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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
Date of Report (Date of earliest event reported): June 4, 1999.
Commission file number 000-27056
Caredata.com, Inc.
(Exact name of registrant as specified in its charter)
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Delaware 58-2256400
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(State or other jurisdiction of incorporation or organization) (I.R.S.Employer Identification No.)
Two Piedmont Center, Suite 400, 3565 Piedmont Rd., Atlanta, Georgia 30305
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(Address of principal executive office) (Zip code)
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Registrant's Telephone Number Including Area Code: (404) 364-6700
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Medirisk, Inc.
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 4, 1999, Caredata.com, Inc., formerly Medirisk, Inc., (the
"Company") acquired by merger (the "Acquisition") Citizen 1 Software, Inc., a
California corporation (Citizen 1). The Acquisition was consummated in
accordance with that certain Acquisition Agreement and Plan of Merger (the
"Acquisition Agreement") dated as of June 2, 1999 by and among the Company,
Citizen 1 Software, Inc., a Delaware corporation (a newly formed merger
subsidiary of the Company), Citizen 1 and certain shareholders of Citizen 1.
Under the terms of the Acquisition Agreement, the Acquisition resulted in the
issuance of 770,000 shares of the Company's common stock $0.001 par value per
share and the payment of $5.0 million in cash to the stockholders of Citizen 1.
Approximately 10% of the merger consideration will be held in escrow for
potential indemnification claims under the Acquisition Agreement. Other than the
escrowed amount, there is no other contingent consideration relating to the
Acquisition. The Company used borrowings under its existing revolving credit
facility with NationsBank to finance the cash portion of the merger
consideration.
The Company and Citizen 1 also entered into Employment Agreements with
three senior executives of Citizen 1. The purchase price and other terms of the
Acquisition Agreement were determined as a result of arms' length negotiations
between unrelated parties. At the closing date, there was no material
relationship between the Company and Citizen 1 or any of the shareholders of
Citizen 1, or any of their respective affiliates, officers, directors or
associates.
Citizen 1's suite of products organize the Internet's healthcare
content through Web research capabilities via a free, consumer-based and premium
Internet and intranet versions provided to healthcare industry researchers on a
subscription basis. Premium versions of CiteLine offer notification of content
changes and improve research productivity by allowing simultaneous searches of
Web databases that are typically reachable only through a particular site's own
search engine.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
It is impractical to provide financial statements for Citizen 1, to the
extent required, at the date of the filing of this Form 8-K. The
financial statements, if required, will be provided as soon as
practicable, but not later than 60 days after the date on which this
Form 8-K is filed.
(b) PRO FORMA FINANCIAL INFORMATION.
It is impractical to file the pro forma financial information for
Citizen 1 to the extent required, at the date of the filing of this
Form 8-K. The pro forma financial information, if required, will be
provided as soon as practicable, but not later than 60 days after the
date on which this Form 8-K is filed.
(c) EXHIBITS.
2.9 Acquisition Agreement and Plan of Merger, dated as of June 2,
1999 by and among Medirisk, Inc., Citizen 1 Software, Inc., a
Delaware corporation, Citizen 1 Software, Inc., a California
corporation and certain shareholders of Citizen 1 Software,
Inc., a California corporation. In accordance with Item
601(b)(2) of Regulation S-K, the Exhibits and Schedules to the
Asset Purchase Agreement have not been filed as exhibits to
this Form 8-K. The Registrant agrees to furnish supplementally
a copy of the omitted Exhibits and Schedules upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CAREDATA.COM, INC.
By: /s/ Thomas C. Kuhn, III
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Thomas C. Kuhn, III
Senior Vice President and
Chief Financial Officer
Dated: June 18, 1999
EXHIBIT INDEX
Document
2.9 Acquisition Agreement and Plan of Merger, dated as of June 2,
1999 by and among Medirisk, Inc., Citizen 1 Software, Inc., a
Delaware corporation, Citizen 1 Software, Inc., a California
corporation and certain shareholders of Citizen 1 Software,
Inc., a California corporation.
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EXHIBIT 2.9
ACQUISITION AGREEMENT AND PLAN OF MERGER
THIS ACQUISITION AGREEMENT AND PLAN OF MERGER (this "Agreement"), is
made as of the 2nd day of June 1999, by and among MEDIRISK, INC., a Delaware
corporation ("Medirisk"), CITIZEN 1 SOFTWARE, INC., a Delaware corporation and
wholly-owned subsidiary of Medirisk ("Merger Sub"), CITIZEN 1 SOFTWARE, INC., a
California corporation (the "Company"), and those shareholders of the Company
executing and delivering this Agreement solely for purposes of Section 4.7
hereof.
W I T N E S S E T H:
WHEREAS, the parties desire to enter into this Agreement pursuant to
which the Company will merge with and into Merger Sub, such that Medirisk will
indirectly acquire all of the outstanding capital stock of the Company from the
shareholders of the Company (all of the shareholders of the Company being
collectively referred to as the "Shareholders," and each individually as a
"Shareholder"), upon the terms and subject to the conditions set forth herein
(the "Merger");
WHEREAS, the Board of Directors of Medirisk, and the respective Boards
of Directors and shareholders of Merger Sub and the Company, have approved the
transactions contemplated by this Agreement;
WHEREAS, Zorba B. Lieberman ("Lieberman"), Neil J. Savasta ("Savasta"),
Bruce D. Mullen ("Mullen") and Lynn Barr are each Shareholders and are
employees, officers and/or directors of the Company, and will receive
appreciable benefits from the Merger as contemplated hereby (collectively, the
"Affiliated Shareholders");
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I
MERGER OF THE COMPANY AND MERGER SUB
1.1 MERGER. Subject to the terms and conditions of this Agreement, at
the Merger Effective Time (as defined in Section 1.2), the Company shall be
merged with and into Merger Sub in accordance with the applicable provisions of
the California General Corporation Law (the "CGCL") and the Delaware General
Corporation Law (the "DGCL"). Merger Sub shall continue as the surviving
corporation resulting from the Merger and shall thereafter conduct
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the business and operations of the Company as a wholly-owned subsidiary of
Medirisk. The Merger shall be consummated pursuant to the terms of this
Agreement.
1.2 FILING OF MERGER CERTIFICATES. Subject to the provisions of this
Agreement, the parties shall file a Certificate of Merger with the California
Secretary of State (the "California Certificate"), executed in accordance with
the relevant provisions of the CGCL and a Certificate of Merger with the
Delaware Secretary of State, executed in accordance with the relevant provisions
of the DGCL (the "Delaware Merger Certificate") and shall make all other filings
or recordings required under each such act as soon as practicable on or after
the Closing Date. The Merger shall become effective on the date and at the time
the Delaware Merger Certificate becomes effective with the Secretary of State of
Delaware (the "Merger Effective Time"). At the Merger Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the CGCL and
the DGCL. Without limiting the generality of the foregoing, and subject thereto,
at the Merger Effective Time, all the property, rights, privileges, powers and
franchises of the Company shall vest in the Merger Sub, and all debts,
liabilities and duties of the Company shall become the debts liabilities and
duties of the Merger Sub.
1.3 ARTICLES AND BYLAWS. The Certificate of Incorporation and Bylaws of
Merger Sub in effect immediately prior to the Merger Effective Time shall be the
Certificate of Incorporation and Bylaws of the surviving corporation until
otherwise amended or repealed; the directors of Merger Sub immediately prior to
the Merger Effective Time shall serve as the directors of the surviving
corporation from and after the Merger Effective Time; and the officers of Merger
Sub in office immediately prior to the Merger Effective Time shall serve as the
officers of the surviving corporation from and after the Merger Effective Time.
1.4 DISSENTING SHAREHOLDERS. Any holder of shares of capital stock of
the Company ("Company Stock") who perfects any available dissenters' rights or
appraisal rights in accordance with and as contemplated by the CGCL
("Dissenters' Rights") shall be entitled to receive the value of such shares in
cash from the surviving corporation after the Merger Effective Time as
determined pursuant to the CGCL; provided, however, that no such payment shall
be made to any dissenting shareholder unless and until such dissenting
shareholder has complied with the applicable provisions of the CGCL and has
surrendered to the surviving corporation the certificate or certificates
representing the shares for which payment is being made. In the event that a
dissenting shareholder of the Company fails to perfect, or effectively withdraws
or loses, its Dissenters' Rights, the surviving corporation shall deliver the
consideration to which such holder of shares of Company Stock is entitled
(without interest) upon surrender of certificates representing such shares held
by such holder.
1.5 CONVERSION OF SHARES; MERGER CONSIDERATION; EXCHANGE PROCEDURES.
(a) Subject to the provisions of this Agreement (including,
without limitation, the holdback provisions set forth in SCHEDULE 8 attached
hereto), and in consideration for the transactions contemplated hereby, at the
Merger Effective Time, by virtue of the Merger and
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without any action on the part of the holders thereof, the shares of the
constituent corporations of the Merger shall be converted as follows:
(i) each share of Merger Sub capital stock issued and
outstanding immediately prior to the Merger Effective Time shall remain issued
and outstanding from and after the Merger Effective Time; and
(ii) the outstanding shares of capital stock of the
Company (excluding treasury shares and shares held by Shareholders who perfect
their Dissenter's Rights as provided in Section 1.4) shall cease to be
outstanding and shall be converted into the right to receive the respective
amounts of cash and/or shares of Medirisk Common Stock (as defined in SCHEDULE
1.5 attached hereto) as set forth in SCHEDULE 1.5, the total amount of all such
cash and stock set forth in SCHEDULE 1.5 being equal to $10,000,000.00 assuming
there are no Shareholders who perfect their Dissenters' Rights; provided,
however, that in no event shall the cash received by all the Shareholders
pursuant to this Agreement (including any cash received by Shareholders who
perfect their Dissenter's Rights) be greater than sixty percent (60%) of the
total consideration received by all the Shareholders pursuant to this Agreement
or the Merger (including the Merger Consideration received by any Shareholders
as well as any amounts received by Shareholders who perfect their Dissenter's
Rights).
Any shares of Company capital stock held in treasury by the Company shall be
canceled and retired at the Merger Effective Time and no consideration shall be
issued in exchange therefor.
(b) Promptly after the Merger Effective Time, Medirisk and the
Company shall cause SunTrust Bank, Atlanta (the "Exchange Agent," as such term
is more particularly defined in the Stock Exchange Agent Agreement (the "Stock
Exchange Agent Agreement") to be entered into between Medirisk, the
Shareholders' Representative and SunTrust Bank, Atlanta substantially in the
form of attached EXHIBIT 1.5) to mail or otherwise deliver to each holder of
record of a certificate or certificates which represented shares of Company
capital stock immediately prior to the Merger Effective Time (the
"Certificates") appropriate transmittal materials and instructions (which shall
specify that delivery shall be effected, and risk of loss and title to such
Certificates shall pass, only upon proper delivery of such Certificates to the
Exchange Agent). The Certificates so delivered shall be duly endorsed as the
Exchange Agent may require. If any Certificate shall have been lost, stolen,
mislaid or destroyed, upon receipt of (i) an affidavit of that fact from the
holder claiming such Certificate to be lost, mislaid, stolen or destroyed, (ii)
such bond, security or indemnity as Medirisk and the Exchange Agent may
reasonably require and (iii) any other documents necessary to evidence and
effect the bona fide exchange thereof, the Exchange Agent shall issue to such
holder the consideration into which the shares represented by such lost, stolen,
mislaid or destroyed Certificate shall have been converted. The Exchange Agent
may establish such other reasonable and customary rules and procedures in
connection with its duties as it may deem appropriate. After the Merger
Effective Time, each holder of shares of Company capital stock (other than
shares as to which statutory dissenters' rights have been perfected as provided
in Section 1.4) issued and outstanding at the Merger Effective Time shall
surrender the Certificate or Certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the
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consideration provided in Section 1.5(a). Medirisk shall not be obligated to
deliver the consideration to which any former holder of Company capital stock is
entitled as a result of the Merger until such holder surrenders such holder's
Certificate or Certificates for exchange as provided in this Section 1.5.
(c) At the Merger Effective Time, the stock transfer books of
the Company shall be closed and no transfer of Company capital stock shall
thereafter be made or recognized by holders of Company capital stock. Until
surrendered for exchange in accordance with the provisions of this Section 1.5,
each Certificate theretofore representing shares of Company capital stock
(excluding treasury shares and shares held by shareholders who perfect their
dissenter's rights as provided in Section 1.4) shall from and after the Merger
Effective Time represent for all purposes only the right to receive the
consideration provided in this Section 1.5 in exchange therefor.
1.6 TAX EFFECT. Medirisk and the Company intend the Merger be a
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (a "Reorganization" and the "Code," respectively). In
connection with that intention, the persons indicated below make the following
representations and warranties.
(a) The Company represents and warrants to Medirisk and Merger
Sub that, except as otherwise disclosed in the Schedules to this Agreement, the
Company has not taken or agreed to take any action, nor does the Company have
any Knowledge of any fact or circumstance that is reasonably likely to prevent
the Merger from qualifying as a Reorganization. The Company agrees to use
reasonable efforts to cause the Merger to qualify, and not to take action which
would cause the Merger not to qualify, as a Reorganization. The Company agrees
to submit a tax certificate to Alston & Bird LLP, containing reasonable
representations, as required by Alston & Bird LLP, for purposes of rendering an
opinion as to certain of the federal income tax consequences of the Merger. As
used in this Agreement, when any statement is made to the "Knowledge" of a
person, it means to the actual knowledge of such person without any duty on the
part of such person to independently investigate or confirm the accuracy of such
statement.
(b) Medirisk and Merger Sub represent and warrant to the
Company and the Shareholders of the Company that, except as otherwise disclosed
in the Schedules to this Agreement, neither Medirisk nor Merger Sub has taken or
agreed to take any action, nor do either of Medirisk or Merger Sub have any
Knowledge of any fact or circumstance that is reasonably likely, to prevent the
Merger from qualifying as a Reorganization. Medirisk and Merger Sub agree to use
reasonable efforts to cause the Merger to qualify, and not to take action which
would cause the Merger not to qualify, as a Reorganization. Medirisk agrees to
submit a tax certificate to Alston & Bird LLP, containing reasonable
representations, as required by Alston & Bird LLP, for purposes of rendering an
opinion as to certain of the federal income tax consequences of the Merger.
(c) Medirisk, Merger Sub and the Company understand that (i)
neither Medirisk, Merger Sub, the Company, nor any of the Shareholders makes any
representation or
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warranty that the Merger will be regarded as a Reorganization, (ii) the Closing
is not subject to a condition that an Internal Revenue Service ruling or tax
opinion be obtained as to the federal income tax consequences of this Agreement
or the Merger, and (iii) Medirisk, Merger Sub, the Company and the Shareholders
will rely solely upon their respective advisors for advice concerning the tax
consequences of the Merger.
(d) Medirisk and Company each represents that the fair market
value of the Medirisk Common Stock plus any other consideration received by each
shareholder of Company will be approximately equal to the fair market value of
the Company Stock surrendered in exchange therefor.
(e) The Company represents that, in the Merger, Merger Sub
will acquire assets representing at least ninety percent (90%) of the fair
market value of the net assets and at least seventy percent (70%) of the fair
market value of the gross assets held by the Company immediately prior to the
Merger. For this purpose, all redemptions and distributions (except for regular,
normal dividends) made by the Company in connection with the Merger and all
amounts paid out of the assets of the Company as Reorganization expenses will be
considered as assets held by the Company immediately prior to the Merger. In
addition, assets disposed of in contemplation of the Merger will be considered
as assets held by the Company immediately prior to the Merger.
(f) The Company warrants that the liabilities of the Company
to be assumed by Merger Sub or Medirisk in the Merger (and the liabilities to
which the assets to be transferred are subject) were incurred or will be
incurred by the Company in the ordinary course of its business.
(g) Medirisk, Merger Sub and Company each warrants that there
is not now, nor will there be at the time of the Merger Effective Time, any
intercorporate indebtedness existing between the Company and Medirisk or between
Company and Merger Sub that was issued, acquired, or will be settled at a
discount.
(h) The Company represents that the Shareholders will pay, or
reimburse the Company as provided in Section 10.5 below, direct costs and
expenses incurred by the Shareholders, or by the Company on their behalf, in
connection with the Merger. Medirisk, Merger Sub, and the Company each
represents that each will pay its respective expenses, if any, incurred in
connection with the Merger.
(i) Each of Medirisk, Merger Sub and the Company represents
that it is not an Investment Company. As used in this Section 1.6(h),
"Investment Company" means a regulated investment company, a real estate
investment trust, or a corporation 50 percent or more of the value of whose
total assets are stock and securities and 80 percent or more of the value of
whose total assets are assets held for investment. In making the 50-percent and
80-percent determinations under the preceding sentence, stock and securities in
any subsidiary corporation shall be disregarded and the parent corporation shall
be deemed to own its ratable share of the subsidiary's assets, and a corporation
shall be considered a subsidiary if the parent owns 50
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percent or more of the combined voting power of all classes of stock entitled to
vote, or 50 percent or more of the total value of shares of all classes of stock
outstanding.
(j) The Company represents that the Company is not under the
jurisdiction of a court in a case under Title 11 of the United States Code, a
receivership, foreclosure, or similar proceeding in a federal or state court.
(k) The Company represents that the fair market value of the
assets to be transferred from the Company to Merger Sub as a result of the
Merger will equal or exceed the sum of the liabilities of the Company to be
assumed by Merger Sub or Medirisk (plus the amount of liabilities to which the
assets to be transferred are subject).
(l) Medirisk represents the payment of cash to the
Shareholders in lieu of fractional shares of Medirisk Stock will not be a
separately bargained for consideration, but will be undertaken solely for the
purpose of avoiding the expense and inconvenience of issuing and transferring
fractional shares, and the total cash consideration that will be paid to the
Company's Shareholders in lieu of fractional shares of Medirisk Stock will
represent less than one (1%) percent of the total consideration issued in the
Merger.
(m) The Company and Medirisk each represents that none of the
compensation to be received by any Shareholder-employee for services as
employees of the Company represents separate consideration for, or is allocable
to, any of their shares of Company Stock, and that none of the shares of
Medirisk Common Stock received by any Shareholder-employees will be separate
consideration or allocable to, any employment agreement. Medirisk represents
that any compensation to be paid to a Shareholder-employee who continues as an
employee of Medirisk or Merger Sub subsequent to the Merger will be for services
rendered and will be not greater in amounts than amounts that would be paid to
third parties bargaining at arms length for similar services.
(n) The Company represents that neither it nor any "Company
Related Party" (as hereinafter defined) has a plan or intention to make prior to
the Merger Effective Time, and except as set forth in SCHEDULE 1.6(M) attached
hereto, Company and any Company Related Parties have not made, any distributions
other than regular, normal dividends to Shareholders in the three (3) year
period prior to the Merger. For purposes of this Agreement, Company Related
Party means any corporation in which at least fifty percent (50%) of the total
combined voting power of all classes of stock entitled to vote or at least fifty
percent (50%) of the value of all classes of stock is or was owned directly or
indirectly by Company.
(o) The Company represents that except as set forth in
SCHEDULE 1.6(N) attached hereto, neither it nor any Company Related Party has
reacquired or redeemed any of its stock within the last three years.
(p) The Company represents that it has made no transfer of its
assets in contemplation of the Merger or during the period beginning with the
commencement of the
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negotiations (whether formal or informal) with Medirisk regarding the Merger and
ending at the Merger Effective Time, other than in the ordinary course of its
business.
(q) Each of Company, Medirisk and Merger Sub represents that
the Agreement together with the other agreements to be executed and delivered in
connection with the Closing of the transactions contemplated herein represent
the entire understanding of Company, Medirisk and Merger Sub with respect to the
Merger.
(r) Medirisk and Merger Sub represent that none of (i)
Medirisk, (ii) any member of Medirisk's affiliated group as defined in Section
1504 of the Code without regard to Section 1504(b) of the Code, (iii) any
corporation in which at least fifty percent (50%) of the total combined voting
power of all classes of stock entitled to vote or at least fifty percent (50%)
of the value of all classes of stock is owned directly or indirectly by Medirisk
or (iv) any entity that is treated as a partnership for federal income tax
purposes and has as an owner a corporation described in (ii), (iii), or (iv) of
this paragraph has the intent at the time of the Closing to, or shall in a
transaction that may be considered in connection with the Merger, acquire or
redeem (directly or indirectly) any Medirisk shares issued in connection with
the transactions described herein.
(s) Medirisk and Merger Sub represent and warrant that, prior
to the Merger, Medirisk will be in control of Merger Sub. For purposes of this
Section, control means the ownership of at least eighty percent (80%) of the
total combined voting power of all classes of stock entitled to vote and at
least eighty percent (80%) of the total number of shares of each on-voting class
of stock. Medirisk and Merger Sub represent and warrant to the Company that
following the Merger, Merger Sub will not issue additional shares of Merger Sub
stock that would result in Medirisk losing control of Merger Sub.
(t) Medirisk represents and warrants to the Company that
Medirisk has no plan or intention to: liquidate Merger Sub, merge Merger Sub
with and into another corporation; sell or otherwise dispose of the stock of
Merger Sub; or cause Merger Sub to sell or otherwise dispose of any of the
assets of the Company acquired in the Merger, except for dispositions made in
the ordinary course of business or transfers to lower-tier corporations in
"Medirisk's qualified group" (as hereinafter defined). For purposes of this
Section "Medirisk's qualified group" means one or more chains of corporations
connected through stock ownership with Medirisk where Medirisk controls at least
one of the corporations and control of each of the corporations is owned by one
of the other corporations.
(u) Medirisk and Merger Sub represent and warrant to the
Company that, following the Merger, Merger Sub, or other corporations that are
members of Medirisk's qualified group, will continue the historic business of
the Company or use a significant portion of the Company's business assets in a
business.
(v) Medirisk and Merger Sub represent that no stock of Merger
Sub will be issued in the Merger.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Medirisk that on the date hereof
(and as of the Merger Effective Time as though made at the Merger Effective
Time) that:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California with the full power and authority to carry on its business in the
places and as it is now being conducted and to own and lease the properties and
assets it now owns or leases. Unless noted otherwise on SCHEDULE 2.1 attached
hereto, the Company is duly qualified to transact business and in good standing
in the other states listed on SCHEDULE 2.1, which, except where the failure to
so qualify would not have a material adverse effect upon the business, assets,
financial condition or results of operations of the Company as a whole, are the
only additional jurisdictions in which operations of the Company's business or
the assets of the Company require such qualification
2.2 AUTHORITY AND STATUS. The Company has the requisite corporate power
and authority to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated by this Agreement without the
necessity of any act or consent not previously obtained of any other person
whomsoever. This Agreement and each and every agreement, document and instrument
to be executed, delivered and performed in connection with this Agreement
(collectively, the "Transaction Documents") by the Company constitutes or will,
when executed and delivered, constitute the valid and legally binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as enforceability may be limited by applicable
equitable principles (whether applied with action at law or in equity) or by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally, and
assuming the due authorization, execution and delivery by the other parties
hereto and thereto, respectively.
2.3 CAPITALIZATION; OWNERSHIP OF COMPANY STOCK. The authorized capital
stock of the Company consists of 100,000,000 shares of authorized common stock
and 54,529,486 shares of authorized Preferred Stock, 2,000,000 of which are
designated Series A Preferred Stock; 1,333,332 of which are designated Series B
Preferred Stock; 2,100,000 of which are designated Series C Preferred Stock;
11,300,000 of which are designated Series D Preferred Stock; 16,950,000 of which
are designated Series E Preferred Stock; 6,000,000 of which are designated
Series E-1 Non-Voting Preferred Stock; 3,500,000 of which are designated Series
F Preferred Stock; 3,846,154 of which are designated Series F-1 Non-Voting
Preferred Stock; 6,250,000 of which are designated Series F-2 Preferred Stock;
and 1,250,000 of which are designated Series F-3 Preferred Stock. 12,351,993
shares of common stock, 2,000,000 shares of Series A Preferred Stock, 1,333,332
shares of Series B Preferred Stock, 1,789,315 shares of Series C Preferred
Stock, 11,300,000 shares of Series D Preferred Stock, 16,569,226 shares of
Series E Preferred Stock, no shares of Series E-1 Non-Voting Preferred Stock,
2,040,521 shares of Series F Preferred Stock, no shares of Series F-1 Non-Voting
Preferred Stock, 3,846,154
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shares of Series F-2 Preferred Stock and 769,231 shares of Series F-3 Preferred
Stock are issued and outstanding as of the date hereof. All of the issued and
outstanding shares or Company Stock are duly authorized, validly issued, fully
paid and nonassessable and were issued pursuant to a valid exemption from
registration under the Securities Act of 1933, as amended, and all applicable
state securities laws. Each Shareholder is the record and/or beneficial owner of
the number of shares of Company Stock, number of derivatives of Company Stock
and/or amount of securities convertible into Company Stock reflected opposite
his, her or its name on SCHEDULE 2.3(I) attached hereto. Except as set forth on
SCHEDULE 2.3(II) attached hereto, there are no outstanding warrants, options,
rights, calls or other commitments of any nature relating to the common stock or
any other capital stock of the Company, and there are no outstanding securities
of the Company convertible into or exchangeable for shares of common stock or
any other capital stock of the Company.
2.4 SUBSIDIARIES, INVESTMENTS AND PREDECESSORS. Except as set forth on
SCHEDULE 2.4 attached hereto, the Company has not owned and does not currently
own, directly or indirectly, of record, beneficially or equitably any capital
stock or other equity, ownership or proprietary interest in any corporation,
partnership, limited liability company, association, trust, joint venture or
other entity. Set forth on SCHEDULE 2.4 is a listing for the last five years of
all predecessor companies of the Company, including the names of any and all
entities from which the Company previously acquired material assets, and any
other entity of which the Company has been a subsidiary or division. Except as
listed on SCHEDULE 2.4, the Company has not sold or disposed of, by way of asset
sale, stock sale, spin-off, split-up or otherwise, any material assets or
business of the Company.
2.5 LIABILITIES AND OBLIGATIONS OF THE COMPANY.
(a) Attached as SCHEDULE 2.5 are true, correct and complete
copies of the Company's unaudited balance sheets as of 31 December 1996, 1997
and 1998 and the related statements of operations and cash flows for the fiscal
years ending on 31 December 1996, 1997 and 1998 (the "Financial Statements").
Also attached as SCHEDULE 2.5 are true, correct and complete copies of the
Company's unaudited balance sheet as of 30 April 1999 and the related unaudited
statement of operations for the four-month period then ended (the "Interim
Financial Statements"). Except as specifically described in SCHEDULE 2.5, the
Financial Statements and the Interim Financial Statements are complete to the
extent required by generally accepted accounting principles, have been prepared
in accordance with generally accepted accounting principles (except that the
Interim Financial Statements do not contain any notes thereto and are subject to
normal recurring year-end adjustments, which if made on the date hereof would
not, individually or in the aggregate, have a material adverse effect on the
Company). Subject to the foregoing sentence, the Financial Statements and the
Interim Financial Statements fairly present in accordance with generally
accepted accounting principles the Company's financial condition of the Company
and the results of its operations and changes in financial position as of the
dates and for the periods reflected therein.
(b) Except as described in SCHEDULE 2.5, the Company has no
liability or obligation related to its assets or business (whether accrued,
absolute, contingent or otherwise),
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except for (i) the liabilities and obligations of the Company that are disclosed
or reserved against in the Interim Financial Statements, to the extent and in
the amounts so disclosed or reserved against, (ii) liabilities that were
incurred or accrued in the ordinary course of the Company's business since the
date of the Interim Financial Statements, (iii) the liabilities and obligations
of the Company under the Material Agreements (as that term is defined in Section
2.11), (iv) those nonmaterial liabilities and obligations of the Company under
contracts and agreements of the Company that are not Material Agreements, and
(v) those liabilities incurred in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the other
Transaction Documents.
2.6 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. Except as set forth
on SCHEDULE 2.6 attached hereto, the execution and delivery of the Transaction
Documents by the Company does not, and the consummation of the transactions
contemplated hereby will not, (a) violate or conflict with any provision of the
Articles of Incorporation, as amended, or Bylaws, as amended, of the Company;
(b) require any consent or approval not previously obtained under, conflict
with, result in the breach, termination or acceleration of, or violate or
constitute an occurrence of default under any provision of any mortgage, deed of
trust, conveyance to secure debt, note, loan, lien, lease, agreement or
instrument to which the Company is a party or by which any of the Company's
properties are bound; (c) constitute a violation of any law, regulation, order,
writ, judgment, injunction, or decree applicable to the Company or by which any
of the Company's properties are bound; (d) result in the creation of any lien
upon any of the assets or business of the Company; or (e) have any impact on
Medirisk's right after the Closing to conduct the business of the Company as
being conducted by the Company prior to the Closing.
2.7 LITIGATION Except as set forth on SCHEDULE 2.7 attached hereto,
there is no suit, action, proceeding, claim or investigation pending or, to the
knowledge of the Company, threatened against, or affecting, the Company; and to
the knowledge of the Company, there exists no basis or grounds for any such
suit, action, proceedings, claim or investigation. SCHEDULE 2.7 also contains a
brief description of any suit, action, proceeding, claim or investigation
involving the Company settled or otherwise concluded since 15 February 1996.
2.8 PERMITS. Except as set forth on SCHEDULE 2.8 attached hereto, the
Company holds, and lists, all licenses, permits and other authorizations from
all appropriate federal, state or other public authorities necessary for the
conduct of the Company's business as currently conducted and the use of its
assets, all of which are listed on SCHEDULE 2.8. The Company is conducting and
has conducted its business so as to comply with all applicable statutes, rules,
ordinances, regulations, orders, injunctions, decrees or any other requirement
of any governmental body, agency or authority binding on it, or relating to its
property or business or its advertising, sales or pricing practices ("Applicable
Law") except where the failure to comply with such Applicable Law would not have
a material adverse affect on the Company, its properties, operations or
financial condition.
2.9 TITLE TO ASSETS. Attached as SCHEDULE 2.9 is a list and summary
description of all real property owned or leased by the Company and of all items
of personal property with a
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fair market value in excess of $15,000.00 owned or leased by the Company (such
list identifying the properties owned by the Company and all of the leases or
agreements under which the Company is lessee of or holds or operates any
property). Except as set forth on SCHEDULE 2.9, the Company has good and valid
title to all of its property and assets, other than leased property, free and
clear of any liens, claims, charges, options, rights of tenants or other
encumbrances, except as disclosed or reserved in the Financial Statements or the
Interim Financial Statements and except for liens for current taxes not yet due
and payable.
2.10 COMPUTER SOFTWARE, INTELLECTUAL PROPERTY.
(a) Attached SCHEDULE 2.10(A) sets forth a complete and correct list
and summary description of all trademarks, trade names, service marks, service
names, brand names, domain name registrations, registered copyrights and
patents, registrations thereof and applications therefor, applicable to or used
by the Company in the conduct of its business, together with a complete list of
all licenses granted by or to the Company with respect to any of the above. All
such trademarks, trade names, service marks, service names, brand names, domain
name registrations, copyrights and patents reflected on SCHEDULE 2.10(A)
attached hereto as owned by the Company are owned by the Company free and clear
of all liens, claims, security interests and encumbrances of any nature
whatsoever. All such trademarks, trade names, service marks, service names,
brand names, copyrights and patents reflected on SCHEDULE 2.10(A) as licensed,
leased or otherwise used (but not owned) by the Company are used by the Company
pursuant to terms of binding agreements under which the Company has the right to
use such trademarks, trade names, service marks, service names, brand names,
copyrights and patents, as currently used in the Company's business without
payment of any royalty or other fee, except as set forth on SCHEDULE 2.10(A).
The Company is not currently in receipt of any notice of violation of, and the
Company is not violating the rights of others in any trademark, trade name,
service mark, copyright, trade secret, know-how or, to the knowledge of the
Company, any patent.
(b) Attached SCHEDULE 2.10(B) contains a complete and accurate list of
the computer software, databases and other intellectual property that is owned
by the Company (the "Owned Software"). Except as set forth on SCHEDULE 2.10(B),
the Company has exclusive rights and title to the Owned Software, free and clear
of all liens, claims, security interests and encumbrances of any nature
whatsoever (other than end-user license agreements), including claims or rights
of employees, agents, consultants, customers, licensees or other parties
involved in the development, creation, marketing, maintenance, enhancement or
licensing of such Owned Software. Except as set forth on SCHEDULE 2.10(B), the
Owned Software is not dependent on any Licensed Software (as defined below) in
order to operate fully in the manner in which it is intended, except for
operating systems and third party applications that are stated in the Owned
Software documentation and are readily commercially available. No Owned Software
has been published or disclosed to any other parties, except (i) as set forth on
SCHEDULE 2.10(B) or (ii) except pursuant to contracts prohibiting publishing or
disclosing of the Owned Software and/or requiring such other parties to keep
such Owned Software confidential. To the knowledge of the Company, no such other
party has breached any such obligation of confidentiality.
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<PAGE> 12
(c) Attached SCHEDULE 2.10(C) contains a complete and accurate
list of all computer software, databases, domain name registrations, copyrights
and other intellectual property that is used by the Company and for which the
Company is the licensee or lessee or otherwise has legal rights of use (other
than commercially available over-the-counter "shrinkwrap" software) (the
"Licensed Software"). SCHEDULE 2.10(C) also sets forth a list of all license
fees, rents, royalties or other charges that the Company is required or
obligated to pay with respect to Licensed Software. Prior to the date of this
Agreement, the Company has delivered to Medirisk true and complete copies of all
agreements under which the Company has the right to use Licensed Software.
Except as described on SCHEDULE 2.10(C), the Company has the right and license
to use, sublicense, modify and copy the Licensed Software as necessary to
operate the Company's business as currently conducted (including proposed
products and services currently being tested, if any), free and clear of any
limitations or encumbrances other than the payment of license or royalty fees
set forth on SCHEDULE 2.10(C). The Company is in full compliance with all
material provisions of any license, lease or other similar agreement pursuant to
which the Company has rights to use the Licensed Software. Except as disclosed
on SCHEDULE 2.10(C), none of the Licensed Software has been incorporated into or
made a part of any Owned Software or any other Licensed Software. The Company
has not published or disclosed any Licensed Software to any other party except,
in the case of Licensed Software that the Company leases or markets to others,
in accordance with and as permitted by any license, lease or similar agreement
relating to the Licensed Software and except pursuant to contracts requiring
such other parties to keep the Licensed Software confidential. To the knowledge
of the Company, no party to whom the Company has disclosed Licensed Software has
breached such obligation of confidentiality.
(d) The Owned Software and the Licensed Software constitute
all software used in relation to the business of the Company (the "Company
Software"), other than commercially available over-the-counter "shrinkwrap"
software. Attached SCHEDULE 2.10(D) sets forth a list of all contract
programmers, independent contractors, nonemployee agents and persons or other
entities (other than employees) who have performed computer programming services
for the Company in connection with any of the Owned Software and identifies all
contracts and agreements to which the Company is a party pursuant to which such
services were performed. The transactions contemplated by this Agreement will
not cause a breach or default under any license or similar agreement relating to
the Company Software or impair Merger Sub's ability to use the Company Software
in the same manner as such Company Software is currently used by the Company.
The Company is not infringing any intellectual property rights of any other
person or entity with respect to the Company Software (including, to the
knowledge of the Company, any patents with respect to the subject matter
thereof), and, to the knowledge of the Company, no other person or entity is
infringing any intellectual property rights of the Company with respect to the
Company Software. The Company is not infringing any intellectual property rights
of any other person or entity with respect to the operation of the Company's
business (including, to the knowledge of the Company, any patents with respect
to the subject matter thereof). With respect to any databases that are contained
in the Owned Software and/or the Licensed Software, the transactions
contemplated by this Agreement will not cause any such database (or a database
having substantially the same information) to be unavailable available for use
by Merger Sub in the same manner as such databases are currently used by the
Company
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<PAGE> 13
(e) The Company and, to the knowledge of the Company, all
other parties to any licensing or similar arrangements under which the Company
is the licensor or has otherwise granted the right to use the Company Software
are in full compliance with such licensing or similar arrangements and are not
in breach of their obligations with respect thereto. The Company is not a party
to any license, installation agreement, maintenance agreement, data processing
agreement, services agreement or other agreement pursuant to which it is
committed to perform software installation, modifications, enhancements or
services without payment or for payments which, in the aggregate, are less than
the reasonably anticipated cost to perform such installation, modifications,
enhancements or services. The Company has complied in all material respects with
its obligations to its customers and licensees in respect of the Company
Software.
(f) Except as set forth on SCHEDULE 2.10(F) attached hereto,
the Company has granted no marketing rights in the Company Software to any third
party, and all marketing rights granted by any third party to the Company have
been granted exclusively to the Company. SCHEDULE 2.10(F) lists and separately
identifies all agreements pursuant to which the Company has granted or been
granted rights to market software, databases and other intellectual property
owned by third parties.
2.11 CONTRACTS.
(a) Attached as SCHEDULE 2.11(A) is a true and correct list of
all contracts, agreements and other instruments to which the Company is a party
under which the aggregate liability of, or benefit to, the Company could
reasonably be expected to exceed $5,000.00, including without limitation
contracts, agreements and other instruments concerning the following matters
(collectively the "Material Agreements"):
(i) the lease (as lessee or lessor) or license (as
licensee or licensor) of any real or personal property (tangible or intangible);
(ii) the employment, termination, severance or engagement
of or with respect to any officer, director, employee, consultant or agent;
(iii) any arrangement between or among the Company, its
affiliates, any Shareholder, any director, officer or employee thereof and/or
related persons, including without limitation loans, guarantees and credit
arrangements;
(iv) any arrangement limiting the freedom of the Company
to compete in any manner in any line of business or requiring the Company to
share profits;
(v) any power of attorney, whether limited or general,
granted by or to the Company;
(vi) any other arrangement that requires performance for
a period of more than thirty (30) days or that requires payments in excess of
$5,000.00;
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<PAGE> 14
(vii) any loan agreement, contract or other arrangement
relating to the borrowing of money by the Company and the amount outstanding
thereunder or the guarantee by the Company of any third party obligation;
(viii) any agreement or arrangement involving intellectual
property rights (other than contracts entered into in the ordinary course of
business with customers and "shrink-wrap" software licenses);
(ix) any contract or arrangement relating to the
provision of data processing, network communication or other technical services
to or by the Company or any affiliate thereof; and
(x) any contract or arrangement relating to the
provision, purchase or sale of goods or services, other than contracts entered
into in the ordinary course of business and involving payments not in excess of
$5,000.00.
(b) Except as set forth on SCHEDULE 2.11(B) attached hereto,
(a) the Material Agreements are valid and effective in accordance with their
terms, and (b) there is not under any Material Agreement (i) any existing or
claimed default by the Company or (ii) to the knowledge of the Company, any
existing or claimed default by any other party. There is no actual or, to the
knowledge of the Company, threatened termination, cancellation or limitation of
any Material Agreements. To the knowledge of the Company, there is no pending or
threatened bankruptcy, insolvency or similar proceeding with respect to any
other party to any of the Material Agreements.
2.12 TAXES. Except as set forth on SCHEDULE 2.12 attached hereto:
(a) The Company has timely and accurately filed all federal,
state, foreign and local Tax Returns (as hereinafter defined)required to be
filed by it, and all Tax Returns filed are complete and accurate. The Company
has timely paid, or will prior to Closing timely pay, all Taxes (as hereinafter
defined) due and owing for all periods prior to Closing, whether or not shown on
any Tax Returns. No liens have been filed and no claims are being asserted or,
to the Knowledge of the Company, contemplated with respect to any Taxes. No
claim has ever been made by any authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. No restrictions on assessment or collection of Taxes have been
waived with respect to the Company, and the Company has not consented to the
extension of any statute of limitations with respect to the Company relating to
Taxes, except for waivers or consents that are no longer in effect. The Company
has received no notice of assessment or proposed assessment of any Taxes claimed
to be owed by it or any other person or entity on its behalf. No Tax Returns,
reports or forms filed by or on behalf of the Company with respect to Taxes are
currently being audited or examined, and the Company has not received any notice
of any such audit or examination. All Taxes and other liabilities due with
respect to completed and settled examinations or concluded litigation have been
fully paid.
(b) The Company has withheld or collected from each payment
made to each of its employees the amount of all Taxes required to be withheld or
collected therefrom, and the
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Company has, to the extent due, paid the same to the proper tax depositories or
collecting authorities. The Company is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms
W-9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state and local Tax laws.
(c) All ad valorem property taxes for years prior to 1999
imposed on the Company with respect to, or which may become a lien on, its
assets and which are due and payable have been paid in full, or appropriate
reserve has been made for payment of such taxes on the books of the Company.
(d) The reserves for Taxes due, or accrued but not yet due,
relating to the income, properties or operations of the Company for any periods
ending on or before the Closing Date as reflected in the Financial Statements
and the Interim Financial Statements are adequate to cover such Taxes. All
reserves for Taxes have been determined in accordance with GAAP consistently
applied.
(e) The Company is not a party to any Tax allocation or
sharing agreement and has never been a member of an affiliated group filing a
consolidated federal income Tax Return, or has any liability for Taxes of any
person under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign law) as a transferee or successor or by contract or
otherwise.
(f) The Company has not made any payments, and is not
obligated to make any payments, and is not a party to any agreement that could
obligate it to make any payments, that would be disallowed as a deduction under
Sections 280G or 162(m) of the Code. The Company has not agreed, and is not
required to make any adjustment under Section 481(a) of the Code (or any similar
provision of state, local or foreign law) by reason of a change in accounting
method. There is no, and will not be any agreement or consent made under Section
341(f) of the Code (or any comparable provision of state, local or foreign law)
affecting the Company). The Company is not required to treat any asset of the
Company as owned by another person pursuant to the "safe harbor" leasing
provisions of the Internal Revenue Code or as "tax-exempt use property" within
the meaning of Section 168(h) of the Code. No closing agreement pursuant to
Section 7121 of the Code that is currently in force and affects the Taxes of the
Company has been entered.
(g) The Company represents that at all times during the
five-year period ending on the Merger Effective Time, the fair market value of
all of the Company's United States real property interests was and will have
been less than fifty (50%) percent of the total fair market value of (A) its
United States real property interests, (B) its interests in real property
located outside the United States, and (C) its other assets used or held for use
in a trade or business. For purposes of the preceding sentence, (X) United
States real property interests include all interests (other than an interest
solely as a creditor) in real property and associated personal property (such as
movable walls and furnishings) located in the United States or the Virgin
Islands and interests in any corporation (other than a controlled corporation)
owning any
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United States real property interest, (Y) the Company is treated as owning its
proportionate share (based on the relative fair market value of its ownership
interest to all ownership interests) of the assets owned by any controlled
corporation or any partnership, trust, or estate in which the Company is a
partner or beneficiary, and (Z) any such entity in turn is treated as owning its
proportionate share of the assets owned by any controlled corporation or any
partnership, trust, or estate in which the entity is a partner or beneficiary.
As used in this paragraph, "controlled corporation" means any corporation at
least fifty percent (50%) of the fair market value of the stock of which is
owned by the Company, in the case of a first-tier subsidiary of the Company, or
by a controlled corporation, in the case of a lower-tier subsidiary.
(h) For purposes of this Agreement, "TAX RETURN" shall mean
any report, return, information return, or other information required to be
supplied to a taxing authority in connection with Taxes. "TAX" or "TAXES" shall
mean any federal, state, county, local, or foreign taxes, charges, fees, levies,
imposts, duties, or other assessments, including income, gross receipts, excise,
employment, sales, use, transfer, license, payroll, franchise, severance, stamp,
occupation, windfall profits, environmental, federal highway use, commercial
rent, customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or add-on
minimum, estimated, or other tax or governmental fee of any kind whatsoever,
imposed or required to be withheld by the United States or any state, county,
local or foreign government or subdivision or agency thereof, including any
interest, penalties, and additions imposed thereon or with respect thereto.
2.13 EMPLOYEE BENEFIT PLANS. Attached as SCHEDULE 2.13 is a list of
every pension, retirement, profit-sharing, deferred compensation, severance pay,
vacation, bonus or other incentive plan, any other written or unwritten employee
program or arrangement that involves the expenditure by the Company of more than
$1,000.00 per year, any medical, vision, dental or other health plan, any life
insurance plan or any other employee benefit plan or fringe benefit plan,
including without limitation any "employee benefit plan," as that term is
defined in Section 3(3) of the Employee Retirement Security Act of 1974, as
amended ("ERISA"), currently or previously adopted, maintained, sponsored or
contributed to by the Company for the benefit of employees, retirees,
dependents, spouses, directors or other beneficiaries and under which employees,
retirees, dependents, spouses, directors or other beneficiaries are eligible to
participate (collectively, the "Benefit Plans"). All of the Benefit Plans (and
any related trusts subject to ERISA) comply with and have been administered in
compliance with the applicable provisions of ERISA, all applicable provisions of
the Code, all applicable state or federal securities laws and all other
applicable laws, rules and regulations. No event has occurred that will or could
reasonably be expected to give rise to a disqualification of any such plan under
Sections 401(a) or 501(a) of the Code or to a tax under Section 511 of the Code.
Neither the Company nor any administrator or fiduciary of any such Benefit Plan
(or agent or delegate of any of the foregoing) has engaged in any transaction or
acted or failed to act in any manner that could reasonably be expected to
subject the Company to any direct or indirect liability for a breach of any
fiduciary or co-fiduciary duty under ERISA. No "party in interest" (as defined
in Section 3(14) of ERISA) or "disqualified person" (as defined in Section
4975(e)(2) of the Code) of any
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<PAGE> 17
Benefit Plan has engaged in any "prohibited transaction" (within the meaning of
Section 4975(c) of the Code or Section 406 of ERISA and not exempt under Section
408 of ERISA).
2.14 CUSTOMERS. Attached as SCHEDULE 2.14 is a true and correct list of
all of the customers doing in excess of $5,000.00 of business with the Company
during 1996, 1997 and 1998 and to date in 1999 setting forth as to each such
customer its name, address, telephone number and principal person of contact.
The Company has not received any notice, nor does it have any reason to believe,
that any such customer has taken or contemplates taking steps that could disrupt
the business relationship of the Company with such customer.
2.15 OFFICERS, DIRECTORS AND BANK ACCOUNTS. SCHEDULE 2.15(A) attached
hereto lists the names of all directors and officers of the Company. SCHEDULE
2.15(B) attached hereto lists the name and location of each bank or other
institution in which the Company has any deposit account or safe deposit box,
all account numbers and names of all persons authorized to draw thereon or to
have access thereto.
2.16 INTERESTED TRANSACTIONS. Except as set forth on SCHEDULE 2.16
attached hereto, the Company is not a party to any contract, agreement or other
instrument or transaction with any of the following persons, or, to the
knowledge of the Company, in which any of the following persons have any direct
or indirect interest (other than as a shareholder or employee of the Company);
(a) Any director or officer of the Company or any of the
Shareholders;
(b) Any of the spouses, parents, siblings, children, aunts,
uncles, nieces, nephews, in-laws or grandparents of any director or officer of
the Company; or
(c) Any corporation, trust, partnership or other entity in
which any of the persons described in clauses (a) or (b) has a beneficial
interest (other than in a corporation whose shares are publicly traded and in
which such persons own beneficially in the aggregate no more than two percent of
the equity interest).
2.17 ABSENCE OF CERTAIN CHANGES. Since 30 April 1999, and except as set
forth on SCHEDULE 2.17 attached hereto: (a) the Company has operated its
business in the ordinary course; (b) there has not been any change in the
business, financial condition or results of operations of the Company that has
had or is reasonably likely to have a material adverse effect on the Company or
its assets or business; (c) there has not been any damage, destruction or loss
(whether or not covered by insurance) to the Company's assets that has had or is
reasonably likely to have a material adverse effect on the Company or its assets
or business; (d) except as disclosed in SCHEDULE 2.17(D) attached hereto, no
customer has canceled, discontinued or given written or oral notice of its
intention to cancel, discontinue or substantially reduce its business with the
Company; and (e) except as disclosed in SCHEDULE 2.17(E) attached hereto, the
Company is not in default and, to the knowledge of the Company, no customer is
in default, under the Company's contracts with any customer, and each such
contract is in full force and effect on the date of this Agreement, and such
customer contracts contain no material changes from the
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<PAGE> 18
standard form of agreement used by the Company (including, without limitation,
any deviation from the standard warranties or limitation of the Company's
liability).
2.18 BOOKS AND RECORDS. All books, records and other information
(financial and otherwise), if any, provided by the Company to Medirisk are true
and correct in all material respects and accurately reflect the existence of the
Company's assets and the results of operations of the Company's business for the
periods of time stated therein, and such books, records and financial
information reflect revenues and income from the Company's business and not from
other sources, except as expressly disclosed to Medirisk.
2.19 ACCOUNTS RECEIVABLE AND PAYABLE. The accounts receivable
outstanding as of the date of the Interim Financial Statements are, and the
accounts receivable of the Company outstanding as of the Closing Date (as
defined in Section 7.1 hereof) will be, (i) valid and genuine accounts
receivable arising only out of bona fide sales and delivery of goods,
performance of services and other business transactions in the ordinary course
of the Company's business consistent with past practice; (ii) subject to no
asserted defenses, counterclaims or rights of setoff, and (iii) except as set
forth on SCHEDULE 2.19 attached hereto, collectible within sixty (60) days after
billing at the full recorded amount thereof less the recorded allowance for
doubtful accounts reflected on the Interim Financial Statements. Except as set
forth on SCHEDULE 2.19, no accounts payable of the Company are, as of the date
of this Agreement, over thirty (30) days old.
2.20 EMPLOYMENT AND LABOR MATTERS.
(a) SCHEDULE 2.20(A) attached hereto sets forth (i) the number
of current full-time and part-time employees of the Company; (ii) the number of
independent contractors currently utilized by the Company and (iii) the name and
compensation paid to each independent contractor, employee of or consultant to
the Company who received salary, bonuses or other compensation for either of the
Company's two most recently ended fiscal years in excess of $35,000.00. Each
current and previous employee of the Company has signed a copy of the Company's
standard-form Employment, Confidential Information and Invention Assignment
Agreement, the form of which has been provided to Medirisk.
(b) To the knowledge of the Company, the Company is in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours, occupational safety and health, including laws concerning unfair
labor practices within the meaning of Section 8 of the National Labor Relations
Act, and the employment of non-residents under the Immigration Reform and
Control Act of 1986.
(c) Except as disclosed on SCHEDULE 2.20(C) attached hereto:
(i) There are no charges, governmental audits,
investigations, administrative proceedings or complaints concerning the
Company's employment practices
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pending or, to the knowledge of the Company, threatened before any federal,
state or local agency or court, and, to the knowledge of the Company, no
reasonable basis for any such matter exists;
(ii) The Company is not a party to any union or collective
bargaining agreement, and, to the knowledge of the Company, no union attempts to
organize the employees of the Company have been made, and no such attempts are
now threatened; and
(iii) The Company has not experienced any organized slowdown,
work interruption, strike, or work stoppage by its employees.
2.21 INSURANCE. Except as described on SCHEDULE 2.21 attached hereto,
all of the assets and business of the Company are insured in such amounts and
against such losses, casualties or risks as are customary for similar properties
and businesses, and SCHEDULE 2.21 contains a list of all policies of insurance
currently in force with respect to the Company and its assets and business.
2.22 ENVIRONMENTAL MATTERS. To the knowledge of the Company and except
as set forth in SCHEDULE 2.22 attached hereto, there is no present or past
Environmental Condition in any way relating to the business, properties or
assets of the Company. "Environmental Condition" means (a) the introduction into
the environment of any pollution, including without limitation any contaminant,
irritant or pollutant or other toxic or hazardous substance, in violation of any
federal, state or local law, ordinance or governmental rule or regulations, as a
result of any spill, discharge, leak, emission, escape, injection, dumping or
release of any kind whatsoever of any substance or exposure of any type in any
workplaces or to any medium, including without limitation air, land, surface
waters or ground waters, or from any generation, transportation, treatment,
discharge, storage or disposal of waste materials, raw materials, hazardous
materials, biomedical waste including blood, toxic materials or products of any
kind or from the storage, use or handling of any hazardous or toxic materials or
other substances, as a result of which the Company has or may become liable to
any person or by any reason of which any of the Assets of the Company may suffer
or be subjected to any lien, encumbrance or restriction of any nature, or (b)
any noncompliance with any federal, state or local environmental law, rule,
regulation or order as a result of or in connection with any of the foregoing.
2.23 COMPANY PRODUCTS AND SERVICES. The Company's products and services
conform in all material respects with any specification, documentation,
performance standard, representation or statement made or provided with respect
thereto by or on behalf of the Company, and there has not been during the last
three (3) years any claim made against the Company by any customer of the
Company or by any other person alleging that any product or service of the
Company (including each version thereof that has been licensed or otherwise made
available by the Company to any person) does not conform in all material
respects with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of the Company,
and, to the knowledge of the Company, there is not a
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<PAGE> 20
reasonable basis for any such claim. No material product liability or warranty
claims have been communicated in writing to or threatened in writing against the
Company. To the knowledge of the Company, the Company's products and services,
as of the date hereof, during and after the calendar year 2000 A.D., include
design, function and performance capabilities such that the Company's products
and services shall not abnormally end and/or have invalid and/or incorrect
results from and/or performance or functional degradation because of the
then-current date. To the knowledge of the Company, the design and function of
the Company's products and services ensure year 2000 A.D. functionality and
include, but are not limited to, date data century recognition, calculations
that accommodate same century and multi-century formulas and date values, and
date data interface values that reflect the century. The Company makes no
representations or warranties with respect to whether or not the products or
services of any supplier (including licensors of software) to the Company are
Year 2000 compliant or that the performance of such products, or the provision
of such services, will not be interrupted by Year 2000 issues.
2.24 SCHEDULES. All Schedules attached hereto are true, correct and
complete as of the date of this Agreement. Matters disclosed on each Schedule
shall be deemed disclosed only for purposes of the matters to be disclosed in
such Schedule and shall not be deemed to be disclosed for any other purpose
unless specifically provided therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MEDIRISK AND MERGER SUB
Medirisk and Merger Sub, jointly and severally, represent and warrant
to the Company that on the date hereof (and as of the Merger Effective Time as
though made at the Merger Effective Time) that:
3.1 ORGANIZATION AND STANDING. Medirisk and Merger Sub are each
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and each has the full power and authority to own
its properties and carry on their respective businesses in the places and as
they are now being conducted.
3.2 AUTHORITY AND STATUS. Each of Medirisk and Merger Sub has all
requisite corporate power and authority to enter into this Agreement and all of
the Transaction Documents to which it is a party, to perform under each of them
and to consummate the transactions contemplated by this Agreement and all of the
Transaction Documents to which it is a party without the necessity of any act or
consent of any other person whomsoever. This Agreement and each and every
agreement, document and instrument to be executed, delivered and performed by
Medirisk or Merger Sub in connection with this Agreement constitute or will,
when executed and delivered, constitute the valid and legally binding
obligations of Medirisk or Merger Sub, enforceable against Medirisk or Merger
Sub in accordance with their respective terms, except as enforceability may be
limited by applicable equitable principles (whether applied with action at law
or in equity) or by bankruptcy, insolvency, reorganization, moratorium
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<PAGE> 21
or similar laws from time to time in effect affecting the enforcement of
creditors' rights generally, and assuming the due authorization, execution and
delivery by the other parties hereto and thereto, respectively.
3.3 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. Except as set forth
on SCHEDULE 3.3 attached hereto, the execution and delivery of this Agreement
and the other Transaction Documents by Medirisk and Merger Sub do not, and the
consummation of the transactions contemplated hereby will not, (a) violate or
conflict with any provision of the Certificate of Incorporation, as amended, or
Bylaws, as amended, of Medirisk or Merger Sub; (b) require any consent or
approval under, conflict with, result in the breach, termination or acceleration
of, or violate or constitute an occurrence of default under any provision of any
mortgage, deed of trust, conveyance to secure debt, note, loan, lien, lease,
agreement or instrument to which Medirisk or Merger Sub is a party or by which
the Company, any Shareholder or any of their respective properties are bound; or
(c) constitute a violation of any law, regulation, order, writ, judgment,
injunction, or decree applicable to Medirisk or Merger Sub or any of Medirisk's
or Merger Sub's properties.
3.4 SEC FILINGS. True, correct and complete copies of the following
documents have been made available to the Shareholders: (i) Medirisk's Annual
Report on Form 10-K for the fiscal year ended 31 December 1998, as filed with
the Securities and Exchange Commission (the "SEC"); and (ii) Medirisk's
Quarterly Report on Form 10-Q for the three-month period ended 31 March 1999, as
filed with the SEC (collectively the "SEC Reports"). Since 31 March 1999, there
has been no material adverse change in the condition (financial or otherwise),
assets, liabilities, business or operations of Medirisk that is unique to the
business of Medirisk and its consolidated subsidiaries and that is required to
be disclosed by applicable law or by the rules of the Nasdaq National Market.
ARTICLE IV
COVENANTS AND UNDERTAKINGS
4.1 COVENANT NOT TO COMPETE. At Closing, each Affiliated Shareholder
will enter into a Covenant Not to Compete with Medirisk and Merger Sub
substantially in the form of attached EXHIBIT 4.1 (the "Covenants Not to
Compete").
4.2 EMPLOYMENT AGREEMENT. At Closing, Lieberman, Savasta and Mullen
shall each enter into an Employment Agreement with Merger Sub in substantially
the form attached hereto as EXHIBIT 4.2 (each an "Employment Agreement").
4.3 INVESTMENT LETTER. At Closing, each Shareholder receiving Medirisk
Common Stock under SECTION 1.5 will execute and deliver to Medirisk an
investment letter with respect to the Medirisk Common Stock to be delivered to
such Shareholder at Closing substantially in the form of attached EXHIBIT 4.3
(the "Investment Letter").
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<PAGE> 22
4.4 [Omitted.]
4.5 CONSENTS AND APPROVALS. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use commercially
reasonable efforts to obtain the waiver, consent and approval of all persons
whose waiver, consent or approval is required in order to consummate the
transactions contemplated by this Agreement, or is required by any agreement,
lease, instrument, arrangement, judgment, decree, order or license to which the
Company is a party or subject that would prohibit, or require the waiver,
consent or approval of any person to such transactions, or under which the
consummation of such transactions would constitute (or with notice or lapse of
time would constitute) an event of default.
4.6 CONDUCT OF THE BUSINESS PRIOR TO CLOSING. Except with the written
consent of Medirisk and except as may be required to effect the transactions
contemplated by this Agreement, between the date of this Agreement and the
earlier of (i) the Merger Effective Time and (ii) the termination of this
Agreement, the Company will (a) not make any distributions of its assets to any
persons except as expressly contemplated by the Schedules hereto; (b) conduct
its operations in the ordinary course of business; (c) keep and maintain its
properties and facilities in good condition, repair and working order,
reasonable wear and tear excepted, and fully insured for liability and property
damages; (d) use commercially reasonable efforts to preserve intact its
business; (e) use commercially reasonable efforts to retain the service of its
employees, agents and consultants involved with or employed by the Company on
terms and conditions not less favorable than those existing prior to the
execution of this Agreement; (f) cooperate with Medirisk's representatives
(without disclosure of this Agreement or the contemplated sale to the Company's
customers or suppliers without the consent of Medirisk) in reviewing facts and
establishing and implementing procedures necessary to effect the Merger as
contemplated by this Agreement; (g) conduct its activities in a manner
consistent with this Agreement; (h) not enter into, assume or make any contract,
loan, license, designation, loan commitment, purchase, sale or disposition of
assets of the Company outside the ordinary course of business; (i) except for
mailing invoices in the ordinary course of business, not contact any customer
regarding collection of any account receivable and not discount any account
receivable; (j) not declare any dividend or comparable distribution of assets;
and (k) promptly advise Medirisk in writing of any material adverse change in
the Company's financial condition or business affairs.
4.7 TERMINATION OF EMPLOYMENT AGREEMENTS. The Affiliated Shareholders
severally agree that any employment or management agreement to which he or she
is a party with the Company will be terminated effective at the Closing without
any further action by such individual, the Company or Medirisk, and no party to
any such agreement will have any liability or obligation thereunder of any
nature or kind from and after the Closing Date. The Company agrees that any
employment or management agreement to which it is a party will be terminated
effective at the Closing without any further action by the Company, such
employee or manager, or Medirisk, and no party to any such agreement will have
any liability or obligation thereunder of any nature or kind from and after the
Closing Date. The foregoing shall not apply to any accrued amounts due and owing
to the Affiliated Shareholders as of the Closing Date under any such employment
or management agreement.
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<PAGE> 23
4.8 RESIGNATIONS. At the Closing, the Company will deliver to Medirisk
resignations, effective on or before the Closing Date of each officer and each
director resigning from all director and/or officer positions held by such
person with the Company.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF MEDIRISK AND MERGER SUB
The obligations of Medirisk and Merger Sub to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or before the Closing Date, of each and every one of the
following conditions:
5.1 REPRESENTATIONS TRUE AND COVENANTS PERFORMED AT CLOSING. The
representations and warranties made by the Company in this Agreement or any
document or instrument delivered to Medirisk or Merger Sub or its
representatives hereunder shall be true and correct on the Closing Date with the
same force and effect as if such representations and warranties had been made on
and as of the Closing Date, except (i) to the extent such representations and
warranties are by their express provisions made as of the date of this Agreement
or another specified date; and (ii) for the effect of any activities or
transactions which may have taken place after the date of this Agreement which
are contemplated by this Agreement. The Company shall have duly performed all of
the agreements, covenants, acts and undertakings to be performed by it, pursuant
to this Agreement or any of the other Transaction documents to which it is a
party, on or prior to the Closing Date. The Company shall deliver to Medirisk
and Merger Sub a certificate of a duly authorized officer thereof, dated the
Closing Date, as to the satisfaction of the conditions set forth in this Section
5.1.
5.2 NO INJUNCTION, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
prohibit, or obtain substantial damages in respect of, or which is related to,
or arises out of, this Agreement or the consummation of the transactions
contemplated hereby, or which is related to or arises out of the business of the
Company, if such action, proceeding, investigation, regulation or legislation
would either make the consummation of the Merger illegal or would reasonably be
concluded to have a material adverse effect on the Company or its assets or
business.
5.3 NO MATERIAL ADVERSE CHANGE. There shall not have been any material
adverse change in the business, assets, liabilities or condition, financial or
otherwise, of the Company between the date of the Interim Financial Statements
and the Closing Date.
5.4 CONSENTS. The Company shall have delivered to Medirisk the written
consents of those parties designated in SCHEDULE 2.6 attached hereto as
"Required Closing Consents," which consents shall be in form, scope and
substance reasonably satisfactory to Medirisk and its counsel.
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<PAGE> 24
5.5 GOOD STANDING CERTIFICATE. Medirisk shall have received a
Certificate of Good Standing from the State of California, and from each other
state in which the Company is qualified to transact business as a foreign
corporation, with respect to the Company as of the most recent practical date
prior to the Closing Date.
5.6 ESCROW AGREEMENT. Medirisk, the Shareholders' Representative (as
defined in SCHEDULE 8 attached hereto) and the Escrow Agent (as that term is
defined in the Escrow Agreement hereinafter referred to) shall have mutually
executed and delivered the Escrow Agreement, the form of which is attached
hereto as EXHIBIT 5.6.
5.7 OPINION OF COUNSEL. Medirisk shall have received an opinion of
counsel to the Company substantially in the form of attached EXHIBIT 5.7.
ARTICLE VI
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF THE COMPANY TO CLOSE
The obligations of the Company to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, any
of which (other than the conditions set forth in Section 6.4 hereof) may be
waived, in writing, exclusively by the Company:
6.1 REPRESENTATIONS TRUE AND COVENANTS PERFORMED AT CLOSING. The
representations and warranties made by Medirisk and Merger Sub in this Agreement
or any document or instrument delivered to the Company shall be true and correct
on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such date. Medirisk
and Merger Sub shall have duly performed all of the agreements, covenants, acts
and undertakings to be performed by it on or prior to the Closing Date. Medirisk
and Merger Sub shall deliver to the Shareholders a certificate of duly
authorized respective officers thereof, dated the Closing Date, as to the
satisfaction of the conditions set forth in this Section 6.1.
6.2 NO INJUNCTION, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
prohibit, or obtain substantial damages in respect of, or which is related to,
or arises out of, this Agreement or the consummation of the transactions
contemplated hereby.
6.3 OPINION OF COUNSEL. The Company shall have received an opinion of
counsel to Medirisk substantially in the form of attached EXHIBIT 6.3.
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<PAGE> 25
6.4 SHAREHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite vote
of the Shareholders under applicable California law and the Company's charter
documents.
ARTICLE VII
CLOSING
7.1 TIME AND PLACE OF CLOSING. The closing (the "Closing") of the
transactions contemplated by this Agreement will be held on 2 June 1999 or such
other date as the parties may agree. The Closing shall commence at 10:00 a.m. at
the offices of Medirisk, Inc., Two Piedmont Center, Suite 400, 3565 Piedmont
Road, N.E., Atlanta, Georgia 30305-1502 or at such other time or place upon
which the parties agree. The date on which Closing occurs shall be referred to
as the "Closing Date."
7.2 TRANSACTIONS AT CLOSING.
(a) The following deliveries shall be made at the Closing:
(i) The Company shall deliver or cause to be delivered to
Medirisk Certificates of Good Standing of the Company, as of the most recent
practicable date, as contemplated by Section 5.5;
(ii) As contemplated by Section 4.1, Medirisk, Merger Sub and
each of the Affiliated Shareholders shall execute and deliver to each other the
Covenants Not to Compete;
(iii) As contemplated by Section 4.2, Merger Sub and each of
Lieberman, Savasta and Mullen shall execute and deliver to each other their
Employment Agreements;
(iv) As contemplated by Section 4.3, each of the Shareholders
receiving Medirisk Common Stock shall execute and deliver to Medirisk an
Investment Letter;
(v) Counsel for the Company shall have delivered to Medirisk
the form of opinion attached hereto as EXHIBIT 5.7;
(vi) Counsel for Medirisk shall have delivered to the
Shareholders' Representative, on behalf of the Shareholders, the form of opinion
attached hereto as EXHIBIT 6.3; and
(vii) Medirisk, the Shareholders' Representative and the
Escrow Agent shall have mutually executed and delivered to each other the Stock
Exchange Agent Agreement and the Escrow Agreement.
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<PAGE> 26
(viii) A duly authorized office of the Company shall execute
and deliver the certificate contemplated by Section 5.1 hereof.
(ix) Duly authorized officers of Medirisk and Merger sub,
respectively, shall execute and deliver the certificates contemplated by Section
6.1 hereof.
(b) (i) At Closing, Medirisk shall cause Merger Sub to
disburse the Cash Consideration as set forth in SCHEDULE 1.5 attached hereto.
(ii) As soon as practicable after Closing once all the items
referred to in Section 7.2(a) have been delivered to Medirisk, Medirisk shall
cause its transfer agent to deliver Medirisk Common Stock to the Shareholders,
allocated as set forth on SCHEDULE 1.5 under the heading "Allocation of Cash and
Medirisk Common Stock Deliverable to Shareholders;" provided, however, that with
respect to each of the Shareholders scheduled to receive Medirisk Common Stock
who actually have been issued share certificates in Company Stock, no Medirisk
Common Stock shall be deliverable to such Shareholder unless and until (i) the
Exchange Agent is in receipt of all items and information necessary to issue
certificates for Medirisk Common Stock, such as, certificates for the Company
Stock formerly representing their shares of Company Stock, duly endorsed for
transfer or accompanied by blank stock powers or equivalent letter of
transmittal, and the full name, address and Social Security or Federal Employer
Identification Numbers of such Shareholder, and (ii) the Exchange Agent has
notified Medirisk of its receipt of such items in accordance with the terms of
the Stock Exchange Agent Agreement.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
The parties shall have the mutual rights of indemnification set forth
on SCHEDULE 8 attached hereto.
ARTICLE IX
TERMINATION
9.1 METHOD OF TERMINATION. This Agreement and the transactions
contemplated by it may be terminated at any time prior to the Closing Date:
(a) By the mutual consent of the Company and Medirisk;
(b) By the Company after 30 June 1999 if Medirisk or Merger
Sub shall (i) fail to perform in any material respect its agreements contained
herein required to be performed
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by it on or prior to the Closing Date, or (ii) materially breach any of its
representations, warranties or covenants contained herein, and such breach has
not been cured with fifteen (15) days after written notice to Medirisk;
(c) By Medirisk after 30 June 1999 if the Company shall (i)
fail to perform in any material respect its agreements contained herein required
to be performed by it on or prior to the Closing Date, or (ii) materially breach
any of its representations, warranties or covenants contained herein, and such
breach has not been cured with fifteen (15) days after written notice to the
Company;
(d) By the Company or Medirisk at any time after 31 July 1999
if the Closing shall not have occurred for any reason on or prior to 31 July
1999.
(e) By either Medirisk or the Company if there shall be any
order, writ, injunction or decree of any court or governmental or regulatory
agency binding on Medirisk, Merger Sub or the Company which prohibits or
restrains Medirisk, Merger Sub and/or the Company from consummating the Merger
hereunder, provided that Medirisk 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 ten (10) days after entry,
by any such court or governmental or regulatory agency.
9.2 NOTICE OF TERMINATION. Notice of termination of this Agreement, as
provided for in this Article IX, shall be given by the parties so terminating to
the other parties hereto in accordance with Section 10.1 of this Agreement.
9.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 9.1 hereof, 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
pursuant to subparagraph (b) or (c) of Section 9.1, 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 pursuant to subparagraphs (b) or (c) of Section 9.1, this Section 9.3
shall not relieve a breaching or defaulting party from any liability to the
other party.
9.4 RISK OF LOSS. The Company shall bear all risk of condemnation,
destruction, loss or damage due to fire or other casualty from the date of this
Agreement through the Closing. If the condemnation, destruction, loss or damage
is such that the business of the Company is interrupted or curtailed or the
assets of the Company are materially affected, then Medirisk shall have the
right to terminate this Agreement. If the condemnation, destruction, loss or
damage is such that the business is neither interrupted nor curtailed or the
assets are not materially affected, or if the business of the Company is
curtailed or interrupted or the assets are materially affected and Medirisk
nevertheless forgoes the right to terminate this Agreement, then the Merger
Consideration shall be adjusted at Closing to reflect such condemnation,
destruction, loss or
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<PAGE> 28
damage to the extent that insurance proceeds are not sufficient to cover such
destruction, loss or damage. If Medirisk, on the one hand, and the Company, on
the other, are unable to agree upon the amount of such adjustment, then the
dispute shall be resolved jointly by the independent accounting firms then
employed by the Company and Medirisk, and if said accounting firms do not agree,
they shall appoint a disinterested independent third-party accountant mutually
acceptable to both of them to make such determination, whose determination of
the dispute shall be final and binding. For purposes of this Section 9.4 the
fees and expenses of the third-party accountant shall be borne one-half by
Medirisk and one-half by the Company.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. (a) All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered by hand,
facsimile or mailed by nationally recognized overnight delivery service or by
registered or certified mail, return receipt requested, first class postage
prepaid, addressed as follows:
If to any Shareholder:
Mr. Benjamin Burditt, Shareholders' Representative
Scripps Ventures
200 Madison Avenue
New York, New York 10016
Facsimile: (212) 293-8717
[Addresses Continued On Next Page]
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Jason L. Gray, Esq.
Facsimile: (650) 845-5000
If to Medirisk or Merger Sub:
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<PAGE> 29
Medirisk, Inc.
Two Piedmont Center, Suite 400
3565 Piedmont Road, N.E.
Atlanta, Georgia 30305-1502
Attention: Legal Department
Facsimile: (404) 364-6703
(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 10.1.
10.2 BROKERS. Medirisk and Merger Sub each represent and warrant to the
Company, and the Company represents and warrants to Medirisk and Merger Sub,
that, except as disclosed in SCHEDULE 10.2 attached hereto, no broker or finder
has acted for it or them or any entity controlling, controlled by or under
common control with it or them in connection with this Agreement.
10.3 FURTHER ASSURANCES. Each party covenants that at any time, and
from time to time, after the Closing, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.
10.4 WAIVER. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived by any
other party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
10.5 EXPENSES. All expenses incurred by the parties hereto in
connection with or related to the authorization, preparation and execution of
this Agreement and the Closing of the transactions contemplated hereby,
including, without limitation of the generality of the foregoing, all fees and
expenses of agents, representatives, counsel and accountants employed by any
such party, shall be borne solely and entirely by the party which has incurred
the same. The Company shall not pay any expenses in connection with or related
to the authorization, preparation and execution of this Agreement or the Closing
of the transactions contemplated hereby (all such expenses to be paid from the
Cash Consideration).
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<PAGE> 30
10.6 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, executors, administrators, successors and assigns.
10.7 HEADINGS. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference, and are not a part
of this Agreement.
10.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto and supersedes and cancels any prior agreements,
representations, warranties, or communications, whether oral or written, among
the parties hereto relating to the transactions contemplated hereby or the
subject matter herein. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an agreement in
writing signed by the party against whom or which the enforcement of such
change, waiver, discharge or termination is sought.
10.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
10.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.11 PRONOUNS. All pronouns used herein shall be deemed to refer to
the masculine, feminine or neuter gender as the context requires.
[Signatures Begin On Next Page]
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IN WITNESS WHEREOF, each party hereto has executed or caused this
Agreement to be executed on its behalf, all on the day and year first above
written.
MEDIRISK, INC.
By:
------------------------------------
KENNETH M. GOINS, JR.
President & Chief Operating Officer
MERGER SUB:
CITIZEN 1 SOFTWARE, INC.,
a Delaware corporation
By:
------------------------------------
KENNETH M. GOINS, JR.
President & Chief Operating Officer
COMPANY:
CITIZEN 1 SOFTWARE, INC.,
a California corporation
By:
------------------------------------
ZORBA B. LIEBERMAN
President & Chief Executive Officer
<PAGE> 32
AFFILIATED SHAREHOLDERS
(The following Shareholders join in this
Agreement solely for purposes of the
agreements severally made by them in Section
4.7 of this Agreement):
--------------------------------------------
ZORBA B. LIEBERMAN
--------------------------------------------
NEIL J. SAVASTA
--------------------------------------------
BRUCE D. MULLEN
--------------------------------------------
LYNN BARR
<PAGE> 33
LIST OF EXHIBITS
EXHIBIT 1.5 Form of Stock Exchange Agent Agreement
EXHIBIT 4.1 Form of Covenant Not to Compete
EXHIBIT 4.2 Form of Employment Agreement
EXHIBIT 4.3 Form of Investment Letter
EXHIBIT 5.6 Form of Escrow Agreement
EXHIBIT 5.7 Form of Opinion of Counsel
EXHIBIT 6.3 Form of Opinion of Counsel to Medirisk and Merger Sub
<PAGE> 34
LIST OF SCHEDULES
SCHEDULE 1.5 Merger Consideration
SCHEDULE 1.6(M) Distributions Other Than Normal Dividends During
Preceding Three Years
SCHEDULE 1.6(N) Reacquisitions or Redemptions of Company Stock During
Preceding Three Years
SCHEDULE 2.1 Foreign Qualifications
SCHEDULE 2.3(I) Shares of Company Stock and Derivative Securities and
the Holders Thereof
SCHEDULE 2.3(II) Other Equity Rights
SCHEDULE 2.4 Subsidiaries, Investments, Dispositions & Predecessors
SCHEDULE 2.5 Financial Statements and Exceptions
SCHEDULE 2.6 Required Consents of the Company and Shareholders
SCHEDULE 2.7 Litigation
SCHEDULE 2.8 Permits
SCHEDULE 2.9 Owned and Leased Property & Exceptions to Title
SCHEDULE 2.10(A) Trademarks, Etc.
SCHEDULE 2.10(B) Owned Software
SCHEDULE 2.10(C) Licensed Software
SCHEDULE 2.10(D) Programmers of Company Software
SCHEDULE 2.10(F) Grants of Intellectual Property Marketing Rights
SCHEDULE 2.11(A) Material Agreements
SCHEDULE 2.11(B) Exceptions to Material Agreements
SCHEDULE 2.12 Taxes
SCHEDULE 2.13 Employee Benefit Plans
SCHEDULE 2.14 Material Customers
SCHEDULE 2.15(A) Directors & Officers of the Company
SCHEDULE 2.15(B) Bank Accounts
SCHEDULE 2.16 Related-Party Transactions
SCHEDULE 2.17 Certain Changes Since 30 April 1999
SCHEDULE 2.17(A) Customer Cancellations
SCHEDULE 2.17(B) Defaults Under Customer Contracts
SCHEDULE 2.19 Delinquent Accounts Payable
SCHEDULE 2.20(A) Employees, Contractors & Material Compensation
SCHEDULE 2.20(C) Labor Matters
SCHEDULE 2.21 Insurance Matters
SCHEDULE 2.22 Environmental Matters
SCHEDULE 3.3 Required Consents of Medirisk
SCHEDULE 8 Indemnification
SCHEDULE 10.2 Participating Brokers
