<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
MEDAPHIS CORPORATION
- --------------------------------------------------------------------------------
(NAME OF ISSUER)
COMMON STOCK, PAR VALUE $.01 PER SHARE
- --------------------------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
584028-104
- --------------------------------------------------------------------------------
(CUSIP NUMBER)
RAYMOND J. NOORDA
NFT VENTURES, INC.
899 W. CENTER STREET
OREM, UTAH 84057
(801) 229-2223
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
May 6, 1996
- --------------------------------------------------------------------------------
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Check the following box if a fee is being paid with the statement
[x]. (A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
(Page 1 of 103 Pages)
Exhibit Index located on Page 12
<PAGE> 2
CUSIP No. 584028-104 SCHEDULE 13D Page 2 of 102 Pages
--------------------- -------- --------
(1) Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
NFT Ventures, Inc.
---------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ X ]
(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
OO
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
Utah
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 0
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 4,436,205
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 0
--------------------------------------------------------
(10) Shared Dispositive Power
4,436,205
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
4,436,205
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
6.83% as of May 8, 1996
---------------------------------------------------------------------
(14) Type of Reporting Person*
CO
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
CUSIP No. 584028-104 SCHEDULE 13D Page 3 of 102 Pages
--------------------- -------- --------
(1) Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
The Raymond J. Noorda and Lewena Noorda Family Trust
---------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ X ]
(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
OO
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
Utah
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 0
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 4,436,205
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 0
--------------------------------------------------------
(10) Shared Dispositive Power
4,436,205
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
4,436,205
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
6.83% as of May 8, 1996
---------------------------------------------------------------------
(14) Type of Reporting Person*
OO
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
CUSIP No. 584028-104 SCHEDULE 13D Page 4 of 102 Pages
--------------------- -------- --------
(1) Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
Raymond J. Noorda
---------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ X ]
(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
OO
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 0
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 4,436,205
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 0
--------------------------------------------------------
(10) Shared Dispositive Power
4,436,205
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
4,436,205
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
6.83% as of May 8, 1996
---------------------------------------------------------------------
(14) Type of Reporting Person*
IN
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 5
CUSIP No. 584028-104 SCHEDULE 13D Page 5 of 102 Pages
--------------------- -------- --------
(1) Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
Lewena Noorda
---------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ X ]
(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
OO
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 0
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 4,436,205
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 0
--------------------------------------------------------
(10) Shared Dispositive Power
4,436,205
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
4,436,205
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
6.83% as of May 8, 1996
---------------------------------------------------------------------
(14) Type of Reporting Person*
IN
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 6
STATEMENT ON SCHEDULE 13D
Item 1. Security and Issuer.
This initial Schedule 13D relates to the Common Stock, par
value $.01 per share (the "Medaphis Common Stock"), of Medaphis Corporation, a
Delaware corporation ("Medaphis"). The principal executive offices of Medaphis
are located at 2700 Cumberland Parkway, Suite 300, Atlanta, Georgia 30339.
Item 2. Identity and Background.
This statement is being filed by NFT Ventures, Inc., a Utah
Corporation ("NFT Ventures"), The Raymond J. and Lewena Noorda Family Trust, a
trust organized under the laws of the State of Utah (the "Noorda Family
Trust"), and Raymond J. and Lewena Noorda as Trustees of the Noorda Family
Trust ("Mr. and Mrs. Noorda", and together with NFT Ventures and the Noorda
Family Trust, the "Reporting Persons"). Mr. and Ms. Noorda also serve as the
directors and President and Vice President, respectively, of NFT Ventures.
Mark Rogers serves as Secretary and Treasurer of NFT Ventures. Mr. and Mrs.
Noorda and Mark Rogers are citizens of the United States of America.
The Reporting Persons may be deemed to be a "group" within the
meaning of Rule 13d-5 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). However, each Reporting Person disclaims
beneficial ownership of Medaphis Common Stock owned by other Reporting Persons.
The principal business of NFT Ventures is venture capital
investments. The principal business address of NFT Ventures is 899 W. Center
Street, Orem, Utah 84057.
The principal business of the Noorda Family Trust is that of
holding trust property, investing trust property and making distributions of
trust property. The principal business address of the Noorda Family Trust is
899 W. Center Street, Orem, Utah 84057.
Mr. Noorda's principal occupation is venture capital
investments. Mr. Noorda's business address is 899 W. Center Street, Orem, Utah
84057.
Ms. Noorda's principal occupation is venture capital
investments. Ms. Noorda's business address is 899 W. Center Street, Orem, Utah
84057.
Mr. Rogers' principal occupation is serving as Secretary and
Treasurer of NFT Ventures. Mr. Rogers' business address is 12950 Saratoga
Avenue, Suite B, Saratoga, California 95070.
None of the Reporting Persons, or, to the best of NFT
Ventures' knowledge, Mr. Rogers, has, during the last five years, been
convicted in a criminal proceeding
Page 6 of 103 Pages
<PAGE> 7
(excluding traffic violations or similar misdemeanors) or been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to federal or state securities laws or finding any violation
with respect to such laws.
The Noorda Family Trust owns 100% of NFT Ventures and Mr. and
Ms. Noorda serve as the only trustees of the Noorda Family Trust. With respect
to the Noorda Family Trust and Mr. and Ms. Noorda, this statement relates only
to their indirect beneficial ownership of Medaphis Common Stock. The shares of
Medaphis Common Stock reported herein have been acquired by NFT Ventures, and
none of the Noorda Family Trust, or Mr. or Ms. Noorda directly holds any
Medaphis Common Stock. Management of the business affairs of NFT Ventures,
including decisions respecting disposition and voting of the shares of medaphis
Common Stock reported herein, resides with the executive officers and directors
of NFT Ventures.
Item 3. Source and Amount of Funds or Other Consideration.
NFT Ventures acquired an aggregate of 4,436,205 shares of
Medaphis Common Stock (the "Merger Shares") in connection with the merger (the
"Merger") of BSGSub, Inc., a wholly owned subsidiary of Medaphis ("BSGSub"),
into BSG Corporation ("BSG"), pursuant to the terms of that certain Merger
Agreement dated as of March 15, 1996, by and among Medaphis, BSGSub and BSG, a
copy of which is attached hereto as Exhibit B (the "Merger Agreement") and
incorporated herein by reference. Pursuant to the Merger Agreement, at the
effective time of the Merger, the outstanding shares of capital stock of BSG
became the right to receive .2300 shares of Medaphis Common Stock in a
transaction pursuant to Rule 145 promulgated under the Securities Act of 1933,
as amended (the "Securities Act"). Prior to the effective time of the Merger,
the NFT Ventures owned approximately 58.84% of the outstanding capital stock of
BSG on a fully dilluted basis.
Item 4. Purpose of Transaction.
As described above in Item 3, NFT Ventures acquired the Merger
Shares in connection with the Merger for investment purposes. Each Reporting
Person will continue to evaluate NFT Ventures' investment in Medaphis on the
basis of various factors, including Medaphis' business, financial condition,
results of operation and prospects, general economic and industry conditions,
the securities markets in general and those for Medaphis' securities in
particular, such Reporting Person's own financial condition, other investment
opportunities and other future developments. Based upon such evaluation, each
Reporting Person will take such actions in the future as such Reporting Person
may deem appropriate in light of the circumstances existing from time to time.
Depending on market and other factors, a Reporting Person may determine that
NFT Ventures should dispose some or all of the Medaphis Common Stock it owns.
Page 7 of 103 Pages
<PAGE> 8
As described above in Item 3, the Merger Shares were acquired
by NFT Ventures in a transaction pursuant to Rule 145 and, therefore, may not
be sold, pledged, conveyed or otherwise transferred without registration or
qualification under the Securities Act and applicable state securities or blue
sky laws or a valid exemption therefrom. In connection with the Merger,
Medaphis granted to NFT Ventures certain demand and incidental registration
rights pursuant to a Registration Rights Agreement (the "Registration Rights
Agreement"), a copy of which is filed as Exhibit C and incorporated herein by
reference.
Except as set forth in this Item 4, no Reporting Person has
any plan or proposal with respect to any of the actions specified in clauses
(a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) The following table sets forth information with
respect to the Medaphis Common Stock beneficially owned by each Reporting
Person as of the close of business on May 6, 1996:
<TABLE>
<CAPTION>
Name Number of Shares Approximate Percentage of
---- ---------------- Outstanding Shares (1)
----------------------
<S> <C> <C>
NFT Ventures 4,436,205(2) 6.83%
Noorda Family Trust 4,436,205(2) 6.83%
Raymond J. Noorda 4,436,205(2) 6.83%
Lewena Noorda 4,436,205(2) 6.83%
</TABLE>
- --------------------------
(1) Computed on the basis of 64,953,205 shares of Medaphis Common Stock
outstanding as of May 8, 1996.
(2) The Reporting Persons may be deemed to be a "group" within the meaning
of Rule 13d-5 under the Exchange Act, by virtue of acquiring the
Merger Shares as described above in Item 3. Thus pursuant to Rule
13d-5, each Reporting Person may be deemed to beneficially own all
Medaphis Common Stock owned by other Reporting Persons. Each
Reporting Person other than NFT Ventures disclaims beneficial
ownership of such Medaphis Common Stock.
(b) NFT Ventures has the sole power to vote or direct the
vote and to dispose or to direct the disposition of the Merger Shares. NFT
Ventures is wholly owned by the Noorda Family Trust. According to the
Declaration of Trust, dated as of October 8, 1980, Mr. and Ms. Noorda are the
Trustees of the Noorda Family Trust. Additionally, Mr. and Ms. Noorda serve as
the only directors and as the President and Vice President,
Page 8 of 103 Pages
<PAGE> 9
respectively, of NFT Ventures and therefore have the power to direct the
affairs of NFT Ventures, including decisions regarding voting and the
disposition of the proceeds from the sale of Medaphis Common Stock owned by NFT
Ventures.
(c) No Reporting Person has acquired any shares of
Medaphis Common Stock within the past 60 days, other than the Merger Shares
acquired on May 6, 1996, as described above in Item 3.
(d) No other person has the right to receive or the power
to direct receipt of dividends from, or the proceeds from the sale of, any
shares of Medaphis Common Stock which the Reporting Persons may be deemed to
beneficially own.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Except as set forth herein, there are no contracts,
arrangements, understandings or relationships (legal or otherwise) among the
persons named in Item 2 hereof and between such persons and any other person
with respect to the any securities of Medaphis, including, but not limited to,
transfer or voting of any of such securities, finder's fees, joint ventures,
loan or option arrangements, puts or calls, guarantees of profits or loss, or
the giving or withholding of proxies.
The Reporting Persons are parties to a Joint Filing Agreement,
a copy of which is attached hereto as Exhibit A (the "Joint Filing Agreement")
and is incorporated herein by reference, with respect to the filing of this and
other Statements and any amendments thereto.
Pursuant to the Merger Agreement, for a period of five years
following the effective date of the Merger, May 6, 1996, Medaphis has agreed to
nominate to the Board of Directors of Medaphis a designee of Mr. Noorda and
Mr. Steven G. Papermaster, Chairman and Chief Executive Officer of BSG. The
description herein of the Merger Agreement is qualified in its entirety by
reference to such agreement, a copy of which is attached hereto as Exhibit B.
As described above in Item 4, in connection with the Merger,
NFT Ventures entered into the Registration Rights Agreement. Pursuant to the
Registration Rights Agreement, NFT Ventures is entitled to certain demand and
incidental registration rights with respect to the Merger Shares. In addition,
Mr. Noorda and NFT Ventures each entered into an Affiliate Letter with
Medaphis, copies of which are attached hereto as Exhibits D and E, respectively
(the "Affiliate Letters") and are incorporated herein by reference, pursuant to
which Mr. Noorda and NFT Ventures have agreed not to sell, transfer or
otherwise dispose of, or in any other way reduce his or its risk with respect
to,
Page 9 of 103 Pages
<PAGE> 10
the Merger Shares, until such time as financial results covering at least 30
days of combined operations of Medaphis and BSG have been published.
Item 7 Material to be Filed as Exhibits.
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
------- ----------------------
<S> <C>
Exhibit A Joint Filing Agreement dated as of May 16, 1996, by and among NFT
Ventures, Inc., The Raymond J. Noorda and Lewena Noorda Family
Trust, Raymond J. Noorda and Lewena Noorda
Exhibit B Merger Agreement dated as of March 15, 1996, by and among
Medaphis Corporation, BSGSub, Inc. and BSG Corporation
Exhibit C Registration Rights Agreement dated as of May 16, 1996, by and
among NFT Ventures, Inc., NP Ventures, Ltd., Mr. Steven G.
Papermaster and Medaphis Corporation
Exhibit D Affiliate Letter from Raymond J. Noorda to Medaphis Corporation
dated May 6, 1996
Exhibit E Affiliate Letter from NFT Ventures, Inc. to Medaphis Corporation
dated May 6, 1996
</TABLE>
Page 10 of 103 Pages
<PAGE> 11
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 16, 1996
NFT VENTURES, INC.
By: /s/ Raymond J. Noorda
---------------------------------
Raymond J. Noorda
President
THE RAYMOND J. AND LEWENA
NOORDA FAMILY TRUST
By: /s/ Raymond J. Noorda
--------------------------------
Raymond J. Noorda
Trustee
/s/ Raymond J. Noorda
--------------------------------
Raymond J. Noorda
/s/ Lewena Noorda
--------------------------------
Lewena Noorda
Page 11 of 103 Pages
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description of Exhibit Located on
- ------- ---------------------- Sequentially
Numbered Page
-------------
<S> <C> <C>
Exhibit A Joint Filing Agreement dated as of May 16, 1996, 13
by and among NFT Ventures, Inc., The Raymond
J. Noorda and Lewena Noorda Family Trust,
Raymond J. Noorda and Lewena Noorda
Exhibit B Merger Agreement dated as of March 15, 1996, by 15
and among Medaphis Corporation, BSGSub, Inc.
and BSG Corporation
Exhibit C Registration Rights Agreement dated as of May 6, 83
1996, by and among NFT Ventures, Inc., NP
Ventures, Ltd., Mr. Steven G. Papermaster and
Medaphis Corporation
Exhibit D Affiliate Letter from Raymond J. Noorda to 99
Medaphis Corporation dated May 6, 1996
Exhibit E Affiliate Letter from NFT Ventures, Inc. to 101
Medaphis Corporation dated May 6, 1996
</TABLE>
Page 12 of 103 Pages
<PAGE> 13
EXHIBIT A
Joint Filing Agreement
This Joint Filing Agreement, executed as of the 14th day of
May, 1996, is by and among NFT Ventures, Inc., a Utah corporation ("NFT"), The
Raymond J. and Lewena Noorda Family Trust, a trust formed under the laws of the
State of Utah (the "Trust"), Raymond J. Noorda and Lewena Noorda.
WHEREAS, NFT owns in excess of 5% of Medaphis Common Stock and
is required to file a statement of Beneficial Ownership on Schedule 13D with
the Securities and Exchange Commission (the "Commission"); and
WHEREAS, the Trust beneficially owns all the issued and
outstanding voting securities of NFT, and Raymond J. Noorda and Lewena Noorda
are the Trustees of the Trust; and
WHEREAS, since the Trust beneficially owns all the outstanding
voting securities of NFT, and Raymond J. Noorda and Lewena Noorda serve as
trustees of the Trust with full investment and voting power over the securities
held by the Trust, the Trust and Raymond J. Noorda and Lewena Noorda may be
deemed to be the beneficial owner of the Medaphis Common Stock held by NFT
pursuant to Rule 13d-3 promulgated by the Commission under the Securities
Exchange Act of 1934 as amended (the "Exchange Act");
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual promises contained herein, and certain other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
NFT, the Trust, Raymond J. Noorda and Lewena Noorda, without
admitting beneficial ownership or the existence of a "group", do hereby agree
to file jointly with the Commission any schedules and reports (including
amendments thereto) made on behalf of NFT or any of its subsidiaries, pursuant
to Sections 13(d), 13(f) and 13(g) of the Exchange Act.
A-1
Page 13 of 103 Pages
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this
Joint Filing Agreement as of the date first above written.
NFT VENTURES, INC.
By: /s/ Raymond J. Noorda
----------------------------------------
Raymond J. Noorda
President
THE RAYMOND J. AND LEWENA NOORDA
FAMILY TRUST
By: /s/ Raymond J. Noorda
----------------------------------------
Raymond J. Noorda
Trustee
/s/ Raymond J. Noorda
----------------------------------------
Raymond J. Noorda
/s/ Lewena Noorda
----------------------------------------
Lewena Noorda
A-2
Page 14 of 103 Pages
<PAGE> 15
EXHIBIT B
MERGER AGREEMENT
by and among
MEDAPHIS CORPORATION,
BSGSUB, INC.
and
BSG CORPORATION
As of March 15, 1996
Page 15 of 103 Pages
<PAGE> 16
<TABLE>
<S> <C>
ARTICLE 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1. Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2. Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.7. Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 CONVERSION OF SHARES; TREATMENT OF OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1. BSG Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2. Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3. Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.4. Treatment of BSG Employee Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.5. Exchange of BSG Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.6. Conversion Amount and Adjustment Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BSG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.2. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.3. Absence of Restrictions and Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.4. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.5. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.7. Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.8. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.9. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.10. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.11. BSG Client Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.12. Tax Returns; Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.13. Officers, Directors and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.14. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.15. Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.17. Title to Properties and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.19. Patents, Trademarks, Trade Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.20. BSG Licensed Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.21. Proxy Statement and Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.22. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.23. Brokers, Finders and Investment Bankers . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.24. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
Page 16 of 103 Pages
<PAGE> 17
<TABLE>
<S> <C>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF MEDAPHIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.2. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.3. Absence of Restrictions and Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.4. Capitalization of Medaphis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.5. Capital Stock of Medaphis Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.6. Medaphis Commission Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.7. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.8. Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.10. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.11. Proxy Statement and Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.12. Tax Returns; Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.13. Billing and Collection Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.14. Medaphis Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.15. Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.16. Medaphis Computer Software and Hardware . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.17. Title to Properties and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.10. Brokers, Finders and Investment Bankers . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.20. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 5 CERTAIN COVENANTS AND AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.1. Conduct of Business by BSG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.2. Conduct of Business by Medaphis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.3. Inspection and Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.4. Proxy Statement and Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.5. BSG Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.6. The Nasdaq National Market Additional Shares Notification. . . . . . . . . . . . . . . . . . . 39
Section 5.7. BSG Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.8. No Solicitation; Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.9. Reasonable Efforts; Further Assurances; Cooperation . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.10. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.11. Financial Statements and Commission Reports . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.12. Supplements to Disclosure Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.13. Pooling of Interests Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.14. Accountant's Review Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.15. Post-Closing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.16. Board Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.17. Continuing Indemnity; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.18. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.19. No Other Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.20. Pending Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.21. Certain Options, Option Plans and Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
Page 17 of 103 Pages
<PAGE> 18
<TABLE>
<S> <C>
ARTICLE 6 CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.1. Conditions to Each Party's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.2. Conditions to Obligations of Medaphis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.3. Conditions to Obligations of BSG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 7 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 8 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.1. Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.2. Specific Performance and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.3. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.4. Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 9 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.2. Disclosure Letters and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.3. Assignment; Successors in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.4 Investigations; Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.5. Number; Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.6. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.7. Controlling Law; Integration; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.8. BSG and Medaphis Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.11. Enforcement of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.12. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.13. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
Page 18 of 103 Pages
<PAGE> 19
DEFINED TERMS
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
1995 Balance Sheet 3.6
Acquisition Proposal 5.8(a)
Affiliate 5.7(a)
Agreement Page 1
Average Closing Price 2.2
BSGSub Page 1
BSG Page 1
BSG Benefit Plans 3.14(a)
BSG Client Contracts 3.11
BSG Common Stock 2.1(a)
BSG Disclosure Letter Page 8
BSG ERISA Affiliate 3.14(b)
BSG Executives 9.8
BSG Financial Statements 3.6
BSG License Agreements 3.20(b)
BSG Licensed Software 3.20(a)
BSG Material Adverse Effect 3.1
BSG Material Contracts 3.10
BSG Preferred Stock 3.4
BSG Proprietary Software 3.20(a)
BSG Software 3.20(a)
BSG Stockholder 2.2
BSG Subsidiaries 3.5
Certificate 2.5(a)
Closing Page 50
Closing Date Page 50
Code 1.7
Commission 2.4(c)
Conversion Ratio 2.6(a)
Coverage 5.18
Delaware Certificate of Merger Page 1
Deloitte & Touche 4.7
DGCL Page 1
Dissenting Shares 2.3
EEOC 3.15
Effective Time 1.6
Employee Benefit Plan 3.14(a)(ii)
Employee Benefit Pension Plan 3.14(o)
Employment Agreements 6.2(l)
Environmental Notice 3.18
</TABLE>
Page 19 of 103 Pages
<PAGE> 20
<TABLE>
<S> <C>
ERISA 3.14(a)(ii)
ERISA Plans 3.14(a)(ii)
Exchange Act 3.3
Excess Parachute Payment 3.14(k)
Fringe Benefit Plans 3.14(a)(iii)
HSR Act 3.3
Intellectual Property 3.19
IRS 3.14(f)
Leased Employees 4.14(n)
Licensed Intellectual Property 3.19
Loss Contingency 3.6
Medaphis Page 1
Medaphis Acquired Companies Plan 2.4(a)
Medaphis Balance Sheet 4.7
Medaphis Benefit Plan 4.14(a)
Medaphis Common Stock 2.1(a)
Medaphis Commission Reports 4.6
Medaphis Disclosure Letter Page 23
Medaphis ERISA Affiliate 4.14(b)
Medaphis Executives 9.8
Medaphis Financial Statements 4.7
Medaphis Hardware 4.16(a)
Medaphis Licensed Agreements 4.16(b)
Medaphis Licensed Software 4.16(b)
Medaphis Material Adverse Effect 4.1
Medaphis Merger Shares 2.6(a)
Medaphis Premises 4.18
Medaphis Proprietary Software 4.16(a)
Medaphis Software 4.16(b)
Medaphis Subsidiaries 4.5
Merger Page 1
NLRB 3.15
Noncompetition and Nonsolicition Agreement 6.2(h)
Non-Qualified Options 2.4(a)
Option Assumption Agreement 2.4(b)
Options 2.4(a)
PBGC 3.14(f)
Pending Acquisitions 5.1(e)
Pension Benefit Plan 3.14(n)
Premises 3.18
Price Waterhouse 3.6
Proprietary Intellectual Property 3.19
Proxy Statement 3.21
PW Comfort Letter 5.14
Qualified Beneficiaries 5.18
</TABLE>
Page 20 of 103 Pages
<PAGE> 21
<TABLE>
<S> <C>
Qualified Plans 3.14(g)
Referral Agency 3.15
Registration Rights Agreement 6.3(h)
Registration Statement 3.21
Relevant Business 5.8(b)
Reorganization Page 1
Scheduled Leases 3.17(b)
Securities Act 3.3
Shrink-wrap 3.20(b)
Specified Arrangements 3.14(a)(i)
Specified Employees 5.1(o)
Specified Stockholders 5.1(o)
Stockholders Agreement Page 1
Survival Period 9.4
Surviving Corporation 1.1
Termination Date Page 50
Total BSG Shares 2.6(a)
</TABLE>
Page 21 of 103 Pages
<PAGE> 22
EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number
- ------- ------
<S> <C>
Delaware Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Parties to Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Stockholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Directors of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . 1.4
Officers of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 1.5
Option Notice and Assumption Agreement . . . . . . . . . . . . . . . . . . . . . . 2.4
Post-Closing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.15
Tax Opinion of King & Spalding . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1(c)
Indemnification Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1(g)
Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3(h)
</TABLE>
Page 22 of 103 Pages
<PAGE> 23
MERGER AGREEMENT
THIS MERGER AGREEMENT, dated as of March 15, 1996 (the "Agreement"),
by and among MEDAPHIS CORPORATION, a Delaware corporation ("Medaphis"), BSGSUB,
INC., a Delaware corporation and a wholly owned subsidiary of Medaphis
("BSGSub"), and BSG CORPORATION, a Delaware corporation ("BSG").
WHEREAS, the respective Boards of Directors of Medaphis, BSGSub and
BSG each have approved this Agreement and the merger (the "Merger"), pursuant
to this Agreement and a certificate of merger in the form attached as Exhibit
1.1 proposed to be filed in the State of Delaware (the "Delaware Certificate of
Merger"), of BSGSub with and into BSG on the terms and conditions contained
herein and in accordance with the Delaware General Corporation Law (the
"DGCL");
WHEREAS, Medaphis, as the sole shareholder of BSGSub, has approved
this Agreement, the Merger and the transactions contemplated hereby pursuant to
action taken by unanimous written consent in accordance with the requirements
of the DGCL and the Certificate of Incorporation and the Bylaws of BSGSub;
WHEREAS, the parties to this Agreement intend that the Merger qualify
as a "reorganization" within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended;
WHEREAS, each of the stockholders of BSG listed on Exhibit 1.2 hereto
has duly executed and delivered to Medaphis a Stockholders Agreement relating
to the shares of capital stock of BSG owned by such stockholder in the form
attached as Exhibit 1.3 (the "Stockholders Agreement"); and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, the parties agree as follows:
Page 23 of 103 Pages
<PAGE> 24
ARTICLE 1.
THE MERGER
Section 1.1. Surviving Corporation. Subject to the provisions of this
Agreement and the DGCL, at the Effective Time, BSGSub shall be merged with and
into BSG, and the separate corporate existence of BSGSub shall cease. BSG shall
be the surviving corporation in the Merger (sometimes called the "Surviving
Corporation") and shall continue its corporate existence under the laws of the
State of Delaware. The Merger shall have the effects set forth in Section 259
of the DGCL.
Section 1.2. Certificate of Incorporation. The Certificate of
Incorporation of BSG shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter duly amended in accordance with its terms and the
DGCL.
Section 1.3. Bylaws. The Bylaws of BSG shall be the Bylaws of the
Surviving Corporation until thereafter duly amended in accordance with their
terms and the DGCL.
Section 1.4. Directors. The directors of the Surviving Corporation
shall consist of the individuals listed on Exhibit 1.4 hereto, such directors
to hold office from the Effective Time until their respective successors are
duly elected and qualified.
Section 1.5. Officers. The officers of the Surviving Corporation
shall consist of the individuals listed on Exhibit 1.5 hereto, such officers to
hold office from the Effective Time until their respective successors are duly
elected and qualified.
Section 1.6. Effective Time. If all of the conditions set forth in
Article 6 have been fulfilled or waived in accordance with the terms hereof and
this Agreement has not been terminated in accordance with Article 8, the
parties shall cause the Delaware Certificate of Merger to be properly executed
and filed on the Closing Date (as defined below) with the Secretary of State of
the State of Delaware. The Merger shall become effective as of the time of
filing of a properly executed Delaware Certificate of Merger. The date and time
when the Merger becomes effective is referred to as the effective time (the
"Effective Time").
Section 1.7. Tax-Free Reorganization. The Merger is intended to be a
reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), and this Agreement is intended to be a "plan
of reorganization" within the meaning of the regulations promulgated under
Section 368 of the Code.
2
Page 24 of 103 Pages
<PAGE> 25
ARTICLE 2.
CONVERSION OF SHARES; TREATMENT OF OPTIONS
Section 2.1. BSG Common Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder:
(a) Subject to Section 2.2, each share of common
stock, par value $0.001 per share, of BSG ("BSG Common Stock") issued
and outstanding immediately prior to the Effective Time (except for
Dissenting Shares and treasury shares) shall be converted, without
any further action, into the right to receive such number of shares
of voting common stock, par value $.01 per share, of Medaphis
("Medaphis Common Stock") as is equal to the Conversion Ratio.
(b) Each share of BSG Common Stock issued
immediately prior to the Effective Time that is then held in BSG's
treasury shall be canceled and retired and all rights in respect
thereof shall cease to exist, without any conversion thereof or
payment of any consideration therefor.
(c) Each share of common stock, par value $.01 per
share, of BSGSub that is issued and outstanding immediately prior to
the Effective Time shall be converted into one share of common stock,
par value $0.001 per share, of the Surviving Corporation.
Section 2.2. Fractional Shares. No scrip or fractional shares of
Medaphis Common Stock shall be issued in the Merger. All fractional shares of
Medaphis Common Stock to which a holder of BSG Common Stock (each a "BSG
Stockholder") immediately prior to the Effective Time would otherwise be
entitled at the Effective Time shall be aggregated. If a fractional share
results from such aggregation, a BSG Stockholder shall be entitled, after the
later of (a) the Effective Time or (b) the surrender of such BSG Stockholder's
Certificate(s) that represent such shares of BSG Common Stock, to receive from
Medaphis an amount in cash in lieu of such fractional share, based on the
Average Closing Price. For purposes of this Agreement, the "Average Closing
Price" shall be the arithmetic average of the closing price per share of
Medaphis Common Stock, as reported on the Nasdaq National Market, for each of
the ten consecutive trading days ending on the trading day immediately prior to
the Closing Date.
Section 2.3. Dissenting Shares. To the extent that appraisal rights
are available under Section 262 of the DGCL, shares of BSG Common Stock that
are issued and outstanding immediately prior to the Effective Time and that
have not been voted for adoption of the Merger and with respect to which
appraisal rights have been properly demanded in accordance with Section 262 of
the DGCL ("Dissenting Shares") shall not be converted into the right to receive
the consideration provided for in Sections 2.1 and 2.2 at or after the
Effective Time unless and until the holder of such shares becomes ineligible
for such appraisal. If a holder of Dissenting Shares becomes ineligible for
3
Page 25 of 103 Pages
<PAGE> 26
appraisal, then, as of the Effective Time or the occurrence of such event,
whichever later occurs, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to
receive the consideration provided for in Sections 2.1 and 2.2. If any BSG
Stockholder asserts the right to be paid for the fair value of such BSG Common
Stock as described above, BSG shall give Medaphis notice thereof and Medaphis
shall have the right to participate in all negotiations and proceedings with
respect to any such demands. BSG shall not, except with the prior written
consent of Medaphis, voluntarily make any payment with respect to, or settle or
offer to settle, any such demand for payment. Payment for Dissenting Shares
shall be made as required by the DGCL.
Section 2.4. Treatment of BSG Options and Warrants.
(a) At the Effective Time, Medaphis shall assume all
of BSG's rights and obligations with respect to stock options and
warrants held by employees, consultants, officers and directors of
BSG as set forth in the BSG Disclosure Letter, which are outstanding
on the date of this Agreement and unexercised at the Effective Time
(together, the "Options"), whether or not the Options are then
exercisable. Immediately following such assumption, Medaphis shall
substitute for such Options non-qualified options (the "Non-
Qualified Options") with exercise and vesting terms and conditions
matching those contained in the Options at the Effective Time; and
the Non-Qualified Options shall be granted under the Medaphis
Non-Qualified Stock Option Plan for Employees of Acquired Companies
(the "Medaphis Acquired Companies Plan") and the Non-Qualified
Options shall contain such other revisions to such terms and
conditions as Medaphis and BSG shall mutually agree upon. Each
Non-Qualified Option shall thereafter evidence the right to purchase
the number of shares of Medaphis Common Stock equal to the product
(rounded up or down as appropriate to a whole share) of (i) the
number of shares of BSG Common Stock covered by such Option
immediately prior to the Effective Time, multiplied by (ii) the
Conversion Ratio. The exercise price of such Non-Qualified Options
for each share of Medaphis Common Stock subject thereto shall be
equal to the quotient (rounded up or down as appropriate to a whole
cent) obtained by dividing (i) the per-share exercise price for
shares of BSG Common Stock subject to such Option immediately prior
to the Effective Time, by (ii) the Conversion Ratio.
(b) At least ten days prior to the Effective Time,
Medaphis shall deliver to each holder of an Option an Option Notice
and Assumption Agreement in the form attached as Exhibit 2.4 (the
"Option Assumption Agreement") setting forth Medaphis's assumption of
the Option and substitution of the Non-Qualified Option in accordance
with the terms of this Section 2.4. BSG shall not grant any options
under any plan or otherwise after the date of this Agreement.
Medaphis shall not be entitled to or required to substitute a
Non-Qualified Option for an Option in accordance with Section 2.4 (a)
until it has received from the holder of an Option a properly
executed and completed Option Assumption Agreement with respect to
the Option.
4
Page 26 of 103 Pages
<PAGE> 27
(c) Medaphis agrees to cause the shares of Medaphis
Common Stock issuable upon exercise of the Non-Qualified Options and
any other options of BSG that are assumed by Medaphis or are issued
by Medaphis in replacement of BSG options to be registered with the
Securities and Exchange Commission (the "Commission") on a Form S-8
Registration Statement as promptly following the Effective Time as is
reasonably practicable. Medaphis further agrees to cause the shares
of Medaphis Common Stock issuable upon exercise of the Non- Qualified
Options to be registered or exempt from the registration requirements
of all applicable state securities laws, rules and regulations.
(d) Approval by the stockholders of BSG of this
Agreement shall constitute authorization and approval of any and all
of the actions described in this Section 2.4.
Section 2.5. Exchange of BSG Common Stock.
(a) On or prior to the Closing Date, Medaphis shall
make available to each record holder who, as of the Effective Time,
was a holder of an outstanding certificate or certificates which
immediately prior to the Effective Time represented shares of BSG
Common Stock (the "Certificate" or "Certificates"), a form of letter
of transmittal and instructions for use in effecting the surrender of
the Certificates for payment therefor and conversion thereof.
Delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the
Certificates to Medaphis and the form of letter of transmittal shall
so reflect. Upon surrender to Medaphis of a Certificate, together
with a properly completed and executed letter of transmittal, the
holder of such Certificate is entitled to receive in exchange
therefor (i) one or more certificates as requested by the holder
(properly issued, executed and countersigned, as appropriate)
representing that number of whole fully paid and nonassessable shares
of Medaphis Common Stock to which such BSG Stockholder shall have
become entitled pursuant to the provisions of Section 2.1 and (ii) as
to any fractional share of Medaphis Common Stock, a check
representing the cash consideration to which such holder shall have
become entitled pursuant to Section 2.2. The Certificate so
surrendered shall forthwith be canceled. No interest will be paid or
accrued on the cash payable upon the surrender of the Certificates.
From the Effective Time until surrender in accordance with the
provisions of this Section 2.4, each Certificate shall represent for
all purposes only the right to receive the consideration provided in
Sections 2.1 and 2.2. All payments of respective shares of Medaphis
Common Stock that are made upon surrender of Certificates in
accordance with the terms hereof shall be deemed to have been made in
full satisfaction of rights pertaining to the shares of BSG Common
Stock evidenced by such Certificates.
(b) In the case of any lost, mislaid, stolen or
destroyed Certificate, the holder thereof may be required, as a
condition precedent to delivery to such holder of the consideration
described in Sections 2.1 and 2.2, to deliver to Medaphis a
reasonably satisfactory indemnity agreement as Medaphis may direct as
indemnity against any claim that
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may be made against Medaphis or the Surviving Corporation with
respect to the Certificate alleged to have been lost, mislaid, stolen
or destroyed.
(c) After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of
the shares of BSG Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for transfer,
they shall be canceled and exchanged for the consideration described
in Sections 2.1 and 2.2.
(d) Any shares of Medaphis Common Stock or cash due
former BSG Stockholders pursuant to Sections 2.1 and 2.2 that remains
unclaimed by such former BSG Stockholder for six months after the
Effective Time shall be held by Medaphis and any former holder of BSG
Common Stock who has not heretofore complied with Section 2.5(a)
shall thereafter look only to Medaphis for issuance of the number of
shares of Medaphis Common Stock and other consideration to which such
holder has become entitled pursuant to the provisions of Sections 2.1
and 2.2; except that neither Medaphis nor any party hereto shall be
liable to a former BSG Stockholder for any amount required to be paid
to a public official pursuant to any applicable abandoned property,
escheat or similar law.
Section 2.6. Conversion Amount and Adjustment Event.
(a) The "Conversion Ratio" shall be equal to such
fraction as is obtained by dividing the Medaphis Merger Shares by the
Total BSG Shares; and such fraction shall be used for the purposes of
this Agreement by calculating the quotient (expressed to four decimal
places) of such fraction. The "Medaphis Merger Shares" shall be equal
to the sum of (i) Ten Million plus (ii) such number of whole shares
of Medaphis Common Stock as is obtained by dividing the aggregate
exercise price of the Options by the closing price per share of
Medaphis Common Stock, as reported on the Nasdaq National Market on
the trading date immediately preceding the date of this Agreement.
The "Total BSG Shares" shall be equal to the sum of (i) 16,984,652
(the number of shares of BSG Common Stock outstanding on the date of
this Agreement), (ii) 15,794,400 (the number of shares of BSG Common
Stock to be issued upon conversion prior to the Effective Time of the
BSG Preferred Stock outstanding on the date of this Agreement), (iii)
1,600,000 and (iv) a number equal to the number of whole shares of
BSG Common Stock issuable upon exercise of all options and warrants
to purchase shares of BSG Common Stock that are outstanding on the
date of this Agreement.
(b) If after the date hereof and prior to the Effective
Time, Medaphis shall have declared a stock split (including a reverse
split) of Medaphis Common Stock or a dividend payable in Medaphis
Common Stock, or any other distribution of Medaphis Common Stock to
holders of Medaphis Common Stock with respect to their Medaphis
Common Stock (including such a distribution or dividend made in
connection with a recapitalization, reclassification, merger,
consolidation, reorganization or similar transaction), then the
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Conversion Ratio shall be appropriately adjusted to reflect such
stock split or dividend or other distribution of securities.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF BSG
With such exceptions as are set forth in a letter (the "BSG
Disclosure Letter") delivered by BSG to Medaphis prior to the execution hereof,
BSG represents and warrants to Medaphis as follows:
Section 3.1. Organization. Each of BSG and the BSG Subsidiaries (as
defined below) is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, as applicable, and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted. BSG and each of the BSG Subsidiaries is
duly qualified to transact business, and is in good standing, as a foreign
corporation or limited liability company in each jurisdiction where the
character of its activities requires such qualification, except where the
failure to so qualify would not have a material adverse effect on the assets,
liabilities, results of operations, financial condition, business or prospects
of BSG and the BSG Subsidiaries taken as a whole (a "BSG Material Adverse
Effect"). BSG has made available to Medaphis accurate and complete copies of
the Certificate or Articles of Incorporation and Bylaws or other governing
documents, as currently in effect, of BSG and each of the BSG Subsidiaries, and
has made available to Medaphis the minute books and stock records of each
thereof. The BSG Disclosure Letter contains a true and correct list of the
jurisdictions in which BSG or any of the BSG Subsidiaries is qualified to do
business as a foreign corporation or limited liability company.
Section 3.2. Authorization. BSG has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement and to consummate the Merger and the other transactions
contemplated hereby. As of the Closing, the execution and delivery of this
Agreement by BSG and the performance by BSG of its obligations hereunder and
the consummation of the Merger and the other transactions provided for herein
will have been duly and validly authorized by all necessary corporate action on
the part of BSG. The Board of Directors of BSG has approved the execution,
delivery and performance of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby. This Agreement has been duly
executed and delivered by BSG and constitutes the legal, valid and binding
agreement of BSG, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles and
the discretion of courts in granting equitable remedies.
Section 3.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the Merger and
the other transactions contemplated by this Agreement and the fulfillment of
and compliance with the terms and conditions of this Agreement do not and will
not, with the passing of time or the giving of notice or both, violate or
conflict with, constitute a breach of or default under, result in the loss of
any material benefit
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under, or permit the acceleration of any obligation under, (i) any term or
provision of the Articles or Certificate of Incorporation or Bylaws of BSG or
any of the BSG Subsidiaries, (ii) any BSG Material Contract, (iii) any
judgment, decree or order of any court or governmental authority or agency to
which BSG or any of the BSG Subsidiaries is a party or by which BSG or any of
the BSG Subsidiaries or any of their respective properties is bound, or (iv)
any statute, law, regulation or rule applicable to BSG or any of the BSG
Subsidiaries, so as to have in the case of subsections (ii) through (iv) above,
a BSG Material Adverse Effect. Except for compliance with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), applicable state securities laws and the filing and
recordation of the Certificate of Merger as required by the DGCL, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental agency or public or regulatory unit, agency, body or
authority with respect to BSG or any of the BSG Subsidiaries is required in
connection with the execution, delivery or performance of this Agreement by BSG
or the consummation of the transactions contemplated by this Agreement by BSG,
the failure to obtain which would have a BSG Material Adverse Effect.
Section 3.4. Capitalization. The authorized capital stock of BSG
consists of 50,000,000 shares of common stock, par value $.001 per share ("BSG
Common Stock"), and 25,000,000 shares of preferred stock, $.001 par value per
share ("BSG Preferred Stock"), with 7,008,800 shares designated as Series A
Preferred Stock and 13,294,200 shares designated as Series B Preferred Stock.
At March 15, 1996, there were 16,984,652 shares of BSG Common Stock issued and
outstanding. At March 15, 1996, there were 2,500,200 shares of Series A
Preferred Stock and 13,294,200 shares of Series B Preferred Stock issued and
outstanding. Each share of BSG Common Stock and BSG Preferred Stock outstanding
at March 15, 1996 is duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights and are owned by the BSG
stockholders as set forth in the BSG Disclosure Letter and no such shares have
been issued in violation of any federal or state securities law. On or prior to
the Effective Time, all of the issued and outstanding shares of BSG Preferred
Stock will have been duly and validly converted into the number of shares of
BSG Common Stock specified in their respective Certificates of Designation.
Except as set forth in the BSG Disclosure Letter, there are no shares of
capital stock of BSG outstanding, and there are no subscriptions, options,
convertible securities, calls, puts, rights, warrants or other agreements,
claims or commitments of any nature whatsoever obligating BSG to purchase,
redeem, issue, transfer, deliver or sell, or cause to be purchased, redeemed,
issued, transferred, delivered or sold, additional shares of the capital stock
or other securities of BSG or obligating BSG to grant, extend or enter into any
such agreement or commitment. No prior offer, issue, redemption, call,
purchase, sale, transfer, negotiation or other transaction of any nature with
respect to the capital stock or equity interests of BSG, or any corporation or
organization which has been merged into BSG, has given or may give rise to any
valid claim or action by any person which is enforceable against BSG, the
Surviving Corporation or any of their respective affiliates and, to the best
knowledge of the BSG Executives (as hereinafter defined), no fact or
circumstance exists which could give rise to any such right, claim or action on
behalf of any person.
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Section 3.5. Subsidiaries. The BSG Disclosure Letter sets forth a
true and complete list of all (i) corporations or other entities of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are, directly or indirectly, owned by BSG, and (ii) partnerships in
which BSG or a BSG Subsidiary (as defined) is (A) a general or limited partner
and (B) entitled to receive more than 50% of the assets of any such partnership
on such partnership's dissolution (collectively, the "BSG Subsidiaries"), the
jurisdiction in which each BSG Subsidiary is incorporated or organized and all
shares of capital stock or of the ownership interests authorized, issued and
outstanding of each BSG Subsidiary. The outstanding shares of capital stock or
other equity interest of each BSG Subsidiary have been duly authorized and are
validly issued, fully paid and nonassessable. All shares of capital stock or
other equity interest of each BSG Subsidiary owned by BSG or any BSG Subsidiary
are set forth in the BSG Disclosure Letter and are owned by BSG, directly or
indirectly, free and clear of all liens, encumbrances, equities or claims. The
BSG Disclosure Letter also sets forth a true and complete list of all
corporations, partnerships and other entities in which BSG or a BSG Subsidiary
owns an equity interest having a value in excess of $10,000, other than the BSG
Subsidiaries or any mutual funds or publicly traded companies. All shares of
capital stock or other equity interest of each such entity are set forth in the
BSG Disclosure Letter and are owned by BSG or a BSG Subsidiary, as applicable,
free and clear of all liens, encumbrances, equities or claims.
Section 3.6. Financial Statements. BSG has made available to Medaphis
the audited balance sheets of BSG and its consolidated subsidiaries as of
December 31, 1993, December 1994 and December 1995 (the December 31, 1995
balance sheet shall be referred to as the "1995 Balance Sheet"), and the
related audited statements of income, changes in stockholders' equity and cash
flows for the respective fiscal year(s) then ended, including the notes
thereto, examined by and accompanied by the report of Price Waterhouse, LLP,
independent public accountants ("Price Waterhouse"). All of the foregoing
financial statements are collectively referred to as the "BSG Financial
Statements." The BSG Financial Statements have been prepared from, and are in
accordance with, the books and records of BSG and its consolidated subsidiaries
and, as applicable, present fairly the financial position, results of
operations, changes in stockholders' equity and cash flows of BSG and its
consolidated subsidiaries as of the dates and for the periods indicated, in
each case in conformity with generally accepted accounting principles,
consistently applied. The BSG Disclosure Letter sets forth a true and complete
list of all loss contingencies (within the meaning of Statement of Financial
Accounting Standards No. 5) (a "Loss Contingency") of BSG existing as of
December 31, 1995 exceeding $50,000 in the case of any single loss contingency
or $250,000 in the case of all loss contingencies.
Section 3.7. Absence of Certain Changes.
(a) Since December 31, 1995, there has not been (i)
any change in the assets, liabilities, results of operations,
financial condition, business or prospects of BSG and the BSG
Subsidiaries, taken as a whole, that has had a BSG Material Adverse
Effect, (ii) any damage, destruction, loss or casualty to property or
assets of BSG or any of the BSG Subsidiaries, whether or not covered
by insurance, which property or assets are material to
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the operations or business of BSG and the BSG Subsidiaries, taken as
a whole, that has had a BSG Material Adverse Effect, (iii) any
declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) in respect of the capital stock
of BSG, any redemption or other acquisition by BSG of any of the
capital stock of BSG or any of the BSG Subsidiaries or any split,
combination or reclassification of shares of capital stock declared
or made by BSG or (iv) any agreement to do any of the foregoing.
(b) Since December 31, 1995, there have not been (i)
any extraordinary losses suffered which, in the aggregate, have
resulted in a BSG Material Adverse Effect, (ii) except as would not
have a BSG Material Adverse Effect, any assets mortgaged, pledged or
made subject to any lien, charge or other encumbrance, (iii) any
material liability or obligation (absolute, accrued or contingent)
incurred or any material bad debt, contingency or other reserve
increase suffered, except, in each such case, in the ordinary course
of business and consistent with past practice, (iv) any claims,
liabilities or obligations (absolute, accrued or contingent) paid,
discharged or satisfied, other than the payment, discharge or
satisfaction, in the ordinary course of business and consistent with
past practice, of claims, liabilities and obligations reflected or
reserved against in the BSG Financial Statements or incurred in the
ordinary course of business and consistent with past practice, (v)
any material guaranteed checks, notes or accounts receivable written
off as uncollectible, except write-offs in the ordinary course of
business and consistent with past practice, (vi) any write down
(under Statement of Financial Accounting Standards No. 121 or
otherwise) of the value of any material asset or investment on BSG's
books or records, except for depreciation and amortization taken in
the ordinary course of business and consistent with past practice,
(vii) any cancellation of any material debts or waiver of any
material claims or rights of substantial value, or sale, transfer or
other disposition of any material properties or assets (real,
personal or mixed, tangible or intangible) of substantial value,
except, in each such case, in transactions in the ordinary course of
business and consistent with past practice, which, in the aggregate,
have resulted in a BSG Material Adverse Effect, (viii) any single
capital expenditure or commitment in excess of $50,000 for additions
to property or equipment, or aggregate capital expenditures and
commitments in excess of $100,000 (on a consolidated basis) for
additions to property or equipment, (ix) any Loss Contingency or Loss
Contingencies of BSG which, in the aggregate, have resulted in a BSG
Material Adverse Effect, (x) any material transactions entered into
other than in the ordinary course of business, (xi) any agreements to
do any of the foregoing, or (xii) any other events, developments or
conditions (including any suit, action, claim, proceeding or
investigation) of any character that have had or are reasonably
likely to have a BSG Material Adverse Effect.
Section 3.8. Legal Proceedings. There are no suits, actions, claims,
proceedings or investigations pending, or, to the best knowledge of the BSG
Executives, threatened against, relating to or involving BSG or any of the BSG
Subsidiaries (or any of its officers or directors) before any court, arbitrator
or administrative or governmental body, which, if finally determined adversely,
are reasonably likely, individually or in the aggregate, to have a BSG Material
Adverse Effect. As of
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March 15, 1996, all pending suits, actions, claims, proceedings or
investigations relating to or involving BSG or any of the BSG Subsidiaries (or
any of its officers or directors) before any court, arbitrator or
administrative or governmental body are adequately provided for in the 1995
Balance Sheet if and to the extent such a provision is required by generally
accepted accounting principles. Neither BSG nor any of the BSG Subsidiaries is
subject to any judgment, decree, injunction, rule or order of any court, and,
to the best knowledge of the BSG Executives, neither BSG nor any of the BSG
Subsidiaries is subject to any governmental restriction applicable to BSG or
any of the BSG Subsidiaries, which is reasonably likely (i) to have a BSG
Material Adverse Effect or (ii) to cause a material limitation on Medaphis's
ability to operate the business of BSG and the BSG Subsidiaries after the
Closing.
Section 3.9. Compliance with Law. Each of BSG and the BSG
Subsidiaries has all material authorizations, approvals, licenses and orders of
and from all governmental and regulatory officers and bodies necessary to carry
on its business as it is currently being conducted, to own or hold under lease
the properties and assets it owns or holds under lease and to perform all of
its obligations under the agreements to which it is a party, and each of BSG
and the BSG Subsidiaries has been and is in compliance with all applicable
laws, regulations and administrative orders of any country, state or
municipality or of any subdivision of any thereof to which its business and its
employment of labor or its use or occupancy of properties or any part thereof
are subject, the failure to obtain or the violation of which would have a BSG
Material Adverse Effect.
Section 3.10. Material Contracts. The BSG Disclosure Letter contains
a correct and complete list of the following (the "BSG Material Contracts"):
(a) all bonds, debentures, notes, mortgages,
indentures or guarantees securing indebtedness in excess of $50,000
individually to which BSG or any of the BSG Subsidiaries is a party
or by which any of their properties or assets (real, personal or
mixed, tangible or intangible) are bound;
(b) all outstanding loans and credit commitments to
BSG or any of the BSG Subsidiaries covering indebtedness in excess of
$50,000 individually;
(c) all contracts or agreements which limit or
restrict in a substantial manner (i) BSG or the BSG Subsidiaries or
any of the BSG Executives from engaging in any business in any
jurisdiction or (ii) others from competing with BSG or the BSG
Subsidiaries in any jurisdiction, except for contracts between BSG or
a BSG Subsidiary and a current or former employee of BSG or a BSG
Subsidiary;
(d) all contracts or agreements requiring BSG to
register its capital stock or securities under federal or state
securities law;
(e) all agreements or documentation evidencing
currently outstanding loans or advances in excess of $50,000
individually made by BSG or any of the BSG Subsidiaries
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to or on behalf of its clients, other than accounts receivables
incurred in the ordinary course of business; and
(f) all existing contracts and commitments (other
than (i) those of the type described in subparagraphs (a), (b), (c),
(d) or (e) of this Section 3.9, (ii) agreements, contracts or
commitments pursuant to which BSG or any of the BSG Subsidiaries
provides goods or services to its clients, (iii) the BSG Benefit
Plans and (iv) any leases with respect to real or personal property)
to which BSG or any of the BSG Subsidiaries is a party or by which
their properties or assets may be bound involving an annual
commitment or annual payment by any party thereto of more than
$50,000 individually.
True and complete copies of all BSG Material Contracts, including all
amendments thereto, have been made available to Medaphis. The BSG Material
Contracts are valid and enforceable in accordance with their respective terms
with respect to BSG and, to the knowledge of the BSG Executives, valid and
enforceable in accordance with their respective terms with respect to any other
party thereto, in each case to the extent material to the business and
operations of BSG and the BSG Subsidiaries taken as a whole and subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles and
the discretion of courts in granting equitable remedies. Except for events or
occurrences, the consequences of which, individually or in the aggregate, would
not have a BSG Material Adverse Effect, there is not under any of the BSG
Material Contracts any existing breach, default or event of default by BSG or
any of the BSG Subsidiaries or event that with notice or lapse of time or both
would constitute a breach, default or event of default by BSG or any of the BSG
Subsidiaries, nor do the BSG Executives know of, and neither BSG nor any of the
BSG Subsidiaries has received notice of, or made a claim with respect to, any
breach or default by any other party thereto.
Section 3.11. BSG Client Contracts. The BSG Disclosure Letter sets
forth a true and complete list of all agreements, contracts or commitments
pursuant to which BSG or any of the BSG Subsidiaries provides goods or services
to its clients which (i) produced annual payments in the year ending December
31, 1995 of at least $400,000 to BSG or a BSG Subsidiary or (ii) which BSG
reasonably expects to produce annual payments in excess of $1,000,000 in 1996
(the "BSG Client Contracts"). Except for provisions in the BSG Client Contracts
granting unilateral termination rights to BSG clients upon notice to BSG, the
execution, delivery and performance of this Agreement by BSG and the
consummation of the transactions contemplated hereby will not, with the passing
of time or the giving of notice or both, violate or constitute a default or
give rise to a termination right under any BSG Client Contract. True and
complete copies of all written BSG Client Contracts, including all amendments
thereto, have been made available to Medaphis. The BSG Client Contracts are
valid and enforceable in accordance with their respective terms with respect to
BSG or the BSG Subsidiaries, as applicable, and, to the knowledge of the BSG
Executives, are valid and enforceable in accordance with their respective terms
with respect to any other party thereto, in each case except as would not have
a BSG Material Adverse Effect. Except for events or occurrences, the
consequences of which, individually or in the aggregate, would not have a BSG
Material Adverse Effect, there is not under BSG Client Contracts any existing
breach, default or event of default by
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BSG or any of the BSG Subsidiaries, or event that with notice or lapse of time
or both would constitute a breach, default or event of default by BSG or any of
the BSG Subsidiaries, nor do the BSG Executives know of, and neither BSG nor
any of the BSG Subsidiaries has received notice of, or made a claim with
respect to, any breach or default by any other party.
Section 3.12. Tax Returns; Taxes. Each of BSG and the BSG
Subsidiaries has duly filed all federal, state, local and foreign tax returns
required to be filed by it and has duly paid or made adequate provision for the
payment of all taxes which are due and payable pursuant to such returns or
pursuant to any assessment with respect to taxes in such jurisdictions, whether
or not in connection with such returns. The liability for taxes reflected in
the 1995 Balance Sheet is sufficient for the payment of all unpaid taxes,
whether or not disputed, that are accrued or applicable for the period ended
December 31, 1995 and for all years and periods ended prior thereto. All
deficiencies asserted as a result of any examinations by the Internal Revenue
Service or any other taxing authority have been paid, fully settled or
adequately provided for in the 1995 Balance Sheet. There are no pending claims
asserted for taxes of BSG or any BSG Subsidiary or outstanding agreements or
waivers extending the statutory period of limitation applicable to any tax
return of BSG or any BSG Subsidiary for any period. BSG and each of the BSG
Subsidiaries have made all estimated income tax deposits and all other required
tax payments or deposits and has complied for all prior periods in all material
respects with the tax withholding provisions of all applicable federal, state,
local and other laws. BSG and each of the BSG Subsidiaries have made available
to Medaphis true, complete and correct copies of their federal income tax
returns for the last three taxable years and made available such other tax
returns requested by Medaphis.
Section 3.13. Officers, Directors and Employees. The BSG Disclosure
Letter contains a true and complete list of all of the officers and directors
of BSG and each BSG Subsidiary, specifying their office and annual rate of
compensation, and a true and complete list of all of the employees of BSG and
each BSG Subsidiary as of the date hereof with whom BSG or a BSG Subsidiary, as
applicable, has a written employment agreement or, to the best knowledge of the
BSG Executives, to whom BSG or a BSG Subsidiary, as applicable, has made verbal
commitments involving material terms which are binding on it and that involve
annual compensation to such employees individually of at least $50,000
(including any estimated bonuses payable thereto). The employment agreements
listed in the BSG Disclosure Letter (except for the employment agreements
marked on the BSG Disclosure Letter as "NOT 3.13") are terminable by BSG or the
applicable BSG Subsidiary without financial penalty or continuing obligation on
the part of BSG or the applicable BSG Subsidiary except as would not result in
a BSG Material Adverse Effect.
Section 3.14. Employee Benefit Plans.
(a) Definition of Benefit Plans. For purposes of
this Section 3.14, the term "BSG Benefit Plan" means any plan,
program, arrangement, fund, policy, practice or contract which,
through which or under which BSG or any BSG ERISA Affiliate provides
benefits or compensation to or on behalf of employees or former
employees of BSG or any
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BSG ERISA Affiliate, whether formal or informal, whether or not
written, including but not limited to the following:
(i) Arrangements - any bonus, incentive
compensation, stock option, deferred compensation, commission,
severance pay, golden parachute or other compensation plan or
rabbi trust ("Specified Arrangements");
(ii) ERISA Plans - any "employee benefit plan"
(as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), including, but
not limited to, any multiemployer plan (as defined in Section
3(37) and Section 4001(a) (3) of ERISA), defined benefit plan,
profit sharing plan, money purchase pension plan, 401(k) plan,
savings or thrift plan, or any plan, fund, program,
arrangement or practice providing for medical (including
post-retirement Medical), hospitalization, accident, sickness,
disability, or life insurance benefits ("ERISA Plans"); and
(iii) Other Employee Fringe Benefits - any stock
purchase, vacation, scholarship, sick days, day care, prepaid
legal services, dependent care or other fringe benefits plans,
programs, arrangements, contracts or practices ("Fringe
Benefit Plans").
(b) BSG ERISA Affiliate. For purposes of this Section
3.14, the term "BSG ERISA Affiliate" means each trade or business
(whether or not incorporated) which together with BSG is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code.
(c) Identification of Benefits Plans. Except for BSG
Benefit Plans which have been terminated and with respect to which
neither BSG nor any BSG ERISA Affiliate has any financial,
administrative or other liability, obligation or responsibility, BSG
does not maintain, nor has it at any time established or maintained,
nor has it at any time been obligated to make, or otherwise made,
contributions to or under or otherwise participated in any BSG Benefit
Plan.
(d) Compliance. Each BSG Benefit Plan maintained by BSG
or a BSG ERISA Affiliate has been maintained, by its terms and in
operation, in all material respects in accordance with all applicable
laws, including (to the extent applicable) Code Section 4980B.
Further, there has been no failure to comply with applicable ERISA or
other requirements concerning the filing of reports, documents and
notices with the Secretary of Labor and the Secretary of Treasury or
the furnishing of such documents to participants or beneficiaries that
could subject any BSG Benefit Plan, BSG or any BSG ERISA Affiliate to
any material civil or criminal sanction.
(e) MEPPA Liability/Post-Retirement Medical Benefits.
Neither BSG nor any BSG ERISA Affiliate maintains, or has at anytime
established or maintained, or has at any
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time been obligated to make, or made, contributions to or under any
multiemployer plan (as defined in Section 3(37) and Section 4001(a)(3)
of ERISA). BSG does not maintain, nor has at any time established or
maintained, nor has at any time been obligated to make, or made,
contributions to or under any plan which provides post-retirement
Medical or health benefits with respect to employees of BSG. There is
no lien upon any property of BSG or any BSG ERISA Affiliate
outstanding pursuant to Section 412(n) of the Code in favor of any BSG
Benefit Plan. No assets of BSG or any BSG ERISA Affiliate have been
provided as security for any BSG Benefit Plan pursuant to Section
401(a) (29) of the Code.
(f) Documentation. BSG has made available to Medaphis a
true and complete copy of the following documents, if applicable, with
respect to each BSG Benefit Plan identified in BSG Disclosure Letter:
(1) all documents, including any insurance contracts and trust
agreements, setting forth the terms of BSG Benefit Plan, or if there
are no such documents evidencing BSG Benefit Plan, a full description
of BSG Benefit Plan, (2) the ERISA summary plan description and any
other summary of plan provisions provided to participants or
beneficiaries for each such BSG Benefit Plan, (3) the annual reports
filed for the most recent three plan years and most recent financial
statements or periodic accounting or related plan assets with respect
to each BSG Benefit Plan, (4) the most recent favorable determination,
notification letter, opinion or ruling from the Internal Revenue
Service ("IRS") for each BSG Benefit Plan, the assets of which are
held in trust, to the effect that such trust is exempt from federal
income tax, and any outstanding request for a determination letter and
(5) each opinion or ruling from the Department of Labor or the Pension
Benefit Guaranty Corporation ("PBGC") with respect to any such BSG
Benefit Plan.
(g) Qualified Status. Each BSG Benefit Plan that is
funded through a trust or insurance contract has satisfied in all
material respects, by its terms and in its operation, all applicable
requirements for an exemption from federal income taxation under
Section 501(a) of the Code. Except for the plans identified as
qualified plans in the BSG Disclosure Letter (the "Qualified Plans")
neither BSG nor any BSG ERISA Affiliate maintains or previously
maintained a BSG Benefit Plan which meets or was intended to meet the
requirements of Section 401(a) of the Code. Except as would not have a
BSG Material Adverse Effect, any determination, opinion or
notification letter issued by the IRS to the effect that the Qualified
Plans qualify under Section 401(a) of the Code and that the related
trust is exempt from taxation under Section 501(a) of the Code remains
in effect and has not been revoked. Each of the Qualified Plans
currently complies in form in all material respects with the
requirements under Section 401(a) of the Code, other than changes
required by statutes, regulations and rulings for which amendments are
not yet required. Each of the Qualified Plans has been administered
according to its terms (except for those terms which are inconsistent
with the changes required by statutes, regulations, and rulings for
which changes are not yet required to be made, in which case the
Qualified Plans have been administered in accordance with the
provisions of those statutes, regulations and rulings) and in
accordance with the requirements of Section 401(a) of the Code. The
Qualified Plans have been tested for compliance with, and
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in all material respects have satisfied the requirements of, Section
401(k)(3) and 401(m)(2) of the Code, if applicable, for each plan year
within the time periods permitted by law.
(h) Legal Actions. Except as would not have a BSG
Material Adverse Effect, there are no actions, audits, suits or claims
known to BSG which are pending or, to the knowledge of the BSG
Executives, threatened against any BSG Benefit Plan, any fiduciary of
any of the BSG Benefit Plans with respect to the BSG Benefit Plans or
against the assets of any of the BSG Benefit Plans, except claims for
benefits made in the ordinary course of the operation of such plans.
(i) Funding. BSG and each BSG ERISA Affiliate has made in
all material respects full and timely payment of all amounts required
to be contributed under the terms of each BSG Benefit Plan and
applicable law or required to be paid as expenses under such BSG
Benefit Plan and no excise taxes are assessable as a result of any
nondeductible or other contributions made or not made to a BSG Benefit
Plan. The assets of all BSG Benefit Plans which are required under
applicable laws to be held in trust are in fact held in trust, and the
assets of each such BSG Benefit Plan equal or exceed the liabilities
of each such plan. The liabilities of each other plan are in all
material respects properly and accurately reported on the financial
statements and records of BSG. The assets of each BSG Benefit Plan are
reported at their fair market value on the books and records of each
plan.
(j) Liabilities. Neither BSG nor any BSG ERISA Affiliate
is subject to any material liability, tax or penalty whatsoever to any
person whomsoever as a result of BSG's or any BSG ERISA Affiliate's
engaging in a prohibited transaction under ERISA or the Code, and BSG
has no knowledge of any circumstances which reasonably might result in
any such material liability, tax or penalty as a result or a breach of
fiduciary duty under ERISA.
(k) Excess Parachute Payments. No payment required to be
made to any employee associated with BSG as a result of the
transactions contemplated hereby under any contract or otherwise will,
if made, constitute an "excess parachute payment" within the meaning
of Section 280G of the Code.
(l) COBRA. BSG and each BSG ERISA Affiliate have complied
in all material respects with the continuation coverage requirements
of Section 1001 of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, and ERISA Sections 601 through 608.
(m) No Acceleration of Liability Under Benefit Plans. The
consummation of the transactions contemplated hereby will not
accelerate or increase any liability under any BSG Benefit Plan
because of an acceleration or increase of any of the rights or
benefits to which employees of BSG or any BSG ERISA Affiliate may be
entitled thereunder.
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(n) Leased Employees. To the knowledge of the BSG
Executives, BSG has made no representations or warranties (whether
written or oral, express or implied) contractually or otherwise to any
client or customer of BSG that BSG employees rendering services to
such client or customer are not "leased employees" (within the meaning
of Section 414(n) of the Code) or that such employees would not be
required to participate under any pension benefit plan (within the
meaning of Section 3(2) of ERISA) (a "Pension Benefit Plan") of such
client or customer of BSG relating either to (a) providing benefits to
employees of BSG under a Pension Benefit Plan of BSG or (b) making
contributions to or reimbursing such client or customer for any
contributions made to a Pension Benefit Plan of such client or
customer on behalf of employees of BSG.
(o) Defined Benefit Plans/Money Purchase Plans. Neither
BSG nor any BSG ERISA Affiliate maintains or contributes or has
maintained or contributed to an "employee benefit pension plan" within
the meaning of Section 3(2) of ERISA that is or was subject to Title
IV of ERISA or Section 412 of the Code.
Section 3.15. Labor Relations. Each of BSG and the BSG Subsidiaries is
in compliance in all material respects with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours, and is not engaged in any unfair labor or unlawful
employment practice. Except as would not result in a BSG Material Adverse
Effect, individually or in the aggregate, there is no (i) unlawful employment
practice discrimination charge involving BSG or any BSG Subsidiary pending
before the Equal Employment Opportunity Commission ("EEOC"), EEOC recognized
state "referral agency" or any other governmental agency; (ii) unfair labor
practice charge or complaint against BSG or any BSG Subsidiary pending before
the National Labor Relations Board ("NLRB"); (iii) labor strike, dispute,
slowdown or stoppage actually pending or, to the best knowledge of the BSG
Executives, threatened against or involving or affecting BSG or any BSG
Subsidiary and no NLRB representation question exists respecting any of its
employees; (iv) grievance or arbitration proceeding pending against BSG or any
BSG Subsidiary and no written claim therefor exists; or (v) collective
bargaining agreement binding on BSG or any BSG Subsidiary.
Section 3.16. Insurance. Each of BSG and the BSG Subsidiaries has
provided to Medaphis a true and complete list of its current insurance
coverages, including names of carriers, amounts of coverage and premiums
therefor. BSG believes that each of BSG and the BSG Subsidiaries has been and
is insured with respect to its properties and the conduct of its business in
such amounts and against such risks as are reasonable in relation to its
business and will use its reasonable efforts to maintain such insurance at
least through the Effective Time. BSG has made available to Medaphis true and
complete copies of all insurance policies covering each of BSG and the BSG
Subsidiaries, their properties, assets, employees or operations.
Section 3.17. Title to Properties and Related Matters.
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(a) Each of BSG and the BSG Subsidiaries has good and
valid title to or valid leasehold interests in its properties
reflected in the 1995 Balance Sheet or acquired after the date thereof
(other than properties sold or otherwise disposed of in the ordinary
course of business), and all of such properties are held free and
clear of all title defects, liens, encumbrances and restrictions,
except, with respect to all such properties, (a) mortgages and liens
securing debt reflected as liabilities on the 1995 Balance Sheet and
(b) (i) liens for current taxes and assessments not in default, (ii)
mechanics', carriers', workmen's, repairmen's, statutory or common law
liens either not delinquent or being contested in good faith, and
(iii) liens, mortgages, encumbrances, covenants, rights of way,
building or use restrictions, easements, exceptions, variances,
reservations and other matters or limitations of any kind, if any,
which either individually or in the aggregate do not have a BSG
Material Adverse Effect. Since December 31, 1995, neither BSG nor any
BSG Subsidiary has granted any security interests or other liens upon
or factored the accounts receivable of BSG or any BSG Subsidiary.
(b) The BSG Disclosure Letter sets forth a true and
complete list of all leases and agreements of BSG or any BSG
Subsidiary granting possession of or rights to real or personal
property with a value of at least $50,000, or in the case of real
property, which provide for annual lease payments in excess of
$100,000 (the "Scheduled Leases"). All such Scheduled Leases are in
full force and effect and constitute the legal, valid, binding and
enforceable obligations of BSG or a BSG Subsidiary, as applicable, and
are legal, valid, binding and, to the knowledge of the BSG Executives,
enforceable in accordance with their respective terms with respect to
each other party thereto, in each case to the extent material to the
business and operations of BSG and the BSG Subsidiaries taken as a
whole and subject in each case to applicable bankruptcy, insolvency
and other similar laws affecting the enforcement of creditors' rights
generally, general equitable principles and the discretion of courts
in granting equitable remedies. Except as would not have a BSG
Material Adverse Effect, each of BSG and the BSG Subsidiaries has
physical possession of all equipment and other assets which are
covered by Scheduled Leases. Except as would not have a BSG Material
Adverse Effect, there are no existing defaults of BSG or any BSG
Subsidiary with respect to such Scheduled Leases or, to the best
knowledge of the BSG Executives, of any of the other parties thereto
(or events or conditions which, with notice or lapse of time, or both,
would constitute a default).
Section 3.18. Environmental Matters. To the best knowledge of the BSG
Executives, each of BSG and the BSG Subsidiaries is in compliance in all
material respects with all statutes, regulations and ordinances relating to the
protection of human health and the environment including, without limitation,
the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Section 11001 et seq., the regulations developed pursuant to these statutes and
the corresponding state and local statutes, ordinances and regulations. There
has been no release by BSG or any BSG Subsidiary or, to the actual knowledge of
the BSG Executives, by any other person of a hazardous
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substance as that term is defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601(14), into the
environment at any property owned or leased by BSG or any BSG Subsidiary (the
"Premises") including, without limitation, any such release in the soil or
groundwater underlying the Premises. To the actual knowledge of the BSG
Executives, there is no asbestos, polychlorinated biphenyls or underground
storage tanks located on the Premises and there have been no releases of
asbestos, polychlorinated biphenyls or materials stored in underground storage
tanks, including, without limitation, petroleum or petroleum-based materials.
Except as would not have a BSG Material Adverse Effect, neither BSG nor any BSG
Subsidiary has received notice of any violation of any environmental statute or
regulation nor has it been advised of any claim or liability pursuant to any
environmental statute or regulation brought by any governmental agency or
private party (in each case, an "Environmental Notice").
Section 3.19. Patents, Trademarks, Trade Names. The BSG Disclosure
Letter sets forth a true and complete list of (i) all patents, trademarks,
trade names (including all federal and state registration pertaining thereto)
and registered copyrights owned by BSG or any BSG Subsidiary and that are
material to their businesses (collectively, the "Proprietary Intellectual
Property") and (ii) all patents, trademarks, trade names, copyrights,
technology and processes used by BSG or any BSG Subsidiary in their businesses
which are material to their businesses and are used pursuant to a license or
other right granted by a third party (collectively, the "Licensed Intellectual
Property", and together with the Proprietary Intellectual Property referred to
as "Intellectual Property"). A true and complete list of all such licenses with
respect to Licensed Intellectual Property is set forth in the BSG Disclosure
Letter. To the best knowledge of the BSG Executives, each of the federal and
state registrations pertaining to the Proprietary Intellectual Property is
valid and in full force and effect. BSG or a BSG Subsidiary owns, or has the
right to use pursuant to valid and effective agreements, all Intellectual
Property, and the consummation of the transactions contemplated hereby will not
materially adversely alter or impair any such rights. No claims are pending
against BSG or a BSG Subsidiary by any person with respect to the use of any
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement relating to the same that would be
likely to result in a BSG Material Adverse Effect; and to the best knowledge of
the BSG Executives the current use by BSG or a BSG Subsidiary of the
Intellectual Property does not in any material respect infringe upon the rights
of any third party. The BSG Disclosure Letter sets forth a list of all
jurisdictions in which BSG or a BSG Subsidiary is operating under a trade name,
and each jurisdiction in which any such trade name is registered.
Section 3.20. BSG Computer Software and Hardware.
(a) The BSG Disclosure Letter sets forth a true and
complete list of: (i) all software owned by BSG material to the
business of BSG, other than custom-developed software developed for
and assigned to a BSG customer (the "BSG Proprietary Software"); (ii)
all software (other than the BSG Proprietary Software and
"shrink-wrap" software) used in connection with the business of BSG
(the "BSG Licensed Software" and together with the BSG Proprietary
Software, the "BSG Software"). BSG has all technical and descriptive
materials to run its business in accordance with its historical
practices, except as would not
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have a BSG Material Adverse Effect. The BSG Proprietary Software
consists of: (i) source and object code embodied in magnetic media;
and (ii) all development and procedural tools necessary to maintain
the BSG Proprietary Software, including licenses to use compilers,
assemblers, libraries and other aids.
(b) BSG has a valid right, title and interest in and to
all intellectual property rights in the BSG Proprietary Software,
except as would not have a BSG Material Adverse Effect. BSG has
developed the BSG Proprietary Software entirely through its own
efforts for its own account and the BSG Proprietary Software is free
and clear of all liens, claims and encumbrances, except as would not
have a BSG Material Adverse Effect. The use of the BSG Licensed
Software and the use and distribution of the BSG Proprietary Software
does not breach any terms of any contract between BSG and any third
party, except as would not have a BSG Material Adverse Effect. To the
best knowledge of the BSG Executives, BSG has been granted under the
license agreements relating to the BSG Licensed Software (the "BSG
License Agreements") valid and subsisting license rights with respect
to all software comprising the BSG Licensed Software, except as would
not have a BSG Material Adverse Effect. Each of BSG and the BSG
Subsidiaries is in compliance with each of the terms and conditions of
each of the BSG License Agreements except to the extent failure to so
comply, individually or in the aggregate, would not have a BSG
Material Adverse Effect. To the best knowledge of the BSG Executives,
in the case of any commercially available "shrink-wrap" software
programs (such as Lotus 1-2-3), BSG has not made and is not using any
unauthorized copies of any such software programs and, to the best
knowledge of the BSG Executives, none of the employees, agents or
representatives of BSG have made or are using any such unauthorized
copies, except as would not have a BSG Material Adverse Effect.
(c) The BSG Proprietary Software and, to the actual
knowledge of the BSG Executives, the BSG Licensed Software does not
infringe any United States patent, copyright, or trade secret or any
other intellectual property right of any third party, except to the
extent that such infringement would not result in a BSG Material
Adverse Effect.
(d) Neither BSG nor any of the BSG Subsidiaries has
granted rights in the BSG Software to any third party except for
rights granted to customers in the ordinary course of business
pursuant to contracts with customers.
(e) To the best knowledge of the BSG Executives, the BSG
Software and the related computer hardware used by BSG in its
operations (the "BSG Hardware") are adequate in all material respects,
when taken together with the other assets, resources and personnel of
BSG and the BSG Subsidiaries, to run the business of BSG and the BSG
Subsidiaries in the same manner as such business has operated since
December 31, 1994, except as would not result in a BSG Material
Adverse Effect. The BSG Disclosure Letter contains a summary
description of any problems experienced by BSG in the past twelve
months with respect to the BSG Software or BSG Hardware and the
provision of services
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to BSG clients which have arisen outside the ordinary course of
business and would result in a BSG Material Adverse Effect.
Section 3.21. Proxy Statement and Registration Statement. The
information with respect to BSG, its officers, directors and affiliates in the
definitive proxy statement to be furnished to the stockholders of BSG (the
"Proxy Statement") that will form a part of the Registration Statement on Form
S-4 relating to the shares of Medaphis Common Stock to be issued in the Merger
(the "Registration Statement") or in the Registration Statement will not, in
the case of the Proxy Statement, on the date the Proxy Statement is first
mailed to stockholders of BSG or on the date of the stockholders' meeting
referred to in Section 5.5, or, in the case of the Registration Statement, at
the time it becomes effective and at the Effective Time, as such Proxy
Statement or Registration Statement is then amended or supplemented, contain
any untrue statement of a material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 3.22. Transactions with Affiliates. No officer, director or
holder of 5% or more of the outstanding capital stock of BSG or any BSG
Subsidiary, or any person with whom any such stockholder, officer or director
has any direct or indirect relation by blood, marriage or adoption, or any
entity in which any such person, owns (other than through a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by all such persons) any beneficial interest in: (i) any contract,
arrangement or understanding involving aggregate consideration in excess of
$25,000 with, or relating to, the business or operations of BSG or any BSG
Subsidiary; (ii) any loan, arrangement, understanding, agreement or contract
for or relating to indebtedness of BSG or a BSG Subsidiary in excess of
$25,000; or (iii) any property with a value of at least $25,000 (real, personal
or mixed), tangible or intangible, used or currently intended to be used in,
the business or operations of BSG or any BSG Subsidiary.
Section 3.23. Brokers, Finders and Investment Bankers. Neither BSG nor
the BSG Subsidiaries nor any of their officers, directors or employees has
employed any broker, finder or investment banker or incurred any liability for
any investment banking fees, financial advisory fees, brokerage fees or
finders' fees in connection with the transactions contemplated hereby.
Section 3.24. Disclosure. No representation, warranty or covenant made
by BSG in this Agreement, the BSG Disclosure Letter or the Exhibits attached
hereto contains an untrue statement of a material fact or omits to state a
material fact required to be stated herein or therein or necessary to make the
statements contained herein or therein not misleading.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF MEDAPHIS AND BSGSUB
With such exceptions as are set forth in a letter (the "Medaphis
Disclosure Letter") delivered by Medaphis to BSG prior to the execution hereof,
Medaphis and BSGSub hereby represent and warrant to BSG as follows:
Section 4.1. Organization. Each of Medaphis and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted. Medaphis and each of its subsidiaries is
duly qualified to transact business, and is in good standing, as a foreign
corporation in each jurisdiction where the character of its activities requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the assets, liabilities, results of operations or
financial condition, business or prospects of Medaphis and its subsidiaries
taken as a whole (a "Medaphis Material Adverse Effect"). Medaphis has delivered
to BSG accurate and complete copies of the Articles or Certificate of
Incorporation and Bylaws, as currently in effect, of Medaphis and each of its
subsidiaries, and has made available to BSG the minute books and stock records
of each thereof. The Medaphis Disclosure Letter contains a true and correct
list of all of the jurisdictions in which Medaphis or any of its subsidiaries
is qualified to do business as a foreign corporation.
Section 4.2. Authorization. Each of Medaphis and BSGSub has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement and to consummate the Merger and
the other transactions contemplated hereby. As of the Closing, the execution
and delivery of this Agreement by Medaphis and BSGSub, the performance by each
of Medaphis and BSGSub of its respective obligations hereunder and the
consummation of the Merger and the other transactions provided for herein will
have been duly and validly authorized by all necessary corporate action on the
part of Medaphis and BSGSub. The Boards of Directors of Medaphis and BSGSub
have approved the execution, delivery and performance of this Agreement and the
consummation of the Merger and the other transactions provided for herein. This
Agreement has been duly executed and delivered by each of Medaphis and BSGSub
and constitutes the valid and binding agreement of each of Medaphis and BSGSub,
enforceable against each of Medaphis and BSGSub in accordance with its terms,
subject to applicable bankruptcy, insolvency and other similar laws affecting
the enforceability of creditors' rights generally, general equitable principles
and the discretion of courts in granting equitable remedies.
Section 4.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the Merger and
the other transactions contemplated by this Agreement, and the fulfillment of
and compliance with the terms and conditions of this Agreement do not and will
not, with the passing of time or the giving of notice or both, violate or
conflict with, constitute a breach of or default under, result in the loss of
any material benefit under, or permit the
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acceleration of any obligation under, (i) any term or provision of the Articles
or Certificate of Incorporation or Bylaws of Medaphis or any of its
subsidiaries, (ii) any Medaphis Material Contract, (iii) any judgment, decree
or order of any court or governmental authority or agency to which Medaphis or
any of its subsidiaries is a party or by which Medaphis, any of its
subsidiaries or any of their respective properties is bound, or (iv) any
statute, law, regulation or rule applicable to Medaphis, or any of its
subsidiaries, so as to have, in the case of subsections (ii) through (iv)
above, a Medaphis Material Adverse Effect. Except for compliance with the
applicable requirements of the HSR Act, the Securities Act, the Exchange Act,
applicable state securities laws and filing and recordation of the Certificate
of Merger as required by the DGCL, no consent, approval, order or authorization
of, or registration, declaration or filing with, any government agency or
public or regulatory unit, agency, body or authority with respect to Medaphis
or any of its subsidiaries is required in connection with the execution,
delivery or performance of this Agreement by Medaphis or BSGSub or the
consummation of the transactions contemplated by this Agreement by Medaphis or
BSGSub, the failure to obtain which would have a Medaphis Material Adverse
Effect.
Section 4.4. Capitalization of Medaphis. The authorized capital stock
of Medaphis consists of 100,600,000 shares of capital stock consisting of
100,000,000 shares of voting common stock, $.01 par value and 600,000 shares of
non-voting common stock, $.01 par value. At March 8, 1996, there were
55,813,099 shares of Medaphis Common Stock issued and outstanding and no shares
of non-voting common stock were issued or outstanding. All shares of Medaphis
Common Stock outstanding as of the date hereof are duly authorized, validly
issued, fully paid, nonassessable and free of pre-emptive rights. The shares of
Medaphis Common Stock to be issued in the Merger will be validly issued, fully
paid, nonassessable and free of pre-emptive rights. The shares of Medaphis
Common Stock issuable upon exercise of the Options have been duly authorized,
and when issued against payment therefor, will be validly issued, fully paid,
nonassessable and free from pre-emptive rights. Except as set forth in this
Section 4.4, there are no shares of capital stock of Medaphis outstanding, and
there are no subscriptions, options, convertible securities, calls, rights,
warrants or other agreements, claims or commitments of any nature whatsoever
obligating Medaphis or any of its subsidiaries to issue, transfer, deliver or
sell, or cause to be issued, transferred, delivered or sold, additional shares
of the capital stock or obligating Medaphis or any of its subsidiaries to
grant, extend or enter into any such agreement or commitment.
Section 4.5. Capital Stock of Medaphis Subsidiaries. The Medaphis
Disclosure Letter sets forth a true and complete list of all (i) corporations
or other entities of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions are, directly or indirectly, owned by
Medaphis, and (ii) partnerships in which Medaphis or a Medaphis Subsidiary (as
defined) is (A) a general or limited partner and (B) entitled to receive more
than 50% of the assets of any such partnership on such partnership's
dissolution (collectively, the "Medaphis Subsidiaries"), the jurisdiction in
which each Medaphis Subsidiary is incorporated or organized, and all shares of
capital stock or other ownership interests authorized, issued and outstanding
of each Medaphis Subsidiary. The outstanding shares of capital stock or other
equity interests
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of each Medaphis Subsidiary have been duly authorized and are validly issued,
fully paid and nonassessable. All shares of capital stock or other equity
interests of each Medaphis Subsidiary owned by Medaphis or any of its
subsidiaries are set forth in the Medaphis Disclosure Letter and are owned by
Medaphis, either directly or indirectly, free and clear of all liens,
encumbrances, equities or claims.
Section 4.6. Medaphis Commission Reports. Medaphis has made available
to BSG (i) Medaphis's Annual Report on Form 10-K for the year ended December
31, 1994, including all exhibits thereto and items incorporated therein by
reference, (ii) Medaphis's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1995, June 30, 1995 and September 30, 1995, including all
exhibits thereto and items incorporated therein by reference, (iii) the proxy
statement relating to Medaphis's Annual Meeting of Stockholders held on April
27, 1995 and (iv) all Current Reports on Form 8-K filed by Medaphis with the
Securities and Exchange Commission (the "Commission") since September 30, 1995,
including all exhibits thereto and items incorporated therein by reference
(items (i) through (iv) in this sentence being referred to collectively as the
"Medaphis Commission Reports"). As of their respective dates, the Medaphis
Commission Reports did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Since December 31, 1994, Medaphis has filed all
forms, reports and documents with the Commission required to be filed by it
pursuant to the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, each of which complied as to form, at the
time such form, document or report was filed, in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and the
applicable rules and regulations promulgated thereunder.
Section 4.7. Financial Statements. Medaphis has delivered to BSG (i)
the audited consolidated balance sheets of Medaphis and its subsidiaries as of
December 31, 1993 and 1994 and its audited consolidated statements of
operations, changes in stockholders' equity and cash flows for the fiscal years
then ended, including the notes thereto, examined by and accompanied by the
report of Deloitte & Touche LLP ("Deloitte & Touche"), independent public
accountants and (ii) the unaudited consolidated balance sheet of Medaphis and
its subsidiaries as of September 30, 1995 (the "Medaphis Balance Sheet") and
its unaudited consolidated statements of operations, stockholders' equity and
cash flows for the nine-month period then ended (all of the financial
statements referred to in this Section 4.7 are collectively referred to as the
"Medaphis Financial Statements"). The Medaphis Financial Statements have been
prepared from, and are in accordance with, the books and records of Medaphis
and its consolidated subsidiaries and, as applicable, present fairly the
consolidated financial position, consolidated results of operations, changes in
stockholders' equity and consolidated cash flows of Medaphis and its
consolidated subsidiaries as of the dates and for the periods indicated, in
each case in conformity with generally accepted accounting principles,
consistently applied. The Medaphis Disclosure Letter sets forth a true and
complete list of all Loss Contingencies of Medaphis existing as of December 31,
1995 exceeding $250,000 in the case of any single loss contingency or
$1,000,000 in the case of all loss contingencies.
Section 4.8. Absence of Certain Changes.
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(a) Since December 31, 1995, there has not been (i) any change
in the assets, liabilities, results of operations, financial condition
or, to the best knowledge of the Medaphis Executives (as hereinafter
defined), business or prospects of Medaphis and its subsidiaries taken
as a whole that has had a Medaphis Material Adverse Effect, (ii) any
damage, destruction, loss or casualty to property or assets of
Medaphis or any of its subsidiaries, whether or not covered by
insurance that has had a Medaphis Material Adverse Effect, (iii) any
declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) in respect of the capital stock
of Medaphis or any redemption or other acquisition of any of the
capital stock of Medaphis or any of its subsidiaries (except for the
acquisition of Medaphis Common Stock in payment of the purchase price
and related taxes upon the exercise of stock options) or any split,
combination or reclassification of shares of capital stock declared or
made by Medaphis, or (iv) any agreement to do any of the foregoing.
(b) Since December 31, 1994, there have not been (i) any
extraordinary losses suffered which, in the aggregate, have resulted
in a Medaphis Material Adverse Effect, (ii) except as would not have a
Medaphis Material Adverse Effect, any assets mortgaged, pledged or
made subject to any lien, charge or other encumbrance, (iii) any
material liability or obligation (absolute, accrued or contingent)
incurred or any material bad debt, contingency or other reserve
increase suffered, except, in each such case, in the ordinary course
of business and consistent with past practice, (iv) any material
claims, liabilities or obligations (absolute, accrued or contingent)
paid, discharged or satisfied, other than the payment, discharge or
satisfaction, in the ordinary course of business and consistent with
past practice, of claims, liabilities and obligations reflected or
reserved against in Medaphis Financial Statements or incurred in the
ordinary course of business and consistent with past practice, (v) any
material guaranteed checks, notes or accounts receivable written off
as uncollectible, except write-offs in the ordinary course of business
and consistent with past practice, (vi) any write down of the value of
any material asset or investment on Medaphis's books or records,
except for depreciation and amortization taken in the ordinary course
of business and consistent with past practice, (vii) any cancellation
of any material debts or waiver of any material claims or rights of
substantial value, or sale, transfer or other disposition of any
properties or assets (real, personal or mixed, tangible or intangible)
of substantial value, except, in each such case, in transactions in
the ordinary course of business and consistent with past practice
which, in the aggregate, have resulted in a Medaphis Material Adverse
Effect, (viii) any single capital expenditure or commitment in excess
of $1,000,000 for additions to property or equipment, or aggregate
capital expenditures and commitments in excess of $30,000,000 (on a
consolidated basis) for additions to property or equipment, (ix) any
Loss Contingency or Loss Contingencies of Medaphis which, in the
aggregate, have resulted in a Medaphis Material Adverse Effect, (x)
any material transactions entered into other than in the ordinary
course of business, (xi) any agreements to do any of the foregoing, or
(xii) any other events, developments or conditions (including any
suit, action, claim, proceeding or investigation) of any character
that has had or is reasonably likely to have a Medaphis Material
Adverse Effect.
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Section 4.9. Legal Proceedings. There are no suits, actions, claims,
proceedings or investigations pending, or, to the best knowledge of the
executive officers of Medaphis, threatened against, relating to or involving
Medaphis or any of its subsidiaries (or any of their officers or directors)
before any court, arbitrator or administrative or governmental body, which, if
finally determined adversely, are reasonably likely, individually or in the
aggregate, to have a Medaphis Material Adverse Effect. As of March 15, 1996,
all pending suits, actions, claims, proceedings or investigations relating to
or involving Medaphis or any of its subsidiaries (or any of their officers or
directors) before any court, arbitrator or administrative or governmental body
are adequately provided for in the Medaphis Balance Sheet if and to the extent
such a provision is required by generally accepted accounting principles.
Neither Medaphis nor any of its subsidiaries is subject to any judgment,
decree, injunction, rule or order of any court, and, to the best knowledge of
the Medaphis Executives, neither Medaphis nor any of its subsidiaries is
subject to any governmental restriction applicable to Medaphis or any such
subsidiary, which is reasonably likely (i) to have a Medaphis Material Adverse
Effect or (ii) to cause a material limitation on Medaphis's ability to operate
the business of Medaphis and its subsidiaries after the Closing.
Section 4.10. Compliance with Law. Each of Medaphis and its
subsidiaries has all material authorizations, approvals, licenses and orders of
and from all governmental and regulatory officers and bodies necessary to carry
on its business as it is currently being conducted, to own or hold under lease
the properties and assets it owns or holds under lease and to perform all of
its obligations under the agreements to which it is a party, and each of
Medaphis and its subsidiaries has been and is in compliance with all applicable
laws, regulations and administrative orders of any country, state, or
municipality or any subdivision of any thereof to which its business and its
employment of labor or its use or occupancy of properties or any part thereof
are subject, the failure to obtain or the violation of which would have a
Medaphis Material Adverse Effect.
Section 4.11. Proxy Statement and Registration Statement. The
information with respect to Medaphis and its subsidiaries and each of their
respective officers, directors and affiliates in the Proxy Statement or in the
Registration Statement, will not, in the case of the Proxy Statement, on the
date the Proxy Statement is first mailed to stockholders of BSG or on the date
of the stockholders' meeting referred to in Section 5.5, or, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, as such Proxy Statement or Registration Statement is then amended or
supplemented, contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Registration Statement and the Proxy Statement will
comply as to form with the applicable provisions of the Securities Act and the
Exchange Act.
Section 4.12. Tax Returns; Taxes. Medaphis has duly filed all federal,
state, local and foreign tax returns required to be filed by it and has duly
paid or made adequate provision for the payment of all taxes which are due and
payable pursuant to such returns or pursuant to any assessment with respect to
taxes in such jurisdictions whether or not in connection with such returns. The
liability for taxes reflected on the Medaphis Balance Sheet is sufficient for
the payment of all unpaid taxes,
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whether or not disputed, that are accrued or applicable for the period ended
December 31, 1995 and for all years and periods ended prior thereto. All
deficiencies asserted as a result of any examinations by the Internal Revenue
Service or any other taxing authority have been paid, fully settled or
adequately provided for in the Medaphis Balance Sheet. There are no pending
claims asserted for taxes of Medaphis or any of its subsidiaries or outstanding
agreements or waivers extending the statutory period of limitation applicable
to any tax return of Medaphis or any of its subsidiaries for any period.
Medaphis and each of its subsidiaries have made all estimated income tax
deposits and all other required tax payments or deposits and have complied for
all prior periods in all material respects with the tax withholding provisions
of all applicable federal, state, local and other laws.
Section 4.13. Billing and Collection Practices.
(a) The current practices and procedures of Medaphis and its
subsidiaries with respect to (i) billing on behalf of clients, (ii)
receiving and processing Medicare and Medicaid payments due to
clients, (iii) holding and transfer of such payments and (iv) method
of determining and collecting the fees received by Medaphis and its
subsidiaries for services provided by providers and physicians
participating in the Medicare or Medicaid programs are not in
violation of the restriction on assignment as set forth in 42 U.S.C.
Section 1395g(c), 42 U.S.C. Section 1395u(b)(6) and 42 U.S.C. Section
1396(a)(32), and the regulations promulgated thereunder or similar
provisions of any state Medicaid program, except for such violations
which in the aggregate would not have a Medaphis Material Adverse
Effect.
(b) Neither Medaphis nor any of its subsidiaries is engaged in
any activity, whether alone or in concert with one of its clients,
which would constitute a violation of any federal laws or the law of
any state (including but not limited to (i) federal antifraud and
abuse or similar laws pertaining to the Medicare, Medicaid, or any
other federal health or insurance program; (ii) state law pertaining
to Medicaid or any other state health or insurance program; (iii)
state or federal laws pertaining to billings to insurance companies,
health maintenance organizations, and other managed care plans or to
insurance fraud; and (iv) federal and state laws relating to
collection agencies and the performance of collection services)
prohibiting fraudulent or abusive or unlawful practices connected in
any way with the provision of health care services the billing for
such services provided to a beneficiary of any state, federal or
private health or insurance program or credit collection services,
except for such violations which in the aggregate would not have a
Medaphis Material Adverse Effect. Without limiting the generality of
the foregoing, neither Medaphis nor any subsidiary has, directly or
indirectly, paid, offered to pay or agreed to pay, or solicited or
received, any fee, commission, sum of money, property or other
remuneration to or from any person which the Medaphis Executives know
or have reason to believe to have been illegal under (i) 42 U.S.C.
Section 1320a-7b(b) or (ii) any similar state law.
(c) Medaphis and its subsidiaries are in compliance in
all material respects with the applicable trust accounting statutes,
rules and regulations of the various states and each
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has sufficient funds deposited in such trust accounts to cover all
trust liabilities to clients of Medaphis and its subsidiaries.
Section 4.14. Medaphis Employee Benefit Plans. Except as to matters of
which BSG is aware, Medaphis hereby represents and warrants as follows:
(a) Definition of Benefit Plans. For purposes of this
Section 4.14, the term "Medaphis Benefit Plan" means any plan,
program, arrangement, fund, policy, practice or contract which,
through which or under which Medaphis or a Medaphis ERISA Affiliate
provides benefits or compensation to or on behalf of employees or
former employees of Medaphis or any Medaphis ERISA Affiliate, whether
formal or informal, whether or not written, including but not limited
to Specified Arrangements, ERISA Plans and Fringe Benefit Plans:
(b) Medaphis ERISA Affiliate. For purposes of this
Section 4.14, the term "Medaphis ERISA Affiliate" means each trade or
business (whether or not incorporated) which together with Medaphis is
treated as a single employer under Section 414(b), (c), (m) or (o) of
the Code.
(c) Identification of Benefit Plans. Except for Medaphis
Benefit Plans which have been terminated and with respect to which
neither Medaphis nor any Medaphis ERISA Affiliate has any financial,
administrative or other liability, obligation or responsibility,
Medaphis does not maintain, nor has at any time established or
maintained, nor has at any time been obligated to make, or otherwise
made, contributions to or under or otherwise participated in any
Medaphis Benefit Plan.
(d) MEPPA Liability/Post-Retirement Medical Benefits.
Neither Medaphis nor any Medaphis ERISA Affiliate maintains, nor has
at any time established or maintained, nor has at any time been
obligated to make, or made, contributions to or under any
multiemployer plan. Medaphis does not maintain, nor has at any time
established or maintained, nor has at any time been obligated to make,
or made, contributions to or under any plan which provides
post-retirement Medical or health benefits with respect to employees
of Medaphis. There is no lien upon any property of Medaphis or any
Medaphis ERISA Affiliate outstanding pursuant to Section 412(n) of the
Code in favor of any Medaphis Benefit Plan. No assets of Medaphis or
any Medaphis ERISA Affiliate have been provided as security for any
Medaphis Benefit Plan pursuant to Section 401(a)(29) of the Code.
(e) Documentation. Medaphis has made available to BSG a
true and complete copy of the following documents, if applicable, with
respect to each Medaphis Benefit Plan identified in the Medaphis
Disclosure Letter: (i) all documents, including any insurance
contracts and trust agreements, setting forth the terms of the
Medaphis Benefit Plan, or if there are no such documents evidencing
the Medaphis Benefit Plan, a full description of the Medaphis Benefit
Plan; (ii) the ERISA summary plan description and any other summary of
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plan provisions provided to participants or beneficiaries for each
such Medaphis Benefit Plan; (iii) the annual reports filed for the
most recent three plan years and most recent financial statements or
periodic accounting of related plan assets with respect to each
Medaphis Benefit Plan; (iv) the most recent favorable determination
letter, opinion or ruling from the IRS for each Medaphis Benefit Plan,
the assets of which are held in trust, to the effect that such trust
is exempt from federal income tax and any outstanding request for a
determination letter; and (v) each opinion or ruling from the
Department of Labor or the PBGC with respect to any such Medaphis
Benefit Plans.
(f) Qualified Status. Each Medaphis Benefit Plan that is
funded through a trust or insurance contract has satisfied in all
material respects, by its terms and in its operation, all applicable
requirements for an exemption from federal income taxation under
Section 501(a) of the Code. Except for the plans identified as
Qualified Plans in the Medaphis Disclosure Letter (the "Qualified
Plans"), neither Medaphis nor any Medaphis ERISA Affiliate maintains
or previously maintained a Medaphis Benefit Plan which meets or was
intended to meet the requirements of Section 401(a) of the Code.
Except as would not have a Medaphis Material Adverse Effect, any
determination, opinion or notification letter issued by the IRS to the
effect that any of the Qualified Plans qualify under Section 401(a) of
the Code and that the related trust is exempt from taxation under
Section 501(a) of the Code remains in effect and has not been revoked.
Each of the Qualified Plans currently complies in form in all material
respects with the requirements under Section 401(a) of the Code, other
than changes required by statutes, regulations and rulings for which
amendments are not yet required. Each of the Qualified Plans has been
administered according to its terms (except for those terms which are
inconsistent with the changes required by statutes, regulations and
rulings for which changes are not yet required to be made, in which
case such Qualified Plan has been administered in accordance with the
provisions of those statutes, regulations and rulings) and in
accordance with the requirements of Section 401(a) of the Code. Each
of the Qualified Plans has been tested for compliance with, and in all
material respects has satisfied the requirements of, Section 401(k)(3)
and 401(m)(2) of the Code for each plan year ending prior to the
Effective Date.
(g) Compliance. Each Medaphis Benefit Plan maintained by
Medaphis or a Medaphis ERISA Affiliate has been maintained, by its
terms and in operation, in all material respects in accordance with
all applicable laws, including (to the extent applicable) Code Section
4980B. Further, there has been no failure to comply with applicable
ERISA or other requirements concerning the filing of reports,
documents and notices with the Secretary of Labor and the Secretary of
Treasury or the furnishing of such documents to participants or
beneficiaries that could subject any Medaphis Benefit Plan, Medaphis
or any Medaphis ERISA Affiliate to any material civil or criminal
sanction.
(h) Legal Actions. Except as would not have a Medaphis
Material Adverse Effect, there are no actions, audits, suits or claims
known to Medaphis which are pending or, to the knowledge of the
Medaphis Executives, threatened against any Medaphis Benefit Plan,
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any fiduciary of any Medaphis Benefit Plans with respect to the
Medaphis Benefit Plans or against the assets of any of the Medaphis
Benefit Plans, except claims for benefits made in the ordinary course
of the operation of such plans.
(i) Funding. Medaphis and each Medaphis ERISA Affiliate
has made full and timely payment of all amounts required to be
contributed under the terms of each Medaphis Benefit Plan and
applicable law or required to be paid as expenses under such Medaphis
Benefit Plan, and no excise taxes are assessable as a result of any
nondeductible or other contributions made or not made to a Medaphis
Benefit Plan. The assets of all Medaphis Benefit Plans which are
required under applicable laws to be held in trust are in fact held in
trust, and the assets of each such Medaphis Benefit Plan equal or
exceed the liabilities of each such plan. The liabilities of each
other plan are in all material respects properly and accurately
reported on the financial statements and records of Medaphis. The
assets of each Medaphis Benefit Plan are reported at their fair market
value on the books and records of each plan.
(j) Liabilities. Neither Medaphis nor any Medaphis ERISA
Affiliate is subject to any material liability, tax or penalty
whatsoever to any person whomsoever as a result of Medaphis' or any
Medaphis ERISA Affiliate's engaging in a prohibited transaction under
ERISA or the Code, and Medaphis has no knowledge of any circumstances
which reasonably might result in any such material liability, tax or
penalty as a result of a breach of fiduciary duty under ERISA.
(k) Amendment/New Plans. From the date of this Agreement
to the Effective Time, no amendment shall be made to any Medaphis
Benefit Plan, no commitment shall be made to amend any Medaphis
Benefit Plan and no commitment shall be made to continue any Medaphis
Benefit Plan or to adopt any new Medaphis Benefit Plan for the benefit
of any employees of Medaphis or any Medaphis ERISA Affiliate absent
the express written consent of BSG.
(l) Excess Parachute Payments. No payment required to be
made to any employee associated with Medaphis as a result of the
transactions contemplated hereby under any contract or otherwise will,
if made, constitute an "excess parachute payment" within the meaning
of Section 280G of the Code.
(m) No Acceleration of Liability Under Benefit Plans. The
consummation of the transactions contemplated hereby will not
accelerate or increase any liability under any Medaphis Benefit Plan
because of an acceleration or increase of any of the rights or
benefits to which employees of Medaphis or any Medaphis ERISA
Affiliate may be entitled thereunder.
(n) Leased Employees. To the knowledge of the Medaphis
Executives, Medaphis has made no representations or warranties
(whether written or oral, express or implied) contractually or
otherwise to any client or customer of Medaphis or any of its
affiliates that
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any Medaphis employees rendering services to such client or customer
are not "leased employees" (within the meaning of Section 414(n) of
the Code) or that such employees would not be required to participate
under any pension benefit plan (within the meaning of Section 3(2) of
ERISA) (a "Pension Benefit Plan") of such client or customer of
Medaphis relating either to (i) providing benefits to employees of
Medaphis under a Pension Benefit Plan of Medaphis or (ii) making
contributions to or reimbursing such client or customer for any
contributions made to a Pension Benefit Plan of such client or
customer on behalf of employees of Medaphis.
Section 4.15. Labor Relations. Each of Medaphis and its subsidiaries
is in compliance in all material respects with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours, and is not engaged in any unfair labor or unlawful
employment practice. Except as would not result in a Medaphis Material Adverse
Effect, individually or in the aggregate, there is no (i) unlawful employment
practice discrimination charge involving Medaphis or any of its subsidiaries
pending before the EEOC, EEOC recognized state "referral agency" or any other
governmental agency; (ii) unfair labor practice charge or complaint against
Medaphis or any of its subsidiaries pending before the NLRB; (iii) labor
strike, dispute, slowdown or stoppage actually pending or, to the best
knowledge of the Medaphis Executives, threatened against or involving or
affecting Medaphis or any of its subsidiaries and no NLRB representation
question exists respecting any of their respective employees; (iv) grievance or
arbitration proceeding pending against Medaphis or any of its subsidiaries and
no written claim therefor exists; and (v) collective bargaining agreement
binding on Medaphis or any of its subsidiaries.
Section 4.16. Medaphis Computer Software and Hardware.
(a) The software owned by Medaphis for license to or use
in connection with the business of Medaphis (the "Medaphis Proprietary
Software") consists of: (i) source and object code embodied in
magnetic Media; and (ii) all development and procedural tools
necessary to maintain the Medaphis Proprietary Software, including
licenses to use compilers, assemblers, libraries and other aids. To
the best knowledge of the Medaphis Executives, Medaphis employs
individuals who are familiar with the business of Medaphis and who are
qualified to maintain the Medaphis Proprietary Software and the
related computer hardware used by Medaphis in its operations (the
"Medaphis Hardware").
(b) Medaphis has all right, title and interest in and to
all intellectual property rights in the Medaphis Proprietary Software,
except as would not have a Medaphis Material Adverse Effect. Medaphis
has developed the Medaphis Proprietary Software entirely through its
own efforts for its own account and the Medaphis Proprietary Software
is free and clear of all liens, claims and encumbrances, except as
would not have a Medaphis Material Adverse Effect. The use of the
software (other than the Medaphis Proprietary Software) used by
Medaphis in connection with the business of Medaphis (the "Medaphis
Licensed Software" and together with the Medaphis Proprietary
Software, the "Medaphis Software") and the use and distribution of the
Medaphis Proprietary Software does not breach any terms of any
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contract between Medaphis and any third party, except as would not
have a Medaphis Material Adverse Effect. To the best knowledge of the
Medaphis Executives, Medaphis has been granted under the license
agreements relating to the Medaphis Licensed Software (the "Medaphis
License Agreements") valid and subsisting license rights with respect
to all software comprising the Medaphis Licensed Software, except as
would not have a Medaphis Material Adverse Effect. Each of Medaphis
and its subsidiaries is in compliance with each of the terms and
conditions of each of the Medaphis License Agreements except as would
not result in a MED Material Adverse Effect. To the best knowledge of
the Medaphis Executives, in the case of any commercially available
"shrink-wrap" software programs (such as Lotus 1-2-3), Medaphis has
not made and is not using any unauthorized copies of any such software
programs and, to the best knowledge of the Medaphis Executives, none
of the employees, agents or representatives of Medaphis have made or
are using any such unauthorized copies, except as would not have a
Medaphis Material Adverse Effect.
(c) The Medaphis Proprietary Software and, to the actual
knowledge of the Medaphis Executives, the Medaphis Licensed Software
does not infringe any United States patent, copyright, or trade secret
or any other intellectual property right of any third party, except to
the extent that such infringement would not result in a Medaphis
Material Adverse Effect. The source code for the Medaphis Proprietary
Software has been maintained in confidence.
(d) Neither Medaphis nor any of its subsidiaries has
granted rights in the Medaphis Software to any third party.
(e) To the best knowledge of the Medaphis Executives, the
Medaphis Software and the Medaphis Hardware are adequate in all
material respects, when taken together with the other assets,
resources and personnel of Medaphis and its subsidiaries, to run the
business of Medaphis and its subsidiaries in the same manner as such
business has operated since December 31, 1994. The MED Disclosure
Letter contains a summary description of any problems experienced by
MED in the past twelve months with respect to the MED Software or MED
Hardware and the provision of services to MED clients which have
arisen outside the ordinary course of business and would result in a
MED Material Adverse Effect.
Section 4.17. Title to Properties and Related Matters. Each of
Medaphis and its subsidiaries has good and valid title to or valid leasehold
interest in its properties reflected in the 1995 Balance Sheet or acquired
after the date thereof (other than property sold or otherwise disposed of in
the ordinary course of business), and all of such properties are held free and
clear of all title defects, liens, encumbrances and restrictions, except, with
respect to all such properties, (a) mortgages and liens securing debt reflected
as liabilities on the Medaphis Balance Sheet and (b) (i) liens for current
taxes and assessments not in default, (ii) mechanics', carriers', workmen's,
materialmen's, repairmen's, statutory or common law liens either not delinquent
or being contested in good faith, and (iii) encumbrances, covenants, rights of
way, building or use restrictions, easements, exceptions, variances,
reservations and other similar matters or limitations, if any, which either
individually or in
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the aggregate do not have a Medaphis Material Adverse Effect. Notwithstanding
the preceding sentence, Medaphis and its subsidiaries make no representation or
warranty in this Section 4.18 or otherwise regarding the validity of title to
any such properties which Medaphis or its subsidiaries have only a leasehold
interest.
Section 4.18. Environmental Matters. There has been no release of a
hazardous substance as that term is defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601(14) by
Medaphis or any of its subsidiaries into the environment at any property owned,
leased or used by Medaphis or any of its subsidiaries (the "Medaphis Premises")
including, without limitation, any release in the soil or ground water
underlying such Medaphis Premises, and, to the actual knowledge of the Medaphis
Executives without any inquiry of any nature whatsoever, there has been no such
release by any other party at any of the Medaphis Premises. Except as would not
result in a Medaphis Material Adverse Effect, neither Medaphis nor any of its
subsidiaries has received an Environmental Notice.
Section 4.19. Brokers, Finders and Investment Bankers. Neither
Medaphis nor any subsidiary of Medaphis, or any of their respective officers,
directors or employees, has employed any broker, finder or investment banker or
incurred any liability for any investment banking fees, financial advisory
fees, brokerage fees or finders' fees in connection with the transactions
contemplated hereby.
Section 4.20. Disclosure. No representation, warranty or covenant made
by Medaphis in this Agreement, the Medaphis Disclosure Letter or the Exhibits
hereto contains any untrue statement of a material fact or omits to state a
material fact required to be stated herein or therein or necessary to make the
statements contained herein or therein not misleading.
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ARTICLE 5.
CERTAIN COVENANTS AND AGREEMENTS
Section 5.1. Conduct of Business by BSG. From the date hereof to the
Effective Time, BSG will, and will cause each of its subsidiaries to, except as
required in connection with the Merger and the other transactions contemplated
by this Agreement and except as otherwise disclosed in the BSG Disclosure
Letter or consented to in writing by Medaphis:
(a) Carry on its businesses in the ordinary course in
substantially the same manner as heretofore conducted and not engage
in any new line of business or enter into any agreement, transaction
or activity or make any commitment except those in the ordinary course
of business and not otherwise prohibited under this Section 5.1;
(b) Neither change nor amend its Certificate or Articles
of Incorporation or Bylaws or other governing documents;
(c) Not issue, sell or grant options, warrants or rights
to purchase or subscribe to, or enter into any arrangement or contract
with respect to the issuance or sale of any of the capital stock of
BSG or any subsidiary or rights or obligations convertible into or
exchangeable for any shares of the capital stock of BSG and not make
any changes (by split-up, combination, reorganization or otherwise) in
the capital structure of BSG or any subsidiary; except, that BSG shall
be permitted to issue (i) shares of BSG Common Stock upon conversion
of shares of BSG Preferred Stock, (ii) shares of BSG Common Stock upon
exercise of Options outstanding on the date of this Agreement that are
exercised in accordance with their terms as the same exist on the date
of this Agreement, and (iii) shares of BSG Common Stock and options to
purchase shares of BSG Common Stock to the extent permitted by Section
5.1(e).
(d) Not declare, pay or set aside for payment any
dividend or other distribution in respect of the capital stock or
other equity securities of BSG and not redeem, purchase or otherwise
acquire any shares of the capital stock or other securities of BSG or
rights or obligations convertible into or exchangeable for any shares
of the capital stock or other securities of BSG or obligations
convertible into such, or any options, warrants or other rights to
purchase or subscribe to any of the foregoing;
(e) Not acquire or enter into an agreement to acquire, by
merger, consolidation or purchase of stock or assets, or otherwise any
business or entity; except, that BSG shall be permitted to issue up to
an aggregate of 1,600,000 shares of its Common Stock and options to
purchase shares of BSG Common Stock pursuant to the acquisition
agreements and/or pending acquisitions listed in the BSG Disclosure
Letter (the "Pending Acquisitions"), but only if Medaphis has reviewed
and approved each Pending Acquisition prior to its closing;
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(f) Use its reasonable efforts to preserve intact the
corporate existence, goodwill and business organization of BSG, to
keep the officers and employees of BSG available to Medaphis and to
preserve the relationships of BSG with customers, suppliers and others
having business relations with BSG;
(g) Not (i) create, incur or assume any long-term debt
(including obligations in respect of capital leases which individually
involve annual payments in excess of $150,000) or, except in the
ordinary course of business under existing lines of credit, create,
incur or assume any short-term debt for borrowed money, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary course of business and consistent with
past practice, (iii) make any loans or advances to any other person,
except in the ordinary course of business and consistent with past
practice, (iv) make any capital contributions to, or investments in,
any person, except in the ordinary course of business and consistent
with past practices with respect to investments, or (v) make any
capital expenditure, except in the ordinary course of business and
consistent with past practice;
(h) Not enter into, modify or extend in any manner the
terms of any employment, severance or similar agreements with officers
and directors nor grant any increase in the compensation of officers,
directors or employees, whether now or hereafter payable, including
any such increase pursuant to any option, bonus, stock purchase,
pension, profit-sharing, deferred compensation, retirement or other
plan, arrangement, contract or commitment; except, that BSG shall be
permitted to grant increases in cash compensation to employees who are
not officers or directors so long as such increases are granted in the
ordinary course of business and consistent with past practice;
(i) Perform in all material respects all of its
obligations under all BSG Material Contracts (except those being
contested in good faith) and not enter into, assume or amend any
contract or commitment that would be a BSG Material Contract other
than contracts to provide services entered into in the ordinary course
of business;
(j) Use its reasonable efforts to maintain in full force
and effect and in the same amounts policies of insurance comparable in
amount and scope of coverage to that now maintained by BSG;
(k) Use its reasonable efforts to continue to collect its
accounts receivable and pay its accounts payable in the ordinary
course of business and consistent with past practices;
(l) Deposit any proceeds received from the exercise of
any Options, warrants or other derivative securities of BSG in a
separate deposit account established in the name of BSG and maintain
such cash proceeds in such account through the Effective Time;
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(m) Prepare and file all federal, state, local and
foreign returns for taxes and other tax reports, filings and
amendments thereto required to be filed by it, and allow Medaphis, at
its request, to review all such returns, reports, filings and
amendments at BSG's offices prior to the filing thereof, which review
shall not interfere with the timely filing of such returns;
(n) Use its best efforts to cause each holder of an
Option to execute and deliver to Medaphis at or prior to the Closing
Date an Option Assumption Agreement with respect to all Options held
by such holder;
(o) Obtain Noncompetition and Nonsolicitation Agreements
(as defined below) with the stockholders designated in the BSG
Disclosure Letter (the "Specified Stockholders") and Employment
Agreements (as defined below) with the employees designated in the BSG
Disclosure Letter (the "Specified Employees") on or prior to the
Closing Date; and
(p) Not take any action the effect of which would be to
cause the Merger to be treated as a taxable transaction.
In connection with the continued operation of the business of BSG
between the date of this Agreement and the Effective Time, BSG shall confer in
good faith on a regular and frequent basis with one or more representatives of
Medaphis designated in writing to report operational matters of materiality and
the general status of ongoing operations. BSG acknowledges that Medaphis does
not and will not waive any rights it may have under this Agreement as a result
of such consultations. All such consultations shall be confirmed in writing by
the parties participating in the same.
Section 5.2. Conduct of Business by Medaphis. From the date hereof to
the Effective Time, Medaphis will, and will cause each of its subsidiaries to,
except as required in connection with the Merger and the other transactions
contemplated by this Agreement and except as otherwise disclosed in the
Medaphis Disclosure Letter or consented to in writing by BSG:
(a) Carry on its businesses in the ordinary course in
substantially the same manner as heretofore conducted;
(b) Neither change nor amend its Articles or Certificate
of Incorporation or Bylaws;
(c) Other than pursuant to the exercise of employee stock
options, warrants and other convertible securities outstanding on the
date hereof, or pursuant to employee plans set forth in the Medaphis
Disclosure Letter or adopted by the Board of Directors of Medaphis
after the date hereof, not issue, sell or grant options, warrants or
rights to purchase or subscribe to, or enter into any arrangement or
contract with respect to the issuance or sale of any of the capital
stock of Medaphis or any of its subsidiaries or rights or obligations
convertible into or exchangeable for any shares of the capital stock
of Medaphis or any of its subsidiaries and not alter the terms of any
presently outstanding options or make any changes
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(by split-up, combination, reorganization or otherwise) in the capital
structure of Medaphis or any of its subsidiaries; provided, however,
that Medaphis shall be permitted hereunder to issue capital stock or
securities convertible into capital stock in transactions: (i)
approved by the Board of Directors of Medaphis; (ii) at a price or
with a conversion price, as applicable, at or above fair market value
as determined in good faith by the Board of Directors of Medaphis; and
(iii) which would not in the good faith determination of the Board of
Directors of Medaphis unreasonably delay the Effective Time;
(d) Not take any action the effect of which would be to
cause the Merger to be treated as a taxable transaction; and
(e) Use its reasonable efforts to preserve intact the
corporate existence, goodwill and business organization of Medaphis
and to preserve the relationships of Medaphis with customers,
suppliers and others having business relations with Medaphis.
Section 5.3. Inspection and Access to Information.
(a) Between the date of this Agreement and the Effective
Time, each party hereto will provide each other party and its
accountants, counsel and other authorized representatives full access,
during reasonable business hours and under reasonable circumstances to
any and all of its premises, properties, contracts, commitments,
books, records and other information (including tax returns filed and
those in preparation) and will cause their respective officers to
furnish to the other party and its authorized representatives any and
all financial, technical and operating data and other information
pertaining to its business, as each other party shall from time to
time reasonably request.
(b) All non-public information obtained by Medaphis or
BSG or any of their representatives pursuant to this Agreement or in
connection with the matters contemplated hereby concerning the
business, operations or affairs of the other will be kept confidential
and will not be used for any purpose other than the consummation of
the transactions contemplated hereby, or be disclosed to any other
person or entity, except for such disclosure to its employees, agents
and representatives who have a need to know the same and who have been
advised of the confidential nature of such information and who agree
to abide by the terms hereof and except for such disclosure as may be
required by applicable law, court order or governmental agency
request. In the event this Agreement is terminated in accordance with
its terms, any non-public information furnished by any party to any
other party hereto will be promptly returned.
Section 5.4. Proxy Statement and Registration Statement.
(a) Medaphis shall prepare and file with the Commission as soon as
is reasonably practicable the Registration Statement and shall use all
reasonable efforts to have the Registration Statement declared effective by the
Commission as promptly as practicable. Medaphis also shall take
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any action required to be taken under state blue sky or securities laws in
connection with the issuance of the Medaphis Common Stock pursuant to the
Merger. Medaphis and BSG will furnish each other with all information
concerning themselves, their subsidiaries, directors, officers and stockholders
and such other matters as may be necessary or advisable for the Registration
Statement, the Proxy Statement, filings under the Blue Sky laws, and any other
statement or application made by or on behalf of Medaphis or BSG to any
governmental body in connection with the Merger and the other transactions
contemplated by this Agreement.
(b) Medaphis will indemnify and hold harmless each of BSG's
directors, officers and other persons, if any, who control BSG (within the
meaning of the Securities Act) from and against any losses, claims, damages,
liabilities or judgments, joint or several, to which they or any of them may
become subject, insofar as such losses, claims, damages, liabilities, or
judgments (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
the Proxy Statement or Registration Statement, or in any amendment or
supplement thereto, or in any state application for qualification, permit,
exemption or registration as a broker/dealer, or in any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse each such person
for any legal or other expenses reasonably incurred by such person in
connection with investigating or defending any such action or claim; provided,
however, that Medaphis shall not be liable, in any such case, to the extent
that any such loss, claim, damage, liability, or judgment (or action in respect
thereof) arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the Proxy Statement or
Registration Statement, or any such amendment or supplement thereto, or in any
such state application, or in any amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to Medaphis by or on
behalf of BSG, or any officer, director or affiliate of BSG for use therein.
Section 5.5. BSG Stockholder Matters. BSG shall call a meeting of its
stockholders to be held as soon as practicable after the date hereof for the
purpose of voting upon matters relating to this Agreement and the transactions
contemplated hereby. BSG will use its reasonable efforts to hold its
stockholders' meeting as promptly as practicable and will, through its Board of
Directors, recommend to its stockholders approval of this Agreement and the
transactions contemplated hereby.
Section 5.6. The Nasdaq National Market Additional Shares
Notification. Medaphis will file an additional shares notification with The
Nasdaq National Market to approve for listing, subject to official notice of
its issuance, the shares of Medaphis Common Stock to be issued in connection
with the Merger and upon the exercise of Non-Qualified Options. Medaphis shall
exercise reasonable good faith efforts to cause the shares of Medaphis Common
Stock to be issued in the Merger to be approved for listing on The Nasdaq
National Market, subject to official notice of issuance, prior to the Effective
Time.
Section 5.7. BSG Affiliates.
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(a) BSG shall deliver to Medaphis a letter identifying
all persons who are, at the time the Merger is submitted to a vote to
the shareholders of BSG, "affiliates" of BSG for purposes of Rule 145
under the Securities Act. BSG shall cause each person who is
identified as an "affiliate" in such letter to deliver to Medaphis on
or prior to the Effective Time a written statement, in form
satisfactory to Medaphis and BSG, that such person will not offer to
sell, transfer or otherwise dispose of any of the shares of Medaphis
Common Stock issued to such person pursuant to the Merger, except (i)
in accordance with the applicable provisions of the Securities Act and
the rules and regulations thereunder and (ii) until such time as
financial results covering at least thirty days of combined operations
of Medaphis and BSG have been published within the meaning of Section
201.01 of the Commission's Codification of Financial Reporting
Policies; provided, however, that each affiliate shall be permitted to
make sales to the extent permitted by applicable accounting rules and
regulations promulgated by the Commission. Medaphis shall be entitled
to place legends on any certificates of Medaphis Common Stock issued
to such affiliates to restrict transfer of such shares as set forth
above.
(b) Medaphis shall take such action with respect to
affiliates of Medaphis as is reasonably appropriate under applicable
accounting rules and regulations promulgated by the Commission for the
Merger to qualify as a "pooling of interests" for accounting purposes.
Section 5.8. No Solicitation; Acquisition Proposals.
(a) From the date hereof until the Effective Time or
until this Agreement is terminated or abandoned as provided in Article
8, BSG shall not directly or indirectly solicit or initiate (including
by way of furnishing any information) discussions with, any
corporation, partnership, person or other entity or group (other than
Medaphis, an affiliate of Medaphis or their authorized representatives
pursuant to this Agreement) concerning any proposal for a merger, sale
of substantial assets, sale of shares of stock or securities or other
takeover or business combination transaction (each, an "Acquisition
Proposal") involving BSG, and BSG will instruct its officers,
directors, advisors and other financial and legal representatives and
consultants not to take any action contrary to the foregoing
provisions of this sentence. BSG will notify Medaphis promptly in
writing if BSG becomes aware that any inquiries or proposals are
received by, any information is requested from, or any negotiations or
discussions are sought to be initiated with BSG with respect to an
Acquisition Proposal. BSG shall immediately cease any existing
activities, discussions or negotiations with any third parties which
may have been conducted on or prior to the date hereof with respect to
an Acquisition Proposal and shall direct and use reasonable efforts to
cause its officers, advisors and representatives not to engage in any
such activities, discussions or negotiations.
(b) From the date hereof until the Effective Time or
until this Agreement is terminated or abandoned as provided in Article
8, Medaphis will notify BSG promptly in writing if Medaphis becomes
aware that any inquiries or proposals are received by, any information
is requested from, or any negotiations or discussions are sought to be
initiated
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with Medaphis with respect to an Acquisition Proposal relating to any
of the Relevant Businesses and shall provide BSG with copies of any
such written proposals or inquiries actually received. "Relevant
Businesses" shall mean all of Medaphis's process re-engineering and
systems integration subsidiaries and capabilities (including, without
limitation, Imonics).
Section 5.9. Reasonable Efforts; Further Assurances; Cooperation.
Subject to the other provisions of this Agreement, the parties hereto shall
each use their reasonable, good faith efforts to perform their obligations
herein and to take, or cause to be taken or do, or cause to be done, all things
necessary, proper or advisable under applicable law to obtain all regulatory
approvals and satisfy all conditions to the obligations of the parties under
this Agreement and to cause the Merger and the other transactions contemplated
herein to be effected on or prior to July 31, 1996 in accordance with the terms
hereof and shall cooperate fully with each other and their respective officers,
directors, employees, agents, counsel, accountants and other designees in
connection with any steps required to be taken as a part of their respective
obligations under this Agreement, including without limitation:
(a) BSG and Medaphis shall promptly make their respective
filings and submissions and shall take, or cause to be taken, all
actions and do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to obtain any required
approval of any other federal, state or local governmental agency or
regulatory body with jurisdiction over the transactions contemplated
by this Agreement.
(b) In the event any claim, action, suit, investigation
or other proceeding by any governmental body or other person is
commenced which questions the validity or legality of the Merger or
any of the other transactions contemplated hereby or seeks damages in
connection therewith, the parties agree to cooperate and use all
reasonable efforts to defend against such claim, action, suit,
investigation or other proceeding and, if an injunction or other order
is issued in any such action, suit or other proceeding, to use all
reasonable efforts to have such injunction or other order lifted, and
to cooperate reasonably regarding any other impediment to the
consummation of the transactions contemplated by this Agreement.
(c) Each party shall give prompt written notice to the
other of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or
warranty of BSG or Medaphis, as the case may be, contained in this
Agreement to be untrue or inaccurate in any material respect at any
time from the date hereof to the Effective Time or that will or may
result in the failure to satisfy any of the conditions specified in
Article 6 and (ii) any failure of BSG or Medaphis, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
(d) Without the prior written consent of Medaphis, BSG
will not terminate any employee if such termination would result in
the payment of any amounts pursuant to "change in control" provisions
of any employment agreement or arrangement.
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Section 5.10. Public Announcements. The timing and content of all
announcements regarding any aspect of this Agreement or the Merger to the
financial community, government agencies, employees or the general public shall
be mutually agreed upon in advance (unless Medaphis or BSG is advised by
counsel that any such announcement or other disclosure not mutually agreed upon
in advance is required to be made by law or applicable rule of The Nasdaq
National Market and then only after making a reasonable attempt to comply with
the provisions of this Section 5.10).
Section 5.11. Financial Statements and Commission Reports. Prior to
the Effective Time, each party hereto shall deliver to the other, as soon as
available but in no event later than 45 days after the end of each fiscal
quarter, a consolidated balance sheet as of the last day of such fiscal period
and the consolidated statements of income, stockholders' equity and cash flows
of such party and its subsidiaries for the fiscal period then ended prepared in
accordance with generally accepted accounting principles with such exceptions
as are noted on such financial statements, and in the case of Medaphis, the
requirements of Form 10-Q (or Form 10-K as the case may be) under the Exchange
Act. Prior to the Effective Time, Medaphis shall deliver to BSG as soon as
available all forms, reports and other documents filed by Medaphis with the
Commission and shall otherwise keep BSG apprised of any material developments
with respect to the business or financial condition of Medaphis.
Section 5.12. Supplements to Disclosure Letters. From time to time
prior to the Effective Time, BSG and Medaphis will each promptly supplement or
amend the respective disclosure letters which they have delivered pursuant to
this Agreement with respect to any matter hereafter arising which, if existing
or occurring at the date of this Agreement, would have been required to be set
forth or described in any such disclosure letter or which is necessary to
correct any information in any such disclosure letter which has been rendered
inaccurate thereby. No supplement or amendment to any such disclosure letter
shall have any effect for the purpose of determining satisfaction of the
conditions set forth in Sections 6.2(a) or 6.3(a) of this Agreement.
Section 5.13. Pooling of Interests Accounting. From and after the date
hereof and until the Effective Time, neither Medaphis nor BSG nor any of their
respective subsidiaries or other affiliates shall knowingly take, or knowingly
fail to take, any action (other than actions expressly contemplated by this
Agreement) that would jeopardize the treatment of Medaphis's acquisition of BSG
as a "pooling of interests" for accounting purposes. Following the Effective
Time, Medaphis shall use its reasonable, best efforts to conduct the business
of Medaphis in a manner that would not jeopardize the characterization of the
Merger as a "pooling of interests" for accounting purposes.
Section 5.14. Accountant's Review Report. BSG agrees to exercise
reasonable efforts to cause Price Waterhouse to deliver to Medaphis a comfort
letter dated the effective date of the Registration Statement in form and
substance reasonably acceptable to Medaphis with respect to certain financial
and statistical information concerning BSG included in the Registration
Statement (the "PW Comfort Letter").
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Section 5.15. Post-Closing Operations. Following the Closing, Medaphis
agrees that certain business operations of Medaphis and BSG will be integrated
and operated as described on Exhibit 5.15 to this Agreement.
Section 5.16. Board Representation. For a period of five years
following the Effective Date, Medaphis will nominate a designee of Raymond J.
Noorda and Steven G. Papermaster for election as a member of Medaphis' Board of
Directors.
Section 5.17. Continuing Indemnity; Insurance. Medaphis covenants and
agrees that:
(a) All rights to indemnification and all limitations of liability
existing in favor of indemnified parties under BSG's Certificate of
Incorporation and Bylaws as in effect as of the date of this Agreement with
respect to matters occurring prior to or at the Effective Time shall survive
the Merger and shall continue in full force and effect, without any amendment
thereto, for a period of three (3) years from such date; provided, however,
that all rights to indemnification in respect of any claim asserted or made as
to which Medaphis is notified within such period shall continue until the final
disposition of such claim.
(b) Medaphis shall use its best efforts to cause the persons
serving as officers and directors of BSG immediately prior to the Effective
Time to be covered for a period of three (3) years from the Effective Time by
the directors' and officers' liability insurance policy maintained by BSG with
respect to acts or omissions which were committed by such officers and
directors in their capacity as such; provided that Medaphis may substitute
therefor policies of at least the same coverage and amounts containing terms
and conditions which are no less advantageous to such directors and officers.
Section 5.18. Employees. As of the Closing Date, Medaphis shall
provide all employees of BSG and each BSG ERISA Affiliate and their dependents,
and all qualified beneficiaries (as defined in Section 4980B(g)(1) of the Code)
entitled to continuation coverage under COBRA (the "Qualified Beneficiaries")
with coverage under one or more Medaphis Benefit Plans and each Medaphis ERISA
Affiliate (the "Successor Welfare Plans"), including, without limitation,
health care coverage ("Coverage"), which meets the following requirements: (i)
service with BSG and each BSG ERISA Affiliate prior to the Closing Date shall
be credited against all service and waiting period requirements under the
Successor Welfare Plans for those employees of BSG and each BSG ERISA Affiliate
(and their eligible dependents) that received coverage from BSG or a BSG ERISA
Affiliate as of the Closing Date, (ii) the Successor Welfare Plans shall not
provide for any pre-existing condition exclusion for those employees of BSG and
each BSG ERISA Affiliate (and their eligible dependents) and Qualified
Beneficiaries that were entitled to coverage from BSG or a BSG ERISA Affiliate
as of the Closing Date, and (iii) the deductibles in effect under the Successor
Welfare Plans for the plan year in which the Closing Date occurs shall be
reduced by any amounts applied towards the deductibles under the BSG Benefit
Plans for the plan year in which the Closing Date occurs provided such
individuals submit evidence to Medaphis sufficient to demonstrate the amount so
applied against any applicable deductibles in effect under any BSG Benefit
Plan.
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Medaphis covenants that the service of each employee of BSG and each
BSG ERISA Affiliate prior to the Closing Date shall be credited as service
under the Medaphis 401(k) Plan for all purposes (including without limitation,
eligibility and vesting) for those employees of BSG and each BSG ERISA
Affiliate that were participants in any 401(k) plan maintained by BSG or a BSG
ERISA Affiliate as of the Closing Date.
Section 5.19. No Other Registration Rights. BSG covenants and agrees
that, as of the Effective Time, the stockholders of BSG shall have no
registration rights in connection with the Common Stock of Medaphis, except to
the extent provided in the Registration Rights Agreement (as defined below).
Section 5.20. Pending Acquisitions. Between the date of this Agreement
and the Effective Time, BSG will cause its officers to furnish to Medaphis and
its authorized representatives any and all business and legal data and other
information pertaining to the Pending Acquisitions as Medaphis shall reasonably
request. BSG shall be required to obtain the consent of Medaphis prior to
executing a definitive agreement with respect to any Pending Acquisition;
provided, that, such consent shall not be unreasonably withheld. BSG shall use
its reasonable best efforts to close the Pending Acquisitions that are reviewed
and approved by Medaphis.
Section 5.21. Certain Options, Option Plans and Warrants.
(a) Prior to the Effective Time, BSG will:
(1) amend (A) Section 12 of its Third Amended and
Restated Incentive Stock Option Plan, adopted by the Board of BSG on
March 16, 1995, (B) Section 12 of its 1995 Incentive Stock Option
Plan, adopted by the Board of BSG as of September 1, 1995, (C) Section
12 of its Amended and Restated Non-Qualified Stock Option Plan,
adopted by the Board of BSG as of January 1, 1992, (D) Section 13 of
each of the Non-Qualified Stock Option Agreements, dated January 15,
1996, between BSG and Michael DiGiovanni, Daryl R. Conner and Scott
Manning, (E) the Non-Qualified Stock Option Agreement, dated February
1, 1996, between BSG and John T. McDonald, (F) the non-qualified
stock options listed as items 6 and 7 of Section 3.4 of the BSG
Disclosure Letter, and (G) the incentive stock options listed as items
5, 8, 9 and 10 of Section 3.4 of the BSG Disclosure Letter, in each
case so that, upon closing of the Merger, each option outstanding
under such plan, agreement or letter at the Effective Time will
evidence the right to purchase the number of shares of Medaphis Common
Stock equal to the product (rounded up or down as appropriate to a
whole share) of (i) the number of shares of BSG Common Stock covered
by such option immediately prior to the Effective Time, multiplied by
(ii) the Conversion Ratio; and the exercise price of such options for
each share of Medaphis Common Stock subject thereto shall be equal to
the quotient (rounded up or down as appropriate to a whole cent)
obtained by dividing (i) the per- share exercise price for shares of
BSG Common Stock subject to such option immediately prior to the
Effective Time, by (ii) the Conversion Ratio. With respect
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to (D) - (H) of the preceding sentence, BSG shall not be obligated to
perform the covenant contained in the preceding sentence if each
holder of an option under any such clause prior to the Effective Time
executes and delivers to Medaphis an Option Assumption Agreement
relating to the option or options granted under the instrument
described in such clause.
(2) elect, under Section IV.A of Article TWO of its 1995
Equity Purchase Plan, for each option outstanding under such plan at
the Effective Time to be treated as provided in clause (ii) of the
second sentence of Section IV.A of Article TWO of such plan; and, with
respect to such options, Medaphis covenants and agrees with BSG to
assume or replace such options in accordance with such election and
such clause (ii). Medaphis and BSG shall not be obligated to perform
the covenants contained in the preceding sentence if each holder of an
option under such plan prior to the Effective Time executes and
delivers to Medaphis an Option Assumption Agreement relating to such
holder's option or options under such plan.
(b) With respect to the Warrant Certificate, dated June 30, 1995,
issued by BSG to, and held by, Insight Venture Management, Inc., Medaphis
covenants and agrees to assume at the Effective Time the obligations of BSG
under such Warrant Certificate, including without limitation, the provisions of
Section 5.1 of such Warrant Certificate (which provisions after the Effective
Time shall apply to Medaphis); after the Effective Time such Warrant
Certificate shall be exercisable to purchase shares of Medaphis Common Stock
pursuant to Section 5.6 of such Warrant Certificate; and BSG covenants and
agrees with Medaphis to make, prior to the Effective Time, appropriate
adjustments, consistent with this Section 5.21(b) and pursuant to clause (ii)
of Section 5.6, in the application of Section 5.6 to the Merger. Medaphis and
BSG shall not be obligated to perform the covenants contained in the preceding
sentence if the holder of such Warrant Certificate prior to the Effective Time
executes and delivers to Medaphis an Option Assumption Agreement relating to
the Warrant Certificate.
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ARTICLE 6.
CONDITIONS TO CLOSING
Section 6.1. Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of each of the following conditions:
(a) BSG Stockholder Approval. The Merger, this Agreement
and the transactions contemplated hereby shall have been approved at
the stockholders' meeting of BSG duly called and held in accordance
with the DGCL by the holders of a majority of the outstanding shares
of BSG Common Stock.
(b) Injunction. At the Effective Time there shall be no
effective injunction, writ or preliminary restraining order or any
order of any nature issued by a court or governmental agency of
competent jurisdiction to the effect that the Merger may not be
consummated as herein provided, no proceeding or lawsuit shall have
been commenced by any governmental or regulatory agency for the
purpose of obtaining any such injunction, writ or preliminary
restraining order and no written notice shall have been received from
any such agency indicating an intent to restrain, prevent, materially
delay or restructure the transactions contemplated by this Agreement.
(c) Tax Opinion. BSG and Medaphis shall each have
received a written opinion of King & Spalding concerning certain
federal income tax consequences of the Merger, substantially in the
form attached as Exhibit 6.1(c).
(d) Registration Statement. The Registration Statement
shall be effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall be in
effect and no proceedings for such purpose, or under the proxy rules
of the Commission pursuant to the Exchange Act and with respect to the
transactions contemplated hereby, shall be pending before or
threatened by the Commission. All applicable state securities laws
shall have been complied with in connection with the issuance of
Medaphis Common Stock to be issued pursuant to the Merger, and no stop
order suspending the effectiveness of any qualification or
registration of such Medaphis Common Stock under such state securities
laws shall have been issued and pending or threatened by the
authorities of any such state.
(e) Pooling. BSG and Medaphis shall have been advised in
writing, as of the Effective Time, by Deloitte & Touche, independent
public accountants, that, in accordance with generally accepted
accounting principles, the Merger qualifies to be treated as a
"pooling of interests" for accounting purposes, and shall have been
advised in writing, as of the Effective Time, by Price Waterhouse that
based upon inquiries and their examination of the
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financial statements of BSG they are not aware of any conditions
relating to BSG that would preclude the use of "pooling of interests"
accounting in connection with the Merger.
(f) The Nasdaq National Market Additional Shares
Notification. The Medaphis Common Stock to be issued pursuant to this
Agreement or pursuant to the exercise of Non-Qualified Options shall
have been approved for listing on The Nasdaq National Market, subject
only to official notice of issuance by Medaphis.
(g) Indemnification Agreement. The Indemnification
Agreement in the form attached as Exhibit 6.1(g) (the "Indemnification
Agreement") shall have been duly executed and delivered by the parties
thereto.
(h) HSR Act. The applicable waiting periods shall have
expired under the HSR Act.
(i) Parachute Payment Approval. Any payment required to
be made by BSG that otherwise would constitute an "excess parachute
payment" under Section 280G of the Code shall have been approved by
the stockholders of BSG in a manner that complies with the shareholder
approval requirements of Section 280G(b)(5)(B) of the Code.
Section 6.2. Conditions to Obligations of Medaphis. The obligation of
Medaphis to effect the Merger shall be subject to the fulfillment at or prior
to the Closing of each of the following additional conditions:
(a) Representations and Warranties. The representations
and warranties of BSG set forth in Article 3 of this Agreement shall
be true and correct as of the date of this Agreement and as of the
Effective Time as though made on and as of the Effective Time, except
that this condition shall not apply to Section 3.24.
(b) Performance of Obligations of BSG. BSG shall have
performed in all material respects all covenants and agreements
required to be performed by it under this Agreement.
(c) Opinion of BSG Counsel. Medaphis shall have received
an opinion of Brobeck, Phleger & Harrison LLP, dated the Closing Date,
in form and substance reasonably satisfactory to Medaphis.
(d) Authorization of Merger. All corporate action
necessary by BSG to authorize the execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken.
(e) Consents. All consents, authorizations, orders and
approvals of (or filings or registrations with) any governmental
commission, board or other regulatory body required in connection with
the execution, delivery and performance of this Agreement shall have
been
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obtained or made, except for filing of the Delaware Certificate of
Merger and any other documents required to be filed after the
Effective Time and except where the failure to have obtained or made
any such consent, authorization, order, approval, filing or
registration would not have a material adverse effect on the business
of Medaphis and BSG following the Effective Time.
(f) Certificates. BSG shall have furnished Medaphis with
a certificate of its appropriate officers as to compliance with the
conditions set forth in Sections 6.2(a), (b) and (d).
(g) Accountant's Review Report and Letter. Medaphis shall
have received the PW Comfort Letter.
(h) Noncompetition and Nonsolicitation Agreement. Each of
the Specified Stockholders shall have executed and delivered a
noncompetition and nonsolicitation agreement with Medaphis that is in
form and substance mutually satisfactory to each party to such
contract (the "Noncompetition and Nonsolicitation Agreements").
(i) Dissenters' Rights. Holders of not more than 10% of
the outstanding BSG Common Stock as of the Closing Date, shall have
elected to exercise appraisal rights pursuant to the DGCL.
(j) Options. Holders of Options listed in the BSG
Disclosure Letter shall have executed and delivered to Medaphis Option
Assumption Agreements with respect to their respective Option or
Options.
(k) Preferred Stock. All outstanding shares of BSG
Preferred Stock shall have been converted into shares of BSG Common
Stock pursuant to applicable provisions of the Restated Certificate of
Incorporation of BSG and on the basis of one share of BSG Common Stock
for each share of BSG Preferred Stock.
(l) Employment Agreements. Each of the Specified
Employees shall have executed and delivered an employment agreement
with Medaphis that in substance reflects the terms described in the
BSG Disclosure Letter (the "Employment Agreements").
Section 6.3. Conditions to Obligations of BSG. The obligation of BSG
to effect the Merger shall be subject to the fulfillment at or prior to the
Closing of each of the following additional conditions:
(a) Representations and Warranties. The representations
and warranties of Medaphis set forth in Article 4 of this Agreement
shall be true and correct as of the date of this Agreement and as of
the Effective Time as though made on and as of the Effective Time,
except that this condition shall not apply to Section 4.20.
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(b) Performance of Obligations by Medaphis. Medaphis
shall have performed in all material respects all covenants and
agreements required to be performed by it under this Agreement.
(c) Opinion of Medaphis Counsel. BSG shall have received
an opinion of King & Spalding, dated the Closing Date, in form and
substance reasonably satisfactory to BSG.
(d) Authorization of Merger. All corporate action
necessary by Medaphis to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken.
(e) Consents. All consents, authorizations, orders and
approvals of (or filings or registrations with) any governmental
commission, board or other regulatory body required in connection with
the execution, delivery and performance of this Agreement shall have
been obtained or made, except for filing of the Delaware Certificate
of Merger and any other documents required to be filed after the
Effective Time and except where the failure to have obtained or made
any such consent, authorization, order, approval, filing or
registration would not have a material adverse effect on the business
of Medaphis and BSG following the Effective Time.
(f) Certificates. Medaphis shall have furnished BSG with
a certificate of its appropriate officers as to compliance with the
conditions set forth in Sections 6.3(a), (b) and (d).
(g) Accountant's Report. BSG shall have received a letter
from Deloitte & Touche dated the effective date of the Registration
Statement under the Securities Act, with respect to certain financial
and statistical information concerning Medaphis and its subsidiaries
included or incorporated by reference in the Registration Statement,
in form and substance customary in transactions of the nature of the
Merger.
(h) Registration Rights Agreement. Medaphis shall have
duly executed and delivered the Registration Rights Agreement in the
form attached as Exhibit 6.3(h) (the "Registration Rights Agreement").
(i) Noncompetition and Nonsolicitation Agreement.
Medaphis shall have executed and delivered the Noncompetition and
Nonsolicitation Agreement with the Specified Stockholders.
(j) Employment Agreements. MED shall have executed and
delivered the Employment Agreements with the Specified Employees.
49
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<PAGE> 72
ARTICLE 7.
CLOSING
The consummation of the transactions contemplated by this Agreement
are referred to as the "Closing." The "Closing Date" shall be the date on which
the Closing occurs. The Closing shall occur as soon as possible following the
BSG Stockholders meeting described in Section 5.5 as is reasonably practicable
and in any event within three business days of the satisfaction or waiver of
the other conditions set forth in Article 6; except that under no circumstance
shall the Closing take place on or after July 31, 1996 (the "Termination
Date"). The Closing shall take place at the offices of King & Spalding, 191
Peachtree Street, Atlanta, Georgia, or at such other place as BSG and Medaphis
may agree.
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ARTICLE 8.
TERMINATION
Section 8.1. Termination and Abandonment. This Agreement may be
terminated at any time prior to the Closing Date, whether before or after
approval by the stockholders of Medaphis:
(a) by mutual agreement of the Boards of Directors of BSG
and Medaphis;
(b) by BSG, if the conditions set forth in Sections 6.1
and 6.3 are not complied with or performed and such noncompliance or
nonperformance has not been cured or eliminated (or by its nature
cannot be cured or eliminated) by Medaphis on or before the
Termination Date;
(c) by Medaphis, if the conditions set forth in Sections
6.1 and 6.2 are not complied with or performed and such noncompliance
or nonperformance has not been cured or eliminated (or by its nature
cannot be cured or eliminated) by BSG on or before the Termination
Date; and
(d) by BSG or Medaphis, if after the meeting of the
stockholders of BSG contemplated by Section 5.5 has been held (after
giving effect to any adjournments thereof) the conditions set forth in
Section 6.1(a) hereof have not been fulfilled.
Section 8.2. Specific Performance and Other Remedies. The parties
hereto each acknowledge that the rights of each party to consummate the
transactions contemplated hereby are special, unique and of extraordinary
character, and that, in the event that any party violates or fails or refuses
to perform any covenant or agreement made by it herein, the non-breaching party
may be without an adequate remedy at law. The parties each agree, therefore,
that in the event that either party violates or fails or refuses to perform any
covenant or agreement made by such party herein, the non- breaching party or
parties may, subject to the terms of this Agreement and in addition to any
remedies at law for damages or other relief, institute and prosecute an action
in any court of competent jurisdiction to enforce specific performance of such
covenant or agreement or seek any other equitable relief.
Section 8.3. Effect of Termination. In the event of termination of
this Agreement pursuant to this Article 8, this Agreement shall forthwith
become void and there shall be no liability on the part of any party or its
respective officers, directors or stockholders, except for obligations under
Section 5.3(b), Section 5.10, Section 8.4, Section 9.13 and this Section, all
of which shall survive the termination. Notwithstanding the foregoing, nothing
contained herein shall relieve any party from liability for any breach of any
covenant or agreement in this Agreement.
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Section 8.4. Termination Fee.
(a) If Medaphis terminates this Agreement pursuant to
Section 8.1(c) or 8.1(d) or BSG terminates this Agreement pursuant to
Section 8.1(b) or 8.1(d), in any such case, as a result of the failure
to satisfy the closing condition in Section 6.1(a), BSG shall within
five business days after such termination, pay Medaphis a fee of
$5,000,000.
(b) If Medaphis terminates this Agreement (other than as
permitted by Section 8.1 of this Agreement) or BSG terminates this
Agreement pursuant to Section 8.1(b) as a result of the failure by
Medaphis to perform any of its covenants, Medaphis shall, within five
business days after such termination, pay BSG a fee of $5,000,000.
Except as provided in Section 9.4, in the event of a payment pursuant to this
Section 8.4, such payment (and, if applicable, the expense reimbursement
contemplated by Section 9.13) shall be in full satisfaction of all obligations
and liabilities of the paying party to the other, arising out of the
termination of this Agreement.
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ARTICLE 9.
MISCELLANEOUS PROVISIONS
Section 9.1. Notices. All notices, communications and deliveries
hereunder shall be made in writing signed by the party making the same, shall
specify the Section hereunder pursuant to which it is given or being made, and
shall be delivered personally or by telecopy transmission or sent by registered
or certified mail or by any express mail service (with postage and other fees
prepaid) as follows:
To Medaphis or BSGSub:
Medaphis
2700 Cumberland Parkway
Suite 300
Atlanta, Georgia 30339
Attn: William R. Spalding, Esq.
Telecopy No.: (770) 431-1667
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attn: Robert W. Miller, Esq.
Telecopy No.: (404) 572-5144
To BSG:
BSG
701 Brazos Street
Austin, Texas 78701
Attn: Mr. Steven G. Papermaster
Telecopy No.: (512) 320-8377
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with a copy to:
Mr. Carmelo M. Gordian
Brobeck, Phleger & Harrison LLP
301 Congress Avenue
Suite 1200
Austin, TEXAS 78701
Telecopy No.: (512) 477-5813
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing.
Section 9.2. Disclosure Letters and Exhibits. The BSG Disclosure
Letter and the Medaphis Disclosure Letter and all Exhibits are hereby
incorporated into this Agreement and are hereby made a part hereof as if set
out in full in this Agreement.
Section 9.3. Assignment; Successors in Interest. No assignment or
transfer by Medaphis, BSGSub or BSG of their respective rights and obligations
hereunder prior to the Closing shall be made except with the prior written
consent of the other parties hereto. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their permitted successors
and assigns, and any reference hereto shall also be a reference to a permitted
successor or assign.
Section 9.4. Investigations; Representations and Warranties. The
representations and warranties of BSG set forth in this Agreement shall
terminate immediately after Closing; except that the representations and
warranties of BSG set forth in the last sentence of Section 3.2, the first
sentence of Section 3.3, but only with respect to clause (ii), and in Sections
3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.14, 3.18, 3.20, 3.23 and 3.24 shall not be
extinguished by the Closing and shall survive the Closing Date until such time
as the issuance date of the audit opinion covering the December 31, 1996 annual
audited consolidated financial statements of Medaphis, but in no event longer
than one year following the Closing Date, except that the representations and
warranties contained in Section 3.4 shall survive until the expiration of the
statute of limitations applicable to each such representation or warranty (the
"Survival Period"). The representations and warranties of Medaphis and BSGSub
set forth in the last sentence of Section 4.2, and in Sections 4.4, 4.7, 4.9,
4.10, 4.11, 4.12, 4.13, 4.14, 4.16(b), (c) and (g), 4.18, 4.19 and 4.20 shall
not be extinguished by the Closing and shall survive the Closing Date and shall
terminate at the expiration of the Survival Period. Notwithstanding anything to
the contrary set forth in this Section 9.4, this Section shall not limit or
restrict BSG's or Medaphis's remedy against the other or any other person for
fraud, willful misconduct, bad faith or any other intentional breach of any
representation, warranty or covenant contained herein. The covenants and
agreements of each of Medaphis, BSGSub and BSG set forth in this Agreement and
the exhibits to this Agreement shall survive the Closing and shall remain in
full force and effect until performed or satisfied by the applicable party
responsible for the same in this Agreement or the exhibits to this Agreement.
The respective representations and warranties of Medaphis, BSGSub and
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<PAGE> 77
BSG contained herein or in any certificate, or other document delivered by any
party prior to Closing shall not be deemed waived or otherwise affected by any
investigation made by a party hereto.
Section 9.5. Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other gender.
Section 9.6. Captions. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise
specified to the contrary, all references to Articles and Sections are
references to Articles and Sections of this Agreement and all references to
Exhibits are references to Exhibits to this Agreement and the BSG Disclosure
Letter and the Medaphis Disclosure Letter.
Section 9.7. Controlling Law; Integration; Amendment.
(a) This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of
Delaware without reference to Delaware's choice of law rules and the
parties hereto hereby agree that any legal proceeding instituted with
respect to this Agreement shall be brought in Atlanta, Georgia and
the parties hereby submit to personal jurisdiction therein and agree
that venue properly lies therein. This Agreement supersedes all
negotiations, agreements and understandings among the parties with
respect to the subject matter hereof and constitutes the entire
agreement among the parties hereto.
(b) This Agreement may not be amended, modified or
supplemented except by written agreement of the parties hereto.
Section 9.8. BSG and Medaphis Knowledge. As used in this Agreement,
the terms "the best knowledge of the BSG Executives," "known to the BSG
Executives" or words of similar import used herein with respect to BSG shall
mean the actual knowledge of any BSG Executive, together with the knowledge a
reasonable business person would have obtained after making reasonable inquiry
and after exercising reasonable diligence with respect to the matters at hand.
The "BSG Executives" shall consist of Messrs. Steven G. Papermaster, David S.
Lundeen, Robert E. Pickering, Jr. , and Gregory A. Grosh. As used in this
Agreement, the terms "the best knowledge of the Medaphis Executives," "known to
the Medaphis Executives" or words of similar import used herein with respect to
Medaphis shall mean the actual knowledge of any Medaphis Executive, together
with the knowledge a reasonable business person would have obtained after
making reasonable inquiry and after exercising reasonable diligence with
respect to the matters at hand. The "Medaphis Executives" shall consist of
Messrs. Randolph G. Brown, Timothy J. Kilgallon, Michael R. Cote and William R.
Spalding.
Section 9.9. Severability. Any provision hereof which is prohibited
or unenforceable in any jurisdiction will, as to such jurisdiction, be
ineffective to the extent of such prohibition or
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unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction will not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by law, the parties hereto waive any provision of law which renders
any such provision prohibited or unenforceable in any respect.
Section 9.10. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement or the terms hereof to produce
or account for more than one of such counterparts.
Section 9.11. Enforcement of Certain Rights. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person, firm or corporation other than the parties hereto, and their
successors or assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, or result in such person, firm or corporation
being deemed a third party beneficiary of this Agreement.
Section 9.12. Waiver. At any time prior to the Effective Time, the
parties hereto, by or pursuant to action taken by their respective Boards of
Directors, may, to the extent legally permitted: (i) extend the time for the
performance of any of the obligations or other acts of any other party; (ii)
waive any inaccuracies in the representations or warranties of any other party
contained in this Agreement or in any document or certificate delivered
pursuant hereto; (iii) waive compliance or performance by any other party with
any of the covenants, agreements or obligations of such party contained herein;
and (iv) waive the satisfaction of any condition that is precedent to the
performance by the party so waiving of any of its obligations hereunder. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of such
party. A waiver by one party of the performance of any covenant, agreement,
obligation, condition, representation or warranty shall not be construed as a
waiver of any other covenant, agreement, obligation, condition, representation
or warranty. A waiver by any party of the performance of any act shall not
constitute a waiver of the performance of any other act or an identical act
required to be performed at a later time.
Section 9.13. Fees and Expenses. Medaphis shall pay its own fees,
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including, but not limited to, the fees,
costs and expenses of its financial advisors, accountants and counsel. BSG
shall pay its own fees, costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, but such fees, costs and
expenses shall not exceed in the aggregate the sum of the amounts of fees
specified in the BSG Disclosure Letter and the reasonable fees and expenses of
accountants and counsel for BSG.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the date first above written.
MEDAPHIS CORPORATION
[Corporate Seal]
Attest: By: /s/ Randolph G. Brown
-------------------------
Title: President, Chairman &
Chief Executive Officer
By: /s/ William R. Spalding
-------------------------
Title: Senior Vice President-Administration
& General Counsel
BSGSUB, INC.
[Corporate Seal]
Attest: By: /s/ Randolph G. Brown
-------------------------
Title: President
By: /s/ William R. Spalding
-------------------------
Title: Assistant Secretary
BSG CORPORATION
[Corporate Seal]
Attest: By: /s/ Steven G. Papermaster
----------------------------
Title: Chairman, Chief Executive
Officer & President
By: /s/ David S. Lundeen
-----------------------
Title: Executive Vice President
57
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<PAGE> 80
EXHIBIT 1.2
PARTIES TO STOCKHOLDERS AGREEMENT
Steven G. Papermaster
Mark Rogers
NFT Ventures, Inc.
NP Ventures Ltd.
Page 80 of 103 Pages
<PAGE> 81
EXHIBIT 1.4
DIRECTORS OF SURVIVING CORPORATION
Randolph G. Brown
Michael R. Cote
William R. Spalding
Steven G. Papermaster
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<PAGE> 82
EXHIBIT 1.5
OFFICERS OF SURVIVING CORPORATION
<TABLE>
<S> <C>
Steven G. Papermaster Chairman of the Board and Chief Executive Officer
David S. Lundeen Executive Vice President and Chief Financial Officer
Robert E. Pickering, Jr. Executive Vice President
Randolph G. Brown Co-Chairman of the Board
William R. Spalding Senior Vice President-General Counsel and Secretary
Michael R. Cote Senior Vice President and Assistant Secretary
Jon Anderson Vice President-Purchasing and Administration
Caryn Dickerson Vice President-Treasurer
</TABLE>
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<PAGE> 83
EXHIBIT 5.15
POST-CLOSING OPERATIONS
1. New Organization. BSG will be the parent/umbrella organization for all
of Medaphis's process re-engineering and systems integration companies
and capabilities (collectively, the "Relevant Businesses"). Imonics,
BSG Alliance/IT and other Relevant Businesses will become subsidiaries
or divisions of BSG and will form a part of the "BSG (Business
Systems) Group". The head of Imonics (as well as any future Relevant
Businesses) will report to the new BSG. The heads of the Relevant
Businesses, along with such executives and Mr. Papermaster, will form
the executive committee of the BSG Group (and BSG Alliance/IT). The
corporate structure of the BSG Group will be modified as needed to
accommodate tax and regulatory considerations.
2. Headquarters. The BSG Group shall remain headquartered in Austin,
Texas.
3. Logos, Trade Names, etc. The BSG logo and "tag" line will continue to
be used by BSG, which will also be known as a "Medaphis Company".
Imonics and other Relevant Businesses may continue in their current
names, but each will also be known as a "BSG Company". BSG (through
Mr. Papermaster) will have responsibility, subject to approval by
Medaphis, for establishing the mission and vision of the BSG Group.
4. Board of Advisors, etc. New BSG will maintain a separate board of
advisors which will provide advice to Mr. Papermaster in connection
with the operation of BSG and the Relevant Businesses. Mr. Papermaster
will be chairman of the Board of Advisors and will be CEO of the BSG
Group and BSG Corporation.
5. Other. BSG will maintain separate financial records. Medaphis and BSG
will enter into defined long term (five year), third party technology
development and management contracts with other Medaphis business
entities, which contracts will provide for arms-length profitability
and will be terminable for cause.
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<PAGE> 84
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
May 6, 1996
NFT Ventures, Inc.
Attn: Mr. Mark Rogers
12950 Saratoga Avenue, Suite B
Saratoga, CA 95070
NP Ventures, Ltd.
701 Brazos Street
Suite 700
Austin, TX 78701
Mr. Steven G. Papermaster
701 Brazos Street
Suite 700
Austin, TX 78701
Dear Sirs:
This letter will confirm that in order to induce BSG Corporation, a
Delaware corporation ("BSG"), to consummate the transactions contemplated under
that certain Merger Agreement, dated as of March 15, 1996, by and among
Medaphis Corporation, a Delaware corporation ("Medaphis"), BSGSub, Inc., a
Delaware corporation and a wholly owned subsidiary of Medaphis ("BSGSub"), and
BSG (the "Merger Agreement"), and for other good and valuable consideration,
the receipt and sufficiency of which are acknowledged and confirmed, Medaphis
covenants and agrees with each of NFT Ventures, Inc., a Utah corporation
("NFT"), Steven G. Papermaster, an individual resident of the State of Texas
("Papermaster"), and NP Ventures, Ltd., a Texas limited partnership ("NP"),
(NFT is individually referred to as a Principal; NP and Papermaster are
collectively referred to as a Principal, and as such with NFT are collectively
referred to as the "Principals" in this Agreement) as follows:
1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
BSG Stock means the common stock, par value $.001 per
share, of BSG.
Commission means the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities
Act.
Page 84 of 103 Pages
<PAGE> 85
Medaphis Stock means the voting common stock, par value $.01
per share, of Medaphis.
Pooling Period means the period beginning at the Effective
Time of the Merger and running through such time as financial results
covering at least thirty days of combined operations of Medaphis and
BSG shall have been published by Medaphis within the meaning of
Section 201.01 of the Commission's Codification of Financial
Reporting Policies.
Registration Expenses means the expenses so described in
Section 8 of this Agreement.
Registration Shares means the shares of Medaphis Stock
issued to the Principals pursuant to the Merger Agreement (as
adjusted in accordance with Section 10 of this Agreement), the
certificates representing which bear the legend set forth in Section
2 below.
Securities Act means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect at the time.
Selling Expenses means the expenses so described in Section
8 of this Agreement.
In addition to the foregoing defined terms, any capitalized terms
used in this Agreement with out definition have the meanings ascribed to such
terms in the Merger Agreement.
2. Medaphis Stock Legend. Each certificate representing the
Registration Shares will be stamped or otherwise imprinted with a legend
substantially in the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION AND HAVE BEEN
ISSUED TO AN AFFILIATE IN A MERGER TRANSACTION SUBJECT TO RULE
145 UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT IN ACCORDANCE WITH THE APPLICABLE REQUIREMENTS OF RULE
145 UNDER THE ACT, PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH IS NOT
SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT AND IN THE
CASE OF A TRANSACTION NOT SUBJECT TO SUCH REGISTRATION
REQUIREMENTS UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY
2
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<PAGE> 86
TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE ACT."
Each certificate issued upon exchange or transfer of any such
Registration Shares will bear the legend set forth in this Section 2, except
that such certificate will not bear such legend if (i) such transfer is in
accordance with the applicable provisions of Rule 145 under the Securities Act,
(ii) such transfer is made pursuant to an effective registration statement
under the Securities Act, or (iii) Medaphis is provided with an opinion of
counsel reasonably satisfactory to Medaphis to the effect that such transfer of
the Registration Shares may be effected without registration under the
Securities Act and that the transferee and any subsequent transferee (other
than an affiliate of Medaphis) would be entitled to transfer such securities in
a public sale without registration under the Securities Act.
3. Demand Registration.
(a) At any time during the period beginning on the first
anniversary of the Closing Date and ending on the Termination Date, either
Principal may request that Medaphis register the Registration Shares under the
Securities Act for public sale, provided that in no event shall such requests
exceed two in the aggregate for both Principals, (the "Demand Rights"). Any
such Demand Rights request must be in writing signed by a Principal holding
then outstanding Registration Shares and must designate the specific number of
Registration Shares proposed to be sold by each of the Principals in such
public offering and the proposed plan of distribution for the Registration
Shares. Prior to providing Medaphis with any such Demand Rights request, such
Principal shall provide reasonable notice to the other Principal of his
intention to so request a Demand Right and provide such other Principal with
the opportunity to sell Registration Shares in connection with such
registration.
(b) Notwithstanding anything to the contrary set forth
in this Section 3, Medaphis shall have no obligation hereunder to: (i) register
Registration Shares if such registration involves 1,000,000 or fewer
Registration Shares; or (ii) maintain the effectiveness of any registration
statement filed pursuant to this Section 3 for a period of time exceeding the
Distribution Period (as defined in Section 5(g) below).
(c) Medaphis shall be entitled in its sole discretion to
delay the filing of the registration statement covering such Registration
Shares to coincide with the next open trading window for directors and
executive officers of Medaphis following the release by Medaphis of quarterly
or annual summary statements of revenues and earnings; provided, however, that
in no event shall Medaphis be permitted hereunder to delay the filing of such
registration statement for a period of more than forty-five days from the date
of receipt of the request for Demand Rights specified in Section 3 (a) of this
Agreement; provided, further, however, that with respect to the initial demand
registration requested by a Principal, Medaphis shall not be permitted to delay
the filing of such registration statement for a period exceeding thirty days.
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(d) Notwithstanding anything to the contrary set forth
in this Section 3, if the Principals exercise a Demand Right and subsequently
inform Medaphis in writing that (i) they desire to withdraw such registration
or (ii) they are unable to sell in excess of 50% of the Registration Shares
covered by such registration statement due to a deterioration in market
conditions or other bona fide reason and the Principals reimburse Medaphis for
all Registration Expenses incurred by Medaphis in connection with such
terminated registration, then the Principals shall be deemed not to have
exercised the Demand Right under this Agreement and shall be permitted to
exercise such right in accordance with the terms of Section 3(a) of this
Agreement on one additional occasion; provided, however, that the Principals
shall be entitled to withdraw a demand registration and preserve the Demand
Right under this Section 3(d) on one occasion only.
(e) Notwithstanding Section 3(d), Medaphis shall have
the right, exercisable by written notice to the Principals within thirty days
after receipt of their request to effect a registration, to include Medaphis's
shares in such registration, in which event such registration shall be deemed
to be Medaphis-initiated registration, and the Principals shall have the right
to include their Registration Shares to the extent permitted under Section 4.
No registration statement initiated by Principals hereunder shall count as a
demand registration under this Section 3(e) unless and until a registration
statement with respect to the Registration Shares covered by the demand shall
have been declared effective (also subject to the provisions of Section 3(d)).
4. Incidental Registration. If at any time following the
Pooling Period and prior to the Termination Date, Medaphis proposes to register
any Medaphis Stock under the Securities Act (other than on Forms S-4, S-8 or
any other form which does not permit registration of securities by selling
Principals for sale to the public for cash) in connection with the proposed
offer and sale for cash either for its own account or on behalf of any holder
of Medaphis Stock (but not any holder of any security convertible into or
exchangeable or exercisable for Medaphis Stock), it will give written notice to
each of the Principals of its intention to do so. Upon the written request of
either of the Principals, given within five business days after receipt of any
such notice, to register any of such Principal's Registration Shares, Medaphis
will use its reasonable efforts to cause the Registration Shares as to which
registration has been so requested to be included in the shares of Medaphis
Stock to be covered by the registration statement proposed to be filed by
Medaphis, all to the extent required to permit the sale or other disposition by
such Principal (in accordance with its written request) of such Registration
Shares so registered. If a registration effected pursuant to this Section 4
involves a firm commitment underwritten public offering, Medaphis shall have
the sole right to select the managing underwriters. The managing underwriters
for such offering shall have the authority to reduce the number of Registration
Shares to be included in such registration if and to the extent they are of the
opinion that inclusion of such Registration Shares would adversely affect the
marketing of the Medaphis Stock to be sold under such offering. Any such
reduction or cutback in the shares included in any such offering shall be
effected in accordance with the following priorities: (a) First, the managing
underwriters shall exclude shares ("Piggyback Shares") of Medaphis Stock
included in such registration by stockholders (including the Principals) by
virtue of incidental or piggyback registration rights (but not demand
registration rights) granted to such stockholders, which exclusion shall be
effected on a pro rata basis based upon the number
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of shares of Medaphis Stock so requested to be registered in such offering by
all such stockholders proposing to sell Piggyback Shares, subject to any
incidental registration rights which are superior to the registration rights of
the Principals pursuant to this Section 4, which superior rights were granted
prior to the date of this Agreement; and (b) Second, and only to the extent
necessary and after the exclusion of all Piggyback Shares, the managing
underwriters shall exclude shares of Medaphis Stock included in such
registration by Medaphis and any stockholder of Medaphis who shall have
exercised a demand registration right in connection with such offering, which
exclusion shall be effected on a pro rata basis based upon the number of shares
of Medaphis Stock proposed to be registered on behalf of Medaphis and on behalf
of any such holder of demand registration rights. Notwithstanding anything to
the contrary contained in this Section 4, if there is a firm commitment
underwritten public offering of Medaphis Stock pursuant to which a Principal
has incidental registration rights under this Section 4 and such Principal
elects to sell Registration Shares in connection with such underwritten public
offering, such Principal shall enter into an agreement (the "Lockup
Agreement"), pursuant to which such Principal shall refrain from selling any
Registration Shares (other than Registration Shares included in such
Registration) then owned by such Principal during the period of distribution of
Medaphis Stock by such underwriters and for a period of ninety days following
the effective date of such registration; provided, however, that such Principal
shall be required to enter into the Lockup Agreement if, and only if, directors
and executive officers of Medaphis enter into an agreement similar to the
Lockup Agreement.
5. Registration Procedures. If and whenever Medaphis is
required by the provisions of Sections 3 or 4 of this Agreement to effect the
registration of any of the Registration Shares under the Securities Act,
Medaphis shall, as expeditiously as practical:
(a) prepare and file with the Commission a registration
statement on the applicable form with respect to such Registration Shares and
use its reasonable best efforts to cause such registration statement to become
and remain effective for the Distribution Period, but no longer and to promptly
notify the Principals of when such registration statement and any amendment to
such registration statement becomes effective, and to provide the Principals
with reasonable access to any written comments received from the Commission in
connection with such registration and any written responses to such
registration statement and any stop order received from the Commission in
connection with such registration statement;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to keep such
registration statement effective for the Distribution Period, but no longer,
and to comply with the provisions of the Securities Act with respect to the
disposition of all Registration Shares covered by such registration statement;
(c) furnish to each Principal such number of copies of
the registration statement and the prospectus included in such registration
statement (including each preliminary prospectus) as such persons may
reasonably request in order to facilitate the public sale or other disposition
of the Registration Shares covered by such registration statement;
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(d) use its reasonable best efforts to register or
qualify the Registration Shares covered by such registration statement under
the securities or blue sky laws of such jurisdictions as the Principals or, in
the case of an underwritten public offering, the managing underwriters, shall
reasonably request; provided, however, that Medaphis shall not for any purpose
be required to execute a general consent to service of process or to qualify to
do business as a foreign corporation in any jurisdiction where it is not so
qualified;
(e) immediately notify each Principal selling
Registration Shares under such registration statement and each underwriter, at
any time when a prospectus relating to such registration statement is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus contained in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements in such registration statement not misleading in the light of the
circumstances then existing and prepare a supplement to or an amendment to such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated in such registration statement or necessary to make the statements
in such registration statement not misleading in the light of the circumstances
then existing;
(f) use its reasonable best efforts to furnish, at the
request of either Principal, on the date that Registration Shares are delivered
to the underwriters for sale pursuant to such registration: (i) an opinion
dated such date of counsel representing Medaphis in connection with such
registration, addressed to the underwriters or broker(s) and to such Principal,
stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop
order suspending the effectiveness of such registration statement has been
issued and no proceedings for that purpose have been instituted or are pending
or contemplated under the Securities Act, (B) the registration statement, the
related prospectus, and each amendment or supplement of such registration
statement or prospectus, comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and regulations of
the Commission under the Securities Act (except that such counsel need express
no opinion as to the financial statements and the other financial and
statistical data contained or incorporated by reference in such registration
statement or prospectus) and (C) to such other effects as may reasonably be
requested by counsel for the underwriters or broker(s), and (ii) a letter dated
such date from the independent public accountants retained by Medaphis,
addressed to the underwriters or broker(s) and to such Principal, stating that
they are independent public accountants within the meaning of the Securities
Act and that, in the opinion of such accountants, the financial statements of
Medaphis included or incorporated by reference in the registration statement or
the prospectus, or any amendment or supplement of such registration statement
or prospectus, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to
the period ending no more than five business days prior to the date of such
letter) with respect to the registration in respect of which such letter is
being given as such underwriters may reasonably request;
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(g) make available for inspection by each Principal, any
underwriter participating in any distribution pursuant to such registration
statement and any attorney, accountant or other agent retained by such
Principal or underwriter, all financial and other records, pertinent corporate
documents and properties of Medaphis, and cause Medaphis's officers, directors
and employees to supply all information reasonably requested by any such
Principal, underwriter, attorney, accountant or agent in connection with such
registration statement.
The period of distribution (the "Distribution Period") of
Registration Shares in a firm commitment underwritten public offering shall be
deemed to extend until, but not beyond, such time as each underwriter has
completed the distribution of all securities purchased by it, and the period of
distribution of Registration Shares in any other registration shall extend
until, but not beyond, the earlier of the sale of all Registration Shares
covered by such registration or ninety days following the effective date of the
registration statement utilized in connection with such registration under the
Securities Act. Medaphis shall have the right to deregister with the
Commission any Registration Shares which remain unsold at the conclusion of any
Distribution Period.
6. Principals' Cooperation. In connection with each
registration pursuant to Sections 3 and 4 of this Agreement, the Principals
selling Registration Shares shall furnish in writing to Medaphis and any
underwriter participating in such offering such information with respect to
themselves and the proposed distribution by them as is reasonably necessary in
order to assure compliance with federal and applicable state securities laws.
7. Underwriting Agreement. In connection with each
registration pursuant to Sections 3 or 4 of this Agreement covering an
underwritten public offering, Medaphis and the Principals agree to enter into a
written agreement with the managing underwriters in such form and containing
such provisions as are customary in the securities business for such an
arrangement between major underwriters and companies of Medaphis's size and
investment stature; provided, however, that such agreement shall not contain
any such provision applicable to Medaphis or the Principals which is
inconsistent with the provisions of this Agreement; provided, further, however,
that the time and place of the closing under said agreement shall be as
mutually agreed upon between Medaphis and such managing underwriters.
8. Expenses.
(a) All expenses incurred by Medaphis in connection with
the registration contemplated by Sections 3 and 4 of this Agreement, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel and independent public accountants for Medaphis,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, but excluding any Selling Expenses, are
called "Registration Expenses" in this Agreement. All underwriting discounts,
selling commissions and brokerage fees, fees and expenses of each of the
Principal's counsel and expenses applicable to the sale of Registration Shares
are in this Agreement called "Selling Expenses."
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(b) Medaphis will pay all Registration Expenses in
connection with each registration statement filed pursuant to Section 3 or 4 of
this Agreement; provided, however, that Medaphis shall not be obligated to pay
any Registration Expenses if in the written opinion of Medaphis's independent
auditors payment of any such Registration Expenses by Medaphis would cause the
Merger pursuant to the Merger Agreement to be accounted for on any basis other
than a "pooling of interests." Registration Expenses to the extent not paid by
Medaphis, and all Selling Expenses in connection with any registration
statement filed pursuant to Section 3 or 4 of this Agreement, shall be borne by
the participating Principals in proportion to the number of Registration Shares
sold or proposed to be sold by such Principals in such registration in relation
to the total number of shares sold or proposed to be sold by all parties under
such registration statement.
9. Indemnification.
(a) In the event of a registration of any of the
Registration Shares under the Securities Act pursuant to Section 3 or 4 of this
Agreement, Medaphis will indemnify and hold harmless each Principal selling
Registration Shares under such registration (a "Selling Principal"), each
underwriter of Registration Shares under such registration, if any, each
broker, dealer or any other similar person acting on behalf of such Principal
and each other person, if any, who controls any of the foregoing persons within
the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect of this Agreement) 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
Registration Shares were registered under the Securities Act pursuant to
Sections 3 or 4 of this Agreement, any preliminary prospectus or final
prospectus contained in such registration statement, or any amendment or
supplement of this Agreement, or arise out of or are based upon the omission or
alleged omission to state in such registration statement a material fact
required to be stated in such registration statement or necessary to make the
statements in such registration statement not misleading, and will reimburse
each such Selling Principal, each such underwriter, broker, dealer or other
person acting on behalf of such Principal and each such controlling person for
any legal or other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that Medaphis will not be liable in any such case if
and to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by such
Selling Principal, such underwriter, broker, dealer or other person acting on
behalf of such Principal or such controlling person in writing specifically for
use in such registration statement or prospectus.
(b) In the event of a registration of any of the
Registration Shares under the Securities Act pursuant to Sections 3 or 4 of
this Agreement, each Selling Principal under such registration, will indemnify
and hold harmless Medaphis and each person, if any, who controls Medaphis
within the meaning of the Securities Act, each officer of Medaphis who signs
the registration statement, each director of Medaphis, each underwriter and
each person who controls
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any underwriter within the meaning of the Securities Act, against all losses,
claims, damages or liabilities, joint or several, to which Medaphis or such
officer or director or underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect of such losses, claims, damages or
liabilities) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Registration Shares were registered under the Securities Act
pursuant to Section 3 or 4 of this Agreement, any preliminary prospectus or
final prospectus contained in such registration statement, or any amendment or
supplement of such registration statement this Agreement, or arise out of or
are based upon the omission or alleged omission to state in such registration
statement a material fact required to be stated in such registration statement
or necessary to make the statements in such registration statement not
misleading, and will reimburse Medaphis and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that such Selling
Principal will be liable under this Agreement in any such case if and only to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with information
pertaining to such Selling Principal, furnished in writing to Medaphis by such
Selling Principal specifically for use in such registration statement or
prospectus; provided, further, however, that the liability of each Selling
Principal under this Agreement shall be limited to the proportion of any such
loss, claim, damage, liability or expense which is equal to the proportion that
the public offering price of shares sold by such Selling Principal under such
registration statement bears to the total public offering price of all
securities sold under such registration statement, but not to exceed the net
proceeds received by such Selling Principal from the sale of Registration
Shares covered by such registration statement.
(c) Promptly after receipt by an indemnified party under
this Agreement of notice of the commencement of any action, such indemnified
party shall, if a claim in respect of such action is to be made against the
indemnifying party under this Agreement, notify the indemnifying party in
writing of such claim, but the omission so to notify the indemnifying party as
provided in this Agreement shall not relieve the indemnifying party of its
obligations under this Section 9 except to the extent that the omission results
in a failure of actual notice to the indemnifying party and such indemnifying
party is damaged solely as a result of the failure to give notice. In case any
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement of such action, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense of such action with counsel satisfactory to
such indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense of
such action, the indemnifying party shall not be liable to such indemnified
party under this Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense of such action other than
reasonable costs of investigation and of liaison with counsel so selected;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded based upon advice of counsel that there
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may be reasonable defenses available to it which are different from or
additional to those available to the indemnifying party or if the interests of
the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, then the indemnified party shall have the right to
select a separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and
fees of such separate counsel and other reasonable expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
(d) Notwithstanding the foregoing, in any such action,
any indemnified party shall have the right to retain its own counsel, but the
fees and disbursements of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party shall have failed to retain
counsel for the indemnified person as aforesaid or (ii) the indemnifying party
and such indemnified party shall have mutually agreed to the retention of such
counsel. It is understood that the indemnifying party shall not, in connection
with any action or related actions in the same jurisdiction, be liable for the
fees and disbursements of more than one separate firm qualified in such
jurisdiction to act as counsel for the indemnified party. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(e) If the indemnification provided for in paragraphs
(a) and (b) of this Section 9 is unavailable or insufficient to hold harmless
an indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions referred to in such paragraphs, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party, as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of Medaphis, on the one hand, and
such Selling Principal, on the other, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
actions as well as any other relevant equitable considerations, including the
failure to give the notice required under such paragraphs. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact relates to information supplied by
Medaphis, on the one hand, or such Selling Principal, on the other hand, and to
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. Medaphis and the Principals
agree that it would not be just and equitable if contributions pursuant to this
paragraph were determined by pro rata allocation (even if the Principals were
treated as one entity for such purpose) or by any other method of allocation
which did not take account of the equitable considerations referred to above in
this paragraph. The amount paid or payable by an indemnified party as a result
of the losses, claims, damages, liabilities or actions referred to above in
this paragraph, shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
paragraph, the Selling Principals shall not be required to contribute any
amount in excess of the amount, if any, by which the total price at which the
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Registration Shares sold by each such Selling Principal was offered to the
public exceeds the amount of any damages which they have otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11 (f) of the Securities Act) is entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
(f) The indemnification of underwriters provided for in
this Section 9 shall be on such other terms and conditions as are at the time
customary and reasonably required by such underwriters. To the extent Medaphis
agrees to provide such underwriters with indemnification rights which differ in
substance from the rights offered the Selling Principals in this Section 9,
then the indemnification of the Selling Principals in such underwriting shall
at such Selling Principal's request be modified to conform to such terms and
conditions.
10. Changes in Medaphis Stock. To the extent that there are any
changes in Medaphis Stock by way of stock split, stock dividend, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made
in the provisions of this Agreement, as may be required, so that the rights and
privileges granted to the Principals under this Agreement shall continue with
respect to the Registration Shares as so changed.
11. Rule 144 Matters. For so long as the Principals hold
Registration Shares and this Agreement has not terminated pursuant to Section
12 of this Agreement, Medaphis agrees to exercise reasonable good faith efforts
to:
(a) Make and keep public information generally
available, as those terms are defined in Rule 144 under the Securities Act, at
all times subsequent to the Effective Time;
(b) File with the Commission in a timely manner reports
and other documents required of Medaphis under the Securities Act and the
Exchange Act to be so filed; and
(c) Furnish to any Principal, so long as such Principal
owns any Registration Shares, promptly upon a written request for the same:
(i) A written statement by Medaphis that it has
complied with the reporting requirements of Rule 144 under
the Securities Act; and
(ii) Such other information as may be reasonably
requested by such Principal to enable such Principal to
avail himself of any rule or regulation of the Commission
which permits the sale of securities without registration
under the Securities Act.
12. Termination. Notwithstanding anything to the contrary set
forth in this Agreement, this Agreement shall terminate and be of no further
force or effect upon the earlier to occur of:
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(a) such time as the Principals shall be able to sell all remaining
Registration Shares then outstanding within a six month period under Rule 144
under the Securities Act; (b) such time as the Principals shall have disposed
of all of the Registration Shares; or (c) the date of the fifth year
anniversary of the Closing Date (the "Termination Date"); provided, however,
that no termination of this Agreement shall affect the parties obligations
under Sections 8 and 9 of this Agreement, which Sections shall survive any
termination of this Agreement.
13. Representations and Warranties of Medaphis and the
Principals.
(a) Medaphis represents and warrants to the Principals
as follows:
(i) The execution, delivery and performance of
this Agreement by Medaphis have been duly authorized by all
requisite corporate action and will not violate any
provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-laws of
Medaphis, or any provision of any material indenture,
agreement or other instrument to which it or any of its
properties or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or
both) a default under any such material indenture, agreement
or other instrument, or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever
upon any of the properties or assets of Medaphis; and
(ii) This Agreement has been duly executed and
delivered by Medaphis and constitutes the legal, valid and
binding obligation of Medaphis, enforceable against Medaphis
in accordance with its terms, subject to applicable
bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general
equitable principles, the discretion of courts in granting
equitable remedies and public policy considerations.
(b) Each of the Principals represents and warrants to
Medaphis as follows:
(i) The execution, delivery and performance of
this Agreement by such Principal has been duly authorized
and will not violate any provision of law, any order of any
court or any agency of government, or any provision of any
material indenture or agreement or other instrument to which
it or any of its properties or assets is bound, or conflict
with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under such material
indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge, or encumbrance
of any nature whatsoever upon any of the properties or
assets of such Principal; and
(ii) This Agreement has been duly executed and
delivered by such Principal and constitutes the legal, valid
and binding obligation of such Principal,
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enforceable against such Principal in accordance with
its terms, subject to applicable bankruptcy, insolvency and
other similar laws affecting the enforceability of
creditors' rights generally, general equitable principles,
the discretion of courts in granting equitable remedies and
public policy considerations.
14. Miscellaneous.
(a) All covenants and agreements contained in this
Agreement by or on behalf of any of the parties to this Agreement shall bind
and inure to the benefit of the respective successors and permitted assigns of
the parties to this Agreement whether so expressed or not.
(b) All notices, requests, consents and other
communications under this Agreement shall be in writing and delivered
personally or by telecopy transmission or sent by registered or certified mail
or by any express mail service, postage or fees prepaid, addressed as follows:
To Medaphis:
Medaphis Corporation
2700 Cumberland Parkway
Suite 300
Atlanta, Georgia 30339
Attn: William R. Spalding, Esq.
Telecopy No.: (770) 432-1667
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attn: Robert W. Miller, Esq.
Telecopy No.: (404) 572-5144
To the Principals:
NFT Ventures, Inc.
Mr. Mark Rogers
12950 Saratoga Avenue, Suite B
Saratoga, CA 95070
NP Ventures, Ltd.
Mr. Steven G. Papermaster
701 Brazos Street
13
Page 96 of 103 Pages
<PAGE> 97
Suite 700
Austin, TX 78701
with a copy to:
Brobeck, Phleger & Harrison LLP
301 Congress Avenue
Suite 1200
Austin, Texas 78701
Attn: Mr. Carmelo M. Gordian
Telecopy No.: (512) 477-5813
or, in any case, at such other address or addresses and telecopy number or
numbers as shall have been furnished in writing to Medaphis (in the case of a
Principal) or to the Principals (in the case of Medaphis).
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
Delaware's choice of law rules.
(d) This Agreement constitutes the entire agreement of
the parties with respect to the subject matter of this Agreement.
(e) 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.
(f) The registration and other rights granted to the
Principals under this Agreement are non- transferrable and cannot be assigned
or transferred in any manner to any third-party without the prior written
consent of Medaphis. Notwithstanding the foregoing, the Principal may assign
the registration rights granted to the Principal herein to no more than ten:
(i) private or public foundations exempt from federal income taxation pursuant
to Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, to which
Registration Shares have been transferred in transactions that do not result in
the recognition of taxable income or capital gain for federal income tax
purposes; and/or (ii) revocable or irrevocable inter vivos trusts, partnerships
or other entities to which Registration Shares have been transferred in
transactions that do not result in the recognition of taxable income or capital
gain for federal income tax purposes.
(g) With the written consent of the holders of eighty
percent of the then outstanding Registration Shares and the written consent of
Medaphis, the obligations of Medaphis and the rights of the Principals under
this Agreement may be waived or modified (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely); provided, however, that no such waiver or
modification shall reduce the aforesaid proportion of Registration Shares, the
holders of which are required to consent to any waiver or modification of this
Section 14(g), without the consent of holders of all of the then
14
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<PAGE> 98
outstanding Registration Shares. Upon effectuation of any such waiver or
modification under this Section 14(g), Medaphis agrees to promptly give written
notice of such waiver or modification to the holders of the Registration Shares
who have not previously consented to such waiver or modification in writing.
(h) Each Principal acknowledges that by operation of
Section 14(g) of this Agreement, the holders of eighty percent of the then
outstanding Registration Shares will, subject to the limitations contained in
Section 14(g), have the right and power to diminish or eliminate certain rights
of the Principals under this Agreement.
(i) If any provision of this Agreement or the
application of any such provision to any person or circumstance shall preclude
the use of "pooling of interests" accounting treatment in connection with the
Merger, then such provision shall be of no force and effect to the extent, and
solely to the extent, necessary to preserve such accounting treatment for the
Merger, and in that event, the remainder of this Agreement shall not be
affected, and in lieu of such provision there shall be added as part of this
Agreement a provision as similar in terms as may be possible for the Merger to
be treated as a "pooling of interests" for accounting purposes.
15
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<PAGE> 99
Please indicate your acceptance of the foregoing by signing
and returning the enclosed counterpart of this letter, whereupon this letter
(herein sometimes called this "Agreement") shall be a binding agreement between
Medaphis and the Principals.
<TABLE>
<S> <C>
Very truly yours,
Attest: MEDAPHIS CORPORATION
By: /S/ By: /S/ Randolph G. Brown
----------------------------------------- ---------------------------------------
Title: Title: President, Chairman and Chief Executive Officer
------------------------------------ ------------------------------------------------
AGREED TO AND ACCEPTED
AS OF THE DATE FIRST
ABOVE WRITTEN.
NFT VENTURES, INC.
Attest:
By: /S/ By: /S/ Raymond J. Noenda
----------------------------------------- ---------------------------------------
Title: Title: President
------------------------------------ ----------------------------------
NP VENTURES, LTD.
By: Powershift Partners, Ltd., its general
partner
Attest:
By: /S/ By: /S/ Steven G. Papermaster
----------------------------------------- ---------------------------------------
Title: Title: President
------------------------------------ ----------------------------------
Attest:
By: /S/ /S/ Steven G. Papermaster
----------------------------------------- ------------------------------------------
Steven G. Papermaster
</TABLE>
16
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<PAGE> 100
AFFILIATE LETTER
May 6, 1996
Medaphis Corporation
2700 Cumberland Parkway
Suite 300
Atlanta, Georgia 30339
Gentlemen:
The undersigned, an officer, director or stockholder of BSG Corporation, a
Delaware corporation ("BSG"), may receive certain shares (the "Shares") of
common stock, par value $.01 per share of Medaphis Corporation, a Delaware
corporation ("Medaphis"), upon the consummation of the merger (the "Merger") of
BSGSub, Inc., a Delaware corporation and a wholly owned subsidiary of Medaphis
("BSGSub") with and into BSG, pursuant to which BSG shall be the surviving
corporation and shall continue its corporate existence under the laws of the
State of Delaware and the separate corporate existence of BSGSub shall cease,
pursuant to the Merger Agreement, dated as of the date hereof, by and among
Medaphis, BSGSub and BSG.
In connection with the receipt of the Shares, if any, by the undersigned
in the Merger, the undersigned represents to and agrees with Medaphis that the
undersigned will not make any offer to sell, transfer or otherwise dispose of
any of the Shares in any transaction, public or private, except in accordance
with the applicable provisions of the Securities Act of 1933, as amended (the
"Act"), including, to the extent applicable, Rule 145 promulgated pursuant to
the Act, as such Act and Rule 145 may be amended. Moreover, the undersigned
will not sell, transfer or otherwise dispose of any of the Shares, or in any
other way reduce the undersigned's risk with respect to the Shares, as
contemplated by APB Opinion No. 16, until such time as financial results
covering at least thirty days of combined operations of Medaphis and BSG
("financial results") have been published ("published") within the meaning of
Section 201.01 of the Securities and Exchange Commission's Codification of
Financial Reporting Policies; provided, however, that the undersigned shall be
permitted to make sales to the extent permitted by applicable accounting rules
and regulations promulgated by the Securities and Exchange Commission ("SEC
Rules"). The undersigned and Medaphis hereby agree that financial results shall
be published by Medaphis as soon as reasonably practicable following the
availability of financial results for the quarter ended June 30, 1996.
The undersigned further agrees that Medaphis shall not be required to
transfer any of the
Page 100 of 103 Pages
<PAGE> 101
Medaphis Corporation
May 6, 1996
Page 2
Shares unless: (a) the financial results referred to in the preceding paragraph
have been published (except to the extent transfers are permitted by the SEC
Rules); and (b)(i) it shall have received evidence reasonably satisfactory to it
of compliance with the provisions of Rule 145 as to the sale of such Shares by
the undersigned, or (ii) the transfer results from a sale of such Shares
pursuant to an effective registration statement under the Act, or (iii) it shall
have received an opinion of counsel, which opinion of counsel shall be
reasonably satisfactory to Medaphis, to the effect that such transfer would not
violate, or make the issuance of the Shares to the undersigned a violation of,
the provisions of the Act. The certificate(s) representing the Shares will bear
a legend to the foregoing effects, and Medaphis will instruct its transfer agent
for the Shares to place appropriate stop orders on the stock transfer records to
reflect such provisions.
The undersigned represents that the undersigned does not currently have
any arrangement, agreement, or understanding regarding the sale of the Shares.
Very truly yours,
NFT Ventures, Inc.
By: /s/ Raymond J. Noorda
---------------------
Title: President
The foregoing is accepted and agreed to as of the
date first above written:
MEDAPHIS CORPORATION
By: /s/
---------------------------------------
Page 101 of 103 Pages
<PAGE> 102
AFFILIATE LETTER
May 6, 1996
Medaphis Corporation
2700 Cumberland Parkway
Suite 300
Atlanta, Georgia 30339
Gentlemen:
The undersigned, an officer, director or stockholder of BSG Corporation, a
Delaware corporation ("BSG"), may receive certain shares (the "Shares") of
common stock, par value $.01 per share of Medaphis Corporation, a Delaware
corporation ("Medaphis"), upon the consummation of the merger (the "Merger") of
BSGSub, Inc., a Delaware corporation and a wholly owned subsidiary of Medaphis
("BSGSub") with and into BSG, pursuant to which BSG shall be the surviving
corporation and shall continue its corporate existence under the laws of the
State of Delaware and the separate corporate existence of BSGSub shall cease,
pursuant to the Merger Agreement, dated as of the date hereof, by and among
Medaphis, BSGSub and BSG.
In connection with the receipt of the Shares, if any, by the undersigned in
the Merger, the undersigned represents to and agrees with Medaphis that the
undersigned will not make any offer to sell, transfer or otherwise dispose of
any of the Shares in any transaction, public or private, except in accordance
with the applicable provisions of the Securities Act of 1933, as amended (the
"Act"), including, to the extent applicable, Rule 145 promulgated pursuant to
the Act, as such Act and Rule 145 may be amended. Moreover, the undersigned
will not sell, transfer or otherwise dispose of any of the Shares, or in any
other way reduce the undersigned's risk with respect to the Shares, as
contemplated by APB Opinion No. 16, until such time as financial results
covering at least thirty days of combined operations of Medaphis and BSG
("financial results") have been published ("published") within the meaning of
Section 201.01 of the Securities and Exchange Commission's Codification of
Financial Reporting Policies; provided, however, that the undersigned shall be
permitted to make sales to the extent permitted by applicable accounting rules
and regulations promulgated by the Securities and Exchange Commission ("SEC
Rules"). The undersigned and Medaphis hereby agree that financial results shall
be published by Medaphis as soon as reasonably practicable following the
availability of financial results for the quarter ended June 30, 1996.
Page 102 of 103 Pages
<PAGE> 103
Medaphis Corporation
May 6, 1996
Page 2
The undersigned further agrees that Medaphis shall not be required to
transfer any of the Shares unless: (a) the financial results referred to in the
preceding paragraph have been published (except to the extent transfers are
permitted by the SEC Rules); and (b)(i) it shall have received evidence
reasonably satisfactory to it of compliance with the provisions of Rule 145 as
to the sale of such Shares by the undersigned, or (ii) the transfer results
from a sale of such Shares pursuant to an effective registration statement
under the Act, or (iii) it shall have received an opinion of counsel, which
opinion of counsel shall be reasonably satisfactory to Medaphis, to the effect
that such transfer would not violate, or make the issuance of the Shares to the
undersigned a violation of, the provisions of the Act. The certificate(s)
representing the Shares will bear a legend to the foregoing effects, and
Medaphis will instruct its transfer agent for the Shares to place appropriate
stop orders on the stock transfer records to reflect such provisions.
The undersigned represents that the undersigned does not currently have
any arrangement, agreement, or understanding regarding the sale of the Shares.
Very truly yours,
/s/ Raymond J. Noorda
The foregoing is accepted and agreed to as of the
date first above written:
MEDAPHIS CORPORATION
By: /s/
--------------------------------
Page 103 of 103 Pages
