executive's bonuses shall be guaranteed.
Section 1.4 Benefits.
(a) Vacation. Executive shall be entitled to four weeks
paid vacation during each calendar year during the
term of this Agreement. Vacation not used during any
calendar year may not be carried forward to the next
year.
(b) Life, Disability and Retirement Programs. Executive
shall be entitled to participate in any life,
disability and retirement programs which may from
time to time be offered generally to all of the other
employees of the Company.
(c) Group Insurance. Executive shall be entitled to
participate in any group health, dental, and vision
insurance programs which may from time to time be
offered generally to all of the other employees of
the Company.
Section 1.5 Stock Options. Executive shall be granted an option to
purchase 100,000 shares of the Company pursuant to that certain 1999 Stock
Option and Incentive Plan (the "Plan") and that certain Stock Option Agreement
dated as of October 1, 1999 ("Option Agreement") (such options and shares to be
subject to such terms and conditions as set forth in the Option Agreement). In
addition, Executive shall be entitled to participate in any other incentive and
stock option plans which may from time to time be offered generally to all of
the other employees of the Company.
Section 1.6 Business Expenses. Executive shall be entitled to
reimbursement of all ordinary and necessary business expenses reasonably
incurred by him for business travel (including reasonable moving expenses),
communications, entertainment and meals in connection with the performance of
Executive's duties under this Agreement in accordance with the Company's
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policies for reimbursement of business expenses in effect from time to time as
reasonably approved by the Board of Directors of the Company.
ARTICLE II
COVENANTS OF EXECUTIVE
Section 2.1 Confidential Information. Executive acknowledges that in
connection with his employment by the Company, Executive may be given access to,
generate, or otherwise come into contact with or become aware of certain
proprietary, secret and/or confidential information and materials which are the
property of or relate to (a) the Company, and/or (b) the Company's business of
electronic health-care industry claims resolution procedures, customers, clients
or suppliers (collectively, "Confidential Matters"). Confidential Matters shall
include, without limitation, all information and materials created or developed
by, provided to or otherwise disclosed to Executive in connection with
Executive's employment by the Company (excepting only information and materials
already known to the public), including, without limitation, all of the
following:
(a) trade secrets, know-how and all other business,
financial or technical information which gives or
could give the Company a competitive advantage;
(b) software used by the Company (including source code
and object code) and associated layouts, templates,
processes, documentation, databases, designs and
techniques, and all modifications thereto
(collectively, "Confidential Software");
(c) the names and addresses of the Company's past,
present or prospective customers or clients and all
documents, information and materials which concern or
relate to such customers or clients, regardless of
whether such documents, information and materials
were supplied or produced by the Company or such
customers or clients;
(d) inventions, improvements, innovations, research and
development, software and all other discoveries or
work product created or used by the Company,
including those which are conceived or developed by
Executive alone or with others in connection with
Executive's employment by the Company, or which are
conceived or developed by Executive after termination
of such employment by using Confidential Matters; and
(e) information concerning the Company's products,
services, systems, methods, employees, technology,
suppliers, licensors, affiliates, financing sources,
profits, revenues, financial condition and affairs,
marketing plans or programs, and business strategies
and practices.
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Executive acknowledges and agrees that Confidential Matters are the
property of the Company and that Executive shall not acquire any ownership
rights in Confidential Matters. Executive shall:
(a) use Confidential Matters solely in connection with
Executive's employment by the Company; and
(b) hold Confidential Matters in trust and confidence,
and use all reasonable means to assure that they are
not directly or indirectly disclosed to or copied by
unauthorized persons or used in an unauthorized
manner, both during and after Executive's employment
by the Company.
Executive shall not load, install, copy, store or otherwise retain any
Confidential Software on any computer or other device which is not Company
property without first obtaining the Company's written consent.
To the extent that Executive creates or develops any Confidential
Matters, Executive shall:
(a) promptly disclose them to the Company; and
(b) at the Company's request, assign them to the Company
and execute all documents and do all things necessary
to assist the Company in obtaining such patent,
copyright, trademark, trade secret and/or other
protection as the Company in its sole discretion
deems necessary or appropriate, with the Company to
pay all resulting expenses.
Upon termination of Executive's employment with the Company for any
reason, Executive shall delete all Confidential Matters from the memory of any
computer belonging to Executive and shall turn over to the Company (a) all
documents and other materials (including, without limitation, all tapes, floppy
disks and other forms of electronic storage media) which constitute, contain or
are derived from Confidential Matters; and (b) all other documents, notes, work
product and other materials connected with or arising out of Executive's
employment with the Company.
Section 2.2 Non-solicitation of Customers. During the term of his
employment with the Company under this Agreement, and for a period of two years
(which shall be extended by the length of any period during which Executive is
in violation of this Section 2.2) after any termination of the Executive's
employment for any reason other than any termination "without Cause", Executive
shall not (on Executive's own behalf or that of any other person or entity)
directly or indirectly sell or otherwise provide or solicit the sale or
provision of any product, license, process or service which directly or
indirectly competes with any product, license, process or service of the Company
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to any person or entity which was, at the time of termination of Executive's
employment, a customer or client of the Company.
Section 2.3 Non-Solicitation of Employees. During the term of
Executive's employment with the Company under this Agreement, and for a period
of two years (which shall be extended by the length of any period during which
Executive is in violation of this Section 2.3) after any termination of
Executive's employment with the Company for any reason other than any
termination "without Cause" (the "Non-solicitation Period"), Executive shall
not, directly or indirectly, through one or more intermediaries or otherwise,
hire, employ, induce, solicit for employment, or assist others in hiring,
employing, inducing or soliciting for employment any individual who is at any
time during the Non-solicitation Period an employee of the Company.
Section 2.4 Injunctive Relief. Executive acknowledges that his actual
or threatened breach of any provision of Article II of this Agreement will cause
or threaten irreparable injury to the Company that cannot adequately be measured
in money damages, and that the Company shall be entitled to obtain injunctive
relief with respect to any such actual or threatened breach by Executive.
Injunctive relief shall be in addition to and not in lieu of any other available
remedies.
ARTICLE III
TERMINATION OF EMPLOYMENT
Section 3.1 Termination by Company. In addition to termination pursuant
to Section 1.1, Executive's employment under this Agreement may be terminated
during the term of this Agreement as follows:
(a) "for Cause," which for purposes of this Agreement
shall mean that the Executive shall have:
(i) committed an act of fraud, embezzlement
or theft in connection with his duties
under this Agreement at any time subsequent
to the date of this Agreement;
(ii) intentionally inflicted material damage to
any material asset of the Company;
(iii) breached any provision of Article II of
this Agreement;
(iv) engaged in the illegal use of drugs during
the term of this Agreement or been under the
influence of alcohol during the performance
of his duties under this Agreement, which
has or may have a material adverse effect on
the business or operations of the Company or
on the reputation of the Company or the
Executive;
(v) been convicted of any crime constituting
a felony under applicable law, other than a
felony related to the operation of a motor
vehicle;
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(vi) committed any act of dishonesty against the
Company;
(vii) committed any intentional tort against the
Company or any employee of the Company;
(viii) committed any act of gross insubordination,
which has or may have a material adverse
effect on the business or operations of the
Company or on the reputation of the Company
or the Executive; or
(ix) resigned for any reason.
(b) "without Cause," which for purposes of this Agreement
shall mean that the Executive shall have:
(i) ceased employment due to Executive's death
or, subject to any applicable federal, state
or local laws (including, but not limited
to, the Americans With Disabilities Act),
any disability which renders Executive
incapable of performing his duties hereunder
for more than one hundred eighty calendar
(180) days; or
(ii) for any reason not constituting "for Cause"
(as defined above) following a determination
by the Board of Directors of the Company to
terminate Executive's employment; provided,
however, that a Section 1.1 Termination
shall not constitute a termination "without
Cause".
Section 3.2 Severance. For purposes of this Agreement, Executive's
entitlement to any severance payments upon termination of his employment shall
be subject to Executive entering into RealMed's standard waiver and release
agreement and shall be as set forth below:
(a) If Executive's employment is terminated by the Company
"without Cause" pursuant to Section 3.1(b), then (i)
Executive shall be entitled to severance pay of 50%
of the sum of Executive's annual rate of base salary
then in effect and Executive's targeted bonus for
such fiscal year, payable in a lump sum on the date
of such termination; and (ii) all of Executive's
rights to purchase common stock of the Company
pursuant to a Regular Option (as defined in the
Option Agreement) or any Project Option (as
defined in the Option Agreement) that has a
Technology Milestone Date (as defined in the Option
Agreement) which is subsequent to the termination
date shall vest, (iii) the Company shall pay
Executive a sum equal to the amount necessary for
Executive to pay the Executive's COBRA payments for
the six (6) months following Executive's
termination date; (iv) the Company shall pay
Executive a sum equal to Executive's per diem
portion of Executive's annual base salary multiplied
by the unused vacation days earned by Executive in
the year of the termination;
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(b) In the event of a Section 1.1 Termination, a
termination of Executive "for Cause," then Executive
shall not receive any severance pay (and Executive
shall forfeit all unused vacation time and any stock
options which have not then vested), unless, and to
the extent that, some severance pay is approved in
writing by the Chief Executive Officer of the Company
in his sole discretion. In the event the Executive
shall provide thirty (30) days prior written notice
of his intent to resign, the Company may accept such
resignation effective as of any date during such
thirty day period as the Company deems appropriate,
provided that the Executive shall receive from the
Company the per diem portion of Executive's annual
salary and be entitled to participate at the Company's
expense in any Company sponsored benefit programs in
which he was a participant as of the effective date
of his resignation for the duration of such thirty day
period. Notwithstanding the foregoing, Executive
shall receive the per diem portion of such annual base
salary that is accrued but unpaid up to the date of
any termination "for Cause."
ARTICLE IV
GENERAL PROVISIONS
Section 4.1 Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes and
withholding as shall be required pursuant to any applicable law, rule or
regulation.
Section 4.2 Attorneys' Fees. If either party shall institute litigation
or arbitration to enforce any of its rights under this Agreement, the prevailing
party shall be entitled to recover from the other party the prevailing party's
reasonable attorneys' fees and costs incurred in any such litigation or
arbitration.
Section 4.3 Notice. For purposes of this Agreement, all communications
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or five (5) business days after having been
mailed by United States registered mail or certified mail, return receipt
requested, postage prepaid, addressed to the Company (to the attention of the
General Counsel of the Company) at its principal executive office or to
Executive at his principal residence, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except the
notices of change of address shall be effective only on receipt.
Section 4.4 Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Indiana, without giving effect to the principles of conflict of
laws of such State. Any and all actions concerning any dispute arising under
this Agreement shall be filed and maintained only in a state or federal court
7
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sitting in the State of Indiana, and each party hereby consents and submits to
the jurisdiction of such state or federal court.
Section 4.5 Validity. It is not the intent of any party hereto to
violate any public policy of any jurisdiction in which this Agreement may be
enforced. If any provision of this Agreement or the application of any provision
hereof to any person or circumstances is held invalid, unenforceable or
otherwise illegal, the remainder of this Agreement and the application of such
provision to any other person or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it valid,
enforceable and legal.
Section 4.6 Entire Agreement. This Agreement supersedes any other
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between the
parties with respect to the employment of the Executive by the Company. Any
waiver or modification of any term of this Agreement shall be effective only if
it is set forth in a writing signed by all parties hereto.
Section 4.7 Successors and Binding Agreement.
(a) This Agreement shall be binding upon and inure to the
benefit of the Company and any Successor of or to the
Company, but shall not otherwise be assignable or
delegable by the Company. "Successor" shall mean any
successor in interest, including, without limitation,
any entity, individual or group of persons acquiring,
directly or indirectly all or substantially all of
the business or assets of the Company, as the case
may be, whether by sale, merger, consolidation,
reorganization or otherwise.
(b) The Company shall require any Successor to agree at
the time of becoming a Successor to perform this
Agreement to the same extent as the original parties
would be required if no succession had occurred.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal
representatives, executors, administrators, heirs,
distributes and legatees.
(d) This Agreement is personal in nature and neither of
the parties shall, without the consent of the other,
assign, transfer or delegate this Agreement or any
rights or obligations hereunder except as expressly
provided in this Section 4.7.
Section 4.8 Captions. The captions in this Agreement are solely
for convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement.
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Section 4.9 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and the Company. No waiver by a party
hereto at any time of any breach by another party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provision or conditions at the
same or at any prior or subsequent time.
Section 4.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
"Company" "Executive"
RealMed Corporation /s/ Tim Bird
Tim Bird
By: /s/ Robert J. Hicks
Print Name: Robert J. Hicks
Title: Chief Executive Officer
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Exhibit 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") , made as of the 15 day of
June, 1999 (the "Effective Date"), by and between REALMED CORPORATION, an
Indiana corporation (the "Company") and Keith Given, an individual resident of
Indiana ("Executive").
WHEREAS, the Company desires to employ Executive as a Senior Vice
President of Business Development and Executive desires to be so employed on the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Executive and the Company
including, without limitation, the promises and covenants of the parties set
forth herein, the parties hereto, intending to be legally bound, hereby agree to
as follows:
ARTICLE I
EMPLOYMENT
Section 1.1 Term of Employment. The term of Executive's employment
under this Agreement shall commence on June 15, 1999 and continue for a period
of five years, unless earlier terminated as provided in this Agreement. At the
end of the initial five year term, this Agreement shall automatically renew for
consecutive two year terms unless either party hereto gives written notice to
the other of its intent to terminate this Agreement at least sixty days prior to
the end of the initial term or any renewal term (a "Section 1.1 Termination").
Notwithstanding the foregoing, the indemnification provisions of this Agreement
contained in Section 4.2 regarding an Excess Parachute Payment (as defined
below) on account of a Change in Control (as defined below) shall survive until
the expiration of the statute of limitations for assessment of any excise tax
under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code").
Section 1.2 Duties and Responsibilities of Executive. Executive is
hereby employed full time as the Senior Vice President of Business Development
of the Company. Executive shall devote his full time, energy, and skill to such
office and shall do and perform all services and acts necessary or advisable to
fulfill the duties of such office. In his capacity as Senior Vice President of
Business Development of the Company, Executive shall report to the Chief
Executive Officer of the Company, and shall conduct and perform such additional
services and activities as may be determined from time to time by the Chief
Executive Officer of the Company. Executive's authority from and responsibility
to the Company shall at all times be subject to the review and discretion of the
Chief Executive Officer of the Company. Executive acknowledges that he has a
duty of loyalty to the Company and shall not engage in, directly or indirectly,
any other business or activity that could materially and adversely affect the
Company's business or Executive's ability to perform his duties under this
Agreement; provided, however, that the Executive shall be free to participate in
<PAGE>
civic and charitable activities so long as such activities do not materially
interfere with his duties and responsibilities hereunder.
Section 1.3 Compensation. For services to be rendered by
Executive under this Agreement, the Company shall pay Executive as follows:
(a) Base Salary. Executive shall be paid a
minimum annual gross salary of one hundred fifteen
thousand dollars ($115,000), payable biweekly.
Executive's annual gross salary may be upwardly
adjusted from time to time by the Chief Executive
Officer of the Company. At no time during the term of
this Agreement shall Executive's base salary be
decreased from the amount of the base salary then in
effect. Executive's base salary shall be earned and
accrued on a per diem basis. In addition, Executive
shall be entitled to a bonus based on performance as
determined by the Chief Executive Officer. The amount
of the performance bonus shall not to exceed fifty
percent (50%) of Executive's base salary.
(b) Pre-IPO Bonus. At any time prior to the
initial public offering of any of the Company's stock
pursuant to an effective registration statement under
the Securities Act of 1933 (an "IPO"), the Executive
shall be part of a bonus pool consisting of senior
management of the Company. Each year, the Company's
Board of Directors, in its discretion, may pay
bonuses to such bonus pool.
(c) Post-IPO Bonus. Subsequent to the
closing of an IPO, Executive shall be entitled to
receive annual bonuses pursuant to a bonus
arrangement then in effect, which arrangement shall
be adopted by the Board of Directors of the Company
after consultation with an independent consulting
firm and which arrangement shall provide for bonus
arrangements comparable to those provided to
executives similarly situated to Executive.
Section 1.4 Tax Reimbursement Payment.
(a) Notwithstanding anything to the contrary
contained in this Agreement, or in any plan of the
Company, or in any other agreement or understanding,
the Company will pay to the Executive, at the times
herein specified, an amount (the "Additional Amount")
equal to the excise tax under Section 4999 of the
Code, if any, incurred or to be incurred by the
Executive by reason of the payments under this
Agreement, acceleration of vesting of stock options,
stock appreciation rights or restricted stock granted
under the Company's various stock option, stock
appreciation or other employee incentive plans, or
payments under any other plan, agreement or
understanding between the Executive and the Company,
constituting Excess Parachute Payments (as defined
below), plus all excise taxes and federal, state and
local income taxes incurred or to be incurred by the
Executive with respect to the receipt of the
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Additional Amount. For purposes of this Agreement,
the term "Excess Parachute Payment" shall mean any
payment or any portion thereof which would be an
"excess parachute payment" within the meaning of
Section 280G(b) of the Code, and which would result
in the imposition of an excise tax on the Executive
under Section 4999 of the Code.
(b) All determinations required to be made
regarding the Additional Amount, including whether
payment of any Additional Amount is required and the
amount of any Additional Amount, shall be made by the
independent accounting firm which is advising the
Company (the "Accounting Firm"), which shall provide
detailed support calculations to the Company and the
Executive on or before the last day of the calendar
year during which occurs the Change in Control (the
"Change in Control Year"). In computing taxes, the
Accounting Firm shall use the highest marginal
federal, state and local income tax rates applicable
to single taxpayers for the year in which the
Additional Amount is to be paid (unless, within
thirty (30) days after the occurrence of the Change
in Control the Executive specifies in writing to the
Company his marginal tax rate) and shall assume the
full deductibility of state and local income taxes
for purposes of calculating federal income tax
liability. The portion of the Additional Amount based
on the excise tax as determined by the Accounting
Firm to be due for the Change in Control Year shall
be paid to the Executive no later than March 1
immediately following the end of the Change in
Control Year. The portion of the Additional Amount
based on the excise tax as determined by the
Accounting Firm to be due for each calendar year
following the Change in Control Year shall be paid to
the Executive on or before March 1 immediately
following the end of each such calendar year. If the
Company determines that the excise tax for any year
will be different from the amount originally
calculated in the report of the Accounting Firm
delivered at the end of the Change in Control Year,
then the Company shall provide to the Executive
detailed support calculations by the Accounting Firm
specifying the basis for the change in the Additional
Amount.
(c) As a result of the uncertainty in the
application of Section 280G of the Code at the time
of the initial determination by the Accounting Firm
of an Additional Amount under Section 1.4(b) hereof,
it is possible that an Additional Amount in excess of
the amount initially determined which will not have
been made by the Company should have been made (an
"Underpayment"). In the event that the Accounting
Firm, based upon controlling precedent, determines
that any Underpayment has occurred, such Underpayment
shall promptly be paid by the Company to or for the
benefit of the Executive, together with interest at
the applicable federal rate provided for in Section
7872(f)(2)(A) of the Code.
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(d) The Executive shall notify the Company
in writing of any claim by the Internal Revenue
Service that, if successful, would require the
payment by the Executive of any excise tax under
Section 4999 of the Code beyond any amount of such
excise tax for which an Additional Amount had
theretofore been determined by the Accounting Firm
under Section 1.4(b) hereof. Such notification shall
be given as soon as practicable but no later than ten
business days after the Executive is informed in
writing of such claim and shall apprise the Company
of the nature of such claim and the date on which
such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of
the 30_day period following the date on which he
gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes
with respect to such claim is due). If the Company
notifies the Executive in writing prior to the
expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give to the Company
any information reasonably requested by the
Company relating to such claim;
(ii) take such action, at
the expense of the Company, in connection
with contesting such claim as the Company
shall reasonably request in writing from
time to time, including, without limitation,
accepting legal representation with respect
to such claim by an attorney reasonably
satisfactory to the Executive;
(iii) cooperate with the
Company in good faith in order effectively
to contest such claim; and
(iv) permit the Company
to participate in any proceedings relating
to such claim;
provided, however, that the Company
shall bear and pay directly all costs and expenses
(including additional interest and penalties)
incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an
after_tax basis, for any excise tax or federal, state
and local income tax (including interest and
penalties with respect thereto) imposed as a result
of such representation and payment of costs and
expense. Without limitation on the foregoing, the
Company shall control all proceedings taken in
connection with such contest and, at its sole option,
may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with
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the Internal Revenue Service or other taxing
authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the
tax (including any penalties or interest) claimed and
pursue a claim for a refund administratively or by
bringing a proceeding in court, and the Executive
agrees to prosecute such contest to a determination
before the Internal Revenue Service or other taxing
authority, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall
determine; provided, however, that if the Company
directs the Executive to pay such claim and seek a
refund, the Company shall advance the amount of such
payment to the Executive, on an interest_free basis
and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any excise tax or
federal, state and local income tax (including
interest and penalties with respect thereto) imposed
with respect to such advance or with respect to any
imputed income with respect to such advance; and
further provided that any extension of the statute of
limitations relating to payment of taxes for the
taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to
issues with respect to which an Additional Amount
would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue
Service or any other taxing authority.
(e) If, after the receipt by the Executive
of an amount advanced by the Company pursuant to the
last sentence of Section 1.4(d), the Executive
receives any refund of any amount paid with the
amount advanced, the Executive shall promptly pay to
the Company the amount of such refund (together with
any interest paid or credited thereon net of any
federal, state, or local income taxes of the
Executive (determined in the manner prescribed by
Section 1.4(b) hereof) with respect to such
interest). If, after the receipt by the Executive of
any amount advanced by the Company pursuant to the
last sentence of Section 1.4(d), a final
determination is made that the Executive is not be
entitled to any refund with respect to such claim,
then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of
any Underpayment otherwise payable under Section
1.4(c).
Section 1.5 Benefits.
(a) Vacation. Executive shall be entitled to
four weeks paid vacation during each calendar year
during the term of this Agreement. Vacation not used
during any calendar year may be carried forward to
the next year; provided, however, that no more than
four weeks of unused vacation time may be carried
forward from one year to the next year.
(b) Life, Disability and Retirement
Programs. Executive shall be entitled to participate
in any life, disability and retirement programs which
may from time to time be offered generally to all of
the other members of the senior management personnel
of the Company.
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(c) Group Insurance. Executive shall be
entitled to participate in any group health, dental,
and vision insurance programs which may from time to
time be offered generally to all of the other members
of the senior management personnel of the Company.
Section 1.6 Stock Options. Executive shall be granted an option to
purchase five hundred thousand (500,000) shares of the Company pursuant to that
certain 1999 Stock Option and Incentive Plan (the "Plan") and that certain Stock
Option Agreement dated as of June 15, 1999 ("SO Agreement") and an additional
one hundred twenty-five (125,000) restricted shares of the Company pursuant to
the Plan and that certain Restricted Stock Agreement dated as of June 15, 1999
("RS Agreement") (such options and shares to be drawn from the employee option
pool and subject to such terms and conditions as set forth in the SO Agreement
and the RS Agreement). In addition, Executive shall be entitled to participate
in any other incentive and stock option plans which may from time to time be
offered generally to all of the other members of the senior management personnel
of the Company and to members of the Board of Directors.
Section 1.7 Business Expenses. Executive shall be entitled to
reimbursement of all ordinary and necessary business expenses reasonably
incurred by him for business travel (including reasonable moving expenses),
communications, entertainment and meals in connection with the performance of
Executive's duties under this Agreement in accordance with the Company's
policies for reimbursement of business expenses in effect from time to time as
reasonably approved by the Chief Executive Officer of the Company.
ARTICLE II
COVENANTS OF EXECUTIVE
Section 2.1 Confidential Information. Executive acknowledges that in
connection with his employment by the Company, Executive may be given access to,
generate, or otherwise come into contact with or become aware of certain
proprietary, secret and/or confidential information and materials which are the
property of or relate to (a) the Company, and/or (b) the Company's business of
electronic health-care industry claims resolution procedures, customers, clients
or suppliers (collectively, "Confidential Matters"). Confidential Matters shall
include, without limitation, all information and materials created or developed
by, provided to or otherwise disclosed to Executive in connection with
Executive's employment by the Company (excepting only information and materials
already known to the public), including, without limitation, all of the
following:
(a) trade secrets, know-how and all other
business, financial or technical information which
gives or could give the Company a competitive
advantage;
(b) software used by the Company (including
source code and object code) and associated layouts,
templates, processes, documentation, databases,
designs and techniques, and all modifications thereto
(collectively, "Confidential Software");
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(c) the names and addresses of the Company's
past, present or prospective customers or clients and
all documents, information and materials which
concern or relate to such customers or clients,
regardless of whether such documents, information and
materials were supplied or produced by the Company or
such customers or clients;
(d) inventions, improvements, innovations,
research and development, software and all other
discoveries or work product created or used by the
Company, including those which are conceived or
developed by Executive alone or with others in
connection with Executive's employment by the
Company, or which are conceived or developed by
Executive after termination of such employment by
using Confidential Matters; and
(e) information concerning the Company's
products, services, systems, methods, employees,
technology, suppliers, licensors, affiliates,
financing sources, profits, revenues, financial
condition and affairs, marketing plans or programs,
and business strategies and practices.
Notwithstanding anything in this Agreement to the contrary, any information or
other matter of or relating to businesses, customers, clients or suppliers of
Newcourt Credit Group, Inc., its successors and assigns, and any of its
affiliates (collectively "Newcourt") shall not be deemed to be Confidential
Matters covered by this Agreement, including, without limitation, any
information relating to potential financing opportunities which may be
discovered by Executive in his capacity as an employee of the Company.
Executive acknowledges and agrees that Confidential Matters
are the property of the Company and that Executive shall not acquire any
ownership rights in Confidential Matters. Executive shall:
(a) use Confidential Matters solely in
connection with Executive's employment by the
Company; and
(b) hold Confidential Matters in trust and
confidence, and use all reasonable means to assure
that they are not directly or indirectly disclosed to
or copied by unauthorized persons or used in an
unauthorized manner, both during and after
Executive's employment by the Company.
Executive shall not load, install, copy, store or otherwise
retain any Confidential Software on any computer or other device which is not
Company property without first obtaining the Company's written consent.
To the extent that Executive creates or develops any Confidential
Matters, Executive shall:
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(a) promptly disclose them to the Company;
and
(b) at the Company's request, assign them to
the Company and execute all documents and do all
things necessary to assist the Company in obtaining
such patent, copyright, trademark, trade secret
and/or other protection as the Company in its sole
discretion deems necessary or appropriate, with the
Company to pay all resulting expenses.
Upon termination of Executive's employment with the Company
for any reason, Executive shall delete all Confidential Matters from the memory
of any computer belonging to Executive and shall turn over to the Company (a)
all documents and other materials (including, without limitation, all tapes,
floppy disks and other forms of electronic storage media) which constitute,
contain or are derived from Confidential Matters; and (b) all other documents,
notes, work product and other materials connected with or arising out of
Executive's employment with the Company.
Section 2.2 Non-solicitation of Customers and Non-Competition. During
the term of his employment with the Company under this Agreement, and for a
period of two years (which shall be extended by the length of any period during
which Executive is in violation of this Section 2.2) after any termination of
the Executive's employment for any reason, Executive shall not (on Executive's
own behalf or that of any other person or entity) directly or indirectly sell or
otherwise provide or solicit the sale or provision of any product, license,
process or service which directly or indirectly competes with any product,
license, process or service of the Company to any person or entity which was, at
the time of termination of Executive's employment, a customer or client of the
Company.
During the term of Executive's employment with the Company under this
Agreement, and for a period of two years (which shall be extended by the length
of any period during which Executive is in violation of this Section 2.2) after
any termination of Executive's employment with the Company for any reason,
Executive shall not (on Executive's own behalf or that of any other person or
entity), without prior written consent of the Chief Executive Officer of the
Company, which consent may be withheld at the sole discretion of the Chief
Executive Officer of the Company, directly or indirectly own, manage, operate,
control, invest in, lend to, acquire an interest in, or otherwise engage or
participate in, (whether as an employee, independent contractor, consultant,
partner, shareholder, joint venturer, investor or any other type of
participant), the management or conduct of any electronic health-care industry
claims resolution business or enterprise that directly or indirectly competes in
any Market Area (as defined below) with any product, license, process or service
that provides electronic health-care industry claims resolution systems which
the Company sold or provided at the time of Executive's termination of
employment with the Company ("Competitive Product"). For purposes of this
Agreement, Market Area shall mean either (i) the standard metropolitan
statistical area as designated by the federal government in which the Company
sold or provided any Competitive Product or (ii) in all other cases, the county
in which the Company sold or provided any Competitive Product. Provided,
however, that nothing in this Section 2.2 shall prohibit Executive from
acquiring or holding, for investment purposes only, less than five percent (5%)
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of the outstanding publicly traded securities of any corporation which may
compete directly or indirectly with the Company or from engaging in the business
of investment banking. Provided, further that nothing contained in this section
2.2 shall prohibit Executive from any employment relationship with Newcourt and
if necessary financing a Competitive Product in the Market Area for and on
behalf of Newcourt, including, without limitation, financing Competitive
Products for and on behalf of Newcourt in the Market Area after termination of
his employment with the Company.
Section 2.3 Non-Solicitation of Employees. During the term of
Executive's employment with the Company under this Agreement, and for a period
of two years (which shall be extended by the length of any period during which
Executive is in violation of this Section 2.3), after any termination of
Executive's employment with the Company for any reason (the "Non-solicitation
Period"), Executive shall not, directly or indirectly, through one or more
intermediaries or otherwise, hire, employ, induce, solicit for employment, or
assist others in hiring, employing, inducing or soliciting for employment any
individual who is at any time during the Non-solicitation Period an employee of
the Company. Provided, however, that nothing in this section 2.3 shall apply to
Executive hiring any employee of the Company as an employee or consultant
Newcourt nor shall it apply to Executive hiring any employee of the Company who
was related to or affiliated with Newcourt prior to working for the Company.
Section 2.4 Injunctive Relief. Executive acknowledges that his actual
or threatened breach of any provision of Article II of this Agreement will cause
or threaten irreparable injury to the Company that cannot adequately be measured
in money damages, and that the Company shall be entitled to obtain injunctive
relief with respect to any such actual or threatened breach by Executive.
Injunctive relief shall be in addition to and not in lieu of any other available
remedies.
Section 2.5 Individual Capacity. This Agreement is entered into with
Executive in his individual capacity and not as an agent or employee of
Newcourt. Notwithstanding the fact that Executive shall also remain an employee
of Newcourt, Executive's obligations under this Article II are personal to him
and shall not be imputed to or otherwise effect Newcourt.
ARTICLE III
TERMINATION OF EMPLOYMENT
Section 3.1 Termination by Company. In addition to termination pursuant
to Section 1.1, Executive's employment under this Agreement may be terminated by
the Company by giving notice to Executive during the term of this Agreement as
follows:
(a) upon Executive's death or, subject to
any applicable federal, state or local laws
(including, but not limited to, the Americans With
Disabilities Act), any disability which renders
Executive incapable of performing his duties
hereunder for more than one hundred twenty calendar
days (termination under this Section 3. 1(a) shall be
deemed termination "without Cause");
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(b) for any reason not constituting "for
Cause" (as defined below) following a determination
by the Chief Executive Officer of the Company to
terminate Executive's employment (termination under
this Section 3.1(b) shall also be deemed termination
"without Cause"; provided, however, that a Section
1.1 Termination shall not constitute a termination
"without Cause"); or
(c) "for Cause," which for purposes of this
Agreement shall mean that the Executive shall have:
(i) committed an act of
fraud, embezzlement or theft in connection
with his duties under this Agreement at any
time subsequent to the date of this
Agreement;
(ii) intentionally
inflicted material damage to any material
asset of the Company or the Company;
(iii) breached any
provision of Article II of this Agreement;
(iv) engaged in the
illegal use of drugs during the term of this
Agreement or been under the influence of
alcohol during the performance of his duties
under this Agreement;
(v) been convicted of
any crime constituting a felony under
applicable law, other than a felony
related to the operation of a motor vehicle;
(vi) committed any act of
dishonesty against the Company;
(vii) committed any
intentional tort against the Company or any
employee of the Company; or
(viii) committed any act
of gross insubordination.
Section 3.2 Termination by Executive. Executive's employment under this
Agreement may be terminated by Executive for "Good Reason" (as defined below) or
otherwise, by giving Company at least 30 days advanced written notice or
termination. For purposes of this Agreement, "Good Reason" shall mean, the
occurrence of any of the following events, unless such event has been consented
to by Executive in writing or such event is fully corrected as provided below:
(a) a material breach by the Company of any
material provision of this Agreement, including, but
not limited to, the assignment to Executive of any
duties materially inconsistent with Executive's
position in the Company or a material adverse
alteration in the nature or status of Executive's
responsibilities; provided, however, that in the
event of this subsection (a) being the sole basis for
termination, Executive shall furnish the Company in
writing a notice of proposed termination setting
forth a specific statement of the Good Cause for
which termination is sought. The Company shall then
have a period of ninety days after the giving of such
notice of proposed termination by Executive in which
to cure the breach specified in such notice. If at
the end of such ninety day period no such cure has
been effected, the Executive's employment shall be
terminated at the end of such ninety day period.
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(b) the occurrence of a "Change in Control"
as defined below.
For purposes of this Agreement a "Change in Control" shall mean an
event as a result of which: (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total voting power of the voting stock of
the Company; (ii) the Company consolidates with, or merges with or into another
corporation or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any person or any corporation
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding voting stock of the Company
is changed into or exchanged for cash, securities or other property, other than
any such transaction where (A) the outstanding voting stock of the Company is
changed into or exchanged for (x) voting stock of the surviving, or transferee
corporation or (y) cash, securities (whether or not including voting stock) or
other property, and (B) the holders of the voting stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
60% of the voting power of the voting stock of the surviving corporation
immediately after such transaction; or (iii) individuals who at the date of the
Merger constitute the Board of the Company (together with any new directors
whose election by such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of 66 2/3% of the directors
then still in office who are either directors at the date of the Merger or whose
election or nomination for election was previously so approved) ceased for any
reason to constitute a majority of the Board of the Company then in office; or
(iv) the Company is liquidated or dissolved or adopts a plan of liquidation;
provided, however that a Change in Control shall not be deemed to have occurred
if (aa) all of the shares of common stock of the Company owned (legally or
beneficially) by Executive were not voted against the transaction which would,
but for this proviso, constitute a Change in Control, or (bb) such Change in
Control relates to an IPO.
Section 3.3 Severance. For purposes of this Agreement, Executive's
entitlement to any severance payments upon termination of his employment shall
be as set forth below:
(a) If, prior to the closing of an IPO
Executive is terminated without Cause pursuant to
Section 3.1(a) or Section 3.1(b) or resigns for Good
Reason (i) Executive shall be entitled to severance
pay of $500,000, payable in a lump sum on the date of
such termination; (ii) all of Executive's rights to
options to purchase common stock of the Company shall
vest; (iii) all of the restrictions on Executive's
restricted stock of the Company granted to him
pursuant to the RS Agent shall lapse and become fully
vested; and (iv) at the option of Executive, the
Company shall either (A) loan Executive an amount
equal all applicable federal and state taxes
recognized by Executive as a result of the vesting of
such options and restricted stock pursuant to
subsections (ii) and (iii) above (the "Recognized
Taxes"), including, without limitation, all federal
and state income and Medicare taxes which loan shall
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bear interest at the lowest rate at which interest
income shall not be imputed to Executive for federal
income tax purposes, interest and principal being due
and payable at the time of an IPO, or (B) purchase
from Executive, at such price as Executive and
Company may agree upon, so many shares so vested as
are necessary to pay the Recognized Taxes;
(b) If, after the closing of an IPO,
Executive is terminated without Cause pursuant to
Section 3.1(a) or Section 3.1(b) or resigns for Good
Reason Executive shall be entitled to receive
severance pay pursuant to a severance arrangement
then in effect, adopted by the Board of Directors of
the Company after consultation with an independent
consulting firm and which arrangement shall provide
for severance pay comparable to severance pay
provided to executives similarly situated to
Executive.
(c) In the event of a Section 1.1
Termination, a termination of Executive for Cause, a
termination by Executive for any reason other than
Good Reason, or any other termination of or by
Executive (other than as set forth in Sections 3.3(a)
and 3.3(b)), then Executive shall not receive any
severance pay (and Executive shall forfeit all unused
vacation time and any stock options which have not
then vested), unless, and to the extent that, some
severance pay is approved in writing by the Chief
Executive Officer of the Company in his sole
discretion. In the event the Executive shall provide
thirty days prior written notice of his intent to
resign, the Company may accept such resignation
effective as of any date during such thirty day
period as the Company deems appropriate, provided
that the Executive shall receive from the Company the
per diem portion of his salary and be entitled to
participate at the Company's expense in any Company
sponsored benefit programs in which he was a
participant as of the effective date of his
resignation for the duration of such thirty day
period. Notwithstanding the foregoing, Executive
shall receive the per diem portion of such annual
salary that is accrued but unpaid up to the date of
any termination for Cause.
ARTICLE IV
GENERAL PROVISIONS
Section 4.1 Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes and
withholding as shall be required pursuant to any applicable law, rule or
regulation.
Section 4.2 Attorneys' Fees. If either party shall institute litigation
or arbitration to enforce any of its rights under this Agreement, the prevailing
party shall be entitled to recover from the other party the prevailing party's
reasonable attorneys' fees and costs incurred in any such litigation or
arbitration.
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Section 4.3 Notice. For purposes of this Agreement, all communications
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or five (5) business days after having been
mailed by United States registered mail or certified mail, return receipt
requested, postage prepaid, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office or to Executive at
his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except the notices
of change of address shall be effective only on receipt.
Section 4.4 Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Indiana, without giving effect to the principles of conflict of
laws of such State. Any and all actions concerning any dispute arising under
this Agreement shall be filed and maintained only in a state or federal court
sitting in the State of Indiana, and each party hereby consents and submits to
the jurisdiction of such state or federal court.
Section 4.5 Validity. It is not the intent of any party hereto to
violate any public policy of any jurisdiction in which this Agreement may be
enforced. If any provision of this Agreement or the application of any provision
hereof to any person or circumstances is held invalid, unenforceable or
otherwise illegal, the remainder of this Agreement and the application of such
provision to any other person or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it valid,
enforceable and legal; provided, however, if the provision so held to be
invalid, unenforceable or otherwise illegal constituted a material inducement to
a party's execution and delivery of this Agreement, such provision shall not be
reformed unless prior to any reformation that party agrees to be bound by the
reformation.
Section 4.6 Entire Agreement. This Agreement supersedes any other
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between the
parties with respect to the employment of the Executive by the Company. Any
waiver or modification of any term of this Agreement shall be effective only if
it is set forth in a writing signed by all parties hereto.
Section 4.7 Successors and Binding Agreement.
(a) This Agreement shall be binding upon and
inure to the benefit of the Company and any Successor
of or to the Company, but shall not otherwise be
assignable or delegable by the Company. "Successor"
shall mean any successor in interest, including,
without limitation, any entity, individual or group
of persons acquiring, directly or indirectly all or
substantially all of the business or assets of the
Company, as the case may be, whether by sale, merger,
consolidation, reorganization or otherwise.
(b) The Company shall require any Successor
to agree at the time of becoming a Successor to
perform this Agreement to the same extent as the
original parties would be required if no succession
had occurred.
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(c) This Agreement shall inure to the
benefit of and be enforceable by Executive's personal
or legal representatives, executors, administrators,
heirs, distributes and legatees.
(d) This Agreement is personal in nature and
neither of the parties shall, without the consent of
the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder
except as expressly provided in this Section 4.7.
Section 4.8 Captions. The captions in this Agreement are solely
for convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement.
Section 4.9 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and the Company. No waiver by a party
hereto at any time of any breach by another party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provision or conditions at the
same or at any prior or subsequent time.
Section 4.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date first above written.
"Company" "Executive"
RealMed Corporation
By: /s/ Robert B. Peterson By: /s/ Keith Given
Signature Signature
Robert B. Peterson, President Keith Given
Printed Name, Title Printed Name
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Exhibit 10.12
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), made effective as of the
31st day of July 1999 (the "Effective Date"), by and between REALMED
CORPORATION, an Indiana corporation (the "Company") and Scott E. Herbst, an
individual resident of Indiana ("Executive").
WHEREAS, the Company desires to employ Executive as a Senior Vice
President and General Counsel and Executive desires to be so employed on the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Executive and the Company
including, without limitation, the promises and covenants of the parties set
forth herein, the parties hereto, intending to be legally bound, hereby agree to
as follows:
ARTICLE I
EMPLOYMENT
Section 1.1 Term of Employment. The term of Executive's employment
under this Agreement shall commence on July 31, 1999 and continue for a period
of five years, unless earlier terminated as provided in this Agreement. At the
end of the initial five year term, this Agreement shall automatically renew for
consecutive two year terms unless either party hereto gives written notice to
the other of its intent to terminate this Agreement at least sixty days prior to
the end of the initial term or any renewal term (a "Section 1.1 Termination").
Notwithstanding the foregoing, the indemnification provisions of this Agreement
contained in Section 1.4 regarding an Excess Parachute Payment (as defined
below) on account of a Change in Control (as defined below in Section 1.4(b))
shall survive until the expiration of the statute of limitations for assessment
of any excise tax under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code").
Section 1.2 Duties and Responsibilities of Executive. Executive is
hereby employed as a Senior Vice President and General Counsel of the Company.
The Company acknowledges that Executive has prior commitments to Newcourt Credit
Group, Inc., its successors and assigns, and any of its affiliates (collectively
"Newcourt"), and,while working as an executive employee for the Company, shall
also remain an employee of Newcourt. Executive may devote whatever time and
attention to Newcourt business that he deems reasonable and proper. In his
capacity as a Senior Vice President and General Counsel of the Company,
Executive shall report to the Chief Executive Officer of the Company, and shall
conduct and perform such additional services and activities as may be determined
from time to time by the Board of Directors of the Company. Executive's
authority from, and responsibility to, the Company shall at all times be subject
to the review and discretion of the Chief Executive Officer and Board of
Directors of the Company. Executive acknowledges that he has a duty of loyalty
to the Company, and, except for his commitments to Newcourt, shall not engage
in, directly or indirectly, any other business or activity that could materially
and adversely affect the Company's business or Executive's ability to perform
<PAGE>
his duties under this Agreement; provided, however, that the Executive shall be
free to participate in civic and charitable activities so long as such
activities do not materially interfere with his duties and responsibilities
hereunder.
Section 1.3 Compensation. For services to be rendered by
Executive under this Agreement, the Company shall pay Executive as follows:
(a) Base Salary. Executive shall be paid a minimum annual
gross salary of one hundred twenty thousand and seven
hundred fifty dollars ($120,750), payable biweekly.
Executive's annual gross salary may be upwardly
adjusted from time to time by the Board of Directors
of the Company. At no time during the term of this
Agreement shall Executive's base salary be decreased
from the amount of the base salary then in effect.
Executive's base salary shall be earned and accrued
on a per diem basis.
(b) Bonus. The Executive shall be eligible for an annual
bonus of thirty percent (30%) of his base salary
payable in the discretion of the Chief Executive
Officer. Such bonus shall be payable by January 1 of
the year following the service and shall be prorated
for any partial year.
(c) Bonus Advance. Within ten days of Executive's
request, the Company agrees to advance up to fifty
thousand dollars ($50,000) of Executive's bonuses in
order to repay all or a portion of Executive's
shareholder loans to Newcourt. Such loan shall be
repaid by Executive on or prior to the earlier of:
(i) Executive ceasing to be an employee of the
Company; or (ii) July 31, 2001. The loan shall be
interest free and evidenced by a Promissory Note in
the form attached hereto as Exhibit A and shall be
subject to the additional terms and conditions set
forth therein. If requested by the Company, such
loan shall be secured by a pledge of Participant's
options or stock and Participant agrees to execute
such pledge and other agreements as the Company may
reasonably request to effect such pledge.
Section 1.4 Tax Reimbursement Payment.
(a) Notwithstanding anything to the contrary contained in
this Agreement, or in any plan of the Company, or in
any other agreement or understanding, the Company
will pay to the Executive, at the times herein
specified, an amount (the "Additional Amount") equal
to the excise tax under Section 4999 of the Code,
if any, incurred or to be incurred by the Executive
by reason of the payments under this Agreement,
acceleration of vesting of stock options, stock
appreciation rights or restricted stock granted under
the Company's various stock option, stock
appreciation or other employee incentive plans, or
payments under any other plan, agreement or
understanding between the Executive and the Company,
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constituting Excess Parachute Payments (as defined
below), plus all excise taxes and federal, state and
local income taxes incurred or to be incurred by the
Executive with respect to the receipt of the
Additional Amount. For purposes of this Agreement,
the term "Excess Parachute Payment" shall mean any
payment or any portion thereof which would be an
"excess parachute payment" within the meaning of
Section 280G(b) of the Code, and which would result
in the imposition of an excise tax on the Executive
under Section 4999 of the Code.
(b) All determinations required to be made regarding the
Additional Amount, including whether payment of any
Additional Amount is required and the amount of any
Additional Amount, shall be made by the independent
accounting firm which is advising the Company (the
"Accounting Firm"), which shall provide detailed
support calculations to the Company and the Executive
on or before the last day of the calendar year during
which occurs the Change in Control (the "Change in
Control Year"). In computing taxes, the Accounting
Firm shall use the highest marginal federal, state
and local income tax rates applicable to single
taxpayers for the year in which the Additional Amount
is to be paid (unless, within thirty (30) days after
the occurrence of the Change in Control the Executive
specifies in writing to the Company his marginal tax
rate) and shall assume the full deductibility of
state and local income taxes for purposes of
calculating federal income tax liability. For
purposes of Article I only, "Change of Control"
shall have the meaning set forth in the Code. The
portion of the Additional Amount based on the excise
tax as determined by the Accounting Firm to be due
for the Change in Control Year shall be paid to the
Executive no later than March 1 immediately
following the end of the Change in Control Year. The
portion of the Additional Amount based on the excise
tax as determined by the Accounting Firm to be due
for each calendar year following the Change in
Control Year shall be paid to the Executive on or
before March 1 immediately following the end of each
such calendar year. If the Company determines that
the excise tax for any year will be different from
the amount originally calculated in the report of the
Accounting Firm delivered at the end of the Change in
Control Year, then the Company shall provide to
the Executive detailed support calculations by the
Accounting Firm specifying the basis for the change
in the Additional Amount.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial
determination by the Accounting Firm of an Additional
Amount under Section 1.4(b) hereof, it is possible
that an Additional Amount in excess of the amount
initially determined which will not have been made by
the Company should have been made (an
"Underpayment"). In the event that the Accounting
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Firm, based upon controlling precedent, determines
that any Underpayment has occurred, such Underpayment
shall promptly be paid by the Company to or for the
benefit of the Executive, together with interest at
the applicable federal rate provided for in Section
7872(f)(2)(A) of the Code.
(d) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if
successful, would require the payment by the
Executive of any excise tax under Section 4999 of the
Code beyond any amount of such excise tax for which
an Additional Amount had theretofore been determined
by the Accounting Firm under Section 1.4(b) hereof.
Such notification shall be given as soon as
practicable but no later than ten business days after
the Executive is informed in writing of such claim
and shall apprise the Company of the nature of such
claim and the date on which such claim is requested
to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period
following the date on which he gives such notice to
the Company (or such shorter period ending on the
date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period
that it desires to contest such claim, the Executive
shall:
(i) give to the Company any information
reasonably requested by the Company relating
to such claim;
(ii) take such action, at the expense of the
Company, in connection with contesting such
claim as the Company shall reasonably
request in writing from time to time,
including, without limitation, accepting
legal representation with respect to such
claim by an attorney reasonably satisfactory
to the Executive;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and
pay directly all costs and expenses (including
additional interest and penalties) incurred in
connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis,
for any excise tax or federal, state and local income
tax (including interest and penalties with respect
thereto) imposed as a result of such representation
and payment of costs and expense. Without limitation
on the foregoing, the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and
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all administrative appeals, proceedings, hearings and
conferences with the Internal Revenue Service or
other taxing authority in respect of such claim and
may, at its sole option, either direct the Executive
to pay the tax (including any penalties or interest)
claimed and pursue a claim for a refund
administratively or by bringing a proceeding in
court, and the Executive agrees to prosecute such
contest to a determination before the Internal
Revenue Service or other taxing authority, in a court
of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided,
however, that if the Company directs the Executive to
pay such claim and seek a refund, the Company shall
advance the amount of such payment to the Executive,
on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis,
from any excise tax or federal, state and local
income tax (including interest and penalties with
respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to
such advance; and further provided that any extension
of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to
be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest
shall be limited to issues with respect to which an
Additional Amount would be payable hereunder and the
Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the
Internal Revenue Service or any other taxing
authority.
(e) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to the last sentence
of Section 1.4(d), the Executive receives any refund
of any amount paid with the amount advanced, the
Executive shall promptly pay to the Company the
amount of such refund (together with any interest
paid or credited thereon net of any federal, state,
or local income taxes of the Executive (determined
in the manner prescribed by Section 1.4(b) hereof)
with respect to such interest). If, after the receipt
by the Executive of any amount advanced by the
Company pursuant to the last sentence of Section
1.4(d), a final determination is made that the
Executive is not be entitled to any refund with
respect to such claim, then such advance shall be
forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the
extent thereof, the amount of any Underpayment
otherwise payable under Section 1.4(c).
Section 1.5 Benefits.
(a) Vacation. Executive shall be entitled to four weeks
paid vacation during each calendar year during the
term of this Agreement. Vacation not used during any
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calendar year may be carried forward to the next
year; provided, however, that no more than four weeks
of unused vacation time may be carried forward from
one year to the next year.
(b) Life, Disability and Retirement Programs. Executive
shall be entitled to participate in any life,
disability and retirement programs which may from
time to time be offered generally to all of the other
members of the senior management personnel of the
Company.
(c) Group Insurance. Executive shall be entitled to
participate in any group health, dental, and vision
insurance programs which may from time to time be
offered generally to all of the other members of the
senior management personnel of the Company.
Section 1.6 Stock Options. Executive shall be granted an option to
purchase 450,000 shares of the Company pursuant to that certain 1999 Stock
Option and Incentive Plan (the "Plan") and that certain Stock Option Agreement
dated effective as of July 31, 1999 ("Option Agreement") (such options and
shares to be drawn from the employee option pool and subject to such terms and
conditions as set forth in the Option Agreement). In addition, Executive shall
be entitled to participate in any other incentive and stock option plans which
may from time to time be offered generally to all of the other members of the
senior management personnel of the Company and to members of the Board of
Directors.
Section 1.7 Business Expenses. Executive shall be entitled to
reimbursement of all ordinary and necessary business expenses reasonably
incurred by him for business travel (including reasonable moving expenses),
communications, entertainment and meals in connection with the performance of
Executive's duties under this Agreement in accordance with the Company's
policies for reimbursement of business expenses in effect from time to time as
reasonably approved by the Board of Directors of the Company.
ARTICLE II
COVENANTS OF EXECUTIVE
Section 2.1 Confidential Information. Executive acknowledges that in
connection with his employment by the Company, Executive may be given access to,
generate, or otherwise come into contact with or become aware of certain
proprietary, secret and/or confidential information and materials which are the
property of or relate to (a) the Company, and/or (b) the Company's business of
electronic health-care industry claims resolution procedures, customers, clients
or suppliers (collectively, "Confidential Matters"). Confidential Matters shall
include, without limitation, all information and materials created or developed
by, provided to or otherwise disclosed to Executive in connection with
Executive's employment by the Company (excepting only information and materials
already known to the public), including, without limitation, all of the
following:
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(a) trade secrets, know-how and all other business,
financial or technical information which gives or
could give the Company a competitive advantage;
(b) software used by the Company (including source code
and object code) and associated layouts, templates,
processes, documentation, databases, designs and
techniques, and all modifications thereto
(collectively, "Confidential Software");
(c) the names and addresses of the Company's past,
present or prospective customers or clients and all
documents, information and materials which concern or
relate to such customers or clients, regardless of
whether such documents, information and materials
were supplied or produced by the Company or such
customers or clients;
(d) inventions, improvements, innovations, research and
development, software and all other discoveries or
work product created or used by the Company,
including those which are conceived or developed by
Executive alone or with others in connection with
Executive's employment by the Company, or which are
conceived or developed by Executive after termination
of such employment by using Confidential Matters; and
(e) information concerning the Company's products,
services, systems, methods, employees, technology,
suppliers, licensors, affiliates, financing sources,
profits, revenues, financial condition and affairs,
marketing plans or programs, and business strategies
and practices.
Notwithstanding anything in this Agreement to the contrary, any information or
other matter of or relating to Newcourt's businesses, customers, clients or
suppliers shall not be deemed to be Confidential Matters covered by this
Agreement, including, without limitation, any information relating to potential
financing opportunities which may be discovered by Executive in his capacity as
an employee of the Company.
Executive acknowledges and agrees that Confidential Matters are the
property of the Company and that Executive shall not acquire any ownership
rights in Confidential Matters. Executive shall:
(a) use Confidential Matters solely in connection with
Executive's employment by the Company; and
(b) hold Confidential Matters in trust and confidence,
and use all reasonable means to assure that they are
not directly or indirectly disclosed to or copied by
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unauthorized persons or used in an unauthorized
manner, both during and after Executive's employment
by the Company.
Executive shall not load, install, copy, store or otherwise retain any
Confidential Software on any computer or other device which is not Company
property without first obtaining the Company's written consent.
To the extent that Executive creates or develops any Confidential
Matters, Executive shall:
(a) promptly disclose them to the Company; and
(b) at the Company's request, assign them to the Company
and execute all documents and do all things necessary
to assist the Company in obtaining such patent,
copyright, trademark, trade secret and/or other
protection as the Company in its sole discretion
deems necessary or appropriate, with the Company to
pay all resulting expenses.
Upon termination of Executive's employment with the Company for any
reason, Executive shall delete all Confidential Matters from the memory of any
computer belonging to Executive and shall turn over to the Company (a) all
documents and other materials (including, without limitation, all tapes, floppy
disks and other forms of electronic storage media) which constitute, contain or
are derived from Confidential Matters; and (b) all other documents, notes, work
product and other materials connected with or arising out of Executive's
employment with the Company.
Section 2.2 Non-solicitation of Customers and Non-Competition. During
the term of his employment with the Company under this Agreement, and for a
period of two years (which shall be extended by the length of any period during
which Executive is in violation of this Section 2.2) after any termination of
the Executive's employment for any reason, Executive shall not (on Executive's
own behalf or that of any other person or entity) directly or indirectly sell or
otherwise provide or solicit the sale or provision of any product, license,
process or service which directly or indirectly competes with any product,
license, process or service of the Company to any person or entity which was, at
the time of termination of Executive's employment, a customer or client of the
Company.
During the term of Executive's employment with the Company under this
Agreement, and for a period of two years (which shall be extended by the length
of any period during which Executive is in violation of this Section 2.2) after
any termination of Executive's employment with the Company for any reason,
Executive shall not (on Executive's own behalf or that of any other person or
entity), without prior written consent of the Board of Directors of the Company,
which consent may be withheld at the sole discretion of the Board of Directors
of the Company, directly or indirectly own, manage, operate, control, invest in,
lend to, acquire an interest in, or otherwise engage or participate in, (whether
as an employee, independent contractor, consultant, partner, shareholder, joint
venturer, investor or any other type of participant), the management or conduct
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of any electronic health-care industry claims resolution business or enterprise
that directly or indirectly competes in any Market Area (as defined below) with
any product, license, process or service which the Company sold or provided at
the time of Executive's termination of employment with the Company ("Competitive
Product"). For purposes of this Agreement, Market Area shall mean either (i) the
standard metropolitan statistical area as designated by the federal government
in which the Company sold or provided any Competitive Product or (ii) in all
other cases, the county in which the Company sold or provided any Competitive
Product. Provided, however, that nothing in this Section 2.2 shall prohibit
Executive from acquiring or holding, for investment purposes only, less than
five percent (5%) of the outstanding publicly traded securities of any
corporation which may compete directly or indirectly with the Company or from
engaging in the business of investment banking. Provided, further that nothing
contained in this section 2.2 shall prohibit Executive from continuing his
employment with Newcourt and if necessary financing a Competitive Product in the
Market Area for and on behalf of Newcourt, including, without limitation,
financing Competitive Products for and on behalf of Newcourt in the Market Area
after termination of his employment with the Company.
Section 2.3 Non-Solicitation of Employees. During the term of
Executive's employment with the Company under this Agreement, and for a period
of two years (which shall be extended by the length of any period during which
Executive is in violation of this Section 2.3), after any termination of
Executive's employment with the Company for any reason (the "Non-solicitation
Period"), Executive shall not, directly or indirectly, through one or more
intermediaries or otherwise, hire, employ, induce, solicit for employment, or
assist others in hiring, employing, inducing or soliciting for employment any
individual who is at any time during the Non-solicitation Period an employee of
the Company.Provided, however, that nothing in this section 2.3 shall apply to
Executive hiring any employee of the Company as an employee or consultant of
Newcourt nor shall it apply to Executive hiring any employee of the Company who
was related to or affiliated withNewcourt prior to working for the Company.
Section 2.4 Injunctive Relief. Executive acknowledges that his actual
or threatened breach of any provision of Article II of this Agreement will cause
or threaten irreparable injury to the Company that cannot adequately be measured
in money damages, and that the Company shall be entitled to obtain injunctive
relief with respect to any such actual or threatened breach by Executive.
Injunctive relief shall be in addition to and not in lieu of any other available
remedies.
Section 2.5 Individual Capacity. This Agreement is entered into with
Executive in his individual capacity and not as an agent or employee of
Newcourt. Notwithstanding the fact that Executive shall also remain an employee
of Newcourt, Executive's obligations under this Article II are personal to him
and shall not be imputed to or otherwise effect Newcourt.
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ARTICLE III
TERMINATION OF EMPLOYMENT
Section 3.1 Termination by Company. In addition to termination pursuant
to Section 1.1, Executive's employment under this Agreement may be terminated by
the Company by giving notice to Executive during the term of this Agreement as
follows:
(a) upon Executive's death or, subject to any applicable
federal, state or local laws (including, but not
limited to, the Americans With Disabilities Act), any
disability which renders Executive incapable of
performing his duties hereunder for more than one
hundred twenty calendar days (termination under this
Section 3.1(a) shall be deemed termination "without
Cause");
(b) for any reason not constituting "for Cause" (as
defined below) following a determination by the Board
of Directors of the Company to terminate Executive's
employment (termination under this Section 3.1(b)
shall also be deemed termination "without Cause";
provided, however, that a Section 1.1 Termination
shall not constitute a termination "without Cause");
or
(c) "for Cause," which for purposes of this Agreement
shall mean that the Executive shall have:
(i) committed an act of fraud, embezzlement
or theft in connection with his duties under
this Agreement at any time subsequent to the
date of this Agreement;
(ii) intentionally inflicted material damage to
any material asset of the Company;
(iii) breached any provision of Article II of
this Agreement;
(iv) engaged in the illegal use of drugs during
the term of this Agreement or been under the
influence of alcohol during the performance
of his duties under this Agreement, which
has or may have a material adverse effect on
the business or operations of the Company or
on the reputation of the Company or the
Executive provided, however, in the case of
any issues relating to the use of alcohol,
the Company has given Executive written
notice of any conduct and such conduct
thereafter continues;
(v) been convicted of any crime constituting
a felony under applicable law, other than a
felony related to the operation of a motor
vehicle;
(vi) intentionally committed any act of
dishonesty against the Company, which has or
may have a material adverse effect on the
business or operations of the Company or on
the reputation of the Company or the
Executive;
(vii) intentionally committed any intentional tort
against the Company or any employee of the
Company, which has or may have a material
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adverse effect on the business or operations
of the Company or on the reputation of the
Company or the Executive; or
(viii) intentionally committed any act of gross
insubordination, which has or may have a
material adverse effect on the business or
operations of the Company or on the
reputation of the Company or the Executive.
Section 3.2 Termination by Executive. Executive's employment under this
Agreement may be terminated by Executive for "Good Reason" (as defined below) or
otherwise, by giving Company at least 30 days advanced written notice or
termination. For purposes of this Agreement, "Good Reason" shall mean, the
occurrence of any of the following events, unless such event has been consented
to by Executive in writing or such event is fully corrected as provided below:
(a) A material breach by the Company of any material
provision of this Agreement, including, but not
limited to, the assignment to Executive of any duties
materially inconsistent with Executive's position
in the Company or a material adverse alteration in
the nature or status of Executive's responsibilities;
provided, however, that in the event of this
subsection (a) being the sole basis for termination,
Executive shall furnish the Company in writing a
notice of proposed termination setting forth a
specific statement of the Good Cause for which
termination is sought. The Company shall then have
a period of ninety days after the giving of such
notice of proposed termination by Executive in
which to cure the breach specified in such
notice. If at the end of such ninety day period no
such cure has been effected, the Executive's
employment shall be terminated at the end of such
ninety day period.
(b) the occurrence of a "Change in Control" as defined
below.
For purposes of this Agreement a "Change in Control" shall mean an
event as a result of which: (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total voting power of the voting stock of
the Company; (ii) (A) the Company consolidates with, or merges with or into
another corporation, and (B) in connection with any such transaction, the
outstanding voting stock of the Company is changed into or exchanged for cash,
securities or other property, other than any such transaction where (x) the
outstanding voting stock of the Company is changed into or exchanged for voting
stock of the surviving, or transferee corporation, or for cash, securities
(whether or not including voting stock) or other property, and (y) the holders
of the voting stock of the Company immediately prior to such transaction own,
directly or indirectly, not less than 60% of the voting power of the voting
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stock of the surviving corporation immediately after such transaction; or (iii)
the Company sells, assigns, conveys, transfers, leases or otherwise disposes of
substantially all of its assets, or (iv) individuals who at the date of this
Agreement constitute the Board of the Company (together with any new directors
whose election by such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of 66 2/3% of the directors
then still in office who are either directors at the date of this Agreement or
whose election or nomination for election was previously so approved) ceased for
any reason to constitute a majority of the Board of the Company then in office;
or (v) the Company is liquidated or dissolved or adopts a plan of liquidation;
provided, however that a Change in Control shall not be deemed to have occurred
if (aa) all of the shares of common stock of the Company owned (legally or
beneficially) by Executive were not voted against the transaction which would,
but for this proviso, constitute a Change in Control, or (bb) such Change in
Control relates to an IPO.
(c) Executive provides the Board of Directors or Chief
Executive Officer a written notice that Executive has
been requested to undertake or support an illegal
activity and the Board or Chief Executive Officer
refuses to revoke or withdraw such request within
five days after the Board's or Chief Executive
Officer's receipt of such notice.
Section 3.3 Severance. For purposes of this Agreement,
Executive's entitlement to any severance payments upon termination of his
employment shall be as set forth below:
(a) If Executive is terminated by the Company "without
Cause" pursuant to Section 3.1(a) or Section 3.1(b)
or resigns for Good Reason, then (i) Executive
shall be entitled to severance pay of 1.5 times the
sum of Executive's annual rate of base salary then in
effect plus Executive's bonus for the last full
fiscal year, payable in a lump sum on the date of
such termination; (ii) all of Executive's rights to
purchase common stock of the Company pursuant to the
Option Agreement, or any rights to receive restricted
stock pursuant to any restricted stock agreement
shall vest, and (iii) at the option of Executive,
the Company shall either (A) loan Executive an amount
equal to all applicable federal and state taxes
recognized by Executive as a result of the vesting of
any restricted stock pursuant to subsection (ii)
above (the "Recognized Taxes"), including, without
limitation, all federal and state income and Medicare
taxes, which loan shall bear interest at the lowest
rate at which interest income shall not be imputed
to Executive for federal income tax purposes,
interest and principal being due and payable at the
earlier of an IPO or 3 years from the date of
Severance, or (B) purchase from Executive, at such
price as Executive and Company may agree upon, so
many shares so vested as are necessary to pay the
Recognized Taxes;
(b) In the event of a Section 1.1 Termination, a
termination by Company of Executive "for Cause," a
termination by Executive for any reason other than
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Good Reason, or any other termination of or by
Executive (other than as set forth in Section
3.3(a)), then Executive shall not receive any
severance pay (and Executive shall forfeit all unused
vacation time and any stock options or restricted
stock which has not then vested), unless, and to the
extent that, some severance pay is approved in
writing by the Board of Directors of the Company in
its sole discretion. In the event the Executive
shall provide thirty days prior written notice of
his intent to resign, the Company may accept such
resignation effective as of any date during such
thirty day period as the Company deems appropriate,
provided that the Executive shall receive from the
Company the per diem portion of his salary and be
entitled to participate at the Company's expense in
any Company sponsored benefit programs in which
he was a participant as of the effective date of his
resignation for the duration of such thirty day
period. Notwithstanding the foregoing, Executive
shall receive the per diem portion of such annual
salary that is accrued but unpaid up to the date of
any termination for Cause.
Section 3.4 Anticipated Increase in Compensation and Severance. The
Company anticipates that it will make an initial public offering of its stock
pursuant to an effective registration statement under the Securities Act of 1933
(the "IPO"). In conjunction with or shortly after the IPO, the Company will
retain an independent consulting firm to study its executive compensation
arrangements and to recommend to the Board of Directors such changes in base
salaries, annual bonuses, and lump sum severance payments, and such changes in
stock incentive arrangements, as will be needed to attract and retain top flight
senior management executives and to insure that the compensation and incentive
opportunities provided to such executives will be equal to or better than, in
the aggregate, those provided by other similarly-situated public company
executives having the same title or performing the same duties. Subject to
approval by the Board, the Company and Executive anticipate that such
arrangements will result in an annual salary and bonus in the aggregate of
approximately $350,000.
Section 3.5 Delay of IPO. In the event that the IPO is not closed on or
before July 31, 2001, Company and Executive agree that the Company will either:
(a) retain an independent consulting firm to study its executive compensation
arrangements and to recommend to the Board of Directors such changes in base
salaries, annual bonuses, and lump sum severance payments, and such changes in
stock incentive arrangements, as will be needed to attract and retain top flight
senior management executives and to insure that the compensation and incentive
opportunities provided to such executives will be equal to or better than, in
the aggregate, those provided to executives of public companies which are
similarly situated to the Company; or (b) agree with Executive on a mutually
agreeable revised compensation plan. In the event that on or prior to September
31, 2001, the Board does not either: (i) reach an agreement with Executive
regarding a new compensation plan; or (ii) adopt the recommendations of the
independent consultant, Executive shall give the Board thirty (30) days written
notice of Executive's conclusion that the requirements of this Section 3.5 have
not been satisfied. In the event that the Board does not cure such breach within
thirty (30) days of its receipt of such notice, then Executive may resign and
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shall be entitled to a one-time payment equal to 75% of the sum of Executive's
annual rate of base salary then in effect plus Executive's bonus for the last
full fiscal year.
ARTICLE IV
GENERAL PROVISIONS
Section 4.1 Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes and
withholding as shall be required pursuant to any applicable law, rule or
regulation.
Section 4.2 Attorneys' Fees. If either party shall institute litigation
or arbitration to enforce any of its rights under this Agreement, the prevailing
party shall be entitled to recover from the other party the prevailing party's
reasonable attorneys' fees and costs incurred in any such litigation or
arbitration.
Section 4.3 Notice. For purposes of this Agreement, all communications
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or five (5) business days after having been
mailed by United States registered mail or certified mail, return receipt
requested, postage prepaid, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office or to Executive at
his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except the notices
of change of address shall be effective only on receipt.
Section 4.4 Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Indiana, without giving effect to the principles of conflict of
laws of such State. Any and all actions concerning any dispute arising under
this Agreement shall be filed and maintained only in a state or federal court
sitting in the State of Indiana, and each party hereby consents and submits to
the jurisdiction of such state or federal court.
Section 4.5 Validity. It is not the intent of any party hereto to
violate any public policy of any jurisdiction in which this Agreement may be
enforced. If any provision of this Agreement or the application of any provision
hereof to any person or circumstances is held invalid, unenforceable or
otherwise illegal, the remainder of this Agreement and the application of such
provision to any other person or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it valid,
enforceable and legal; provided, however, if the provision so held to be
invalid, unenforceable or otherwise illegal constituted a material inducement to
a party's execution and delivery of this Agreement, such provision shall not be
reformed unless prior to any reformation that party agrees to be bound by the
reformation.
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Section 4.6 Entire Agreement. This Agreement supersedes any other
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between the
parties with respect to the employment of the Executive by the Company. Any
waiver or modification of any term of this Agreement shall be effective only if
it is set forth in a writing signed by all parties hereto.
Section 4.7 Successors and Binding Agreement.
(a) This Agreement shall be binding upon and inure to the
benefit of the Company and any Successor of or to the
Company, but shall not otherwise be assignable or
delegable by the Company. "Successor" shall mean any
successor in interest, including, without limitation,
any entity, individual or group of persons acquiring,
directly or indirectly all or substantially all of
the business or assets of the Company, as the case
may be, whether by sale, merger, consolidation,
reorganization or otherwise.
(b) The Company shall require any Successor to agree at
the time of becoming a Successor to perform this
Agreement to the same extent as the original parties
would be required if no succession had occurred.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal
representatives, executors, administrators, heirs,
distributes and legatees.
(d) This Agreement is personal in nature and neither of
the parties shall, without the consent of the other,
assign, transfer or delegate this Agreement or any
rights or obligations hereunder except as expressly
provided in this Section 4.7.
Section 4.8 Captions. The captions in this Agreement are solely
for convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement.
Section 4.9 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and the Company. No waiver by a party
hereto at any time of any breach by another party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provision or conditions at the
same or at any prior or subsequent time.
Section 4.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
"Company" "Executive"
RealMed Corporation
/s/ Scott E. Herbst
By: /s/ Robert J. Hicks
Print Name: Robert J. Hicks
Title: Chief Executive Officer
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Exhibit 10.14
ECLIPSE/REALMED AGREEMENT
This Agreement ("Agreement") is dated and effective as of June 15, 1999 and
is by and among Robert B. Peterson, Mark A. Morris, Eclipse America Corporation
("Eclipse America"), Eclipse Computing, Inc. ("Eclipse Computing"), RealMed
Capital Corporation, Eclipse Consulting Group, Inc., Eclipse Powernet, Inc.,
Eclipse Financial Corporation, Eclipse Group, Inc. (the foregoing persons and
entities shall be collectively referred to as the "Eclipse Parties") and RealMed
Corporation (the "Company").
RECITALS
A. Contemporaneously with the execution and delivery of this Agreement,
the Company and Newcourt Financial USA Inc. ("Newcourt") are entering into a
Loan Agreement pursuant to which, among other things, Newcourt will commit,
subject to certain terms and conditions, to loan up to $17,500,000 to the
Company.
B. In connection with the Loan Agreement and the transactions
contemplated thereby, Newcourt and the other parties to this Agreement desire to
establish with certainty the nature and extent of any and all relationship
between the Company, on the one hand, and the Eclipse Parties, on the other
hand.
C. Newcourt will not execute and deliver the Loan Agreement or
consummate the transaction contemplated thereby unless, among other things, this
Agreement is executed and delivered by the parties hereto.
D. The parties hereto believe it is desirable for the Company and
Newcourt to enter into the Loan Agreement and are, therefore, willing to enter
into this Agreement in order to induce Newcourt to enter into the Loan
Agreement. Each of the parties also believes it is in its best interest to enter
into this Agreement in order to establish with certainty the matters set forth
in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
1. Each of the Eclipse Parties (on its own behalf and on
behalf of its Affiliates), on the one hand, and the Company, on the other hand,
agree that, except as set forth in this Agreement, each and every agreement,
commitment, contract and/or understanding, whether oral or written, between such
Eclipse Party (or any of its Affiliates) and the Company (including, but not
limited to each agreement, commitment, contract and understanding listed on
Exhibit A) (collectively, the "Terminated Agreements") is hereby terminated and
rendered null and void and the Company is hereby released from any and all
<PAGE>
obligations, covenants and duties under each of the Terminated Agreements.
Notwithstanding the foregoing, none of the agreements listed on Exhibit B (the
"Surviving Agreements") shall be included in the term "Terminated Agreements"
and the validity, enforceability and continuing force and effect of the
Surviving Agreements shall be unaffected by this Agreement. For purposes of this
Agreement, (a) the term "Affiliate" (or "Affiliates") means, with respect to any
specified Person, any other Person controlling, controlled by, or under common
control with, the specified Person (however, the Company shall not be considered
to be an Affiliate of any Interested Party), and (b) the term "Person" means any
natural person, corporation, partnership, trust, limited liability company,
estate, association or other entity.
2. Each of the Eclipse Parties (on its own behalf and on
behalf of its Affiliates) absolutely, irrevocably and unconditionally releases
the Company from any and all claims, causes of action, demands, and rights,
which he or it has, or may have, whether known or unknown, absolute or
contingent, matured, or unmatured, in connection with or arising under (a) any
of the Terminated Agreement, and/or (b) any transaction, event or occurrence
occurring on or prior to the date of this Agreement; provided, however, that the
foregoing release shall not extend to claims, causes of action, demands or
rights arising under this Agreement or any Surviving Agreement.
3. Eclipse Computing acknowledges and agrees that it has
previously transferred, assigned and conveyed, free and clear of any liens,
claims, and encumbrances, to Company, good and marketable title to all of
Eclipse Computing's rights in the property described on the attached Exhibit C
(the "Proprietary Rights") and such transfer assignment and conveyance is hereby
ratified and confirmed. Each of the other Eclipse Parties hereby acknowledges
that neither it nor any of its Affiliates has any right, title and interest in
or to any of the Proprietary Rights. If, nonetheless, any of the Eclipse Parties
or any of their Affiliates should have any right, title or interest in or to the
Proprietary Rights, each such Eclipse Party (on its own behalf and/or on behalf
of any applicable Affiliate) hereby transfers, assigns and conveys good and
marketable title, free and clear of any liens, claims and encumbrances, to all
such right, title and interest, and any goodwill associated therewith, to the
Company.
4. (a) Subject to the terms and conditions this Agreement,
upon request by the Company and to the extent that Eclipse America has employees
available to provide services, Eclipse America agrees to provide the Company
with personnel acceptable to the Company (the "Leased Employees") for the
purpose of providing computer programming and other related services to the
Company ("Services"). Such Services shall be provided from time to time as
requested by the Company. The Company shall be obligated to pay only for time
spent by Leased Employees on behalf of the Company to the extent such time is
reflected on a time sheet signed by the Company.
(b) Company may release any Leased Employee without prior
notice to Eclipse America if, in the Company's opinion, such Leased Employee
does not perform satisfactorily, does not comply with the Company's security
requirements or other rules and regulations applicable to the conduct of the
Company employees, or for other good cause.
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(c) Eclipse America may withdraw any Leased Employee from
providing Services on thirty days prior written notice to the Company, provided
Eclipse America, if requested by the Company, provides the Company with a
replacement Leased Employee acceptable to the Company. If any Leased Employee
performing Services terminates his or her employment with Eclipse America,
Eclipse America shall provide the Company with a replacement Leased Employee
acceptable to the Company as soon as possible.
(d) Company agrees to pay Eclipse America an hourly fee for
the performance of the Services of each Leased Employee equal to Eclipse
America's actual cost of employing such Leased Employee, which costs are set
forth on Exhibit D. Company may request changes in the costs set forth in
Exhibit D no more often then twice per year; however, such changes shall not be
effective until accepted in a writing signed by the Chief Executive Officer of
the Company.
(e) Eclipse America shall submit invoices (with the required
time sheets) to Company monthly for Leased Employees who performed Services
during the preceding month. Invoices shall be sent to RealMed Corporation, 10333
N. Meridian Street, Suite 350, Indianapolis, Indiana 46290, Attention: Robert J.
Hicks, or such other address indicated by Company.
(f) Invoices shall be payable thirty (30) days after receipt;
however, in the event Company has questions concerning any invoiced item,
payment of that item shall be made only after the satisfactory resolution of
those questions.
(g) During the term of Section 4 of this Agreement and for a
period of three years after final payment by Company, all of Eclipse America's
records relating to Services performed and amounts invoiced by Eclipse America
under this Agreement shall be open to inspection and subject to audit and
reproduction by Company or Company's agent or representative.
(h) Eclipse America and Company acknowledge and agree that,
although Leased Employees performing Services for Company shall perform Services
pursuant to Company's general instructions, such Leased Employees shall at all
times and for all purposes be deemed employees of Eclipse America and not
employees of Company. Eclipse America shall be responsible for Leased Employees
being advised of this fact.
(i) Eclipse America shall be responsible for all contract
obligations it may have with the Leased Employees, for the payment of all wages
and salaries payable to Leased Employees, and the cost of providing Leased
Employees with any fringe benefits to which they are entitled by reason of being
employed by Eclipse America. Eclipse America shall also be responsible for
withholding payroll taxes from the wages and salaries paid to Leased Employees
and the payment of all payroll taxes relating to their employment to government
agencies and shall provide worker's compensation insurance, unemployment
insurance and any other insurance required by statute.
(j) Eclipse America shall indemnify and hold Company harmless
from any loss, damage, cost or expense which Company may incur by reason of or
arising out of (1) any Leased Employee filing any lien against any property of
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Company or any claim or lawsuit against Company in which the Leased Employee
claims payment from Company for Services to Company, (2) any injury (including
death) to any Leased Employee arising from providing Services pursuant to this
Agreement, not caused by the intentional act or omission of Leased Employee, or
(3) any personal injury (including death) or property damage caused by the
negligent or intentional act or omissions of any Leased Employee, excluding
property damage to the Company's property arising out of any Leased Employee's
failure to perform Services in an professional and competent manner, regardless
of whether such failure arises out of a negligent or intentional act of the
Leased Employee or omission of the Leased Employee.
(k) Company agrees that it will not actively solicit the
employment of any Leased Employees who have performed Services for Company under
this Agreement until at least twelve months after such employees first performed
Services for Company; provided, however, the foregoing shall not apply to Leased
Employees who, on their own initiative, seek employment by Company.
(l) Each of the Eclipse Parties agrees (on its own behalf and
on behalf of its Affiliates) that it will not, at any time, solicit the
employment of, hire, retain or employ, any employees of Company.
(m) In the course of the performance of this Agreement,
Eclipse Parties may acquire information that Company deems confidential,
including trade secrets and unpublished technical information and data to which
Company has proprietary rights. Confidential Information shall also include
information of a third party which Company is under an obligation to maintain in
confidence. All such information is referred to hereinafter as Disclosed
Information. Eclipse America shall retain such Disclosed Information in strict
confidence and shall not use it for the benefit of Eclipse America or others or
communicate it to others without the written agreement of the Company's Chief
Executive Officer. Eclipse America shall not duplicate any documents, or permit
others to do so, without prior written approval of the Company's Chief Executive
Officer. Documents made available to Eclipse America by Company shall remain the
property of Company and shall be delivered along with all copies thereof to
Company upon request, upon termination of Section 4 or this Agreement.
(n) All work product arising out of or in connection with any
Services is work for hire for Company and shall be the property of Company, with
Company owning the copyright and all other rights with respect thereto. In the
event any part of the work product does not qualify as a work for hire, Eclipse
America hereby assigns the entire copyright and all other rights to the work
product to Company. All originals and copies of such work product shall be
delivered to Company upon request or at the termination of this Agreement,
whichever is earlier. Eclipse America agrees to execute, without further
consideration, assignments or other documents that may be necessary to establish
Company's ownership of such work product.
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(o) Section 4 of this Agreement may be terminated by either
Eclipse America or the Company by giving at least thirty days advanced written
notice to the other; provided, however, that subsection 4(g), (i), (j), (k),
(l), (m) and (n) shall survive any such termination.
5. Eclipse America hereby leases to Company, and Company
hereby leases from Eclipse America, the property listed in Exhibit E (the
"Leased Property") for $16,000 per month, payable in arrears for 45 months (the
"Lease Term"). All such payments shall be due ten days after month end.
Notwithstanding the foregoing, Company shall have the right, with respect to any
Leased Property, to make payments directly to any person who is the lessor of,
or has a security interest in, such property ("Direct Payments") and to reduce
the payments otherwise due Eclipse America by the amount of any such Direct
Payment. Eclipse America represents and warrants to Company that Eclipse America
owns all such property free and clear of all liens, claims, charges and
encumbrances of any kind, except for liens which, in the aggregate, secure debt
of $16,000 per month or less, which debt does not continue beyond the Lease
Term. Upon the earlier of the end of the Lease Term or the closing of an Initial
Public Offering, Company shall have the option to purchase the Leased Property
on an "AS IS, WHERE IS" basis for $1.00, which shall be deemed to be good,
valuable and sufficient consideration. In such event, upon Company's request,
Eclipse America shall execute and deliver a bill of sale evidencing such
conveyance. Each Eclipse Party acknowledges and agrees that all property on the
Premises (as defined below) is either owned by the Company or is Leased Property
and that any new equipment, furniture or fixtures which shall become located on
the Premises will be the property of the Company, free and clear of all liens
created by or through the Eclipse Party and that each Eclipse Party shall have
no interest in such property. In the event that any of the Eclipse Parties
desire to use any personal property located on the Premises and the Company
finds such use to be acceptable, then the Company and such Eclipse Party shall
enter into a lease agreement on commercially reasonable terms.
6. The applicable Eclipse Party hereby subleases to the
Company, and Company hereby subleases from the applicable Eclipse Party, the
premises known as 10333 N. Meridian Street, Suite 350, Indianapolis, Indiana
(the "Premises"). The term of the sublease shall be for the remaining term of
the underlying lease between the applicable Eclipse Party and the landlord (the
"Real Estate Lease"), a true and correct copy of which has been provided to the
Chief Executive Officer of the Company. The sublease rent payable by the Company
shall be equal to the rent due under the Lease. If any Eclipse Party occupies
any portion of the Premises from time to time, it shall pay to the Company a
prorata portion of the sublease rent paid by the Company based on the actual
square footage of the space occupied by such Eclipse Party. No Eclipse Party
shall modify, amend, terminate, or exercise any options which it may have under,
the Real Estate Lease without the written consent of the Chief Executive Officer
of the Company. Any notices received by any Eclipse Party in connection with the
Real Estate shall be promptly provided to the Company.
7. The parties acknowledge and agree that the Company owes
$36,170 to Eclipse America. The Company shall pay such amount to Eclipse America
within 15 business days after the date of this Agreement. The parties
acknowledge and agree that no other payables are due from the Company to any of
the Eclipse Parties or any of their Affiliates.
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8. Within six weeks of the date of this Agreement, each
Eclipse Party agrees to cease any use of the name "RealMed" (or any variation
thereof) and RealMed Capital Corporation shall change its name to a name that
does not include the term "RealMed" or any variation thereof.
9. Each party agrees that, from time to time, it will execute
and deliver, or cause to be executed and delivered, such additional agreements,
instruments, certificates and documents and take all such actions as any other
party to this Agreement may reasonably request for purposes of implementing or
effectuating the provisions of this Agreement.
10. This Agreement shall be binding upon and shall inure to
the benefit of all parties to this Agreement and their respective heirs,
executors, administrators, assigns and successors in interest.
11. The parties affirm that this Agreement has been entered
into in the State of Indiana and shall be governed by and construed in
accordance with the substantive laws of the State of Indiana, notwithstanding
any state's choice of law rules to the contrary. Further, the parties expressly
agree that any and all action concerning any dispute arising under this
Agreement shall be filed and maintained only in a state or federal court sitting
in the State of Indiana, and each party hereby consents and submits to the
jurisdiction of such state or federal court.
12. If any term or provision of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
each of the parties shall use its reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
13. No change, amendment, modification or supplement to this
Agreement shall be valid or effective unless it is in writing and is duly
executed by each party to this Agreement or its duly authorized successor or
assign.
14. The failure of any party to this Agreement to enforce at
any time any provision of this Agreement shall not be construed to be a waiver
of such provision, nor in any way to affect the validity of this Agreement or
any part of it or the right of such party to enforce each and every provision of
this Agreement. Any waiver of any breach or provision of this Agreement must be
in a writing signed by the waiving party in order to be effective and, except as
otherwise clearly expressed in such a writing, no waiver of any breach or
provision of this Agreement shall constitute a waiver of any other breach or
provision or a continuing waiver. The performance by any party to this Agreement
of any act not required of it by the terms of this Agreement shall not
constitute either an agreement that such act is required or a waiver of the
scope of, or limitations on, its obligations under this Agreement and no such
performance shall estop such party from denying any obligation to perform such
act or asserting such scope or limitations with respect to any further or future
acts or failures to act.
6
<PAGE>
15. When used in this Agreement, words denoting the singular
include the plural and vice versa and words of any gender include all genders.
16. This Agreement constitutes a complete and total
integration of the understanding of the parties with respect to the subject
matter of this Agreement and it supersedes all prior and all contemporaneous
agreements and understandings (whether written, oral or implied) of the parties,
or their respective agents, with respect to such subject matter.
17. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute but one agreement. Any facsimile transmission of a
signed counterpart of this Agreement shall be deemed to be an original
counterpart and all signatures appearing thereon shall be deemed to be
originals.
18. In the event of any litigation among any of the parties to
this Agreement regarding the matters governed hereby or the enforcement hereof,
the losing party shall pay to the prevailing party all reasonable expenses and
costs, including reasonable attorneys' fees, incurred by the prevailing party in
connection with such litigation.
19. Each of Newcourt, JLT, LP and the French Shareholders (as
defined in the Shareholder Agreement of even date herewith) shall be a third
party beneficiary of this Agreement entitled to enforce this Agreement in its
own name, so long as it owns at least 5% of the issued and outstanding common
stock of the Company.
7
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date set forth at the beginning of this Agreement.
REALMED CORPORATION
By: /s/ Robert B. Peterson
Robert B. Peterson, President
/s/ Robert B. Peterson
Robert B. Peterson
ECLIPSE AMERICA CORPORATION
By: /s/ Mark A. Morris /s/ Mark A. Morris
Mark A. Morris
By:
Its only officers, directors and shareholders
REALMED CAPITAL CORPORATION ECLIPSE COMPUTING, INC.
By: /s/ Mark A. Morris By: /s/ Mark A. Morris
By:________________________________ By:________________________________
Its only officers, directors and shareholders
Its only officers, directors and shareholders
ECLIPSE POWERNET, INC. ECLIPSE CONSULTING GROUP, INC.
By: /s/ Mark A. Morris By: /s/ Mark A. Morris
By:________________________________ By:________________________________
Its only officers, directors and shareholders
Its only officers, directors and shareholders
(Signatures continued on next page)
8
<PAGE>
(Signatures continued from preceding page)
ECLIPSE GROUP, INC. ECLIPSE FINANCIAL CORPORATION
By: /s/ Mark A. Morris By: /s/ Mark A. Morris
By:________________________________ By:________________________________
Its only officers, directors and shareholders
Its only officers, directors and shareholders
9
<PAGE>
Exhibit A
Partial List of Terminated Agreements
1. Services Contract, dated April 23, 1997, between Eclipse Consulting
Group, Inc. and Eclipse Medisave America Corporation.
<PAGE>
Exhibit B
Surviving Agreements
1. Asset Purchase Agreement, dated April 25, 1997 and effective as of
January 1, 1997 between Eclipse Computing, Inc. and Eclipse Medisave
America Corporation.
2. Bill of Sale, effective as of January 1, 1997, signed by Eclipse
Consulting, Inc. in favor of Eclipse Medisave America Corporation.
3. The Release and Termination Agreement dated as of June 15, 1999 among
the Company, Newcourt Financial USA Inc., Candel & Partners, Gemplus
SCA, Gemplus Corp., West Plaines Investment, Inc., Finno SCA, Allan
Green, JLT, L.P., Rollin M. Dick, Mark A. Morris, Robert B. Peterson,
and any "Surviving Agreement" set forth on Exhibit A thereto.
4. Memorandum signed by the Company and agreed to by Peterson
memorializing the loan on May 4, 1998 made to the Company by Peterson
in the principal amount of $150,000 with an interest rate of 4%.
<PAGE>
Exhibit C
Proprietary Rights
All customer lists, software, source code, trade secrets, copyrights,
and other intellectual property related to processing, adjudicating, paying and
documenting medical insurance claims for providers of medical services and
medical insurance companies and all goodwill associated therewith and all
trademarks, trade names, and service marks including:
Medisave America Master Group Administration Reference
Manual registered effective December 9, 1997.
Medisave America Master Group Administration - Version 2.4
registered effective December 10, 1997.
The names "RealMed Corporation," "RealMed" and all variations and
derivations thereof.
<PAGE>
Exhibit D
Leased Employees
Computer Programming Consultants................................$95.00 per hour
Other Personnel....................................To Be Agreed Upon by RealMed
CEO and Applicable Eclipse Party
<PAGE>
Exhibit E
Leased Property
Leased Property consists of the property listed on the following 6
pages on Exhibit E-1 and all property listed on pages 1-7 of Exhibit E-2 that is
not owned by RealMed Corporation.
<PAGE>
Exhibit 23.02
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Selected Consolidated Financial Data" and "Experts" and to the use of our
report dated January 14, 2000 (except Note 12, as to which the date is March
15, 2000), in the Registration Statement (Form S-1) and related
Prospectus of RealMed Corporation dated April 6, 2000.
/s/ Ernst & Young LLP
Indianapolis, Indiana
March 31, 2000
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<NAME> RealMed Corporation
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<PERIOD-START> JAN-01-1999
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