May 1, 2000
Mr. Daniel A. Silber
Chief Financial Officer
MedPlus, Inc.
8805 Governor's Hill Drive
Cincinnati, Ohio 45249
RE: Waiver of Subordinated Debt Funding Restrictions
Dear Dan,
On June 8, 1999, MedPlus, Inc. issued an Amended and Restated
Subordinated Note due 2004 (the "Note") to Cahill, Warnock
Strategic Partners Fund, L.P. (the "Fund") with a face amount of
$1,895,000. The terms of the Note explicitly state that "in
every instance where the Company receives any cash from, or any
cash is made available to it by, any event or source including
but not limited to a corporate partnering up-front payment of any
nature, equity financing or sale of assets, but specifically
excluding (i) a sale of accounts receivable, (ii) any sales or
licenses of Company products and/or services in what has
heretofore been the ordinary course of business, (iii) any bank
financing, credit facility or similar lending arrangement
(including Senior Debt), and (iv) any sale by DiaLogos
Incorporated of equity securities of DiaLogos, the Company shall
immediately pay to the holders of the Notes an amount equal to
the lesser of (1) the total amount of principal and interest
remaining unpaid under the Note and (2) the total amount of cash
received by the Company or made available to it in such
instance."
In order to obtain financing to further your E-Health initiative,
you have requested that the paragraph referred to above be waived
until the earlier of either MedPlus, Inc. receiving in excess of
$6,000,000 of additional non-operating funding (as defined in the
paragraph above) or February 1, 2001. As per your request, and
subject to the terms herein, the Fund agrees to the above
modification to the terms of the Note.
This waiver is subject to the following terms and conditions:
- As of the date of acceptance of this waiver, MedPlus will
grant to the Fund a warrant to purchase 23,615 shares of the
Company's common stock. The warrants will have a five-year term
and be granted with an exercise price equal to the closing market
price of MedPlus' common stock as traded on the NASDAQ on April
24, 2000.
- If MedPlus receives additional non-operating funding, as
defined, in excess of $6,000,000 during its fiscal 2001, MedPlus
will utilize all excess proceeds to repay its outstanding
subordinated debt commitment to the Fund and its affiliates.
- On June 25, 1999, Cahill, Warnock Strategic Partners Fund,
L.P. was granted a warrant to purchase 668,905 shares of the
Series A convertible preferred stock. This warrant does not
become exercisable until the Company's common stock trades at a
fair value of at least $7.17 over a 20-day period. The Company
will amend the warrant to eliminate this restriction, making the
warrant subject to immediate exercise.
- The Company will also amend the warrant to purchase 668,905
shares of the Series A convertible preferred stock to convert
into common stock, at the option of the Fund. If the Fund so
elects, the Company agrees to commence registration of the common
shares, at the expense of the Company, beginning June 1, 2001.
- The Company agrees it will issue to the Fund, a warrant to
purchase 94,750 common shares, subject to the same registration
right as above, exercisable at $.01 per share, annually beginning
February 1, 2002, if the Note is not paid in full.
- The Note is scheduled to be redeemed in three equal annual
installments beginning April 30, 2002. The Company agrees that
if a scheduled payment has not been made when due, the amount of
such scheduled payment will be exchanged into a debenture that is
convertible into Series A convertible preferred stock, or an
equivalent class of preferred, at the holder's option. This
debenture will have a ten-year term, bear interest at 8% and be
convertible into Series A convertible preferred stock at $1.729
per share, with the same conversion feature and registration
right as the warrant to purchase 668,905 shares of the Series A
convertible preferred stock.
- Review and approval of implementing documents by the Fund's
legal counsel.
Sincerely,
/s/ Edward Cahill
Edward Cahill
General Partner
Cahill, Warnock Strategic Partners Fund, L.P.
AGREED AND ACCEPTED. MedPlus, Inc.
By: Philip S. Present II
Title: Chief Operating Officer
Date: May 26, 2000
