<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO
ANNUAL REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended March 31, 1995
Commission File Number 33-6683NY
MICRO HEALTHSYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-2467332
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification Number)
414 EAGLE ROCK AVENUE, WEST ORANGE, NEW JERSEY 07052
(Address of principal executive offices) (Zip Code)
(201) 731-9252
(Registrant's telephone number, including area code)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(TITLE OF CLASS)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ ]
At June 26, 1995, the aggregate market value of the voting stock of the
registrant held by non-affiliates was approximately $13,073,000.
At June 26, 1995, the registrant had 6,241,137 outstanding shares of Common
Stock, at $0.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
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ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names of the directors and certain information about them are set forth
below.
<TABLE>
<CAPTION>
Name Age Position
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Graham O. King 55 Chairman of the Board and Chief Executive Officer
S.M. Caravetta 69 Vice Chairman of the Board
James A. Pesce 52 President and Director
Frederick R. Blume 53 Director
Stanford J. Goldblatt 56 Director
Robert E. King 59 Director
Robert C. Bowers 49 Director
James E. Cowie 40 Director
Ambassador Maxwell M. Rabb 83 Director
Stephen J. Feinberg 56 Director
</TABLE>
GRAHAM O. KING joined the Company on October 12, 1994 as the Company's Chief
Executive Officer. He was appointed Chairman of the Board of Directors at a
Board of Directors meeting held on October 28, 1994. He was formerly with
Shared Medical Systems, Inc., a healthcare information service company, from
October 1, 1986 until October 31, 1993, where he served as its President from
April 1987. From October 31, 1993 until joining the Company, he was a partner
with Salt Creek Ventures, a private investment company. Mr. King and Mr.
Robert E. King, another director of the Company, are brothers.
S. M. CARAVETTA was the Chairman of the Board of Directors, and Chief Executive
Officer from its organization in 1976 through October 28, 1994. He became Vice
Chairman of the Board of Directors on October 28, 1994. Mr. Caravetta has been
a director of the Company since 1976.
FREDERICK R. BLUME has been a director of the Company since 1993. He has been
a Managing Partner of Capital Health Venture Partners, a healthcare venture
capital firm, since June 1986. Prior to founding Capital Health, Mr. Blume was
a Managing Director of Paine Webber Group specializing in corporate healthcare
financing. He is presently a director of Cytyc Corporation, Oculon Corporation
and Washington National Corporation.
<PAGE> 3
STANFORD J. GOLDBLATT has been a director of the Company since April 20, 1995.
He has been a partner in the law firm of Hopkins & Sutter, counsel to the
Company, since 1979.
ROBERT E. KING has been a director of the Company since April 20, 1995. For a
twelve year period prior to October 1994, Mr. King was a director and Chief
Executive Officer of CA Newtrend Inc., the general partner of Newtrend, L.P.
(and its partnership and corporate predecessors), a software, service and
outsourcing provider in the financial institutions market. Mr. King and Mr.
Graham O. King are brothers.
ROBERT C. BOWERS has been a director of the Company since April 20, 1995.
Since June 19, 1995, Mr. Bowers has been Vice President and Chief Financial
Officer of HTE, Inc., a software service company in the state and local
government market. From June 1985 through October 1994, Mr. Bowers was Senior
Vice President and Chief Financial Officer of CA Newtrend Inc., the general
partner of Newtrend, L.P. (and its partnership and corporate predecessors).
JAMES E. COWIE has been a director of the Company since July 18, 1995. Mr.
Cowie has been a general partner of Frontenac Company, a Delaware general
partnership that is the general partner of Frontenac VI and other venture
capital partnerships, since 1989. He also serves on the boards of directors of
PLATINUM technology, inc., U.S. Robotics, Inc. and Open Environment
Corporation.
STEPHEN J. FEINBERG has been a director of the Company since September 1982.
He has been a partner of Salon, Marrow and Dyckman, a law firm that has
performed services for the Company, since March 1993. Prior thereto he was a
partner of Feinberg, Felzen & Nigro and predecessor firms since 1980. He is
the Secretary and a director of Homestead National Corporation, an independent
specialty property and casualty insurance company.
AMBASSADOR MAXWELL M. RABB has been a director since 1991. He is currently
counsel to the law firm of Kramer, Levin, Nessen, Kamin and Frankel. He joined
the firm in 1991. He was a partner of Stroock & Stroock & Levan from 1989 to
1991. He served as United States Ambassador to Italy from 1981 to 1989. He
was named by President Eisenhower to the then newly created post as Secretary
to the Cabinet in The White House in 1953 and has served in every national
administration since 1953. Amb. Rabb is currently a member of the Board of
Directors of the following: Sterling National Bank, MIC Industries, Baltimore
Orioles, Alusit International Corp., Liberty Cable Company, Inc., Black Hole
Technologies, Data Software and Systems, Graffitex, Inc. and CompuTower. He is
on the Advisory Board of The General George C. Marshall Home Preservation Fund,
Inc. and Fashion Institute of Technology, New York.
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CONCERNING THE BOARD OF DIRECTORS
Prior to October 1994, outside directors of the Company received up to $1,000
per meeting for their services to the Company in such capacity. During the
fiscal year ended March 31, 1995, Mr. Rabb and Mr. Blume, two outside directors
of the Company, were each paid $2,000. Mr. Feinberg, the third outside
director, did not receive any fees. Effective October 1994, outside directors
of the Company were granted stock options under the Company's 1994 Non-Employee
Director Stock Option Plan (the "1994 Plan") in lieu of cash compensation.
Under the 1994 Plan, the Board of Directors of the Company is authorized to
grant options to purchase up to 350,000 shares of Common Stock to certain
non-employee directors. Under the terms of the 1994 Plan, a non-employee
director is granted options to purchase 50,000 shares of Common Stock at the
market price on the day he or she becomes a director or, in the case of outside
directors that were in office during October 1994, the date of adoption of the
1994 Plan. The options vest at the rate of 10,000 shares per year, expire if
not exercised within ten years from the date of grant, and are
non-transferrable by option holders during an option holder's lifetime. Under
circumstances set forth in the 1994 Plan, the options may be exercised within
six months following termination of service to the Company, or within one year
in the event of death or total disability. In January 1995, each of Mr. Bowers
and Mr. Robert King, as consideration for his agreement to serve as a
consultant to the Company, was issued options under the Company's Amended 1993
Stock Option Plan. Neither Mr. Bowers nor Mr. King received options under the
1994 Plan upon his appointment as a director of the Company. Neither Mr.
Goldblatt nor Mr. Cowie, upon being appointed as a director of the Company,
accepted any options. The option holdings of the directors are set forth under
"Item 12 - Security Ownership of Certain Beneficial Owners and Management"
below. Directors are also reimbursed for their reasonable travel expenses
incurred in attending meetings.
The Board of Directors met or took action without a meeting eight times during
the fiscal year ended March 31, 1995. Other than directors elected during the
year, there is no present director nominated for election who attended fewer
than 75% of the aggregate of the total number of meetings of the Board of
Directors and the total number of meetings held by all committees of the Board
of Directors on which he served.
The Board of Directors maintains an Audit Committee, an Option Committee, a
Nominating Committee and a Compensation Committee.
The Audit Committee discusses matters of concern to the independent auditor
resulting from the audit; reviews changes in accounting principles in the
financial statements; and reviews non-auditing services performed for the
Company by the independent auditor. During the fiscal year ended March 31,
1995, the members of the Audit Committee were Mr. Feinberg and Ambassador Rabb.
The Audit Committee met once during fiscal 1995, and both members of the
Committee were present at the meeting.
The Option Committee administers the 1993 Stock Option Plan. During the fiscal
year ended March 31, 1995, the members of the Option Committee were Mr.
Caravetta, Ambassador Rabb and Mr. Feinberg. The Option Committee met or took
action without a meeting three times during fiscal 1995, and all members of the
Option Committee were present at all meetings.
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<PAGE> 5
During the fiscal year ended March 31, 1995, the members of the Compensation
Committee were Mr. Feinberg and Ambassador Rabb. The Compensation Committee
did not meet during fiscal 1995.
During the fiscal year ended March 31, 1995, the members of the Nominating
Committee were Mr. Graham King, Mr. Caravetta and Mr. Blume. The Nominating
Committee did not meet during fiscal 1995. The Nominating Committee will
consider nominees submitted by the stockholders of the Company. Submissions
should be made in a writing addressed to the attention of the Nominating
Committee at the Company's principal executive offices.
The Company has agreed with each director of the Company that the Company shall
indemnify the director against certain claims that may be asserted against him
by reason of serving on the Board of Directors.
Mr. Graham King is a party to an Employment Agreement with the Company that
extends through March 31, 1996. This agreement and certain other terms of Mr.
King's employment with the Company are discussed under "Item 11 - Discussion of
1995 Executive Officer Compensation and Employment Contracts" below.
Mr. Caravetta is a party to a Senior Consulting Agreement with the Company.
This agreement extends through April 1, 1998. This agreement and certain other
terms of Mr. Caravetta's arrangements with the Company are set forth under
"Discussion of 1995 Executive Officer Compensation and Employment Contracts"
below.
Mr. King and Mr. Caravetta have signed an agreement to the effect that each
will vote for the other as a director of the Company. Mr. Caravetta has also
agreed, among other things, to vote in favor of the slate of directors
nominated by the Nominating Committee.
Mr. Pesce is a party to an Employment Agreement with the Company. This
agreement extends through April 1, 1996. This agreement and certain other
terms of Mr. Pesce's employment with the Company are discussed under
"Discussion of 1995 Executive Officer Compensation and Employment Contracts"
below.
Mr. Goldblatt is a partner in the law firm of Hopkins & Sutter. Hopkins &
Sutter received legal fees and reimbursement for disbursements from the Company
for legal services provided to the Company by Hopkins & Sutter during the
fiscal year ended March 31, 1995, and received legal fees and reimbursement for
disbursements from the Company for legal services provided to Mr. Graham King
in connection with the negotiation and documentation of Mr. King's employment
arrangement with the Company during the fiscal year ended March 31, 1995. The
Company has continued to employ the services of Hopkins & Sutter; no estimate
of the legal fees for the 1996 fiscal year can be made at this time. Mr.
Goldblatt is also a member of the Advisory Committee of Frontenac Company, a
Delaware general partnership that is the general partner of Frontenac VI
Limited Partnership ("Frontenac VI"). The Company is contemplating an issuance
of 1,500,000 shares of Series A Convertible Preferred Stock, warrants to
purchase 390,000 shares of the Company's Common Stock at an exercise price of
$0.10 per share and warrants to purchase 198,000 shares of the Company's Common
Stock at an exercise price of $3.50
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<PAGE> 6
per share, to Frontenac VI, a trust established for the benefit of Robert E.
King and his descendants, and Morgan Holland Fund II, L.P. (See "Item 13 -
Certain Relationships and Related Transactions.") Mr. Goldblatt is also the
trustee of a trust established for the benefit of members of Mr. Goldblatt's
family, which trust is a limited partner in Frontenac VI. Hopkins & Sutter
provides legal services to Frontenac VI, Frontenac Company and Robert E. King
on a regular basis, although it has not provided legal services to Frontenac
VI, Frontenac Company or Mr. King with regard to any transactions with the
Company.
Mr. Bowers and Mr. Robert E. King began serving as paid consultants to the
Company in January 1995, and may from time to time in the future act as paid
consultants to the Company. For their services as consultants during the
fiscal year ended March 31, 1995, each of Mr. King and Mr. Bowers was
compensated for consulting services provided, and each received options to
purchase 50,000 shares of the Company's Common Stock at an exercise price of
$3.50 per share under the Company's Amended 1993 Stock Option Plan.
Mr. Robert E. King is a member of the Advisory Committee of Frontenac Company,
and is the general partner of a limited partner of Frontenac VI. A trust
established for the benefit of Mr. King and his descendants has agreed to
purchase securities of the Company for a purchase price of $500,000 to be paid
to the Company by such trust. (See "Item 13 - Certain Relationships and
Related Transactions.")
Mr. Cowie is a general partner of Frontenac Company, which is the general
partner of Frontenac VI. Frontenac VI has agreed to purchase securities of the
Company for a purchase price of $5,000,000 to be paid to the Company by
Frontenac VI. (See "Item 13 -Certain Relationships and Related Transactions.")
If the issuance of securities to Frontenac VI is not approved by the
stockholders of the Company, Mr. Cowie has agreed to resign from the Board of
Directors.
The Company maintains a directors and officers liability insurance policy
covering all directors of the Company.
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ITEM 11: EXECUTIVE COMPENSATION
The following table summarizes the annual and long-term compensation of certain
of the Company's executive officers for fiscal 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Long-Term Comp. All Other
Annual Compensation Options (Shares) Comp.
------------------- ----------------
Name/Position Restricted Securities
Stock Underlying
Age Year Salary Bonus Awards(2) Options
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Graham O. King, 55 1995 $100,197 $26,427 $1,256,250 1,000,000 939(3)
Chairman and CEO(1)
S.M. Caravetta 69 1995 275,000 -- -- -- 3,223(4)
Vice Chairman of the 1994 274,423 -- -- -- 2,857(4)
Board and Senior 1993 225,000 183,728 -- -- 2,598(4)
Consultant(1)
James A. Pesce 52 1995 180,000 -- -- 133,000 None(5)
President 1994 179,654 -- -- -- None(5)
1993 150,000 183,728 -- -- None
Thomas Schleck 50 1995 104,000 -- -- 10,000 None
Exec. V.P. and Secretary 1994 103,769 2,000 -- -- None
(since 1986) 1993 98,000 29,534 -- -- None
</TABLE>
- -------------------------
(1)Mr. King joined the Company as its Chief Executive Officer on October 12,
1994. Mr. Caravetta was the Company's Chief Executive Officer prior to October
12, 1994.
(2)The amounts shown in the table represent the market price on the date of
grant of awards of restricted stock. On July 12, 1995, Mr. King held 300,000
restricted shares with a value of $1,162,500 (based on the closing price of the
Common Stock on July 12, 1995). Dividends are payable on the shares of
restricted stock at the same rate as paid to all stockholders. With respect to
Mr. King's restricted stock, if he voluntarily resigns without good reason, or
is terminated for cause prior to a change of control prior to the first or
second anniversary of his employment with the Company, he will return 200,000
or 100,000 shares, respectively, for cancellation.
(3)Represents the premium on term life insurance maintained for Mr. King by the
Company. This table does not include the cost of legal services provided to
Mr. King at the Company's expense in connection with the negotiation of his
employment arrangement.
(4)The Company maintains a term life policy in the face amount of $500,000 on
the life of Mr. Caravetta for the benefit of Mr. Caravetta's wife or her estate.
Represents the premium on the term insurance portion of a split dollar life
insurance policy maintained by the Company on Mr. and Mrs. Caravetta's lives.
See "Discussion of 1995 Executive Officer Compensation and Employment
Contracts."
(5)The Company has agreed that if Mr. Pesce dies while employed by the Company,
the Company shall pay to his irrevocably designated beneficiary $100,000 per
annum for a period of ten (10) years thereafter, payable in equal monthly
installments, commencing on the first day of the month following death. The
Company maintains a term life policy in the face amount of $500,000 on the life
of Mr. Pesce, which the Company believes when considering tax effects will be
sufficient to cover this plan.
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DISCUSSION OF 1995 EXECUTIVE OFFICER COMPENSATION
AND EMPLOYMENT CONTRACTS
Mr. Graham O. King joined the Company as Chief Executive Officer on October 12,
1994. He became Chairman of the Board of Directors effective October 28, 1994.
Mr. King has an Employment Agreement that extends through March 31, 1996.
Unless either party elects not to extend the agreement, it automatically
extends for one year terms thereafter. The agreement provides for a salary of
$239,000 per year with a performance bonus not to exceed fifty percent (50%) of
salary. Mr. King's salary can be increased at the discretion of the Board of
Directors. During the first year of the agreement, fifty percent (50%) of the
total bonus is guaranteed. The agreement provides for one year severance
unless there is termination for cause or a voluntary resignation without good
reason as defined in his Employment Agreement. Mr. King was issued 300,000
shares of Common Stock of the Company in lieu of a cash signing bonus. In the
event that prior to the first or second anniversary of his employment Mr. King
voluntarily resigns without good reason, or is terminated for cause, prior to a
change of control as defined in his Employment Agreement, he will return
200,000 or 100,000 shares, respectively, for cancellation. Mr. King has agreed
with the Company not to sell more than 33,333 of these shares plus any
shortfall from previous fiscal quarters in any fiscal quarter during Mr. King's
employment.
Mr. King was granted stock options to acquire 1,000,000 shares of Common Stock
of the Company at the market price ($3.50/share) on the date of the
commencement of his employment. These stock options vest whenever the stock has
traded at or above $5.00 on at least 30 of the 40 prior business days, or upon
a change of control. Alternatively, 400,000 shares vest on October 12, 1995
and 600,000 shares vest on October 12, 2002, unless they have previously become
exercisable. These options contain anti-dilution provisions authorizing
adjustments under certain circumstances. Mr. King's shares, including those
underlying options, are subject to a registration rights agreement. The
Company has also agreed to reimburse Mr. King for the cost of a term life
insurance policy for $1,000,000 on Mr. King's life for his benefit.
On June 14, 1995, the Company agreed to loan Mr. Graham King $157,800 in order
to allow Mr. King to pay the income taxes due in connection with a portion of
the restricted stock he received. The terms of the note evidencing the loan
provide that the loan is interest-free until 120 days after the Company
registers Mr. King's restricted stock for sale, that the loan bears interest at
a rate equal to the rate of return achieved by the Company on its cash reserves
plus 1% after such date, and that the Company may demand repayment at any time
after the note begins to accrue interest.
On October 12, 1994, the Company entered into a Senior Consulting Agreement
with Mr. Caravetta. This agreement was amended by a letter dated November 11,
1994. The Senior Consulting Agreement replaced and superceded a prior
employment agreement between Mr. Caravetta and the Company. The agreement
provides for a salary of $275,000 per annum, and provides a split dollar life
insurance policy on the lives of Mr. and Mrs. Caravetta in the face amount of
$2,000,000 through the end of the
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term of the agreement, which is April 1, 1998. Pursuant to the Senior
Consulting Agreement, a stock option for 150,000 common shares granted to Mr.
Caravetta by the Company was canceled.
Mr. Caravetta's Senior Consulting Agreement includes a change of control clause
that provides that, in the event of a change of control of the Company during
the term of Mr. Caravetta's agreement, the Company shall pay him an amount
equal to 2.9 times the average annual base compensation paid to him during the
five fiscal years of the Company immediately preceding the change of control,
provided such change of control takes place on or before March 31, 1996. If
such change of control takes place between April 1, 1996 and March 31, 1997,
the Company shall pay him an amount equal to two times such average annual
compensation; and, if such change of control takes place between April 1, 1997
and March 31, 1998, the Company shall pay him an amount equal to 1.5 times the
average annual base salary and incentive compensation. The aforesaid payment
shall be made to him in twelve or, at his election, in twenty-four, equal
monthly installments, commencing on the first day of the month following the
change of control. Other than the change of control payments, Mr. Caravetta
shall not be entitled to any other salary or consulting payments under the
Senior Consulting Agreement after a change of control. Mr. Caravetta has
agreed that a change of control in favor of Mr. King or persons affiliated with
Mr. King shall not be deemed a change in control for purposes of his Senior
Consulting Agreement.
Mr. Caravetta's agreement also contains clauses that provide for medical
insurance coverage for the remainder of his and his wife's life (at her expense
following his death). The Company also maintains a term life policy in the
face amount of $500,000 on the life of Mr. Caravetta, payable to Mr.
Caravetta's wife or her estate.
The Company has in effect an employment contract with Mr. Pesce that provides
for salary of $180,000 per annum, plus an incentive bonus of 2- 1/2% of pretax
profits above $500,000. This agreement also contains a one year salary
continuation clause which provides that Mr. Pesce will receive one year's
salary if he is terminated for any reason other than cause.
Mr. Schleck has been employed by the Company for nineteen years.
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The following chart lists the executive officers of the Company other than the
executive officers named in the executive compensation table:
<TABLE>
<CAPTION>
Year of
Name Age Position Employment
---- --- -------- ----------
<S> <C> <C> <C>
Michael B. Loscalzo 50 Vice President, Finance, Planning and 1995
Administration
Stephen G. Sullivan 45 Vice President, Marketing and Business 1978
Development
James J. Aurelio 42 Vice President, Sales 1994
Derek A. Pickell 34 Vice President, Sales 1995
Robert E. Van Metre 54 Vice President, Accounting and Finance 1995
Sophia V. Bilinsky 29 Vice President, Physician Services 1995
</TABLE>
Michael B. Loscalzo: Mr. Loscalzo has more than 25 years experience in the
health care industry.
From 1993 to 1995, Mr. Loscalzo was a Senior Vice President of Cain Brothers &
Company, a New York based health care investment banking firm.
Mr. Loscalzo was a co-founder and, from 1988 to 1992, Managing Director of The
Hunter Group, a health care workout firm. As Managing Director, he served as a
member of the on site senior management team in a number of high profile health
care turnarounds. Between 1988 and 1991, he served as either CEO or CFO of
workout clients in Seattle, Washington; St. Paul, Minnesota; Miami, Florida;
and San Francisco, California.
Prior to the formation of The Hunter Group, Mr. Loscalzo served as Senior Vice
President of Finance for a Philadelphia teaching hospital. From 1978 to 1985,
he was a manager in Arthur Andersen & Co.'s Philadelphia health care audit
practice.
Stephen G. Sullivan: Mr. Sullivan has 27 years of experience in the health
care information systems industry.
Prior to its acquisition in 1991 by the Company, Mr. Sullivan served as
majority stockholder and Chief Executive Officer of Administration Information
Systems Corporation ("AISCorp."), a multi-million dollar annual revenue medical
services and information systems company. In this capacity, Mr. Sullivan
successfully negotiated systems contracts with major medical centers and
hospital based physician groups for
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<PAGE> 11
the sale and installation of sophisticated medical information systems and
outsourced business management services.
Prior to founding AISCorp. in 1978, Mr. Sullivan served as Corporate Director
of MIS for IPCO Hospital Supply Company and as director, MIS U. S. Operations
for Kempak Data Services(SWISSAIR).
James J. Aurelio: Mr. Aurelio has 17 years experience selling scientific
instrumentation used in the academic, biotechnology and diagnostic laboratory
markets.
Prior to joining the Company, Mr. Aurelio worked for Beckman Instruments, Inc.
from 1985 to 1988 as National Sales Manager for the Laboratory Automation
Software Systems Division. Mr. Aurelio was promoted to the position of Eastern
Area Field Operations Manager in 1988. In this position, he was responsible
for sales, service and local marketing. He managed 13 field sales and service
managers and 150 sales, service and customer service professionals.
Derek A. Pickell: Mr. Pickell has 15 years of experience in the health care
information systems industry.
Prior to joining the Company, Mr. Pickell served as Senior Vice President of
Sales and Service for Wellmark Incorporated from 1992 to 1995. In this
position, Mr. Pickell had national responsibility for supplying eligibility
verification, claims management, electronic remittance and fund transfer,
managed care management and receivables management software and services to the
health care industry.
Mr. Pickell served as National Sales Director for the Health Care Systems
Division of Ferranti International from 1989 to 1992. In this position, Mr.
Pickell created the account management program to handle the sales and support
for all company clients.
Robert E. Van Metre: Mr. Van Metre has over 20 years of experience in
financial management in the financial services industry.
From 1987 through 1994, Mr. Van Metre held several senior management positions
with Integrated Resources Life Companies, Inc. including, Senior Vice President
- - Chief Financial Officer, Executive Vice President, and President.
From 1982 through 1987, Mr. Van Metre was Executive Vice President-Chief
Financial Officer for the Dasake Group, Inc.
Mr. Van Metre held a variety of senior management positions with Household
Interratios (HFC) from 1973-1982. Prior to joining HFC, he was Administrator
of Finance for the Illinois State Toll Highway Authority.
Sophia V. Bilinsky: Prior to joining the Company, Ms. Bilinsky was the
President and Chief Operating Officer of Healthnet, Inc., the largest primary
care group practice operating across Connecticut, New York, and New Jersey.
While at Healthnet, she was
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responsible for developing the infrastructure and processes required by today's
physician groups, MSOs and networks to effectively compete in the changing
health care environment. In 1994, Healthnet was acquired by Coastal Healthcare
Group, Inc.
From 1991-1992 Ms. Bilinsky was Director, Direct Investment Group for
Whitehead/Sterling. She was Associate, then Vice President, Medical Markets
Group for General Electric Corporation from 1989-1991. Ms. Bilinsky served as
Relationship Associate & Corporate Finance Associate, World Corporate Group for
CitiBank, N.A. from 1986-1989.
All officers hold office until their successors are duly elected or appointed
and qualified, or until their earlier resignation or removal.
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<PAGE> 13
OPTION YEAR-END VALUE TABLE
The following table sets forth information concerning the value at March 31,
1995 of option grants during the year to each named executive officer. Options
vest as determined at the time of the grant and expire after ten years from the
date of grant. Vesting is contingent on continuing employment with the
Company.
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
Potential Realizable Value
Individual Grants at Assumed Annual Rates
of Stock Price Appreciation
for Option Term(1)
- ------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
- ------------------------------------------------------------------------------------------------------------
Percent of Total
Options Granted Exercise
Options to Employees in or Base Expiration
Name Granted Fiscal Year Price Date 0% 5% 10%
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Graham O. 1,000,000 52% $3.50 10/12/2004 $687,500 $3,320,000 $7,361,297
King
S.M. 0 - - - - - -
Caravetta
James A. 133,000 7% $3.00 09/06/2004 - $250,930 $635,900
Pesce
Thomas 10,000 less than 1% $3.50 01/31/2005 - $20,900 $51,054
Schleck
</TABLE>
(1)Other than column (f), amounts reported in these columns represent amounts
that may be realized upon exercise of the options immediately prior to the
expiration of their term assuming the specified compounded rates of
appreciation (5% and 10%) of the Company's Common Stock over the term of the
options. These numbers are calculated based on rules promulgated by the
Securities and Exchange Commission and do not reflect the Company's estimate of
future stock price increases. Actual gains, if any, on stock option exercises
and Common Stock holdings are dependent on the timing of such exercise and the
future performance of the Company's Common Stock. There can be no assurance
that the rates of appreciation assumed in this table can be achieved or that
the amounts reflected will be received by the individuals.
The following table sets forth information with respect to options exercised
and held by the named executive officers as of March 31, 1995:
AGGREGATED OPTION EXERCISES IN FISCAL 1995
AND MARCH 31, 1995 OPTION VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
--------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Shares Unexercised In-The-Money
Acquired on Value Options at Options at
Name Exercise Realized March 31,1995 March 31, 1995(1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Graham O. King 0 - 1,000,000 $500,000
S.M. Caravetta 0 - - -
James A. Pesce 0 - 133,000 $133,000
Thomas Schleck 0 - 10,000 $5,000
</TABLE>
(1)The value of options reflects the increase in market value of the Company's
Common Stock from the date of grant through March 31, 1995 (when the closing
price of Company Common Stock was $4.00 per share). The table includes both
options that are vested and options that are not vested. Value actually
realized by the executive officers will depend on the value of the Company's
Common Stock at the time of exercise.
12
<PAGE> 14
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as provided by the holders to the
Company, concerning beneficial ownership of Common Stock as of July 17, 1995,
by (i) all persons known by the Company to be the beneficial owners of five
percent or more of the issued and outstanding Common Stock of the Company, (ii)
each of the directors and named executive officers and (iii) the directors and
executive officers of the Company as a group. Except as noted, all addresses
are 414 Eagle Rock Avenue, West Orange, New Jersey 07052.
<TABLE>
<CAPTION>
No. of Shares Percentage of
Name of Beneficial Owner Beneficially Owned Ownership
------------------------ ------------------ -------------
<S> <C> <C>
S.M. Caravetta(1) 1,098,128 17.5 %
Frederick R. Blume. Blume(2,6), c/o American Healthcare Fund, 122 345,812 5.5 %
S. Michigan Ave., Chicago, IL 60603
Graham O. King(3) 300,000 4.8 %
James A. Pesce(4) 173,333 2.8 %
Thomas Schleck(5) 20,000 Less than 1 %
Stanford J. Goldblatt 0 Less than 1 %
Robert E. King(6,7,8) 33,500 Less than 1 %
Robert C. Bowers(6) 0 Less than 1 %
James E. Cowie(8) 0 Less than 1 %
Amb. Maxwell M. Rabb(6) 5,000 Less than 1 %
Stephen J. Feinberg(6,9) 226,419 3.6 %
Stephen G. Sullivan(10) 388,116 6.2 %
David K. Vanco(11) c/o Management Data Services, 655 W. Grand 470,000 7.5 %
Ave., Elmhurst, IL 60126
All Officers and Directors(1-10) as a Group (18 persons)(12) 2,376,513 38%
</TABLE>
(1)Includes 116,000 shares of Common Stock owned by the children of Mr.
Caravetta. Mr. Caravetta disclaims beneficial ownership of such shares.
Includes 222,128 shares of Common Stock owned by trusts, of which the children
of Mr. Caravetta are the beneficiaries and Mr. Stephen J. Feinberg and the
wife of Mr. Caravetta are trustees. Mr. Caravetta disclaims beneficial
ownership of such shares. Mr. Caravetta may be deemed to be the promoter or
founder of the Company as such term is defined under the federal securities
laws.
(2)Shares which are owned by American Healthcare Fund, L.P., of which Mr. Blume
is an affiliate and as to which Mr. Blume disclaims beneficial ownership.
(3)Shares issued to Mr. King in lieu of a cash bonus upon acceptance of
employment with the Company, subject to certain cancellation provisions. Does
not include 1,000,000 shares issuable upon exercise of stock options which are
not currently exercisable. (See "Discussion of 1995 Executive Officer
Compensation and Employment Agreements.")
(4)Includes 83,333 shares that represent the vested portion of Mr. Pesce's
133,000 stock options.
(5)Does not include 10,000 shares which might be issued upon exercise of a stock
option which has not yet vested.
13
<PAGE> 15
(6)Does not include 50,000 shares which might be issued upon exercise of a stock
option which has not yet vested.
(7)Includes 18,000 shares held in Trust for the benefit of Mr. King's children.
Mr. King disclaims beneficial ownership of such shares.
(8)Does not include shares issuable upon conversion or exercise of the Series A
Shares, Series A Warrants and Series B Warrants to be issued if the Proposal
for Private Placement of Series A Shares and Warrants is approved.
(9)Includes 4,291 shares owned by the children of Mr. Feinberg and a trust for
the benefit of the children of Mr. Feinberg, of which Mr. Feinberg disclaims
beneficial ownership. Includes 222,128 shares of Common Stock owned by trusts
for the benefit of Mr. Caravetta's children, and of which Mr. Feinberg and the
wife of Mr. Caravetta are Trustees. Mr. Feinberg disclaims beneficial
ownership of such shares.
(10)Includes 60,000 shares that represent the vested portion of Mr. Sullivan's
options to purchase 75,000 shares, and 559 shares held by Mr. Sullivan's wife.
(11)Includes vested options to purchase 25,000 shares. Does not include 55,000
shares that may be issued to Mr. Vanco pursuant to the terms of a merger
agreement to which the Company and Mr. Vanco are parties.
(12)Does not include 327,667 shares which might be issued upon exercise of
options held by executive officers other than the named executive officers of
the Company. Includes only once shares reported by each of Mr. Caravetta and
Mr. Feinberg.
14
<PAGE> 16
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 18, 1995, the Company entered into a Series A Convertible Preferred
Stock and Warrant Purchase Agreement (the "Purchase Agreement"), by and among
the Company, Frontenac VI, a trust established for the benefit of Robert E.
King and his descendants and Morgan Holland Fund II, L.P. (collectively the
"Purchasers"), pursuant to which the Company has agreed (subject to approval of
the Company's stockholders and certain other conditions) to sell to the
Purchasers, through a private placement, (i) 1,500,000 shares of Series A
Convertible Preferred Stock of the Company, par value $0.01 per share, (ii)
warrants to purchase up to 390,000 shares of the Company's Common Stock at an
exercise price of $0.10 per share, and (iii) warrants to purchase up to 198,000
shares of the Company's Common Stock at an exercise price of $3.50 per share,
for an aggregate purchase price of $6,000,000.
A copy of the Purchase Agreement, together with certain of the exhibits
thereto, is attached hereto as Exhibit 10(37), and is hereby incorporated by
reference. The above description is qualified in its entirety by reference to
such exhibit.
Additional information with respect to Certain Relationships and Related
Transactions is included herein under the headings "Concerning the Board of
Directors" and "Executive Compensation."
SECTION 16 FILINGS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own beneficially more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of such securities of the Company. Directors,
executive officers and greater than ten percent stockholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) reports
they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and representations that no other reports were
required, all Section 16(a) filing requirements applicable to its directors,
executive officers and greater than ten percent beneficial owners were complied
with during the 1994 fiscal year, except that Mr. Loscalzo did not make a Form
3 filing within the time period established by Section 16(a).
15
<PAGE> 17
EXHIBITS
10(37) Series A Convertible Preferred Stock and Warrant Purchase Agreement,
dated July 18, 1995, by and among the Company and the Purchasers names
therein, and certain exhibits thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
MICRO HEALTHSYSTEMS, INC.
Dated: July 24, 1995 By: /s/ Graham O. King
-------------------------------
Graham O. King,
Chief Executive Officer
16
<PAGE> 1
Exhibit 10(37)
SERIES A CONVERTIBLE PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
AMONG
MICRO HEALTHSYSTEMS, INC.
AND
THE PURCHASERS NAMED ON SCHEDULE 1 HERETO
DATED AS OF JULY 18, 1995
<PAGE> 2
Exhibit 10(37)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. [INTENTIONALLY BLANK] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. PURCHASE AND SALE OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Authorization and Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Organization; Good Standing; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Valid Issuance of Preferred and Common Stock and Warrants . . . . . . . . . . . . . . . . . . . . 2
3.4 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Capitalization and Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Contracts and Other Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.9 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.10 Compliance With Other Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.12 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.13 Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.14 Holdings Company Act and Investment Company Act Status . . . . . . . . . . . . . . . . . . . . . . 6
3.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.16 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.17 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.19 Offering of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.20 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.21 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Acquire Entirely for Own Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Reliance Upon Investor's Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Sophisticated Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.7 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Exhibit 10(37)
<S> <C>
5. COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Financial Statements and Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Inspection of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Lost, Stolen, Destroyed or Mutilated Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4 No Superior Preferred 13
5.5 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7 Acquisition of Assets; Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 Additional Rights and Limitations of Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . 14
6. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Restated Certificate and the Certificate of Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.1 Indemnification by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.2 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.2 Expiration of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.6 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.8 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.11 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.12 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Schedules and Exhibits
Schedule 1 - Names and Addresses of Investors
Exhibit A-1 - Form of Amended and Restated Certificate of Incorporation
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Exhibit 10(37)
<S> <C>
Exhibit A-2 - Form of Certificate of Designation of Series A Convertible Preferred Stock
Exhibit B - Form of Series A Warrant
Exhibit C - Form of Series B Warrant
Exhibit D - Form of Registration Rights Agreement
Exhibit E - Form of Opinion of Company Counsel
</TABLE>
iii
<PAGE> 5
Exhibit 10(37)
MICRO HEALTHSYSTEMS, INC.
SERIES A CONVERTIBLE PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
THIS SERIES A CONVERTIBLE PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT (this "Agreement") is made as of July 18, 1995, among MICRO
Healthsystems, Inc., a Delaware corporation (the "Company"), and the purchasers
listed on Schedule 1 attached hereto (each, an "Investor" and collectively, the
"Investors").
The parties hereto agree as follows:
1. [INTENTIONALLY BLANK]
2. PURCHASE AND SALE OF SECURITIES
2.1 Authorization and Issuance of Securities.
(a) Prior to the Closing, the Company shall have adopted
resolutions and filed with the Secretary of State of the State of Delaware (i)
the Restated Certificate of Incorporation (the "Restated Certificate") in the
form attached hereto as Exhibit A-1 and (ii) the Certificate of Designation
Relating to the Series A Convertible Preferred Stock (the "Certificate of
Designation") in the form attached hereto as Exhibit A-2.
(b) Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to the Investors, and the
Investors agree to purchase from the Company, individually and not jointly, in
the aggregate, (i) 1,500,000 shares of Series A Convertible Preferred Stock of
the Company (the "Series A Preferred Stock") for a purchase price of $4.00 per
share, (ii) Series A Warrants to initially purchase 390,000 shares of Common
Stock of the Company substantially in the form of Exhibit B attached hereto
(the "Series A Warrants") and (iii) Series B Warrants to initially purchase
198,000 shares of Common Stock of the Company substantially in the form of
Exhibit C attached hereto (the "Series B Warrants", and collectively with the
Series A Warrants, the "Warrants"). Each Investor agrees to purchase
securities of the type, and in the amounts, as set forth on Schedule 1 hereto.
The number of shares of Common Stock which may be purchased upon the exercise
of the Warrants and the price per share are subject to the terms and conditions
set forth in the Warrants. The Series A Preferred Stock, the Series A Warrants
and the Series B Warrants are sometimes hereafter collectively referred to as,
the "Securities".
2.2 Closing. The purchase, sale and delivery of the
Securities shall take place at the office of Winston & Strawn, 35 West Wacker
Drive, Chicago, Illinois 60601, at 10:00 a.m. local time, on the second
business day after the Company's annual meeting held during its
1
<PAGE> 6
Exhibit 10(37)
fiscal year ending in 1996, or at such other time, date or place as the Company
and the Investors may mutually agree upon in writing (which time, date and
place are designated as the "Closing"). At the Closing, the Company shall
deliver to each Investor, (i) a certificate representing the number of shares
of Series A Preferred Stock to be purchased hereunder, (ii) a single registered
Series A Warrant to purchase the number of shares of Common Stock of the
Company set forth next to such Investor's name in the appropriate column on
Schedule 1 hereto and (iii) a single registered Series B Warrant to purchase
the number of shares of Common Stock of the Company set forth next to such
Investor's name in the appropriate column on Schedule 1 hereto. The Series A
Preferred Stock, Series A Warrants and Series B Warrants shall be delivered
against payment of the purchase price therefor by wire transfer payable to the
Company to one or more accounts designated by the Company prior to the Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Investor that, except
as set forth on the Disclosure Schedule delivered to the Investors
simultaneously with the execution of this Agreement (the "Disclosure
Schedule"):
3.1 Organization; Good Standing; Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as
now conducted and, assuming stockholder approval and the filing of the Restated
Certificate and the Certificate of Designation, to execute and deliver this
Agreement and the Registration Rights Agreement to issue and sell the Series A
Preferred Stock, the Series A Warrants and the Series B Warrants pursuant to
the terms hereof and the Common Stock issuable upon conversion or exercise
thereof, and to carry out the provisions of this Agreement, the Registration
Rights Agreement, the Restated Certificate and the Certificate of Designation.
The Company is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on the condition (financial or other), results of operations or
assets or properties of the Company and the Subsidiaries taken as a whole (a
"Material Adverse Effect").
3.2 Authorization. All corporate action on the part of the Company
(other than stockholder approval and the filing of the Restated Certificate and
the Certificate of Designation) necessary for the authorization, execution and
delivery of this Agreement and the Registration Rights Agreement, the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance (or reservation for issuance), sale and delivery of the
Series A Preferred Stock, the Series A Warrants and the Series B Warrants
pursuant to the terms hereof and the Common Stock issuable upon conversion or
exercise thereof has been taken, and this Agreement and the Registration Rights
Agreement have been, or at the Closing will have been, duly executed and
delivered by the Company and constitute, or at the Closing will constitute,
valid and legally binding obligations of the Company, enforceable in accordance
with their
Exhibit 10(37)
2
<PAGE> 7
Exhibit 10(37)
respective terms. Prior to the Closing, the Restated Certificate and the
Certificate of Designation will have been filed with the Secretary of State of
the State of Delaware in accordance with the General Corporation Law of
Delaware ("Delaware Law").
3.3 Valid Issuance of Preferred and Common Stock and Warrants. The
Series A Preferred Stock, the Series A Warrants and the Series B Warrants that
are being acquired by the Investors hereunder, when issued and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and
will be free and clear of all liens, pledges, security interests, options,
rights of first refusal, encumbrances, claims, preemptive rights and other
third party rights ("Liens"), other than restrictions on transfer under this
Agreement, the Warrants, the Registration Rights Agreement and applicable state
and federal securities law.
The Common Stock issuable upon conversion of the Series A Preferred
Stock, and exercise of the Series A Warrants and the Series B Warrants will be
duly and validly reserved for issuance and, when issued in compliance with the
provisions of the Restated Certificate, the Certificate of Designation and the
Warrants, will be duly and validly issued, fully paid and nonassessable and
will be free and clear of all Liens other than restrictions on transfer under
this Agreement, the Warrants, the Registration Rights Agreement and applicable
state and federal securities laws.
3.4 Governmental Consents. No consents, approval, qualification,
order or authorization of, or declaration or filing with, any local, state, or
federal governmental authority ("Consents") is required on the part of the
Company in connection with the Company's valid execution, delivery or
performance of this Agreement, the Registration Rights Agreement (other than
Consents required in connection with the Company's performance of its
obligations under the Registration Rights Agreement), and the sale, issuance or
delivery of the Series A Preferred Stock, the Series A Warrants and the Series
B Warrants by the Company pursuant to the terms hereof or the Common Stock
issuable upon conversion or exercise thereof, except (i) the filing of (x) the
Restated Certificate and (y) the Certificate of Designation with the Secretary
of State of the State of Delaware, (ii) such Consents as will have been made or
obtained prior to the Closing, except that any notices required to be filed
with the Securities and Exchange Commission (the "Commission") under Regulation
D of the Securities Act of 1933, as amended (the "Securities Act"), or such
postclosing filings as may be required under applicable state securities laws
and (iii) other Consents, the failure which to obtain or make would not result
in a Material Adverse Effect.
3.5 Capitalization and Voting Rights. The authorized capital stock
of the Company will consist immediately prior to the Closing of:
(i) Preferred Stock. 10,000,000 shares of Preferred Stock, of which
1,500,000 shares shall be Series A Convertible Preferred Stock, par value $0.01
per share. No
Exhibit 10(37)
3
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Exhibit 10(37)
shares of Series A Preferred Stock will be issued and outstanding immediately
prior to the Closing.
(ii) Common Stock. 30,000,000 shares of Common Stock, of which
6,256,837 shares are issued and outstanding as of the date hereof.
(iii) Except for currently outstanding options to purchase 2,284,167
shares of Common Stock pursuant to the Company Option Plans (as defined below),
there are not outstanding any options, warrants, rights (including conversion
or preemptive rights and rights of first refusal), or agreements for the
purchase or acquisition from the Company of any shares of its capital stock.
In addition to the aforementioned options, the Company has reserved an
additional 772,833 shares of its Common Stock for purchase upon exercise of
options to be granted in the future under the Company Option Plans and, to the
Company's knowledge, there is no agreement or understanding between any persons
that affects or relates to the voting or giving of written consents with
respect to any security or the voting by a director of the Company. "Company
Option Plans" shall mean, collectively, (i) the MICRO Healthsystems, Inc. 1993
Stock Option Plan, as amended, (ii) the 1994 Non-Employee Director Stock Option
Plan, as amended and (iii) such other plans and agreements pursuant to which
the Company has heretofore granted options or other rights to purchase capital
stock of the Company.
3.6 Subsidiaries. The Disclosure Schedule contains a list of each
person in which the Company, directly or indirectly, owns a majority of the
securities having ordinary voting power for the election of directors (the
"Subsidiaries"). Each of the Subsidiaries is duly organized and existing under
the laws of the jurisdiction in which it is incorporated or organized and is in
good standing under such laws. Each Subsidiary is duly qualified to transact
business and is in good standing in every jurisdiction (domestic or foreign) in
which the nature of the respective business conducted or property owned by it
makes such a qualification necessary and where the failure to so qualify would
result in a Material Adverse Effect. All of the outstanding shares of the
capital stock of each of the Subsidiaries have been duly and validly authorized
and issued, are fully paid and nonassessable, and are owned by the Company,
free and clear of any Liens other than Liens securing existing bank debt
(disclosed on the Disclosure Schedule). There are not outstanding any options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal) or agreements for the purchase or acquisition from any Subsidiary of
any shares of its capital stock. None of the Subsidiaries is a party or
subject to any agreement or understanding, and, to the best of the Company's
knowledge, there is no agreement or understanding between any persons, that
affect or relates to the voting or giving of written consents with respect to
any security or the voting by a director of any of the Subsidiaries.
3.7 Contracts and Other Commitments. All contracts, agreements,
indentures and instruments which are in effect as of the date of this Agreement
and are required to be disclosed under Regulation S-K or in the Company's
Annual Report on Form 10-K as of the date
Exhibit 10(37)
4
<PAGE> 9
Exhibit 10(37)
hereof (the "Material Contracts") are set forth on the Disclosure Schedule.
Neither the Company nor any of the Subsidiaries is in default under any
Material Contract other than defaults which, individually or in the aggregate,
do not result in a Material Adverse Effect.
3.8 Registration Rights. Except as provided in the Registration
Rights Agreement, the Company is not obligated to register under the Securities
Act any of its presently outstanding securities or any of its securities that
may subsequently be issued.
3.9 Permits. The Company and the Subsidiaries have all franchises,
permits, licenses, and any similar authority necessary for the conduct of their
respective businesses as now being conducted by each of them, the lack of which
could, individually or in the aggregate, result in a Material Adverse Effect.
Neither the Company nor any of the Subsidiaries is in default of or in
violation in any material respect of any of such franchises, permits, licenses
or other similar authority, except for defaults or violations which would not
result in a Material Adverse Effect.
3.10 Compliance With Other Instruments. Neither the Company nor any
of the Subsidiaries is in violation or default (i) of any provision of its
Charter or Bylaws or (ii) to the knowledge of the Company, of any judgment,
order, writ, decree, statute, rule, or regulation applicable to the Company or
the Subsidiaries. Neither the execution, delivery or performance of this
Agreement and the Registration Rights Agreement, nor the execution and filing
of the Restated Certificate or the Certificate of Designation, nor the issuance
of the Securities hereunder, nor fulfillment of nor compliance with the terms
and provisions hereof or thereof, nor the payment of dividends on the Series A
Preferred Stock as contemplated by the Certificate of Designation out of funds
legally available therefor, nor the redemption thereof out of funds legally
available therefor will conflict with or result in a breach of the terms,
conditions or provisions of, or give rise to a right of termination under, or
constitute a default under, or result in any violation of, the Charter or
Bylaws of the Company or any of the Subsidiaries, or any mortgage, agreement,
instrument, order, judgment, decree, statute, rule or regulation to which the
Company or any of the Subsidiaries or any of their respective property is
subject, other than conflicts, breaches, defaults, terminations or violations
which, individually or in the aggregate, do not result in a Material Adverse
Effect or materially adversely affect the ability of the Company to perform its
obligations under this Agreement, the Registration Rights Agreement, the
Restated Certificate or the Certificate of Designation.
3.11 Litigation. There is no action, suit, proceeding, or
investigation pending or, to the Company's knowledge, currently threatened
against the Company, or any of the Subsidiaries or any of their respective
properties or assets, that questions the validity of this Agreement or the
Registration Rights Agreement or the right of the Company to enter into such
agreements, or to consummate the transactions contemplated hereby or thereby,
or that is reasonably expected to result, either individually or in the
aggregate, in a Material Adverse Effect, or in any material change in the
current equity ownership of the Company or the
Exhibit 10(37)
5
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Exhibit 10(37)
Subsidiaries. Neither the Company nor any of the Subsidiaries is a party to,
or to the Company's knowledge, named in any order, writ, injunction, judgment,
or decree of any court, government agency, or instrumentality.
3.12 Financial Statements.
(a) The Company has delivered to each Investor its audited financial
statements, including the consolidated balance sheets, as of March 31, 1995 and
the related consolidated statements of operations, statements of stockholders'
deficit and statements of cash flows for the fiscal years then most recently
ended, and the related notes thereto (such audited financial statements are
referred to as the "Financial Statements").
(b) The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and with each other. The Financial Statements
fairly present the financial condition, operating results and cash flows of the
periods, indicated therein.
3.13 Changes.
Since March 31, 1995, there has not been:
(a) any change in the assets, liabilities, financial condition, or
operating results of the Company from that reflected in the Financial
Statements, except changes that have not resulted in, in the aggregate, a
Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, that has resulted in a Material Adverse Effect;
(c) any waiver or compromise by the Company or any of the
Subsidiaries of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any Lien or payment of any
material obligation by the Company or any of the Subsidiaries, except in the
ordinary course of business;
(e) any material adverse change to a Material Contract;
(f) any material change in any compensation arrangement or agreement
with any executive officer or director of the Company or any of the
Subsidiaries;
(g) any sale, assignment, or transfer of any patents, trademarks,
copyrights, trade secrets, or other intangible assets, except for licenses
granted in the ordinary course of business;
Exhibit 10(37)
6
<PAGE> 11
Exhibit 10(37)
(h) any resignation or termination of employment of any officer or
key employee of the Company or any of the Subsidiaries;
(i) any receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company or any of the
Subsidiaries;
(j) any mortgage, pledge, transfer of a security interest in, or
Lien, created by the Company or any of the Subsidiaries, with respect to any of
its material properties or assets, except liens for taxes not yet due or
payable;
(k) any loans or guarantees made by the Company or any of its
Subsidiaries to or for the benefit of its officers or directors, or any members
of their immediate families, other than travel advances and other advances made
in the ordinary course of its business or loans and advances of less than
$25,000 to any such person;
(l) any declaration, setting aside, or payment or other distribution
in respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase, or other acquisition of any of such stock by the Company;
(m) to the best of the Company's knowledge, any other event or
condition of any character that, individually or in the aggregate, might
reasonably be expected to result in a Material Adverse Effect; or
(n) any agreement or commitment by the Company or any of the
Subsidiaries to do any of the things described in this Section 3.13.
3.14 Holdings Company Act and Investment Company Act Status. The
Company is not a "holding company" or a "public utility company" as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended. The
Company is not an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
3.15 Taxes. The Company and the Subsidiaries have filed all required
Tax returns and reports which are material and have paid, or adequately
provided for the payment of, all Taxes, assessments and other governmental
charges imposed upon them or upon any of their respective assets, income or
franchises, except where the failure to file or pay would not result in a
Material Adverse Effect. "Taxes" include all federal, state, local, foreign
and provincial income, capital gains, property transfer, payroll, withholding,
excise, sales, use, use and occupancy, mercantile, real estate, personal
property, value added, capital stock, franchise or other taxes, assessments or
charges and estimated taxes relating thereto.
Exhibit 10(37)
7
<PAGE> 12
Exhibit 10(37)
3.16 Disclosure. Neither this Agreement nor the Disclosure Schedule
or exhibits hereto contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
herein and therein not misleading, when taken as a whole. There is no fact
peculiar to the Company or any of the Subsidiaries of which the Company is
aware which the Company has not disclosed to the Investors in writing which
would result, or has resulted in, a Material Adverse Effect or, so far as the
Company can now reasonably foresee, will materially adversely affect the
ability of the Company to perform this Agreement, the Registration Rights
Agreement or its obligations in respect of the Securities.
3.17 ERISA.
(a) The Disclosure Schedule sets forth a true, correct, and complete
list of all Company Plans. The Company and the Subsidiaries have, with respect
to each Company Plan, delivered to the Investor true and complete copies of (i)
all Plan documents and agreements; (i) the most recent summary Plan description
for each Plan and material employee communications; (iii) the most recent
annual report (including all Schedules thereto, if any); and (iv) if the Plan
is intended to qualify under Section 401(a) or 403(a) of the Code, the most
recent determination letter received from the Internal Revenue Service or
opinion letter received from the sponsor of a prototype plan.
(b) With respect to each Plan, neither the Company nor any of the
Subsidiaries has direct or indirect, actual or contingent, liability which
would result in a Material Adverse Effect, other than to make payments for
contributions, premiums or benefits or other expenses related to such Plans
when due in the ordinary course, all of which payments that are due have been
made and no Plan is a "defined benefit plan" (as defined in Section 3(35) of
ERISA). No assets of the Company or any of the Subsidiaries are subject to any
lien under Sections 302(f), 306(a), 307(a), 412 or 4068 of ERISA or Sections
401(a)(29) or 312(n) of the Code.
(c) With respect to each Company Plan: (i) each such Plan conforms
to, and its administration is in compliance with, all applicable laws and
regulations, except where the failure to conform or comply would not result in
a Material Adverse Effect; (ii) the form of each such Plan intended to qualify
under Sections 401(a) or 403(a) of the Code so qualifies except for the
adoption of amendments for which the remedial amendment period under Section
401(b) of the Code has not yet expired; (iii) no such Plan is subject to
Section 302 of ERISA or Section 412 of the Code; (iv) no such Plan is subject
to Title IV of ERISA; (v) there are no actions, suits or claims pending or, to
the knowledge of the Company, threatened (other than routine claims for
benefits) which would result in a Material Adverse Effect; and (vi) each such
Plan that is a group health plan has been operated in compliance with Section
4980B of the Code at all times, except to the extent that non-compliance would
not result in a Material Adverse Effect.
(d) Except as specified on the Disclosure Schedule, there are no
Retiree Welfare Plans for former or current employees of the Company or any of
the Subsidiaries that
Exhibit 10(37)
8
<PAGE> 13
Exhibit 10(37)
are not fairly reflected by reserves shown in the Financial Statements (to the
extent such reserves are required in accordance with generally accepted
accounting principles). The consummation of the transactions contemplated by
this Agreement (without any further action) will not (i) entitle any current or
former employee, officer, director or agent of or consultant to the Company or
any of the Subsidiaries to severance pay, unemployment compensation or any
similar payment, (ii) accelerate the time of payment or vesting of or increase
the amount of compensation due to any current or former employee, officer,
director or agent of or consultant to the Company or any of the Subsidiaries,
or (iii) constitute a "prohibited transaction" (as defined in Section 406 or
407 of ERISA or Section 4975 of the Code).
(e) No Company Plan is a "multiple employer plan" or a "multiemployer
plan" within the meaning of ERISA or the Code; and neither the Company nor any
of the Subsidiaries has direct or indirect, actual or contingent, liability
with respect to any partial or complete withdrawal (as such terms are defined
in Sections 4203 and 4205 of ERISA) from any multiemployer plan which would
result in a Material Adverse Effect.
(f) As these terms are used in this Section:
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Plan" means any Plan maintained by or contributed to by the
Company or any Subsidiary that provides benefits with respect to employees or
former employees of the Company or any of the Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Plan" means any "employee benefit plan" within the meaning of Section
3(3) of ERISA, including but not limited to any pension, retirement, profit
sharing, stock bonus incentive, stock option, restricted stock or other equity
based compensation plan, other plan of deferred compensation, medical, dental
or other health benefit plan, life insurance, disability insurance or accident
insurance plan, severance plan, policy, program or arrangement with respect to
which the Company or any of the Subsidiaries has any direct or indirect, fixed
or contingent, liability.
"Welfare Plan" means any Plan maintained by or contributed to by the
Company or a Subsidiary that is a welfare plan within the meaning of Section
3(1) of ERISA and provides benefits with respect to employees or former
employees of the Company or any of the Subsidiaries.
"Retiree Welfare Plan" means any Welfare Plan that provides medical,
dental or health benefits with respect to employees or former employees of the
Company or any of the
Exhibit 10(37)
9
<PAGE> 14
Exhibit 10(37)
Subsidiaries beyond the thirtieth day following their retirement or other
termination of service (other than coverage mandated under Section 4980B of the
Code).
3.18 Environmental Matters. Neither the Company nor any of the
Subsidiaries has disposed of or arranged for the disposal of any hazardous
substances, other than in conformity with applicable laws and regulations, at
any facility, location or site owned or leased by the Company or any of the
Subsidiaries except to the extent that such disposal does not, individually or
in the aggregate, result in a Material Adverse Effect and, to the best of the
Company's knowledge, neither the Company nor any of the Subsidiaries has been
designated a potentially liable party for remedial action or response costs in
connection with such facility, location or site under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, the Federal
Resource Conservation and Recovery Act, as amended, the Toxic Control Substance
Act, the Clean Water Act, the Clean Air Act or comparable state statutes,
except to the extent that any such designation does not result in a Material
Adverse Effect. To the best of the Company's knowledge, except for such use or
storage of hazardous substances as is incidental to the conduct of the
Company's or any of the Subsidiaries' operations, which use and storage is or
has been in conformity with applicable laws and regulations, except where the
failure to conform wold not result in a Material Adverse Effect, no property or
asset owned or leased by the Company or any of the Subsidiaries has been used
for the storage, treatment, generation, processing, production or disposal of
any hazardous substances or as a landfill or other waste disposal site in
violation of applicable environmental laws, except to the extent that such uses
or storage do not, individually or in the aggregate, result in a Material
Adverse Effect. To the best of the Company's knowledge, underground storage
tanks are not and have not been located on or under any property or assets
owned or leased by the Company or any of the Subsidiaries, except to the extent
that such storage tanks do not, individually or in the aggregate, result in a
Material Adverse Effect. For the purpose of this Section, "hazardous
substances" shall mean those substances defined or listed by the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, the Federal
Resource Conservation and Recovery Act, the Clean Air Act and regulations
thereunder.
3.19 Offering of the Shares. To the knowledge of the Company, neither
the Company nor any person acting on its behalf has offered the Securities or
any similar securities of the Company for sale or exchange to, solicited any
offers to buy such securities of the Company from or otherwise approached or
negotiated with respect to such securities of the Company with, any person
other than the Investors and a limited number of other Persons that it believed
were "accredited investors" (as defined in Rule 501(a) under the Securities
Act). Based in part on the accuracy of the representations and warranties of
the Investors contained herein, neither the Company nor any person acting on
its behalf has taken or will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Securities
under the Securities Act and the rules and regulations of the Commission
thereunder) which might subject the offering, issuance or exchange of the
Securities to the registration
Exhibit 10(37)
10
<PAGE> 15
Exhibit 10(37)
requirements of Section 5 of the Securities Act. The Company will offer and
exchange the Securities in compliance with all applicable state securities laws
and will make all necessary filings and qualifications required by such laws.
"Person" shall mean an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company
or any other entity or organization, including a governmental or political
subdivision or any agency or instrumentality thereof.
3.20 Intellectual Property.
(a) The Disclosure Schedule contains a listing of all software and
databases that are material to the conduct of the business of the Company and
the Subsidiaries, taken as a whole, in which the Company or any of the
Subsidiaries: (i) holds any ownership interest ("Owned Software"); or (ii)
holds written license to use (with said license agreement being also
identified), but excluding PC based software that is available pursuant to
"shrink wrap" agreements ("Third Party Software", Owned Software and Third
Party Software being referred to collectively as "Software"). To the knowledge
of the Company, the Company and the Subsidiaries do not use any software or
databases that are material to the business of the Company and the
Subsidiaries, taken as a whole, for which the user has neither ownership rights
nor a valid license.
(b) To the knowledge of the Company, the Company or one of the
Subsidiaries possesses legal rights in the Software that are sufficient to
conduct the business of the Company and the Subsidiaries as the same is
presently conducted.
(c) To the knowledge of the Company, there are no outstanding
options, licenses or agreements of any kind relating to the Software to which
the Company or the Subsidiaries is a party which, with respect to the Company's
or such Subsidiaries' ability to use the Software, would result in a Material
Adverse Effect.
3.21 Labor Relations. There is no pending or, to the Company's
knowledge, threatened strike, picketing, work stoppage or work slowdown
involving employees of the Company or any of the Subsidiaries. No union is
certified by the National Labor Relations Board as collective bargaining agent
for employees of the Company or any of the Subsidiaries. No written demand is
pending for recognition of such employees, no election for certification is
pending, and, to the Company's knowledge, no such demand is scheduled.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby represents and warrants that:
4.1 Authorization. The Investor has full power and authority to
enter into this Agreement and perform its obligations hereunder. The execution
and delivery of this Agreement
Exhibit 10(37)
11
<PAGE> 16
Exhibit 10(37)
and the consummation of the transactions contemplated by this Agreement by the
Investor have been duly approved by all necessary proceedings on the part of
the Investor. This Agreement has been duly executed and delivered by the
Investor. This Agreement constitutes a valid and legally binding obligation of
such Investor, enforceable in accordance with its terms.
4.2 Governmental Consents. No Consent is required on the part of the
Investor in connection with the execution and delivery of this Agreement or the
performance by the Investor of the transactions contemplated hereby, except for
filings after the Closing under Section 13(d) of the Securities Exchange Act of
1934 (the "Exchange Act").
4.3 Acquire Entirely for Own Account. This Agreement is made with
the Investor in reliance upon the Investor's representation to the Company,
which by its execution of this Agreement it hereby confirms, that the
Securities to be acquired by the Investor and the Common Stock issuable upon
conversion of the Warrants will be acquired for investment for the Investor's
own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, the Investor further represents that,
it does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to any of the Securities or the Common Stock issuable upon
conversion of the Securities.
4.4 Reliance Upon Investor's Representations. The Investor
understands that the Securities are not, and any Common Stock acquired upon
conversion thereof at the time of issuance may not be, registered under the
Securities Act on the ground that the acquisition provided for in this
Agreement and the issuance of securities hereunder is exempt from registration
under the Securities Act pursuant to Section 4(2) thereof, and that the
Company's reliance on such exemption is predicated on the Investor's
representations set forth herein.
4.5 Sophisticated Investor. The Investor is an "accredited investor"
as defined in Rule 501(a) under the Securities Act. The Investor is a
sophisticated purchaser with respect to the Securities, has been given the
opportunity to access the records of the Company and its Subsidiaries and has
made its own independent analysis and investigation into the business,
operations, financial condition and general creditworthiness of the Company and
the Subsidiaries and has made its own independent decision to acquire the
Securities pursuant to the terms and conditions set forth in this Agreement,
except that the Investor has relied upon the representations, warranties and
covenants of the Company contained in this Agreement.
4.6 Restricted Securities. The Investor understands that the
Securities may not be sold, transferred, or otherwise disposed of without
registration under the Securities Act or an exemption therefrom, and that in
the absence of an effective registration statement covering the Securities or
an available exemption from registration under the Securities Act, the
Securities
Exhibit 10(37)
12
<PAGE> 17
Exhibit 10(37)
must be held indefinitely to redemption in accordance with their terms. In
particular, the Investor is aware that the Securities may not be sold pursuant
to Rule 144 promulgated under the Securities Act unless all of the conditions
of that Rule are met.
4.7 Legend. Each certificate or other document evidencing any of the
Securities being acquired hereunder shall be endorsed with the legend set forth
below, and the Investor covenants that, except to the extent such restrictions
are waived by the Company, the Investor shall not transfer the shares
represented by any such certificate without complying with the restrictions on
transfer described in the legend endorsed on such certificate,
with respect to the Series A Preferred Stock:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH
SHARES UNDER SUCH ACT OR LAWS OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED."
with respect to the Warrants:
"THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR SUCH LAWS OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO
THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
5. COVENANTS OF THE COMPANY
5.1 Financial Statements and Other Reports. The Company agrees that
it will deliver to each holder of at least 100,000 shares of Series A Preferred
Stock:
(i) promptly upon transmission thereof and in any event, not later
than the expiration of the applicable filing period pursuant to the Securities
Act and the Exchange Act,
Exhibit 10(37)
13
<PAGE> 18
Exhibit 10(37)
copies of all such financial statements, proxy statements, notices and reports
as the Company shall send to its stockholders and copies of all such
registration statements, other than registration statements relating to
employee benefit or dividend reinvestment plans, and all such regular and
periodic reports as it shall file with the Commission;
(ii) promptly upon production thereof and in any event, no later than
sixty (60) days after the beginning of each fiscal year, an operating plan
(adopted by the Board of Directors of the Company) for such fiscal year
prepared for each month, including projected cash flow and capital expenditure
budgets for each month supported by a narrative describing the assumptions upon
which the plan is based; and
(iii) such other financial information as shall be reasonably requested
by a holder of the Securities promptly after such holder provides a written
request with respect thereto to the Company.
5.2 Inspection of Property. As long as any Investor or any of such
Investor's Affiliates shall hold at least 100,000 shares of the Series A
Preferred Stock, the Company will permit representatives of any such Investor
to visit and inspect, at such Investor's expense, any of the properties of the
Company and its Subsidiaries, to examine the corporate books and make copies or
extracts therefrom and to discuss the affairs, finances and accounts of the
Company and its Subsidiaries with the principal officers of the Company, all at
such reasonable times and as often as such Investor may reasonably request.
Such Investor agrees not to disclose to any Person any information or data
obtained by it pursuant to Section 5.1 or this Section 5.2 until such
information or data otherwise becomes publicly available or except pursuant to
a valid subpoena, judicial process or its equivalent or as otherwise required
by applicable law; provided, however, such Investor shall have used its best
efforts to give the company advance notice of such subpoena or judicial process
so that the Company may seek an appropriate protective order. Such Investor
will take appropriate measures to limit the communication of material
non-public information concerning the Company and the Subsidiaries to those of
its agents, employees, partners and representatives who have a genuine and bona
fide need to know the same. Such Investor will advise its agents, employees,
partners and representatives who do receive such information of the obligation
of such Investor hereunder and of the obligations imposed under the federal and
state securities laws. "Affiliate" shall have the meaning set forth under Rule
12b-2 of the Exchange Act.
5.3 Lost, Stolen, Destroyed or Mutilated Stock Certificates. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any certificate representing the Securities, in the case of
loss, theft or destruction, upon delivery of an indemnity reasonably
satisfactory to the Company, or, in the case of mutilation, upon surrender and
cancellation thereof, the Company will issue a new certificate of like tenor
for a number of shares of the Series A Preferred Stock, the Series A Warrants
or the Series B
Exhibit 10(37)
14
<PAGE> 19
Exhibit 10(37)
Warrants, as the case may be, equal to the number of shares of such stock
represented by the certificate lost, stolen, destroyed or mutilated.
5.4 No Superior Preferred. As long as not less than 300,000 shares
of the Series A Preferred Stock remain outstanding, the Company shall not (a)
alter or change the rights, preferences or privileges of the Series A Preferred
Stock, or (b) issue any preferred or common stock superior or pari passu to the
Series A Preferred Stock with respect to the payment of dividends or the
distribution of assets upon liquidation, without the written consent of holders
of not less than a majority of the shares of Series A Preferred Stock then
outstanding.
5.5 Reporting Requirements. As long as the Company is subject to the
periodic reporting requirements of the Exchange Act, the Company will file all
reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the Commission thereunder.
5.6 Affiliate Transactions. As long as not less than 300,000 shares
of the Series A Preferred Stock remain outstanding, the Company will not enter
into, without the consent of the Company's Board of Directors, any material
transaction, arrangement or agreement with any Affiliate (including, without
limitation, any officer or director of any Affiliate) involving, directly or
indirectly, the payment of money or transfer of property to such Affiliate or
officer or director of such Affiliate, having an aggregate value in excess of
$250,000, except for (i) such transactions, arrangements or agreements which
the Preferred Director (as defined in the Certificate of Designation) has
consented to in writing or (ii) customary employment arrangements and benefit
programs on reasonable terms no less favorable to the Company or any Subsidiary
than would be obtained by the Company or any Subsidiary in a comparable
arm's-length transaction with a Person who is not an Affiliate of the Company
or any Subsidiary.
5.7 Acquisition of Assets; Investments. As long as not less than
300,000 shares of the Series A Preferred Stock remain outstanding, the Company
shall not, other than in the ordinary course of business, purchase or acquire a
business of another Person (by means of acquisition of the assets or shares of
capital stock of any Person) for consideration in excess of $1,000,000, unless
such purchase or acquisition has been approved by a majority of the Board of
Directors of the Company.
5.8 Additional Rights and Limitations of Series A Preferred Stock.
(a) So long as at least 300,000 shares of Series A Preferred Stock are
outstanding, the holders of Series A Preferred Stock shall be entitled to the
preemptive right to subscribe for and purchase their respective pro rata
portion of any issuance of Common Stock of the Company. The preemptive right
granted under this section shall not apply to the issuance of Excluded Stock
(as defined in the Certificate of Designation), issuances or deemed issuances
Exhibit 10(37)
15
<PAGE> 20
Exhibit 10(37)
of Common Stock pursuant to an underwritten registered offering or issuances or
deemed issuances of Common Stock in connection with the acquisition of the
assets or securities of any Person.
(b) If an issuance of Common Stock gives rise to a preemptive right
under this Section 5.8, the Company shall give all holders of Series A
Preferred Stock written notice of such issuance within thirty (30) days prior
to such issuance, which notice shall set forth the price and terms of such
issuance. A holder of Series A Preferred Stock may exercise the preemptive
right granted in this Section 5.8 only by giving written notice of exercise to
the Company within fifteen (15) days following the receipt of the Company's
notice to the holder. The holder's notice of exercise shall specify the number
of shares of Common Stock being purchased by such holder and shall be
accompanied by a cashier's check or certified check in the full amount of the
price for the shares being purchased.
(c) In determining a holder's pro rata portion of any issuance of
Common Stock for purpose of this Section 5.8, it shall be assumed that all
outstanding options or rights to purchase Common Stock have been exercised and
that all securities exchangeable for or convertible into Common Stock have been
so exchanged or converted. The rights contained in this Section 5.8 may be
waived or amended in accordance with the provisions of Section 9.9 hereof.
6. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING
The obligations of each Investor under Section 2.1(b) of this Agreement
are subject to the fulfillment on or before the Closing of each of the
following conditions, the waiver of which shall only be effective against such
Investor if it consents in writing thereto:
6.1 Stockholder Approval. The adoption of the Restated Certificate
and the Certificate of Designation and the issuance and sale of the Securities
shall have been duly authorized and approved by the stockholders of the Company
in accordance with Delaware Law.
6.2 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body that are required to be
obtained prior to the Closing in connection with the lawful issuance and sale
of the Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
6.3 Opinion of Company Counsel. The Investors shall have received
from Hopkins & Sutter, special counsel for the Company, an opinion, dated the
date of the Closing, in the form attached hereto as Exhibit E.
Exhibit 10(37)
16
<PAGE> 21
Exhibit 10(37)
6.4 Registration Rights Agreement. The Company shall have executed
and delivered to the Investors that certain Registration Rights Agreement dated
as of the date hereof (the "Registration Rights Agreement") attached hereto as
Exhibit D, setting forth certain rights, privileges and obligations of the
Company and the Investors with respect to the Securities.
7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company to the Investors under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions:
7.1 Stockholder Approval. The adoption of the Restated Certificate
and the Certificate of Designation and the issuance and sale of the Securities
shall have been duly authorized and approved by the stockholders of the Company
in accordance with Delaware Law.
7.2 Restated Certificate and the Certificate of Designation. The
Restated Certificate and the Certificate of Designation shall have been
accepted for filing by the Secretary of State of Delaware.
7.3 Qualifications. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body that are required to be
obtained prior to the Closing in connection with the lawful issuance and sale
of the Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
8. INDEMNIFICATION
8.1 Indemnification by the Company.
(a) The Company hereby agrees to indemnify and hold harmless each
Investor (including its partners and employees) and its Affiliates against any
and all losses, damages, liabilities, claims, demands, judgments, settlements,
costs and expenses of any nature whatsoever (including reasonable attorneys'
fees) (collectively, "Losses") (i) resulting from or arising out of the
inaccuracy of any representation or warranty or the breach or non-performance
of any covenant or agreement of the Company contained in this Agreement, or
(ii) in connection with any threatened or pending litigation involving such
Investor with respect to the transaction contemplated by this Agreement, unless
such Losses arise principally out of the gross negligence, malfeasance, or bad
faith of such Investor.
(b) If any action, proceeding or claim shall be brought or asserted
against any Investor (including its employees) or its Affiliates (each, a
"Investor Indemnified Party") by any third party, which action, proceeding or
claim, if determined adversely to the interest of the Investor Indemnified
Party, would entitle the Investor Indemnified Party to indemnity pursuant to
this Section 8.1, the Investor Indemnified Party shall promptly but in no event
later than
Exhibit 10(37)
17
<PAGE> 22
Exhibit 10(37)
fifteen (15) days from the date that such action, proceeding or claim was
commenced, notify the Company of the same in writing specifying in detail the
basis of such claim and the facts pertaining thereto, and the Company shall be
entitled to assume the defense thereof and have the sole control of the defense
and settlement thereof, including the employment of counsel and the payment of
all expenses; provided, however, that the Investor Indemnified Party shall have
the right to employ counsel separate from counsel employed by the Company in
any such action and to participate in the defense thereof, and the fees and
expenses of such counsel shall be at the expense of the Investor Indemnified
Party unless (i) (1) the employment thereof has been specifically authorized by
the Company in writing or (2) the use of counsel chosen by the Company to
represent the Investor Indemnified Party would present such counsel with a
conflict of interest or (ii) the Company has failed to assume the defense and
to employ counsel. The Company shall not be liable for any settlement of any
such action or proceeding effected without the written consent of the Company
(unless such consent is unreasonably withheld by the Company), but if settled
with the written consent of the Company, or if there shall be a final judgment
for plaintiff in any such action, the Company agrees to indemnify and hold
harmless the Investor Indemnified Party from and against any and all Losses by
reason of such settlement or judgment. Notwithstanding the foregoing, without
the written consent of the Investor Indemnified Party, the Company shall not be
entitled to settle any nonmonetary claim involving the business, operations or
assets of the Investor Indemnified Party if such settlement would impose on it
any obligation which cannot be satisfied by the payment of money.
8.2 Contribution. If the indemnification provided in this Section 8
were to be unavailable to the parties hereto for any reason, the Company and
the Investors will contribute to the Losses in the proportion that the
Company's interest bears to each Investor's interest (on a pro rata basis) in
the matters contemplated by this Agreement.
9. MISCELLANEOUS
9.1 Entire Agreement. This Agreement and the documents referred to
herein (together with the letter agreement dated June 26, 1995 which the
parties hereto agree shall terminate at the Closing) constitute the entire
agreement among the parties and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Matters disclosed in any paragraph
of the Disclosure Schedule shall be deemed to be disclosed with respect to all
paragraphs of the Disclosure Schedule. The Company's Form 10-K filed June 29,
1995 (and delivered to the Investors prior to the date hereof), the exhibits
thereto, including all information and exhibits incorporated therein shall be
deemed incorporated in the Disclosure Schedule.
9.2 Expiration of Warranties. The warranties and representations of
the Company and the Investor contained in or made pursuant to this Agreement
shall in no way be affected by an investigation of the subject matter thereof
made by or on behalf of the Company or the Investor and shall survive the
Closing. Notwithstanding the foregoing, the representations
Exhibit 10(37)
18
<PAGE> 23
Exhibit 10(37)
and warranties contained in Sections 3.7, 3.9, 3.11, 3.12, 3.13 3.14, 3.15,
3.16, 3.17, 3.18, 3.19, 3.20 and 3.21 shall survive only until March 31, 1997.
9.3 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reasons of this Agreement,
except as expressly provided in this Agreement.
9.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED UNDER THE LAWS OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO THE
PRINCIPLES OF THE CONFLICTS OF LAWS THEREOF.
9.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.6 Titles and Subtitles. The title and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.7 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified by hand or
professional courier service, upon confirmation of telex or telecopy, five (5)
days after deposit with the United States Post Office, by registered or
certified mail, postage prepaid or upon the next day following deposit with a
nationally recognized overnight air courier, addressed as follows:
(a) if to an Investor, to its address set forth on Schedule 1 hereto.
(b) If to the Company, to:
MICRO Healthsystems, Inc.
414 Eagle Rock Avenue
West Orange, NJ 07052
Attention: Graham O. King
Facsimile: 201-731-1295
Exhibit 10(37)
19
<PAGE> 24
Exhibit 10(37)
With a copy to:
Stanford Goldblatt, Esq.
Hopkins & Sutter
Three First National Plaza
Chicago, IL 60602
Facsimile: 312-558-4276
Any party may by notice given in accordance with this Section 9.7 to the other
party to this Agreement designate another address or person for receipt of
notice hereunder.
9.8 Finder's Fees. Each party represents that it neither is nor will
it be obligated for any finder's fee or commission in connection with this
transaction.
9.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors
holding, or prior to the Closing obligated to purchase, a majority of the
Series A Preferred Stock.
9.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
9.11 Expenses. Irrespective of whether the Closing is effected, the
Company shall pay all reasonable fees, costs and expenses (including, without
limitation, the reasonable legal fees, costs and expenses of special legal
counsel to Frontenac VI Limited Partnership ("Frontenac")) that Frontenac
incurs from June 1, 1995 to the date of determination with respect to the
negotiation, execution and delivery of this Agreement up to a maximum aggregate
amount of $50,000.
9.12 Termination. This Agreement and all rights and obligations of
the parties hereto may be terminated at any time on or after September 15, 1995
(so long as the Closing has not occurred) by the written consent of the Company
or the Investors obligated to purchase, in the aggregate, a majority of the
Series A Preferred Stock pursuant hereto.
Exhibit 10(37)
20
<PAGE> 25
Exhibit 10(37)
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MICRO HEALTHSYSTEMS, INC.
By: _____________________________
Name: Graham O. King
Title:
FRONTENAC VI LIMITED PARTNERSHIP
By: Frontenac Company
Its: General Partner
By: _____________________________
Name: James E. Cowie
Its: General Partner
ROBERT E. KING INCOME TRUST
By:_______________________________
David A. Hutchinson, as Trustee
of the Robert E. King Income Trust,
dated December 18, 1986
MORGAN HOLLAND FUND II, L.P.
By:_______________________________
Name: James F. Morgan, a
General Partner
<PAGE> 26
Exhibit 10(37)
SCHEDULE 1
<TABLE>
<CAPTION>
INVESTOR SERIES A SERIES B SERIES A
NAME AND ADDRESS WARRANTS(1) WARRANTS(1/) PREFERRED STOCK(2)
<S> <C> <C> <C>
Frontenac VI Limited Partnership 325,000 165,000 1,250,000
c/o Frontenac Company
135 South LaSalle Street
Suite 3800
Chicago, IL 60603
Attention: James E. Cowie
Facsimile: 312-368-9520
Robert E. King Income Trust 32,500 16,500 125,000
15 Salt Creek Lane
Suite 411
Hinsdale, IL 60521
Attention: David A. Hutchison,
Trustee
Morgan Holland Fund II, L.P. 32,500 16,500 125,000
One Liberty Square
Boston, MA 02109
Attention: James F. Morgan
</TABLE>
____________________
(1) Number of shares of Common Stock issuable upon exercise
(2) Number of shares of Series A Convertible Preferred Stock
<PAGE> 27
Exhibit A-1 To
Purchase Agreement
AMENDED AND
RESTATED CERTIFICATE
OF INCORPORATION
OF
MICRO HEALTHSYSTEMS, INC.
(ORIGINAL CERTIFICATE OF INCORPORATION
FILED DECEMBER 3, 1976)
MICRO HEALTHSYSTEMS, INC. (the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Law"), does hereby certify:
I. That the Board of Directors of the Corporation adopted a
resolution setting forth the Amended and Restated Certificate of Incorporation
set forth below, declaring it advisable and submitting it to the stockholders
entitled to vote in respect thereof for their consideration of such Amended and
Restated Certificate of Incorporation at the annual meeting of stockholders of
the Corporation.
II. That at such annual meeting of the stockholders, the holders
of a majority of the outstanding stock entitled to vote thereon has voted in
favor of the adoption of the Amended and Restated Certificate of Incorporation
set forth below.
III. That the Amended and Restated Certificate of Incorporation set
forth below has been duly adopted in accordance with Sections 242 and 245 of
the Law:
FIRST: The name of the Corporation is Micro Healthsytems, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover,
in the County of Kent. The name of the registered agent of the Corporation at
such address is the United States Corporation Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware, as amended from time to time (the
"Law").
<PAGE> 28
Exhibit A-1 To
Purchase Agreement
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Forty Million (40,000,000), of
which Thirty Million (30,000,000) shares shall be of a class designated "Common
Stock", having a par value of $.01 per share, and Ten Million (10,000,000)
shares shall be of a class designated "Preferred Stock", having a par value of
$.01 per share.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions of the shares of each class shall
be as follows:
(1) Common Stock Provisions
1.1 Dividend rights. Subject to provisions of law and
the preferences and other rights of the Preferred Stock, or any series
thereof, and of any other stock ranking prior to the Common Stock as
to dividends, the holders of the Common Stock shall be entitled to
receive dividends at such time and in such amounts as may be
determined by the Board of Directors of the Corporation.
1.2 Voting rights. Except as provided by law and in or
this Restated Certificate of Incorporation and subject to the rights
of the Preferred Stock, or any series thereof, each share of the
Common Stock shall entitle the holder thereof to one vote on each
matter submitted to a vote of the stockholders of the Corporation.
1.3 Liquidation rights. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary (a "Liquidation"), after payment or provision for payment
of the debts and other liabilities of the Corporation and the
preferential amounts to which the holders of any stock ranking prior
to the Common Stock in the distribution of assets shall be entitled
upon such Liquidation, and subject to participation rights, if any, of
the Preferred Stock, or any series thereof, the holders of the Common
Stock and the holders of any other stock ranking on a parity with the
Common Stock in the distribution of assets upon such Liquidation shall
be entitled to share in the remaining assets of the Corporation
according to their respective interests.
(2) Preferred Stock Provisions
2.1 The Preferred Stock may be issued from time to time
by the Board of Directors of the Corporation in one or more series.
All shares of any one series of Preferred Stock shall be identical
except as to the dates
Exhibit A-1 to Purchase Agreement
2
<PAGE> 29
Exhibit A-1 To
Purchase Agreement
of issue and the dates from which dividends on shares of the series
issued on different dates shall accumulate (if cumulative). Subject
to the Law, authority is expressly granted to the Board of Directors
of the Corporation to authorize the issuance of one or more series of
Preferred Stock, and to fix by resolution or resolutions providing for
the issuance of each such series the voting powers, designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions, of such
series, to the full extent now or hereafter permitted by law,
including, but not limited to, the following:
(a) The number of shares of such series, which may
subsequently be increased (except as otherwise provided by the
resolution or resolutions of the Board of Directors of the
Corporation providing for the issuance of such series) or
decreased (to a number not less than the number of such shares
then outstanding) by resolution or resolutions of the Board of
Directors of the Corporation, and the distinctive designation
thereof;
(b) The dividend rights of such series, the preferences,
if any, over any other class or series of stock, or of any
other class or series of stock over such series, as to
dividends, the extent, if any, to which shares of such series
shall be entitled to participate in dividends with shares of
any other series or class of stock, whether dividends on
shares of such series shall be fully, partially or
conditionally cumulative, or a combination thereof, and any
limitations, restrictions or conditions on the payment of such
dividends;
(c) The rights of such series, and the preferences, if
any, over any other class or series of stock, or of any other
class or series of stock over such series, in the event of any
voluntary or involuntary Liquidation of the Corporation and
the extent, if any, to which shares of any such series shall
be entitled to participate in such event with any other series
or class of stock;
(d) The time or times during which, the price or prices
at which, and the terms and conditions on which, the shares of
such series may be redeemed;
Exhibit A-1 to Purchase Agreement
3
<PAGE> 30
Exhibit A-1 To
Purchase Agreement
(e) The terms of any purchase, retirement or sinking fund
which may be provided for the shares of such series;
(f) The terms and conditions, if any, upon which the
shares of such series shall be convertible into or
exchangeable for shares of any other series, class or classes,
or any other securities, to the full extent now or hereafter
permitted by law;
(g) The voting powers or rights, if any, of such series
in addition to the voting powers provided by law;
(h) The limitations or restrictions, if any, applicable,
while shares of such series are outstanding, to the payment of
dividends or making of distributions on, or the acquisition
of, or the use of monies for purchase or redemption of, any
other class or series of stock of the Corporation, or upon any
other action of the Corporation, and the terms and conditions
thereof; and
(i) Any other preference, rights, powers, limitations and
restrictions, including without limitation restrictions on
transferability, and qualifications of shares of such series,
not inconsistent with law and this Restated Certificate of
Incorporation.
2.2 Any shares of any series of Preferred Stock which
shall at any time be acquired by the Corporation by reasons of
redemption or otherwise shall become part of the authorized but
undesignated Preferred Stock and be subject to designation as provided
in Section 2.1.
2.3 The amendment of the terms of any certificate of
designation of any series of the Preferred Stock of which shares are
outstanding shall require only (i) that the Board of Directors of the
Corporation adopt a resolution setting forth the amendment proposed,
declaring its advisability, and either calling a special meeting of
the holders of such series of Preferred Stock for consideration of
such amendment or directing that the amendment proposed be considered
at the next annual meeting of stockholders by the holders of such
series of Preferred Stock (in either event, subject to the ability of
such holders to act by written consent in lieu of a meeting), and (ii)
that the holders of a majority (or such greater number as may be
required by the certificate of designation of such series)
Exhibit A-1 to Purchase Agreement
4
<PAGE> 31
Exhibit A-1 To
Purchase Agreement
of the outstanding shares of such series of Preferred Stock have voted
in favor of the amendment. Except for holders of a series of
Preferred Stock the terms of which are being amended, no holder of
Common Stock and no holder of any series of Preferred Stock shall be
entitled to vote upon such amendment unless the rights of such holders
would be adversely affected by such amendment or such vote shall
otherwise be required by law or by any certificate of designation of
any series of Preferred Stock.
FIFTH: The following provisions are inserted for the regulation and
conduct of the affairs of the Corporation, and it is expressly provided that
they are intended to be in furtherance, and not in limitation or exclusion, of
the powers elsewhere conferred herein or in the by-laws of the Corporation or
conferred by law:
(1) Subject to any limitations set forth in the
Certificate of Designation with respect to any series of Preferred
Stock, the number of directors of the Corporation shall be such as
from time to time shall be fixed by, or in the manner provided in, the
by-laws of the Corporation. Election of directors need not be by
written ballot unless the by-laws of the Corporation so provide.
(2) The Board of Directors of the Corporation shall have
the power without the assent or vote of the stockholders:
(a) To make, alter, amend, change, add to or repeal the
by-laws of the Corporation; to fix and vary the amount to be
reserved for any proper purpose; to authorize and cause to be
executed mortgages and liens upon all or any part of the
property of the Corporation; to determine the use and
disposition of any surplus or net profits; and to fix the
times for the declaration and payment of dividends.
(b) To determine from time to time whether, and to what
extent, and at what times and places, and under what
conditions and regulations, the accounts and books of the
Corporation (other than the stock ledger) or any of them,
shall be open to the inspection of the stockholders.
Exhibit A-1 to Purchase Agreement
5
<PAGE> 32
Exhibit A-1 To
Purchase Agreement
(3) The Board of Directors of the Corporation may, in its
discretion, submit any contract or act for approval or ratification at
any annual meeting of the stockholders or in any meeting of the
stockholders called for the purpose of considering any such act or
contract, and any contract or act that shall be approved or be
ratified by the vote of the holders of a majority of the stock of the
Corporation which is represented in person or by proxy at such meeting
and entitled to vote thereat (provided that a lawful quorum of
stockholders be there represented in person or by proxy) shall be as
valid and as binding upon the Corporation and upon all the
stockholders as though it had been approved or ratified by every
stockholder of the Corporation, whether or not the contract or act
would otherwise be open to legal attack because of directors'
interest, or for any other reason.
(4) In addition to the powers and authorities set forth
herein or by statute expressly conferred upon it, the Board of
Directors of the Corporation is hereby empowered to exercise all such
powers and do all such acts and things as may be exercised or done by
the Corporation; subject to the provisions of the General Corporation
Law of the State of Delaware, as amended from time to time, this
Amended and Restated Certificate, and the by-laws of the Corporation
from time to time adopted by the stockholders; provided, however, that
no by-law of the Corporation so adopted shall invalidate any prior act
of the directors which would have been valid if such by-law of the
Corporation had not been adopted.
To the extent any committee of directors of the Corporation is lawfully
entitled to exercise the powers of the Board of Directors of the Corporation,
such committee may exercise any right or authority of the Board of Directors
under this Amended and Restated Certificate of Incorporation and references
herein to the Board of Directors of the Corporation shall include any committee
thereof.
SIXTH: No holder of any of the shares of the stock of the
Corporation, whether now or hereafter authorized and issued, shall be entitled
as of right to purchase or subscribe for (1) any unissued stock of any class,
or (2) any additional shares of any class to be issued by reason of any
increase of the authorized capital stock of the Corporation of any class, or
(3) bonds, certificates of indebtedness, debentures or other securities
convertible into stock of the Corporation, or carrying any right to purchase
stock of any class, but any such unissued stock or such additional authorized
issue of any stock or of other securities convertible into stock, or carrying
any right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors of the Corporation to such persons, firms,
corporations or associations and upon such
Exhibit A-1 to Purchase Agreement
6
<PAGE> 33
Exhibit A-1 To
Purchase Agreement
terms as may be deemed advisable by the Board of Directors of the Corporation
in the exercise of its discretion.
SEVENTH: Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in
a summary way of the Corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for the Corporation
under the provisions of Section 291 of the Law, as amended from time to time,
or on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of Section 279 of
the Law, as amended from time to time, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, said comprise or arrangement and said
reorganization shall, if sanctioned by the court to which said application has
been made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of the Corporation, as the case may
be, and also on the Corporation.
EIGHTH: The Corporation shall, to the full extent permitted by Section
145 of the Delaware General Corporation Law of the State of Delaware, as
amended from time to time, indemnify all persons whom it may indemnify pursuant
thereto.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provisions contained in the certificate of incorporation in the
manner now or hereafter prescribed by statute and all rights conferred on
officers, directors and stockholders herein are granted subject to this
reservation.
TENTH: No director of the Corporation shall be liable to the
Corporation or any of its stockholders for monetary damages for breaches of
fiduciary duty as a director to the extent permitted by law, except that this
provision shall not eliminate or limit the liability of any director (1) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) under Section 174 of
the Law, as amended from time to time, or (4) for any transaction from which
the director derived an improper personal benefit.
Exhibit A-1 to Purchase Agreement
7
<PAGE> 34
Exhibit A-1 To
Purchase Agreement
ELEVENTH: The certificate of incorporation of the Corporation,
as herein amended, shall constitute a restatement of and shall supersede the
certificate of incorporation of the Corporation, as previously amended.
Exhibit A-1 to Purchase Agreement
8
<PAGE> 35
Exhibit A-1 To
Purchase Agreement
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by its Chairman of the
Board, President or one of its Vice Presidents on August ____, 1995.
MICRO HEALTHSYSTEMS, INC.
By:______________________________
Title:___________________________
Exhibit A-1 to Purchase Agreement
9
<PAGE> 36
Exhibit A-2 To
Purchase Agreement
MICRO HEALTHSYSTEMS, INC.
CERTIFICATE OF DESIGNATION RELATING
TO THE SERIES A CONVERTIBLE PREFERRED STOCK WITH A PAR VALUE OF
$.01 PER SHARE OF MICRO HEALTHSYSTEMS, INC.
---------------------------------------
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
-----------------------------------------------------
MICRO Healthsystems, Inc., a Delaware corporation (the "Corporation),
hereby certifies that pursuant to the authority contained in Article Fourth of
the Corporation's Amended and Restated Certificate of Incorporation (the
"Restated Certificate of Incorporation"), and in accordance with the provisions
of Section 151 of the General Corporation Law of the State of Delaware, the
following resolution was duly adopted by the Board of Directors of the
Corporation, creating a series of its Preferred Stock designated as "Series A
Convertible Preferred Stock":
RESOLVED, that there is hereby created a series of the Preferred Stock
of the Corporation designated Series A Convertible Preferred Stock, par value
$.01 per share (the "Series A Preferred Stock"), consisting of 1,500,000 shares
and having the voting powers, preferences and relative, participating,
optional, conversion and other special rights, and the qualifications,
limitations or restrictions, hereinafter set forth:
Section 1. Dividends.
1A. General Obligation. When and as declared by the
Corporation's Board of Directors and to the extent permitted under the General
Corporation Law of Delaware, the Corporation will pay preferential
cumulative dividends to the holders of Series A Preferred Stock as provided in
this Section 1. Except as otherwise provided herein, dividends on each share
of Series A Preferred Stock will accrue on a daily basis at the rate of 8%
compounded quarterly on each Dividend Reference Date (defined below) per annum
of the Liquidation Value thereof plus accumulated and unpaid dividends thereon
from and including the date of issuance of such share of Series A Preferred
Stock to and including the earlier of (i) the date on which the
<PAGE> 37
Exhibit A-2 To
Purchase Agreement
Liquidation Value of such share of Series A Preferred Stock plus any accrued
and unpaid dividends thereon is paid upon any liquidation, dissolution or
winding up of the Corporation, (ii) the date on which such share of Series A
Preferred Stock is converted into Common Stock or (iii) the date on which such
share of Series A Preferred Stock is redeemed in accordance with Section 3
hereof. Such dividends will accrue whether or not they have been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends. The date on which the
Corporation initially issues any share of Series A Preferred Stock will be
deemed to be its "date of issuance" regardless of the number of times transfer
of such share of Series A Preferred Stock is made on the stock records
maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such share of Series A Preferred
Stock.
1B. Dividend Reference Dates. To the extent not paid on
March 31, June 30, September 30 and December 31 of each year (the "Dividend
Reference Dates"), all dividends which have accrued on each share of
Series A Preferred Stock outstanding during the three-month period (or other
period in the case of the initial Dividend Reference Date) shall be accumulated
and shall remain accumulated dividends with respect to each such share of
Series A Preferred Stock until paid.
1C. Distribution of Partial Dividend Payments. If at any
time the Corporation pays less than the total amount of dividends then
accrued with respect to Series A Preferred Stock, such payment will be
distributed ratably among the holders of Series A Preferred Stock on the basis
of the amount of accrued and unpaid dividends with respect to the shares of
Series A Preferred Stock owned by each such holder.
1D. Preference. The holders of Series A Preferred Stock
shall be entitled to dividends and distributions in preference and priority to
holders of Junior Securities. The Corporation shall not, without the
prior written consent of the holders of not less than a majority of the shares
of Series A Preferred Stock then outstanding pay any dividend or distribution
(other than dividends payable solely in Junior Securities) on any Junior
Securities at any time when accumulated dividends on Series A Preferred Stock
have not been paid in full.
Section 2. Liquidation.
Upon any liquidation, dissolution or winding up of the
Corporation (a "Liquidation"), each holder of Series A Preferred Stock will be
entitled to be paid, before any distribution or payment is made upon any
Junior Securities, an amount in cash equal to the aggregate Liquidation Value
of all of such holder's shares of Series A Preferred Stock plus all
Exhibit A-2 To Purchase Agreement
2
<PAGE> 38
Exhibit A-2 To
Purchase Agreement
accrued but unpaid dividends thereon. If upon a Liquidation, the Corporation's
assets available for distribution to its stockholders after payments on Senior
Securities (as defined herein) are insufficient to permit payment to the
holders of Series A Preferred Stock of the aggregate Liquidation Value of
Series A Preferred Stock plus all accrued but unpaid dividends thereon and to
the holders of Pari Passu Securities (as defined herein) the entire
preferential amount payable with respect to any Pari Passu Securities, then the
entire assets available for distribution will be distributed, pro rata based
upon the aggregate liquidation value of the securities held by each holder
thereof, among the holders of (i) Series A Preferred Stock (pro rata based upon
the aggregate Liquidation Value of Series A Preferred Stock held by each such
holder plus all accrued but unpaid dividends thereon) and (ii) Pari Passu
Securities. After payment in full shall have been made to the holders of
Series A Preferred Stock of the aggregate Liquidation Value of Series A
Preferred Stock plus all accrued but unpaid dividends thereon, the holders of
the Series A Preferred Stock shall not share in any remaining assets of the
Corporation available for distribution. The Corporation will mail written
notice of a Liquidation to each record holder of Series A Preferred Stock not
less than thirty (30) days prior to the effective date thereof. Neither the
consolidation or merger of the Corporation into or with any other corporation
or corporations, nor the sale or transfer by the Corporation of all or any part
of its assets, nor the reduction of the capital stock of the Corporation, will
be deemed to be a Liquidation within the meaning of this Section 2.
Section 3. Redemptions.
3A. Mandatory Redemption. On August ___, 2000, the
Corporation shall redeem all (but, subject to Section 3C, not less than all) of
Series A Preferred Stock then outstanding in accordance with this
Section 3 at a price per share of Series A Preferred Stock equal to the
Redemption Price (as defined below), which Redemption Price shall be payable in
accordance with the Amortization Schedule attached hereto as Schedule 3A.
3B. Redemption Price. For each share of Series A Preferred
Stock which is to be redeemed, the Corporation shall be obligated to pay to the
holder thereof an amount in immediately available funds (the "Redemption
Price") equal to the Liquidation Value thereof plus all accrued but unpaid
dividends thereon in accordance with the Amortization Schedule attached hereto
as Schedule 3A. The first installment of the Redemption Price shall be paid to
each holder of Series A Preferred Stock upon surrender by such holder at the
Corporation's principal office of the certificate representing such share of
Series A Preferred Stock. Unless the Corporation fails to pay the portion of
Redemption Price owed to the holder of a share of Series A Preferred Stock upon
presentation of the certificate representing such share on or after the date on
which such share is to be redeemed, all rights of the holder of such share
(other than
Exhibit A-2 To Purchase Agreement
3
<PAGE> 39
Exhibit A-2 To
Purchase Agreement
the right to receive payment of the Redemption Price as set forth herein) shall
cease on such date, and such share shall not be deemed to be outstanding
thereafter.
3C. Insufficient Funds. If the funds of the Corporation
legally available for redemption of Series A Preferred Stock are insufficient
to redeem the total number of shares of Series A Preferred Stock to be
redeemed, those funds which are legally available will be used to redeem the
maximum possible number of shares of Series A Preferred Stock ratably among the
holders of such shares to be redeemed based upon the Redemption Price of the
Series A Preferred Stock held by each such holder. Thereafter, when additional
funds of the Corporation are legally available for the redemption of Series A
Preferred Stock, such funds will be used to redeem the balance of the shares of
Series A Preferred Stock which the Corporation became obligated to redeem but
which it has not redeemed (such redemptions to be made on a monthly basis). In
case fewer than the total number of shares of Series A Preferred Stock
represented by any certificate are redeemed in any installment, a new
certificate representing the number of unredeemed shares of such Series A
Preferred Stock will be issued to the holder promptly without cost to such
holder promptly after surrender of the certificate representing the redeemed
shares of Series A Preferred Stock.
3D. Redeemed or Otherwise Acquired Shares. Any shares of
Series A Preferred Stock which are redeemed or otherwise acquired by the
Corporation will be canceled and will not be reissued, sold or otherwise
transferred.
Section 4. Voting Rights.
(a) Except as otherwise required by law, the Restated
Certificate of Incorporation of the Corporation, as amended, or any certificate
of designation, the holders of Series A Preferred Stock will be entitled
to vote with the holders of Common Stock on each matter submitted to a vote of
the Corporation's stockholders as a single class, with each share of Series A
Preferred Stock having a number of votes equal to the number of votes possessed
by the number of shares of Common Stock into which such share of Series A
Preferred Stock is convertible as of the record date for the determination of
stockholders entitled to vote on such matter and shall be entitled to notice of
any stockholders' meeting in accordance with the Bylaws of the Corporation.
Fractional votes shall not be permitted and any fractional voting rights
resulting from the above formula (after aggregating all shares into which
shares of Series A Preferred Stock held by each holder could be converted)
shall be rounded to the nearest whole number (with one-half being rounded
upward).
Exhibit A-2 To Purchase Agreement
4
<PAGE> 40
Exhibit A-2 To
Purchase Agreement
(b) So long as at least 300,000 shares of Series A Preferred
Stock are then outstanding and Frontenac VI Limited Partnership owns not less
than a majority of such shares, the holders of Series A Preferred Stock,
voting as a single class, shall be entitled to elect one (1) member of the
Board of Directors who shall also be a member of the Executive Committee of the
Board of Directors (or an equivalent committee, if any) (the "Preferred
Director"). Except as otherwise required by the Restated Certificate of
Incorporation of the Corporation, as amended, or any certificate of
designation, the holders of Common Stock and the holders of Preferred Stock,
voting as a single class, shall be entitled to elect the remaining members of
the Board of Directors.
(c) Notwithstanding any other provision in the Restated
Certificate of Incorporation, as amended, any certificate of designation, or
the Bylaws of the Corporation, the Board of Directors shall not at any
time consist of more than twelve (12) members without the prior written
approval of the Preferred Director.
Section 5. Conversion.
5A. Conversion Procedure.
(i) At any time and from time to time, any holder of
shares of Series A Preferred Stock may convert all or any portion of such shares
(including any fraction of a share) into the number of shares of Common Stock
computed by dividing (a) the number of shares of Series A Preferred Stock to be
converted times $4.00 per share, by (b) the Conversion Price (as defined in
Section 5B below).
(ii) Each conversion of Series A Preferred Stock will
be deemed to have been effected as of the close of business on the date on
which the certificate or certificates representing Series A Preferred
Stock to be converted have been surrendered at the principal office of the
Corporation. At such time as such conversion has been effected, the rights of
the holder of such Series A Preferred Stock as such holder will cease and the
Person or Persons in whose name or names any certificate or certificates for
shares of Common Stock are to be issued upon such conversion will be deemed to
have become the holder or holders of record of the shares of Common Stock
represented thereby.
(iii) As soon as possible after a conversion has been
effected and in no event later than ten (10) business days after delivery of
the certificate representing the shares converted, the Corporation will
deliver to the converting holder:
Exhibit A-2 To Purchase Agreement
5
<PAGE> 41
Exhibit A-2 To
Purchase Agreement
(a) a certificate or certificates representing
the number of shares of Common Stock issuable by reason of such
conversion in such name or names and such denomination or denominations
as the converting holder has specified;
(b) the amount payable under Section 5A(vi)
below with respect to such conversion;
(c) a certificate representing any shares of
Series A Preferred Stock which were represented by the certificate or
certificates delivered to the Corporation in connection with such
conversion but which were not converted; and
(d) the amount of accrued but unpaid dividends
payable under Section 1A(ii) above with respect to each share of Series
A Preferred Stock so converted to the extent funds are legally
available to pay such dividends.
(iv) The issuance of certificates for shares of Common
Stock upon conversion of Series A Preferred Stock will be made without charge
to the holders of such Series A Preferred Stock for any issuance tax in
respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of shares of Common Stock. Upon
conversion of any share of Series A Preferred Stock, the Corporation will take
all such actions as are necessary in order to insure that the Common Stock
issued as a result of such conversion is validly issued, fully paid and
nonassessable.
(v) The Corporation will not close its books against
the transfer of Series A Preferred Stock or of Common Stock issued or issuable
upon conversion of Series A Preferred Stock in any manner which interferes
with the timely conversion of Series A Preferred Stock.
(vi) If any fractional interest in a share of Common
Stock would, except for the provisions of this Section 5A(vi), be deliverable
upon any conversion of Series A Preferred Stock, the Corporation, in lieu of
delivering the fractional share therefor, shall pay an amount to the holder
thereof equal to the market price of such fractional interest as of the date of
conversion, as determined in good faith by the Board of Directors of the
Corporation.
5B. Conversion Price.
(a) The initial "Conversion Price" will be $4.00 per share.
In order to prevent dilution of the conversion rights granted under this
subdivision, the Conversion Price will be
Exhibit A-2 To Purchase Agreement
6
<PAGE> 42
Exhibit A-2 To
Purchase Agreement
subject to adjustment from time to time pursuant to this Section 5B; provided,
however, that there will be no adjustment of the Conversion Price as a result
of (i) issuances or deemed issuances of Common Stock for incentive or
compensatory purposes to directors, officers and employees of, and consultants
to, the Corporation and its Subsidiaries which are from time to time approved
by the Board of Directors, including, without limitation, grants of stock
options and the issuance of Common Stock upon the exercise thereof
("Compensatory Stock"), but not exceeding any time prior to August __, 1996 (or
any time thereafter unless approved by the Board of Directors of the
Corporation), 3,057,000 shares of Common Stock (net of any repurchases of such
shares or options), subject to adjustment for all subdivisions and combinations
of Common Stock, (ii) any split, subdivision or combination of Common Stock
into a different number of securities of the same class (subject to Section
11.5 hereof) ("Split Stock"), (iii) issuances or deemed issuances of Common
Stock upon exercise or conversion, as the case may be, of the Series A Warrants
or the Series B Warrants (each as defined in the Warrant Purchase Agreement) or
the Series A Preferred Stock ("Converted Stock"), (iv) issuances or deemed
issuances of not more than 55,000 shares of Common Stock to David K. Vanco
pursuant to that certain Agreement and Plan of Merger between the Corporation,
Vanco Business Management, Inc. and David K. Vanco, as amended (subject to
adjustment for all subdivisions and combinations) ("Vanco Stock") or (v) any
distribution, granting or sale of any Purchase Rights in accordance with
Section 7 hereof ("Purchase Stock", and together with Compensatory Stock, Split
Stock, Converted Stock and Vanco Stock, the "Excluded Stock"). Anything herein
to the contrary notwithstanding, no adjustment in the Conversion Price shall be
required unless such adjustment, either by itself or with other adjustments not
previously made, would require a change of at least $.10 in such price;
provided, however, that any adjustment which by reason of this sentence is not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.
(b) If and whenever, after the date of issuance, the
Corporation issues or sells, or in accordance with Section 5C is deemed to have
issued or sold, any shares of its Common Stock (other than Excluded
Stock) for a consideration per share less than the Conversion Price in effect
immediately prior to the time of such issuance or sale, then forthwith upon
such issuance or sale the Conversion Price will be reduced to the conversion
price determined by dividing (a) the sum of (1) the product derived by
multiplying the Conversion Price in effect immediately prior to such issuance
or sale times the number of shares of Common Stock Deemed Outstanding
immediately prior to such issuance or sale, plus (2) the consideration, if any,
received or deemed received by the Corporation upon such issuance or sale, by
(b) the number of shares of Common Stock Deemed Outstanding immediately prior
to such issuance or sale plus the number of shares of Common Stock issued or
deemed to have been issued in such sale pursuant to this Section 5.
Exhibit A-2 To Purchase Agreement
7
<PAGE> 43
Exhibit A-2 To
Purchase Agreement
5C. Effect on Conversion Prices of Certain Events.
(i) For purposes of determining the adjusted
Conversion Price under Section 5B(ii), the following will be applicable.
(a) Issuance of Rights or Options. If the
Corporation in any manner grants, issues or sells any right, warrant
or option to subscribe for or to purchase Common Stock or any stock or
other securities convertible into or exchangeable for Common Stock
(such rights, warrants or options being herein called "Options," and
such convertible or exchangeable stock or securities being herein
called "Convertible Securities") (other than Excluded Stock) and the
price per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of any such Convertible
Securities is less than the Conversion Price in effect immediately
prior to the time of the granting, issuance or sale of such Options,
then the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to be outstanding and to have
been issued and sold by the Corporation at the time of the granting of
such Options for such price per share. For purposes of this Section,
the "price per share for which Common Stock is issuable" shall be
determined by dividing (A) the total amount, if any, received or
receivable by the Corporation as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon exercise of all such Options, plus in
the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable
to the Corporation upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further
adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or
when Common Stock is actually issued upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
(b) Issuance of Convertible Securities. If
the Corporation in any manner issues or sells any Convertible
Securities (other than Excluded Stock) and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is
less than the Conversion Price in effect immediately prior to the time
of such issue or sale, then the maximum number of shares of Common
Stock issuable upon conversion
Exhibit A-2 To Purchase Agreement
8
<PAGE> 44
Exhibit A-2 To
Purchase Agreement
or exchange of such Convertible Securities shall be deemed to
be outstanding and to have been issued and sold by the Corporation at
the time of the issuance or sale of such Convertible Securities for
such price per share. For the purposes of this Section, the "price per
share for which Common Stock is issuable" shall be determined by
dividing (A) the total amount received or receivable by the Corporation
as consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the conversion or exchange thereof, by
(B) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Price shall be made when Common
Stock is actually issued upon the conversion or exchange of such
Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of the Conversion Price had been or are to be made pursuant
to other provisions of this Section 5, no further adjustment of the
Conversion Price shall be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Rate.
If the purchase price provided for in any Option, the additional
consideration (if any) payable upon the issue, conversion or exchange
of any Convertible Security, or the rate at which any Convertible
Security is convertible into or exchangeable for Common Stock change at
any time, and such change is not due solely to the operation of
anti-dilution provisions similar in nature to those set forth in this
Section 5, the Conversion Price in effect at the time of such change
shall be readjusted to the Conversion Price which would have been in
effect at such time had such Option or Convertible Security originally
provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time initially
granted, issued or sold.
(d) Treatment of Expired Options and
Unexercised Convertible Securities. Upon the expiration of any Option
or the termination of any right to convert or exchange any
Convertible Security without the exercise of any such Option or right,
the Conversion Price then in effect hereunder will be adjusted to the
Conversion Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such expiration or
termination, never been issued.
(e) Calculation of Consideration Received. If
any Common Stock, Option or Convertible Security is issued or sold or
deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the gross amount
Exhibit A-2 To Purchase Agreement
9
<PAGE> 45
Exhibit A-2 To
Purchase Agreement
received by the Corporation therefor. If any Common Stock, Options or
Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by
the Corporation will be the fair value of such consideration, except
where such consideration consists of securities, in which case the
amount of consideration received by the Corporation will be the Market
Price thereof as of the date of receipt. If any Common Stock, Option
or Convertible Security is issued in connection with any merger in
which the Corporation is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation
as is attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration
other than cash and securities will be determined jointly by the
Corporation and the holders of a majority of the outstanding Series A
Preferred Stock. If such parties are unable to reach agreement within
ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be
determined by an independent appraiser jointly selected by the
Corporation and the holders of a majority of the outstanding Series A
Preferred Stock; provided if such parties are unable to reach agreement
upon the selection of an independent appraiser within fifteen (15) days
after the Valuation Event, within twenty-five (25) days after the
Valuation Event, the Corporation and the holders of a majority of
Series A Preferred Stock then outstanding will each choose a qualified
independent appraiser reasonably acceptable to the other party and each
such appraiser will deliver in writing its determination of the fair
value of such consideration. If the difference between the two
appraisals is 10% or less of the lower amount, the fair value will be
the average of such two appraisals. If the difference between the two
appraisals is greater than 10% of the lower amount, the two appraisers
will, within thirty-five (35) days after the Valuation Event, jointly
choose a third qualified independent appraiser. Within forty-five (45)
days after the Valuation Event, the third appraiser will deliver its
determination of fair value and the final determination of the fair
value of such consideration will be equal to the average of the two (2)
appraisals which are nearest to each other. The expenses of the
appraisers will be paid one-half by the Corporation and one-half by the
holders of Series A Preferred Stock (pro rata based on the number of
shares of Series A Preferred Stock held).
(f) Integrated Transactions. In case any
Option is issued in connection with the issue or sale of other
securities of the Corporation, together comprising one integrated
transaction in which no specific consideration is allocated to such
Option by the parties thereto, the Option will be deemed to have been
issued for a consideration of $.01.
Exhibit A-2 To Purchase Agreement
10
<PAGE> 46
Exhibit A-2 To
Purchase Agreement
(g) Treasury Shares. The number of shares of
Common Stock outstanding at any given time does not include shares
owned or held by or for the account of the Corporation or any
Subsidiary, and the disposition of any shares so owned or held will be
considered an issue or sale of Common Stock.
(h) Record Date. If the Corporation takes a
record of the holders of Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities or (ii) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date will be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription
or purchase, as the case may be.
5D. Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) its outstanding shares of Common Stock into
a greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced, and if the Corporation at any
time combines (by combination, reverse stock split or otherwise) its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
5E. Reorganization, Reclassification, Consolidation, Merger
or Sale. Any capital reorganization, reclassification, consolidation, merger,
exchange of shares or sale or transfer or more than 80% of the
Corporation's assets to another Person which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as a "Corporate Change." Prior
to the consummation of any Corporate Change, the Corporation will make
appropriate provisions (in form and substance reasonably satisfactory to the
holders of a majority of Series A Preferred Stock then outstanding) to insure
that each of the holders of Series A Preferred Stock will thereafter have the
right to acquire and receive, in lieu of or (if additional consideration is
received) in addition to the shares of Common Stock immediate theretofore
acquirable and receivable upon the conversion of such holder's Series A
Preferred Stock, such shares of stock, securities or assets as such holder
would have received in connection with such Corporate Change if such holder had
converted its Series A Preferred Stock immediately prior to such Corporate
Change. In any such case, the Corporation will make appropriate provisions (in
form and substance reasonably satisfactory to the holders of a majority of
Series A Preferred Stock then outstanding) to insure that the
Exhibit A-2 To Purchase Agreement
11
<PAGE> 47
Exhibit A-2 To
Purchase Agreement
provisions of this Section 5 and Sections 6 and 7 will thereafter be applicable
to Series A Preferred Stock (including, without limitation, in the case of any
such consolidation, merger or sale in which the successor corporation or
purchasing corporation is other than the Corporation, an immediate adjustment
of the Conversion Price to the value for the Common Stock reflected by the
terms of such consolidation, merger or sale). The Corporation will not effect
any such consolidation, merger or sale, unless prior to the consummation
thereof, the successor corporation (if other than the Corporation) resulting
from such consolidation or merger or the corporation purchasing such assets
assumes by written instrument (in form and substance reasonably satisfactory to
the holders of a majority of Series A Preferred Stock then outstanding), the
obligation to deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
5F. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 5 but not expressly provided for
by such provisions, then the Board of Directors will make an appropriate
adjustment in each Conversion Price so as to protect the rights of the holders
of Series A Preferred Stock.
5G. Notices.
(i) Immediately upon any adjustment of the Conversion
Price of any class of Series A Preferred Stock, the Corporation will give
written notice thereof to all holders of such class of Series A Preferred Stock.
(ii) The Corporation will give written notice to all
holders of Series A Preferred Stock at least twenty (20) days prior to the date
on which the Corporation closes its books or takes a record (a) with respect
to any dividend or distribution upon Common Stock, (b) with respect to any pro
rata subscription offer to holders of Common Stock or (c) for determining
rights to vote with respect to any Corporate Change, dissolution or
liquidation.
(iii) The Corporation will also give written notice
to the holders of Series A Preferred Stock at least twenty (20) days prior to
the date on which any Corporate Change will take place.
5H. Mandatory Conversion. (a) The Corporation may require
the conversion of all of the outstanding Series A Preferred Stock at any time
after a Triggering Event. A
Exhibit A-2 To Purchase Agreement
12
<PAGE> 48
Exhibit A-2 To
Purchase Agreement
"Triggering Event" shall be deemed to have occurred on any date after August
__, 1997 (a "Determination Date") if, as of the Determination Date, the sum of
(a) the product of (x) the Market Price of a share of the Common Stock as of
the Determination Date, and (y) the number of shares of Common Stock (including
for purposes of this calculation fractional shares) that is then issuable upon
conversion of one (1) share of Series A Preferred Stock, plus (b) the amount of
all dividends (whether in the form of cash, securities or other properties)
that accrued (whether paid or unpaid) on each share of Class A Preferred Stock
from August __, 1995 to and including the Determination Date, equals or exceeds
$11.00 (the "Trigger Price"); provided, such Trigger Price shall be
proportionately decreased in the event of a split or subdivision, or
proportionately increased in the event of a combination, of the Common Stock
into a different number of securities of the same class.
Any such mandatory conversion shall be effected at the time of
and subject to the occurrence of such a Triggering Event and upon the giving
notice of such mandatory conversion to all holders of Series A Preferred Stock
without any further action by the holders of such shares or the Corporation.
Upon any such conversion subsequent to a Triggering Event, shares of Common
Stock issued upon such conversion shall be registered with the Securities
Exchange Commission in the manner prescribed, and subject to the terms and
conditions of, that certain Registration Rights Agreement dated as of August
___, 1995 among the Corporation and the investors named therein.
(b) Upon the conversion of all of the shares of Series A
Preferred Stock initially issued to Frontenac VI Limited Partnership, all of
the remaining shares of Series A Preferred Stock then outstanding shall be
automatically converted into shares of Common Stock at the Conversion Price
then in effect, without any further action by the holders of such shares or the
Corporation.
(c) Upon any such conversion pursuant to this Section or
Section 3C, the rights of each holder of such Series A Preferred Stock as such
holder shall cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Series A Preferred Stock shall be
deemed to have become the holder or holders of record of the shares of Common
Stock represented thereby. Promptly following delivery of written notice from
the Corporation to each holder of Series A Preferred Stock that such a
conversion has occurred, each such holder shall deliver certificates
representing the shares of Series A Preferred Stock held by such holder to the
Corporation for cancellation.
Section 6. Liquidating Dividends.
Exhibit A-2 To Purchase Agreement
13
<PAGE> 49
Exhibit A-2 To
Purchase Agreement
If the Corporation pays a dividend upon the Common Stock
payable otherwise than in cash out of earnings or earned surplus (in accordance
with generally accepted accounting principles, consistently applied) except
for a stock dividend payable in shares of Common Stock or a stock split (a
"Liquidating Dividend"), then the Corporation shall pay to the holders of
Series A Preferred Stock at the time of payment thereof the Liquidating
Dividends which would have been paid on such Common Stock had such Series A
Preferred Stock been converted into Common Stock immediately prior to the date
on which a record is taken for such Liquidating Dividend, or, if no record is
taken, the date as of which the record holders of Common Stock entitled to such
dividends are to be determined.
Section 7. Purchase Rights.
If at any time the Corporation distributes, grants or sells
any Options, Convertible Securities or rights to stock, warrants, securities or
other property to all record holders of any class of Common Stock (the
"Purchase Rights"), then each holder of Series A Preferred Stock will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock acquirable upon conversion of
such holder's Series A Preferred Stock immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the distribution, issue or sale of such Purchase
Rights.
Section 8. Registration of Transfer.
The Corporation will keep at its principal office a register
for the registration of Series A Preferred Stock. Upon the surrender of any
certificate representing Series A Preferred Stock at such place, the
Corporation will, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares of Series A Preferred Stock represented by the surrendered certificate.
Each such new certificate will be registered in such name and will represent
such number of shares of Series A Preferred Stock as is requested by the holder
of the surrendered certificate and will be substantially identical in form to
the surrendered certificate; provided, however, that any transfer shall be
subject to any applicable restrictions on the transfer of such shares and the
payment of any applicable transfer taxes, if any, by the holder thereof.
Section 9. Replacement.
Exhibit A-2 To Purchase Agreement
14
<PAGE> 50
Exhibit A-2 To
Purchase Agreement
Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Series A Preferred Stock, and in the case of any such
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory
to the Corporation, or, in the case of any such mutilation, upon surrender of
such certificate, the Corporation will (at its expense) execute and deliver in
lieu of such certificate a new certificate of like kind representing the number
of shares of Series A Preferred Stock represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
Section 10. Definitions.
"Common Stock Deemed Outstanding" means, at any given time,
the number of shares of Common Stock actually outstanding at such time, plus,
the number of shares of Common Stock issuable upon the exercise, conversion
or exchange of all Options or Convertible Securities then outstanding, whether
or not they are actually exercisable, convertible or exchangeable at such time
(including, without limitation, the Series A Preferred Stock).
"Junior Securities" means the Corporation's equity securities
other than Series A Preferred Stock, Senior Securities or Pari Passu Securities.
"Liquidation Value" means $4.00 per share.
"Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there has been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of ten (10)
days consisting of the day as of which "Market Price" is being determined and
the nine (9) consecutive business days prior to such day. If at any time such
security is not listed on any securities exchange or quoted in the NASDAQ
System or the over-the-counter market, the "Market Price" will be the fair
value thereof determined jointly by the Corporation and the holders of a
majority of Series A Preferred Stock. If such parties are unable to reach
agreement within a reasonable period of time, such fair value will be
determined by an independent
Exhibit A-2 To Purchase Agreement
15
<PAGE> 51
Exhibit A-2 To
Purchase Agreement
appraiser jointly selected by the Corporation and the holders of a majority of
Series A Preferred Stock. The expenses of the appraisers will be paid one-half
by the Corporation and one-half by the holders of the Series A Preferred Stock
(pro rata based on the number of shares of Common Stock which would be issuable
upon conversion by the holders of the Series A Preferred Stock).
"Pari Passu Securities" means any securities of the Corporation
that rank on a parity with the Series A Preferred Stock with respect to
dividends or upon a Liquidation.
"Person" means an individual, a partnership, a Corporation, an
association, a joint stock company, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Senior Securities" means any securities of the Corporation
that rank senior to the Series A Preferred Stock with respect to dividends or
upon a Liquidation.
"Stock and Warrant Purchase Agreement" means that certain
Series A Convertible Stock and Warrant Purchase Agreement, dated as of July 18,
1995, by and among the Corporation and the purchasers named on Schedule 1
thereto.
"Subsidiary" means any Corporation of which the shares of stock
having a majority of the general voting power in electing the board of
directors are, at the time as of which any determination is being made,
owned by the Corporation either directly or indirectly through Subsidiaries.
Section 11. Amendment and Waiver.
No amendment, modification or waiver will be binding or
effective with respect to any provision of this Part 2 without the prior
written consent of the holders of not less than a majority of the shares
of Series A Preferred Stock outstanding at the time such action is taken. No
change in the terms hereof may be accomplished by merger or consolidation of
the Corporation with another Corporation unless the Corporation has obtained
the prior affirmative vote or written consent of the holders of not less than a
majority of the shares of Series A Preferred Stock then outstanding.
Section 12. Notices.
Except as otherwise expressly provided, all notices referred
to herein shall be in writing and shall be delivered by via overnight courier,
return receipt requested, postage prepaid
Exhibit A-2 To Purchase Agreement
16
<PAGE> 52
Exhibit A-2 To
Purchase Agreement
and shall be deemed to have been delivered when so mailed (i) to the
Corporation, at its principal executive offices and (ii) to any stockholder, at
such holder's address as it appears in the stock records of the Corporation
(unless otherwise indicated in writing by any such holder).
Exhibit A-2 To Purchase Agreement
17
<PAGE> 53
Exhibit A-2 To
Purchase Agreement
IN WITNESS WHEREOF, MICRO Healthsystems, Inc. has caused this
Certificate of Designation to be duly executed this ____ day of August, 1995.
MICRO Healthsystems, Inc.
-----------------------------
By:
Its:
<PAGE> 54
Exhibit A-2 To
Purchase Agreement
Schedule 3A
Amortization Schedule
<TABLE>
<CAPTION>
Amount of Redemption Price Payment Date
- -------------------------- ------------
<S> <C>
16.67% August __, 2000
16.67% February __, 2001
16.67% August __, 2001
16.67% February __, 2002
16.67% August __, 2002
16.67% February __, 2003
</TABLE>
<PAGE> 55
Exhibit B To
Purchase Agreement
FORM OF SERIES A WARRANT
THIS SERIES A WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR SUCH LAWS OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED.
No. WR-A__ Series A Warrant
to Purchase ________ Shares of
Common Stock
SERIES A WARRANT TO PURCHASE COMMON STOCK
OF
MICRO HEALTHSYSTEMS, INC.,
A DELAWARE CORPORATION
This certifies that, for value received, __________________________________,
or registered assigns (the "Holder") is entitled, subject to the terms set
forth below, to purchase from MICRO HEALTHSYSTEMS, INC. (the "Company"), a
Delaware corporation, _______ shares of the Common Stock of the Company, during
the Exercise Period (as defined herein), upon surrender hereof, at the
principal office of the Company referred to below, with the Notice of Exercise
attached hereto as Exhibit A duly executed, and simultaneous payment therefor
in lawful money of the United States or otherwise as hereinafter provided, at
the Exercise Price per share as set forth in Section 2 below. The number,
character and Exercise Price of such shares of Common Stock are subject to
adjustment as provided below. The term "Series A Warrant" as used herein shall
include this Series A Warrant and any warrants delivered in substitution or
exchange thereafter as provided herein.
This Series A Warrant is issued in connection with the transactions entered
into pursuant to that certain Series A Convertible Preferred Stock and Warrant
Purchase Agreement among the Company, the Holder and the other investors named
therein, dated as of July ___, 1995 (the "Warrant Purchase Agreement"),
providing for the issuance and sale of the Series A Warrants, the Series B
Warrants (as defined therein) and the Series A Convertible Preferred Stock (the
<PAGE> 56
Exhibit B To
Purchase Agreement
"Series A Preferred Stock"). This Series A Warrant is one of the Series A
Warrants referred to as the "Series A Warrants" in the Warrant Purchase
Agreement.
1. Term of Series A Warrant. Subject to the terms and conditions set forth
herein including, without limitation, Section 12 hereof, this Series A Warrant
shall be exercisable, in whole or in part, during the term commencing on August
___, 1999 and ending at 5:00 p.m., Central standard time, on August ___, 2000
(the "Exercise Period"), and shall be void thereafter.
2. Exercise Price. The Exercise Price at which this Series A Warrant may be
exercised shall be $0.10 per share of Common Stock.
3. Exercise of Series A Warrant.
(a) Mechanics. The purchase rights represented by this Series A Warrant
are exercisable by the Holder in whole or in part, but not for less than 25,000
shares at a time (or such lesser number of shares which may then constitute the
maximum number purchasable), at any time, or from time to time, during the term
hereof as described in Section 1 above, by the surrender of this Series A
Warrant and the Notice of Exercise attached hereto as Exhibit A duly completed
and executed on behalf of the Holder, at the office of the Company (or such
other office or agency of the Company as it may designate by notice in writing
to the Holder at the address of the Holder appearing on the books of the
Company), upon payment (i) in cash or by check acceptable to the Company, (ii)
by deduction from the number of shares delivered upon exercise of the Series A
Warrant of a number of shares which has an aggregate Current Market Price (as
defined herein) on the date of exercise equal to the aggregate Exercise Price
for all shares to be purchased pursuant to this Series A Warrant, or (iii) by a
combination of (i) and (ii), of the purchase price of the shares to be
purchased.
(b) Certificates. This Series A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive
the shares of Common Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such shares as of the close of business on
such date. As promptly as practicable on or after such date and in any event
within ten (10) days thereafter, the Company at its expense shall issue and
deliver to the person or persons entitled to receive the same a certificate or
certificates for the number of shares issuable upon such exercise. In the
event that this Series A Warrant is exercised in part, the Company at its
expense will execute and deliver a new Series A Warrant of like tenor
exercisable for the number of shares for which this Series A Warrant may then
be exercised.
Exhibit B to Purchase Agreement
2
<PAGE> 57
Exhibit B To
Purchase Agreement
(c) Net Issue Exercise. Notwithstanding any provisions herein to the
contrary, if the fair market value of one (1) share of Common Stock is greater
than the Exercise Price (at the date of calculation as set forth below), in
lieu of exercising this Series A Warrant for cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Series A
Warrant (or the portion being exercised) by surrender of this Series A Warrant
at the principal office of the Company together with the properly endorsed
Notice of Exercise and notice of such election in which event the Company shall
issue to the Holder a number of shares of Common Stock computed using the
following formula:
X = Y(A-B)
------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under the Series
A Warrant or, if only a portion of the Series A Warrant is being
exercised, the portion of the Series A Warrant being exercised (at
the date of such calculation)
A = the Current Market Price of one (1) share of the Company's Common
Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
For purposes of this Agreement, "Current Market Price" of any security means
the average of the closing prices of such security's sales on all securities
exchanges on which such security may at the time be listed, or, if there has
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such security is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the- counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of ten (10) days consisting of the day as of which "Current
Market Price" is being determined and the nine (9) consecutive business days
prior to such day. If at any time such security is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the "Current Market Price" will be the fair value thereof determined
jointly by the corporation and the holders of a majority of the Series A
Warrants.
Exhibit B to Purchase Agreement
3
<PAGE> 58
Exhibit B To
Purchase Agreement
If such parties are unable to reach agreement within a reasonable period of
time, such fair value will be determined by an independent appraiser jointly
selected by the corporation and the holders of a majority of the Series A
Warrants. The expenses of the appraisers will be paid one-half by the Company
and one-half by the holders of the Series A Warrants (pro rata based on the
number of shares of Common Stock issuable upon exercise of the Series A
Warrants).
4. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Series A Warrant.
In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
5. Replacement of Series A Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Series A Warrant and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement reasonably satisfactory in form and
substance to the Company or, in the case of mutilation, on surrender and
cancellation of this Series A Warrant, the Company at its expense shall execute
and deliver, in lieu of this Series A Warrant, a new warrant of like tenor and
amount.
6. Rights of Stockholders. Subject to Section 9 of this Series A Warrant, the
Holder shall not be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company that may at any
time be issuable upon the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, or change of stock to no par value, consolidation, merger, conveyance,
or otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Series A Warrant shall have been
exercised as provided herein.
7. Transfer of Series A Warrant.
(a) Series A Warrant Register. The Company will maintain a register (the
"Series A Warrant Register") containing the names and addresses of the Holder
or other holders. Any holder of this Series A Warrant or any portion thereof
may change its address as shown on the Series A Warrant Register by written
notice to the Company requesting such change. Any notice or written
communication required or permitted to be given to the Holder may be delivered
or given by mail to the Holder as shown on the Series A Warrant Register and at
the
Exhibit B to Purchase Agreement
4
<PAGE> 59
Exhibit B To
Purchase Agreement
address shown on the Series A Warrant Register. Until this Series A Warrant is
transferred on the Series A Warrant Register of the Company, the Company may
treat the Holder as shown on the Series A Warrant Register as the absolute
owner of this Series A Warrant for all purposes, notwithstanding any notice to
the contrary.
(b) Series A Warrant Agent. The Company may, by written notice to the
Holder, appoint an agent for the purpose of maintaining the Series A Warrant
Register referred to in Section 7(a) above, issuing the Common Stock or other
securities then issuable upon the exercise of this Series A Warrant, exchanging
this Series A Warrant, replacing this Series A Warrant, or any or all of the
foregoing. Thereafter, any such registration, issuance, exchange, or
replacement, as the case may be, shall be made at the office of such agent.
(c) Transferability and Nonnegotiability of Series A Warrant. This Series
A Warrant may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company). Subject to the provisions of
this Series A Warrant with respect to compliance with the Securities Act of
1933, as amended (the "Act"), title to this Series A Warrant may be transferred
by endorsement (by the Holder executing the Notice of Assignment attached
hereto) and delivery in the same manner as a negotiable instrument transferable
by endorsement and delivery.
(d) Exchange of Series A Warrant Upon a Transfer. On surrender of this
Series A Warrant for exchange, properly endorsed on the Notice of Assignment
attached hereto and subject to the provisions of this Series A Warrant with
respect to compliance with the Act and with the limitations on assignments and
transfers contained in this Section 7, the Company at its expense shall issue
to or on the order of the Holder a new warrant or warrants of like tenor, in
the name of the Holder or as the Holder (on payment by the Holder of any
applicable transfer taxes) may direct, for the number of shares issuable upon
exercise hereof.
(e) Compliance with Securities Laws.
(i) The Holder, by acceptance hereof, acknowledges that this Series A
Warrant and the shares of Common Stock to be issued upon exercise hereof are
being acquired solely for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Series A Warrant or any shares of Common Stock to be
issued upon exercise hereof except under circumstances that will not result in
a violation of the Act or any state securities laws. Upon exercise of this
Exhibit B to Purchase Agreement
5
<PAGE> 60
Exhibit B To
Purchase Agreement
Series A Warrant, the Holder shall, if requested by the Company, confirm in
writing, in a form satisfactory to the Company, that the shares of Common Stock
so purchased are being acquired solely for the Holder's own account, and not as
a nominee for any other party, for investment, and not with a view toward
distribution or resale.
(ii) This Series A Warrant and all shares of Common Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in substantially
the following form (in addition to any legend required by state securities
laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR SUCH LAWS OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
8. Reservation of Stock. The Company covenants that during the Exercise
Period, the Company will reserve from its authorized and unissued Common Stock
a sufficient number of shares to provide for the issuance of Common Stock upon
the exercise of this Series A Warrant and, from time to time, will take all
steps necessary to amend its Certificate of Incorporation to provide sufficient
reserves of Common Stock issuable upon exercise of this Series A Warrant. The
Company further covenants that all shares that may be issued upon the exercise
of rights represented by this Series A Warrant, upon exercise of the rights and
payment of the Exercise Price, all as set forth herein, and will be free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously or otherwise specified
herein). The Company agrees that its issuance of this Series A Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for shares of Common Stock upon the exercise of this Series A Warrant.
9. Notices.
(a) In the event:
(i) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Series A
Exhibit B to Purchase Agreement
6
<PAGE> 61
Exhibit B To
Purchase Agreement
Warrant) for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities, or to receive any other right, or
(ii) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the
Company with or into another corporation, or any conveyance of all or
substantially all of the assets of the Company to another corporation, or
(iii) of any voluntary dissolution, liquidation or winding-up of the
Company,
then, and in each such case, the Company will mail or cause to be mailed (via
overnight courier) to each holder of the Series A Warrants a notice specifying,
as the case may be, (A) the date on which a record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (B) the date on which
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock (or such
stock or securities at the time receivable upon the exercise of this Series A
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
fifteen (15) days prior to the date therein specified.
(b) All such notices, advices and communications shall be deemed to have
been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing (via overnight courier), on the second
business day following the date of such mailing (or such earlier date if
received thereon).
10. Amendments.
(a) Any term of this Series A Warrant may be amended with the written
consent of the Company and the holders of warrants representing not less than a
majority of the shares of Common Stock issuable upon exercise of the Series A
Warrants. Any amendment effected in accordance with this Section 10 shall be
binding upon each holder of the Series A Warrants, each future holder of all
such Series A Warrants, and the Company; provided, however, no special
consideration or inducement may be given to any such holder in connection with
such consent that is not given ratably to all such holders equally and ratably
in accordance
Exhibit B to Purchase Agreement
7
<PAGE> 62
Exhibit B To
Purchase Agreement
with the number of shares of Series A Warrants. The Company shall promptly
give notice to all holders of the Series A Warrants of any amendment effected
in accordance with this Section 10.
(b) No waivers of, or exceptions to, any terms, condition or provision of
this Series A Warrant, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition or
provision.
11. Registration Rights. Upon exercise of this Series A Warrant, the Holder
shall have and be entitled to exercise, together with all other holders of
securities possessing registration rights under that certain Registration
Rights Agreement, of even date herewith, between the Company and the parties
who have executed the counterpart signature pages thereto or are otherwise
bound thereby (the "Registration Rights Agreement"), the rights of registration
granted under the Registration Rights Agreement to Registrable Securities (as
defined in the Registration Rights Agreement). By its receipt of this Series A
Warrant, Holder agrees to be bound and is subject to the rights, limitations
and preferences set forth in the Registration Rights Agreement.
12. Cancellation.
(i) Upon the occurrence of an Initial Cancellation Event (as defined
herein), the purchase rights represented by 195,000 Series A Warrants (or all
of the outstanding Series A Warrants if less than 195,000 Series A Warrants are
then outstanding) shall be deemed terminated in whole, but not in part, without
any further action by the Company; provided, the Company shall, in good faith,
use its best efforts to give notice of such termination of such aggregate
amount of Series A Warrants by giving written notice to each of the holders
thereof. Not later than ten (10) days after receipt of any such notice, each
such holder shall surrender the Series A Warrants held thereby (pro rata based
on the number of shares of Common Stock which would be issuable upon exercise
by the holders of the Series A Warrants as calculated by the Company) to the
Company without any representation or warranty (other than that such holder has
good and valid title thereto free and clear of liens, claims, encumbrances and
restrictions of any kind). An "Initial Cancellation Event" shall have been
deemed to have occurred as of any date after the date hereof (the
"Determination Date") if the sum of (a) the product of (x) the Current Market
Price of a share of Common Stock as of the Determination Date and (y) the
number of shares of Common Stock (including for purposes of this calculation
fractional shares) that are then issuable upon conversion of one (1) share of
Series A Preferred Stock (or, if no shares of Series A Preferred Stock are then
outstanding, the number of shares of Common Stock (including for purposes of
this calculation fractional shares) that would then
Exhibit B to Purchase Agreement
8
<PAGE> 63
Exhibit B To
Purchase Agreement
be issuable upon conversion of one (1) share of Series A Preferred Stock if
shares of Series A Preferred Stock were then outstanding), plus (b) the amount
of all dividends (whether in the form of cash, securities or other properties)
that accrued (whether paid or unpaid) on one (1) share of Series A Preferred
Stock from August ___, 1995 to and including the Determination Date (or if no
share of Series A Preferred Stock is then outstanding, the amount of all
dividends (whether in the form of cash, securities or other properties) that
would have accrued (whether paid or unpaid) if one (1) share of Series A
Preferred Stock had remained outstanding through the Determination Date) shall
equal or exceed $10.00 (the "Initial Cancellation Price"); provided, such
Initial Cancellation Price shall be proportionately decreased in the event of a
split or subdivision, or proportionately increased in the event of a
combination, of the Common Stock into a different number of securities of the
same class.
(ii) Upon the occurrence of a Second Cancellation Event (as defined herein),
the purchase rights represented by the outstanding Series A Warrants shall be
deemed terminated in whole, but not in part, without any further action by the
Company; provided, the Company shall, in good faith, use its best efforts to
give notice of such termination of such outstanding Series A Warrants by giving
written notice to each of the holders thereof. Not later than ten (10) days
after receipt of any such notice, each such holder shall surrender the Series A
Warrants held thereby to the Company without any representation or warranty
(other than that such holder has good and valid title thereto free and clear of
liens, claims, encumbrances and restrictions of any kind). A "Second
Cancellation Event" shall have deemed to have occurred as of the Determination
Date if the sum of (a) the product of (x) the Current Market Price of a share
of Common Stock as of the Determination Date and (y) the number of shares of
Common Stock (including for purposes of this calculation fractional shares)
that are then issuable upon conversion of one (1) share of Series A Preferred
Stock (or, if no shares of Series A Preferred Stock are then outstanding the
number of shares of Common Stock (including for purposes of this calculation
fractional shares), that would then be issuable upon conversion of one (1)
share of Series A Preferred Stock if shares of Series A Preferred Stock were
then outstanding), plus (b) the amount of all dividends (whether in the form of
cash, securities or other properties) that accrued (whether paid or unpaid) on
one (1) share of Series A Preferred Stock from August ___, 1995 to and
including the Determination Date (or if no share of Series A Preferred Stock is
then outstanding, the amount of all dividends (whether in the form of cash,
securities or other properties) that would have accrued (whether paid or
unpaid) if one (1) share of Series A Preferred Stock had remained outstanding
through the Determination Date) shall equal or exceed $11.00 (the "Second
Cancellation Price"); provided, such Second Cancellation Price shall be
proportionately decreased in the event of a split or subdivision, or
proportionately increased in the event of a combination, of the Common Stock
into a different number of securities of the same class.
Exhibit B to Purchase Agreement
9
<PAGE> 64
Exhibit B To
Purchase Agreement
13. Miscellaneous.
13.1 Nonwaiver. No course of dealing or any delay or failure to exercise any
right, power or remedy hereunder on the part of the holder hereof shall operate
as a waiver of or otherwise prejudice such holder's rights, powers or remedies.
13.2 Notices. Any notice, demand or delivery to be made pursuant to the
provisions of this Series A Warrant shall be sufficiently given or made if sent
via overnight courier, addressed to (a) the Holder at its last known address
appearing on the books of the Company maintained for such purpose or (b) the
Company at its principal office at 414 Eagle Rock Avenue, West Orange, New
Jersey 07834, Attention: Graham O. King. The holder of this Series A Warrant
and the Company may each designate a different address by notice to the other
pursuant to this Section 13.2.
13.3 Like Tenor. All Series A Warrants shall at all times be identical,
except as to the Preamble.
13.4 Remedies. The Company stipulates that the remedies at law of the holder
of this Series A Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Series A Warrant are not and will not be adequate and that, to the fullest
extent permitted by law, such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
13.5 Successors and Assigns. This Series A Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Company, the holder hereof, and shall be enforceable by any such
holder.
13.6 Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Agreement, but this Agreement shall be construed as if such
unenforceable provision had never been contained herein.
Exhibit B to Purchase Agreement
10
<PAGE> 65
Exhibit B To
Purchase Agreement
13.7 Integration. This Series A Warrant replaces all prior agreements,
supersedes all prior negotiations and (together with the Warrant Purchase
Agreement) constitutes the entire agreement of the parties with respect to the
transactions contemplated herein.
13.8 Headings. The headings of the Articles and Sections of this Series A
Warrant are for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Series A Warrant.
13.9 GOVERNING LAW. THIS SERIES A WARRANT SHALL BE GOVERNED BY THE INTERNAL
LAWS (AS OPPOSED TO CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS.
Exhibit B to Purchase Agreement
11
<PAGE> 66
Exhibit B To
Purchase Agreement
IN WITNESS WHEREOF, MICRO HEALTHSYSTEMS, INC. has caused this Series A
Warrant to be executed by its officers thereunto duly authorized.
Dated: August ___, 1995
MICRO HEALTHSYSTEMS, INC.
By:_________________________________
Name:
Title:
The undersigned, by accepting this Series A Warrant, agrees to be bound by the
terms and conditions hereof.
[HOLDER]
By: _________________________________
Its: ________________________________
<PAGE> 67
Exhibit B To
Purchase Agreement
EXHIBIT A
NOTICE OF EXERCISE
MICRO HEALTHSYSTEMS, INC.
414 Eagle Rock Avenue
West Orange, New Jersey 07834
(1) The undersigned hereby elects to purchase _____________ shares of Common
Stock of MICRO HEALTHSYSTEMS, INC., pursuant to the terms of the attached
Series A Warrant, and tenders herewith payment of the purchase price for such
shares in full.
(2) In exercising this Series A Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment, and that the undersigned
will not offer, sell or otherwise dispose of any such shares of Common Stock
except under circumstances that will not result in a violation of the
Securities Act of 1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name is specified
below:
_____________________________________________
(Name)
_____________________________________________
(Name)
(4) Please issue a new Series A Warrant for the unexercised portion of the
attached Series A Warrant in the name of the undersigned or in such other name
as is specified below:
_____________________________________________
(Name)
__________________________ _____________________________________________
(Date) (Name)
<PAGE> 68
Exhibit B To
Purchase Agreement
EXHIBIT B
NOTICE OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered owner of this Series A Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Series A Warrant, with respect to
the number of shares of Common Stock set forth below:
<TABLE>
<CAPTION>
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
<S> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint Attorney
_________________________________________________ to make such transfer on the
books of MICRO HEALTHSYSTEMS, INC., maintained for the purpose, with full power
of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Series A Warrant and the shares of stock to be issued
upon exercise hereof for conversion thereof are being acquired for investment
and that the Assignee will not offer, sell or otherwise dispose of this Series
A Warrant or any shares of stock to be issued upon exercise hereof or
conversion thereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
laws. Further, the Assignee has acknowledged that upon exercise of this Series
A Warrant, the Assignee shall, if requested by the Company, confirm in
writing, in a form satisfactory to the Company, that the shares of stock so
purchased are being acquired for investment and not with a view toward
distribution or resale.
Dated: _____________________________
________________________________________
Signature of Holder
<PAGE> 69
Exhibit C To
Purchase Agreement
FORM OF SERIES B WARRANT
THIS SERIES B WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR SUCH LAWS OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED.
No. WR-B_ Series B Warrant
to Purchase ________ Shares of
Common Stock (subject to adjustment)
SERIES B WARRANT TO PURCHASE COMMON STOCK
OF
MICRO HEALTHSYSTEMS, INC.,
A DELAWARE CORPORATION
This certifies that, for value received, __________________________________,
or registered assigns (the "Holder") is entitled, subject to the terms set
forth below, to purchase from MICRO HEALTHSYSTEMS, INC. (the "Company"), a
Delaware corporation, ____________ shares of the Common Stock of the Company,
during the Exercise Period (as defined herein), upon surrender hereof, at the
principal office of the Company referred to below, with the Notice of Exercise
attached hereto as Exhibit A duly executed, and simultaneous payment therefor
in lawful money of the United States or otherwise as hereinafter provided, at
the Exercise Price per share as set forth in Section 2 below. The number,
character and Exercise Price of such shares of Common Stock are subject to
adjustment as provided below. The term "Series B Warrant" as used herein shall
include this Series B Warrant and any warrants delivered in substitution or
exchange thereafter as provided herein.
This Series B Warrant is issued in connection with the transactions entered
into pursuant to that certain Series A Convertible Preferred Stock and Warrant
Purchase Agreement between the Company, the Holder and the other investors
named therein, dated as of July 18, 1995 (the "Warrant Purchase Agreement").
This Series B Warrant is one of the Series B Warrants referred to as the
"Series B Warrants" in the Warrant Purchase Agreement.
<PAGE> 70
Exhibit C To
Purchase Agreement
1. Term of Series B Warrant. Subject to the terms and conditions set forth
herein, this Series B Warrant shall be exercisable, in whole or in part, during
the term commencing on the date hereof and ending at 5:00 p.m., Central
standard time, on August ___, 2000 (the "Exercise Period"), and shall be void
thereafter.
2. Exercise Price. The Exercise Price at which this Series B Warrant may be
exercised shall be $3.50 per share of Common Stock, as adjusted from time to
time pursuant to Section 11 hereof.
3. Exercise of Series B Warrant.
(a) Mechanics. The purchase rights represented by this Series B Warrant
are exercisable by the Holder in whole or in part, but not for less than 10,000
shares at a time (or such lesser number of shares which may then constitute the
maximum number purchasable; such number being subject to adjustment as provided
in Section 11 below), at any time, or from time to time, during the term hereof
as described in Section 1 above, by the surrender of this Series B Warrant and
the Notice of Exercise attached hereto as Exhibit A duly completed and executed
on behalf of the Holder, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company), upon payment
in cash or by check acceptable to the Company.
(b) Certificates. This Series B Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive
the shares of Common Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such shares as of the close of business on
such date. As promptly as practicable on or after such date and in any event
within ten (10) days thereafter, the Company at its expense shall issue and
deliver to the person or persons entitled to receive the same a certificate or
certificates for the number of shares issuable upon such exercise. In the
event that this Series B Warrant is exercised in part, the Company at its
expense will execute and deliver a new Series B Warrant of like tenor
exercisable for the number of shares for which this Series B Warrant may then
be exercised.
4. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Series B Warrant.
In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
Exhibit C to Purchase Agreement
2
<PAGE> 71
Exhibit C To
Purchase Agreement
5. Replacement of Series B Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Series B Warrant and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement reasonably satisfactory in form and
substance to the Company or, in the case of mutilation, on surrender and
cancellation of this Series B Warrant, the Company at its expense shall execute
and deliver, in lieu of this Series B Warrant, a new warrant of like tenor and
amount.
6. Rights of Stockholders. Subject to Sections 9 and 11 of this Series B
Warrant, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Stock or any other securities of the Company that
may at any time be issuable upon the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issuance of stock, reclassification of
stock, change of par value, or change of stock to no par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until the Series B
Warrant shall have been exercised as provided herein.
7. Transfer of Series B Warrant.
(a) Series B Warrant Register. The Company will maintain a register (the
"Series B Warrant Register") containing the names and addresses of the Holder
or other holders. Any holder of this Series B Warrant or any portion thereof
may change his address as shown on the Series B Warrant Register by written
notice to the Company requesting such change. Any notice or written
communication required or permitted to be given to the Holder may be delivered
or given by mail to the Holder as shown on the Series B Warrant Register and at
the address shown on the Series B Warrant Register. Until this Series B
Warrant is transferred on the Series B Warrant Register of the Company, the
Company may treat the Holder as shown on the Series B Warrant Register as the
absolute owner of this Series B Warrant for all purposes, notwithstanding any
notice to the contrary.
(b) Series B Warrant Agent. The Company may, by written notice to the
Holder, appoint an agent for the purpose of maintaining the Series B Warrant
Register referred to in Section 7(a) above, issuing the Common Stock or other
securities then issuable upon the exercise of this Series B Warrant, exchanging
this Series B Warrant, replacing this Series B Warrant, or any or all of the
foregoing. Thereafter, any such registration, issuance, exchange, or
replacement, as the case may be, shall be made at the office of such agent.
Exhibit C to Purchase Agreement
3
<PAGE> 72
Exhibit C To
Purchase Agreement
(c) Transferability and Nonnegotiability of Series B Warrant. This Series
B Warrant may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company). Subject to the provisions of
this Series B Warrant with respect to compliance with the Securities Act of
1933, as amended (the "Act"), title to this Series B Warrant may be transferred
by endorsement (by the Holder executing the Assignment Form annexed hereto) and
delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery.
(d) Exchange of Series B Warrant Upon a Transfer. On surrender of this
Series B Warrant for exchange, properly endorsed on the Notice of Assignment
attached hereto and subject to the provisions of this Series B Warrant with
respect to compliance with the Act and with the limitations on assignments and
transfers contained in this Section 7, the Company at its expense shall issue
to or on the order of the Holder a new warrant or warrants of like tenor, in
the name of the Holder or as the Holder (on payment by the Holder of any
applicable transfer taxes) may direct, for the number of shares issuable upon
exercise hereof.
(e) Compliance with Securities Laws.
(i) The Holder, by acceptance hereof, acknowledges that this Series B
Warrant and the shares of Common Stock to be issued upon exercise hereof are
being acquired solely for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Series B Warrant or any shares of Common Stock to be
issued upon exercise hereof except under circumstances that will not result in
a violation of the Act or any state securities laws. Upon exercise of this
Series B Warrant, the Holder shall, if requested by the Company, confirm in
writing, in a form satisfactory to the Company, that the shares of Common Stock
so purchased are being acquired solely for the Holder's own account and not as
a nominee for any other party, for investment, and not with a view toward
distribution or resale.
(ii) This Series B Warrant and all shares of Common Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in substantially
the following form (in addition to any legend required by state securities
laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR
Exhibit C to Purchase Agreement
4
<PAGE> 73
Exhibit C To
Purchase Agreement
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR SUCH LAWS OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED.
8. Reservation of Stock. The Company covenants that during the Exercise
Period, the Company will reserve from its authorized and unissued Common Stock
a sufficient number of shares to provide for the issuance of Common Stock upon
the exercise of this Series B Warrant and, from time to time, will take all
steps necessary to amend its Certificate of Incorporation to provide sufficient
reserves of Common Stock issuable upon exercise of this Series B Warrant. The
Company further covenants that all shares that may be issued upon the exercise
of rights represented by this Series B Warrant, upon exercise of the rights and
payment of the Exercise Price, all as set forth herein, and will be free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously or otherwise specified
herein). The Company agrees that its issuance of this Series B Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for shares of Common Stock upon the exercise of this Series B Warrant.
9. Notices.
(a) Whenever the Exercise Price or number of shares purchasable hereunder
shall be adjusted pursuant to Section 11 hereof, the Company shall issue a
certificate signed by its Chief Financial Officer setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the Exercise Price and
number of shares purchasable hereunder after giving effect to such adjustment,
and shall cause a copy of such certificate to be mailed (via overnight courier)
to the holder of this Series B Warrant.
(b) In the event:
(i) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Series B Warrant) for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, or
Exhibit C to Purchase Agreement
5
<PAGE> 74
Exhibit C To
Purchase Agreement
(ii) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the
Company with or into another corporation, or any conveyance of all or
substantially all of the assets of the Company to another corporation, or
(iii) of any voluntary dissolution, liquidation or winding-up of the
Company,
then, and in each such case, the Company will mail or cause to be mailed (via
overnight courier) to each holder of the Series B Warrants a notice specifying,
as the case may be, (A) the date on which a record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (B) the date on which
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock (or such
stock or securities at the time receivable upon the exercise of this Series B
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
fifteen (15) days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to have
been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing (via overnight courier), on the second
business day following the date of such mailing (or such earlier date if
received thereon).
10. Amendments.
(a) Any term of this Series B Warrant may be amended with the written
consent of the Company and the holders of warrants representing a majority of
the shares of Common Stock issuable upon exercise of the Series B Warrants.
Any amendment effected in accordance with this Section 10 shall be binding upon
each holder of the Series B Warrants, each future holder of all such Series B
Warrants, and the Company; provided, however, no special consideration or
inducement may be given to any such holder in connection with such consent that
is not given ratably to all such holders equally and ratably in accordance with
the number of shares of Series B Warrants. The Company shall promptly give
notice to all holders of Series B Warrants of any amendment effected in
accordance with this Section 10.
Exhibit C to Purchase Agreement
6
<PAGE> 75
Exhibit C To
Purchase Agreement
(b) No waivers of, or exceptions to, any terms, condition or provision of
this Series B Warrant, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition or
provision.
11. Adjustments. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:
11.1 Exercise Price.
(a) In order to prevent dilution of the exercise rights granted hereunder,
the Exercise Price will be subject to adjustment from time to time pursuant to
this Section 11; provided, however, there will be no adjustment of the Exercise
Price as a result of (i) issuances or deemed issuances of Common Stock for
incentive or compensatory purposes to directors, officers and employees of, and
consultants to, the Company or its Subsidiaries which are from time to time
approved by the Company's Board of Directors, including, without limitation,
grants of stock options and the issuance of Common Stock upon the exercise
thereof ("Compensatory Stock") but not exceeding, at any time prior to August
__, 1996 (or any time thereafter unless approved by the Board of Directors (or
the Compensation Committee thereof) of the Company), 3,057,000 shares of Common
Stock (net of any repurchases of such shares or options), subject to adjustment
for all subdivisions and combinations, (ii) any split, subdivision or
combination of Common Stock into a different number of securities of the same
class (subject to Section 11.5 hereof) ("Split Stock"), (iii) issuances or
deemed issuances of Common Stock upon conversion or exercise, as the case may
be, of the Series A Preferred Stock, the Series A Warrants or the Series B
Warrants (each as defined in the Warrant Purchase Agreement) ("Converted
Stock"), (iv) issuances or deemed issuances of not more than 55,000 shares of
Common Stock to David K. Vanco pursuant to that certain Agreement and Plan of
Merger among the Company, Vanco Business Management, Inc. and David K. Vanco,
as amended (subject to adjustment for all subdivisions and combinations)
("Vanco Stock") or (v) any distribution or granting of stock or other
securities or property (other than cash) of the Company, by way of dividend, in
accordance with Section 11.6 hereof ("Purchase Stock", and together with
Converted Stock, Compensatory Stock, Vanco Stock and Split Stock, the "Excluded
Stock").
Anything herein to the contrary notwithstanding, no adjustment in the
Exercise Price shall be required unless such adjustment, either by itself or
with other adjustments not previously made, would require a change of at least
$.10 in such price; provided, however, that any adjustment which by reason of
this sentence is not required to be made shall be carried forward and taken
into account in any subsequent adjustment.
Exhibit C to Purchase Agreement
7
<PAGE> 76
Exhibit C To
Purchase Agreement
(b) If and whenever, after the date hereof, the Company issues or sells,
or in accordance with Section 11.2 is deemed to have issued or sold, any shares
of its Common Stock (other than Excluded Stock) for a consideration per share
less than the Exercise Price in effect immediately prior to the time of such
issuance or sale, then forthwith upon such issuance or sale the Exercise Price
will be reduced to the exercise price determined by dividing (i) the sum of (1)
the product derived by multiplying the Exercise Price in effect immediately
prior to such issuance or sale times the number of shares of Common Stock
Deemed Outstanding immediately prior to such issuance or sale, plus (2) the
consideration, if any, received or deemed received by the Company upon such
issuance or sale, by (ii) the number of shares of Common Stock Deemed
Outstanding immediately prior to such issuance or sale plus the number of
shares of Common Stock issued or deemed to have been issued in such sale
pursuant to this Section 11. "Common Stock Deemed Outstanding" means, at any
given time, the number of shares of Common Stock actually outstanding at such
time, plus, the number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all Options or Convertible Securities then
outstanding, whether or not they are actually exercisable, convertible or
exchangeable at such time (including, without limitation, the Series A
Preferred Stock).
11.2. Effect on Exercise Prices of Certain Events.
For purposes of determining the adjusted Exercise Price under Section
11.1(ii), the following will be applicable:
(a) Issuance of Rights or Options. If the Company in any manner grants,
issues or sells any right, warrant or option to subscribe for or to purchase
Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (such rights, warrants or options being herein
called "Options," and such convertible or exchangeable stock or securities
being herein called "Convertible Securities") (other than Excluded Stock) and
the price per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of any such Convertible
Securities is less than the Exercise Price in effect immediately prior to the
time of the granting, issuance or sale of such Options, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to be outstanding and to have been issued and sold by the Company at
the time of the granting of such Options for such price per share. For
purposes of this Section, the "price per share for which Common Stock is
issuable" shall be determined by dividing (A) the total amount, if any,
received or receivable by the Company as consideration for the granting of
such Options, plus the
Exhibit C to Purchase Agreement
8
<PAGE> 77
Exhibit C To
Purchase Agreement
minimum aggregate amount of additional consideration payable to the Company
upon exercise of all such Options, plus in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the exercise
of such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further adjustment
of the Exercise Price shall be made when Convertible Securities are actually
issued upon the exercise of such Options or when Common Stock is actually
issued upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.
(b) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities (other than Excluded Stock) and
the price per share for which Common Stock is issuable upon conversion or
exchange thereof is less than the Exercise Price in effect immediately prior
to the time of such issue or sale, then the maximum number of shares of
Common Stock issuable upon conversion or exchange of such Convertible
Securities shall be deemed to be outstanding and to have been issued and sold
by the Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this Section, the
"price per share for which Common Stock is issuable" shall be determined by
dividing (A) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of
all such Convertible Securities. No further adjustment of the Exercise Price
shall be made when Common Stock is actually issued upon the conversion or
exchange of such Convertible Securities, and if any such issue or sale of
such Convertible Securities is made upon exercise of any Options for which
adjustments of the Exercise Price had been or are to be made pursuant to
other provisions of this Section 11, no further adjustment of the Exercise
Price shall be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Rate. If the purchase price
provided for in any Option, the additional consideration (if any) payable
upon the issue, conversion or exchange of any Convertible Security, or the
rate at which any Convertible Security is convertible into or exchangeable
for Common Stock change at any time, and such change is not due solely to the
operation of anti-dilution provisions similar in nature
Exhibit C to Purchase Agreement
9
<PAGE> 78
Exhibit C To
Purchase Agreement
to those set forth in this Section 11, the Exercise Price in effect at the
time of such change shall be readjusted to the Exercise Price which would
have been in effect at such time had such Option or Convertible Security
originally provided for such changed purchase price, additional consideration
or changed conversion rate, as the case may be, at the time initially
granted, issued or sold.
(d) Treatment of Expired Options and Unexercised Convertible Securities.
Upon the expiration of any Option or the termination of any right to convert
or exchange any Convertible Security without the exercise of any such Option
or right, the Exercise Price then in effect hereunder will be adjusted to the
Exercise Price which would have been in effect at the time of such expiration
or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been
issued.
(e) Calculation of Consideration Received. If any Common Stock, Option
or Convertible Security is issued or sold or deemed to have been issued or
sold for cash, the consideration received therefor will be deemed to be the
gross amount received by the Company therefor. If any Common Stock, Options
or Convertible Securities are issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
will be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by
the Company will be the Current Market Price thereof as of the date of
receipt. If any Common Stock, Option or Convertible Security is issued in
connection with any merger in which the Company is the surviving Company, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving Company as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash and
securities will be determined jointly by the Company and the holders of a
majority of the outstanding Series B Warrants. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the "Valuation Event"), the fair value of such
consideration will be determined by an independent appraiser jointly selected
by the Company and the holders of a majority of the outstanding Series B
Warrants; provided if such parties are unable to reach agreement upon the
selection of an independent appraiser within fifteen (15) days after the
Valuation Event, within twenty-five (25) days after the Valuation Event, the
Company and the holders of a majority of the Series B Warrants then
outstanding will each choose a qualified independent appraiser reasonably
acceptable to the other party and each such appraiser will deliver in writing
its
Exhibit C to Purchase Agreement
10
<PAGE> 79
Exhibit C To
Purchase Agreement
determination of the fair value of such consideration. If the difference
between the two appraisals is 10% or less of the lower amount, the fair value
will be the average of such two appraisals. If the difference between the
two appraisals is greater than 10% of the lower amount, the two (2)
appraisers will, within thirty-five (35) days after the Valuation Event,
jointly choose a third qualified independent appraiser. Within forty-five
(45) days after the Valuation Event, the third appraiser will deliver its
determination of fair value and the final determination of the fair value of
such consideration will be equal to the average of the two (2) appraisals
which are nearest to each other. The expenses of the appraisers will be paid
one-half by the Company and one-half by the holders of the Series B Warrants
(pro rata based on the number of shares of Common Stock which would be
issuable upon exercise by the holders of the Series B Warrants).
For purposes of this Agreement, "Current Market Price" of any security
means the average of the closing prices of such security's sales on all
securities exchanges on which such security may at the time be listed, or, if
there has been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of
4:00 P.M., New York time, or, if on any day such security is not quoted in
the NASDAQ System, the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in
each such case averaged over a period of ten (10) days consisting of the day
as of which "Current Market Price" is being determined and the nine (9)
consecutive business days prior to such day. If at any time such security is
not listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Current Market Price" will be the fair value
thereof determined jointly by the corporation and the holders of a majority
of the Series B Warrants. If such parties are unable to reach agreement
within a reasonable period of time, such fair value will be determined by an
independent appraiser jointly selected by the corporation and the holders of
a majority of the Series B Warrants. The expenses of the appraisers will be
paid one-half by the Company and one-half by the holders of the Series B
Warrants (pro rata based on the number of shares of Common Stock issuable
upon exercise of the Series B Warrants).
(f) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Option by
Exhibit C to Purchase Agreement
11
<PAGE> 80
Exhibit C To
Purchase Agreement
the parties thereto, the Option will be deemed to have been issued for a
consideration of $.01.
(g) Treasury Shares. The number of shares of Common Stock outstanding at
any given time does not include shares owned or held by or for the account of
the Company or any Subsidiary, and the disposition of any shares so owned or
held will be considered an issue or sale of Common Stock.
(h) Record Date. If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (i) to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities or
(ii) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue
or sale of the shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
11.3 Merger, Sale of Assets, etc. If at any time while this Series B
Warrant or any portion thereof, is outstanding and unexpired there shall be (i)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity but the shares of the Company's capital
stock outstanding immediately prior to the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the holder of this Series B Warrant shall thereafter be
entitled to receive upon exercise of this Series B Warrant, during the period
specified herein and upon payment of the Exercise Price then in effect, the
number of shares of stock or other securities or property of the successor
corporation resulting from such reorganization, merger, consolidation, sale or
transfer that a holder of the shares deliverable upon exercise of this Series B
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Series B Warrant had been
exercised immediately before such reorganization, merger, consolidation, sale
or transfer. The foregoing provisions of this Section 11.3 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Series B Warrant. If the
per-share consideration payable to the holder hereof for shares in connection
with any such transaction is in a form other than cash or marketable
securities, then the value of such
Exhibit C to Purchase Agreement
12
<PAGE> 81
Exhibit C To
Purchase Agreement
consideration shall be determined pursuant to the provisions of Section
11.2(ii)(e). In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Series B Warrant with respect to the rights and
interests of the Holder after the transaction, to the end that the provisions
of this Series B Warrant shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable
after that event upon exercise of this Series B Warrant.
11.4 Reclassification, etc. If the Company, at any time while this Series B
Warrant, or any portion thereof, remains outstanding and unexpired by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Series B Warrant exist into the same or
a different number of securities of any other class or classes, this Series B
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Series B Warrant immediately prior to such reclassification or other change and
the Exercise Price therefor shall be appropriately adjusted, all subject to
further adjustment as provided in this Section 11.4.
11.5 Split, Subdivision or Combination of Shares. If the Company at any
time while this Series B Warrant, or any portion thereof, remains outstanding
and unexpired shall split, subdivide or combine the securities as to which
purchase rights under this Series B Warrant exist, into a different number of
securities of the same class, the Exercise Price for such securities shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
11.6. Adjustments for Dividends in Stock or Other Securities or Property.
If while this Series B Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Series B Warrant exist at the time shall have received, or, on or after the
record date fixed for the determination of eligible stockholders, shall have
become entitled to receive, without payment therefor, other or additional stock
or other securities or property (other than cash) of the Company, by way of
dividend, then and in each case, this Series B Warrant shall represent the
right to acquire, in addition to the number of shares of the security
receivable upon exercise of this Series B Warrant, and without payment of any
additional consideration therefor, the amount of such other or additional stock
or other securities or property (other than cash) of the Company, by way of
dividend, that such holder would hold on the date of such exercise had it been
the holder of record of the security receivable upon exercise of this Series B
Warrant on the date thereof and had thereafter, during the period from the date
thereof to and including the date of such exercise, retained such shares
Exhibit C to Purchase Agreement
13
<PAGE> 82
Exhibit C To
Purchase Agreement
and/or all other additional stock available by it as aforesaid during such
period, giving effect to all adjustments called for during such period by the
provisions of this Section 11.
11.7 Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment pursuant to this Section 11, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each holder of the Series B Warrants a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based.
11.8 No Impairment. The Company will not, by any voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 11 and in the
taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holders of this Series B Warrant against impairment.
12. Registration Rights. Upon exercise of this Series B Warrant, the Holder
shall have and be entitled to exercise, together with all other holders of
securities possessing registration rights under that certain Registration
Rights Agreement of even date herewith, between the Company and the parties who
have executed the counterpart signature pages thereto or are otherwise bound
thereby (the "Registration Rights Agreement"), the rights of registration
granted under the Registration Rights Agreement to Registrable Securities (as
defined in the Registration Rights Agreement). By its receipt of this Series B
Warrant, the Holder agrees to be bound and is subject to the rights,
limitations and preferences set forth in the Registration Rights Agreement.
13. Miscellaneous.
13.1 Nonwaiver. No course of dealing or any delay or failure to exercise any
right, power or remedy hereunder on the part of the holder hereof shall operate
as a waiver of or otherwise prejudice such holder's rights, powers or remedies.
13.2 Notices. Any notice, demand or delivery to be made pursuant to the
provisions of this Series B Warrant shall be sufficiently given or made if sent
via overnight courier, addressed to (a) the Holder at its last known address
appearing on the books of the Company maintained for such purpose or (b) the
Company at its principal office at 414 Eagle Rock Avenue, West Orange, New
Jersey 07834, Attention: Graham O. King. The holder of this
Exhibit C to Purchase Agreement
14
<PAGE> 83
Exhibit C To
Purchase Agreement
Series B Warrant and the Company may each designate a different address by
notice to the other pursuant to this Section 13.2.
13.3 Like Tenor. All Series B Warrants shall at all times be identical,
except as to the Preamble.
13.4 Remedies. The Company stipulates that the remedies at law of the holder
of this Series B Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Series B Warrant are not and will not be adequate and that, to the fullest
extent permitted by law, such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
13.5 Successors and Assigns. This Series B Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Company, the holder hereof, and shall be enforceable by any such
holder.
13.6 Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Agreement, but this Agreement shall be construed as if such
unenforceable provision had never been contained herein.
13.7 Integration. This Series B Warrant replaces all prior agreements,
supersedes all prior negotiations and (together with the Warrant Purchase
Agreement) constitutes the entire agreement of the parties with respect to the
transactions contemplated herein.
13.8 Headings. The headings of the Articles and Sections of this Series B
Warrant are for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Series B Warrant.
13.9 GOVERNING LAW. THIS SERIES B WARRANT SHALL BE GOVERNED BY THE INTERNAL
LAWS (AS OPPOSED TO CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS.
Exhibit C to Purchase Agreement
15
<PAGE> 84
Exhibit C To
Purchase Agreement
IN WITNESS WHEREOF, MICRO HEALTHSYSTEMS, INC. has caused this Series B
Warrant to be executed by its officers thereunto duly authorized.
Dated: August ___, 1995
MICRO HEALTHSYSTEMS, INC.
By: _______________________________
Name:
Title:
The undersigned, by accepting this Series B Warrant, agrees to be bound by the
terms and conditions hereof.
[HOLDER]
By: ______________________________
Its: ______________________________
<PAGE> 85
Exhibit C To
Purchase Agreement
EXHIBIT A
NOTICE OF EXERCISE
MICRO HEALTHSYSTEMS, INC.
414 Eagle Rock Avenue
West Orange, New Jersey 07834
(1) The undersigned hereby elects to purchase _____________ shares of Common
Stock of MICRO HEALTHSYSTEMS, INC., pursuant to the terms of the attached
Series B Warrant, and tenders herewith payment of the purchase price for such
shares in full.
(2) In exercising this Series B Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment, and that the undersigned
will not offer, sell or otherwise dispose of any such shares of Common Stock
except under circumstances that will not result in a violation of the
Securities Act of 1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name is specified
below:
__________________________________________
(Name)
__________________________________________
(Name)
(4) Please issue a new Series B Warrant for the unexercised portion of the
attached Series B Warrant in the name of the undersigned or in such other name
as is specified below:
__________________________________________
(Name)
_________________________________ __________________________________________
(Date) (Name)
<PAGE> 86
EXHIBIT B
NOTICE OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered owner of this Series B Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Series B Warrant, with respect to
the number of shares of Common Stock set forth below:
<TABLE>
<CAPTION>
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
<S> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint Attorney ___________________
to make such transfer on the books of MICRO HEALTHSYSTEMS, INC., maintained
for the purpose, with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Series B Warrant and the shares of stock to be issued
upon exercise hereof for conversion thereof are being acquired for investment
and that the Assignee will not offer, sell or otherwise dispose of this Series
B Warrant or any shares of stock to be issued upon exercise hereof or
conversion thereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
laws. Further, the Assignee has acknowledged that upon exercise of this Series
B Warrant, the Assignee shall, if requested by the Company, confirm in
writing, in a form satisfactory to the Company, that the shares of stock so
purchased are being acquired for investment and not with a view toward
distribution or resale.
Dated: _____________________________
_______________________________________
Signature of Holder
<PAGE> 87
Exhibit D To
Purchase Agreement
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of August
___, 1995, between MICRO Healthsystems, Inc., a Delaware corporation (the
"Company"), and the entities listed on Schedule 1 hereto (each, a "Purchaser",
and collectively, the "Purchasers"). Certain capitalized terms used in this
Agreement are defined in Section 1 of this Agreement.
WHEREAS, the Company and the Purchasers have entered into that certain
Series A Convertible Preferred Stock and Warrant Purchase Agreement (the "Stock
and Warrant Purchase Agreement") dated as of July 18, 1995, providing for the
issuance and sale of the Securities (as defined herein) by the Company to the
Purchasers. The execution and delivery of this Agreement is a condition
precedent to the closing of the transactions contemplated by the Stock and
Warrant Purchase Agreement.
The parties hereto agree as follows:
1. Definitions. As used herein, the following terms have the following
respective meanings:
"Amended Certificate of Incorporation" means the Certificate of
Incorporation of the Company, as amended and restated as of the date hereof.
"Certificate of Designation" means the Certificate of Designation Relating
to the Series A Convertible Preferred Stock of the Company.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act or the Exchange
Act.
"Common Stock" means the common stock, par value $0.01 per share, of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of any such similar
Federal statute.
"Initiating Holder" is defined in Section 2.1.
<PAGE> 88
Exhibit D To
Purchase Agreement
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company
or any other entity or organization, including a governmental or political
subdivision or any agency or instrumentality thereof.
"Preferred Stock" means the Series A Convertible Preferred Stock of the
Company issued and sold pursuant to the Stock and Warrant Purchase Agreement.
"Registrable Securities" means (i) shares of Common Stock issued or issuable
pursuant to the conversion or exercise, as the case may be, of the Securities
and (ii) any Common Stock issued or issuable upon any stock split, stock
dividend, recapitalization, or similar transaction relating to the Securities;
provided, that Registrable Securities shall not include any shares sold to the
public pursuant to Rule 144 promulgated by the Commission under the Securities
Act or pursuant to an effective registration statement under the Securities
Act. For purposes of this Agreement, a Person will be deemed to be a holder of
Registrable Securities whenever such Person holds a security exercisable for or
convertible into such Registrable Securities, whether or not such exercise or
conversion has actually been effected.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursement of counsel
for the Company and of its independent public accountants, including the
expenses of "cold comfort" letters required by or incident to such performance
and compliance, any disbursement of underwriters customarily paid by issuers or
sellers of securities, and the reasonable fees and expenses of one counsel to
all of the Selling Holders (selected by the Selling Holders holding not less
than a majority of the Registrable Securities covered by such registration).
"Requesting Holder" is defined in Section 2.2.
"Securities" means, collectively, the Preferred Stock, the Series A Warrants
and the Series B Warrants.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933, as
Exhibit D to Purchase Agreement
2
<PAGE> 89
Exhibit D To
Purchase Agreement
amended, shall include a reference to the comparable section, if any, of such
similar Federal statute.
"Selling Holder" is defined in Section 2.1.
"Series A Warrants" means those certain Series A Warrants of the Company
issued and sold pursuant to the Stock and Warrant Purchase Agreement.
"Series B Warrants" means those certain Series B Warrants of the Company
issued and sold pursuant to the Stock and Warrant Purchase Agreement.
2. Registration Under Securities Act.
2.1. Registration on Request. (a) Request. At any time on or after the
six-month anniversary of the date hereof and upon the written request of one
(1) or more holders (the "Initiating Holders") of Registrable Securities
holding not less than 33% of the Registrable Securities then held by the
holders of Registrable Securities that the Company effect the registration
under the Securities Act of all or part of such Initiating Holders' Registrable
Securities, the Company will promptly give written notice of such requested
registration to all registered holders of Registrable Securities, and thereupon
the Company will use its best efforts to effect the registration under the
Securities Act, including by means of a shelf registration pursuant to Rule 415
under the Securities Act if so requested in such request and if the Company is
then eligible to use such a registration (a "Shelf Registration"), of
(i) the Registrable Securities which the Company has been
requested to register by such Initiating Holders, and
(ii) all other Registrable Securities which the Company has
been requested to register by the holders thereof (such holders together with
the Initiating Holders are hereinafter referred to as the "Selling Holders") by
written request given to the Company within fifteen (15) days after the giving
of such written notice by the Company,
all to the extent required to permit the disposition of the Registrable
Securities so as to be registered; provided, however, the Company shall not be
required to file a registration statement under this Section 2.1 if (i) less
than $1,000,000 of Registrable Securities are to be included in such
registration, (ii) any registration statement (other than on Form S-4 or S-8 or
any successor or similar forms are filed in connection with an exchange offer
or any offering of securities solely to the Company's existing stockholders)
covering securities to be sold by the Company
Exhibit D to Purchase Agreement
3
<PAGE> 90
Exhibit D To
Purchase Agreement
has been filed and not withdrawn or has been declared effective within the
preceding one hundred eighty (180) days if the preceding registration was on
Form S-3 or two hundred seventy (270) days if the preceding registration was on
Form S-1 or S-2 or (iii) the Company shall furnish to the Selling Holders a
certificate signed by the Chief Executive Officer of the Company stating that
in the good faith judgment of the Board of Directors it would be materially
detrimental to the Company or its stockholders for a registration statement to
be filed in the near future, in which event, with respect to (iii) above, the
Company's obligation to use its best efforts to register, qualify or comply
under this Section 2.1 shall be deferred for a period not to exceed ninety (90)
days, such right to delay a request not to be exercised by the Company more
than once in any twelve-month period.
(b) Registration Statement Form. Registrations under
this Section 2.1 shall be on such appropriate registration form of the
Commission as shall be selected by the Company. The Company agrees to include
in any such registration statement all information which, in the opinion of
counsel to the Company, is required to be included.
(c) Expenses. The Company will pay the Registration
Expenses in connection with any registration requested pursuant to this Section
2.1, provided, the Company shall not be required to pay the Registration
Expenses of (i) any registration proceeding begun pursuant to this Section 2.1,
the request of which has been subsequently withdrawn by the Selling Holders,
unless the holders of a majority of the Registrable Securities agree that such
request will constitute a demand registration pursuant to Section 2.1 or (ii)
any registration in connection with which the Selling Holders assumed
responsibility for payment of the Registration Expenses.
(d) Effective Registration Statement. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been
effected (i) unless a registration statement with respect thereto has become
effective, (ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason not
attributable to the Selling Holders and has not promptly thereafter become
effective, or (iii) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such registration are not
satisfied or waived, other than by reason of a failure on the part of the
Selling Holders.
(e) Selection of Underwriters. The underwriter or
underwriters of each underwritten offering of the Registrable Securities so to
be registered shall be selected by the Company.
Exhibit D to Purchase Agreement
4
<PAGE> 91
Exhibit D To
Purchase Agreement
(f) Priority in Requested Registration. If the managing
underwriter of any underwritten offering shall advise the Company in writing
(with a copy to each Selling Holder) that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering within a price range acceptable to the
Selling Holders holding not less than a majority of the Registrable Securities
requested to be included in such registration, the Company will include in such
registration, to the extent of the number which the Company is so advised can
be sold in such offering, Registrable Securities requested to be included in
such registration and other securities requested to be included in such
registration pursuant to registration rights contained in agreements existing
as of the date hereof and registration rights granted after the date hereof in
accordance with Section 5 ("Pari Passu Rights"), pro rata among the Selling
Holders and other holders requesting such registration according to the total
number of Registrable Securities and other securities requested to be
registered by each Selling Holder or other holder, as the case may be.
(g) Limitations on Registration on Request.
Notwithstanding anything in this Section 2.1 to the contrary, in no event will
the Company be required to effect, in the aggregate, without regard to the
holder of Registrable Securities making such request, more than two (2)
registrations with respect to an underwritten public offering (a "Requested
Underwritten Offering") pursuant to this Section 2.1; provided, however, in the
event (i) the Selling Holders assume in writing responsibility for payment of
the Registration Expenses, whether or not such registration is ultimately
effected, (ii) the registration occurs in connection with a Triggering Event
(as defined in the Certificate of Designation) or (iii) the Company exercises
its pre-emptive right pursuant to Section 2.2(h), any such registration shall
not be treated as a Requested Underwritten Offering for purposes of the
limitations set forth in this Section 2.1(g).
(h) Pre-emption. The Company will have the right to
pre-empt one (1) (but no more than one) Requested Underwritten Offering
pursuant to this Section 2.1 with a primary registration by delivering written
notice of such intention to the Initiating Holders within five (5) business
days after the Company has received a request for such Requested Underwritten
Offering; provided, (i) the Company shall deliver to the Initiating Holders a
plan of the Board of Directors of the Company with respect to such primary
registration no later than thirty (30) days after the Company has received a
request for such Requested Underwritten Offering and (ii) such primary
registration shall take effect no later than one hundred and eighty (180) days
after such Requested Underwritten Offering has occurred. In the ensuing
primary registration, the holders of Registrable Securities will have such
piggyback rights as are set forth in Section 2.2.
Exhibit D to Purchase Agreement
5
<PAGE> 92
Exhibit D To
Purchase Agreement
2.2. Incidental Registration. (a) Right to Include
Registrable Securities. If the Company at any time proposes to register any of
its securities under the Securities Act by registration on Forms S-1, S-2 or
S-3 or any successor or similar form(s), whether or not for sale or for its own
account, it will each such time give prompt written notice to all registered
holders of Registrable Securities of its intention to do so and of such
holders' rights under this Section 2.2. Upon the written request of any such
holder (a "Requesting Holder") made as promptly as practicable and in any event
within fifteen (15) days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
Requesting Holder), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Requesting Holders thereof;
provided, however, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with 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 each Requesting Holder of Registrable Securities and (i) in
the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from any obligation of the Company to pay the
Registration Expenses in connection therewith), without prejudice, however, to
the rights of any holder or holders of Registrable Securities entitled to do so
to request that such registration be effected as a registration under Section
2.1, subject to Section 2.1(g), and (ii) in the case of a determination to
delay registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. No registration effected under this Section 2.2 shall relieve the
Company of its obligation to effect any registration upon request under Section
2.1. Subject to Section 2.1(g), the Company will pay all Registration Expenses
in connection with registration of Registrable Securities requested pursuant to
this Section 2.2.
(b) Priority in Incidental Registrations. If the
managing underwriter of any underwritten offering shall inform the Company by
letter with a copy to the holder or holders of Registrable Securities of its
belief that the number or type of Registrable Securities requested to be
included in such registration would materially adversely affect such offering,
then the Company will include in such registration, to the extent of the number
and type which the Company is so advised can be sold in (or during the time of)
such offering, first, all securities proposed by the Company to be sold for its
own account in a primary offering or by the holder requesting such
registration in a secondary offering, and second, such Registrable Securities
and other securities with Pari Passu Rights requested to be included in such
registration, such Registrable Securities and other securities to be included
in such registration pro rata among the Requesting Holders and other holders
according to the total number of Registrable Securities
Exhibit D to Purchase Agreement
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<PAGE> 93
Exhibit D To
Purchase Agreement
requested to be included in such registration by each such Requesting Holder or
other holder, as the case may be, and third, all other securities requested to
be included in such registration.
(c) Selection of Underwriters. If a registration
pursuant to this Section 2.2 involves an underwritten offering, the underwriter
or underwriters thereof shall be selected by the Company. Each Requesting
Holder agrees that it will sell all of its Registrable Securities to be
included in such registration to the underwriter or underwriters selected by
the Company pursuant to this Section 2.2(c) on the same terms and conditions as
are applicable to the Company or other sellers of the same securities
thereunder, and at the same price as any Registrable Securities to be sold by
the Company or any such other sellers thereunder.
2.3. Registration Procedures. If and whenever the Company
is required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Sections 2.1 and
2.2, the Company will as expeditiously as practicable:
(i) prepare and file with the Commission the requisite
registration statement to effect such registration and thereafter use its best
efforts to cause such registration statement to become effective; provided,
however, that the Company may discontinue any registration of its securities
which are not Registrable Securities (and, under the circumstances specified in
Section 2.2(a), its securities which are Registrable Securities), at any time
prior to the effective date of the registration statement relating thereto;
(ii) prepare and file with the Commission 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 and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by such registration
statement for such period as shall be required for the disposition of all of
such Registrable Securities; provided, however, that, such period need not
exceed twelve (12) months with respect to any Shelf Registration and ninety
(90) days with respect to any other registration statement;
(iii) furnish to each seller of Registrable Securities covered
by such registration statement, such number of conformed copies of such
registration statement and of each amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus contained
in such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act, and
such other documents as such seller may reasonably request;
Exhibit D to Purchase Agreement
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<PAGE> 94
Exhibit D To
Purchase Agreement
(iv) use its best efforts (A) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such States of the
United State of America where an exemption is not available and as the sellers
of Registrable Securities covered by such registration statement shall
reasonably request, (B) to keep such registration or qualification in effect
for so long as such registration statement remains in effect, and (C) to take
any other action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the securities
to be sold by such sellers, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the requirements
of this subdivision (iv) be obligated to be so qualified, to consent to general
service of process in any such jurisdiction or subject itself to taxation in
any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by
such other Federal or state governmental agencies or authorities as may be
necessary in the opinion of counsel to the Company to enable the sellers
thereof to consummate the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a
signed counterpart, addressed to each such seller, of:
(A) an opinion of counsel for the Company, and
(B) a "comfort" letter signed by the independent public
accountants who have certified the Company's financial statements included or
incorporated by reference in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent to the date of
such financial statements as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities (and dated the dates such opinions
and comfort letters are customarily dated);
(vii) notify each seller of Registrable Securities covered
by such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, upon discovery that, or
upon the happening of any event as a result of which,
Exhibit D to Purchase Agreement
8
<PAGE> 95
Exhibit D To
Purchase Agreement
the prospectus included in such registration statement, as then in effect,
includes a statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were made, and
at the request of any such seller promptly prepare and furnish to it 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 securities, such prospectus shall not include an untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than eighteen
(18) months, beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, and promptly furnish to each
such seller of Registrable Securities a copy of any amendment or supplement to
such registration statement or prospectus;
(ix) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration; and
(x) use its best efforts to list all Registrable
Securities covered by such registration statement on any national securities
exchange (including the NASDAQ National Market) on which Registrable Securities
covered by such registration statement are then listed.
The Company may require each seller of Registrable Securities as to which any
registration is being affected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company
may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (vii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3 and, if so directly by the Company, will deliver to the Company (at
the Company's expense) all copies, other than
Exhibit D to Purchase Agreement
9
<PAGE> 96
Exhibit D To
Purchase Agreement
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
2.4. Underwritten Offerings. (a) Requested Underwritten
Offerings. If requested by the underwriters for any underwritten offering by
holders of Registrable Securities pursuant to a registration requested under
Section 2.1, the Company will use reasonable efforts to enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to the Company, the holders
of not less than a majority of the Registrable Securities to be included in
such registration and the underwriters and to contain such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of that type, including, without limitation, indemnities to the
effect and to the extent provided in Section 2.5. The holders of the
Registrable Securities proposed to be distributed by such underwriters will
cooperate with the Company in the negotiation of the underwriting agreement.
Such holders of Registrable Securities shall be parties to such underwriting
agreement and may, at their option, require that any or all of 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 holders of Registrable Securities and that any or all
of the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities.
(b) Incidental Underwritten Offerings. If the Company
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, subject to Section 2.2, the Company will if
requested by any Requesting Holder of Registrable Securities use its best
efforts to arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such Requesting Holder among the
securities of the Company to be distributed by such underwriters. The holders
of Registrable Securities to be distributed by such underwriters shall be
parties to the underwriting agreement between the Company and such underwriters
and may, at their option, require that any or all of 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 holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such holders of
Registrable Securities.
(c) No Person may participate in any registration
hereunder which is underwritten unless such Person (A) agrees to sell such
Person's securities on the basis provided
Exhibit D to Purchase Agreement
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<PAGE> 97
Exhibit D To
Purchase Agreement
in any underwriting arrangements approved by the Person or Persons entitled
hereunder to approve such arrangements and (B) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
2.5. Indemnification. (a) Indemnification by the Company.
In the event of any registration of any securities of the Company under the
Securities Act, the Company will, and hereby does, indemnify and hold harmless,
in the case of any registration statement filed pursuant to Section 2.1 or 2.2,
each seller of any Registrable Securities covered by such registration
statement, each such seller's stockholders, directors, officers, partners,
agents and affiliates and each other person who participates as an underwriter
in the offering or sale of such securities and each other person, if any, who
controls such seller or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint and
several, to which such seller or any such stockholder, director, officer,
partner, agent or affiliate or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company will
reimburse such seller and each such stockholder, director, officer, partner,
agent or affiliate, underwriter and controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
seller or underwriter, as the case may be, specifically for use in the
preparation thereof and provided further that the Company shall not be liable
to any person who participates as an underwriter in the offering or sale of
Registrable Securities or any other person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or
amended, to the person
Exhibit D to Purchase Agreement
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<PAGE> 98
Exhibit D To
Purchase Agreement
asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such stockholder, director, officer, partner, agent or affiliate or
controlling person or underwriter and shall survive the transfer of such
securities by such seller.
(b) Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking reasonably satisfactory to it from the
prospective seller of such Registrable Securities, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in subdivision
(a) of this Section 2.5) the Company and each director of the Company, each
officer of the Company and each other person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company specifically
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling person and shall survive the transfer of such securities by such
seller.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section
2.5, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 2.5, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. If any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may
exist in respect of such claim, to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
Exhibit D to Purchase Agreement
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<PAGE> 99
Exhibit D To
Purchase Agreement
incurred by the latter in connection with the defense thereof. No indemnifying
party shall be liable for any settlement of any action or proceeding effected
without its written consent (which consent shall not be unreasonably withheld).
(d) Contribution. If the indemnification provided for in
this Section 2.5 shall for any reason be held by a court to be unavailable to
an indemnified party under subdivision (a) or (b) hereof in respect of any
loss, claim, damage or liability, or any action in respect thereof, then, in
lieu of the amount paid or payable under subdivision (a) or (b) hereof, the
indemnified party and the indemnifying party under subdivision (a) or (b)
hereof shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses as they are reasonably incurred
in connection with investigating or defending the same), (i) in such proportion
as is appropriate to reflect the relative fault of the Company and the
prospective sellers of Registrable Securities covered by the registration
statement which resulted in such loss, claims, damage or liability, or action
in respect thereof, with respect to the statements or omissions which resulted
in such loss, claims, damage or liability, or action in respect thereof, as
well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company and such prospective sellers from the offering of the securities
covered by such registration statement. 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. Such prospective sellers' obligations to
contribute as provided in this subdivision (d) are several in such proportion
as is appropriate to reflect the relative fault of each of the prospective
sellers, as well as any other relevant equitable consideration, and not joint;
provided, however, that if such allocation is not permitted by applicable law,
the prospective sellers' obligations to contribute shall be in proportion to
the relative value of their respective registrable securities covered by such
registration statement. In addition, no person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any action or
claim effected without such person's consent, which consent shall not be
unreasonably withheld.
(e) Other Indemnification. Indemnification and contribution
similar to that specified in the preceding subdivisions of this Section 2.5
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any Federal or state law or regulation of any governmental authority other than
the Securities Act.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 2.5 shall be made by periodic payments of
the amount thereof during the course of
Exhibit D to Purchase Agreement
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<PAGE> 100
Exhibit D To
Purchase Agreement
the investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred, provided the indemnified party agrees to repay
such payments if it is ultimately determined that the indemnified party was not
entitled to indemnification.
2.6. Adjustments Affecting Registrable Securities. The
Company will not effect or permit to incur any combination or subdivision of
Registrable Securities which would materially adversely affect the ability of
the holders of Registrable Securities to include such Registrable Securities in
any registration of its securities contemplated by this Section 2 or the
marketability of such Registrable Securities under any such registration.
2.7. Certain Rights of Holders If Named in a Registration
Statement. If any statement contained in a registration statement under the
Securities Act refers to any holder of Registrable Securities by name or
otherwise as the holder of any securities of the Company and such reference to
such holder by name or otherwise is not required by the Securities Act or any
of the rules and regulations promulgated thereunder, then such holder shall
have the right to require the deletion of the reference to such holder.
2.8. Rule 144. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or, if the Company is not required to
file such reports, will, upon the request of any holder, make publicly
available other information) and will take further action as any holder may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by any rule or regulation
now in effect or hereafter adopted by the Commission. Upon the request of any
holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
2.9. Conversion of Exercise of Securities. The Securities
must be converted into, or exercised for, Common Stock prior to the sale of
such Securities pursuant to a registration under this Agreement.
3. Holdback Agreements. Each holder of Registrable
Securities agrees not to effect any public sale of equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, including a sale to the public pursuant to Rule 144 of the
Commission, during the period commencing fifteen (15) days prior to and ending
ninety (90) days after the effective date of any underwritten registration of
the Company's
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Exhibit D To
Purchase Agreement
securities (except as part of such underwritten registration), if and to the
extent requested by the underwriter or underwriters managing the registered
public offering, unless such underwriter or underwriters otherwise agree.
4. Restrictions on Dispositions. In connection with the
disposition of the Registrable Securities under a registration statement
pursuant to this Agreement, in order for any holder of Registrable Securities
to dispose of Registrable Securities pursuant to a prospectus that is a part of
such registration statement (other than an underwritten offering), such holder
must give the Company written notice of its intention to sell any of the
Registrable Securities at least two (2), but not more than twenty (20),
business days prior to the date of the proposed sale(s), which notice shall
include the number of shares proposed to be disposed, and the time period
during which the shares may be disposed (the "Sale Period"), and the holder
agrees that, during the Sale Period, it shall not deliver any prospectus that
is a part of such registration statement in connection with any disposition of
the Registrable Securities during any period of time when, but only so long as,
the Company, after receipt of the notice set forth above, notifies such holder
that the Company is in possession of material non- public information that
would be required to be disclosed in the registration statement (or any
amendment, or post-effective amendment thereto); provided that the Company
shall advise such holder in writing as soon as any such delay is no longer
applicable.
5. Limitations on Subsequent Registration Rights. From
and after the date of this Agreement, the Company shall not, without the prior
consent of the Executive Committee of the Board of Directors of the Company,
enter into any agreement with any holder or prospective holder of any
securities of the Company giving such holder or prospective holder any
registration rights the terms of which are pari passu with or more favorable
than the registration rights granted hereunder.
6. Transfer or Assignment of Registration Rights. The
rights to cause the Company to register securities granted to a holder of
Registrable Securities by the Company in this Agreement may be transferred or
assigned by such a holder in connection with the transfer of the Registrable
Securities; provided, the Company is given written notice at the time of or
within a reasonable time after said transfer or assignment, stating the name
and address of the transferee or assignee and identifying the Securities with
respect to which such registration rights are being transferred or assigned,
and, provided further, that the transferee or assignee of such rights assumes
in writing the obligations of such holder under this Agreement.
7. Amendment and Waivers. This Agreement may be amended
with the consent of the Company and the Company may take any action herein
prohibited, or omit to
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Exhibit D To
Purchase Agreement
perform any act herein required to be performed by it, only if the Company
shall have obtained the written consent to such amendment, action or omission
to act, of the holders of not less than a majority of the Registrable
Securities. Each holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
7, whether or not such Registrable Securities shall have been marked to
indicate such consent.
8. Nominees for Beneficial Owners. In the event that
any Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election in writing delivered
to the Company, be treated as the holder of such Registrable Securities for
purposes of any request or other action by any holder or holders of Registrable
Securities pursuant to this Agreement or any determination of any number or
percentage of shares of Registrable Securities contemplated by this Agreement.
If the beneficial owner of any Registrable Securities so elects, the Company
may require assurances reasonably satisfactory to it of such owner's beneficial
ownership of such Registrable Securities.
9. Notices. All communications provided for hereunder
shall be sent via overnight courier, shall be deemed to be received two (2)
days after being sent, or, if earlier, the date of actual receipt, and shall be
addressed as follows:
(a) if to the Purchasers, addressed to the Purchasers in
the manner set forth in the Stock and Warrant Purchase Agreement, or at such
other address as any Purchaser shall have furnished to the Company in writing;
(b) if to any other holder of Registrable Securities, at
the address that such holder shall have furnished to the Company in writing,
or, until any such other holder so furnishes to the Company an address, then to
and at the address of the last holder of such Registrable Securities who has
furnished an address to the Company; or
(c) if to the Company, addressed to it in the manner set
forth in the Stock and Warrant Purchase Agreement, or at such other address as
the Company shall have furnished to each holder of Registrable Securities at
the time outstanding.
10. Assignment; Calculation of Percentage Interests in
Registrable Securities. (a) This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and, with respect to
the Company, its respective successors and assigns.
Exhibit D to Purchase Agreement
16
<PAGE> 103
Exhibit D To
Purchase Agreement
(b) For purposes of this Agreement, all references to a
percentage of the Registrable Securities shall be calculated based upon the
number of shares of Registrable Securities outstanding at the time such
calculation is made.
11. Descriptive Headings. The descriptive headings of
the several sections and paragraphs of this Agreement are inserted for
reference only and shall not limit or otherwise affect the meaning hereof.
12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAWS OF THE STATE OF ILLINOIS.
13. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
14. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
Exhibit D to Purchase Agreement
17
<PAGE> 104
Exhibit D To
Purchase Agreement
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
MICRO HEALTHSYSTEMS, INC.
By: ______________________________
Name:
Title:
FRONTENAC VI LIMITED PARTNERSHIP
By: Frontenac Company
Its: General Partner
By: ______________________________
Name: James E. Cowie
Its: General Partner
ROBERT E. KING INCOME TRUST
By: ______________________________
David A. Hutchison, as Trustee
of the Robert E. King Income
Trust,
dated December 18, 1986
MORGAN HOLLAND FUND II, L.P.
By: ______________________________
Name: James F. Morgan,
a General Partner
<PAGE> 105
Exhibit D To
Purchase Agreement
SCHEDULE 1
Names and Addresses of Purchasers
Frontenac VI Limited Partnership
c/o Frontenac Company
135 South LaSalle Street
Suite 3800
Chicago, IL 60603
Attn: James E. Cowie
Robert E. King Income Trust
15 Salt Creek Lane
Suite 411
Hinsdale, IL 60521
Attn: David A. Hutchison, Trustee
Morgan Holland Fund II, L.P.
One Liberty Square
Boston, MA 02109
Attn: James F. Morgan
