<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.____)*
MEDIRISK, INC.
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(NAME OF ISSUER)
COMMON STOCK
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(TITLE OF CLASS OF SECURITIES)
584794 10 9
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(CUSIP NUMBER)
JAMES K. MURRAY, III, EXECUTIVE VICE PRESIDENT
HEALTHPLAN SERVICES CORPORATION
3501 FRONTAGE ROAD
TAMPA, FLORIDA 33607
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
JANUARY 28, 1997
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(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 [ ].
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.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(continued on following pages)
(Page 1 of 7 Pages)
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CUSIP No. 58474 10 9 SCHEDULE 13D Page 2 of 7 Pages
--------------------- -------- --------
(1) Names of Reporting Persons
HEALTHPLAN SERVICES CORPORATION
S.S. or I.R.S. Identification Nos. of Above Persons
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(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ ]
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(3) SEC Use Only
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(4) SOURCE OF FUNDS*
WC
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(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
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(6) Citizenship or Place of Organization
DELAWARE
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(7) Sole Voting Power
Number of 480,442 (SEE TEXT OF ITEM 4)
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 480,442 (SEE TEXT OF ITEM 4)
--------------------------------------------------------
(10) Shared Dispositive Power
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
480,442 (SEE TEXT OF ITEM 4)
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(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
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(13) Percent of Class Represented by Amount in Row (11)
11.1
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(14) Type of Reporting Person*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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CUSIP No. 58474 10 9 SCHEDULE 13D Page 3 of 7 Pages
--------------------- -------- --------
(1) Names of Reporting Persons
JAMES K. MURRAY, III
S.S. or I.R.S. Identification Nos. of Above Persons
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(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ ]
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(3) SEC Use Only
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(4) SOURCE OF FUNDS*
WC
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(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
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(6) Citizenship or Place of Organization
UNITED STATES
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(7) Sole Voting Power
Number of
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 480,442 (SEE TEXT OF ITEM 4)
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With
--------------------------------------------------------
(10) Shared Dispositive Power
480,442 (SEE TEXT OF ITEM 4)
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
480,442 (SEE TEXT OF ITEM 4)
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(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
11.1
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(14) Type of Reporting Person*
IN
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Page 3 of 7 Pages
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ITEM 1. SECURITY AND ISSUER
(a) NAME AND ADDRESS OF ISSUER
Medirisk, Inc., Two Piedmont Center, Suite 400, 3565 Piedmont Road,
N.E., Atlanta, Georgia 30305
(b) CLASS OF SECURITIES: Common Stock
ITEM 2. IDENTITY AND BACKGROUND
(a) NAME OF PERSONS FILING
(i) HealthPlan Services Corporation
(ii) James K. Murray, III
(b) ADDRESS OF PRINCIPAL BUSINESS OFFICE OR, IF NONE, RESIDENT
(i) 3501 Frontage Road, Tampa, Florida 33607
(ii) 3501 Frontage Road, Tampa, Florida 33607
(c) PRESENT PRINCIPAL OCCUPATION AND THE PRINCIPAL BUSINESS
(i) Provider of marketing, distribution, administrative and cost
containment services on behalf of health care payers
(ii) Executive officer of HealthPlan Services Corporation
("HPSC").
(d) CRIMINAL CONVICTIONS
(i) None
(ii) None
(e) SECURITIES LAWS VIOLATIONS
(i) None
(ii) None
(f) CITIZENSHIP
(i) Delaware
(ii) United States
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERTION
Funds for the purchase of the shares issued by Medirisk, Inc.
(the "Company") (in the amount of $2,000,000) were, and funds for
the purchase of shares upon the exercise of warrants (in the
amount of up to $4,472) will be, provided from HPSC's own funds.
ITEM 4. PURPOSE OF TRANSACTION
On January 8, 1996, HPSC entered into a Securities Purchase
Agreement (the "Agreement") with the Company pursuant to which the
Company issued and HPSC acquired, 280,623 shares of Series A
Convertible Preferred Stock, and in connection with the Company's
initial public offering, such Series A Convertible Preferred Stock
was automatically converted 182,292 shares of Common Stock. In
Page 4 of 7 Pages
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addition, pursuant to the Agreement and in conjunction with the
issuance of $6,900,000 in Senior Subordinated Notes to HPSC, the
Company issued HPSC warrants (the "Warrants") to purchase up to 298,150
shares of Common Stock for $0.015 per share. Such warrants expire on
January 8, 2003. The shares and Warrants were purchased for
investment.
Pursuant to the Agreement, HPSC has the right to designate one
person to be nominated to the Company's Board of Directors so long as
HPSC owns or has the right to acquire at least 162,400 shares of Common
Stock. In addition, HPSC and the Company are parties to a Registration
Rights Agreement (the "Registration Rights Agreement") pursuant to
which HPSC, or its transferees, is entitled to certain rights with
respect to shares currently owned by HPSC or issuable upon the exercise
of the Warrants. Pursuant to the Registration Rights Agreement, the
Company grants to HPSC one demand registration per calendar year for a
total of two demand registrations, subject to certain restrictions. In
addition, HPSC is permitted to participate in any offering in the event
the Company proposes to register any of its securities under the
Securities Act of 1933. The Company has agreed under the Registration
Rights Agreement to indemnify the holders of stock that is sold
thereunder against certain liabilities under the Securities Act of
1933.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
HPSC owns 182,292 shares of Common Stock and has the right upon
exercise of the Warrants to acquire up to 298,150 shares of Common
Stock for $0.015 per share. HPSC possesses the sole power to
vote or direct the vote and to dispose of or direct the disposition of
all shares of Common Stock owned or acquired by HPSC.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
The information set forth in Item 4 and in the Exhibits to this
Schedule 13D is incorporated herein by reference. In addition, Mr.
Murray is an executive officer of HPSC and a director of the Company
and, as such, may be deemed to share voting and investment power with
respect to the shares owned by HPSC.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1.1 - Securities Purchase Agreement dated January 8, 1996
between the Company and HPSC.
Exhibit 1.2 - Amendment No. 1 Securities Purchase Agreement.
Exhibit 1.3 - Amendment No. 2 to Securities Purchase Agreement.
Exhibit 1.4 - Amendment No. 3 to Securities Purchase Agreement.
Exhibit 2.1 - Warrant Agreement dated January 8, 1996 between the
Company and HPSC.
Exhibit 2.2 - Amendment No. 1 to Warrant Agreement.
Exhibit 2.3 - Amendment No. 2 to Warrant Agreement.
Exhibit 3.1 - Registration Rights Agreement dated January 8, 1996
between the Company and HPSC.
Page 5 of 7 pages
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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.
HEALTHPLAN SERVICES CORPORATION
February 7, 1997 /s/ James K. Murray, III
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Date Signature
EVP & CFO
-------------------------------
Name/Title
JAMES K. MURRAY, III
2/7/92 James K. Murray, III
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Date Signature
-------------------------------
Name/Title
Page 6 of 7 pages
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Exhibit A to Schedule 13D
We, the Undersigned, hereby express our agreement that the attached
Schedule 13D is filed on behalf of each of us.
February 7, 1997
HEALTHPLAN SERVICES CORPORATION
By: /s/ James K. Murray, III
--------------------------
Name: James K. Murray
-------------------------
Title: EVP & CFO
------------------------
/s/ James K. Murray, III
------------------------------
JAMES K. MURRAY, III
Page 7 of 7 pages
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EXHIBIT 1.1
EXECUTION COPY
================================================================================
SECURITIES PURCHASE AGREEMENT
DATED
JANUARY 8, 1996
BETWEEN
MEDIRISK, INC.,
AND
HEALTHPLAN SERVICES CORPORATION
================================================================================
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT is entered into on this 8th
day of January 1996, by and among MEDIRISK, INC., a Florida corporation (the
"Company"), and HEALTHPLAN SERVICES CORPORATION, a Delaware corporation
("Purchaser").
BACKGROUND
WHEREAS, Purchaser desires to purchase 280,623 shares of
Series B Convertible Preferred Stock of the Company and to purchase up to
$10,000,000.00 in original principal amount of Senior Subordinated Notes, for
the purposes of financing the Company's ongoing acquisition program and for
working capital purposes, and in connection therewith, the Company will issue
to Purchaser warrants to purchase shares of Series A Common Stock of the
Company, as more fully described herein and in the Warrant Agreement; and
WHEREAS, capitalized terms used in this Agreement have the
meanings specified on Appendix A.
AGREEMENT
NOW, THEREFORE, Purchaser and the Company hereby agree as
follows:
SECTION 1
PURCHASE AND SALE OF SECURITIES
1.1 Purchase and Sale of Convertible Preferred Stock. The Company
agrees to use its best efforts to cause its shareholders to approve an
amendment to and restatement of its Articles of Incorporation in the form set
forth on EXHIBIT A attached hereto. Purchaser agrees to purchase from the
Company, and the Company agrees to issue and sell to Purchaser, 280,623 shares
of Series B Convertible Preferred Stock (the "Preferred Stock") at the Closing.
Purchaser agrees to pay the Company the sum of $2,000,000 in consideration of
such shares. On the Closing Date, Purchaser shall deliver $2,000,000 to the
Company by wire transfer or bank cashier's check against delivery by the
Company to the Purchaser of a certificate for the shares of Preferred Stock
purchased hereunder.
1.2 Purchase and Sale of Senior Subordinated Notes.
1.2.1 Purchase and Sale. Purchaser agrees to purchase from
the Company Senior Subordinated Notes in an aggregate original principal amount
equal to up to $10,000,000, upon and subject to the provisions of this Section
1.2. The Senior Subordinated Notes shall be purchased at par, and on each
occasion on which the Company issues Senior Subordinated Notes to Purchaser
hereunder, it shall also issue and
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deliver a warrant certificate to Purchaser in accordance with the Warrant
Agreement. The Company shall sell not less than $6,500,000 of Senior
Subordinated Notes to Purchaser on or before the third anniversary of the
Closing Date (the "Third Anniversary"), unless the Purchaser's commitment has,
pursuant to Section 1.3, been terminated prior to the Company's sale of such
amount. Purchaser's obligation to purchase Senior Subordinated Notes shall be
reduced on each Subsequent Closing Date by an amount equal to the original
principal amount of the Senior Subordinated Notes purchased on such Subsequent
Closing Date, and such obligation shall not be increased or restored in any way
by any payment on or in respect of the Senior Subordinated Notes. Purchaser
and the Company acknowledge and agree that the execution and delivery of this
Agreement has taken place in the State of Georgia and that the execution and
delivery of the Senior Subordinated Notes will take place in the State of
Georgia or such other state as the Company may have its principal place of
business.
1.2.2 Form and Terms of Notes. The Senior Subordinated
Notes shall be substantially in the form of EXHIBIT B attached hereto. The
Senior Subordinated Notes shall be payable in Dollars, and all interest shall
be computed in and based upon Dollars. The Senior Subordinated Notes shall
bear interest at a rate of 10% per annum. Interest payable under the Senior
Subordinated Notes outstanding from time to time shall be computed on the basis
of a 365-day year, actual days elapsed, from the date of disbursement until
repayment. The Company shall pay all documentary stamp and other taxes, if
any, related to the issuance of the Senior Subordinated Notes.
1.2.3 Subsequent Closings. From time to time after the
Closing Date and before the Third Anniversary or the earlier termination of
Purchaser's commitment to purchase Senior Subordinated Notes hereunder as
provided in Section 1.3, the Company may deliver to the Purchaser a notice of
borrowing (a "Notice of Borrowing"), which notice shall set forth the original
principal amount of Senior Subordinated Notes to be sold to Purchaser, the use
for which such funds are being requested, the closing date for such purchase
and a statement that such notice is given under this Agreement. The closing
date (a "Subsequent Closing Date") set forth in such notice shall be not less
than 20 days after the date such notice is given to the Purchaser, and the
Company shall use its reasonable best efforts to provide Purchaser with the
maximum amount of notice of a sale of Senior Subordinated Notes as is possible
under the circumstances. The minimum amount of Senior Subordinated Notes to be
sold at any subsequent closing under this Section 1.2.3 (a "Subsequent
Closing") shall be $1,000,000, and shall be in increments of $100,000 above
such amount. The purchase price for the Senior Subordinated Notes shall be the
original principal amount thereof, and, subject to the satisfaction of the
terms and conditions of this Agreement, such purchase price shall be paid by
Purchaser to the Company on each Subsequent Closing Date by wire transfer or
bank cashier's check against delivery by the Company to Purchaser of the Senior
Subordinated Notes issued on such Subsequent Closing Date. The parties agree
that a Subsequent Closing may occur on the Closing Date, if the Company gives
Purchaser a Notice of Borrowing with respect thereto at least five Business
Days prior to the Closing Date.
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1.2.4 Right of Prepayment. The Company may prepay the
Senior Subordinated Notes in whole or in part at any time and from time to time
without penalty or premium; provided, however, that the Company shall not be
entitled to reborrow any such amount prepaid.
1.3 Termination of Commitment to Purchase Notes. Purchaser's
obligation to purchase Senior Subordinated Notes hereunder shall, except as
provided below, terminate automatically upon the earliest to occur of (i) the
Company's Initial Public Offering, (ii) a Change of Control of the Company,
(iii) an Event of Default, (iii) the Third Anniversary or (iv) the death of
Mark Kaiser or the termination of Mark Kaiser's employment with the Company;
provided, however, that (i) in the event of the death of Mark Kaiser on or
before December 31, 1996 if Purchaser desires to terminate its commitment
thereafter as a result of such death, Purchaser must give notice to the Company
of its termination of the commitment to purchase Senior Subordinated Notes and
the termination of Purchaser's obligation shall not occur until such notice is
given to the Company in writing by Purchaser, and (ii) in the event of an Event
of Default, Purchaser's obligation to purchase Senior Subordinated Notes shall
resume upon its waiver, if given, of such Event of Default..
1.4 Mandatory Repayment
1.4.1 Scheduled Repayments. Subject to the acceleration
provisions of Section 6, the Company shall repay all principal and interest
remaining outstanding on the Senior Subordinated Notes at maturity on January
8, 2003. The principal payment hereunder shall be paid by wire transfer or
bank cashier's check.
1.4.2 Mandatory Prepayment. Notwithstanding the provisions
of Section 1.4.1, all outstanding principal and interest relating to the Senior
Subordinated Notes shall be due and payable within 15 Business Days after the
earlier to occur of (i) the Company's Initial Public Offering and (ii) a Change
of Control of the Company.
SECTION 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Purchaser. Purchaser
represents and warrants to the Company that:
2.1.1 Investment. The Preferred Stock and the Senior
Subordinated Notes to be purchased by Purchaser hereunder are being acquired
for investment purposes only for Purchaser's own account, not as a nominee or
agent, and not with a view to the distribution or resale of any part thereof.
2.1.2 Sophistication. Purchaser has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of Purchaser's investment in the Preferred Stock and the
Senior Subordinated Notes;
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Purchaser has the ability to bear the economic risks of such investment;
Purchaser has the capacity to protect Purchaser's own interests in connection
with the transactions contemplated by this Agreement; and Purchaser has had an
opportunity to obtain such financial and other information from the Company as
Purchaser deems necessary or appropriate in connection with evaluating the
merits of the investment in the Preferred Stock and the Senior Subordinated
Note; provided, however, that none of the Purchaser's representations hereunder
are intended in any way to limit the scope or applicability of the Company's
representations and warranties in this Agreement, the truth, accuracy and
completeness of which Purchaser has relied upon in its investment in the
Preferred Stock and the Senior Subordinated Note.
2.2 Representations and Warranties of the Company. The Company
represents and warrants to Purchaser that:
2.2.1 Capitalization; Legal Status; Qualification. The
authorized capitalization and all outstanding shares of capital stock and
options, warrants and similar rights to subscribe to or purchase capital stock
of the Company are set forth on EXHIBIT C. Except as described in SCHEDULE
2.2.1, as of the date of this Agreement, the Company has no Subsidiaries and
has not operated, and does not operate, under any fictitious name. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Florida. The Company is duly qualified or licensed to
do business and in good standing as a foreign corporation in all jurisdictions
where the nature or conduct of its business as now conducted requires such
qualification. Except as described in SCHEDULE 2.2.1, there are no preemptive
rights to purchase capital stock of the Company except those contained in the
Investment Documents. The Company has furnished to Purchaser a complete and
correct copy of the Company's Articles of Incorporation and Bylaws, each as
amended or restated and currently in effect. The Company is not in violation
of any of the provisions of its Articles of Incorporation or Bylaws, which
violation has not been waived in the Consent and Modification Agreement. The
minute books of the Company contain complete and accurate records of all
actions taken and resolutions adopted by the Company's board of directors and
any committees thereof and by its shareholders since the Company's
organization. The stock transfer ledger of the Company accurately reflects the
ownership of the capital stock of the Company. Access to complete and accurate
copies of all such minute books and the stock transfer ledger has been provided
by the Company to Purchaser.
2.2.2 No Violation. Except as reflected on SCHEDULE 2.2.2,
the execution, delivery and performance by the Company of the Investment
Documents to which it is a party, and any other instruments or documents it
executed and delivered hereunder: (a) do not conflict with its articles of
incorporation or bylaws, (b) do not violate any provision of any law, rule,
regulation or ordinance, or any order or ruling of any court or governmental
entity, and (c) do not result in a breach of or constitute a default (or an
event which with the passage of time or giving of notice, or both, would
constitute a default) under, or cause or permit the acceleration of the
maturity of or give rise to any right of termination, cancellation, imposition
of fees or penalties under, any
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contract, obligation, debt, note, bond, lease, mortgage, license, indenture or
other instrument to which the Company is a party or by which the Company, or
any of its properties or assets, may be bound.
2.2.3 Corporate Power and Authority; Governmental or Other
Consents. The Company has all requisite corporate power and authority to carry
on its business as presently conducted and as currently proposed to be
conducted, and to own, lease, sell or operate its properties. The Company has
the requisite corporate power and authority to execute, deliver and perform its
obligations under the Investment Documents to which it is a party, and any
other instruments or documents executed and delivered by it hereunder. No
governmental or other consents, approvals, authorizations, registrations,
declarations or filings are required for the execution, delivery and
performance of the Investment Documents by the Company. The Company is not
subject to any law, rule or regulation restricting in any way its ability to
incur indebtedness or to issue shares of its capital stock or rights to acquire
such shares. Neither the execution and delivery of this Agreement or the other
Investment Documents nor the fulfillment of or compliance with their respective
provisions and terms will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a violation of or default under any
applicable law, regulation, order, writ or decree, or any Material Agreement or
create any security interest, chattel mortgage, lien or other encumbrance upon
any of the property or assets of the Company pursuant to the terms of any
agreement or instrument to which the Company is a party or by the Company or
its assets are bound, except those in favor of the Purchaser expressly created
by the Investment Documents.
2.2.4 Due Authorization; Validity; Enforceability. The
Investment Documents and all other instruments or documents executed by the
Company in connection with the Investment Documents (including the Senior
Subordinated Notes when executed and delivered in accordance with this
Agreement) have been duly authorized, executed and delivered, and constitute
legal, valid and binding obligations of the Company, enforceable in accordance
with their respective terms except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (whether considered in an action at law or in equity).
2.2.5 Ownership of Assets. The Company (i) is the owner or
has the lawful right to use in the manner currently used by the Company all of
the assets used in its business or currently reflected as assets of the Company
on the financial statements of the Company and (ii) has good title (and with
respect to leased property, a leasehold interest in accordance with the terms
of the lease relating to such property) to its interest in such assets free and
clear of all claims, Liens, title defects and objections, easements, equities,
rights of way, covenants, restrictions, security interests or other
encumbrances except for Liens permitted to exist pursuant to Section 5.5 and
involuntary Liens arising in the ordinary course of business and securing sums
not yet due.
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2.2.6 Financial Statements; Other Information. (a) The
Company has delivered to Purchaser copies of the Financial Statements, attached
as EXHIBIT D. The Financial Statements present fairly in all material respects
in accordance with GAAP consistently applied with prior periods the financial
condition, results of operations, earnings, shareholder's equity and cash flows
of the Company as of the dates and for the periods covered thereby and disclose
all material Liabilities of the Company of a nature required to be disclosed in
financial statements in accordance with GAAP, whether liquidated or
unliquidated, fixed, contingent or inchoate.
(b) The information contained in that certain
Medirisk, Inc. Confidential Information Memorandum, dated October 19, 1995,
provided to Purchaser on behalf of the Company was true and correct in all
material respects as of the date thereof; provided, however, that such
Confidential Information Memorandum is subject to the disclosures contained
therein and no representation or warranty is made hereunder with respect to any
projections or projected consolidated financial statements included in such
Confidential Information Memorandum or the assumptions used to prepare such
projections or projected consolidated financial statements; provided, further,
that the Company believes such assumptions to be reasonable as of the date of
this Agreement, except as disclosed on SCHEDULE 2.2.6.1. Purchaser
acknowledges and agrees that, as set forth on SCHEDULE 2.2.6.1, the Company has
informed Purchaser that some of the assumptions used to prepare such
projections or projected financial statements are not correct as of the date of
this Agreement.
(c) The pro forma balance sheet as of November
30, 1995 and the related pro forma statements of income attached hereto as
SCHEDULE 2.2.6.2 for the eleven-month period ending November 30, 1995
reflecting the pro forma combined results of operations for the Company and
Formations In Health Care, Inc. for such period were prepared in good faith,
and such pro forma statements present fairly in all material respects in
accordance with GAAP the financial condition, results of operations, earnings
and shareholder's equity of the Company and Formations In Health Care, Inc. as
of the dates and for the periods covered thereby (except that such pro forma
statements (i) do not contain notes thereto or statements of cash flows and are
subject to customary year-end audit adjustments, (ii) assume that the Company's
acquisition of Formations In Health Care, Inc. was closed effective January 1,
1995, (iii) reflect information based upon the financial statements of
Formations In Health Care, Inc., which are prepared upon the cash basis, rather
than the accrual basis, (iv) assume that such acquisition will be accounted for
by the Company as a "pooling of interests" when such acquisition will, in fact,
be accounted for by the Company as a purchase, and (v) were prepared in part
based upon financial information provided to the Company by Formations In
Health Care, Inc., which information the Company has not independently
verified). Purchaser acknowledges and agrees that such pro forma statements
are based in part upon information prepared by the management of Formations In
Health Care, Inc. and furnished to the Company, which information the Company
believes to be correct but is unable independently to verify.
- 6 -
<PAGE> 8
2.2.7 Absence of Undisclosed Liabilities. The Company has
no material Liabilities except (i) Liabilities that are reflected or reserved
against in the Financial Statements, or (ii) Liabilities incurred in the
ordinary course of business since September 30, 1995. Except for information
concerning Formations In Health Care, Inc. and its business and operations,
all information provided to Purchaser in or as part of the Schedules to this
Agreement, or that is set forth or described in any such Schedule, is true and
correct in all material respects, and with respect to information concerning
Formations In Health Care, Inc. and its business and operations, to the
knowledge of the Company, all such information that has been provided to
Purchaser in or as part of the Schedules to this Agreement is true and correct
in all material respects.
2.2.8 Absence of Certain Changes. Except as set forth on
SCHEDULE 2.2.8, since September 30, 1995, the Company has not:
(a) suffered any material adverse change in its
financial condition, working capital, assets, Liabilities, earnings, reserves,
business, operations or prospects;
(b) suffered any loss, damage, destruction or
other casualty materially and adversely affecting any of its properties, assets
or business whether or not covered by insurance;
(c) borrowed or agreed to borrow any funds except
pursuant to this Agreement and except for the incurrence of trade accounts
payable in the ordinary course of business and consistent with past practice;
(d) sold, transferred, assigned or otherwise
disposed of any of its property or assets in excess individually or in the
aggregate of $50,000 or permitted, or allowed, any of its property or assets to
be subjected to any Lien or restriction of any kind, except for properties and
assets sold or encumbered since September 30, 1995 in the ordinary course of
business and consistent with past practice;
(e) declared, paid or set aside for payment any
dividend or other distribution in respect of its capital stock or other
securities or equity interests or, directly or indirectly, redeemed, purchased
or otherwise acquired any shares of its capital stock or other securities or
equity interests; or
(f) made any change in any method of accounting
or accounting practice or any change in depreciation or amortization policies
or rates theretofore adopted.
2.2.9 Regulatory Compliance. The Company possesses all
permits and other authorizations from federal, foreign, state and local
governmental authorities required by applicable provisions of law to permit it
to operate the Business, except where
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the failure to have such a permit or authorization would not have a Material
Adverse Effect.
2.2.10 Litigation. There is no (a) legal, administrative,
arbitration or other proceeding, suit, claim or action of any nature,
investigation or controversy, pending or, to the knowledge of the Company,
threatened against the Company, whether at law or in equity, or before or by
any arbitrator or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality and the
Company has no knowledge of any facts or circumstances that reasonably could be
expected to result in such a procedure, suit, claim, action, investigation or
controversy; or (b) judgment, decree, injunction or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
against the Company.
2.2.11 Taxes. Except as set forth in SCHEDULE 2.2.11, the
Company has duly and timely filed all federal, state, local and foreign tax
reports and returns required to be filed on or before the Closing Date with
respect to all federal, state, local and foreign taxes, including, but not
limited to, all income, ad valorem, property, and value added sales and use
taxes, except where the failure to so file has subsequently been corrected or
would not have a Material Adverse Effect. All taxes and other related charges
due or claimed to be due from the Company by federal, state, local or foreign
taxing authorities have been paid, or are being contested in good faith by
appropriate proceedings and, as of the respective dates thereof, were
adequately reserved for on the Financial Statements. There are no pending
audits of any tax return of the Company filed with any governmental agency, and
there are no outstanding agreements or waivers extending the statutory period
of limitation applicable to any federal, state, local or foreign income tax
return or report for any period.
2.2.12 Insurance. The Company has obtained insurance in
such amounts and covering such risks as is usually carried by companies engaged
in similar businesses in the relevant jurisdiction and owning or leasing
similar properties. All such policies are in full force and effect, and all
premiums with respect thereto are currently paid. A complete list of all such
policies is contained in SCHEDULE 2.2.12.
2.2.13 Debt Instruments. SCHEDULE 2.2.13 contains a
complete list of all loan agreements, promissory notes, letters of credit,
security agreements or other financing documents to which the Company is a
party or by which the Company or any of its properties or assets (including,
without limitation, equipment subject to any equipment lease), is bound which
individually or in the aggregate involve an obligation of $50,000 or more (the
"Debt Instruments"), together with a description of the term and amount owing
in respect thereof. There are no existing material defaults by the Company or
any other obligor under or party to any such Debt Instrument, and no event has
occurred which (whether with notice, lapse of time, or both, or the happening
or occurrence of any other event) would constitute a material default by the
Company or give rise to the right of any holder to accelerate the indebtedness
represented thereby.
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<PAGE> 10
2.2.14 Benefit Plans.
(a) Except as set forth in SCHEDULE 2.2.14(A),
the Company does not maintain or contribute to any "employee pension benefit
plan," as such term is defined in Section 3(2) of ERISA; and each such
"employee pension benefit plan" set forth in SCHEDULE 2.2.14(A) ("Pension
Plan") is in compliance with the applicable provisions of ERISA, the Code, and
all other law, except where the failure to be in such compliance can be cured
within applicable statutory or regulatory cure periods and such failures would
not in the aggregate result in a fine, penalty or excise tax in excess of
$5,000. Complete copies of all Pension Plans and all summary plan descriptions
of Pension Plans, as in effect on the date hereof, have been delivered to
Purchaser;
(b) Except as set forth in SCHEDULE 2.2.14(B), no
Pension Plan, fiduciary thereof or trust created thereunder has engaged in a
transaction that might reasonably be expected to subject the Company, directly
or indirectly, to any tax on prohibited transactions imposed by Section 4975 of
the Code or to any civil penalty imposed by Section 502 of ERISA;
(c) Except as set forth in SCHEDULE 2.2.14(C),
the Company does not maintain or contribute to any "employee welfare benefit
plan," as such term is defined in Section 3(1) of ERISA; and each such
"employee welfare benefit plan" set forth in SCHEDULE 2.2.14(C) ("Welfare
Plan") is in compliance with the applicable provisions of ERISA, the Code, and
all other law, except where the failure to be in such compliance can be cured
within applicable statutory or regulatory cure periods and such failures would
not in the aggregate result in a fine, penalty or excise tax in excess of
$5,000. Complete copies of all Welfare Plans and all summary plan
descriptions of Welfare Plans, as in effect on the date hereof, have been
provided to Purchaser;
(d) Except as set forth in SCHEDULE 2.2.14(D),
the Company does not maintain or contribute to any bonus, incentive
compensation, stock option, stock purchase, or other fringe benefit plan or
program, whether or not reflected in a written document;
(e) Except as set forth in SCHEDULE 2.2.14(E), no
Pension Plan (either currently sponsored by the Company or terminated by the
Company within the past six years) has (i) incurred an "accumulated funding
deficiency" (within the meaning of Section 412(a) of the Code), whether or not
waived; (ii) been a plan with respect to which a Reportable Event has occurred
within six (6) years prior to the Closing Date; or (iii) been a plan with
respect to which any termination liability to the PBGC has been or is expected
to be incurred or with respect to which there exist conditions or events that
have occurred presenting a risk of termination by the PBGC; and
(f) The Company: (i) has not incurred a partial
or complete withdrawal from a "multiemployer plan" within the meaning of
Section 3(37) of ERISA to which the Company has been obligated to contribute
("Multiemployer Plan") which
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<PAGE> 11
resulted in the imposition of withdrawal liability under the Multiemployer
Pension Plan Amendments Act of 1980, as amended, that has not been assessed and
paid in full on the date hereof, or which could result in the imposition of
withdrawal liability under such act; and (ii) does not participate in any
Multiemployer Plan with respect to which the Company or its ERISA Affiliates
would have withdrawal liability in the event of a complete withdrawal on the
Closing Date.
2.2.15 Certain Contracts and Commitments. Except as set
forth in SCHEDULE 2.2.15:
(a) The Company has no collective bargaining or
union contracts or agreements;
(b) The Company has not entered into any written
agreement restricting it from carrying on its business within the United
States or any subdivision thereof;
(c) The Company is not a party to any "safe
harbor lease" as defined in Section 168(f)(8) of the Internal Revenue Code of
1954 as in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982;
(d) The Company is not in default on any
Indebtedness, or on any material lease, commitment, contract, instrument or
obligation by which it or its properties or assets is bound (collectively the
"Material Agreements" and individually a "Material Agreement"), and, to the
knowledge of the Company, no other party to any of the Material Agreements is
in default of any material provision of such Material Agreement; and
(e) The Company is not a party to any
shareholders agreement, registration rights agreement or other currently
effective agreement with any of its shareholders with respect to the stock or
operations of the Company.
2.2.16 Labor Matters. Except to the extent set forth in
SCHEDULE 2.2.16: (a) the Company is and has been in material compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation,
any such laws respecting employment discrimination, occupational safety and
health, and unfair labor practices; (b) there is no unfair labor practice
complaint against the Company pending or, to the knowledge of the Company,
threatened before the National Labor Relations Board or any comparable state,
local or foreign agency nor are any disputes, claims or legal proceedings
pending or threatened before any court or tribunal arising under contract,
common law or pursuant to any employment legislation, and no liability has been
incurred by the Company that remains undischarged in respect of any unfair
labor practice complaint or any breach of contract claim or any award under
employment legislation or for wrongful dismissal, and no order has been made
for reinstatement or re-engagement of any former employee; (c)
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<PAGE> 12
there is no labor strike, dispute, slowdown or stoppage or other industrial
action actually pending or, to the knowledge of the Company, threatened against
or directly affecting the employees of the Company; (d) to the knowledge of the
Company, no union representation question exists and no union or other
organization of employees are recognized for collective bargaining purposes,
and no union organization effort is underway, respecting the employees of the
Company; (e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending, and, to the knowledge of the
Company, no claims therefor exist, except where such grievance or claim would
not have a Material Adverse Effect; (f) the Company is not delinquent in
payments to any of its employees for any wages, salaries, commissions, bonuses
or other direct compensation for any services performed by them to the Closing
Date or amounts required to be reimbursed to such employees, and the Company is
not otherwise in breach of any contract of employment of any employee; or (g)
upon termination of the employment of any of the employees of the Company, the
Company will not be liable to any of its employees for severance pay.
2.2.17 Compliance with Law. The Company is in material
compliance with all laws, regulations and orders applicable to the Business,
including, without limitation, applicable building, planning, zoning or health
laws, ordinances and regulations. The Company has not received any
notification that it is in violation of any such laws, regulations or orders,
and neither the Company nor, to the knowledge of the Company, any employee
thereof (while acting in such capacity), has made any payment or gift to or for
the benefit of any Person, which payment or gift violates any statute or law.
2.2.18 No Subordination. Other than the obligation of
Purchaser to enter into a subordination agreement with respect to the Senior
Debt as contemplated by Section 4.1, there is no agreement, indenture, contract
or instrument to which the Company is a party or by which it may be bound that
requires the subordination in right of payment of any of the Obligations to the
repayment of any other obligation of the Company.
2.2.19 Solvency. The Company is Solvent prior to, and after
giving effect to, the transactions contemplated by the Investment Documents.
No transfer of property is being made and no obligation is being incurred in
connection with the transactions contemplated by the Investment Documents with
the intent to hinder, delay or defraud either present or future creditors of
the Company.
2.2.20 Valid Issuance. All of the outstanding capital stock
of the Company has been duly authorized and validly issued and is fully paid
and non-assessable and has been issued in material compliance with applicable
securities and other similar laws. When issued after the amendment of the
Articles of Incorporation of the Company contemplated by Section 3.1.4 in
accordance with, and for the consideration specified in, this Agreement, the
Preferred Stock will have been duly authorized and validly issued and will be
fully paid and non-assessable, and Purchaser will receive title to such
Preferred Stock free and clear of any lien, charge or encumbrance created by
the action or inaction
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of the Company. When issued after such amendment upon exercise of the warrants
issued pursuant to the Warrant Agreement in accordance with, and for the
consideration specified in, the Warrant Agreement, the Series A Common Stock
will have been duly authorized and validly issued and will be fully paid and
non-assessable, and Purchaser will receive title to such Series A Common Stock
free and clear of any lien, charge or encumbrance created by the action or
inaction of the Company.
2.2.21 Proprietary Rights. The Company owns or has the
right to use all patents, trademarks, trade names, service marks, service
names, trade secrets, copyrights and other proprietary intellectual property
rights and applications therefor, and any corporate or other name,
(collectively, "Proprietary Rights") as are used or held for use in the
Company's business free and clear of any encumbrance other than the rights of
licensors of Proprietary Rights licensed to the Company and other than the
rights of licensees of Proprietary Rights licensed by the Company to others.
SCHEDULE 2.2.21 sets forth a list of all Proprietary Rights that are owned by
or licensed to the Company and that are not readily commercially available and
sets forth a list of any licenses or other agreements related thereto.
SCHEDULE 2.2.21 indicates whether and where any such Proprietary Right has been
registered or filed by the Company with the United States Patent and Trademark
Office or the corresponding office of any other jurisdiction. Except as set
forth in SCHEDULE 2.2.21: (i) no Person has a right to receive a royalty or
similar payment from the Company in respect of any Proprietary Rights, whether
pursuant to any contractual arrangements entered into by the Company or
otherwise; (ii) the Company does not have any licenses granted by or to it or
any other agreements to which it is a party relating in whole or in part to any
of the Proprietary Rights owned by the Company; (iii) neither any of the
Proprietary Rights nor the use thereof by the Company infringes upon or
otherwise violates any intellectual property rights of a third party; (iv)
there are no proceedings instituted against or written notices received by the
Company that are presently outstanding that allege that the use by the Company
of the Proprietary Rights infringes upon or otherwise violates any intellectual
property rights of a third party; (v) the Company has no knowledge of any
infringement or violation of the rights of the Company in or to the Proprietary
Rights by any third party; (vi) no claim has been asserted in writing to the
Company or, to the knowledge of the Company, threatened by any Person with
respect to the ownership, validity, license or use of, or any infringement
resulting from, any of the Proprietary Rights used by the Company or the
provision or sale of any services or products of the Company; (vii) the Company
has the right to provide and sell the services and products provided and sold
by it and to conduct its business as heretofore conducted using the Proprietary
Rights, and the consummation of the transactions contemplated hereby will not
alter or impair any such rights; and (viii) no officer, director or employee of
the Company owns or has any interest in any Proprietary Rights or any secret,
invention or process used by the Company in connection with its business.
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<PAGE> 14
2.2.22 Environmental Matters. Except as set forth in
SCHEDULE 2.2.22:
(a) The Company is in compliance with all
material provisions of the Environmental Laws, except where the failure to so
be in compliance will not result in a Material Adverse Effect.
(b) The Company has not received any assessment,
notice of liability or notice of financial responsibility, and the Company has
not received any notice of any action, claim or proceeding to determine such
liability or responsibility, or the amount thereof, or to impose civil
penalties, with respect to a site listed on any federal or state listing of
sites containing or believed to contain Hazardous Wastes. The Company has not
received notification that any Hazardous Wastes that it has disposed of have
been found in any site at which any governmental agency is conducting an
investigation or other proceeding under any Environmental Law.
(c) To the knowledge of the Company no property,
and no portion of any building, structure, facility or improvement located on
such property, that is used or occupied by the Company in its business (i)
contains friable asbestos or polychlorinated byphenyls ("PCBs"); (ii) has
electrical transformers, fluorescent light fixture ballasts or other equipment
containing PCBs installed thereon or therein; (iii) is used for the handling,
processing, storage or disposal or Hazardous Wastes; or (iv) contains
above-ground or underground storage tanks or other storage facilities for
Hazardous Wastes.
(d) No excise taxes have been imposed on the
Company pursuant to Sections 4611, 4661 or 4681 of the Code.
2.2.23 Collection of Accounts Receivable. Except as set
forth in the columns labeled "ADJ" and "OUTSTANDING 04-Jan-96" on attached
SCHEDULE 2.2.23, the Company has collected all receivables shown on the balance
sheet of the Company as of September 30, 1995 included in the Financial
Statements attached hereto as EXHIBIT D..
SECTION 3
CONDITIONS PRECEDENT
3.1 Purchaser's Conditions to Initial Closing. The obligation of
Purchaser to purchase the Preferred Stock, as well as the binding nature of
Purchaser's obligation to purchase Senior Subordinated Notes, is subject to the
fulfillment or waiver of all of the following conditions prior to, or
contemporaneously with, the closing of the purchase and sale of the Preferred
Stock (the "Closing"); from and after the Closing, the obligation of Purchaser
to purchase Senior Subordinated Notes is subject only to the conditions set
forth in Section 3.2:
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3.1.1 Representations and Warranties. The representations
and warranties of the Company contained herein shall be true and correct in all
material respects on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date; and as of the Closing Date, no Event of
Default shall have occurred and be continuing and no Event of Default shall
occur upon the consummation of the transactions contemplated by the Investment
Documents. Purchaser shall have received a certificate of an officer of the
Company certifying the provisions of this Section 3.1.1.
3.1.2 Executed Documents. The Company shall have
delivered, or shall have caused to be delivered, to Purchaser, the following
documents, duly executed by all parties thereto:
(a) this Agreement;
(b) a certificate representing the Preferred
Stock purchased hereunder;
(c) a Senior Subordinated Note, if any, in the
principal amount of any Senior Subordinated
Note to be sold on the Closing Date;
(d) the Warrant Agreement and certificates
representing the warrants, if any, issued
pursuant thereto;
(e) the Shareholders Agreement;
(f) the Registration Rights Agreement;
(g) the Consent and Modification Agreement; and
(g) the legal opinion of Alston & Bird
substantially in the form attached hereto as
EXHIBIT H.
3.1.3 Certified Documents, Etc. The Company shall have
delivered, or shall have caused to be delivered, to Purchaser copies of the
following documents, duly certified, or the following certificates, as
applicable:
(a) Resolutions of the Board of Directors of the
Company authorizing (1) the execution, delivery and performance of the
Investment Documents, (2) the consummation of the transactions contemplated by
the Investment Documents, (3) the reservation of the shares to be issued upon
exercise of the warrants issued under the Warrant Agreement or conversion of
the Preferred Stock, and (4) all other actions to be taken by the Company in
connection with the Investment Documents;
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<PAGE> 16
(b) Certificates, signed by the Secretary of the
Company dated as of the Closing Date, as to the incumbency, and containing the
specimen signature or signatures, of the Person or Persons authorized to
execute the Investment Documents on behalf of the Company, together with
evidence of the incumbency of such company officer;
(c) The articles of incorporation of the Company,
certified as of a recent date by the Secretary of State of the state under the
laws of which the Company is incorporated and copies of the bylaws of the
Company, certified as of the Closing Date by the Secretary of the Company; and
(d) A certificate of status, good standing or
existence with respect the Company from the Secretary of State of the state
under the laws of which the Company is incorporated, dated as of a recent date.
3.1.4 Amendment of Articles of Incorporation. The Company
shall have amended and restated its Articles of Incorporation, in form and
substance acceptable to Purchaser, and the Amended and Restated Articles of
Incorporation so adopted shall have the Preferred Stock as part of the
Company's authorized capitalization.
3.1.5 Other Acts, Conditions, Etc.. All acts, conditions
and things (including, without limitation, the obtaining of any necessary
regulatory approvals and the making of any required filings, recordings or
registrations) required to be done and performed and to have happened precedent
to the execution, delivery and performance of the Investment Documents and to
constitute the same legal, valid and binding obligations of the parties
thereto, enforceable in accordance with their respective terms, shall have been
done and performed and shall have happened in due and strict compliance with
all applicable laws.
3.1.6 Documents in Satisfactory Form. All documentation,
including, without limitation, documentation for corporate and legal
proceedings, and all instruments in connection with the transactions
contemplated by the Investment Documents and all documents executed and
delivered in connection with the Investment Documents shall be reasonably
satisfactory in form and substance to Purchaser (including without limitation
all disclosure schedules prepared in connection with the Investment Documents),
and Purchaser shall have received all further information and documents that
Purchaser may have reasonable requested, such documents where appropriate to be
certified by proper authorities and corporate officials and parties.
3.2 Purchaser's Conditions to Subsequent Closings. The obligation
of Purchaser to purchase Senior Subordinated Notes on the Subsequent Closing
Dates is subject to the fulfillment of all of the following conditions prior
to, or contemporaneously with, the Subsequent Closing:
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3.2.1 Representations and Warranties. The representations
and warranties of the Company contained herein shall be true and correct in all
material respects on and as of such Subsequent Closing Date, with the same
effect as though made on and as of such Subsequent Closing Date, except for
changes (i) occurring in the ordinary course of the Company's business; (ii)
occurring in connection with the incurrence of Senior Debt and Other Credit
Facilities, (iii) occurring in connection with acquisitions permitted under
Sections 5.6 and 5.8 and (iv) disclosed in updated disclosure schedules to this
Agreement (including disclosure schedules with respect to Sections of this
Agreement that do not currently refer to a SCHEDULE for an exception to the
representation and warranty made in such Section) delivered by the Company to
Purchaser not less than five Business Days prior to the Subsequent Closing
Date, all of which changes do not, individually or in the aggregate, represent
a Material Adverse Effect; and as of such Subsequent Closing Date, the Company
shall not have violated or be in violation of any covenant or agreement to be
performed by the Company under any of the Investment Documents, and no Event of
Default shall have occurred and be continuing and no Event of Default shall
occur upon the consummation of the transactions contemplated by the Investment
Documents. Purchaser shall have received a certificate of an officer of the
Company, dated as of such Subsequent Closing Date, certifying the provisions of
this Section 3.2.1.
3.2.2 Executed Documents. The Company shall have
delivered, or shall have caused to be delivered, to Purchaser, the following
documents, duly executed by all parties thereto:
(a) a Senior Subordinated Note in the principal
amount of the Senior Subordinated Note to be
sold on such Subsequent Closing Date, as such
principal amount is specified in the Notice
of Borrowing delivered by the Company to
Purchaser with respect to such sale pursuant
to Section 1.2(a); and
(b) a certificate representing the warrants
issued pursuant to the Warrant Agreement upon
such sale of Senior Subordinated Notes.
3.2.3 Certified Documents, Etc. The Company shall have
delivered, or shall have caused to be delivered, to Purchaser copies of the
following documents, duly certified, or the following certificates, as
applicable:
(a) A certificate of the Secretary of the Company
to the effect that the resolutions of the Board of Directors of the Company
authorizing (1) the execution, delivery and performance of the Investment
Documents; (2) the consummation of the transactions contemplated by the
Investment Documents, (3) the reservation of the shares to be issued upon
exercise of the Warrants or conversion of the Preferred Stock, and (4) all
other actions to be taken by the Company in connection with the Investment
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<PAGE> 18
Documents, delivered at the initial Closing have not been amended, modified or
revoked in any respect;
(b) Certificates, signed by the Secretary of the
Company dated as of the Subsequent Closing Date, as to the incumbency, and
containing the specimen signature or signatures, of the Person or Persons
authorized to execute the Investment Documents on behalf of the Company,
together with evidence of the incumbency of such company officer; and
(c) A certificate of status, good standing or
existence with respect the Company from the Secretary of State of the state
under the laws of which the Company is incorporated, dated as of a recent date.
3.2.4 Key Man Insurance. The "key man" life insurance on
the life of Mark Kaiser described in Section 4.2.6 shall be in full force and
effect, and Purchaser shall, as required by such Section 4.2.6, be named as the
beneficiary thereof as provided in such Section 4.2.6.
3.3 The Company's Conditions to Initial Closing. The obligation
of the Company to sell the Preferred Stock, as well as the binding nature of
the Company's obligation to sell Senior Subordinated Notes, is subject to the
fulfillment or waiver of all of the following conditions prior to, or
contemporaneously with, the Closing; from and after the Closing, the obligation
of the Company to sell Senior Subordinated Notes is subject only to the
conditions set forth in Section 3.4:
3.3.1 Representations and Warranties. The representations
and warranties of Purchaser contained herein shall be true and correct in all
material respects on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date. The Company shall have received a
certificate of an officer of Purchaser certifying the provisions of this
Section 3.3.1.
3.3.2 Executed Documents. Purchaser shall have delivered,
or shall have caused to be delivered, to the Company, the following documents,
duly executed by all parties thereto:
(a) this Agreement;
(b) the Warrant Agreement;
(c) the Shareholders Agreement;
(d) the Registration Rights Agreement; and
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(e) the legal opinion of Fowler, White, Gillen,
Boggs, Villareal and Banker, P.A.
substantially in the form attached hereto as
EXHIBIT I.
3.3.3 Certified Documents, Etc. Purchaser shall have
delivered, or shall have caused to be delivered, to the Company copies of the
following documents, duly certified, or the following certificates, as
applicable:
(a) Resolutions of the Board of Directors or
Executive Committee of the Board of Directors of Purchaser authorizing (1) the
execution, delivery and performance of the Investment Documents, (2) the
consummation of the transactions contemplated by the Investment Documents, and
(3) all other actions to be taken by Purchaser in connection with the
Investment Documents;
(b) Certificates, signed by the Secretary or an
Assistant Secretary of Purchaser dated as of the Closing Date, as to the
incumbency, and containing the specimen signature or signatures, of the Person
or Persons authorized to execute the Investment Documents on behalf of
Purchaser, together with evidence of the incumbency of such company officer;
and
(c) A certificate of status, good standing or
existence with respect Purchaser from the Secretary of State of the state under
the laws of which Purchaser is incorporated, dated as of a recent date.
3.4 The Company's Conditions to Subsequent Closings. The
obligation of the Company to sell Senior Subordinated Notes on the Subsequent
Closing Dates is subject to the fulfillment of all of the following conditions
prior to, or contemporaneously with, the Subsequent Closing:
3.4.1 Representations and Warranties. The representations
and warranties of Purchaser contained herein shall be true and correct in all
material respects on and as of such Subsequent Closing Date, with the same
effect as though made on and as of such Subsequent Closing Date. The Company
shall have received a certificate of an officer of Purchaser, dated as of such
Subsequent Closing Date, certifying the provisions of this Section 3.4.1.
3.4.2 Certified Documents, Etc. Purchaser shall have
delivered, or shall have caused to be delivered, to the Company copies of the
following documents, duly certified, or the following certificates, as
applicable:
(a) A certificate of the Secretary or an
Assistant Secretary of Purchaser to the effect that the resolutions of the
Board of Directors or Executive Committee of the Board of Directors of
Purchaser authorizing (1) the execution, delivery and performance of the
Investment Documents; (2) the consummation of the transactions contemplated by
the Investment Documents, and (3) all other actions to be taken by
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<PAGE> 20
Purchaser in connection with the Investment Documents, delivered at the initial
Closing have not been amended, modified or revoked in any respect; and
(b) Certificates, signed by the Secretary or an
Assistant Secretary of Purchaser dated as of the Subsequent Closing Date, as to
the incumbency, and containing the specimen signature or signatures, of the
Person or Persons authorized to execute the Investment Documents on behalf of
Purchaser, together with evidence of the incumbency of such company officer.
SECTION 4
AFFIRMATIVE COVENANTS
4.1 Subordination by Purchaser. Purchaser agrees that the
indebtedness represented by the Senior Subordinated Notes is to be subordinate
to one or more secured credit facilities in an aggregate original principal
amount not to exceed $2,000,000 obtained by the Company subsequent to the
Closing Date for the purposes of financing working capital requirements in the
ordinary course of business and/or financing equipment purchases (the "Senior
Debt"). Purchaser agrees to enter into a subordination agreement on
commercially reasonable terms with the Bank or Banks providing such secured
credit facilities to the Company, the terms of which subordination agreement
will not unreasonably restrict Purchaser's rights to accelerate the maturity of
the Senior Subordinated Notes or to pursue its remedies upon an Event of
Default; provided, however, that Purchaser shall not be required to subordinate
the indebtedness represented by the Senior Subordinated Notes to more than
$2,000,000 in aggregate original principal amount of Senior Debt; provided,
further, that such Senior Debt shall be on terms and conditions reasonably
customary for secured working capital or equipment financing credit
transactions.
4.2 Covenants of the Company. The Company covenants that so long
as any of the Obligations of the Company to Purchaser hereunder or under any of
the other Investment Documents remains outstanding, and until final payment in
full of the Senior Subordinated Notes, the Company shall, and shall cause each
Affiliated Company of the Company to:
4.2.1 Punctual Payments. Pay when due: (a) the interest
and principal on the Senior Subordinated Notes, at the times and place and in
the manner specified therein, (b) any fees or other liabilities due hereunder
at the times and place and in the manner specified herein, (c) any taxes,
assessments or governmental charges of any governmental authority, and (d) any
other obligation of the Company for or in respect of Indebtedness, unless in
the cases of (c) and (d), the same (i) is being contested by the Company in
good faith and (ii) does not result in (A) any Lien upon any material asset of
the Company or upon any substantial portion of the Company's assets, (B) an
acceleration of any other material obligation of the Company or (C) the loss of
any material right under or the material breach of any agreement that is
material to the Company. Pay within 30
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<PAGE> 21
days after the scheduled due date, or such later date as may be possible
without the incurrence of a material penalty, any and all obligations of the
Company not described in the immediately preceding sentence, unless any of the
same is being contested by the Company in good faith.
4.2.2 Accounting Records. Maintain adequate books and
records in accordance with GAAP, and permit any representative of Purchaser,
during the Company's regular business hours upon reasonable notice, to inspect,
copy, audit and examine such books and records and inspect the properties of
the Company and its Affiliated Companies.
4.2.3 Reporting Requirements. (a) Provide Purchaser with
copies of all notices of meeting delivered to the members of the Board of
Directors of the Company and of all other materials delivered to the members of
the Board of Directors in their capacity as such or to the Investors (as
defined in the Consent and Modification Agreement) in their capacity as such.
(b) In addition, the Company will provide
Purchaser with:
(i) as soon as available and in any
event within 120 days after the end of each Fiscal Year (other than the Fiscal
Year ended December 31, 1995, in which event on or before June 30, 1996),
audited consolidated financial statements of the Company and its Affiliated
Companies as of the end of and for such Fiscal Year, together with an
unqualified report thereon of the Company's independent certified public
accounting firm, such financial statements to include a balance sheet,
statements of income, shareholders' equity and cash flows, and footnotes, all
prepared in accordance with GAAP;
(ii) as soon as available and in any
event within 30 days after the end of each month, a consolidated balance sheet
of the Company and its Affiliated Companies as of the end of such month and
statements of income, retained earnings and cash flows of the Company and its
Affiliated Companies for such month and for the Fiscal Year to date, prepared
in accordance with GAAP subject to normal year-end audit adjustments applied on
a basis consistent with prior years;
(iii) as soon as possible and in any event
within ten Business Days after the Company has knowledge of the occurrence of
any Event of Default or Potential Default, a statement of the chief executive
officer, chief financial officer or chief operating officer of the Company
setting forth details of such event and the action that the Company and its
Affiliated Companies propose to take with respect thereto;
(iv) as soon as possible and in any event
within ten Business Days after acquiring knowledge thereof, written notice of
all litigation, actions, suits or proceedings threatened or commenced affecting
the Company or any of its
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<PAGE> 22
Affiliated Companies or the properties or business of the Company or any of its
Affiliated Companies if the relief sought thereunder is either unspecified as
to amount, or is for damages in excess of $10,000 or, if awarded, could
reasonably be expected to materially and adversely affect the business,
properties, condition (financial or otherwise), or operations of the Company or
any of its Affiliated Companies; and as soon as possible and in any event
within five Business Days after any material development or change in the
status of any such litigation, action, suit or proceeding, notice of such
development or change;
(v) promptly after the furnishing
thereof, copies of any statement or report furnished to any other holder of the
debt or equity securities of the Company or any of its Affiliated Companies,
including without limitation any statement or report furnished pursuant to the
terms of any stock purchase, indenture, loan or credit or similar agreement and
not otherwise required to be furnished to Purchaser pursuant to any other
clause of this Section 4.2.3, but excluding (i) any statement or request
delivered to any holder of the debt or equity securities of the Company or any
of its Affiliated Companies other than in such Person's capacity as a holder of
such debt or equity and (ii) routine correspondence between the Bank and the
Company; and
(vi) prompt written notice of the
occurrence of any event that has had, or that could reasonably be expected to
have, a Material Adverse Effect on the Company.
4.2.4 Existence; Compliance With Law and Material
Agreements. Preserve and maintain its corporate existence, and all of its
licenses, permits, governmental approvals, rights, privileges and franchises
necessary or desirable in the normal conduct of its business as now conducted
or presently proposed to be conducted; conduct its business in an orderly and
regular manner; comply with the provisions of all material agreements to which
the Company is a party, except where such failure to comply will not cause a
Material Adverse Effect on the Company or cause the Company to lose any of its
material rights under such agreements, comply with the provisions of all
documents pursuant to which it is organized or which govern its continued
existence; and comply with the requirements of all applicable laws, rules,
regulations, ordinances, orders of any governmental authority, including,
without limitation, all applicable Environmental Laws and ERISA, and
requirements for the maintenance of its insurance, licenses, permits,
governmental approvals, rights, privileges and franchises, including, but not
limited to, all applicable federal, state, regional or local environmental
laws, rules, regulations, ordinances and orders.
4.2.5 Insurance. Maintain and keep in force with insurers
reasonably acceptable to Purchaser insurance of the types and in amounts
customarily carried in lines of business similar to its line of business in the
relevant jurisdiction, including without limitation fire, extended coverage,
public liability, property damage, business interruption, and workers'
compensation, and deliver to Purchaser, from time to time, at Purchaser's
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<PAGE> 23
request, schedules setting forth all insurance then in effect. All premiums on
insurance policies required under this Section shall be paid by the Company.
4.2.6 Key Man Insurance. Within 180 days after Closing,
the Company shall obtain from an insurer reasonably acceptable to Purchaser,
and thereafter shall maintain until the Senior Subordinated Notes are repaid in
full, a policy of "key man" life insurance insuring the life of Mark A. Kaiser
in an amount equal to $2,000,000, and naming the Purchaser the beneficiary
thereof up to the principal amount of the Senior Subordinated Notes held by
Purchaser at any time. In the event of the death of Mr. Kaiser, the Purchaser
shall credit toward the prepayment of the Senior Subordinated Notes, as and
when received by Purchaser, the proceeds of such policy up to the aggregate
amount of the Senior Subordinated Notes and all interest accrued thereunder
outstanding at such time. The Company shall not change such beneficiary of, or
pledge or otherwise grant a security interest in, such "key man" life insurance
policy, to secure the Senior Debt or otherwise. Notwithstanding the foregoing
provisions of this Section 4.2.6, until January 1, 1997, Purchaser shall be
named the beneficiary the entire face amount of such policy without limitation
as to the principal amount of the Senior Subordinated Notes; and if Mr. Kaiser
dies on or prior to December 31, 1996, the Company shall, unless otherwise
directed by Purchaser, deliver all of the proceeds of such policy, if, as and
when received, to Purchaser (and Purchaser shall be entitled to retain all such
proceeds delivered to Purchaser), which proceeds shall first be applied toward
the prepayment of the Senior Subordinated Notes and shall, if such proceeds are
greater that the then-outstanding amount of the Senior Subordinated Notes, then
be retained by Purchaser without further obligation hereunder as a reduction of
the purchase price paid by Purchaser for the Preferred Stock.
4.2.7 Notice to Purchaser. Promptly (but in no event more
than five Business Days after the occurrence of each such event or matter) the
Company shall give notice in writing to Purchaser of: (a) any change in its
name, state of incorporation, organizational structure or composition; (b) any
termination or cancellation of any insurance policy which it is required to
maintain and which it does not replace with substantially similar coverage; (c)
any warranty claim or uninsured or partially uninsured loss or liability
through liability or property damage, or through fire, theft or any other cause
affecting its property in excess of an aggregate of $250,000; (d) any loss of a
customer from which the Company received more than 5% of its revenues during
the previous year; (e) any Event of Default or Potential Default; or (f) any
event proposed in writing by, or under active discussions with, any Person
that, if consummated, could result in a Change of Control.
4.2.8 Purchaser's Designee. As promptly as reasonably
practicable after the Closing Date, the Company shall cause one vacancy to be
created on the Board of Directors of the Company (by increasing the number of
members of the Board of Directors or otherwise) and shall, with respect to such
vacancy, thereafter immediately cause a person designated by Purchaser to be
elected to the Board of Directors. Each designee of the Purchaser shall serve
until his successor is duly elected and qualified. The
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<PAGE> 24
Company shall include one designee of Purchaser in the slate of nominees
recommended by the Board of Directors or the Company's management to
shareholders for election as directors at each annual meeting of shareholders
of the Company, commencing with the first annual meeting of shareholders after
the Closing Date and so long as Purchaser owns Preferred Stock, common stock of
the Company and Warrants representing, in the aggregate, ownership of or the
right to acquire at least 250,000 shares of Series A Common Stock of the
Company (as adjusted for stock splits, stock dividends and similar events
occurring after the date of this Agreement). The Company shall vote all shares
for which the Company's management or Board of Directors holds proxies or is
otherwise entitled to vote in favor of the election of such designee. The
Company's management shall in all respects use its best efforts to cause the
election of such designee. In the event that such designee shall cease to
serve as a director for any reason, the resulting vacancy shall be filled by a
designee of Purchaser. Any such designee of Purchaser must be reasonably
acceptable to the Company; provided that the Company shall not unreasonably
withhold its approval of any such designee. In the event that Purchaser ceases
to own Preferred Stock, common stock of the Company and Warrants representing,
in the aggregate, ownership of or the right to acquire at least 250,000 shares
of Series A Common Stock of the Company (as adjusted for stock splits, stock
dividends and similar events occurring after the date of this Agreement) for a
period of 90 consecutive days, Purchaser shall cause its designee to resign
from the Board of Directors. The Company's obligations under this Section
4.2.8 shall terminate at such time as Purchaser continues to beneficially own
Preferred Stock, common stock of the Company and Warrants representing, in the
aggregate, ownership of or the right to acquire less than 250,000 shares of
Series A Common Stock of the Company (as adjusted for stock splits, stock
dividends and similar events occurring after the date of this Agreement) for a
period of 180 days. Purchaser and the Company acknowledge and agree that the
Shareholders Agreement contains provisions that require the Purchaser to vote
to elect certain designees of other shareholders to the Board of Directors and
provisions that require other shareholders to vote to elect Purchaser's
designee to the Board of Directors.
4.2.9 Visitation Rights. The Company shall permit any
representatives designated by Purchaser, upon reasonable written notice and
during normal business hours and such other times as Purchaser may reasonably
request, to (i) visit and inspect any of the properties of the Company, (ii)
examine the corporate and financial records of the Company and make copies
thereof or extracts therefrom, and (iii) discuss the affairs, finances and
accounts of the Company with the directors, officers, key employees and
independent accountants of the Company. The presentation of an executed copy
of this Agreement by Purchaser to the Company's independent accountants shall
constitute the Company's permission to its independent accountants to
participate in discussions with such Persons.
4.2.10 Current Public Information. At all times after the
Company has filed a registration statement with the Securities and Exchange
Commission pursuant to the Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company shall file all reports required to be
filed by it under the Act and the Exchange
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<PAGE> 25
Act and the rules and regulations adopted by the Securities and Exchange
Commission thereunder and shall take such further action as the Purchaser may
reasonably request, all to the extent required to enable Purchaser or any other
holder, from time to time, of the Preferred Stock or shares of Series A Common
Stock issuable upon conversion of the Preferred Stock or exercise of warrants
issued under the Warrant Agreement to sell the Preferred Stock (or the Series A
Common Stock issuable upon conversion thereof) or such Series A Common Stock
pursuant to (i) Rule 144 adopted by the Securities and Exchange Commission
under the Act (as such rule may be amended from time to time) or any similar
rule or regulation hereafter adopted by the Securities and Exchange Commission
or (ii) as and to the extent set forth in the Registration Rights Agreement, a
registration statement on Forms S-1, S-2 or S-3 or any similar registration
form hereafter adopted by the Securities and Exchange Commission. Upon
request, the Company shall deliver to Purchaser a written statement as to
whether the Company has complied with such requirements.
4.2.11 Public Disclosures. The Company shall not disclose
Purchaser's name or identity as an investor of the Company in any press release
or other public announcement or in any document or material filed with any
governmental entity, without the prior written consent of Purchaser, unless
such disclosure (i) does nothing more than identify Purchaser as an investor in
the Company in a format previously approved by Purchaser or (ii) is required by
applicable law or governmental regulations or by order of a court of competent
jurisdiction, in which case prior to making such disclosure the Company shall
give written notice to Purchaser describing in reasonable detail the proposed
content of such disclosure and shall permit Purchaser to review and comment
upon the form and substance of such disclosure.
SECTION 5
NEGATIVE COVENANTS
The Company further covenants that, so long as any of the
Obligations of the Company to Purchaser hereunder remain outstanding and until
final payment in full of the Senior Subordinated Notes, without the prior
written consent of Purchaser, the Company shall not, and the Company shall not
allow any of its Affiliated Companies to:
5.1 Use of Funds. Use the proceeds of the purchase and sale of
Senior Subordinated Notes for any purpose other than financing the acquisition
of businesses in the same general line of business as that engaged in by the
Company (as described in Section 5.3) and for ordinary course of business
working capital purposes (other than payments of interest or principal due on
the Senior Subordinated Notes or the Senior Debt).
5.2 Dividends, Distributions. Except for dividends payable in
respect of the Company's Series A Convertible Preferred Stock and the Preferred
Stock, declare or pay any dividend or distribution either in cash, stock or any
other property on its capital stock now or hereafter outstanding or on any
warrant, option or other right to acquire capital
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<PAGE> 26
stock now or hereafter outstanding (except for the securities issued or
issuable under the Warrant Agreement) or redeem, retire, purchase or otherwise
acquire any shares of any class of its capital stock now or hereafter
outstanding or any warrant, option or other right to acquire capital stock now
or hereafter outstanding (except for the securities issued or issuable under
the Warrant Agreement), including without limitation any put, call or other
right to payment under any warrant, option or other right to acquire capital
stock now or hereafter outstanding (other than the securities issued or
issuable under the Warrant Agreement); provided, that any Affiliated Company
may pay dividends and distributions to the Company for reasonable and customary
administrative expenses of the Company, and (ii) the Company may purchase from
any of its current or former employees or officers the shares of Series A
Common Stock of the Company owned by any such current or former employee or
officer on the terms and conditions set forth in the shareholder agreements
between the Company and each such current or former employee or officer with
respect to such Series A Common Stock if (A) no Event of Default or Potential
Default has occurred at the time of payment for such shares, and (B) purchase
of such shares would not create an Event of Default or Potential Default.
5.3 Business. Discontinue the Business or engage in any business
activities or operations substantially different from or unrelated to the
development, implementation, sale, marketing and servicing of computer
databases, software, information products and other tools (and support services
related to such databases, software, information products and tools) to
measure, track, report on, and manipulate and analyze healthcare or insurance
industry information, including, without limitation, information concerning
costs, procedures, treatments, practitioners and protocols.
5.4 Indebtedness. Create, incur, assume or permit to exist any
Indebtedness (other than the Obligations); provided, however, that this Section
5.4 shall not prohibit:
(a) the incurrence of Senior Debt (as defined in
Section 4.1) or Other Credit Facilities (as defined in Section 1.1(b) of the
Warrant Agreement);
(b) the incurrence in the ordinary course of
business or trade accounts payable;
(c) Indebtedness for taxes, assessments,
governmental charges or levies;
(d) Indebtedness of the Company existing as of
the Closing Date and disclosed in the Financial Statements or in SCHEDULE 2.2.8
and indebtedness of any business acquired by the Company, which indebtedness
was outstanding immediately prior to the acquisition of such business and was
fully disclosed to the Company prior to acquiring such business;
- 25 -
<PAGE> 27
(e) purchase money Indebtedness incurred in
connection with the acquisition of equipment and not in excess of $250,000 in
the aggregate at any time outstanding;
(f) debt to insurance or bonding companies in
connection with the performance or payment bonds obtained by the Company to
secure its performance under contracts entered into in the ordinary course of
its business;
(g) debt issued to sellers of businesses acquired
by the Company in full or partial consideration of the purchase of such
businesses; and
(i) Indebtedness between the Company and any
wholly-owned Subsidiary so long as it is evidenced by a note or other
instrument reasonably satisfactory to Purchaser.
5.5 Liens. Create or suffer to exist any Lien or any other type
of preferential arrangement, upon or with respect to any of its assets or
properties, whether now owned or hereafter acquired, or assign any right to
receive income to secure any Indebtedness of any Person except:
(a) Liens securing the Senior Debt;
(b) Leases and lessor interests in security
deposits given pursuant to leases of real property entered into by the Company
or any of its Affiliated Companies, as lessee, in the ordinary course of
business;
(c) Liens for current taxes, assessments or other
governmental charges (i) which are not delinquent, or (ii) the validity of
which is contested in good faith by appropriate proceedings upon stay of
execution of the enforcement thereof and which are in respect of claims for
current taxes, assessments or other governmental charges not exceeding an
aggregate amount of $100,000;
(d) Liens, for charges incurred in the ordinary
course of business in connection with worker's compensation, unemployment
insurance or other forms of governmental insurance or benefits, or to secure
performance of statutory obligations entered into in the ordinary course of
business;
(e) Liens of attachment and judgment respecting
claims, the validity of which is being contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof (i) in an
aggregate amount not exceeding $100,000, or (ii) which shall be vacated within
10 days after the creation thereof;
(f) Mechanics', materialmen's or other similar
Liens arising in the ordinary course of business which either (i) are inchoate
and relate to an obligation which is not yet due and payable or (ii) are being
contested in good faith by appropriate
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<PAGE> 28
proceedings upon stay of execution of the enforcement thereof and are in an
aggregate amount not exceeding $100,000;
(g) Liens incurred in connection with purchase
money Indebtedness permitted under Section 5.5(f);
(h) Liens securing Indebtedness permitted under
subsections (a), (c), (d), and (f), Section 5.4; and
(i) Liens incurred in replacement of Liens
permitted under Section 5.5(a) through (h).
5.6 Subsidiaries; Investments. Create any Subsidiary, make any
capital contribution to or other investment in any Affiliated Company or make
any Investment, except for Permitted Investments. Notwithstanding the
provisions of the preceding sentence, the Company may, with the prior written
consent of Purchaser, which consent will not be unreasonably withheld, create a
Subsidiary provided that (i) the Company shall not make any capital
contribution to or other investment in excess of $500,000 in any such
Subsidiary unless such contribution or investment is approved in advance by
Purchaser, (ii) the Company may purchase stock of another corporation in an
acquisition transaction (not described in Section 5.8 below) in which the
Company becomes the owner of 80% or more of the equity of such corporation;
(iii) each of the terms, covenants and conditions of the Investment Documents
applicable to the business and operations of the Company shall be applicable to
the business and operations of such Subsidiary, including without limitation
all financial covenants and reporting requirements which, unless otherwise
required by Purchaser, shall be applied on a consolidated basis, (iv) all
financial statements shall be prepared on a consolidated basis and (iv) the
Company shall own, directly or indirectly, 100% of the capital stock of such a
Subsidiary that is newly created and 80% of the capital stock of an acquired
Subsidiary. Purchaser acknowledges and agrees that the Company may acquire all
of the outstanding capital stock of Formations in Health Care, Inc. from
Pamella Leiter for consideration consisting of cash, stock and options to
purchase stock.
5.7 Guaranteed Indebtedness. Create, assume, incur, or be or
become liable for any Guaranteed Indebtedness except: (a) it may endorse
negotiable instruments for deposit or collection in the ordinary course of
business; (b) any Affiliated Company of the Company may guaranty or become
jointly liable with respect to the Obligations; and (c) it may guaranty or
become jointly liable on any Indebtedness or Lien which such guarantor would
have been permitted to incur under Sections 5.4 and 5.5; (d) guarantees of the
Senior Debt or an Other Credit Facility; and (e) guarantees of the Obligations.
5.8 Mergers. Merge with or into, consolidate with or into, or
enter into a statutory share exchange with another Person or acquire all or
substantially all of the assets or capital stock of any Person, provided,
however, that (i) the Company may acquire all of the outstanding capital stock
of Formations in Health Care, Inc. from
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<PAGE> 29
Pamella Leiter as permitted in Section 5.6 hereof, (ii) the Company may make
acquisitions at fair market value in arm's- length transactions, which do not
individually or when taken together with all other acquisitions after the date
of this Agreement result in a Change of Control; and (iii) in either event each
of the terms covenants and conditions of the Investment Documents applicable to
the business and operations of the Company shall be applicable to the business
and operations of the acquired company, including without limitation all
financial covenants and reporting requirements which, unless otherwise required
by Purchaser, shall be applied on a consolidated basis.
5.9 Restrictions on Sales of Assets. Sell or otherwise dispose of
any property except:
(a) sales, leases, rentals or dispositions of
property as a result of a constructive loss or similar loss of the property or
a decision to dispose under a fix/sell analysis;
(b) sales, leases, rentals or dispositions of
property in the ordinary course of business and for consideration not less than
the fair market value;
(c) sales, leases, rentals or dispositions of
property not in excess of $200,000 in the aggregate during any Fiscal Year; and
(d) the disposition of any obsolete or retired
property not used or useful in its business the fair market value of which
obsolete or retired property, singly or when aggregated with all other such
assets sold pursuant to this clause (e) over the original term of the Senior
Subordinated Notes does not exceed $500,000.
5.10 Financial Covenants.
5.10.1 Consolidated EBITDA. Permit the Consolidated EBITDA
determined at the end of each Fiscal Year to be less than the amount specified
below:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1996 $ 1,800,000
December 31, 1997 $ 3,900,000
December 31, 1998 $ 5,900,000
December 31, 1999 $ 8,800,000
December 31, 2000 and thereafter $ 13,000,000
</TABLE>
5.10.2 Minimum Consolidated Net Worth. Permit Consolidated
Net Worth determined at the end of each Fiscal Year specified below to be less
than the amount specified below:
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<PAGE> 30
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1995 $ 300,000
December 31, 1996 $ 3,500,000
December 31, 1997 $ 5,000,000
December 31, 1998 $ 8,000,000
December 31, 1999 $12,000,000
December 31, 2000 and thereafter $16,000,000
</TABLE>
5.10.3 Consolidated Debt to Consolidated EBITDA. Permit the
ratio of Consolidated Debt to Consolidated EBITDA determined at the end of each
Fiscal Year to exceed the ratio specified below:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1996 4.0:1.0
December 31, 1997 3.0:1.0
December 31, 1998 2.0:1.0
December 31, 1999 1.0:1.0
December 31, 2000 and thereafter 1.0:1.0
</TABLE>
(C) Fixed Charge Coverage. Permit the Fixed Charge
Coverage Ratio determined at the end of each Fiscal Year to be less than the
ratio specified below:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1996 2.0:1.0
December 31, 1997 4.0:1.0
December 31, 1998 and thereafter 6.0:1.0
</TABLE>
5.11 Prepayment of Indebtedness. Prepay Indebtedness, other than
the Senior Debt and the Obligations, before the stated maturity thereof.
5.12 Executive Compensation. Allow any of its officers, directors
or employees to use any assets or property of the Company or any of its
Affiliated Companies for personal purposes. Neither the Company nor any of its
Affiliated Companies shall increase the salary or other compensation or
benefits paid or provided to any officer or director of the Company or such
Affiliated Company except to the extent that such increase (a) is commercially
reasonable and in accordance with industry standards and (b) is approved by the
Compensation Committee (composed entirely of directors who are not employees of
the Company or any Affiliate of the Company) of the Board of Directors of the
Company or such Affiliated Company, as the case may be, provided that in no
event will any option plan or option agreement be amended or instituted which
causes the total
- 29 -
<PAGE> 31
of all options available for grant to employees, directors and sellers of
businesses acquired by the Company, outstanding options issued to employees,
directors and sellers of businesses acquired by the Company, and stock issued
under any employee benefit plan or otherwise to any employee or director (in
his or her capacity as such) to exceed 493,850 shares of Series A Common Stock
(as adjusted for stock splits, stock dividends and similar events occurring
after the date of this Agreement).
5.13 Series of Common Stock. Amend the Articles of Incorporation
of the Company or otherwise adopt any class or series of common stock of the
Company other than the Series A Common Stock or issue any shares of capital
stock of the Company or any options, rights or warrants convertible into or
exercisable or exchangeable for any such capital stock, except for Excluded
Shares (as defined in the Amended and Restated Articles of Incorporation of the
Company attached hereto as EXHIBIT A).
SECTION 6
EVENTS OF DEFAULT
6.1 Events of Default. The occurrence of any of the following
shall constitute an "Event of Default" under this Agreement:
(a) the Company shall fail to pay when due any
principal, interest, premium or other amount payable under the Senior
Subordinated Notes;
(b) the Company shall fail to observe or perform,
or shall fail to cause any of its Affiliated Companies to observe or perform,
any obligation, covenant or other provision contained in any of the Investment
Documents (other than a failure to pay when due principal, interest, premium or
other amounts payable under the Senior Subordinated Notes), or in the Consent
and Modification Agreement (whether or not such failure is consented to or
waived by the shareholders who are parties to the Consent and Modification
Agreement), which failure, if susceptible of cure, is not cured prior to the
later of 30 days after the occurrence of such failure or the expiration of any
applicable grace period for performance of such obligation, covenant or other
provision, or which failure is not waived by Purchaser in writing;
(c) any representation or warranty made by the
Company herein or in any of the Investment Documents shall be false or
misleading in any material respect on the date upon which such representation
or warranty is made or deemed made;
(d) acceleration of any Indebtedness of the
Company or any of its Affiliated Companies, which Indebtedness in the aggregate
principal amount exceeds $100,000;
(e) any material default under the Senior Debt,
an Other Credit Facility or any other indebtedness of the Company for borrowed
money owed to a bank, insurance company, venture capital firm or other
financial institution;
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<PAGE> 32
(f) the entry of any judgment, order or decree
against a the Company or any of its Affiliated Companies; or the filing of a
notice of judgment lien against the Company or any of its Affiliated Companies;
or the recording of any abstract of judgment against the Company or any of its
Affiliated Companies in any county in which the Company or such Affiliated
Company has an interest in real property; or the service of a notice of levy or
of a writ of attachment or execution, or other like process, against the assets
of the Company or any of its Affiliated Companies; and such judgment, judgment
lien, levy, attachment or execution shall not have been vacated, discharged or
stayed within 30 days from the entry thereof;
(g) the Company or any of its Affiliated
Companies shall cease to be Solvent, or shall suffer or consent to or apply for
the appointment of a receiver or administrative receiver, trustee, custodian or
liquidator of itself or any of its property, or shall generally fail to pay its
debts as they become due, or shall make a general assignment for the benefit of
creditors; the Company or any of its Affiliated Companies shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Code, or under any state or federal law granting relief to debtors,
whether now or hereafter in effect; or any involuntary petition or proceeding
pursuant to the Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for debtors is filed or
commenced against the Company or any of its Affiliated Companies, which
petition or proceeding (i) results in the entry of an order for relief or any
such adjudication of relief, or (ii) remains unreleased or undischarged for a
period of 60 days, or (iii) the Company or such Affiliated Company files an
answer admitting jurisdiction of the court and the material allegations of the
petition; or the Company or any of its Affiliated Companies shall be
adjudicated a bankrupt, or an order for relief shall be entered by any court of
competent jurisdiction under the Bankruptcy Code or any other applicable state
or federal law relating to bankruptcy, reorganization or other relief for
debtors;
(h) the dissolution of, the liquidation of, or
the suspension of business by, the Company, or any of the directors or
shareholders of the Company shall take action seeking to effect the dissolution
or liquidation of the Company;
(i) any of the Investment Documents shall, at any
time, cease to be in full force and effect except in accordance with its terms
or shall be declared null and void pursuant to a judicial or other governmental
act, or the validity or enforceability thereof shall be contested by any party
thereto; and
(j) any financial statement, report or other
document to be delivered by or on behalf of the Company to the Purchaser after
the Closing Date pursuant to the Investment Documents is false or misleading in
any material respect when made or delivered.
6.2 Remedies.
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<PAGE> 33
6.2.1 Termination of Advances; Acceleration. Upon the
occurrence of any Event of Default, and at any time thereafter as long as the
Event of Default is continuing, (i) Purchaser may, by notice to the Company,
declare the Purchaser's obligation to purchase Senior Subordinated Notes under
Section 1.2 of this Agreement to be terminated, whereupon the same shall
forthwith terminate and (ii) the holders of a majority of the then-outstanding
principal amount of the Senior Subordinated Notes may, by notice to the
Company, declare the Senior Subordinated Notes and all interest thereon and all
other amounts payable under this Agreement and the Investment Documents to be
forthwith due and payable, whereupon the Senior Subordinated Notes, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Company; provided, however, that in
the event of an actual or deemed entry of an order for relief with respect to
the Company or any of its Subsidiaries under the Federal Bankruptcy Code, then,
unless any such Event of Default is waived in writing by Purchaser, (x) the
obligation of the Purchaser to purchase Senior Subordinated Notes under Section
1.2 of this Agreement shall automatically be terminated and (y) the Senior
Subordinated Notes, and all such interest and all such amounts shall
automatically become and be due and payable without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Company. In addition, without limiting any other rights of Purchaser or a
holder of Senior Subordinated Notes, whenever the holders of a majority of the
outstanding amount of the Senior Subordinated Notes have the right to declare
any indebtedness to be immediately due and payable and have so declared and
whenever the Senior Subordinated notes shall become automatically due and
payable as provided in the immediately preceding sentence, Purchaser and any
such holder may set off against the indebtedness without notice any amounts
then owed to the Company by Purchaser or such holder in any capacity.
6.2.2 Cumulative Remedies. All rights, remedies or
recourse of the holders of the Senior Subordinated Notes under this Agreement,
the Senior Subordinated Notes, or any other Investment Documents, under the
Uniform Commercial Code or other law, in equity or otherwise, are cumulative,
and exercisable concurrently and may be pursued singularly, successively or
together and may be exercised as often as occasion therefor shall arise. No
act of commission or omission by a holder of the Senior Subordinated Notes,
including, but not limited to, any failure to exercise, or any delay,
forbearance or indulgence in the exercise of any right, remedy or recourse
hereunder or under any Investment Document shall be deemed a waiver, release or
modification of that or any other right, remedy or recourse, and no single or
partial exercise of any right, remedy or recourse shall preclude the Purchaser
from any other or future exercise of the right, remedy or recourse or the
exercise of any other right, remedy or recourse. No waiver or release of any
such rights, remedies and recourse shall be effective against Purchaser or any
holder of the Senior Subordinated Notes unless in writing and manually signed
by an authorized officer of Purchaser or such holder, and then only to the
extent therein recited. A waiver, release or modification with reference to
any one event shall not be construed as continuing or constituting a course of
dealing, and no such waiver, release
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<PAGE> 34
or modification shall be construed as a bar to, or as a waiver, release or
modification of, any subsequent right, remedy or recourse as to a subsequent
event.
6.2.3 No Liability. Whether or not the holders of the
Senior Subordinated Notes elect to employ any or all remedies available in the
event of the occurrence of any Event of Default, such holders shall not be
liable for the payment of any expenses incurred by the Company in connection
with the exercise of any remedy available or for the performance or
non-performance of any obligation of the Company.
6.2.4 Waiver of Default. Purchaser or any other holder of
Senior Subordinated Notes may, by written notice to the Company, at any time
and from time to time, waive any Event of Default that has occurred hereunder
and its consequences. Any such waiver shall be for such period and subject to
such conditions as shall be specified in any such notice. In the case of any
such waiver, the Company shall be restored to its former position hereunder and
under the Investment Documents, and any Event of Default so waived shall be
deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Event of Default.
6.2.5 No Waiver. No failure to exercise and no delay in
exercising, on the part of any holder of Senior Subordinated Notes, any right,
power or privilege hereunder or under any of the other Investment Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.
6.2.6 Right to Damages. Without limiting the foregoing,
the Purchaser shall be entitled to recover damages (including, without
limitation, reasonable attorneys' fees and expenses of any suit to enforce this
Agreement or recover damages hereunder) from the Company by reason of any
breach by the Company of any provision of this Agreement, any Investment
Document (including, without limitation, the representations, warranties and
covenants of the Company contained therein and herein), the Company's Articles
of Incorporation or Bylaws or any other document delivered at the same time as
the execution and delivery of this Agreement or related thereto.
SECTION 7
MISCELLANEOUS
7.1 Transfers. Prior to the earlier to occur of (i) an Initial
Public Offering by the Company or (ii) December 31, 2002, Purchaser may not
assign this Agreement or make a transfer of the Preferred Stock, except to an
Affiliate of Purchaser, the obligations of which Affiliate the Purchaser
unconditionally guarantees. The Purchaser may transfer the Senior Subordinated
Notes issued hereunder to any party that is not a competitor of the Company.
7.2 Termination.
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<PAGE> 35
7.2.1 Method of Termination. This Agreement and the
transactions contemplated by it may be terminated at any time prior to the
Closing:
(a) By the mutual consent of Seller and Purchaser;
(b) By the Company after January 8, 1996 if the
transactions contemplated hereby have not been closed or if any of the
conditions to the Company's obligations set forth in Section 3.3 have not been
satisfied or waived by the Company, unless the failure to close such
transactions is due to any failure by the Company to perform in any material
respect its agreements contained herein required to be performed by it on or
prior to the Closing Date, or a material breach any of the Company's
representations, warranties or covenants contained herein;
(c) By Purchaser after January 31, 1996, if the
transactions contemplated hereby have not been closed or if any of the
conditions to Purchaser's obligations set forth in Section 3.1 have not been
satisfied or waived by Purchaser, unless the failure to close such transactions
is due to any failure by Purchaser to perform in any material respect its
agreements contained herein required to be performed by it on or prior to the
Closing Date, or a material breach any of Purchaser's representations,
warranties or covenants contained herein;
(d) By the Company or Purchaser at any time after
February 15, 1996, if the Closing shall not have occurred for any reason on or
prior to February 15, 1996;
(e) By either Purchaser or the Company if there shall be
any order, writ, injunction or decree of any court or governmental or
regulatory agency binding on Purchaser or the Company, which prohibits or
restrains Purchaser and/or the Company from consummating the transactions
contemplated by this Agreement, provided that Purchaser and the Company shall
have used their reasonable best efforts to have any such order, writ,
injunction or decree lifted and the same shall not have been lifted within 30
days after entry, by any such court or governmental or regulatory agency.
7.2.2 Notice of Termination. Notice of termination of this
Agreement, as provided for in this Section 7.2, shall be given by the party so
terminating to the other party hereto in accordance with Section 7.3 of this
Agreement.
7.2.3 Effect of Termination. If this Agreement terminates
pursuant to Section 7.2, this Agreement shall become void and of no further
force and effect, and each party shall pay the costs and expenses incurred by
it in connection with this Agreement and, provided the Agreement was not
terminated as a result of a breach of this Agreement, no party (or any of its
officers, directors, employees, agents, representatives or shareholders) shall
be liable to any other party for any costs, expenses, damages (direct or
indirect) or loss of anticipated profits. If, however, this Agreement is
terminated as a
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<PAGE> 36
result of a breach, this Section 7.2.3 shall not relieve a breaching or
defaulting party from any liability to the other party.
7.2.4 Termination of Covenants. If the transactions
contemplated by this Agreement are consummated, all of the covenants set forth
in Sections 4 and 5 (except for the covenants set forth in Section 4.2.8) shall
remain in force until no Obligations of the Company to Purchaser hereunder or
of Purchaser to the Company hereunder remain outstanding and until payment in
full of the Senior Subordinated Notes, and when there are no such Obligations
and the Senior Subordinated Notes have been paid in full, the covenants set
forth in Sections 4 and 5 (except for the covenants set forth in Section 4.2.8)
shall terminate and be of no further force and effect. The covenant set forth
in Section 4.2.8 shall remain in force as provided in such covenant.
7.3 Notices. In order to be effective, any notice or other
communication required or permitted hereunder, shall, unless otherwise stated
herein, be in writing and shall be transmitted by messenger, delivery service,
mail, telecopy, as specified below:
If to Purchaser:
HealthPlan Services Corporation
P.O. Box 30098
Tampa, Florida 33630-3098
Telecopier: (813) 289-9359
Attention: Mr. James K. Murray III, Chief Financial
Officer and Mary Fahy, General Counsel
with a copy (which shall not constitute notice) to:
Fowler, White, Gillen, Boggs, Villareal and Banker, P.A.
501 East Kennedy Boulevard, Suite 1700
Tampa, Florida 33602
Telecopier: (813) 229-8313
Attention: David C. Shobe
If to the Company:
Medirisk, Inc.
Two Piedmont Center, Suite 400
3565 Piedmont Road
Atlanta, Georgia 30305-1502
Telecopier: (404) 364-6711
Attention: Mark A. Kaiser, Chairman and Chief
Executive Officer
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<PAGE> 37
With a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopier: (404) 881-7777
Attention: Keith O. Cowan
or at such other address as a party shall designate in a written notice to the
other parties hereto given in accordance with this Section 7.3. All notices
and other communications shall be effective (i) if sent by messenger or
delivery service, when delivered, (ii) if sent by mail, five days after having
been sent by certified mail, with return receipt requested, or (iii) if sent by
telecopier with receipt acknowledged, when sent.
7.3 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, except that Purchaser may not assign this Agreement or any rights
hereunder except as provided in Section 7.1, and except that Purchaser may not,
even if assignment is permitted under Section 7.1, assign its right to
designate a member of the Board of Directors of the Company pursuant to Section
4.2.8, except to an Affiliate of Purchaser.
7.4 Entire Agreement, Amendment. The Investment Documents
(including the Exhibits and Schedules thereto) executed by the Company in
connection with, or as required by, this Agreement constitute the entire
agreement between the Company and Purchaser with respect to the transactions
contemplated by this Agreement; supersede all prior or contemporaneous
negotiations, communications, discussions and correspondence concerning the
subject matter hereof; and may be amended or modified only with the written
consent of the holders of a majority in principal amount of the Senior
Subordinated Notes then outstanding, except that no such amendment or
modification shall become effective if it extends the maturity or reduces the
rate of interest payable with respect to the Senior Subordinated Notes, alters
the terms of payment of the principal and interest under the Senior
Subordinated Notes, or reduces the percentage of holders of principal amount of
the Senior Subordinated Notes necessary to approve modifications or amendments
to this Agreement without the consent of each holder of the Senior Subordinated
Notes affected thereby. Whenever the consent or approval of Purchaser is
required, such consent or approval must be given in writing by the holders of a
majority in principal amount of the Senior Subordinated Notes then outstanding.
7.5 Severability of Provisions. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or any
remaining provisions of this Agreement, and the parties shall use their
respective best efforts to negotiate and enter into an amendment to this
Agreement whereby such provision will be modified in a manner that is
consistent with the intended
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<PAGE> 38
economic consequences of the invalid provision and that, as modified, is legal
and enforceable.
7.6 GOVERNING LAW. THIS AGREEMENT AND THE SENIOR SUBORDINATED
NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF GEORGIA.
7.7 CONSENT TO EXCLUSIVE JURISDICTION, VENUE AND FORUM. THE
COMPANY HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION, VENUE AND FORUM OF ANY
STATE OR FEDERAL COURT IN TAMPA, FLORIDA WITH RESPECT TO ANY ACTION, WHETHER
COMMENCED BY PURCHASER OR ANY OTHER PERSON, WHICH, IN WHOLE OR IN PART, IN ANY
WAY ARISES UNDER OR RELATES TO THE INVESTMENT DOCUMENTS, AND THE COMPANY AGREES
THAT ANY SUCH ACTION FILED BY IT WILL BE FILED IN SUCH A COURT.
7.8 Incorporation of Exhibits and Schedules by Reference. All
Appendices, Exhibits and Schedules to this Agreement are incorporated herein by
this reference.
7.9 Counterparts. This Agreement may be executed in separate
counterparts, each of which, when so executed, shall be deemed to be an
original and all of which, when taken together, shall constitute but one and
the same agreement.
7.10 Survival. The representations, warranties, covenants and
agreements made herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
notwithstanding any investigation made by Purchaser or its agents or
representatives.
7.11 Interest. The Company and Purchaser agree that in no event
shall the amount of interest or other consideration due to Purchaser with
respect to the making of the loans evidenced by the Senior Subordinated Notes
exceed the maximum rate of interest allowed by applicable law, and in the event
any such payment is inadvertently paid by the Company or inadvertently received
by the Purchaser, then such excess sum shall be credited as a payment of
principal to be applied to the principal, unless the Company shall notify
Purchaser in writing that the Company elects to have such excess sum returned
to it forthwith. It is the express intent of the parties hereto that the
Company not pay and Purchaser not receive, directly or indirectly, in any
manner whatsoever, interest in excess of that which may be lawfully paid by the
Company under applicable law.
(remainder of page intentionally left blank, signatures follow)
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<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed the day and year first written above.
MEDIRISK, INC.
By: /s/ Mark A. Kaiser
-------------------------------------
Mark A. Kaiser, Chairman and Chief
Executive Officer
HEALTHPLAN SERVICES CORPORATION
By: /s/ James K. Murray, III
-------------------------------------
James K. Murray III, Executive Vice
President and Chief Financial Officer
<PAGE> 40
EXHIBITS
Exhibit A: Form of Amended and Restated Articles of Incorporation
Exhibit B: Form of Senior Subordinated Promissory Note
Exhibit C: Capitalization
Exhibit D: Financial Statements
Exhibit E: Form of Shareholders Agreement
Exhibit F: Form of Registration Rights Agreement
Exhibit G: Form of Warrant Agreement
Exhibit H Form of Opinion of Alston & Bird
Exhibit I Form of Opinion of Fowler, White, Gillen, Boggs, Villareal and
Baker P.A.
Exhibit J Form of Consent and Modification Agreement
SCHEDULES
Schedule 2.2.1 Existing Preemptive Rights
Schedule 2.2.2 Required Consents
Schedule 2.2.6.1 Variations from Assumptions
Schedule 2.2.6.2 Pro Forma Financial Statements
Schedule 2.2.8 Absence of Certain Changes
Schedule 2.2.11 Tax Matters
Schedule 2.2.12 Insurance Policies
Schedule 2.2.13 Debt Instruments
Schedule 2.2.14 Benefit Plans
Schedule 2.2.15 Contracts and Commitments
Schedule 2.2.16 Labor Matters
Schedule 2.2.21 Proprietary Rights
Schedule 2.2.22 Envrironmental Matters
Schedule 2.2.23 Accounts Receivable
<PAGE> 41
APPENDIX A
DEFINITIONS
A. Certain Defined Terms.
The following terms used in this Agreement have the following
meanings:
"Act" means the Securities Act of 1933, as amended from time
to time, or any successor statute.
"Affiliate" means, as to any Person, any other Person that
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
means possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities,
or partnership or other ownership interests, by contract or otherwise),
provided that, in any event: (a) any Person that owns directly or indirectly
fifty percent (50%) or more of the securities having ordinary voting power for
the election of directors or other members of the governing body of a
corporation or fifty percent (50%) or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of
such other Person) will be deemed to control such corporation or other Person;
and (b) each director or officer of such Person shall be deemed to be an
Affiliate of such Person.
"Affiliated Company" means any Subsidiary of the Company.
"Agreement" means this Securities Purchase Agreement, as it
may be amended from time to time.
"Bank" means the lender or lenders chosen by the Company to
provide up to $2,000,000 in secured working capital and/or equipment financing
indebtedness, and any successor, assign or subsequent holder of the Senior
Debt.
"Bankruptcy Code" means the Bankruptcy Reform Act, Title 11 of
the United States Code, as amended or recodified from time to time, or any
successor statute.
"Business" means the business of the Company as presently
conducted and as proposed to be conducted.
"Business Day" means any day on which commercial banks in
Tampa, Florida are required to be open for business.
"Capital Lease" means a lease giving rise to a Capitalized
Lease Obligation.
<PAGE> 42
"Capitalized Lease Obligation" means indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
"Change of Control" means, with respect to the Company, a sale
of all or substantially all of the Company's assets; a merger, statutory share
exchange or consolidation in which the Persons holding the Company's voting
securities as of the Closing Date (and assuming (i) the grant to and exercise
by the Purchaser of the greater of (A) 68.15% of the maximum number of warrants
to be issued to the Purchaser under the Warrant Agreement and (B) the number of
Warrants actually issued to Purchaser under the Warrant Agreement, and (ii) the
exercise of all warrants and options of the Company outstanding on the Closing
Date by the holders thereof) cease to hold more than 50% of the Outstanding
Voting Power of the surviving or resulting corporation; or a transaction or
series of transactions in which a Person or group (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934), (i) who did not hold voting
securities of the Company as of the date of this Agreement, acquires beneficial
ownership of more than 50% of the Outstanding Voting Power of the Company or
(ii) increased its ownership of voting securities of the Company from the
number beneficially owned by such Person or group as of the Closing Date to
more than 50% of the Outstanding Voting Power of the Company.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" means January 8, 1996.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
"Company" has the meaning set forth in the first paragraph
of this Agreement.
"Consent and Modification Agreement" means that certain
Consent and Modification Agreement, of even date herewith, by and among the
Company, Sears Pension Trust, Brantley Investment Partners II, L.P. and
Laurence H. Powell, substantially in the form of EXHIBIT J attached hereto.
"Consolidated Amortization" means, for any period, the
aggregate amount of all amortization expense of the Company as shown on the
consolidated financial statements of the Company in accordance with GAAP.
"Consolidated Debt" means the sum of all Indebtedness of the
Company as determined in accordance with GAAP, after elimination of all
intercompany items.
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<PAGE> 43
"Consolidated Depreciation" means, for any period, the
aggregate amount of all depreciation expense of the Company as shown on the
consolidated financial statements of the Company in accordance with GAAP.
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for the Company for such period as determined in accordance with GAAP,
plus all amounts deducted therefrom for such period, if any, in respect of (i)
Consolidated Interest Charges, (ii) Consolidated Depreciation, (iii)
Consolidated Taxes and (iv) Consolidated Amortization.
"Consolidated Interest Charges" means, for any period, the
aggregate amount of all interest on Indebtedness (including payments in the
nature of interest under Capital Leases) that would, in accordance with GAAP,
be deducted in determining Consolidated Net Income for such period.
"Consolidated Net Income," for any period, means the amount of
net income or net loss of the Company, for such period (taken as a cumulative
whole) determined on a consolidated basis in accordance with GAAP after
elimination of intercompany items and portions of income attributable to
minority interests in Subsidiaries (until such earnings are received by the
Company), provided, that there shall be excluded:
(i) any gains or losses on the sale or other disposition
of investments or of fixed or capital assets, and any taxes on such
excluded gains and any tax deductions or tax credits on account of any
such excluded losses;
(ii) the proceeds of any life insurance policy;
(iii) net earnings and losses of any Subsidiary accrued
prior to the date it became a Subsidiary;
(iv) net earnings and losses of any entity, substantially
all the assets of which have been acquired in any manner, that were
realized by such entity prior to the date of such acquisition;
(v) net earnings and losses of any entity (i) with which
the Company shall have consolidated, (ii) that shall have merged into
or with the Company, or (iii) that shall have acquired or been
acquired by the Company through a statutory share exchange, which
earnings and losses were realized by such entity prior to the date of
such consolidation or merger;
(vi) net earnings of any business entity (other than a
Subsidiary) in which the Company has an ownership interest unless such
net earnings shall have actually been received by the Company in the
form of cash distributions; and
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<PAGE> 44
(vii) earnings resulting from any reappraisal, reevaluation
or write-up of assets.
"Consolidated Net Worth" means at any time the consolidated
stockholders' equity of the Company as of such time as determined in accordance
with GAAP.
"Consolidated Taxes" means, for any period, the aggregate
amount of all Taxes paid by the Company during such period, as determined in
accordance with GAAP.
"Debt Instruments" has the meaning set forth in Section 2.2.13.
"Dollars" and "$" mean the lawful money of the United States
of America.
"Environmental Law" means any statute, law, ordinance,
regulation, order or rule of any federal or state governmental agency or body
that relates to pollution or protection of the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq. and other statutes, laws, ordinances,
regulations, orders or rules relating to emissions, discharges, releases or
threatened releases of Hazardous Wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute.
"ERISA Affiliate" means any company which, as of a given
moment, is a member of a "controlled group of corporations" or a group of
"trades or businesses (whether or not incorporated) which are under common
control" (as defined in Sections 414(b) and (c) of the Code, respectively) of
which Borrower or any of its Affiliated Companies is a member.
"Events of Default" means each of the events set forth in
Section 6.1.
"Exchange Act" has the meaning set forth in Section 4.2.10.
"Financial Statements" means balance sheet and statements of
income and cash flows for the Company for the Fiscal Years ending December 31,
1993 and December 31, 1994 and the balance sheet and statement of income and
cash flows for the Company for the nine-month period ending September 30, 1995.
"Fiscal Year" means the fiscal year of the Company, which
shall be the twelve-month period ending on the last day in the month of
December.
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<PAGE> 45
"Fixed Charge Coverage Ratio" means (i) Consolidated EBITDA
divided by (ii) scheduled payments of principal on Consolidated Debt plus cash
payments of Consolidated Interested Charges.
"GAAP" means generally accepted accounting principles and
practices, consistently applied, as promulgated in (i) the documents of Rule
203 of the Code of Professional Conduct of the American Institute of Certified
Public Accountants, (ii) Statement of Accounting Standards No. 43 "Omnibus
Statement on Auditing Standards" of the Auditing Standards Board of the
American Institute of Certified Public Accountants and (iii) any superseding or
supplemental documentation of equal authority promulgating generally accepted
accounting principles and practices, all as in effect from time to time.
"Guaranteed Indebtedness" of any Person means all Indebtedness
(x) of any Person other than such Person and either (y) guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (a) to pay or purchase such
Indebtedness or to advance or supply funds for the payment or purchase of such
Indebtedness, (b) to purchase, sell or lease (as lessee or lessor) property, or
to purchase or sell services, primarily for the purpose of enabling the debtor
to make payment of such Indebtedness or to assure the holder of such
Indebtedness against loss, (c) to supply funds to or in any other manner invest
in the debtor (including any agreement to pay for property or services
irrespective of whether or not such property is received or such services are
rendered and any agreement to maintain working capital or other balance sheet
condition) or (d) otherwise to assure the holder of such Indebtedness against
loss, or (z) secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any lien, security
interest or other charge or encumbrance upon or in property (including without
limitation accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness.
"Hazardous Wastes" means any substance or waste that is
defined as hazardous or toxic in any in any Environmental Law.
"Indebtedness" means, for any Person without double counting,
(i) all indebtedness or other obligations of such Person for borrowed money or
for the deferred purchase price of property or services, (ii) all indebtedness
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property), (iii) all
obligations under leases that are or should be, in accordance with GAAP,
recorded as Capital Leases in respect of which such Person is liable as lessee,
(iv) liabilities in respect of unfunded vested benefits under any Plan, (v) all
obligations owed pursuant to any interest rate hedging arrangement or in
respect of any letter of credit established for the account of such Person
(including without limitation all obligations to reimburse the
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<PAGE> 46
issuer thereof in respect of amounts drawn thereunder), and (vi) all Guaranteed
Indebtedness.
"Initial Public Offering" means the Company's first offering
of Common Stock of the Company that is registered under the Act, which offering
is underwritten on a firm commitment basis and produces gross proceeds in
excess of $10,000,000.
"Investment" as applied to any Person, means any direct or
indirect purchase or other acquisition by that Person of stock or other
securities, or of a beneficial interest in stock or other securities, of any
other Person (other than a Subsidiary), or any direct or indirect loan, advance
(other than advances to employees for moving and travel expenses, drawing
accounts, and similar expenditures in the ordinary course of business) or
capital contribution by that Person to any other Person, including all
Indebtedness and accounts receivable from that other Person which are not
current assets or did not arise from sales of goods or services to that other
Person in the ordinary course of business. The amount of any Investment (other
than loans, advances and accounts receivable) shall be the original cost of
such Investment plus the cost of all additions thereto, and the amount of any
Investment shall be without any adjustments for increases or decreases in
value, or write-ups, write-downs, or write-offs with respect to such
Investment.
"Investment Documents" means this Agreement, the Senior
Subordinated Notes, the Warrant Agreement, the Registration Rights Agreement
and the Shareholders Agreement.
"Liabilities" means obligations of any nature, whether
absolute, accrued, contingent or otherwise, whether due or to become due and
whether or not required to be reflected or reserved against on a balance sheet
under GAAP.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, whether voluntary or involuntary,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code of any jurisdiction.
"Material Adverse Effect" means any circumstances, change in,
or effect on the Company or its business that, individually or when taken
together with all other circumstances, changes in or effects on the Company or
its business is or is reasonably likely to be materially adverse to the
condition (financial or otherwise), results of operations, earnings, business,
assets (including intangible assets) or prospects of the Company or a material
and adverse effect on the Company's ability to perform its obligations under
any of the Investment Documents or Material Agreements or under any other
document, investment or agreement issued in connection herewith or therewith to
which the Company is a party or any adverse effect whether or not material,
upon the binding nature, validity or enforceability of any material provision
of any Investment Document or Material Agreement.
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<PAGE> 47
"Material Agreement" has the meaning set forth in Section
2.2.15.
"Multiemployer Plan" has the meaning set forth in Section
2.2.14.
"Notice of Borrowing" has the meaning set forth in Section
1.2.3.
"Obligations" means all obligations of every nature of the
Company from time to time owed to Purchaser under any of the Senior
Subordinated Notes.
"Other Credit Facility" has the meaning set forth in Section
1.1(b) of the Warrant Agreement attached hereto as EXHIBIT G.
"Outstanding Voting Power of the Company" means the total
number of votes which may be cast in the election of directors of the Company
at any meeting of shareholders of the Company if all securities (and all such
securities issuable upon the exercise or conversion of options, warrants or
other convertible or exercisable securities) entitled to vote at such meeting
were present and voted at such meeting.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor to its functions.
"PCBs" has the meaning set forth in Section 2.2.22.
"Pension Plan" has the meaning set forth in Section 2.2.14.
"Permitted Investments" means with respect to all the Company,
Investments in: (i) obligations issued or guaranteed by the United States of
America; (ii) certificates of deposit, demand deposits, bankers acceptances,
disbursement or time deposits of the Company and other "money market
instruments" issued by the Bank or any bank or trust company organized under
the laws of the United States of America or any state thereof and having
capital and surplus in an aggregate amount not less than $100,000,000; (iii)
open market commercial paper bearing the highest credit rating issued by
Standard & Poor's Corp. or by another nationally recognized credit rating firm;
(iv) repurchase agreements entered into with the Bank or any bank or trust
company organized under the laws of the United States of America or any state
thereof having capital and surplus in an aggregate amount not less than
$100,000,000; (v) shares of "money market funds", each having net assets of not
less than $100,000,000; in each case maturing or being due or payable in full
not more than one hundred eighty (180) days after the Company's acquisition
thereof; and (vi) certificates of deposit of, or demand or time deposits in,
the Bank.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts and other
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<PAGE> 48
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Plan" means an "employee benefit plan" (as defined in Section
3(3) of ERISA) maintained or contributed to by the Company or any of its
Affiliated Companies.
"Potential Default" means any condition, event or act that,
with the giving of notice, passage of time or both, would constitute an Event
of Default.
"Preferred Stock" has the meaning set forth in Section 1.1.
"Purchaser" has the meaning set forth in the first paragraph
of this Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement to be entered into between the Company and Purchaser substantially in
the form attached hereto as EXHIBIT F.
"Reportable Event" means a "reportable event" (as defined in
Section 4043(b) of ERISA) with respect to which reporting to the PBGC within
thirty (30) days of occurrence has not been waived.
"Senior Debt" has the meaning set forth in Section 4.1.
"Senior Debt Documents" means the Credit Agreement and any
document or agreement executed in connection with the Senior Debt.
"Senior Subordinated Notes" means the promissory notes issued
pursuant to Section 1.2 to Purchaser in aggregate principal amounts equal to up
to $10,000,000, and any note or notes subsequently issued in place of such
notes.
"Shareholders Agreement" means the Shareholders Agreement to
be entered into among the Company, Purchaser, Brantley Venture Partners II,
L.P., Sears Pension Trust and Laurence H. Powell substantially in the form
attached hereto as EXHIBIT E.
"Solvent" means that: (a) the fair valuation of all of its
property is in excess of the total amount of its debts (including contingent
liabilities as properly valued) as of the date solvency is determined under the
Bankruptcy Code or any applicable enactment of the Uniform Fraudulent Transfer
Act or similar statute; (b) the present fair salable value of all of its
property is more than the amount that will be required to pay the Person's
existing debts (including contingent liabilities as properly valued) as they
become absolute and matured, as determined in accordance with any applicable
enactment of the Uniform Fraudulent Conveyance Act or similar statute; (c) it
does not intend to incur, nor believe that it will incur, nor reasonably should
believe that it will incur, debts beyond its
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<PAGE> 49
ability to pay as they mature, as determined in accordance with the Bankruptcy
Code, any applicable enactment of the Uniform Fraudulent Conveyance Act, any
applicable enactment of the Uniform Fraudulent Transfer Act or any similar
statute; and (d) is not engaged in a business or a transaction or about to be
engaged in a business or a transaction for which its property constitutes (i)
unreasonably small capital, for purposes of the Bankruptcy Code and any
applicable enactment of the Uniform Fraudulent Conveyance Act, or similar
statute, or (ii) unreasonably small assets, for purposes of any applicable
enactment of the Uniform Fraudulent Transfer Act, or similar statute.
"Subsequent Closing" has the meaning set forth in Section
1.2.3.
"Subsequent Closing Date" has the meaning set forth in Section
1.2.3.
"Subsidiary" of any Person means a corporation of which more
than fifty percent (50%) of the outstanding shares of capital stock of each
class having ordinary voting power is owned by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries or which is controlled directly or indirectly by the first person.
"Third Anniversary" has the meaning set forth in Section
1.2.1.
"Transfer" means the sale, pledge, assignment or other
transfer of the Senior Subordinated Notes or Preferred Stock, in whole or in
part, and of the rights of the holders thereof under this Agreement.
"Warrant Agreement" means the Warrant Agreement to be entered
into by and between the Company and Purchaser substantially in the form
attached hereto as EXHIBIT G.
"Welfare Plan" has the meaning set forth in Section 2.2.14.
B. Accounting Terms. For purposes of this Agreement, all
accounting terms not otherwise defined herein have the meanings assigned to
them in conformity with GAAP.
C. Other Definitional Provisions.
(1) Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, to the singular
include the plural, and to the part include the whole. The term "including" is
not limiting and the term "or" has the inclusive meaning represented by the
term "and/or." The words "hereof," "herein," "hereunder," and similar terms
in this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to "Sections," "Appendices,"
"Exhibits" and "Schedules" are to Sections, Appendices, Exhibits and
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<PAGE> 50
Schedules, respectively, of this Agreement, unless otherwise specifically
provided. Terms defined herein may be used in the singular or the plural.
(2) Accounting principles and practices are "consistently
applied" when the accounting principles and practices observed in a current
period are comparable in all material respects to the accounting principles and
practices applied in the preceding period.
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<PAGE> 51
As filed January 8, 1996 at 3:04 p.m.
with the Secretary of State of Florida
Tallahassee, Florida
EXHIBIT A
FORM OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
MEDIRISK, INC.
WHEREAS, the name of the corporation is Medirisk, Inc.;
WHEREAS, the corporation was incorporated pursuant to the laws of the
State of Florida on June 17, 1983;
WHEREAS, the corporation's registered agent and registered office are as
follows:
Registered Agent: CT Corporation System
Registered Office: 1200 South Pine Island Road
Plantation, Florida 33324
WHEREAS, the undersigned corporation, by and through its shareholders, and
pursuant to the provisions of Sections 607.1003 and 607.1007, Florida Business
Corporation Act, desires to amend and restate its Articles of Incorporation in
their entirety; and
WHEREAS, the corporation's shareholders, on January 8, 1996, by written
consent in lieu of meeting approved and adopted the amendment and restatement
of the corporation's Articles of Incorporation in the manner hereinafter set
forth;
The address of the principal office and the mailing address of the
corporation is: Two Piedmont Center, Suite 400, 3565 Piedmont Road,
Atlanta, Georgia 30305
NOW, THEREFORE, the undersigned hereby certifies that the Articles of
Incorporation are hereby amended and restated in their entirety as follows:
"AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
MEDIRISK, INC.
FIRST: The name of the corporation is MEDIRISK, INC.
<PAGE> 52
SECOND: The registered agent of the corporation is CT Corporation System,
and the address of the corporation's agent is 1200 South Pine Island Road,
Plantation, Florida 33324.
THIRD: The purpose of the corporation is to engage in and transact any
business, lawful act or activity for which a corporation may be organized under
Section 607.0101 to 607.1907, inclusive, of the Florida Business Corporation
Act.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is TWENTY THREE MILLION FOUR HUNDRED
THOUSAND (23,400,000), divided into classes as follows:
THREE MILLION (3,000,000) shares shall be Series A Convertible Preferred
Stock, $.001 par value per share (the "Series A Preferred Shares"),
FOUR HUNDRED THOUSAND (400,000) shall be Series B Convertible Preferred
Stock, $.001 par value per share (the "Series B Preferred Shares"), and
TWENTY MILLION (20,000,000) shares shall be Series A Common Stock, $.001
par value per share ("Common Shares").
The following are statements of the relative powers, preferences, rights
and the qualifications, limitations or restrictions of the Series A Preferred
Shares, the Series B Preferred Shares and the Common Shares.
SECTION I.
Series A Preferred Shares
1. Definitions.
For purposes of this Section I of Article FOURTH, the following
definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean Medirisk, Inc.
(c) "Original Issue Date" for the Series A Preferred Shares shall
mean the date on which the first share of such Series A Preferred Shares
was originally issued.
(d) "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting shares shall at the time be owned directly or
indirectly by the Company or by one or more subsidiaries.
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<PAGE> 53
2. Dividends.
(a) The holders of record of the then outstanding Series A Preferred
Shares shall be entitled to receive when, as and if declared by the Board, but
in any event not prior to the third anniversary of the Original Issue Date, out
of the funds legally available therefor, cumulative dividends at the annual
rate of 8% per share. Such dividends shall accrue on each Series A Preferred
Share from and after the third anniversary of the Original Issue Date, shall
accrue from day to day, whether or not earned or declared, and shall be payable
in cash. Such dividends will in no event be declared or paid by the Company
prior to the payment in full of those certain Senior Subordinated Promissory
Notes issued by the Company pursuant to that certain Securities Purchase
Agreement, dated January 8, 1996, by and between the Company and HealthPlan
Services Corporation (the "Securities Purchase Agreement").
(b) Subject to the provisions of this paragraph 2 of this Section I, the
provisions of the Securities Purchase Agreement and the provisions of a
Shareholders Agreement among the Company and certain shareholders of the
Company, as the same may be amended from time to time, the Company may, in the
Board's discretion, declare and pay dividends or distributions, or make
provision for the payment thereof, on any equity security of the Company, but
only if all accrued dividends and distributions on the Series A Preferred
Shares and the Series B Preferred Shares shall have been paid and made in full
prior to the date of any such declaration, payment, provision or distribution.
(c) Notwithstanding anything in the foregoing to the contrary, no
dividends shall be declared, paid or distributed, or provision therefor made,
on any Common Shares, unless simultaneously therewith there also shall be
declared, paid or distributed, or provision therefor made, as the case may be,
a dividend or distribution pro rata on each then outstanding Series A Preferred
Share to each holder thereof. For purposes of the foregoing, the number of
Series A Preferred Shares deemed to be outstanding with respect to each such
holder shall be equal to the maximum number of Common Shares into which such
holder's Series A Preferred Shares would then be convertible upon exercise of
the Conversion Rights described in paragraph 5 of this Section I.
3. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities and obligations of the
Company, each holder of Series A Preferred Shares then outstanding shall be
entitled to be paid out of the net assets of the Company available for
distribution to its shareholders prior and in preference to any payment or
declaration and setting apart for payment of any amount in respect of the
Common Shares, an amount equal to the sum of the following: (i) $1.95 per
Series A Preferred Share held by such holder, (ii) an amount equal to all
accrued and unpaid dividends thereon, whether or not earned or declared, to and
including the date full payment shall be tendered to the holders of the Series
A Preferred Share with respect to
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<PAGE> 54
such liquidation, dissolution or winding up, and (iii) the fair market value,
reasonably determined in good faith by the Board, of the evidences of
indebtedness, assets and securities referred to in paragraph 5(f) of this
Section I to which such holders would have been entitled to receive upon
conversion of their Series A Preferred Shares (clauses (i) through (iii),
collectively the "Series A Liquidation Preference"); if upon any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
assets to be distributed to the holders of the Series A Preferred Shares and
the Series B Preferred Shares shall be insufficient to permit the payment to
such holders of the full aggregate amount of the Series A Liquidation
Preference plus the Series B Liquidation Preference (as defined below), then
all of the net assets of the Company available for distribution to its
shareholders shall be distributed ratably among the holders of the Series A
Preferred Shares and the Series B Preferred Shares in proportion to the then
applicable Series A Liquidation Preference with respect to each Series A
Preferred Share and the then applicable Series B Liquidation Preference with
respect to each Series B Preferred Share.
(b) Upon the completion of the distribution required by subparagraph (a),
if assets of the Company remain to be distributed, each holder of Series A
Preferred Shares shall be entitled to be paid out of the remaining assets of
the Company, as and when distributed, pro rata with the holders of Common
Shares on each Series A Preferred Share deemed to be outstanding. For purposes
of the foregoing, the number of Series A Preferred Shares deemed to be
outstanding with respect to each such holder shall be equal to the maximum
number of Common Shares into which such holder's Series A Preferred Shares
would then be convertible upon exercise of the Conversion Rights described in
paragraph 5 of this Section I.
(c) Written notice of any such liquidation, dissolution or winding up,
stating a payment date, the place where such payment shall be made, an estimate
of the net value that would be received by each such holder if all such holders
converted all of their Series A Preferred Shares immediately prior to such
liquidation, dissolution or winding up of the Company, and containing a
statement of or reference to applicable conversion rights, shall be given by
first class mail, postage prepaid, not less than 30 days prior to the payment
day stated therein, to each holder of record of the Series A Preferred Shares
at such holder's address as shown in the records of the Company.
(d) Whenever the distribution provided for in this paragraph 3 of this
Section I shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as determined in
good faith by the Board.
4. Voting Rights. Except as otherwise expressly provided herein or as
required by law, the holders of Series A Preferred Shares shall be entitled to
vote on all matters upon which holders of Common Shares have the right to vote
and, with respect to such vote, shall be entitled to notice of any
shareholders' meeting in accordance with the bylaws of the Company, and shall
be entitled to a number of votes equal to the number of Common Shares into
which such Series A Preferred Shares could then be converted, upon conversion
pursuant to the Conversion Rights described in paragraph 5 of this Section I,
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<PAGE> 55
at the record date for the determination of shareholders entitled to vote on
such matters or, if no such record date is established, at the date such vote
is taken or any written consent of shareholders is solicited. Except as
otherwise expressly provided herein, or to the extent class or series voting is
otherwise required by law or agreement, the holders of Series A Preferred
Shares and Common Shares shall vote together as a single class and not as
separate classes.
5. Conversion. The holders of the Series A Preferred Shares shall have
the following conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each Series A Preferred Share shall be convertible,
at the option of the holder thereof, at any time after the date of issuance of
such shares, at the office of the Company or any transfer agent for the Series
A Preferred Shares or Common Shares, into fully paid and nonassessable Common
Shares, at the Conversion Price (as hereafter defined) therefor in effect at
the time of conversion determined as provided herein, and prior to the closing
date for any underwritten public offering of Common Shares conducted on a firm
commitment basis and registered under the Securities Act of 1933, as amended,
the gross proceeds of which to the Company and/or selling shareholders (if any)
are at least $10 million (a "Public Offering") (but the right to convert shall
not expire upon such occurrence unless an automatic conversion shall have
occurred as set forth in paragraph 5(c) of this Section I).
(b) Conversion Price. Each Series A Preferred Share shall be convertible
into the number of Common Shares that results from dividing $1.95 by the
conversion price per share (the "Conversion Price") in effect at the time of
conversion of such Series A Preferred Share. The Conversion Price for each
Series A Preferred Share at the Original Issue Date shall be $1.95 and shall be
subject to adjustment from time to time as provided herein.
(c) Automatic Conversion. Each Series A Preferred Share which remains
outstanding on the closing date for a Public Offering (the "Registration Date")
shall automatically and without any action on the part of the holder thereof or
the Company, except as provided in clause (i) below, be converted on the same
basis and at the same Conversion Price as if each holder thereof had properly
exercised his right to convert on the date next preceding the Registration
Date; provided, that (i) each holder of Series A Preferred Shares shall have
received written notice of the proposed Public Offering at least 30 days prior
to the date the registration statement relating to that Public Offering becomes
effective, (ii) such conversion shall be effective at the close of business on
the Registration Date, and (iii) the Company shall have no obligation to issue
and deliver to any such holder of Series A Preferred Shares on such date a
certificate for the number of Common Shares to which such holder shall be
entitled until such time as such holder has surrendered his certificate or
certificates for his Series A Preferred Shares, duly endorsed, at the office of
the Company or any transfer agent for the Common Shares, or the holder notifies
the Company that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any
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<PAGE> 56
loss incurred by it in connection therewith. All rights with respect to Series
A Preferred Shares outstanding on the Registration Date shall terminate on such
Registration Date, except only the right of the holders of such shares to
receive Common Shares upon surrender of their certificates for the Series A
Preferred Shares and their rights with respect to unpaid dividends described in
paragraph 5(d) of this Section I.
(d) Mechanics of Conversion; Unpaid Dividends. Before any holder of
Series A Preferred Shares shall be entitled to convert the same into Common
Shares, such holder shall either (i) surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or of any transfer agent
for the Series A Preferred Shares or Common Shares, or (ii) deliver an
affidavit in favor of the Company stating that such certificates have been
lost, stolen or destroyed and containing an agreement satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection
therewith, and shall give written notice by mail, postage prepaid, to the
Company at such office that such holder elects to convert the same and shall
state therein the number of Series A Preferred Shares being converted and the
name or names in which the certificate or certificates for Common Shares to
which such holder shall be entitled. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the Series A Preferred Shares to be converted, and the person or
persons entitled to receive the Common Shares issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
Common Shares issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such Common Shares on such date. All
dividends accrued and unpaid prior to surrender of Series A Preferred Shares
surrendered for conversion shall at the option of the holders of Series A
Preferred Shares, either (i) be subtracted from the aggregate Conversion Price
as in effect at the time of conversion or (ii) constitute a debt of the Company
payable to the converting shareholder, and no dividend or other distribution
shall be paid on, declared or set apart for any Common Shares until such debt
is fully paid or sufficient funds set apart for the payment thereof.
(e) Adjustment for Stock Splits and Combinations. If the Company shall at
any time or from time to time after the Original Issue Date effect a
subdivision or combination of any outstanding Common Shares, the Conversion
Price then in effect immediately before that subdivision or combination shall
be proportionately adjusted by multiplying the then effective Conversion Price
by a fraction, (i) the numerator of which shall be the number of Common Shares
issued and outstanding immediately prior to such subdivision or combination,
and (ii) the denominator of which shall be the number of Common Shares issued
and outstanding immediately after such subdivision or combination. The number
of Common Shares outstanding at any time shall, for the purposes of this
paragraph 5(e) of this Section I, include the number of Common Shares into
which any convertible securities of the Company may be converted, or for which
any warrant, option or rights of the Company may be exchanged. Any adjustment
under this paragraph 5(e) of this Section I shall become effective at the close
of business on the date the subdivision or combination becomes effective.
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<PAGE> 57
(f) Adjustments for Other Dividends and Distributions. In the event the
Company at any time or from time to time after the Original Issue Date shall
make or issue, or fix a record date for the determination of holders of Common
Shares entitled to receive, a dividend or other distribution payable in (i)
evidences of indebtedness of the Company, (ii) assets of the Company (other
than cash), or (iii) securities of the Company other than Common Shares, then
and in each such event provision shall be made so that the holders of Series A
Preferred Shares shall receive upon conversion thereof, in addition to the
number of Common Shares receivable thereupon, the amount of such evidences,
assets or securities that they would have received had they held, on such
record date, the maximum number of Common Shares into which their Series A
Preferred Shares could then have been converted.
(g) Adjustment for Reclassification, Exchange or Substitution. If the
Common Shares issuable upon the conversion of the Series A Preferred Shares
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this paragraph 5 of this Section I), then and
in each such event the holder of each Series A Preferred Share shall have the
right thereafter to convert each such share into the kind and amount of shares
of stock and other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the maximum number of Common
Shares into which such Series A Preferred Shares could have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
(h) Reorganization, Mergers, Consolidations or Sales of Assets or Capital
Stock. If at any time or from time to time there shall be (i) a capital
reorganization of the Common Shares (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this paragraph
5 of this Section I) or (ii) a merger, consolidation or statutory share
exchange of the Company with or into another corporation in which
consolidation, merger or statutory share exchange persons owning capital stock
of the Company immediately prior to the consolidation, merger or share exchange
own less than a majority of the voting stock of the resulting, surviving or
exchanging corporation, or (iii) the sale of all or substantially all the
Company's properties and assets or capital stock to any other person, then, as
a part of such reorganization, merger, share exchange, consolidation or sale,
provision shall be made so that the holders of the Series A Preferred Shares
shall thereafter be entitled to receive, upon conversion of the Series A
Preferred Shares, the number of shares of stock or other securities or property
of the Company, or of the successor corporation resulting from such merger or
consolidation, share exchange or sale, to which a holder of the maximum number
of Common Shares into which such Series A Preferred Shares would then be
converted would have been entitled on such capital, reorganization, merger,
share exchange, consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions of this paragraph
5 of this Section I with respect to the rights
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<PAGE> 58
of the holders of the Series A Preferred Shares after the reorganization,
merger, share exchange, consolidation or sale to the end that the provisions of
this paragraph 5 of this Section I (including adjustment of the Conversion
Price then in effect and the number of shares purchasable upon conversion of
the Series A Preferred Shares) shall be applicable after that event as nearly
equivalent as may be practicable.
(i) Sale of Shares Below Conversion Price.
(i) If, at any time or from time to time after the Original Issue
Date, the Company shall issue or sell Additional Common Shares (as
hereinafter defined), other than as a dividend and other than upon a
subdivision or combination of Common Shares as provided in paragraph 5(e)
of this Section I, for a consideration per share less than the then
existing Conversion Price for the Series A Preferred Shares (or, if an
adjusted Conversion Price shall be in effect by reason of one or more
previous adjustments, then less than such adjusted Conversion Price), then
in each case the then Conversion Price for the Series A Preferred Shares
shall be reduced, as of the opening of business on the date of such
issue or sale, to a price equal to such consideration per share.
(ii) For the purpose of making any adjustment in the Conversion
Price or number of Common Shares deliverable on conversion of Series A
Preferred Shares as provided above, the consideration received by the
Company for any issue or sale of securities shall,
(A) to the extent it consists of cash, be computed at the net amount
of cash receivable by the Company after deduction of any
underwriting or similar commissions, concessions or compensation
paid or allowed by the Company in connection with such issue or
sale,
(B) to the extent it consists of services or property other than
cash, be computed at the fair market value of such services or
property as reasonably determined in good faith by the Board; and
(C) if Additional Common Shares, Convertible Securities (as
hereinafter defined), or rights or options to purchase either
Additional Common Shares or Convertible Securities are issued or
sold together with other shares or securities or other assets of the
Company for a consideration that covers both, be computed as the
portion of the consideration so received that may be reasonably
determined in good faith by the Board to be allocable to such
Additional Common Shares, Convertible Securities or rights or
options.
(iii) For the purpose of the adjustment provided in subsection (i)
of this paragraph 5(i) of this Section I, if at any time or from time to
time after the Original Issue Date the Company shall issue any rights or
options for the purchase
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<PAGE> 59
of, or stock or other securities convertible into, Additional Common
Shares (such convertible stock or securities being hereinafter referred to
as "Convertible Securities"), then, in each case, if the Effective Price
(as hereinafter defined in this subsection (iii) of this paragraph 5(i) of
this Section I) of such rights, options or Convertible Securities shall be
less than the then existing Conversion Price for the Series A Preferred
Shares, the Company shall be deemed to have issued at the time of the
issuance of such rights or options or Convertible Securities the maximum
number of Additional Common Shares issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such
shares an amount equal to the total amount of the consideration, if any,
received by the Company for the issuance of such rights or options or
Convertible Securities, plus, in the case of such options or rights, the
minimum amounts of consideration, if any, payable to the Company upon
exercise or conversion of such options or rights. For purposes of this
subsection (iii) of this paragraph 5(i) of this Section I, "Effective
Price" shall mean the quotient determined by dividing the total of all
such minimum amounts of consideration by such maximum number of Additional
Common Shares. No further adjustment of the Conversion Price adjusted
upon the issuance of such rights, options, or Convertible Securities shall
be made as a result of the actual issuance of Additional Common Shares on
the exercise of any such rights or options or the conversion of any such
Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire
without having been exercised, the Conversion Price adjusted upon the
issuance of such rights, options or Convertible Securities shall be
readjusted to the Conversion Price that would have been in effect had an
adjustment been made on the basis that the only Additional Common Shares
so issued were the Additional Common Shares, if any, actually issued or
sold on the exercise of such rights or options or rights of conversion of
such Convertible Securities, and such Additional Common Shares, if any,
were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether or not
exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted plus the consideration, if any,
actually received by the Company on the conversion of such Convertible
Securities.
(iv) For the purpose of the adjustment provided for in subsection
(i) of this paragraph 5(i) of this Section I, if at any time or from time
to time after the Original Issue Date the Company shall issue any rights
or options for the purchase of Convertible Securities, then, in each such
case, if the Effective Price (as hereinafter defined in this subsection
(iv) of this paragraph 5(i) of this Section I) thereof is less than the
then current Conversion Price, the Company shall be deemed to have issued
at the time of the issuance of such rights or options the maximum number
of Additional Common Shares issuable upon conversion of the total amount
of Convertible Securities covered by such rights or options and to have
received as consideration for the issuance of such Additional Common
Shares
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an amount equal to the amount of consideration, if any, payable to the
Company upon the conversion of such Convertible Securities plus the
consideration, if any, received by the Company upon the issuance of such
Convertible Securities. For purposes of the foregoing "Effective Price"
for purposes of this subsection (iv) of paragraph 5(i) of this Section I
shall mean the quotient determined by dividing the total amount of such
consideration by such maximum number of Additional Common Shares. No
further adjustment of such Conversion Price adjusted upon the issuance of
such rights or options shall be made as a result of the actual issuance of
the Convertible Securities upon the exercise of such rights or options or
upon the actual issuance of Additional Common Shares upon the
conversion of such Convertible Securities.
The provisions of subsection (iii) above for the readjustment of
such Conversion Price upon the expiration of rights or options or the
rights of conversion of Convertible Securities, shall apply mutatis
mutandis to the rights, options and Convertible Securities referred to in
this subsection (iv).
(j) Definition. The term "Additional Common Shares" as used herein shall
mean all Common Shares issued or deemed issued by the Company after the
Original Issue Date, whether or not subsequently reacquired or retired by the
Company, other than (i) Common Shares issued upon conversion of the Series A
Preferred Stock, (ii) Common Shares issued upon conversion of the Series B
Preferred Stock, (iii) any Common Shares, Convertible Securities, options or
rights (as adjusted for all stock dividends, stock splits, subdivisions and
combinations) issued to employees, officers, directors, consultants or other
persons performing services for the Company or any Subsidiary (if so issued
solely because of any such person's status as an officer, director, employee,
consultant or other person performing services for the Company or any
Subsidiary and not as part of any offering of the Company's securities)
pursuant to any stock option plan, stock purchase plan or management incentive
plan, agreement or arrangement approved by a majority of the members of the
Board of Directors who are not employees of the Company or any subsidiary of
the Company, (iv) as to each holder of Series A Preferred Shares, Common Shares
which are purchased by such holder, (v) up to 300,000 Common Shares (as
adjusted for all stock dividends, stock splits and combinations) issued upon
the exercise of stock purchase warrants originally granted in connection with
sales or issuances of Series A Preferred Shares or debt or other securities
which are convertible into Series A Preferred Shares, (v) any Common Shares
issued upon the exercise of up to 605,314 stock purchase warrants granted in
connection with sales or issuances of Senior Subordinated Promissory Notes by
the Company to HealthPlan Services Corporation or any assignee or successor of
HealthPlan Services Corporation, (vi) any Common Shares (as adjusted for all
stock dividends, stock splits, subdivisions and combinations) issued to sellers
of businesses acquired by the Company as full or partial consideration of such
acquisition, or (vii) Common Shares issued or issuable with respect to the
securities referred to in (i), (ii), (iii), (iv), (v) or (vi) by way of stock
split or stock dividend or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
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(k) Accountants' Certificate of Adjustment. In each case of an adjustment
or readjustment of the Conversion Price for the number of Common Shares or
other securities issuable upon conversion of the Series A Preferred Shares, the
Company, at its expense, shall cause independent certified public accountants
of recognized standing selected by the Company (who may be the independent
certified public accounts then auditing the books of the Company) to compute
such adjustment or readjustment in accordance herewith and prepare a
certificate showing such adjustment or readjustment, and shall mail such
certificate, by first-class mail, postage prepaid, to each registered holder of
the Series A Preferred Shares at the holder's address as shown in the Company's
books. The certificate shall set forth such adjustment or readjustment,
showing in detail the facts upon which such adjustment or readjustment is based
including a statement of (i) the consideration received or to be received by
the Company for any Additional Common Shares issued or sold or deemed to have
been issued or sold, (ii) the Conversion Price at the time in effect for each
series of the Series A Preferred Shares, and (iii) the number of Common Shares
and the type and amount, if any, of other property which at the time would be
received upon conversion of the Series A Preferred Shares.
(l) Notices of Record Date. In the event of (i) any taking by the company
of a record of the holders of any class or series of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any reclassification or recapitalization of the
capital stock of the Company, any merger or consolidation of the Company, or
any transfer of all or substantially all of the assets or capital stock of the
company to any other corporation, entity or person, or any voluntary of
involuntary dissolution, liquidation or winding up of the affairs of the
Company, the Company shall mail to each holder of Series A Preferred Shares at
least 30 days prior to the record date specified therein, a notice specifying
(A) the date of on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution,
(B) the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective, and (C) the time, if any is to be fixed, as to when the
holders of record of Common Shares (or other securities) shall be entitled to
exchange their shares of Common Shares (or other securities) for securities or
other property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up.
(m) Fractional Shares. No fractional Common Shares shall be issued upon
conversion of Series A Preferred Shares. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Company shall pay cash equal
to the product of such fraction multiplied by the fair market value of one
Common Share on the date of conversion, as reasonably determined in good faith
by the Board. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of Series A
Preferred Shares the holder is at the time converting into Common Shares and
the number of Common Shares issuable upon such aggregate conversion.
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<PAGE> 62
(n) Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued Common
Shares, solely for the following purposes, (i) such number of Common Shares
required to pay all dividends payable in Common Shares which the Company by
agreement is obligated, or may choose, to pay, (ii) such number of Common
Shares as may from time to time be required, at such time, to be issued by the
Company upon exercise of all then-exercisable warrants and options to purchase
Common Shares or the right to convert other convertible securities into Common
Shares, and (iii) such number of its Common Shares as shall from time to time
be sufficient to effect the Conversion of all outstanding Series A Preferred
Shares. As a condition precedent to the taking of any action which would cause
an adjustment to the Conversion Price, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued Common Shares to such number of shares as shall be
sufficient in order that it may be validly and legally issue the Common Shares
issuable based upon such adjusted Conversion Price.
(o) Notices. Any notice required by the provisions of this paragraph 5 of
this Section I to be given to the holder of the Series A Preferred Shares shall
be deemed given when personally delivered to such holder or five business days
after the same has been deposited in the United States mail, certified or
registered mail, return receipt requested, postage prepaid, and addressed to
each holder of record at this address appearing on the books of the Company.
(p) Payment of Taxes. The Company will pay all taxes and other
governmental charges (other than taxes measured by the revenue or income of the
holders of the Series A Preferred Shares) that may be imposed in respect of the
issue or delivery of Common Shares upon conversion of the Series A Preferred
Shares.
(q) No Dilution or Impairment. The Company shall not amend these Articles
of Incorporation or participate in any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, for the purpose of avoiding or
seeking to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred Shares against dilution or other impairment.
6. Status of Preferred Shares. No Series A Preferred Shares acquired by
the Company by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from
the shares which the Company shall be authorized to issue, except for the
pledge of such shares upon redemption thereof pursuant to an agreement to which
the Company is a party for the purpose of securing repayment of amounts owing
with respect to such redemption.
SECTION II.
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<PAGE> 63
Series B Preferred Shares
1. Definitions.
For purposes of this Section II of Article FOURTH, the following
definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Common Stock Outstanding" means the number of Common Shares
outstanding plus the number of Common Shares issuable upon exercise of all
outstanding Options and upon conversion of all outstanding Convertible
Securities, including the Series B Preferred Shares.
(c) "Company" shall mean Medirisk, Inc.
(d) "Convertible Securities" means any indebtedness or shares of
capital stock convertible into or exchangeable for Common Shares.
(e) "Excluded Shares" means (i) Common Shares issued upon conversion
of the Series A Preferred Shares, (ii) Common Shares issued upon
conversion of the Series B Preferred Shares, (iii) the Common Shares
issuable upon the exercise of warrants granted in connection with the
issuance and sale by the Company of Senior Subordinated Notes to
HealthPlan Services Corporation or its successors or assigns, (iv) Common
Shares, Options or Convertible Securities issued to employees, officers,
directors or consultants of the Company or its Subsidiaries in
transactions approved or pursuant to a plan approved by a majority of the
members of the Board of Directors of the Company who are not employees of
the Company or any subsidiary of the Company, (v) as to each holder of
Series B Preferred Shares, Common Shares which are purchased by such
holder, (vi) up to 300,000 Common Shares (as adjusted for all stock
dividends, stock splits and combinations) issued upon the exercise of
stock purchase warrants originally granted in connection with sales or
issuances of Series A Preferred Shares or debt or other securities which
are convertible into Series A Preferred Shares, (vii) Common Shares,
Options or Convertible Securities issued to sellers of businesses acquired
by the Company as full or partial consideration of such acquisition, or
(viii) Common Shares issued or issuable with respect to the securities
referred to in (i), (ii), (iii), (iv), (v), (vi) or (vii) by way of stock
split or stock dividend or in connection with a combination of shares,
recapitalization, merger, consolidation, share exchange or other
reorganization.
(f) "Fair Value" of a Common Share on any specified date means:
(i) If Common Shares are then listed or admitted to trading on any
national securities exchange or traded on any national market system, the
average
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<PAGE> 64
of the daily closing prices for the thirty (30) trading days
before such date, excluding any trades which are not bona fide, arm's
length transactions. The closing price for each day shall be the last
sale price on such date or, if no such sale takes place on such date, the
average of the closing bid and asked prices on such date, in each case as
officially reported on the principal national securities exchange or
national market system on which such shares are then listed, admitted to
trading or traded.
(ii) If no Common Shares are then listed or admitted to trading on
any national securities exchange or traded on any national market system,
the average of the reported closing bid and asked prices thereof on such
date in the over-the-counter market as shown by the National Association
of Securities Dealers automated quotation system or, if such shares are
not then quoted in such system, as published by the National Quotation
Bureau, Incorporated or any similar successor organization, and in either
case as reported by any member firm of the New York Stock Exchange
selected by the holders of a majority of the outstanding Series B
Preferred Shares.
(iii) If no Common Shares are then listed or admitted to trading on
any national exchange or traded on any national market system, and if no
closing bid and asked prices thereof are then so quoted or published in
the over-the-counter market, the fair value of a Common Share shall be as
mutually agreed by the Company and holders of a majority of the
outstanding Series B Preferred Shares; provided, however that if the
Company and such holders are unable to mutually agree upon the fair value,
the Company and such holders shall, within five days from the date that
either party determines that they cannot agree, jointly retain an
investment banking firm, or a nationally recognized accounting firm or
other firm providing similar valuation services, satisfactory to each of
them. If the Company and such holders are unable to agree on the
selection of such a firm within such five day period, the Company and such
holders shall, within twenty days after expiration of such five day
period, each retain a separate independent investment banking firm (which
firm, in either case, shall not be the investment banking firm regularly
retained by the Company). If either the Company or such holders fail to
retain such an investment banking firm during such twenty day period, then
the independent investment banking firm retained by such holders or the
Company, as the case may be, shall alone take the actions described below.
Such firms shall determine within 30 days of being retained the fair value
of a Common Share and deliver their opinion in writing to the Company and
to such holders as to the fair value. If such firms cannot jointly agree
upon the fair value, then, unless otherwise directed in writing by both
the Company and such holders, such firms, in their sole discretion, shall
choose another investment banking firm independent of the Company, which
firm shall make such determination and render such an opinion as promptly
as practicable. In either case, the determination so made shall be
conclusive and binding on the Company and the holders of the Series B
Preferred Shares. The fees and expenses for such determination made by
any and all such
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<PAGE> 65
investment banking or other firms shall be paid one-half by the Company
and one-half by such holders. In the determination of the fair value of a
Common Share, there shall not be taken into consideration any premium for
shares representing control of the Company.
(g) "Option" means any right, warrant or option to subscribe for or
purchase Common Shares or Convertible Securities.
(h) "Original Issue Date" for the Series B Preferred Shares shall
mean the date on which the first share of such Series B Preferred Shares
was originally issued.
(i) "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting shares shall at the time be owned directly or
indirectly by the Company or by one or more subsidiaries.
2. Dividends.
(a) The holders of record of the then outstanding Series B Preferred
Shares shall be entitled to receive when, as and if declared by the Board, but
in any event not prior to the first anniversary of the Original Issue Date, out
of the funds legally available therefor, cumulative dividends at the annual
rate of 8% per share. Such dividends shall accrue on each Series B Preferred
Share from and after the first anniversary of the Original Issue Date, shall
accrue from day to day, whether or not earned or declared, and shall be payable
in cash. Such dividends will in no event be declared or paid by the Company
prior to the payment in full of those certain senior subordinated Promissory
Notes issued by the Company pursuant to the Securities Purchase Agreement.
(b) Subject to the provisions of this paragraph 2 of this Section II, the
provisions of the Securities Purchase Agreement and the provisions of a
Shareholders Agreement among the Company and certain shareholders of the
Company, as the same may be amended from time to time, the Company may, in the
Board's discretion, declare and pay dividends or distributions, or make
provision for the payment thereof, on any equity security of the Company, but
only if all accrued dividends and distributions on the Series A Preferred
Shares and the Series B Preferred Shares shall have been paid and made in full
prior to the date of any such declaration, payment, provision or distribution.
(c) Notwithstanding anything in the foregoing to the contrary, no
dividends shall be declared, paid or distributed, or provision therefor made,
on any Common Shares, unless simultaneously therewith there also shall be
declared, paid or distributed, or provision therefor made, as the case may be,
a dividend or distribution pro rata on each then outstanding Series B Preferred
Share to each holder thereof. For purposes of the foregoing, the number of
Series B Preferred Shares deemed to be outstanding with respect to each such
holder shall be equal to the maximum number of Common Shares into which
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<PAGE> 66
such holder's Series B Preferred Shares would then be convertible upon exercise
of the Conversion Rights described in paragraph 5 of this Section II.
3. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities and obligations of the
Company, each holder of Series B Preferred Shares then outstanding shall be
entitled to be paid out of the net assets of the Company available for
distribution to its shareholders prior and in preference to any payment or
declaration and setting apart for payment of any amount in respect of the
Common Shares, an amount equal to the sum of the following: (i) $7.13 per
Series B Preferred Share held by such holder, and (ii) the fair market value,
reasonably determined in good faith by the Board, of the evidences of
indebtedness, assets and securities referred to in paragraph 5(e) hereof to
which such holders would have been entitled to receive upon conversion of their
Series B Preferred Shares (clauses (i) and (ii), collectively the "Series B
Liquidation Preference"); if upon any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, the assets to be distributed to
the holders of the Series A Preferred Shares and the Series B Preferred Shares
shall be insufficient to permit the payment to such holders of the full
aggregate amount of the Series A Liquidation Preference plus the Series B
Liquidation Preference, then all of the net assets of the Company available for
distribution to its shareholders shall be distributed ratably among the holders
of the Series A Preferred Shares and the Series B Preferred Shares in
proportion to the then applicable Series A Liquidation Preference with respect
to each Series A Preferred Share and the then applicable Series B Liquidation
Preference with respect to each Series B Preferred Share.
(b) Upon the completion of the distribution required by subparagraph (a),
if assets of the Company remain to be distributed, each holder of Series B
Preferred Shares shall be entitled to be paid out of the remaining assets of
the Company, as and when distributed, pro rata with the holders of Common
Shares on each Series B Preferred Share deemed to be outstanding. For purposes
of the foregoing, the number of Series B Preferred Shares deemed to be
outstanding with respect to each such holder shall be equal to the maximum
number of Common Shares into which such holder's Series B Preferred Shares
would then be convertible upon exercise of the Conversion Rights described in
paragraph 5 of this Section II.
(c) Written notice of any such liquidation, dissolution or winding up,
stating a payment date, the place where such payment shall be made, an estimate
of the net value that would be received by each such holder if all such holders
converted all of their Series B Preferred Shares immediately prior to such
liquidation, dissolution or winding up of the Company, and containing a
statement of or reference to applicable conversion rights, shall be given by
first class mail, postage prepaid, not less than 30 days prior to the payment
day stated therein, to each holder of record of the Series B Preferred Shares
at such holder's address as shown in the records of the Company.
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<PAGE> 67
(d) Whenever the distribution provided for in this paragraph 3 of this
Section II shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as determined in
good faith by the Board.
4. Voting Rights. Except as otherwise expressly provided herein or as
required by law, the holders of Series B Preferred Shares shall be entitled to
vote on all matters upon which holders of Common Shares have the right to vote
and, with respect to such vote, shall be entitled to notice of any
shareholders' meeting in accordance with the bylaws of the Company, and shall
be entitled to a number of votes equal to the number of Common Shares into
which such Series B Preferred Shares could then be converted, upon conversion
pursuant to the Conversion Rights described in paragraph 5 of this Section II,
at the record date for the determination of shareholders entitled to vote on
such matters or, if no such record date is established, at the date such vote
is taken or any written consent of shareholders is solicited. Except as
otherwise expressly provided herein, or to the extent class or series voting is
otherwise required by law or agreement, the holders of Series B Preferred
Shares and Common Shares shall vote together as a single class and not as
separate classes.
5. Conversion. The holders of the Series B Preferred Shares shall have
the following conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each Series B Preferred Share shall be convertible,
at the option of the holder thereof, at any time after the date of issuance of
such shares, and prior to the closing date for any Public Offering giving rise
to an automatic conversion as provided in paragraph 5(c) of this Section II, at
the office of the Company or any transfer agent for the Series B Preferred
Shares or Common Shares, into fully paid and nonassessable Common Shares, at
the Conversion Price (as hereafter defined) therefor in effect at the time of
conversion determined as provided herein.
(b) Conversion Price. Each Series B Preferred Share shall be convertible
into the number of Common Shares that results from dividing $7.13 by the
conversion price per share (the "Series B Conversion Price") in effect at the
time of conversion of such Series B Preferred Share. The Series B Conversion
Price for each Series B Preferred Share at the Original Issue Date shall be
$7.13 and shall be subject to adjustment from time to time as provided herein.
(c) Automatic Conversion. Each Series A Preferred Share which remains
outstanding on the closing date for a Public Offering (the "Registration Date")
shall automatically and without any action on the part of the holder thereof or
the Company, except as provided in clause (i) below, be converted on the same
basis and at the same Conversion Price as if each holder thereof had properly
exercised his right to convert on the date next preceding the Registration
Date; provided, that (i) each holder of Series A Preferred Shares shall have
received written notice of the proposed Public Offering at least 30 days prior
to the date the registration statement relating to that Public Offering
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becomes effective, (ii) such conversion shall be effective at the close of
business on the Registration Date, and (iii) the Company shall have no
obligation to issue and deliver to any such holder of Series A Preferred Shares
on such date a certificate for the number of Common Shares to which such holder
shall be entitled until such time as such holder has surrendered his
certificate or certificates for his Series A Preferred Shares, duly endorsed,
at the office of the Company or any transfer agent for the Common Shares, or
the holder notifies the Company that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. All rights
with respect to Series A Preferred Shares outstanding on the Registration Date
shall terminate on such Registration Date, except only the right of the holders
of such shares to receive Common Shares upon surrender of their certificates
for the Series A Preferred Shares and their rights with respect to unpaid
dividends described in paragraph 5(d) of this Section I.
(d) Mechanics of Conversion; Unpaid Dividends. Before any holder of
Series B Preferred Shares shall be entitled to convert the same into Common
Shares, such holder shall either (i) surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or of any transfer agent
for the Series B Preferred Shares or Common Shares, or (ii) deliver an
affidavit in favor of the Company stating that such certificates have been
lost, stolen or destroyed and containing an agreement satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection
therewith, and shall give written notice by mail, postage prepaid, to the
Company at such office that such holder elects to convert the same and shall
state therein the number of Series B Preferred Shares being converted and the
name or names in which the certificate or certificates for Common Shares to
which such holder shall be entitled. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the Series B Preferred Shares to be converted, and the person or
persons entitled to receive the Common Shares issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
Common Shares issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such Common Shares on such date. All
dividends accrued and unpaid prior to surrender of Series B Preferred Shares
surrendered for conversion shall at the option of the holders of Series B
Preferred Shares, either (i) be subtracted from the aggregate Series B
Conversion Price as in effect at the time of conversion or (ii) constitute a
debt of the Company payable to the converting shareholder, and no dividend or
other distribution shall be paid on, declared or set apart for any Common
Shares until such debt is fully paid or sufficient funds set apart for the
payment thereof.
(e) Adjustment for Stock Splits and Combinations. If the Company shall at
any time or from time to time after the Original Issue Date effect a
subdivision or combination of any outstanding Common Shares, the Series B
Conversion Price then in effect immediately before that subdivision or
combination shall be proportionately adjusted by multiplying the then effective
Series B Conversion Price by a fraction, (i) the numerator of which shall be
the number
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of Common Shares issued and outstanding immediately prior to such subdivision
or combination, and (ii) the denominator of which shall be the number of Common
Shares issued and outstanding immediately after such subdivision or
combination. The number of Common Shares outstanding at any time shall, for
the purposes of this paragraph 5(e) of this Section II, include the number of
Common Shares into which any convertible securities of the Company may be
converted, or for which any warrant, option or rights of the Company may be
exchanged. Any adjustment under this paragraph 5(e) of this Section II shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(f) Adjustments for Other Dividends and Distributions. In the event the
Company at any time or from time to time after the Original Issue Date shall
make or issue, or fix a record date for the determination of holders of Common
Shares entitled to receive, a dividend or other distribution payable in (i)
evidences of indebtedness of the Company, (ii) assets of the Company (other
than cash), or (iii) securities of the Company other than Common Shares, then
and in each such event provision shall be made so that the holders of Series B
Preferred Shares shall receive upon conversion thereof, in addition to the
number of Common Shares receivable thereupon, the amount of such evidences,
assets or securities that they would have received had they held, on such
record date, the maximum number of Common Shares into which their Series B
Preferred Shares could then have been converted.
(g) Adjustment for Reclassification, Exchange or Substitution. If the
Common Shares issuable upon the conversion of the Series B Preferred Shares
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this paragraph 5 of this Section II), then and
in each such event the holder of each Series B Preferred Share shall have the
right thereafter to convert each such share into the kind and amount of shares
of stock and other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the maximum number of Common
Shares into which such Series B Preferred Shares could have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
(h) Reorganization, Mergers, Consolidations or Sales of Assets or Capital
Stock. If at any time or from time to time there shall be (i) a capital
reorganization of the Common Shares (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this paragraph
5 of this Section II) or (ii) a merger, consolidation or statutory share
exchange of the Company with or into another corporation in which
consolidation, merger or statutory share exchange persons owning capital stock
of the Company immediately prior to the consolidation, merger or share exchange
own less than a majority of the voting stock of the resulting, surviving or
exchanging corporation, or (iii) the sale of all or substantially all the
Company's properties and assets or capital stock to any other person, then, as
a part of such reorganization, merger, consolidation, share exchange or sale,
provision shall be made so that the holders
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<PAGE> 70
of the Series B Preferred Shares shall thereafter be entitled to
receive, upon conversion of the Series B Preferred Shares, the number of shares
of stock or other securities or property of the Company, or of the successor
corporation resulting from such merger or consolidation, share exchange or
sale, to which a holder of the maximum number of Common Shares into which such
Series B Preferred Shares would then be converted would have been entitled on
such capital, reorganization, merger, share exchange, consolidation, or sale.
In any such case, appropriate adjustment shall be made in the application of
the provisions of this paragraph 5 of this Section II with respect to the
rights of the holders of the Series B Preferred Shares after the
reorganization, merger, share exchange, consolidation or sale to the end that
the provisions of this paragraph 5 of this Section II (including adjustment of
the Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series B Preferred Shares) shall be applicable after that
event as nearly equivalent as may be practicable.
(i) Change in Series B Conversion Price Upon Issuance of Securities. If
the Company issues or sells any Common Shares, other than Common Shares
Outstanding on the Original Issue Date of the Series B Preferred Shares and
Excluded Shares, or issues any Convertible Security or Option entitling the
issuee to acquire Common Shares for a consideration per share less than the
Fair Value in effect immediately prior to the time of such issuance or sale,
then the Series B Conversion Price shall be reduced to the lower of the
following:
(I) the price determined by dividing (i) an amount equal to the sum of (x)
the Common Shares Outstanding immediately prior to such issuance or sale
multiplied by the then current Series B Conversion Price, plus (y) the
aggregate consideration, if any, received by the Company upon such issuance or
sale, by (ii) the Common Shares Outstanding immediately after such issuance or
sale; or
(II) the price determined by multiplying the then current Series B
Conversion Price by a fraction (i) the numerator of which shall be the sum of
(A) the Common Shares Outstanding immediately prior to such issuance or sale,
plus (B) the number of Common Shares that the aggregate consideration, if any,
received by the Company upon such issuance or sale would purchase at the Fair
Value on the date of such issuance or sale and (ii) the denominator of which
shall be the Common Shares Outstanding immediately after and giving effect to
such issuance or sale.
For the purposes of this paragraph 5(i) of this Section II, the following
provisions shall also be applicable:
(i) Cash Consideration. If the Company issues the Common Shares, Option
or Convertible Security for cash, the consideration received by the Company
therefor (or, if such shares are offered by the Company for subscription, the
subscription price, or, if such shares are sold to underwriters or dealers for
public offering without a subscription offering, the initial public offering
price), after deducting therefrom any
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<PAGE> 71
reasonable compensation or discount paid or allowed to underwriters or dealers
or others performing similar services but without deducting therefrom any
reasonable expenses incurred in connection therewith, shall be deemed to be the
consideration received by the Company for such shares.
(ii) Non-Cash Consideration. If the Company issues (other than upon
conversion or issuance of a Convertible Security) the Common Shares, Option or
Convertible Security for a consideration wholly or partially other than cash,
including services rendered, the fair value of such consideration, as
determined by the Board of Directors of the Company in good faith shall be
deemed to be the value, for purposes of this Section 5(i) of this Section II,
of the consideration other than cash received by the Company for such
securities except that any Common Share, Option or Convertible Security issued
for services shall be deemed to be issued for no consideration.
(iii) Options and Convertible Securities. If the Company issues or grants
any Option or any Convertible Security, and the inclusion thereof in the
calculation of an adjusted Series B Conversion Price pursuant to this paragraph
5(i) of this Section II would result in a Series B Conversion Exercise Price
lower than if excluded, the total maximum number of Common Shares issuable upon
the exercise of such Option or upon conversion or exchange of the total maximum
amount of such Convertible Security outstanding at the time such Convertible
Security first becomes convertible or exchangeable shall be deemed to be issued
and to be outstanding for the purposes of this paragraph 5(i) of this Section
II as of the date of issue or grant of such Option or, in the case of the issue
or sale of a Convertible Security other than where the same is issuable upon
the exercise of an Option, as of the date of such issue or sale and to have
been issued for the sum of the amount (if any) paid for such Option or
Convertible Security and the amount (if any) payable upon the exercise of such
Option or upon conversion or exchange of such Convertible Security at the time
such Convertible Security becomes convertible or exchangeable. If the
inclusion thereof would not result in a Series B Conversion Price lower than if
excluded, or if, at the time of exercise, the Series B Conversion Price which
would result from deeming such an Option or Convertible Security to have been
issued on the date of exercise is lower than that which resulted from
adjustment of the Exercise Price at the time of issuance, such Option or
Convertible Security shall not be deemed to be issued until the close of
business on the date of exercise, conversion or exchange and issuance of Common
Shares pursuant thereto.
(iv) Reclassification. The reclassification of securities other than
Common Shares into securities including Common Shares shall be deemed to
involve the issuance for a consideration other than cash of such Common Shares
at the close of business on the date fixed for the determination of
stockholders entitled to receive such Common Shares.
(j) Change in Exercise Price or Conversion Rate of Option or Convertible
Securities.
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<PAGE> 72
(i) Not Due to Dilution. If the purchase price provided for in any
Option, or the additional consideration (if any) payable upon the conversion or
exchange of any Convertible Security, or the rate at which any Convertible
Security is convertible into or exchangeable for Common Shares changes at any
time (other than under or by reason of provisions designed to protect against
dilution), the Series B Conversion Price in effect at the time of the change
shall be readjusted to the Series B Conversion Price that would have been in
effect at such time had such Option or Convertible Security still outstanding
provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted, issued or
sold.
(ii) Due to Dilution. If the purchase price provided for in any Option,
or the additional consideration (if any) payable upon the conversion or
exchange of any Convertible Security, or the rate at which any Convertible
Security is convertible into or exchangeable for Common Shares is reduced at
any time under or by reason of provisions with respect thereto designed to
protect against dilution, then in case of the delivery of Common Shares upon
the exercise of any such Option or upon conversion or exchange of any such
Convertible Security, the Series B Conversion Price then in effect hereunder
shall, upon issuance of such Common Shares, be adjusted to such amount as would
have obtained had such Option or Convertible Security never been issued and had
adjustments been made only upon the issuance of the Common Shares delivered as
aforesaid and for the consideration actually received for such Option or
Convertible Security and Common Shares.
(k) Termination of Option or Conversion Rights. If any right to purchase
Common Shares under any Option or any right to convert or exchange any
Convertible Security terminates or expires, the Series B Conversion Price then
in effect shall, upon such termination, be changed to the Series B Conversion
Price that would have been in effect at the time of such expiration or
termination had such Option or Convertible Security to the extent outstanding
immediately prior to such expiration or termination, never been issued, and the
Common Shares thereunder shall no longer be deemed to be Common Shares
Outstanding.
(l) Successive Changes. The provisions of this paragraph 5 of this
Section II shall apply to successive issuances, dividends or other
Distributions, subdivisions and combinations on or of Common Shares after the
Original Issue Date of the Series B Preferred Shares.
(m) Accountants' Certificate of Adjustment. In each case of an adjustment
or readjustment of the Series B Conversion Price for the number of Common
Shares or other securities issuable upon conversion of the Series B Preferred
Shares, the Company, at its expense, shall cause independent certified public
accountants of recognized standing selected by the Company (who may be the
independent certified public accounts then auditing the books of the Company)
to compute such adjustment or readjustment in accordance herewith and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first-class mail, postage prepaid, to each registered
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<PAGE> 73
holder of the Series B Preferred Shares at the holder's address as shown in the
Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (i) the consideration received
or to be received by the Company for any Common Shares issued or sold or deemed
to have been issued or sold after the Original Issue Date of the Series B
Preferred Shares that are not Excluded Shares, (ii) the Series B Conversion
Price at the time in effect for each series of the Series B Preferred Shares,
and (iii) the number of Common Shares and the type and amount, if any, of other
property which at the time would be received upon conversion of the Series B
Preferred Shares.
(n) Certain Other Actions Prohibited. The Company shall not by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Series B Preferred Shares set forth in
this Section II, but shall at all times in good faith assist in the carrying
out of all of the such terms and shall take all such reasonable action as
required to protect the conversion privilege of the holders of Series B
Preferred Shares against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (i) shall not increase the par value
of the Common Share above the Series B Conversion Price, (ii) shall take all
such actions as may be necessary or appropriate under local, state or federal
laws of the United States of America in order that the Company may validly and
legally issue fully paid and nonassessable Common Shares upon the conversion
exercise of all Series B Preferred Shares from time to time outstanding and
(iii) shall not take any action which results in any adjustment of the Series B
Conversion Price if the total number of Common Shares or other securities
issuable after the action upon the conversion of all of the Series B Preferred
Shares would exceed the total number of Common Shares or other securities then
authorized by the Company's Articles of Incorporation and available for the
purpose of issue upon such exercise.
(o) Notices of Record Date. In the event of (i) any taking by the company
of a record of the holders of any class or series of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any reclassification or recapitalization of the
capital stock of the Company, any merger or consolidation of the Company, or
any transfer of all or substantially all of the assets or capital stock of the
company to any other corporation, entity or person, or any voluntary of
involuntary dissolution, liquidation or winding up of the affairs of the
Company, the Company shall mail to each holder of Series B Preferred Shares at
least 30 days prior to the record date specified therein, a notice specifying
(A) the date of on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution,
(B) the date on which any such reorganization, reclassification, transfer,
consolidation, merger, share exchange, dissolution, liquidation or winding up
is expected to become effective, and (C) the time, if any is to be fixed, as to
when the holders of record of Common Shares (or other securities) shall be
entitled to exchange their shares of Common Shares (or other securities) for
securities or other
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<PAGE> 74
property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, share exchange, dissolution, liquidation or winding up.
(p) Fractional Shares. No fractional Common Shares shall be issued upon
conversion of Series B Preferred Shares. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Company shall pay cash equal
to the product of such fraction multiplied by the Fair Value of one Common
Share on the date of conversion. Whether or not fractional shares are issuable
upon such conversion shall be determined on the basis of the total number of
Series B Preferred Shares the holder is at the time converting into Common
Shares and the number of Common Shares issuable upon such aggregate conversion.
(q) Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued Common
Shares, solely for the following purposes, (i) such number of Common Shares
required to pay all dividends payable in Common Shares which the Company by
agreement is obligated, or may choose, to pay, (ii) such number of Common
Shares as may from time to time be required, at such time, to be issued by the
Company upon exercise of all then-exercisable warrants and options to purchase
Common Shares or the right to convert other convertible securities into Common
Shares, and (iii) such number of its Common Shares as shall from time to time
be sufficient to effect the Conversion of all outstanding Series B Preferred
Shares. As a condition precedent to the taking of any action which would cause
an adjustment to the Conversion Price, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued Common Shares to such number of shares as shall be
sufficient in order that it may be validly and legally issue the Common Shares
issuable based upon such adjusted Conversion Price.
(r) Notices. Any notice required by the provisions of this paragraph 5 to
be given to the holder of the Series B Preferred Shares shall be deemed given
when personally delivered to such holder or five business days after the same
has been deposited in the United States mail, certified or registered mail,
return receipt requested, postage prepaid, and addressed to each holder of
record at this address appearing on the books of the Company.
(s) Payment of Taxes. The Company will pay all taxes and other
governmental charges (other than taxes measured by the revenue or income of the
holders of the Series B Preferred Shares) that may be imposed in respect of the
issue or delivery of Common Shares upon conversion of the Series B Preferred
Shares.
6. Status of Preferred Shares. No Series B Preferred Shares acquired by
the Company by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from
the shares which the Company shall be authorized to issue, except for the
pledge of such shares upon
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<PAGE> 75
redemption thereof pursuant to an agreement to which the Company is a party for
the purpose of securing repayment of amounts owing with respect to such
redemption.
SECTION III.
Common Shares
Each Common Share shall have one vote upon all matters to be voted on by
the holders of Common Shares. Each Common Share shall be entitled to
participate equally in all dividends payable with respect to the Common Shares
and to share ratably, subject to the rights and preferences of any series of
Preferred Shares, in all assets of the corporation in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the corporation, or upon any distribution of the asset of the corporation.
FIFTH: No holder of shares of the corporation of any class shall be
entitled as such, as a matter of right, to subscribe for or purchase shares of
any class, now or hereafter authorized, or to subscribe for or purchase
securities convertible into or exchangeable for shares of the corporation or to
which shall be attached or appertain any warrants or rights entitling the
holder thereof to subscribe for or purchase shares, except such rights of
subscription or purchase, if any, for such considerations and upon such terms
and conditions as its Board of Directors from time to time may determine.
SIXTH: Notwithstanding any provision of Sections 607.0101 to 607.1907,
inclusive, of the Florida General Corporation Act, or any successor statutes
now or hereafter in force, requiring for the authorization or taking of any
action the vote or consent of the holders of shares entitling them to exercise
two-thirds or any other proportion of the voting power of the corporation or of
any class or classes of shares thereof, such action, unless otherwise expressly
required by law or these Articles of Incorporation, may be authorized or taken
by the vote or consent of the holders of shares entitling them to exercise a
majority of the voting power of the corporation or of such class or classes of
shares thereof.
SEVENTH: To the extent permitted by law, the corporation, by action of
its Board of Directors, may purchase or otherwise acquire shares of any class
issued by it at such times, for such considerations and upon such terms and
conditions as its Board of Directors may determine.
EIGHTH: No person who is serving or has served as a director of the
corporation shall be personally liable to the corporation or any of its
shareholders for monetary damages for breach of any fiduciary duty of such
person as a director by reason of any act or omission of such person as a
director; provided, however, that the foregoing provision shall not eliminate
or limit the liability of any person (a) for any breach of such person's duty
of loyalty as a director to the corporation or its shareholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 607.0834 of the Florida Business
Corporation Act, (d)
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<PAGE> 76
for any transaction from which such person derived any improper personal
benefit, or (e) to the extent that such liability may not be limited to
eliminated by virtue of the provisions of Section 607.0850 of the Florida
Business Corporation Act or any successor section or statute. Any repeal or
modification of this Article EIGHTH by the shareholders of the corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director or the corporation existing at the time of
such repeal or modification.
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in these Restated Articles of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred
upon shareholders herein are granted subject to this reservation.
TENTH: The provisions of Section 607.0902 of the Florida Business
Corporation Act shall not apply to control share acquisitions (as defined in
such Section 607.0902) of shares of the corporation.
IN WITNESS WHEREOF, the undersigned has set its hand hereto as of the
_____ day of ________________, 199__.
MEDIRISK, INC., a Florida corporation
By:
------------------------------------
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<PAGE> 77
EXHIBIT B
FORM OF SENIOR SUBORDINATED NOTE
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER
AND ANY APPLICABLE STATE SECURITIES LAWS.
SENIOR SUBORDINATED PROMISSORY NOTE
$________________ ______________, 199__
FOR VALUE RECEIVED, the undersigned MEDIRISK, INC., a Florida corporation
(the "Company"), hereby promises to pay to the order of HealthPlan Services
Corporation, a Delaware corporation ("Holder"), or its assigns, the principal
sum of _________________ Dollars ($_____________) and accrued interest thereon,
which shall be due and payable to Holder as provided below.
This Note is one of the Senior Subordinated Notes referred to in, and is
entitled to the benefits of, the Securities Purchase Agreement, dated January
8, 1996, among the Company and Holder (the "Securities Purchase Agreement").
Capitalized terms used without definition herein shall have the meanings given
to them in the Securities Purchase Agreement.
Subject to the provisions of Section 1.4 of the Securities Purchase
Agreement and to the acceleration provisions of Section 6 of the Securities
Purchase Agreement, the Company shall repay all principal and interest
outstanding in respect of this Note as follows on the earliest to occur of (i)
an Initial Public Offering by the Company; (ii) a Change of Control of the
Company; or (iii) at maturity on January 8, 2003.
Interest on the unpaid principal amount outstanding hereunder shall accrue
from the date hereof until maturity at the rate of 10% per annum. Interest
shall be computed on the basis of a 365-day year, actual days elapsed. The
first payment of interest on the outstanding principal amount of this Note
shall be due and payable by Borrowers to Lender in arrears on
____________________, 199___, for the period from the Subsequent Closing Date
on which this Note was issued until ________________, 199__, and thereafter
such interest shall be due and payable quarterly in arrears. The interest
payment for each such quarterly term shall be made on the last day of the term,
with such quarterly payments to be made on March 31, June 30, September 30 and
December 31 of each year.
Payment of principal and interest shall be made in lawful money of the
United States of America (by wire transfer or immediately available funds) to
the Holder at P.O.
<PAGE> 78
Box 30098, Tampa, Florida 33630-3098 or at any other place of payment that may
be designated by the Holder in writing prior to the date upon which such
payment is due.
In the event that any payment of principal, interest or any other sum
required to be paid under this Note or the Securities Purchase Agreement is not
made when due or that any other Event of Default occurs and is not cured within
the applicable period, if any, provided for in the Securities Purchase
Agreement, all principal and accrued interest shall, at the option of the
holders of a majority in principal amount outstanding of the Senior
Subordinated Notes unless otherwise provided in the Securities Purchase
Agreement, become immediately due and payable. In the event that any payment
of principal, interest or any other sum required to be paid under this Note or
the Securities Purchase Agreement is not made when due, interest on all such
principal, interest or other sum shall accrue from the due date (not giving
effect to any grace or cure period) at the rate of 18% per annum, compounded
quarterly, calculated on the basis of a 365-day year, actual days elapsed, or
at the maximum rate permitted by law, whichever is less.
This Note may be prepaid in whole or in part without premium or penalty.
The Company waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note.
The Company agrees to pay all costs and expenses, including, without
limitation, reasonable attorneys' fees and expenses, expended or incurred by
the Holder in connection with the enforcement of this Note or the collection of
any sums due hereunder
The Company and the Holder agree that in no event shall the amount of
interest or other consideration due to the Holder with respect to the making of
the loans evidenced by the Senior Subordinated Notes shall exceed the maximum
rate of interest allowed by applicable law, and in the event any such payment
is inadvertently paid by the Company or inadvertently received by the
Purchaser, then such excess sum shall be credited as a payment of principal to
be applied to the principal, unless the Company shall notify the Holder in
writing that the Company elects to have such excess sum returned to it
forthwith. It is the express intent of the parties hereto that the Company not
pay and the Holder not receive, directly or indirectly, in any manner
whatsoever, interest in excess of that which may be lawfully paid by the
Company under applicable law.
MEDIRISK, INC.
By:
------------------------------------
Mark A. Kaiser
Chairman and Chief Executive Officer
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<PAGE> 79
EXHIBIT I
ALSTON&BIRD
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-7777
January 8,1996
HealthPlan Services Corporation
P.O. Box 30098
Tampa, Florida 33630-3098
Attention: James K. Murray III, Chief Financial Officer
Re: Securities Purchase Agreement, dated January 8, 1996, between
Medirisk, Inc. and HealthPlan Services Corporation
Ladies and Gentlemen:
We are counsel to Medirisk, Inc. (the "Company") in connection with the
execution and delivery of that certain Securities Purchase Agreement (the
"Agreement") dated as of January 8, 1996 by and between the Company and
HealthPlan Services Corporation ("Purchaser").
This opinion is delivered pursuant to Section 3.1.2(h) of the Agreement.
This opinion is governed by, and shall be interpreted in accordance with, the
Legal Opinion Accord (the "Accord") of the ABA Section of Business Law (1991).
As a consequence it is subject to a number of qualifications, exceptions,
definitions, limitations on coverage and other limitations, all as more
particularly described in the Accord, and this opinion should be read in
conjunction with the Accord. The Law covered by the opinions expressed herein
is limited to the Federal Law of the United States and the Law of the State of
Georgia. Capitalized terms used and not otherwise defined in this opinion
shall have the meanings assigned to such terms in the Accord or the Agreement.
We have participated in the preparation of the Agreement and the Exhibits
and Schedules thereto, and we have examined such other documents, certificates,
and instruments as we have deemed necessary or appropriate for the purposes of
this opinion. As to factual matters material to our opinion, we have relied
upon the representations made by the Company in the Agreement and upon
certificates of officers of the Company and public officials.
601 Pennsylvania Avenue, N.W.
North Building, Suite 250
Washington, D.C. 20004-2601
<PAGE> 80
HealthPlan Services Corporation
January 8, 1996
Page 2
As to the opinions in paragraphs 2, 3, 4, 5 and 6 hereof, we have reviewed
the following agreements (collectively, the "Investment Documents"):
a. the Agreement;
b. the Registration Rights Agreement;
c. the Shareholders Agreement;
d. the Warrant Agreement; and
e. the form of Senior Subordinated Note.
Based upon the foregoing and such investigation as we have deemed
necessary, we are of the opinion that:
1. The Company is validly existing as a corporation under the laws of the
State of Florida.
2. The Company has twenty million (20,000,000) authorized shares of Class
A Common Stock, $.001 par value per share; three million (3,000,000) authorized
shares of Series A Convertible Preferred Stock, $.001 par value per share; and
four hundred thousand (400,000) authorized shares of Class B Preferred Stock,
$.001 par value per share. Based solely upon our review of the Company's stock
transfer ledger and a certificate of an officer of the Company that such ledger
is accurate, of such authorized capital, there are 910,200 shares of Series A
Common Stock and 1,292,359 shares of Series A Convertible Preferred Stock
issued and outstanding; and, upon Closing of the transactions contemplated by
the Securities Purchase Agreement and payment of the consideration specified
therein by the Purchaser, on the Closing Date there shall be 280,623 shares of
Series B Convertible Preferred Stock issued and outstanding. Subject to the
understanding, with your permission, that no opinion is given herein as to the
effect of any nonpayment of applicable stamp taxes with respect to the issuance
and transfer of stock of the Company, the outstanding shares of Series A Common
Stock and Series B Convertible Preferred Stock are, and upon payment therefor
in accordance with the agreement the shares of Preferred Stock issuable to
Purchaser under the Agreement will be, validly issued and are fully paid and
nonassessable, and together all such shares comprise the totality of the
Company's outstanding capitalization as of the date hereof. 665,180 shares of
the authorized Series A Common Stock have been reserved for issuance pursuant
to the terms of the Warrant Agreement, and 280,623 shares of the authorized
Series A Common Stock have been reserved by the Company for issuance upon
the conversion of the Preferred Stock.
<PAGE> 81
HealthPlan Services Corporation
January 8, 1996
Page 3
3. The Company has the corporate power to execute and deliver the
Investment Documents to which it is a party and any other instruments or
documents executed and delivered by it under the Agreement, to perform its
obligations thereunder, to own and use its assets and to conduct its business.
No governmental or other consents, approvals, authorizations, registrations,
declarations or filings with any governmental authority of the United States or
the State of Georgia are required for the execution, delivery and performance
of the Investment Documents by the Company. The Company is not subject to any
law, rule or regulation of the United States or the State of Georgia
restricting in any way its ability to incur indebtedness or to issue shares of
its capital stock or rights to acquire such shares as contemplated by the
Investment Documents.
4. The Company has duly authorized the execution and delivery of the
Investment Documents and all other instruments or documents executed by the
Company in connection with the Investment Documents, and the Company has duly
executed and delivered the Investment Documents and such other instruments and
documents. Each of the Investment Documents is a valid and binding obligation
of the Company enforceable against the Company in accordance with its
respective terms. With your consent, the opinions set forth in this paragraph
4 are subject to the limitations and qualifications set forth in Appendix A as
well as the qualifications of the Accord to which this entire opinion is
subject.
5. The issuance of the Senior Subordinated Notes pursuant to the
Securities Purchase Agreement and payment of such notes in accordance with
their terms, and the related issuance of warrant certificates pursuant to the
Warrant Agreement and exercise of such warrants in accordance with their terms,
do not violate any law of the State of Georgia relating to interest and usury.
6. The execution and delivery of the Investment Documents by the Company
and the consummation of the transactions contemplated thereby, if the Company
were now to perform its obligations under the Investment Documents, will not
(a) conflict with any provisions of the Company's articles of incorporation or
bylaws, (b) violate any provisions of any existing federal or state
constitution, statute, law, rule, regulation or order to which the Company or
its assets are subject, or (c) result in a breach of or constitute a default
(or an event of default which with the passage of time or giving of notice, or
both, would constitute a default) under, or cause or permit the acceleration of
the maturity of or give rise to any right of termination, cancellation,
imposition of fees or penalties under, any material written agreement, which
breach or default has not been waived. With your permission we have assumed
that the term "material written agreement" used in clause (c) above includes
only those agreements listed on SCHEDULES 2.2.13, 2.2.14 and 2.2.15 to the
Agreement and those agreements that are Exhibits to the Agreement.
<PAGE> 82
HealthPlan Services Corporation
January 8, 1996
Page 4
Based upon the limitations and qualifications set forth above, we confirm
to you that:
1. To our knowledge, there is no litigation or other proceeding that is
pending, threatened or contemplated which would restrain, invalidate or
challenge, or would seek to restrain, invalidate or challenge or would seek
damages in connection with, the transactions contemplated by the Investment
Documents.
2. The Company is qualified to transact business as a foreign corporation
in the State of Georgia. The foregoing statement is based solely upon a
certificate provided by the Secretary of State of the State of Georgia, a copy
of which the Company has delivered to you, and is limited to the meaning
ascribed to such certificate by such state agency.
Assumptions and Qualifications
In addition to the assumptions and qualifications set forth specifically
above, this opinion letter is subject to the following assumptions and
qualifications:
1. With your permission, the General Qualifications, specifically
including, without limitation, the Bankruptcy and Insolvency Exception, the
Equitable Principles Exception and the Other Common Qualifications, apply to
the opinions set forth above; provided that the opinion expressed in paragraph
5 is not subject to any of the General Qualifications relating to laws relating
to interest or usury.
2. With respect to paragraph 4 above, we express no opinion as to whether
Section 7.11 of the Securities Purchase Agreement is enforceable.
3. With respect to paragraph 5 above, we express no opinion as to whether
the interest and other consideration received by Purchaser in connection with
its purchase of Senior Subordinated Notes is usurious in the event Section 7.11
of the Securities Purchase Agreement is not enforceable, and such Senior
Subordinated Notes are required to be prepaid prior to April 8, 1997 by reason
of (i) acceleration following the occurrence of an Event of Default or (ii) an
event giving rise to a mandatory prepayment beyond the control of the Company.
Furthermore, for the purposes of the prior sentence, we have assumed that the
only interest paid or deemed paid on the notes is interest calculated at the
rate of 18% per annum plus the value of the Warrants issued pursuant to the
Warrant Agreement, and that the only effect of such a required prepayment prior
to April 8, 1997 is to truncate or shorten the period of time over which the
rate of interest on the notes is calculated.
<PAGE> 83
HealthPlan Services Corporation
January 8, 1996
Page 5
4. For purposes of paragraph 5 hereof, we have assumed that the right of
Purchaser to purchase shares of the Company pursuant to the Warrant Agreement
has a fair market value as of the date hereof of not greater than $7.13 for
each such share of Series A Common Stock issuable thereunder.
The opinions expressed in this opinion letter are based upon the law as
currently in effect and currently existing interpretations thereof. Insofar as
our opinions relate to future events or circumstances, the opinions expressed
herein are based upon the assumption that such laws and prevailing
interpretations thereof will remain unchanged. We assume no obligation to
advise you of any changes in the foregoing subsequent to the delivery of this
opinion letter. This opinion letter is rendered solely for your information in
connection with the transactions described above and is not to be used,
circulated, quoted or otherwise referred to for any purpose whatsoever, except
to the extent authorized in the Accord, without in each instance our prior
written consent.
Very truly yours,
ALSTON & BIRD
By:
--------------------------
Keith O. Cowan, Partner
<PAGE> 1
EXHIBIT 1.2
AMENDMENT NUMBER 1 TO SECURITIES PURCHASE AGREEMENT
<PAGE> 2
AMENDMENT NUMBER 1 TO
SECURITIES PURCHASE AGREEMENT
THIS AMENDMENT NUMBER 1 TO SECURITIES PURCHASE AGREEMENT (this
"Amendment") is made and entered into as of this 31st day of May, 1996, by and
between MEDIRISK, INC., a Florida corporation (the "Company"), and HEALTHPLAN
SERVICES CORPORATION, a Delaware corporation ("Purchaser");
WITNESSETH:
WHEREAS, Purchaser and the Company are parties to a Securities Purchase
Agreement, dated January 8, 1996 (the "Agreement"), pursuant to which Purchaser
purchased certain Convertible Preferred Stock of the Company and agreed to
purchase certain subordinated promissory notes to be issued by the Company
pursuant to the terms of the Agreement; and
WHEREAS, Purchaser and the Company now desire to amend the Agreement as
set forth in this Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants hereinafter set forth, the parties agree as follows:
1. AMENDMENT OF AGREEMENT. Purchaser and the Company
hereby agree to amend the Agreement by deleting Section 5.12 therefrom in its
entirety and adding the following in lieu thereof:
5.12 Executive Compensation. Allow any of its officers,
directors or employees to use any assets or property of the Company or
any of its Affiliated Companies for personal purposes. Neither the
Company nor any of its Affiliated Companies shall increase the salary
or other compensation or benefits paid or provided to any officer or
director of the Company or such Affiliated Company except to the extent
that such increase (a) is commercially reasonable and in accordance
with industry standards and (b) is approved by the Compensation
Committee (composed entirely of directors who are not employees of the
Company or any Affiliate of the Company) of the Board of Directors of
the Company or such Affiliated Company, as the case may be, provided
that in no event will any option plan or option agreement be amended or
instituted which causes the total of all options available for grant to
employees, directors and sellers of businesses acquired by the Company,
outstanding options issued to employees, directors and sellers of
businesses acquired by the Company, and stock issued under any employee
benefit plan or otherwise to any employee or director (in his or her
capacity as such) to exceed 893,850 shares of Series A Common Stock (as
adjusted for stock splits, stock dividends and similar events occurring
after the date of this Agreement); provided, however, that at least
200,000 of such shares shall be issuable under an employee stock option
plan and a directors stock option plan,
<PAGE> 3
both of which plans shall be adopted and approved by the Company's
Board of Directors and shareholders prior to the closing of an Initial
Public Offering and under which plans no fewer than 200,000 shares of
Series A Common Stock or options or other rights to purchase Series A
Common Stock shall be available for grant after the Company's closing
of an Initial Public Offering.
2. MISCELLANEOUS. Except as specifically modified and amended
by this Amendment, the Agreement shall remain in full force and effect, and the
terms and conditions of the Agreement are hereby ratified and confirmed in all
respects as so amended.
IN WITNESS WHEREOF, each party hereto has executed or caused this
Amendment to be executed on its behalf, all on the day and year first above
written.
COMPANY:
MEDIRISK, INC.
By:/s/ Mark A. Kaiser
----------------------------------------------
Mark A. Kaiser
Chairman of the Board and Chief Executive
Officer
PURCHASER:
HEALTHPLAN SERVICES CORPORATION
By:/s/ James K. Murray, III
----------------------------------------------
James K. Murray, III, Executive Vice President
and Chief Financial Officer
-2-
<PAGE> 1
EXHIBIT 1.3
AMENDMENT NUMBER 2 TO SECURITIES PURCHASE AGREEMENT
<PAGE> 2
AMENDMENT NUMBER 2 TO
SECURITIES PURCHASE AGREEMENT
This AMENDMENT NUMBER 2 TO SECURITIES PURCHASE AGREEMENT (this "Amendment")
is entered into on this 29th day of August 1996, by and among MEDIRISK, INC., a
Florida corporation (the "Company"), and HEALTHPLAN SERVICES CORPORATION, a
Delaware corporation ("Purchaser").
BACKGROUND
WHEREAS, Purchaser and the Company are parties to a Securities Purchase
Agreement, dated January 8, 1996 (the "Agreement"), pursuant to which Purchaser
purchased 280,623 shares of Series B Convertible Preferred Stock of the Company
and agreed to purchase up to $10,000,000.00 in original principal amount of
Senior Subordinated Notes (as defined in the Agreement); and
WHEREAS, the parties desire to amend the Agreement as set forth in this
Amendment.
NOW, THEREFORE, Purchaser and the Company hereby agree as follows:
1. Amendment of Appendix A. Appendix A to the Agreement is amended by
inserting immediately following the definition of "Senior Subordinated Notes"
the following:
"Series A Common Stock" means the Series A Common Stock of the
Company and any stock into which such Series A Common Stock is converted
in any recapitalization, merger, consolidation, statutory share exchange
or similar event.
2. Miscellaneous. Except as specifically modified and amended by this
Amendment, the Agreement shall remain in full force and effect, and the terms of
the Agreement are hereby ratified and confirmed in all respects as so amended.
[the remainder of this page intentionally left blank]
<PAGE> 3
IN WITNESS WHEREOF, each party hereto has executed or caused this Amendment
to be executed on its behalf, all on the day and year first above written.
MEDIRISK, INC.
By: /s/ Mark A. Kaiser
------------------------------------
Title: President
------------------------------------
HEALTHPLAN SERVICES CORPORATION
By: /s/ James K. Murray, III
------------------------------------
Title: Executive Vice President
------------------------------------
- 2 -
<PAGE> 1
EXHIBIT 1.4
AMENDMENT NUMBER 3 TO SECURITIES PURCHASE AGREEMENT
<PAGE> 2
AMENDMENT NUMBER 3 TO
SECURITIES PURCHASE AGREEMENT
This AMENDMENT NUMBER 3 TO SECURITIES PURCHASE AGREEMENT (this "Amendment")
is entered into on this 18th day of September 1996 but is effective for all
purposes as of January 8, 1996, by and among MEDIRISK, INC., a Florida
corporation (the "Company"), and HEALTHPLAN SERVICES CORPORATION, a Delaware
corporation ("Purchaser").
BACKGROUND
WHEREAS, Purchaser and the Company are parties to a Securities Purchase
Agreement, dated January 8, 1996, as amended as of May 31, 1996 and August 22,
1996 (as so amended, the "Agreement"), pursuant to which Purchaser purchased
280,623 shares of Series B Convertible Preferred Stock of the Company and agreed
to purchase up to $10,000,000.00 in original principal amount of Senior
Subordinated Notes (as defined in the Agreement); and
WHEREAS, upon delivery and review of the Company's audited financial
statements for the year ended December 31, 1995, the parties have determined
that they established certain of the financial covenants set forth in the
Agreement based upon their review of the Company's unaudited financial
statements as of September 30, 1995 and upon certain assumptions concerning the
Company's business and financial transactions for 1996 and the accounting
treatment therefor; and
WHEREAS, the parties desire to acknowledge that the assumptions underlying
such anticipated financial transactions, and the parties' assumptions concerning
the accounting therefor, were changed by way of mutual consent and that such
changes necessitate an amendment of certain of the financial covenants set forth
in the Agreement, with such amendment being effective as of the parties' entry
into the Agreement, and the parties desire to acknowledge and agree that no
default has existed or now exists based upon such covenants;
NOW, THEREFORE, Purchaser and the Company hereby agree as follows:
1. Amendment of Agreement. Section 5.10 of the Agreement is hereby amended
by deleting such Section in its entirety and inserting in lieu thereof the
following:
<PAGE> 3
5.10 Financial Covenants.
5.10.1 Consolidated EBITDA. Permit the Consolidated EBITDA
determined at the end of each Fiscal Year to be less than the amount
specified below:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1996 $ 192,000
December 31, 1997 $ 3,900,000
December 31, 1998 $ 5,900,000
December 31, 1999 $ 8,800,000
December 31, 2000 and thereafter $13,000,000
</TABLE>
5.10.2 Minimum Consolidated Net Worth. Permit Consolidated Net
Worth determined at the end of each Fiscal Year specified below to be
less than the amount specified below:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1995 ($11,586,000)
December 31, 1996 ($9,637,000)
December 31, 1997 ($5,000,000)
December 31, 1998 $ 8,000,000
December 31, 1999 $ 12,000,000
December 31, 2000 and thereafter $ 16,000,000
</TABLE>
5.10.3 Consolidated Debt to Consolidated EBITDA. Permit the ratio
of Consolidated Debt to Consolidated EBITDA determined at the end of each
Fiscal Year to exceed the ratio specified below:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1996 47.0:1.0
December 31, 1997 3.0:1.0
December 31, 1998 2.0:1.0
December 31, 1999 1.0:1.0
December 31, 2000 and thereafter 1.0:1.0
</TABLE>
(C) Fixed Charge Coverage. Permit the Fixed Charge Coverage Ratio
determined at the end of each Fiscal Year to be less than the ratio
specified below:
- 2 -
<PAGE> 4
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1996 n/a
December 31, 1997 4.0:1.0
December 31, 1998 and thereafter 6.0:1.0
</TABLE>
2. Amendment of Appendix A. Appendix A is hereby amended by deleting
therefrom the definition of "Consolidated EBITDA" and inserting in lieu thereof
the following:
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for the Company for such period as determined in accordance with GAAP,
plus all amounts deducted therefrom for such period, if any, in respect of
(i) Consolidated Interest Charges, (ii) Consolidated Depreciation, (iii)
Consolidated Taxes, (iv) Consolidated Amortization, and (v) consolidated
in progress research and development charges or similar non-cash charges
or expenses incurred by the Company in connection with acquisitions, or
similar transactions, occurring during or prior to such period.
3. Effect of Amendment. This Amendment shall be effective as of the date
of the Agreement as if the modifications and amendments made herein were
included in the Agreement ab initio, and the covenants originally contained in
Section 5.10 shall be deemed for all purposes never to have been in force or
effect. The parties acknowledge that the provisions of Section 5.10 were agreed
to based upon mutually anticipated financial transactions and certain financial
assumptions, and that the revised covenants set forth in this Amendment
accurately reflect the parties' original intent upon entering into the
Agreement. The parties further acknowledge and agree that no default has
existed or now exists as a result of any failure to comply with such covenants.
4. Miscellaneous. Except as specifically modified and amended by this
Amendment, the Agreement shall remain in full force and effect, and the terms
of the Agreement are hereby ratified and confirmed in all respects as so
amended. Capitalized terms used and not defined in this Amendment but defined
in the Agreement shall have the respective meanings set forth in the Agreement.
[the remainder of this page intentionally left blank, signature page follows]
- 3 -
<PAGE> 5
IN WITNESS WHEREOF, each party hereto has executed or caused this
Amendment to be executed on its behalf, all on the day and year first above
written.
MEDIRISK, INC.
By: /s/ Kenneth M. Goins, Jr.
-------------------------
Title: Vice President
-------------------------
HEALTHPLAN SERVICES CORPORATION
By: /s/ James K. Murray, III
------------------------
Title: Executive Vice President
------------------------
- 4 -
<PAGE> 1
EXHIBIT 2.1
EXECUTION COPY
____________________________________________________________________
WARRANT AGREEMENT
DATED
JANUARY 8, 1996
BETWEEN
MEDIRISK, INC.
AND
HEALTHPLAN SERVICES CORPORATION
____________________________________________________________________
<PAGE> 2
WARRANT AGREEMENT
This WARRANT AGREEMENT is entered into this 8th day of January 1996, by
and between MEDIRISK, INC., a Florida corporation (the "Company"), and
HEALTHPLAN SERVICES CORPORATION, a Delaware corporation (the "Investor").
BACKGROUND
The Company is authorized to issue 20,000,000 shares of Series A Common
Stock, par value $0.001.
Pursuant to this Agreement, the Company shall issue up to 665,180 warrants
to the Investor entitling it to purchase, subject to adjustment as provided in
this Agreement, up to an aggregate of 665,180 shares of Series A Common Stock
of the Company, such maximum aggregate number of shares representing 16% of the
outstanding shares of Series A Common Stock of the Company on a fully diluted
basis on the date hereof.
Capitalized terms used in this Agreement shall have the meanings set forth
on APPENDIX A.
NOW, THEREFORE, the Company and the Investor agree as follows:
ARTICLE 1
THE WARRANTS
1.1 Issuance of Warrants. (a) On each Subsequent Closing Date, in
consideration of the purchase by Investor of the Senior Subordinated Notes
purchased on such Subsequent Closing Date, the Company shall issue to the
Investor a number of Warrants equal to the aggregate original principal amount
of the Senior Subordinated Notes purchased at such Subsequent Closing
multiplied by 0.066518 (the "Warrant Multiple"). A maximum of 665,180 Warrants
will be issued hereunder if Investor purchases Senior Subordinated Notes with
an aggregate original principal amount equal to $10,000,000, such Warrants
representing 16% of the outstanding shares of the Company on a fully diluted
basis on the date hereof. At each such Subsequent Closing the Company shall
deliver to the Investor a Warrant Certificate representing such Warrants. Each
Warrant will entitle the Investor to purchase one share of Series A Common
Stock of the Company, with such number being adjusted as provided in Article 4
of this Agreement on account of events occurring after the date of this
Agreement, whether or not such events occur before or after the issuance of the
Warrant.
(b) If the Company (i) establishes any credit facility (an "Other Credit
Facility") prior to such time as the maximum number of Warrants issuable
hereunder have been issued, which credit facility is not (A) Senior Debt (as
defined in the Securities Purchase Agreement) or (B) indebtedness issued by the
Company to a seller of a business
<PAGE> 3
acquired by the Company in connection with the Company's acquisition of such
business, and (ii) incurs any indebtedness under such Other Credit Facility,
then the Company shall issue to the Investor effective as of each day on which
it incurs indebtedness under such Other Credit Facility a number of Warrants
equal to the aggregate original principal amount of the indebtedness incurred
by the Company under such Other Credit Facility on such day multiplied by the
Warrant Multiple. The Company shall deliver to the Investor a Warrant
Certificate representing the Warrants issuable under this subsection (b) within
30 days after the day on which it incurs indebtedness under such Other Credit
Facility.
(c) Subject to the provisions of subsection (d) below, if on the day the
Company engages in, or experiences, a Maturity Event the Company has not issued
at least 68.15% of the maximum number of Warrants issuable under this
Agreement, then the Company shall issue to the Investor a number of Warrants
equal to (i) 68.15% of the maximum number of Warrants issuable under this
Agreement minus (ii) the number of Warrants that have been issued under this
Agreement prior to such Maturity Event. The Company shall deliver to the
Investor a Warrant Certificate representing the Warrants issuable under this
subsection (c) within 10 Business Days after the effective date of such
Maturity Event. For the purposes of this Agreement, the term "Maturity Event"
means (A) an Initial Public Offering by the Company; (B) a Change of Control of
the Company; (C) the third anniversary of the date of this Agreement; (D) any
acceleration by the Investor of the maturity of the Indebtedness outstanding
under the Senior Subordinated Notes or any Event of Default that would give the
Investor the right to accelerate such maturity at a time when the Investor is
precluded from accelerating such maturity by reason of a Subordination
Agreement, (E) the death of Mark A. Kaiser, if such death occurs on or after
January 1, 1997, and (F) the termination of the employment of Mark A. Kaiser
with the Company.
(d) Notwithstanding the provisions of subsection (c) above, if Mark A.
Kaiser dies on or before December 31, 1996 (a "1996 Kaiser Death"), the
Investor may, on any date after such 1996 Kaiser Death and prior to a
subsequent Maturity Event, terminate its commitment to purchase Senior
Subordinated Notes as set forth in the Securities Purchase Agreement or
determine not to purchase Senior Subordinated Notes that it was otherwise
obligated to purchase thereunder except for the occurrence of the 1996 Kaiser
Death (a "Kaiser Death Funding Termination Event"); and upon such Kaiser Death
Funding Termination Event, subsection (c) of this Section 1.1 shall terminate
and be of no force and effect. In the absence of a Kaiser Death Funding
Termination Event, the Company shall continue to issue Warrants to Investor in
accordance with the provisions of this Agreement.
1.2 Execution of Warrant Certificates. Warrant Certificates may be
signed on behalf of the Company by any person authorized by the Company to do
so. Any person who, on the actual date of the execution of a Warrant
Certificate, is authorized by the Company to sign the Warrant Certificate, may
sign on the Company's behalf even if such person was not authorized to do so on
the Subsequent Closing Date.
- 2 -
<PAGE> 4
1.3 Registration. The Company may deem and treat the registered Holder
of a Warrant Certificate as the absolute owner for all purposes, notwithstanding
any notation of ownership or other writing thereon made by anyone.
1.4 Exchanges. At the option of the Holder, any Warrant Certificate may
be exchanged when surrendered at the principal office of the Company for one or
more Warrant Certificates representing in the aggregate a Warrant or Warrants
to acquire a like number and kind of shares of Series A Common Stock in the
Company by the Holder. Warrant Certificates surrendered for exchange shall be
canceled by the Company.
1.5 Mutilated or Missing Warrant Certificates. If any of the Warrant
Certificates shall be mutilated, lost, stolen or destroyed, the Company shall
issue, in exchange and substitution for and upon cancellation of such Warrant
Certificate, a new Warrant Certificate representing an equivalent number of
Warrants, but only upon receipt of evidence of such loss, theft or destruction
reasonably satisfactory to the Company or, if requested by the Company, upon
receipt of a duly executed indemnification agreement reasonably satisfactory to
the Company; provided, however, that the Investor shall not be required to
deliver an indemnity bond.
1.6 Term and Exercisability of Warrants. The Warrants shall be
exercisable, at any time or from time to time, in whole or in part, in the
manner provided in Section 1.7; provided, however, that at the Expiration Date
any unexercised Warrants shall become void and all rights of the Investor with
respect to such Warrants shall cease.
1.7 Manner of Exercise of Warrants. Subject to the provisions of this
Agreement, the Investor shall have the right to purchase from the Company, and
the Company shall issue and sell to the Investor, one share of Series A Common
Stock for each Warrant exercised, upon surrender to the Company at its
principal office of the Warrant Certificate representing such Warrant, together
with a Form of Warrant Subscription in substantially the form of EXHIBIT A-2
completed and signed, and upon payment to the Company of the Exercise Price in
lawful money of the United States of America.
1.8 Issuance of Shares Upon Exercise. Upon exercise of a Warrant, the
Company shall issue and cause to be delivered to the Investor, registered in
the name of the Investor, a certificate representing the share or shares of
Series A Common Stock issuable upon the exercise of such Warrant. Such
certificate shall be deemed to have been issued, and the Investor shall be
deemed to have become a holder of record of such Series A Common Stock, as of
the date of surrender of the Warrant Certificate and payment of the Exercise
Price. The Warrants shall be exercisable, at the election of the Investor,
either as an entirety or for part only of the number of Warrants specified in
the Warrant Certificate representing such Warrants. If less than all of the
Warrants evidenced by a Warrant Certificate are exercised at any time prior to
the Expiration Date, a new Warrant Certificate or Certificates shall be issued
by the Company, registered in the name of the Investor, representing the
remaining unexercised number of Warrants evidenced by the
- 3 -
<PAGE> 5
Warrant Certificate so surrendered. All Warrant Certificates surrendered upon
exercise of Warrants shall be canceled by the Company.
1.9 Payment of Expenses and Taxes. The Company shall pay all expenses
and taxes imposed by law or any governmental agency, including any documentary
stamp taxes, attributable to the issuance of Warrant Shares upon the exercise
of Warrants.
1.10 Reservation of Shares. The Company covenants and agrees that, so
long as any Warrants remain outstanding, the Company shall (i) at all times
have authorized and reserved a number of shares of Series A Common Stock
sufficient to provide for the exercise of the Warrants, and (ii) take all such
action as may be required to assure that the par value, if any, per share of
Series A Common Stock is at all times equal to or less than the Exercise Price
as in effect from time to time pursuant to this Agreement.
1.11 Securities Law Compliance. If the issuance of any shares of Series A
Common Stock required to be reserved for purposes of the exercise of any
Warrants requires the registration with, or approval of, any governmental
authority or requires listing on any national securities exchange or national
market system before such shares may be so issued, the Company shall at its
expense use its best efforts to cause such shares to be duly registered,
approved or listed, as the case may be, so that such shares may be issued in
accordance with the terms hereof; provided, however, that the foregoing shall
not apply to the extent that such issuance would require registration or
qualification as a public offering as a result of the Transfer of the Warrants.
1.12 Fractional Shares. The Company need not issue fractional shares
upon the exercise of Warrants but in lieu thereof may pay to the Investor the
Fair Value of such fractional shares; provided, however, that in the event that
the Company undertakes a reduction in the number of shares of Series A Common
Stock outstanding, it shall be required to issue fractional shares to Investor
if it exercises all or any part of its Warrants.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 By the Company. The Company represents and warrants to the Investor
as follows:
2.1.1 Legal Status; Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated. The Company is duly qualified or
licensed to do business and is in good standing as a foreign corporation in all
jurisdictions where the nature of conduct of its business as now conducted
requires such qualification. The Company has all requisite corporate power and
authority to conduct business as presently conducted and as currently proposed
to be conducted, to own, lease, sell or otherwise dispose of or operate its
properties, and to enter into and perform this Agreement.
- 4 -
<PAGE> 6
2.1.2 Capitalization. Prior to giving effect to the transactions
contemplated hereunder and under the other Investment Documents, the authorized
capitalization and all outstanding shares of capital stock of the Company and
all outstanding Options and Convertible Securities are as set forth on EXHIBIT
C to the Securities Purchase Agreement.
2.1.3 Valid Issue. All shares of Series A Common Stock that may be issued
upon exercise of the Warrants are duly authorized and, upon issuance in
accordance with the provisions of this Agreement and payment therefor as herein
provided, shall be validly issued, fully paid and nonassessable and free from
all taxes, liens, charges and security interests (other than liens and security
interests created by the Investor).
2.1.4 Authority; No Conflicts. This Agreement and any other instruments
or documents to be executed and delivered on behalf of the Company pursuant to
this Agreement have been duly authorized by all necessary corporate action on
the part of the Company. Neither the execution and delivery nor the
performance of this Agreement and any other instruments or documents executed
and delivered pursuant hereto by the Company (i) conflicts with the Charter
Documents of the Company, (ii) violates any law, regulation or ordinance, or
any order or ruling of any court or governmental entity, applicable to the
Company or (iii) results in a breach or violation of, or constitutes a default
under, any term of any agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound.
2.1.5 Binding and Enforceability. This Agreement has been duly executed
and delivered by the Company and is a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium and other laws of general applicability
relating to or affecting creditors' rights and general principles of equity,
whether such enforcement is considered in a proceeding at law or in equity.
2.1.6 Governmental and Other Consents. No governmental or other consents,
approvals, authorizations, registrations, declarations or filings are required
for the execution and delivery of this Agreement on behalf of the Company and
the performance of this Agreement by the Company.
2.2 Securities Law Representations of the Investor. The Investor
represents, warrants and acknowledges to the Company as follows:
2.2.1 Investment. The Warrants issued to the Investor, and the Warrant
Shares to be issued to the Investor upon exercise of the Warrants, are being
acquired for investment only for the Investor's own account, not as a nominee
or agent, and not with a view to the resale or other distribution thereof. The
Investor has not been contacted concerning the acquisition of the Warrants or
Warrant Shares by means of any advertisement.
- 5 -
<PAGE> 7
2.2.2 Sophistication. The Investor has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of the Investor's investment in the Warrants and the Warrant Shares; the
Investor has the ability to bear the economic risks of such investment; the
Investor has the capacity to protect its own interests in connection with the
transactions contemplated by this Agreement; and the Investor has had an
opportunity to obtain such financial and other information from the Company as
the Investor deems necessary or appropriate in connection with evaluating the
merits of the investment in the Warrants and the Warrant Shares; provided,
however, that none of the Investor's representations hereunder are intended in
any way to limit the scope or applicability of the Company's representations
and warranties in this Agreement and the Securities Purchase Agreement, the
truth, accuracy and completeness of which such Investor has relied upon in its
investment in the Warrants and the Warrant Shares.
2.2.3 Accredited Investor. The Investor qualifies as an Accredited
Investor.
ARTICLE 3
COVENANTS OF THE COMPANY
The Company covenants that, so long as any of the Warrants or Warrant
Shares remain outstanding, the Company shall and shall cause each of its
Subsidiaries to:
3.1 Records. Maintain adequate books and records in accordance with
GAAP, and permit a representative of Investor, at any reasonable time during the
Company's regular business hours upon reasonable prior notice, to inspect,
copy, audit and examine such books and records, to visit and inspect the
properties of the Company and its Subsidiaries, and to discuss the business,
finances and affairs of the Company and its Subsidiaries with the officers and
directors thereof, all at the expense of the Company.
3.2 Existence; Compliance With Law. Preserve and maintain its corporate
existence, and all of its licenses, permits, governmental approvals, rights,
privileges and franchises necessary or desirable in the normal conduct of its
business as now conducted or presently proposed to be conducted; conduct its
business in an orderly and regular manner; comply with the provisions of all
documents pursuant to which it is organized or which govern its continued
existence; and comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority and requirements for the
maintenance of its insurance, licenses, permits, governmental approvals,
rights, privileges and franchises.
3.3 Reporting Requirements. From and after the date of this Agreement
and until the earlier to occur of (i) the Company's registration of one or more
of its classes of its securities under the Securities Exchange Act of 1934, as
amended, or (ii) Investor's ceasing to own or have the right to acquire an
aggregate of at least 25,000 shares of Series A Common Stock, the Company will
deliver to Investor:
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(i) as soon as available and in any event within 120 days after the end
of each Fiscal Year (other than the Fiscal Year ending December 31, 1995, in
which case on or before June 30, 1996), audited consolidated financial
statements of the Company and its Affiliated Companies (as defined in the
Securities Purchase Agreement) as of the end of and for such Fiscal Year,
together with an unqualified report thereon of the Company's independent
certified public accounting firm, such financial statements to include a
balance sheet, statements of income, shareholders' equity and cash flows, and
footnotes, all prepared in accordance with GAAP;
(ii) as soon as available and in any event within 30 days after the end
of each month, a consolidated balance sheet of the Company and its Affiliated
Companies as of the end of such month and statements of income, retained
earnings and cash flows of the Company and its Affiliated Companies for such
month and for the Fiscal Year to date, prepared in accordance with GAAP subject
to normal year-end audit adjustments applied on a basis consistent with prior
years;
(iii) as soon as possible and in any event within ten Business Days after
the Company has knowledge of the occurrence of any breach of this Agreement or
any other Investment Document (as defined in the Securities Purchase
Agreement), a statement of the chief executive officer, chief financial officer
or chief operating officer of the Company setting forth details of such event
and the action that the Company and its Affiliated Companies propose to take
with respect thereto;
(iv) as soon as possible and in any event within ten Business Days after
acquiring knowledge thereof, written notice of all litigation, actions, suits
or proceedings threatened or commenced affecting the Company or any of its
Affiliated Companies or the properties or business of the Company or any of its
Affiliated Companies if the relief sought thereunder is either unspecified as
to amount, or is for damages in excess of $10,000 or, if awarded, could
reasonably be expected to materially and adversely affect the business,
properties, condition (financial or otherwise), or operations of the Company or
any of its Affiliated Companies; and as soon as possible and in any event
within five Business Days after any material development or change in the
status of any such litigation, action, suit or proceeding, notice of such
development or change; and
(v) promptly after the furnishing thereof, copies of any statement or
report furnished to any other holder of the debt or equity securities of the
Company or any of its Affiliated Companies, including without limitation any
statement or report furnished pursuant to the terms of any stock purchase,
indenture, loan or credit or similar agreement and not otherwise required to be
furnished to Purchaser pursuant to any other clause of this Section 3.3, but
excluding (i) any statement or request delivered to any holder of the debt or
equity securities of the Company or any of its Affiliated Companies other than
in such Person's capacity as a holder of such debt or equity and (ii) routine
correspondence between the Bank (as defined in the Securities Purchase
Agreement) and the Company.
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ARTICLE 4
ANTI-DILUTION PROTECTION
4.1 Basis for Anti-Dilution Calculations. The parties agree that as of
the date of this Agreement each Warrant issued hereunder shall entitle its
holder to receive one share of Series A Common Stock upon the exercise of such
Warrant and that the maximum number of Warrants issuable hereunder is 665,180.
The parties acknowledge and agree that the number of shares of Series A Common
Stock or other consideration to be received upon the exercise of each Warrant
is subject to adjustment as provided in this Article 4 and that such number of
shares and other consideration shall be calculated as if each Warrant issued
hereunder was issued on and as of the date of this Agreement, regardless of
when actually issued. For Example, if (i) this Agreement were executed on
January 5, 1996 (but no Warrants were issued on such date), (ii) on January 25,
1996 an event took place that, upon application of the provisions of this
Article 4, would cause the number of shares of Series A Common Stock issuable
upon the exercise of a Warrant to be adjusted to 2.5 shares per Warrant and
(iii) 200 Warrants were issued on February 1, 1996, then the Warrants issued on
February 1, 1996 would entitle the Investor to receive 500 shares of Series A
Common Stock upon the exercise of all such Warrants.
4.2 Change in Exercise Price Upon Issuance of Securities. If the Company
issues or sells any shares of Series A Common Stock, other than Series A Common
Stock Outstanding on the date hereof and Excluded Shares, or issues any
Convertible Security or Option entitling the issuee to acquire shares of Series
A Common Stock for a consideration per share less than the Fair Value in effect
immediately prior to the time of such issuance or sale, then the Exercise Price
shall be reduced to the lower of the following:
(a) the price determined by dividing (i) an amount equal to the sum of
(x) the Series A Common Stock Outstanding immediately prior to such issuance or
sale multiplied by the then Current Exercise Price, plus (y) the aggregate
consideration, if any, received by the Company upon such issuance or sale, by
(ii) the Series A Common Stock Outstanding immediately after such issuance or
sale; or
(b) the price determined by multiplying the Current Exercise Price by a
fraction (i) the numerator of which shall be the sum of (A) the Series A Common
Stock Outstanding immediately prior to such issuance or sale, plus (B) the
number of shares of Series A Common Stock that the aggregate consideration, if
any, received by the Company upon such issuance or sale would purchase at the
Fair Value on the date of such issuance or sale and (ii) the denominator of
which shall be the Series A Common Stock outstanding immediately after and
giving effect to such issuance or sale.
For the purposes of Section 4.2, the following provisions shall also be
applicable:
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4.2.1 Cash Consideration. If the Company issues the Series A Common
Stock, Option or Convertible Security for cash, the consideration received by
the Company therefor (or, if such shares are offered by the Company for
subscription, the subscription price, or, if such shares are sold to
underwriters or dealers for public offering without a subscription offering,
the initial public offering price), after deducting therefrom any compensation
or discount paid or allowed to underwriters or dealers or others performing
similar services but without deducting therefrom any expenses incurred in
connection therewith, shall be deemed to be the consideration received by the
Company for such shares.
4.2.2 Non-Cash Consideration. If the Company issues (other than upon
conversion or issuance of a Convertible Security) the Series A Common Stock,
Option or Convertible Security for a consideration wholly or partially other
than cash, including services rendered, the fair value of such consideration,
as determined by the Board of Directors of the Company in good faith shall be
deemed to be the value, for purposes of this Section 4.2, of the consideration
other than cash received by the Company for such securities except that any
Series A Common Stock, Option or Convertible Security issued for services shall
be deemed to be issued for no consideration.
4.2.3 Options and Convertible Securities. If the Company issues or grants
any Option or any Convertible Security, and the inclusion thereof (as if
exercised or converted) in the calculation of an adjusted Exercise Price
pursuant to this Section 4.2 would result in an Exercise Price lower than if
such Option or Convertible Security were excluded, then the total maximum
number of shares of Series A Common Stock issuable upon the exercise of such
Option or upon conversion or exchange of the total maximum amount of such
Convertible Security outstanding at the time such Convertible Security first
becomes convertible or exchangeable shall be deemed to be issued and to be
outstanding for the purposes of this Section 4.2 as of the date of issue or
grant of such Option or, in the case of the issue or sale of a Convertible
Security other than where the same is issuable upon the exercise of an Option,
as of the date of such issue or sale and to have been issued for the sum of the
amount (if any) paid for such Option or Convertible Security and the amount (if
any) payable upon the exercise of such Option or upon conversion or exchange of
such Convertible Security at the time such Convertible Security becomes
convertible or exchangeable. If the inclusion of such Option or Convertible
Security (as if exercised or converted) would not result in an Exercise Price
lower than if such Option or Convertible Security were excluded, or if, at the
time of exercise, the Exercise Price which would result from deeming such an
Option or Convertible Security to have been issued on the date of exercise is
lower than that which resulted from adjustment of the Exercise Price at the
time of issuance, then such Option or Convertible Security shall not be deemed
to be issued until the close of business on the date of exercise, conversion or
exchange and issuance of Series A Common Stock pursuant thereto.
4.2.4 Reclassification. The reclassification of securities other than
Series A Common Stock into securities including Series A Common Stock shall be
deemed to
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involve the issuance for a consideration other than cash of such Series A
Common Stock at the close of business on the date fixed for the determination
of stockholders entitled to receive such Series A Common Stock.
4.3 Change in Exercise Price or Conversion Rate of Option or Convertible
Securities.
4.3.1 Not Due to Dilution. If the purchase price provided for in any
Option, or the additional consideration (if any) payable upon the conversion or
exchange of any Convertible Security, or the rate at which any Convertible
Security is convertible into or exchangeable for shares of Series A Common
Stock changes at any time (other than under or by reason of provisions designed
to protect against dilution), the Current Exercise Price in effect at the time
of the change shall be readjusted to the Exercise Price that would have been in
effect at such time had such Option or Convertible Security still outstanding
provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted, issued or
sold.
4.3.2 Due to Dilution. If the purchase price provided for in any Option,
or the additional consideration (if any) payable upon the conversion or
exchange of any Convertible Security, or the rate at which any Convertible
Security is convertible into or exchangeable for shares of Series A Common
Stock is reduced at any time under or by reason of provisions with respect
thereto designed to protect against dilution, then in case of the delivery of
shares of Series A Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Security, the Current Exercise
Price then in effect hereunder shall, upon issuance of such shares of Series A
Common Stock, be adjusted to such amount as would have obtained had such Option
or Convertible Security never been issued and had adjustments been made only
upon the issuance of the shares of Series A Common Stock delivered as aforesaid
and for the consideration actually received for such Option or Convertible
Security and the Series A Common Stock.
4.4 Termination of Option or Conversion Rights. If any right to purchase
Series A Common Stock under any Option or any right to convert or exchange any
Convertible Security terminates or expires, the Current Exercise Price shall,
upon such termination, be changed to the Exercise Price that would have been in
effect at the time of such expiration or termination had such Option or
Convertible Security to the extent outstanding immediately prior to such
expiration or termination, never been issued, and the shares of Series A Common
Stock issuable thereunder shall no longer be deemed to be Series A Common Stock
Outstanding.
4.5 Stock Splits; Etc.
4.5.1 Adjustment for Stock Splits and Combinations. If the Company shall
at any time or from time to time after the date of this Agreement effect a
subdivision or combination of any outstanding shares of Series A Common Stock,
the Exercise Price
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then in effect immediately before that subdivision or combination shall be
proportionately adjusted by multiplying the then effective Exercise Price by a
fraction, (i) the numerator of which shall be the number of shares of Series A
Common Stock issued and outstanding immediately prior to such subdivision or
combination, and (ii) the denominator of which shall be the number of shares of
Series A Common Stock issued and outstanding immediately after such subdivision
or combination. The number of shares of Series A Common Stock outstanding at
any time shall, for the purposes of this Section 4.5, include the number of
shares of Series A Common Stock into which any convertible securities of the
Company may be converted, or for which any warrant, option or rights of the
Company may be exchanged. Any adjustment under this Section 4.5 shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
4.5.2 Adjustments for Other Dividends and Distributions. In the event the
Company at any time or from time to time after the date of this Agreement shall
make or issue, or fix a record date for the determination of holders of shares
of Series A Common Stock entitled to receive, a dividend or other distribution
payable in (i) evidences of indebtedness of the Company, (ii) assets of the
Company (other than cash), or (iii) securities of the Company other than shares
of Series A Common Stock, then and in each such event provision shall be made
so that the holders of Warrants shall receive upon exercise thereof, in
addition to the number of shares of Series A Common Stock receivable upon the
exercise thereof, the amount of such evidences, assets or securities that they
would have received had they held, on such record date, the maximum number of
shares of Common Stock they could have received upon exercise of their
Warrants.
4.5.3 Adjustment for Reclassification, Exchange or Substitution. If the
Series A Common Stock issuable upon the exercise of the Warrants shall be
changed into the same or a different number of shares of any class or classes
of stock, whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for above, or a reorganization, merger, consolidation or sale of assets
provided for elsewhere in this Section 4.5), then and in each such event the
holder of a Warrant shall have the right thereafter to receive upon the
exercise of such Warrant the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification
or other change, by holders of the maximum number of shares of Series A Common
Stock as the holder of a Warrant could have received upon exercise of such
Warrant immediately prior to such reorganization, reclassification or change,
all subject to further adjustment as provided herein.
4.5.2 Reorganization, Mergers, Consolidations or Sales of Assets or
Capital Stock. If at any time or from time to time there shall be (i) a
capital reorganization of the Series A Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section 4.5) or (ii) a merger, consolidation or statutory share exchange
of the Company with or into another corporation in which consolidation, merger
or statutory share exchange persons owning
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capital stock of the Company immediately prior to the consolidation, merger or
share exchange own less than a majority of the voting stock of the resulting,
surviving or exchanging corporation, or (iii) the sale of all or substantially
all the Company's properties and assets or capital stock to any other person,
then, as a part of such reorganization, merger, consolidation, share exchange
or sale, provision shall be made so that the holders of the Warrants shall
thereafter be entitled to receive, upon exercise of the Warrants, the number of
shares of stock or other securities or property of the Company, or of the
successor corporation resulting from such merger or consolidation, share
exchange or sale, to which a holder of the maximum number of shares of Series A
Common Stock that a holder of a Warrant could receive upon exercise thereof
would have been entitled on such capital, reorganization, merger, share
exchange, consolidation, or sale. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 4.5 with
respect to the rights of the holders of the Warrants after the reorganization,
merger, share exchange, consolidation or sale to the end that the provisions of
this Section 4.5 (including adjustment of the Exercise Price then in effect and
the number of shares purchasable upon exercise of the Warrants) shall be
applicable after that event as nearly equivalent as may be practicable.
4.6 Successive Changes. The provisions of this Article shall apply to
successive issuances, dividends or other Distributions, subdivisions and
combinations on or of shares of Series A Common Stock after the date of this
Agreement.
4.7 Adjustment of Shares Issuable Upon Exercise of Warrants. Upon each
adjustment of the Exercise Price as a result of the calculations made pursuant
to this Article 4, each Warrant outstanding prior to the making of the
adjustment in the Exercise Price shall thereafter be treated as that number of
Warrants, and shall evidence the right to purchase, at the adjusted Exercise
Price, that number of shares of Series A Common Stock (calculated to the
nearest hundredths), obtained by (i) multiplying the number of shares of Series
A Common Stock purchasable upon exercise of a Warrant prior to adjustment by
the Exercise Price in effect prior to adjustment, and (ii) dividing the product
so obtained by the Exercise Price in effect after such adjustment of the
Exercise Price.
4.8 Notice of Adjustment to Holders. Upon the occurrence of each
adjustment or readjustment of the Exercise Price, the Company at its expense
shall compute such adjustment or readjustment in accordance with the terms
hereof. Promptly, and in no case more than 60 days after the occurrence of
such adjustment or readjustment, the Company shall furnish the Investor with a
certificate signed by the Company's chief financial officer setting forth in
reasonable detail (i) the Exercise Price after such adjustment or readjustment,
(ii) the method of calculation and the facts upon which such calculation is
based and (iii) the number of shares of Series A Common Stock purchasable upon
exercise of a Warrant after such adjustment or readjustment. If, within ten
Business Days after receipt of such certificate, the Investor so requests in
writing, the Company shall at its expense cause the computation of an
adjustment or readjustment to be recalculated by independent certified public
accountants of recognized standing selected by the Company,
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which accountants shall have had no affiliation with the Company for the five
years preceding such recalculation except to make another recalculation
hereunder or under the provisions of the Company's Articles of Incorporation
governing the Series B Convertible Preferred Stock. At any time or from time
to time, upon written request from the Investor, the Company shall at its
expense provide the Investor a certificate setting forth the current Exercise
Price and the number of shares of Series A Common Stock and the amount, if any,
of other property which at that time would be received by the Investor upon
exercise of its Warrants.
4.9 Certain Other Actions Prohibited. The Company shall not by amendment
of its Charter Documents or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the provisions of this Agreement, but shall at all times in good faith
assist in the carrying out of all of the provisions of this Agreement and shall
take all such action as the Investor may reasonably request to protect the
exercise privilege of the Investor against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (i) shall not
increase the par value of a share of Series A Common Stock above the Exercise
Price, (ii) shall take all such actions as may be necessary or appropriate
under local, state or federal laws of the United States of America in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Series A Common Stock upon the exercise of all Warrants from time to
time outstanding and (iii) shall not take any action which results in any
adjustment of the Exercise Price if the total number of shares of Series A
Common Stock or other securities issuable after the action upon the exercise of
all of the Warrants, Options and Convertible Securities then outstanding would
exceed the total number of shares of Series A Common Stock or other securities
then authorized by the Company's Charter Documents and available for the
purpose of issue upon such exercise.
ARTICLE 5
CERTAIN CORPORATE TRANSACTIONS
5.1 Prohibition on Dividends, Distributions. For so long as any of the
Warrants or Warrant Shares remain outstanding, the Company shall not declare or
pay any dividend or Distribution in cash, stock or any other property on its
capital stock now or hereafter outstanding or on any Option now or hereafter
outstanding (other than the Warrants) or redeem, retire, purchase or otherwise
acquire any shares of any class of its capital stock now or hereafter
outstanding or any Option now or hereafter outstanding (other than the
Warrants); provided, however, that nothing in this Section 5.1 or any other
provision of this Warrant Agreement shall restrict the Company's purchase of
shares of Series A Common Stock or options to purchase Series A Common Stock
pursuant to the terms of any shareholder or other agreement between the Company
and any employee or former employee of the Company in accordance with the terms
of such agreement; provided, further, that nothing in this Section 5.1 or any
other provision of this Warrant Agreement shall restrict the Company's ability
to declare or pay a dividend or Distribution permitted by the Securities
Purchase Agreement if such dividend or Distribution is paid to
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the Investor as if all Warrants held by the Investor immediately prior to such
dividend or Distribution were exercised in full.
5.2 Reorganization. For so long as any of the Warrants or Warrant Shares
remain outstanding, the Company shall not reorganize, or consolidate with,
merge into or enter into a statutory share exchange with another corporation,
partnership or other entity (other than a reorganization, consolidation or
merger not involving a Change of Control in which the Company is the surviving
entity) or transfer all or substantially all of its assets to another entity
(any one of which shall constitute a "Reorganization") unless each Holder shall
have the right to continue to have the Warrants outstanding and receive upon
exercise thereof the consideration specified in Section 4.5.4.
5.3 Notice. Notice of any contemplated Reorganization, or of any
dissolution, winding up or liquidation, and the proposed terms thereof,
including specifically in the case of a Reorganization how compliance with the
requirements of Section 5.2 shall be secured, shall be given to the Holders at
least 30 days before (i) the proposed consummation of such Reorganization,
dissolution, winding up or liquidation or (ii) the record date therefor,
whichever is earlier.
ARTICLE 6
MISCELLANEOUS
6.1 Transfers. Prior to the earlier to occur of (i) an Initial Public
Offering by the Company or (ii) December 31, 2002, Investor may not assign this
Agreement or make a transfer of the Warrants, except to an Affiliate of
Investor, the obligations of which Affiliate the Investor unconditionally
guarantees. Following an Initial Public Offering by the Company or December
31, 2002, the Investor may transfer the Warrants to any Person subject to
compliance with applicable federal and state securities laws.
6.2 Notices. In order to be effective, any notice or other communication
required or permitted hereunder, shall, unless otherwise stated herein, be in
writing and shall be transmitted by messenger, delivery service, mail,
telecopy, as specified below:
If to Investor:
HealthPlan Services Corporation
P. O. Box 30098
Tampa, Florida 33630-3098
Telecopier: (813) 289-9559
Attention: Mr. James K. Murray III, Executive
Vice President and Chief Financial Officer
and Mary Fahy, General Counsel
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with a copy (which shall not constitute notice) to:
Fowler, White, Gillen, Boggs, Villareal, and Banker, P.A.
501 East Kennedy Boulevard, Suite 1700
Tampa, Florida 33602
Telecopier: (813) 229-8313
Attention: David C. Shobe
If to the Company:
Medirisk, Inc.
Two Piedmont Center, Suite 400
3565 Piedmont Road
Atlanta, Georgia 30305-1502
Telecopier: (404) 364-6711
Attention: Mark A. Kaiser, Chairman and Chief
Executive Officer
With a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopier: (404) 881-7777
Attention: Keith O. Cowan
or at such other address as a party shall designate in a written notice to the
other parties hereto given in accordance with this Section 6.2. All notices
and other communications shall be effective (i) if sent by messenger or
delivery service, when delivered, (ii) if sent by mail, five days after having
been sent by certified mail, with return receipt requested, or (iii) if sent by
telecopier with receipt acknowledged, when sent.
6.3 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that Investor may not assign this Agreement or any rights
hereunder except as provided in Section 6.1.
6.4 Costs of Enforcement. If any party to this Agreement seeks to
enforce its rights under this Agreement by legal proceedings, the
non-prevailing party shall pay all reasonable costs and expenses incurred by
the prevailing party, including, without limitation, all reasonable attorneys'
fees.
6.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF
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<PAGE> 17
GEORGIA.
6.6 CONSENT TO EXCLUSIVE JURISDICTION, VENUE AND FORUM. THE COMPANY
HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION, VENUE AND FORUM OF ANY STATE OR
FEDERAL COURT IN TAMPA, FLORIDA WITH RESPECT TO ANY ACTION, WHETHER COMMENCED
BY AN INVESTOR OR ANY OTHER PERSON, WHICH, IN WHOLE OR IN PART, IN ANY WAY
ARISES UNDER OR RELATES TO THIS AGREEMENT, AND THE COMPANY AGREES THAT ANY SUCH
ACTION FILED BY IT WILL BE FILED IN SUCH A COURT.
6.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which, when so executed, shall be deemed to be an
original and all of which, when taken together, shall constitute but one and
the same agreement.
6.8 Survival of Representations and Warranties. The representations and
warranties in this Agreement shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
notwithstanding any investigation made by any of the Investor, their agents or
representatives. All statements as to factual matters contained in any
certificate, exhibit or other instrument delivered by or on behalf of the
Company pursuant hereto or in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties of the Company
hereunder as of the date of such certificate, exhibit or instrument.
6.9 Remedies. In the event of a breach by the Company of this Agreement,
the Investor, in addition to being entitled to exercise all rights granted by
law, including recovery of damages, shall be entitled to seek specific
performance of its rights under this Agreement. The Company agrees that in any
action seeking specific performance of this Agreement (i) it will not argue
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach of this Agreement by the Company and (ii) it will waive
the defense in any action for specific performance that a remedy at law would
be adequate.
6.10 Incorporation of Exhibits and Schedules by Reference. All Exhibits
and Schedules to this Agreement are incorporated herein by this reference.
6.11 Entire Agreement; Amendment. This Agreement (including the Exhibits,
Schedules and the parts of the Securities Purchase Agreement incorporated by
reference herein) constitute the entire agreement between the Company and the
Investor with respect to the subject matter hereof, superseding all prior or
contemporaneous negotiations, communications, discussions and correspondence
concerning the subject matter hereof. This Agreement may be modified or
amended or any provision hereof may be waived only with the written consent of
the Holders of at least two-thirds (2/3) of the aggregate number of Warrants
and Warrant Shares then outstanding.
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(remainder of page intentionally left blank, signatures follow)
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<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, this Agreement
to become effective as of the date first above written.
MEDIRISK, INC.
By: /s/ Mark A. Kaiser
---------------------------------
Mark A. Kaiser, Chairman and
Chief Executive Officer
HEALTHPLAN SERVICES
CORPORATION
By: /s/ James K. Murray III
----------------------------------
James K. Murray III, Executive
Vice President and Chief Financial
Officer
<PAGE> 20
EXHIBITS
Exhibit A: Form of Warrant Certificate
A-1: Form of Assignment
A-2: Form of Warrant Subscription
B-1
<PAGE> 21
APPENDIX A
DEFINITIONS
A. Certain Defined Terms. The following terms used in this Agreement
have the following meanings:
"Accredited Investor" has the same meaning as in Section 501(a)(3) of
Regulation D promulgated under the Act.
"Act" means the Securities Act of 1933, as amended from time to time, or
any successor statute.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, controls, or is under common control with, or is controlled by,
such Person. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") means
possession, directly or indirectly, of power to direct or cause the direction
of management or policies (whether through ownership of securities, or
partnership or other ownership interests, by contract or otherwise); provided
that, in any event: (i) any Person which owns directly or indirectly 50% or
more of the securities having ordinary voting power for the election of
directors or other members of the governing body of a corporation or fifty 50%
or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
control such corporation or other Person.
"Change of Control" has the meaning set forth in the Securities Purchase
Agreement.
"Charter Documents" of a Person means the articles or certificate of
incorporation, the by-laws and any other charter documents of such Person,
including without limitation any certificate of designation, as amended or
restated and as in effect as of the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Act.
"Convertible Securities" means any indebtedness or shares of capital stock
convertible into or exchangeable for shares of Series A Common Stock.
<PAGE> 22
"Current Exercise Price" means the Exercise Price immediately before the
occurrence of any event which, pursuant to Article 4, causes an adjustment to
the Exercise Price.
"Distribution" has the meaning given such term "distribution" in Section
607.06401 of the Florida Business Corporation Act as in effect on the date of
this Agreement, including without limitation, the distribution of evidences of
the Company's indebtedness, securities other than the Company's voting common
stock, and other assets.
"Event of Default" shall have the meaning given such term in the
Securities Purchase Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute.
"Excluded Shares" has the meaning set forth in the Amended and Restated
Articles of Incorporation of the Company in effect as of the date of this
Agreement
"Exercise Price" means the price of $0.01 per share adjusted from time to
time as provided in Article 4.
"Expiration Date" means 5:00 p.m., Atlanta time, on January 8, 2003.
"Fair Value" of a share of Series A Common Stock on any specified date
means:
(i) If shares of Series A Common Stock are then listed or admitted to
trading on any national securities exchange or traded on any national market
system, the average of the daily closing prices for the thirty (30) trading
days before such date, excluding any trades which are not bona fide, arm's
length transactions. The closing price for each day shall be the last sale
price on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices on such date, in each case as officially
reported on the principal national securities exchange or national market
system on which such shares are then listed, admitted to trading or traded.
(ii) If no shares of Series A Common Stock are then listed or admitted to
trading on any national securities exchange or traded on any national market
system, the average of the reported closing bid and asked prices thereof on
such date in the over-the-counter market as shown by the National Association
of Securities Dealers automated quotation system or, if such shares are not
then quoted in such system, as published by the National Quotation Bureau,
Incorporated or any similar successor organization, and in either case as
reported by any member firm of the New York Stock Exchange selected by the
Holder.
(iii) If no shares of Series A Common Stock are then listed or admitted to
trading on any national exchange or traded on any national market system, and
if no
<PAGE> 23
closing bid and asked prices thereof are then so quoted or published in the
over-the-counter market, the fair value of a share of Series A Common Stock
shall be as mutually agreed by the Company and the Investor; provided, however
that if the Company and the Investor are unable to mutually agree upon the fair
value, the Company and the Investor shall, within five days from the date that
either party determines that they cannot agree, jointly retain an investment
banking firm, or a nationally recognized accounting firm or other firm
providing similar valuation services, satisfactory to each of them. If the
Company and the Investor are unable to agree on the selection of such a firm
within such five day period, the Company and the Investor shall, within twenty
days after expiration of such five day period, each retain a separate
independent investment banking firm (which firm, in either case, shall not be
the investment banking firm regularly retained by the Company or the Investor).
If either the Company or the Investor fail to retain such an investment
banking firm during such twenty day period, then the independent investment
banking firm retained by the Investor or the Company, as the case may be, shall
alone take the actions described below. Such firms shall determine within
thirty days of being retained the fair value of a share of Series A Common
Stock and deliver their opinion in writing to the Company and to the Investor
as to the fair value. If such firms cannot jointly agree upon the fair value,
then, unless otherwise directed in writing by both the Company and the
Investor, such firms, in their sole discretion, shall choose another investment
banking firm independent of the Company and the Investor, which firm shall make
such determination and render such an opinion as promptly as practicable. In
either case, the determination so made shall be conclusive and binding on the
Company and the Investor. The fees and expenses for such determination made by
any and all such investment banking or other firms shall be paid one-half by
the Company and one-half by the Investor. In the determination of the fair
value of a share of Series A Common Stock, there shall not be taken into
consideration any premium for shares representing control of the Company.
"GAAP" means generally accepted accounting principles and practices,
consistently applied, as promulgated in (i) the documents of Rule 203 of the
Code of Professional Conduct of the American Institute of Certified Public
Accountants, (ii) Statement of Accounting Standards No. 43 "Omnibus Statement
on Auditing Standards" of the Auditing Standards Board of the American
Institute of Certified Public Accountants and (iii) any superseding or
supplemental documentation of equal authority promulgating generally accepted
accounting principles and practices, all as in effect from time to time.
Accounting principles and practices are "consistently applied" when the
accounting principles and practices observed in a current period are comparable
in all material respects to the accounting principles and practices applied in
the preceding period.
"Holder" means any registered holder of Warrants or Warrant Shares.
"Initial Public Offering" has the meaning set forth in the Securities
Purchase Agreement
"Maturity Event" has the meaning set forth in Section 1.3(c).
<PAGE> 24
"New Securities" means any and all shares of the Company's capital stock,
Options or Convertible Securities other than Excluded Shares.
"Option" means any right, warrant or option to subscribe for or purchase
shares of Series A Common Stock or Convertible Securities, including the
Warrants.
"Other Credit Facility" has the meaning set forth in Section 1.1(b).
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts and other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Reorganization" has the meaning set forth in Section 5.2.
"Securities Purchase Agreement" means that certain Securities Purchase
Agreement, dated January 8, 1996, by and between the company and the Investor.
"Senior Subordinated Notes" means those promissory notes issued by the
Company pursuant to the Securities Purchase Agreement.
"Series A Common Stock" means the Series A Common Stock issued by the
Company or any successor thereto.
"Series A Common Stock Outstanding" means the number of shares of Series A
Common Stock outstanding plus the number of shares of Series A Common Stock
issuable upon exercise of all outstanding Options and upon conversion of all
outstanding Convertible Securities, including this Warrant.
"Subsequent Closing Date" means a date on which Senior Subordinated Notes
are purchased by the Investor pursuant to the Securities Purchase Agreement.
"Subsidiary" of any Person means a corporation of which more than fifty
percent (50%) of the outstanding shares of capital stock of each class entitled
to vote on the election of directors is owned by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries.
"Subordination Agreement" has the meaning set forth in the Securities
Purchase Agreement.
"Transfer" means the sale, pledge, assignment or other transfer of the
Warrants or the Warrant Shares, in whole or in part, and of the rights of the
Holders under this Agreement.
<PAGE> 25
"Warrant Certificates" means the certificates representing the Warrants,
registered in the name of the Holder, substantially in the form of EXHIBIT A.
"Warrant Multiple" has the meaning set forth in Section 1.1(a).
"Warrants" means the warrants issued pursuant to this Agreement, which,
when exercised, give the Holder thereof the right to obtain one share of Series
A Common Stock per warrant, subject to adjustment.
"Warrant Shares" means the shares of Series A Common Stock acquired or
acquirable upon exercise of the Warrants, any shares of Series A Common Stock
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, such shares of Series A
Common Stock any other interest in the Company that has been or may be acquired
upon exercise of the Warrants.
B Interpretation.
Unless the context of this Agreement clearly requires otherwise,
references to the plural include the singular, to the singular include the
plural, and to the part include the whole. The term "including" is not
limiting and the term "or" has the inclusive meaning represented by the term
"and/or." The words "hereof," "herein," "hereunder," and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to "Articles," "Sections,"
"Appendices," "Subsections," "Exhibits," and "Schedules" are to Articles,
Sections, Appendices, Subsections, Exhibits and Schedules, respectively, of
this Agreement, unless otherwise specifically provided. Terms defined herein
may be used in the singular or the plural. Any capitalized terms used herein
which are not specifically defined herein have the meaning given to them in the
Securities Purchase Agreement.
<PAGE> 26
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND THE SHARES PURCHASABLE
UPON EXERCISE OF THE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND
ANY APPLICABLE STATE SECURITIES LAWS.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE ISSUED PURSUANT TO AND ARE
SUBJECT TO A WARRANT AGREEMENT THAT FIXES THE RIGHTS AND OBLIGATIONS OF THE
COMPANY AND THE HOLDER OF THESE WARRANTS AND PLACES CERTAIN RESTRICTIONS ON THE
TRANSFERABILITY OF THE WARRANTS. A COPY OF THE WARRANT AGREEMENT IS ON FILE AT
THE COMPANY'S PRINCIPAL OFFICE.
<TABLE>
<CAPTION>
SERIES A COMMON STOCK WARRANT CERTIFICATE
<S> <C>
VOID AFTER January 8, 2003 For the Purchase of _______
Shares of Series A Common Stock
</TABLE>
MEDIRISK, INC. a Florida corporation (the "Company"), hereby certifies
that, for value received, HEALTHPLAN SERVICES CORPORATION, or any permitted
assigns, is the registered holder (the "Holder") of ________________________
(_________) Warrants (the "Warrants") to purchase shares (the "Shares") of
Series A Common Stock of the Company ("Series A Common Stock"). As of January
8, 1996, each Warrant entitles the Holder to purchase from the Company one
fully paid and nonassessable share of Series A Common Stock at an initial
exercise price (the "Exercise Price") of $.01 per share; provided, however,
that the number of shares that each Warrant entitles the Holder to purchase is
subject to adjustment as provided in Article 4 of the Warrant Agreement, dated
January 8, 1996, between the Company and the Holder (the "Warrant Agreement"),
whether the event leading to such adjustment takes place before or after the
date on which this Warrant Certificate is issued.
The Holder's right to purchase Shares hereunder shall be exercised by
surrender to the Company of this Warrant Certificate, together with an executed
Form of Warrant Subscription (attached hereto) and payment of the aggregate
Exercise Price of the Warrants exercised, at the principal executive office of
the Company, upon the terms and subject to the conditions set forth in this
Warrant Certificate and in the Warrant Agreement referred to herein.
A-1
<PAGE> 27
The Warrants represented by this Warrant Certificate are part of a duly
authorized issue of up to 665,180 warrants to purchase shares of Series A
Common Stock and have been issued pursuant to the Warrant Agreement. The
Warrant Agreement is incorporated in this Warrant Certificate by this reference
and must be referred to for a description of the rights, obligations and duties
of the Company and the Holders of the Warrants issued pursuant to the Warrant
Agreement.
If, upon any exercise of Warrants represented by this Warrant Certificate,
the number of Warrants exercised is less than the total number of Warrants
represented by this Warrant Certificate, there shall be issued to the Holder or
the Holder's assignee a new Warrant Certificate representing the number of
Warrants not exercised.
This Warrant Certificate, when surrendered to the Company in accordance
with the terms of the Warrant Agreement, may be exchanged without payment of
any service charge for another Warrant Certificate or Warrant Certificates
representing in the aggregate a like number of Warrants.
Subject to and in accordance with the terms of the Warrant Agreement, any
or all of the Warrants represented by this Warrant Certificate may be
transferred by presentation to the Company accompanied by an executed Form of
Assignment (attached hereto). A new Warrant Certificate representing the
number of Warrants so transferred shall be issued to the transferee, subject to
any limitations provided in the Warrant Agreement, without charge. If the
number of Warrants so transferred is less than the total number of Warrants
represented by this Warrant Certificate, there shall be issued to the
transferor a new Warrant Certificate representing the number of Warrants not
transferred.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
signed by the person named below thereunto duly authorized.
DATED: ____________, 199___ MEDIRISK, INC.
By:
----------------------------
Title:
----------------------------
A-2
<PAGE> 28
EXHIBIT A-1
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED, ____________________ hereby sells, assigns and
transfers unto ____________________, the Warrants represented by the within
Warrant Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ____________________ to transfer
such Warrants on the books of the within-named Corporation with full power of
substitution.
DATED: __________, 19__
Signature
--------------------------------
A-1-1
<PAGE> 29
EXHIBIT A-2
FORM OF WARRANT SUBSCRIPTION
(To be signed only upon exercise of Warrant.)
TO: __________
The undersigned, the holder of the Warrants represented by the attached
Warrant Certificate (the "Holder"), hereby irrevocably elects to exercise the
purchase right represented by such Warrants for, and to purchase thereunder,
__________* Shares of Series A Common Stock (the "Shares") of ______________
(the "Company") and herewith makes payment, as provided in the Warrant
Agreement, of US $_____________ therefor. The Holder hereby requests that the
Company issue ______ shares of Series A Common Stock and requests that the
certificate(s) for such Shares be issued in the name of, and delivered to:
--------------------
--------------------
--------------------
<TABLE>
<S> <C>
------------------------- (Signature must conform in all
------------------------- respects to name of Holder as
(Address) specified on the face of the
Warrant Certificate)
</TABLE>
Dated: __________, 19__.
* Insert here the number of Shares called for on the face of the Warrant
Certificate (or, in the case of a partial exercise, the portion thereof as
to which the Warrants are being exercised), in either case without making
any adjustment for additional Shares or any other securities or property
or cash which, pursuant to the adjustment provisions of the Warrant
Agreement, may be deliverable upon exercise.
A-2-1
<PAGE> 1
EXHIBIT 2.2
AMENDMENT NUMBER 1 TO WARRANT AGREEMENT
<PAGE> 2
AMENDMENT NUMBER 1 TO
WARRANT AGREEMENT
This AMENDMENT NUMBER 1 TO WARRANT AGREEMENT (this "Amendment") is entered
into on this 29th day of August, 1996, by and among MEDIRISK, INC., a Florida
corporation (the "Company"), and HEALTHPLAN SERVICES CORPORATION, a Delaware
corporation (the "Investor").
BACKGROUND
WHEREAS, the Investor and the Company are parties to a Warrant Agreement,
dated January 8, 1996 (the "Agreement"), pursuant to which the Company agreed
to issue up to 665,180 warrants entitling the Investor to purchase up to an
aggregate of 665,180 shares of Series A Common Stock of the Company; and
WHEREAS, the parties desire to amend the Agreement as set forth in this
Amendment.
NOW, THEREFORE, the Investor and the Company hereby agree as follows:
1. Amendment of Appendix A. Appendix A to the Agreement is amended by
deleting therefrom the definition of "Series A Common Stock" in its entirety and
inserting in lieu thereof the following:
"Series A Common Stock" manes the Series A Common Stock of the
Company and any stock into which such Series A Common Stock is converted
in any recapitalization, merger, consolidation, statutory share exchange
or similar event.
2. Miscellaneous. Except as specifically modified and amended by this
Amendment, the Agreement shall remain in full force and effect, and the terms of
the Agreement are hereby ratified and confirmed in all respects as so amended.
[the remainder of this page intentionally left blank]
<PAGE> 3
IN WITNESS WHEREOF, each party hereto has executed or caused this
Amendment to be executed on its behalf, all on the day and year first above
written.
MEDIRISK, INC.
By: Kenneth M. Goins, Jr.
---------------------
Title: Vice President
---------------------
HEALTHPLAN SERVICES CORPORATION
By James K. Murray, III
------------------------
Title: Executive Vice President
------------------------
- 2 -
<PAGE> 1
EXHIBIT 2.3
AMENDMENT NUMBER 2 TO WARRANT AGREEMENT
<PAGE> 2
AMENDMENT NUMBER 2 TO
WARRANT AGREEMENT
This AMENDMENT NUMBER 2 TO WARRANT AGREEMENT (this "Amendment") is entered
into on this 28th day of October, 1996, by and among MEDIRISK, INC., a Delaware
corporation (the "Company"), and HEALTHPLAN SERVICES CORPORATION, a Delaware
corporation (the "Investor").
BACKGROUND
WHEREAS, the Investor and the Company (as successor by merger to Medirisk,
Inc., a Florida corporation) are parties to a Warrant Agreement, dated January
8, 1996, as amended by Amendment Number 1 to Warrant Agreement, dated August __,
1996 (as so amended, the "Agreement"), pursuant to which the Company agreed to
issue up to 665,180 warrants entitling the Investor to purchase up to an
aggregate of 665,180 shares of Series A Common Stock of the Company; and
WHEREAS, the parties desire to amend the Agreement as set forth in this
Amendment.
NOW, THEREFORE, the Investor and the Company hereby agree as follows:
1. Amendment of Section 3.1. Section 3.1 to the Agreement is amended by
deleting such Section in its entirety and inserting in lieu thereof the
following:
3.1 Records. Until the earlier to occur of (i) the Company's payment
in full of all Senior Subordinated Notes issued to the Investor under the
Securities Purchase Agreement dated January 8, 1996 between the Company
and the Investor, and (ii) Investor's ceasing to own or have the right to
acquire an aggregate of at least 25,000 shares of Series A Common Stock,
the Company will (a) maintain adequate books and records in accordance
with GAAP, and (b) permit a representative of Investor, at any reasonable
time during the Company's regular business hours upon reasonable prior
notice, to inspect, copy, audit and examine such books and records, to
visit and inspect the properties of the Company and its Subsidiaries, and
to discuss the business, finances and affairs of the Company and its
Subsidiaries with the officers and directors thereof, all at the expense
of the Company.
2. Amendment of Section 5.1. Section 5.1 to the Agreement is amended by
deleting such Section in its entirety and inserting in lieu thereof the
following:
5.1 Prohibition on Dividends, Distributions. Until the Company's
registration of one or more of its classes of securities under the
Securities Exchange Act of 1934, as amended, the Company shall not declare
or pay any
<PAGE> 3
dividend or Distribution in cash, stock or any other property on its
capital stock now or hereafter outstanding or on any Option now or
hereafter outstanding (other than the Warrants) or redeem, retire,
purchase or otherwise acquire any shares of any class of its capital stock
now or hereafter outstanding or any Option now or hereafter outstanding
(other than the Warrants); provided, however, that nothing in this Section
5.1 or any other provision of this Warrant Agreement shall restrict the
Company's purchase of shares of Series A Common Stock or options to
purchase Series A Common Stock pursuant to the terms of any shareholder or
other agreement between the Company and any employee or former employee of
the Company in accordance with the terms of such agreement; provided,
further, that nothing in this Section 5.1 or any other provision of this
Warrant Agreement shall restrict the Company's ability to declare or pay a
dividend or Distribution permitted by the Securities Purchase Agreement if
such dividend or Distribution is paid to the Investor as if all Warrants
held by the Investor immediately prior to such dividend or Distribution
were exercised in full.
3. Miscellaneous. Except as specifically modified and amended by this
Amendment, the Agreement shall remain in full force and effect, and the terms of
the Agreement are hereby ratified and confirmed in all respects as so amended.
IN WITNESS WHEREOF, each party hereto has executed or caused this Amendment
to be executed on its behalf, all on the day and year first above written.
MEDIRISK, INC.
By: /s/ Kenneth M. Goins, Jr.
-------------------------
Title: Vice President
-------------------------
HEALTHPLAN SERVICES CORPORATION
By: /s/ James K. Murray, III
------------------------
Title: Executive Vice President
------------------------
- 2 -
<PAGE> 1
EXHIBIT 3.1
EXECUTION COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
DATED
JANUARY 8, 1996
BETWEEN
MEDIRISK, INC.,
AND
HEALTHPLAN SERVICES CORPORATION
================================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of
January 8, 1996 by and between MEDIRISK, INC., a Florida corporation (the
"Company"), and HEALTHPLAN SERVICES CORPORATION, a Delaware corporation (the
"Shareholder").
W I T N E S S E T H
WHEREAS, the Company and the Shareholder are parties to a Securities
Purchase Agreement dated January 8, 1996 (the "Securities Purchase Agreement"),
providing for, upon the terms and subject to the conditions of the Securities
Purchase Agreement, the acquisition by the Shareholder of Series B Convertible
Preferred Stock of the Company (the "Preferred Stock") and Warrants to purchase
Series A Common Stock of the Company (the "Warrants"), and upon the conversion
of the Preferred Stock or the exercise of the Warrants the Shareholder will
receive shares of Series A Common Stock of the Company (the "Restricted
Shares"); and
WHEREAS, it is in the best interests of the Company and the Shareholder
that certain registration rights be granted to the Shareholder with respect to
the Restricted Shares;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1. DEFINITIONS.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of Tampa, Florida are authorized by law to
close.
"Closing Date" shall have the meaning set forth in the Stock Purchase
Agreement.
"Commission" means the Securities and Exchange Commission and any
successor commission or agency having similar powers.
"Common Stock" means the Series A Common Stock of the Company and any
stock into which such Series A Common Stock is converted in any
recapitalization, merger, consolidation, statutory share exchange or similar
event.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE> 3
"Initial Public Offering" means the means the Company's first offering of
Common Stock of the Company that is registered under the Securities Act, which
offering is underwritten on a firm commitment basis and produces gross proceeds
in excess of $10,000,000.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture, or other
entity of whatever nature.
"Registrable Securities" means the Restricted Shares acquired by the
Shareholder upon conversion of the Preferred Stock or acquired upon the
exercise of the Warrants granted from time to time under the Warrant Agreement
(as defined in the Securities Purchase Agreement) and held by the Shareholder
at a given time; provided that any of such Restricted Shares shall cease to be
Registrable Securities if and when (i) a registration statement with respect to
the disposition of such Restricted Shares shall have become effective under the
Securities Act and such Restricted Shares shall have been disposed of pursuant
to such effective registration statement, (ii) such Restricted Shares have been
or could be sold to the public under circumstances in which all of the
applicable conditions of Rule 144 (or any similar rule then in force) under the
Securities Act were met or would be met, as the case may be, without limitation
on the number of Restricted Shares that could be sold by the Shareholder
thereunder, (iii) such Restricted Shares shall have been otherwise transferred,
if new certificates or other evidences for such Restricted Shares not bearing a
legend restricting further transfer and not subject to any stop transfer order
or other restrictions on transfer shall have been delivered by the Company and
subsequent disposition of such Restricted Shares shall not require registration
or qualification of such Restricted Shares under the Securities Act, or (iv)
such Restricted Shares shall have ceased to be outstanding.
"Registration Expenses" means (i) all registration and filing fees, (ii)
fees and expenses of compliance with federal or state securities or blue sky
laws (including fees and disbursements of counsel in connection with blue sky
qualification of the Registrable Securities), (iii) printing expenses, (iv)
internal expenses (including, without limitation, all salaries and expenses of
officers and employees of the Company performing legal or accounting duties),
(v) fees and disbursements of counsel for the Company and fees and expenses for
independent certified public accountants retained by the Company (including the
expenses of any comfort letters or costs associated with the delivery by
independent certified public accountants of a comfort letter or comfort letters
requested pursuant to Section 2.4(h) hereof), (vi) fees and expenses of any
special experts retained by the Company in connection with such registration,
(vii) fees and expenses of listing the Registrable Securities on a securities
exchange or interdealer quotation system, (viii) any documentary stamp or
similar taxes payable in connection with the issuance or sale of the
Registrable Securities, (ix) fees of the National Association of Securities
Dealers, Inc., and (x) fees of transfer agents and registrars; but shall not
include any underwriting fees, discounts or commissions attributable to the
sale of Registrable Securities, any out-of-pocket expenses of the Shareholder
(or the agents who manage the Shareholder's
- 2 -
<PAGE> 4
accounts) or any fees and expenses of counsel for the Shareholder or any
expenses of underwriters except as specifically indicated above.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE 2
REGISTRATION RIGHTS
2.1 DEMAND REGISTRATION. The Company shall, upon the written demand of
the Shareholder at any time after the closing of the Initial Public Offering by
the Company, use its reasonable best efforts to effect the registration (the
"Demand Registration") under the Securities Act of such number of Registrable
Securities held by the Shareholder as shall be indicated in a written demand
sent to the Company by the Shareholder; provided, however, that (i) the Company
shall only be obligated to effect one Demand Registration per calendar year and
a total of two Demand Registrations; (ii) the Company shall not be required to
register in any Demand Registration an amount of Registrable Securities
representing less than 2% of the number of shares of Series A Common Stock
then-outstanding or $5,000,000 in market value, whichever is less (except that
the Shareholder shall in any event be entitled to Demand Registration of all,
but not less than all, the Registrable Securities then held by it); (iii) a
Demand Registration shall not count as such until it has become effective and
the Shareholder has been able to register and sell at least 90% of the
Registrable Securities requested to be included in such registration, provided
that if, after it has become effective, the offering of Registrable Securities
pursuant to such registration is interfered with by any stop order, injunction
or other order or requirement of the Commission or other governmental entity or
court, such registration shall be deemed not have been effected unless such
stop order, injunction or other order or requirement shall subsequently have
been vacated or otherwise removed; (iv) a Demand Registration shall not count
as such if the Company (or any other shareholder of the Company) offers any of
its securities pursuant to a registration initiated in response to a demand by
the Shareholder (such registration being, instead, treated as a Piggyback
Registration as provided below); and (v) the Company shall not be required to
effect a Demand Registration if counsel for the Company reasonably acceptable
to the Shareholder shall deliver to the Shareholder an opinion reasonably
acceptable to counsel for the Shareholder that, pursuant to Rule 144 under the
Securities Act or otherwise, the Shareholder can sell Registrable Securities
proposed to be included in the Demand Registration without registration under
the Securities Act, without limitation as to the number of Registrable
Securities that are proposed to be sold by the Shareholder. The Company shall
pay all expenses in connection with a registration initiated as a Demand
Registration that, by reason of the application of the immediately preceding
sentence, does not count as a Demand Registration. If a Demand Registration is
initiated by the Shareholder, and the Company (or any other shareholder of the
Company with similar registration rights) then wishes to offer any of its
securities in connection with the registration, then the registration shall be
considered a Piggyback Registration (as defined in Section 2.2) and the
provisions of Section 2.2 and not this Section 2.1 shall apply. If a Demand
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Registrable
Securities and, if
- 3 -
<PAGE> 5
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any,
which can be sold in an orderly manner in such offering with a price range
acceptable to the Shareholder, the Company will include in such registration
prior to the inclusion of any securities that are not Registrable Securities
the number of Registrable Securities requested to be included which in the
opinion of such underwriters can be sold in an orderly manner within the price
range of such offering. Upon receipt of the Purchaser's written demand, the
Company shall expeditiously (but in any event within 90 days) file a
registration statement under the Securities Act for the Registrable Securities
and use its best efforts to have such registration statement declared effective
as soon as practicable after the filing thereof; provided that (A) the Company
shall not be required to cause any special audit to be undertaken in connection
with any such registration and (B) the Company shall not be required to file
any registration statement during any period of time (not exceeding 90 days)
when (I) the Company is contemplating a public offering of its securities and,
in the judgment of the managing underwriter thereof (or the Company, if such
offering is not underwritten) such filing would have a material adverse effect
on the contemplated offering, (II) the Company is in possession of material
information that it deems advisable not to disclose in a registration statement
or (III) the Company is engaged in any program for the repurchase of voting
securities of the Company. The Shareholder shall have the right to select the
underwriters for a Demand Registration, subject to the approval of the Company,
which approval will not be unreasonably withheld.
2.2 INCIDENTAL REGISTRATION.
(a) If the Company proposes to register any of its equity securities (the
"Priority Securities") under the Securities Act (other than a registration (i)
on Form S-8 or S-4 or any successor or similar forms, (ii) relating to equity
securities issuable upon exercise of employee stock options or in connection
with any employee benefit or similar plan of the Company, or (iii) in
connection with a direct or indirect acquisition by the Company of another
company), whether or not for sale for its own account, in a manner that would
permit registration of Registrable Securities for sale to the public under the
Securities Act, it will on each such occasion give prompt written notice to the
Shareholder of its intention to do so and of the Shareholder's rights under
this Section 2.2, at least 30 days prior to the anticipated filing date of the
registration statement relating to such registration. Any such notice shall
offer the Shareholder the opportunity to request to include in such
registration statement such number of Registrable Securities as the Shareholder
may request (the "Piggyback Registration"). Upon the written request of the
Shareholder made within 20 days after the receipt of notice from the Company
(which request shall specify the number of Registrable Securities intended to
be disposed of by the Shareholder and the intended method of disposition
thereof), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the Shareholder, to the extent requisite to
permit the disposition (in accordance with such intended methods thereof) of
the Registrable Securities so to be registered; provided that (i) if such
registration involves an underwritten public offering, the Shareholder must
sell its Registrable Securities to the underwriters selected by the Company on
the same terms and conditions as apply to the
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<PAGE> 6
Company; and (ii) if, at any time after giving written notice of its intention
to register any securities pursuant to this Section 2.2(a) and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
securities, the Company shall give written notice to the Shareholder and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration. If a registration pursuant to
this Section 2.2(a) involves an underwritten public offering and the
Shareholder requests shares be included in such registration, the Shareholder
may elect, by notice to the Company not less than 10 business days prior to the
anticipated effective date of the registration statement filed in connection
with such registration, not to register such shares in connection with such
registration.
(b) Priority In Incidental Registrations. If a registration pursuant to
this Section 2.2 involves an underwritten public offering and the managing
underwriter advises the Company that, in its view, the number of equity
securities (including all Registrable Securities) which the Company, the
Shareholder and any other persons intend to include in such registration
exceeds the largest number of securities that can, in the opinion of the
managing underwriter, be sold in such offering (the "Maximum Offering Size"),
the Company will include in such registration, in the following priority, up to
the Maximum Offering Size:
(i) first, all the Priority Securities (including any to be sold for
the Company's own account or for other holders of Priority Securities
exercising demand registration rights), with such priorities among them as
the Company may determine; and
(ii) second, the equity securities requested to be sold for the account
of the Shareholder and the holders of Registrable Securities and Executive
Registrable Securities (as defined in the Consent and Modification
Agreement dated January 8, 1996, by and among the Company, Brantley
Investment Partners II, L.P., Sears Pension Trust and Laurence H. Powell)
pro rata on the basis of the relative number of equity securities that all
such persons have requested to be included in such registration; and
(iii) third, the equity securities requested to be sold for the account
of all other persons pro rata on the basis of the relative number of equity
securities that all such persons have requested to be included in such
registration;
provided, however, that if securities owned by any executive officer of the
Company are included in the Priority Securities, then any Registrable
Securities that the Shareholder proposes to include in such registration shall
also be deemed Priority Securities, and to the extent securities owned by any
such executive officer are included in the registration, the Shareholder's
Registrable Securities shall be included in such registration pro rata with
those owned by the Shareholder and all executive officers on the basis of the
relative number of equity securities that the Shareholder and all such
executive officers have requested to be included in such registration.
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<PAGE> 7
2.3 HOLDBACK AGREEMENTS.
(a) If any registration of Registrable Securities shall be in connection
with an underwritten public offering and the Shareholder elects to have shares
included in such offering, the Shareholder agrees not to effect any public sale
or distribution under the Securities Act of any Registrable Securities (other
than the sale of Registrable Securities included in and as part of such
offering), and not to effect any such public sale or distribution of any other
equity security of the Company or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (in each
case, other than as part of such public offering) during the 5 business days
prior to, and during the 90-day period (or such longer period as requested by
the underwriters and agreed to by the Shareholder) which begins on, the
effective date of such registration statement, provided that the Shareholder
has received written notice of such registration at least two business days
prior to the anticipated beginning of the 5 business day period referred to
above.
(b) If any registration of Registrable Securities shall be in connection
with an underwritten public offering, the Company agrees not to effect any
public sale or distribution of any of its equity securities or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than any such sale or distribution of such securities in
connection with any merger or consolidation by the Company or any subsidiary of
the Company or the acquisition by the Company or a subsidiary of the Company of
the capital stock or substantially all the assets of any other person or in
connection with an employee stock ownership or other benefit plan) during the 5
business days prior to, and during the 90-day period (or such longer period as
requested by the underwriters and agreed to by the Company) which begins on,
the effective date of such registration statement.
2.4 REGISTRATION PROCEDURES. Whenever the Shareholder requests that any
Registrable Securities be registered pursuant to Section 2.1 or Section 2.2,
the Company will use its best efforts to effect the registration and the sale
of such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and the Company, in connection
with any such request, will:
(a) Prepare and file with the Commission, as expeditiously as possible,
a registration statement on any form for which the Company then qualifies
or which counsel for the Company shall deem appropriate and which form
shall be available for the sale of the Registrable Securities to be
registered thereunder and which shall state, if applicable, that the
subject Registrable Securities are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act, and use its best
efforts to cause such registration statement to become and remain effective
for the period of distribution contemplated thereby (determined as
hereinafter provided).
(b) Prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as
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<PAGE> 8
may be necessary to keep such registration statement effective for the
period specified in this Section 2.4 and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement in accordance with the sellers' intended method
of disposition set forth in such registration statement for such period.
(c) Will, a reasonable time prior to filing a registration statement
or prospectus or any amendment or supplement thereto, furnish to the
Shareholder and each underwriter, if any, of the Registrable Securities
covered by such registration statement copies of such registration
statement as proposed to be filed, and thereafter the Company will furnish
to the Shareholder and underwriter, if any, such number of copies of such
registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto and documents incorporated by
reference therein), the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as the
Shareholder or underwriter may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by the Shareholder.
(d) Promptly notify the Shareholder of any stop order issued or
threatened by the Commission and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
(e) Use its best efforts to (i) register or qualify the Registrable
Securities under such other securities or blue sky laws of such
jurisdictions in the United States as the managing underwriter or
Shareholder shall reasonably request and (ii) cause such Registrable
Securities to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company and to do any and all other acts and things that
may be reasonably necessary or advisable to enable the Shareholder to
consummate the disposition of the Registrable Securities owned by the
Shareholder; provided that the Company will not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise
be required to qualify but for this paragraph (e), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of
process in any such jurisdiction.
(f) Immediately notify the Shareholder and each underwriter, at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the occurrence 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 therein not misleading in the light of the circumstances then
existing, and the Company will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the
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<PAGE> 9
statements therein not misleading and promptly make available to the
Shareholder any such supplement or amendment.
(g) Make available for inspection by the Shareholder, any underwriter
participating in any disposition pursuant to such registration statement
and any attorney, accountant or other professional retained by the
Shareholder or underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and properties of the
Company and cause the Company's officers, directors and employees to
supply all information, in every instance where reasonably requested by
any Inspectors in connection with such registration statement.
(h) Will furnish to the Shareholder of Registrable Securities covered
by such registration statement and to each underwriter, if any, a signed
counterpart, addressed to the Shareholder or underwriter, of (i) an
opinion or opinions of counsel to the Company and (ii) a comfort letter or
comfort letters from the Company's independent public accountants, each in
customary form and covering such matters of the type customarily covered
by opinions or comfort letters in such transactions.
(i) Will otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission.
(j) Use its best efforts to cause all such Registrable Securities to
be listed on each securities exchange or interdealer quotation system on
which the same or similar securities issued by the Company are then
listed.
For purposes of paragraphs (a) and (b) of this Section 2.4, (i) the period
of distribution of securities in an underwritten public offering shall be
deemed to extend until the later of the date each underwriter has completed the
distribution of all securities purchased by it and the termination of the
period in which prospectuses must be delivered under Rule 174 of the Securities
Act, and (ii) the period of distribution of securities in any other
registration shall be deemed to extend until the earlier of the sale of all
securities covered thereby and 60 days after the effective date thereof.
The Company may require the Shareholder promptly to furnish in writing to
the Company such information regarding the distribution of the Registrable
Securities as the Company may from time to time reasonably request and such
other information as may be legally required in connection with such
registration.
In connection with each registration pursuant to Section 2.1 or Section
2.2 covering an underwritten public offering, the Company and the Shareholder
agree to enter into a written agreement with the managing underwriter in such
form and containing such provisions as are customary in the securities business
for such an arrangement between major underwriters and companies of the
Company's size and investment stature, provided that such agreement shall not
contain any provision applicable to the Company that is inconsistent with the
provisions hereof.
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<PAGE> 10
The Shareholder agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 2.4(f) hereof,
the Shareholder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until the Shareholder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 2.4(f) hereof. In the event that
the Company shall give such notice, the Company shall extend the period during
which such registration statement shall be maintained effective hereof by the
number of days during the period from and including the date of the giving of
notice pursuant to Section 2.4(f) hereof to the date when the Company shall
make available to the Shareholder a prospectus supplemented or amended to
conform with the requirements of Section 2.4(f) hereof.
2.5 EXPENSES. The Company will pay all Registration Expenses in
connection with any registration statement filed pursuant to Article II hereof.
All other expenses of registration, including underwriting discounts and
selling commissions and any out-of-pocket expenses incurred by the Shareholder
relating to the sale or disposition of the Shareholder's Registrable
Securities, shall be paid by the Shareholder.
2.6 INDEMNIFICATION BY THE COMPANY. If the Shareholder includes
Registrable Securities in a registration statement pursuant to Section 2.1 or
Section 2.2, the Company agrees to indemnify and hold harmless the Shareholder,
and each person, if any, who controls the Shareholder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, pending or threatened claims, damages, liabilities,
joint or several (or actions in respect thereof), including, as incurred and
without limitation, reasonable legal, accounting, expert witnesses, or other
costs of investigating, preparing or defending any such claim or action
("expenses"), arising under the Securities Act or otherwise, caused by any
untrue statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the Registrable Securities
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) or any preliminary prospectus, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon and in conformity with information relating to the
Shareholder or its plan of distribution of the Registrable Securities furnished
in writing to the Company by the Shareholder or on the Shareholder's behalf
expressly for use therein; provided, however, that with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus, or in any prospectus, as the case may be, the indemnity
agreement contained in this paragraph shall not apply to the extent that any
such loss, claim, damage, liability or expenses results from the fact that a
current copy of the prospectus (or, in the case of a prospectus, the prospectus
as amended or supplemented) was not sent or given to the person asserting
any such loss, claim, damage, liability or expenses at or prior to the written
confirmation of the sale of the Registrable Securities concerned to such person
if it is determined that the Company has provided such prospectus and it was
the responsibility
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<PAGE> 11
of the Shareholder to provide such person with a current copy of the prospectus
(or such amended or supplemented prospectus, as the case may be) and such
current copy of the prospectus (or such amended or supplemented prospectus, as
the case may be) would have cured the defect giving rise to such loss, claim,
damage, liability or expense. The Company also agrees to indemnify any
underwriters of the Registrable Securities, their officers and directors and
each person who controls such underwriters on substantially the same basis as
that of the indemnification of the Shareholders provided in this Section 2.6.
2.7 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES AND
UNDERWRITERS. The Shareholder, if any of its Registrable Securities are
included in any registration statement, agrees to indemnify and hold harmless
the Company, its officers, directors and agents and each person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to the Shareholder, but only with respect to
information relating to the Shareholder or its plan of distribution of the
Registrable Securities furnished in writing by the Shareholder or on the
Shareholder's behalf expressly for use in any registration statement or
prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or any preliminary prospectus. The Shareholder also agrees
to indemnify and hold harmless underwriters of the Registrable Securities,
their officers and directors and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the Company
provided in this Section 2.7. In no event and under no circumstances shall
Shareholder be liable for indemnification in an amount in excess of the
proceeds received by Shareholder from the sale of Registrable Securities
pursuant to the registration statement. As a condition to including
Registrable Securities in any registration statement filed in accordance with
Article II hereof, the Company may require that it shall have received an
undertaking reasonably satisfactory to it from any underwriter to indemnify and
hold it harmless to the extent customarily provided by underwriters with
respect to similar securities.
2.8 CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 2.6 or
2.7, such person (an "Indemnified Party") shall promptly notify the person
against whom such indemnity may be sought (the "Indemnifying Party") in writing
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all fees and expenses; provided that the failure of
any Indemnified Party so to notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent that the
Indemnifying Party is materially prejudiced by such failure to notify. In any
such proceeding, any Indemnified Party shall have the right to retain its own
counsel, and the fees and expenses of the counsel of such Indemnified Party
shall be at the expense of such Indemnifying Party if (i) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the retention of
such counsel or (ii) in the reasonable judgment
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<PAGE> 12
of such Indemnified Party representation of both parties by the same counsel
would be inappropriate because there may be defenses available to the
Indemnified Party 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. It is
understood that the Indemnifying Party shall not, in connection with any
proceeding or related proceedings, in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one counsel for the Shareholder's
Indemnified Parties and one counsel for the underwriters' Indemnified Parties
(in each case in addition to any local counsel) at any time for all such
Indemnified Parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firms for the Indemnified
Parties, such firm shall be designated in writing by the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent which consent shall not be unreasonably
withheld, but if settled with such consent, or if there shall be a final
judgment for the plaintiff, the Indemnifying Party shall indemnify and hold
harmless such Indemnified Parties from and against any loss or liability (to
the extent stated above) by reason of such settlement or judgment. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such proceeding.
2.9 CONTRIBUTION. If the indemnification provided for in this Article II
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities and expenses in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Parties in connection with the actions or inactions which resulted
in such losses, claims, damages, liabilities and expenses. The relative fault
of the Company on the one hand and of the Shareholder on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Shareholder agree that it would not be just and
equitable if contribution pursuant to this Section 2.9 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 2.9, the Shareholder
shall not be required to contribute any amount in excess of the amount by which
the net proceeds received by the Shareholder exceeds the amount of any damages
which the Shareholder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
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<PAGE> 13
2.10 PARTICIPATION IN PUBLIC OFFERING. No person may participate in any
registration hereunder unless such person (a) agrees to sell such person's
Restricted Shares on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and this Agreement.
2.11 OTHER INDEMNIFICATION. Indemnification similar to that specified
herein (with appropriate modifications) shall be given by the Company and the
Shareholder with respect to any required registration or other qualification of
securities under any state law or regulation or governmental authority other
than the Securities Act.
ARTICLE 3
MISCELLANEOUS
3.1 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
any provisions hereof.
3.2 NO INCONSISTENT AGREEMENTS. From and after the date of this
Agreement, the Company shall not enter into any agreement with any holder of
any securities of the Company providing for the granting to such holder of
registration rights unless such agreement:
(a) Includes as a term the equivalent of Section 2.3 of this
Agreement;
(b) Includes a provision that, in the case of a Demand
Registration, protects the Shareholder if marketing factors require a
limitation on the number of securities to be included in an underwriting in the
manner contemplated by Sections 2.1 and 2.2 of this Agreement; and
(c) Is otherwise not inconsistent with the rights granted to
the Shareholder in this Agreement.
3.3 REMEDIES. The Company acknowledges and agrees that in the event of
any breach of this Agreement by it, the Shareholder would be irreparably harmed
and could not be made whole by monetary damages. The Company accordingly
agrees (i) not to argue in any action for specific performance that a remedy at
law would be adequate, and (ii) that the Shareholder, in addition to any other
remedy to which she may be entitled at law or in equity, shall be entitled to
seek specific performance of this Agreement.
3.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein and therein, and there are no restrictions, promises,
representations, warranties, covenants, or undertakings with respect to the
subject matter hereof, other than those expressly set forth
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<PAGE> 14
or referred to herein or therein. This Agreement supersedes all prior
agreements and understandings between the parties hereto with respect to the
subject matter hereof.
3.5 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party hereto to another party hereto shall be in writing
and shall be deemed given upon the earlier of delivery thereof, if by hand or
upon receipt if sent by certified or registered mail, postage prepaid, return
receipt requested, or on the second next business day after deposit if sent by
a recognized overnight delivery service or upon facsimile transmission (with
request of assurance of receipt in a manner customary for communications of
such type), to the following addresses:
If to the Shareholder:
HealthPlan Services Corporation
P.O. Box 30098
Tampa, Florida 33630-3098
Facsimile #: (813) 289-9359
Attention: James K. Murray III, Executive
Vice President and Chief
Financial Officer,and
Mary Fahy, General Counsel
with a copy (which shall not constitute notice) to:
Fowler, White, Gillen, Boggs, Villareal and Banker,
P.A.
501 East Kennedy Boulevard, Suite 1700
Tampa, Florida 33602
Facsimile #: (813) 229-8313
Attention: David. C. Shobe
If to the Company:
Medirisk, Inc.
Two Piedmont Center, Suite 400
3565 Piedmont Road
Atlanta, Georgia 30305-1502
Facsimile #: (404) 364-6711
Attention: Mark A. Kaiser
with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Facsimile #: (404) 881-7777
Attention: Keith O. Cowan
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<PAGE> 15
(b) If delivered personally or by facsimile, the date on which a notice,
request, instruction or document is delivered shall be the date on which such
delivery is made and, if delivered by mail, the date on which such notice,
request, instruction or document is received shall be the date of delivery.
(c) Any party hereto may change its address specified for notices herein
by designating a new address by notice in accordance with this Section 3.5.
3.6 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA.
3.7 SEVERABILITY. The invalidity or unenforceability of any provisions
of this Agreement in any jurisdiction shall not affect the validity, legality
or enforceability of the remainder of this Agreement in such jurisdiction or
the validity, legality or enforceability of this Agreement, including any such
provision, in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
3.8 SUCCESSORS, ASSIGNS, TRANSFEREES. The provisions of this Agreement
shall be binding upon and accrue to the benefit of the parties hereto and their
respective heirs, successors, and assigns. Without limiting the generality of
the foregoing, the registration rights conferred herein on the Shareholder
shall inure to the benefit of any and all subsequent holders from time to time
of the Registrable Securities, unless otherwise agreed to by such subsequent
holders; provided that such subsequent holders promptly provide the Company
with their names and addresses and that such subsequent holder has acquired
such Registrable Securities in a transaction that did not violate Section 7.1
of the Securities Purchase Agreement.
3.9 COMPANY REPORTS. The Company covenants that, from and after the time
the Company engages in an Initial Public Offering, it will file the reports
required to be filed by the Company under the Securities Act and the Exchange
Act, and the rules and regulations adopted by the Commission thereunder; and it
will take such further action as the Shareholder may reasonably request, all to
the extent required from time to time to enable the Shareholder to sell the
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the reasonable request of
the Shareholder, the Company will deliver to the Shareholder a written
statement as to the status of the filings made by the Company with the
Commission with copies of such filings.
3.10 DEFAULTS. A default by any party to this Agreement in such party's
compliance with any of the conditions or covenants hereof or performance of any
of the obligations of such party hereunder shall not constitute a default by
any other party.
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<PAGE> 16
3.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same Agreement.
3.12 RECAPITALIZATION, ETC. In the event that any capital stock or other
securities are issued in respect of, in exchange for, or in substitution of,
any Registrable Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the Restricted Shares or any other change in
capital structure of the Company, appropriate adjustments shall be made in the
provisions of this Agreement so as to fairly and equitably preserve, as far as
practicable, the original rights of the Shareholder under this Agreement.
3.13 CONSENT TO EXCLUSIVE JURISDICTION, VENUE AND FORUM. THE COMPANY
HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION, VENUE AND FORUM OF ANY STATE OR
FEDERAL COURT IN TAMPA, FLORIDA WITH RESPECT TO ANY ACTION, WHETHER COMMENCED
BY THE SHAREHOLDER OR ANY OTHER PERSON, WHICH, IN WHOLE OR IN PART, IN ANY WAY
ARISES UNDER OR RELATES TO THE INVESTMENT DOCUMENTS, AND THE COMPANY AGREES
THAT ANY SUCH ACTION FILED BY IT WILL BE FILED IN SUCH A COURT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MEDIRISK, INC.
By: /s/ Mark A. Kaiser
-------------------------------------
Mark A. Kaiser
Chairman and Chief Executive Officer
HEALTHPLAN SERVICES CORPORATION
By: /s/ James K. Murray III
-------------------------------------
James K. Murray III
Executive Vice President and Chief
Financial Officer
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