1
EXHIBIT 10.2
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
This Amended and Restated Stock Purchase Agreement (this "Agreement") is
made as of March 3, 2000 among HealthGrades.com, Inc., a Delaware corporation
(the "Company"), and Essex Woodlands Health Ventures Fund IV, L.P. ("Essex"),
Chancellor V, L.P. ("Invesco"), Paine Webber, as custodian for William J. Punk,
I.R.A. ("PW"), and Punk, Ziegal & Company Investors, L.L.C. ("Punk") (Punk, PW,
Invesco and Essex are collectively referred to as the "Purchasers"). This
Agreement amends and restates in its entirety that certain Stock Purchase
Agreement dated as of February 4, 2000 among Essex, PW, Punk and the Company.
SECTION I
SALE OF COMMON STOCK AND WARRANTS
1.1. Sale of Shares and Warrants.
(a) Subject to the terms and conditions hereof, at the Closing (as defined
below), the Company will issue and sell to the Purchasers, and the Purchasers
will buy from the Company, an aggregate of 7,400,000 shares of Common Stock (the
"Closing Shares") and warrants, in the form attached hereto as Exhibit A (the
"Warrants"), to purchase to an aggregate of 2,590,000 shares of Common Stock at
an initial exercise price of $4.00 per share, for an aggregate purchase price of
$14,800,000. The number of shares of Common Stock and Warrants to be purchased
and the purchase price to be paid by each of the Purchasers are set forth on
Schedule 1.1 hereto.
(b) The shares of Common Stock issuable upon exercise of the Warrants are
collectively referred to herein as the "Warrant Stock."
SECTION II
CLOSING DATE; DELIVERY
2.1. Closing Date.
(a) The closing of the purchase and sale of the Shares and the Warrants
hereunder shall be held at the offices of McDermott, Will & Emery, 227 West
Monroe Street, Chicago, Illinois 60606 at 10:00 a.m. local time on March 16,
2000 (the "Closing") or at such other time and place upon which the Company and
the Purchasers shall agree (the date of the Closing is hereinafter referred to
as the "Closing Date").
2
2.2. Delivery. At the Closing, the Company will deliver to the Purchasers a
duly executed certificate, registered in the Purchasers' names, representing the
Shares to be purchased by the Purchasers, and the Warrants, against payment of
the purchase price therefor, by wire transfer per the Company's instructions.
SECTION III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule delivered herewith, the
Company represents and warrants to the Purchasers on the date hereof and as of
the Closing as follows:
3.1. Organization and Standing; Articles and Bylaws. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Delaware and is in good standing under such laws. The
Company has all requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Company is not presently qualified to do
business as a foreign corporation in any jurisdiction other than the states set
forth on Schedule 3.1 hereto, and the failure to be so qualified or to qualify
in any other jurisdiction will not have a material adverse effect on the
business as now conducted or as now proposed to be conducted of the Company and
its subsidiaries taken as a whole ("Material Adverse Effect"). The Company has
furnished or will furnish on or prior to the Closing Date, to the Purchasers or
their special counsel, copies of its Certificate of Incorporation and bylaws, as
amended. Said copies are, or will be, true, correct and complete and contain all
amendments through the Closing Date.
3.2. Corporate Power. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement, to sell and issue the
Shares and Warrants hereunder, to issue the Warrant Stock upon exercise of the
Warrants and to carry out and perform its obligations under the terms of this
Agreement.
3.3. Subsidiaries. Except as set forth on the Disclosure Schedule, the
Company has no subsidiaries or affiliated companies and does not otherwise own
or control, directly or indirectly, any equity interest in any corporation,
association or business entity. Each of the subsidiaries listed on the
Disclosure Schedule is a corporation or a limited liability company duly
organized and validly existing under, and by virtue of, the laws of the
jurisdiction of its incorporation or formation and is in good standing under
such laws. Each of the subsidiaries has all requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company is
not owned or controlled by, directly or indirectly, any corporation, association
or business entity.
3.4. Capitalization.
(a) The authorized capital stock of the Company consists solely of (i)
50,000,000 shares of Common Stock, $0.001 par value per share ("Common Stock"),
of which 12,268,490 shares
- 2 -
3
are issued and outstanding (not including the sale of Common Stock pursuant to
this Agreement and the Management Investment Agreement (as hereinafter defined)
and subject to increases based on exercise of outstanding options), and (ii)
2,000,000 shares of Preferred Stock, par value $0.001 per share ("Preferred
Stock"), of which no shares are issued and outstanding. Not including the sale
of Warrant Stock pursuant to this Agreement options to purchase not more than
5,730,000 shares of Common Stock are issued and outstanding. All the issued and
outstanding shares are duly authorized and validly issued, fully paid and
nonassessable and owned of record and beneficially by the shareholders and in
the amounts set forth in Schedule 3.4, and have been offered, issued, sold and
delivered by the Company in compliance with applicable federal and state
securities laws. Schedule 3.4 sets forth all outstanding options, warrants
(other than the Warrants) or any other rights to purchase any shares of Company
capital stock and the number and type of shares of Company capital stock which
such options, warrants or other rights are issuable for.
(b) Except as set forth on Schedule 3.4, there are no outstanding
preemptive, conversion or other rights, options, warrants or agreements granted
or issued by or binding upon the Company for the purchase or acquisition of any
shares of its capital stock. The Company holds 7,383,671 shares of its capital
stock in its treasury.
(c) All of the authorized capital stock of Health Care Ratings, Inc. and
ProviderWeb.net, Inc. (collectively, "the Subsidiary") is solely owned by the
Company. No options to purchase shares of capital stock of the Subsidiary are
issued and outstanding. All the issued and outstanding shares are duly
authorized and validly issued, fully paid and nonassessable and owned of record
and beneficially by the Company, and have been offered, issued, sold and
delivered in compliance with applicable federal and state securities laws. There
are no outstanding options, warrants or any other rights to purchase any shares
of Subsidiary capital stock.
3.5. Authorization. All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement by the Company, the authorization, sale,
issuance and delivery of the Shares, the Warrants, and the Warrant Stock, and
the performance of all of the Company's obligations hereunder has been taken or
will be taken prior to the Closing. This Agreement, when executed and delivered
by the Company, shall constitute the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other laws from time to time in effect that
affect creditors' rights generally and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). The Shares, when issued and delivered in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable and will have the rights, preferences and privileges, if any,
described in the Certificate; the Warrants, when issued and delivered in
compliance with the provisions of this Agreement, will constitute the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms; the Warrant Stock has been duly and validly
reserved and, when issued and delivered in compliance with the provisions of
this Agreement and the Warrants, will be validly issued, fully
- 3 -
4
paid and nonassessable; no person has any preemptive right to subscribe for the
Shares, the Warrants, or the Warrant Stock; and the Shares, the Warrants, and
the Warrant Stock will be free of any liens or encumbrances, other than any
liens or encumbrances created by or imposed upon the holders thereof through no
action of the Company; provided, however, that the Shares, the Warrants, and the
Warrant Stock will be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein.
3.6. Financial Statements. The Company has delivered to the Purchasers its
audited balance sheet and statement of operations as of and for the period ended
December 31, 1998 (the "1998 Financial Statements") and its combined unaudited
balance sheet and statement of operations as of and for the period ended
September 30, 1999 (collectively with the 1998 Financial Statements, the
"Financial Statements"). The Financial Statements have been prepared by the
Company (or in the case of the 1998 Financial Statements, a certified public
accountant) in accordance with generally accepted accounting principles applied
on a consistent basis (except as otherwise indicated in the notes thereto)
throughout the periods indicated (except that the quarterly financial statements
do not contain footnotes and are subject to normal year-end adjustments), and
show all material liabilities, absolute or contingent, of the Company required
to be recorded thereon in accordance with generally accepted accounting
principles.
3.7. Absence of Changes. Since September 30, 1999 and except as noted in
the Disclosure Schedule:
(a) the Company has not entered into any transaction which was not in
the ordinary course of business;
(b) there has been no material adverse change in the condition
(financial or otherwise), business, property, assets or liabilities of the
Company;
(c) there has been no damage to, destruction of or loss of physical
property (whether or not covered by insurance) materially adversely
affecting the business or operations of the Company, either alone or in the
aggregate;
(d) the Company has not declared, set aside or paid any dividend or
made any distribution on its stock, or redeemed, purchased or otherwise
acquired any of its stock;
(e) the Company has not increased the compensation of any of its
officers, or the rate of cash compensation of its employees as a group,
except as part of regular compensation increases in the ordinary course of
business;
(f) there has been no resignation or termination of employment of any
key officer or employee of the Company, and the Company does not know of
the impending resignation or termination of employment of any such officer
or employee;
- 4 -
5
(g) there has been no labor dispute involving the Company or its
employees and none is pending or, to the best of the Company's knowledge,
threatened;
(h) there has been no change, except in the ordinary course of
business, in the contingent obligations of the Company, by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(i) there have not been any loans made by the Company to any of its
employees, officers or directors other than travel advances and office
advances made in the ordinary course of business;
(j) there has been no payment of any amounts or liability incurred to
or in respect of, or sale of any properties or assets (real, personal or
mixed, tangible or intangible) to, or any transaction or agreement or
arrangement of the Company with, any corporation or business in which any
corporate officer or director of the Company has any direct or indirect
ownership interest;
(k) the Company has not sold, transferred or leased any of its assets
except in the usual and ordinary course of business, none of which
materially and adversely affects the business or property of the Company;
(l) the Company has not canceled or compromised any material debt or
claim, or waived or released any right of material value;
(m) there has been no change in any method of accounting or accounting
practice of the Company;
(n) no notes or accounts receivable or portions thereof have been
written off by the Company as uncollectible (except for write-offs in the
ordinary course of business and consistent with past practice);
(o) there has been no issuance or sale by the Company of any stock,
bonds or other corporate securities of which the Company is the issuer, or
grant, issuance or change of any stock options, warrants or other rights to
purchase securities;
(p) there has been no discharge or satisfaction by the Company of any
lien or payment or satisfaction of any obligation or liability (whether
absolute, accrued, contingent or otherwise and whether due or to become
due) other than current liabilities shown on the September 30, 1999 balance
sheet referred to in Section 3.6 and current liabilities incurred since the
date of such balance sheet, in the ordinary course of business and
consistent with past practice;
- 5 -
6
(q) there has been no capital expenditure, or commitment to make any
capital expenditure, by the Company for additions to property, plant or
equipment, individually or in the aggregate in excess of $25,000;
(r) the Company has not entered into any collective bargaining
agreements or employment agreements;
(s) there has been no change to a material contract or arrangement by
or to which the Company or any of its assets is bound or subject, including
(without limitation) those relating to customers; or
(t) there has been no other event or condition of any character
pertaining to and materially adversely affecting the assets or business of
the Company.
3.8. Material Liabilities. The Company has no material liabilities or
obligations, absolute or contingent (individually or in the aggregate), except
(i) the liabilities and obligations set forth in the Financial Statements, (ii)
liabilities and obligations which have been incurred subsequent to September 30,
1999 in the ordinary course of business which have not been, individually or in
the aggregate, materially adverse, (iii) liabilities and obligations under
leases for its principal offices and for equipment, and (iv) liabilities and
obligations under sales, procurement and other contracts and arrangements
entered into in the normal course of business.
3.9. Title to Properties and Assets; Liens, etc. The Company has good and
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than the lien of current taxes not yet due and
payable. The Company owns or leases all the property and assets necessary for
its business as currently conducted and as proposed to be conducted. The Company
does not have any ownership interest in real property except as listed on the
Disclosure Schedule. With respect to the property and assets which the Company
leases, the Company is in compliance with all leases in all material respects.
All personal property and assets that are material to the business, operations
or financial condition of the Company, and, to the knowledge of the Company, all
buildings, structures and fixtures used by it in the conduct of its business,
are in good operating condition and repair, ordinary wear and tear excepted.
3.10. Compliance with Other Instruments, None Burdensome, etc. The Company
is not in violation of any term of its Certificate of Incorporation or bylaws,
or of any term or provision of any mortgage, indebtedness, indenture, contract,
agreement, instrument, judgment or decree, and is not in violation of any order,
statute, rule or regulation applicable to the Company in each case where such
violation would have a Material Adverse Effect. The execution, delivery and
performance of and compliance with this Agreement, and the issuance of the
Shares, the Warrants, and the Warrant Stock, have not resulted and will not
result in any violation of, or conflict with, or constitute a default under, the
Company's Certificate of Incorporation or bylaws or any of its material
agreements or result in the creation of, any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company.
- 6 -
7
3.11. Patents and Other Intangible Assets.
(a) The Company (i) owns or has the right to use, free and clear of all
liens, claims and restrictions, all patents, trademarks, service marks, trade
names, copyrights (and licenses with respect to the foregoing) used in the
conduct of its business as now conducted or as proposed to be conducted, and
such patents, trademarks, service marks, trade names, copyrights (and licenses
with respect to the foregoing) do not infringe upon or otherwise act adversely
to the right or claimed right of any person under or with respect to any of the
foregoing so that such infringements and actions would have a Material Adverse
Effect, and (ii) is not obligated or under any contract whatsoever to make any
payments by way of royalties, fees or otherwise to any owner of, licensor of, or
other claimant to, any patent, trademark, trade name, copyright or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate the proprietary rights of others. To the
best of the Company's knowledge, no person or entity is violating the
proprietary rights of the Company.
(b) The Company owns and has the unrestricted right to use all trade
secrets, including know-how, inventions, designs, processes, and technical data
required for or incident to the development, manufacture, operation and sale of
all products and services proposed to be sold by the Company, free and clear of
any rights, liens or claims of others, including without limitation, former
employers of all current and former employees, consultants, officers, directors
and shareholders of the Company.
3.12. Litigation, etc. Except as set forth on the Disclosure Schedule or in
the Company's most recent Form 10-Q or Annual Report on Form 10-K (collectively,
the "Current SEC Reports"), there are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency. The Company is not a party or subject to the provisions of
any order, writ, injunction, judgment or decree of any court or governmental
agency or instrumentality. Except as set forth on the Disclosure Schedule or in
the Current SEC Reports, there is no action, suit, proceeding or investigation
by the Company currently pending or which the Company intends to initiate.
3.13. Employees; Consultants. Set forth on the Disclosure Schedule is a
list of each employee and consultant of the Company whose base salary or cash
compensation is in excess of $50,000. Set forth on the Disclosure Schedule is a
list of all consulting agreements between the Company and the Company's
consultants. The Company has delivered to the Purchasers prior to the date
hereof copies of all consulting agreements between the Company and the Company's
consultants, or a written summary of any oral agreement between the Company and
any Company consultant. Set forth on the Disclosure Schedule is a list of all
employment agreements with employees not terminable at will without continuing
obligation to the Company. Except as set forth on the Disclosure Schedule, to
the knowledge of the Company, no employee of the Company has any affiliation
with or obligation to any other employer. The Company is not aware that any key
employee intends to terminate his or her employment with the Company, nor does
the Company have a present intention to terminate the employment of any officer
or key
- 7 -
8
employee. To the knowledge of the Company, no employee of the Company is in
violation of any term of any employment contract, patent disclosure agreement,
non-competition agreement or any other contract or agreement or any restrictive
covenant relating to the relationship of any such employee to the Company,
because of the nature of the business conducted or contemplated to be conducted
by the Company or the use of trade secrets or proprietary information of others,
to any former employee.
3.14. Certain Transactions. The Company is not indebted, directly or
indirectly, to any of its officers, directors or shareholders or to their
respective spouses or children, in any amount whatsoever other than for the
reimbursement of business expenses incurred in the ordinary course of business;
none of said officers, directors or shareholders, or any members of their
immediate families, are indebted to the Company other than for travel advances
or other business-related advances made in the ordinary course of business or
have any direct or indirect ownership interest in any firm or corporation with
which the Company is affiliated or, to the knowledge of the Company, with which
the Company has a business relationship. To the knowledge of the Company, no
officer, director or shareholder, or any member of their immediate families, is,
directly or indirectly, interested in any material contract of the Company,
other than employment agreements, stock options and notes to officers of the
Company issued by the Company set forth on the Disclosure Schedule (the "Officer
Documents"). The Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation other than its subsidiaries.
3.15. Material Contracts and Obligations. The Disclosure Schedule contains
a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which the Company is a party or by which it is bound: (i) that
are material to the conduct and operations of its business and properties, (ii)
which provide for payments to or by the Company in excess of $50,000, (iii)
which obligate the Company to share, license or develop any product or
technology, (iv) which involve transactions or proposed transactions between the
Company and its officers, directors, affiliates or any affiliate thereof other
than the Officer Documents, or (v) that were not entered into by the Company in
its ordinary course of business (collectively, the "Contracts"). Each of the
Contracts is valid, binding and in full force and effect (assuming due
authorization and execution by the other parties thereto), and is enforceable by
the Company in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws from time to time in effect that affect creditors'
rights generally and subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
The Company has performed all material obligations required to be performed by
it to date under each of the Contracts and is not (with or without the lapse of
time or giving of notice or both) in breach or default in any respect thereunder
and no other party to any of the Contracts is (with or without the lapse of time
or the giving of notice or both) in breach or default in any respect thereunder.
Copies of such agreements and contracts and documentation evidencing such
liabilities and other obligations have been made available for inspection by the
Purchasers and their counsel.
3.16. Registration Rights. Except as provided in this Agreement and as set
forth in the Disclosure Schedule, the Company is not under any contractual
obligation to register (as defined
- 8 -
9
in Section 7.1 below) now or in the future, whether contingent or not, any of
its presently outstanding securities or any of its securities which may
hereafter be issued.
3.17. Consents. No consent, approval or authorization of (or designation,
declaration of filing with) any governmental authority on the part of the
Company is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the Shares, the Warrants and the
Warrant Stock, or the consummation of any other transaction contemplated hereby
or thereby, other than a Form D to be filed with the Securities and Exchange
Commission and any applicable blue sky filings. No vote, consent or approval in
any manner of any lender to the Company or the holder of any security of the
Company is required as a condition to the execution, delivery and performance of
this Agreement. In addition to the foregoing and other than the consent of
Nasdaq to waiver of the shareholders approval requirements of Rule 4310, there
are no consents or waivers, other than those which have been obtained, which the
Company must obtain so as to be able to fulfill its obligations and to provide
the Purchasers with all their rights under this Agreement.
3.18. Offering. Subject to the accuracy of the Purchasers' representations
in Section 4 hereof, the offer, sale and issuance of the Shares and the Warrants
to be issued in conformity with the terms of this Agreement, and the issuance of
the Warrant Stock upon the exercise of the Warrants, constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act.
3.19. Brokers or Finders; Other Offers. Except as set forth in the
Disclosure Schedules, the Company has not incurred, and will not incur, directly
or indirectly, as a result of any action taken by the Company, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement.
3.20. No Voting Agreement. There are no outstanding stockholder agreements,
voting trusts, proxies or other arrangements or understandings among the
stockholders of the Company relating to the voting of their respective shares.
3.21. Tax. All required tax returns of the Company have been accurately
prepared and duly and timely filed, and all taxes required to be paid with
respect to the periods covered by such returns have been paid. The Company has
not been delinquent in the payment of any tax, assessment or governmental
charge. For these purposes, references to "taxes" and "tax returns" shall be
interpreted broadly to include any Federal, state or local tax or tax return,
and any tax, tax return or equivalent of any taxing jurisdiction outside of the
United States.
3.22. Franchises, Licenses, and Permits. Except as set forth on the
Disclosure Schedule, the Company has all franchises, permits, licenses and other
similar authority necessary for the conduct of its business as currently
conducted, except for those which the failure to have would not have a Material
Adverse Effect. The Company is not in default in any of such franchises,
permits, licenses or other similar authority.
3.23. Issuance Taxes. All taxes imposed upon the Company by law as a result
of the issuance, sale and delivery of the shares of the Shares, the Warrants, or
the Warrant Stock shall
- 9 -
10
have been fully paid, and all laws imposing such taxes shall have been fully
complied with, on or prior to the Closing Date.
3.24. Books and Records. The books of account, stock record books, minute
books, bank accounts and other corporate records of the Company are true,
correct and complete and have been maintained in accordance with good business
practices.
3.25. ERISA. Except as set forth on the Disclosure Schedule, the Company
does not maintain any employee pension benefit plan as defined in paragraph
3(2)(A) of Title I of the Employee Retirement Income Security Act of 1974, as
amended. The Company is in compliance in all material respects with all its
obligations pursuant to such plans.
3.26. Labor Relations. No labor union or any representative thereof has
made any attempt to organize or represent employees of the Company. There are no
unfair labor practice charges, pending trials with respect to unfair labor
practice charges, pending grievance proceedings or adverse decisions of a Trial
Examiner of the National Labor Relations Board against the Company.
3.27. Insurance. The Company maintains insurance which is customary in its
industry and which the Company reasonably believes is commercially reasonable
given the risks involved in the business conducted or which has been conducted
by the Company.
3.28. Environmental and Safety Laws. The Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and no expenditures are or will be required in
order to comply with any such statute, law or regulation.
3.29. Use of Proceeds. The Company will use the proceeds from the sale of
the Shares and the Warrants substantially as set forth on the Disclosure
Schedule. None of the proceeds from the sale of the Shares or the Warrants shall
be used to secure or pre-pay all or any portion of the Company's outstanding
bank debt, if any.
3.30. SEC Reports. Since January 1, 1997, the Company has filed with the
SEC all forms, statements, reports and documents (including all exhibits,
post-effective amendments and supplements thereto) required to be filed by it
under each of the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended, and the respective rules and
regulations thereunder, each of which, as amended if applicable, complied when
filed or, in case an amendment was filed thereto, when the amendment was filed,
with all applicable requirements if the appropriate act and the rules and
regulations thereunder. The Company has previously delivered to the Purchasers
copies (including all exhibits, post-effective amendments and supplements
thereto) of its (a) Annual Reports on Form 10-K for the years ended December 31,
1997 and 1998, as filed with the SEC, (b) proxy and information statements
relating to (i) all meetings of its stockholders (whether annual or special) and
(ii) if any, actions by written consent in lieu of a stockholders' meeting from
January 1, 1997, until the date hereof, and (c) all other reports, including
quarterly reports, and registration statements filed by the Company with the SEC
since January 1, 1997 (the documents referred to in clauses (a), (b) and
- 10 -
11
(c) filed prior to the date hereof are collectively referred to as the "SEC
Reports"). As of their respective dates, the SEC Reports (and, in the case of
those reports that were amended, as amended) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3.31. Physician Practices. The Disclosure Schedule sets forth a list of all
of the agreements, understandings and arrangements between the Company and any
physician practices (the "Practices") that (i) are currently in effect or under
which the Company has any continuing liability or obligations and (ii) terminate
any agreements, understandings or arrangements that the Company had with any
Practices, including, without limitation, all management services agreements,
restructuring agreements and settlement agreements (the "Physician Agreements").
True and complete copies of all of the Physician Agreements have been delivered
to the Purchasers. Except as set forth in the Disclosure Schedule, neither the
Company nor, to the knowledge of the Company, any other party to the Physician
Agreements is in material default in any of their respective obligations under
the Physician Agreements.
3.32. Credit Agreement. The Disclosure Schedule sets forth all loan
agreements, credit agreements and any other debt agreements to which the Company
is a party or is otherwise bound. The Company is not in default in any of its
obligations under the Second Amended and Restated Revolving Loan and Security
Agreement, as amended, dated as of November 21, 1997 among the Company and Bank
of America, N.A., as agent, and the other banks signatory thereto (the "Credit
Agreement") and amended as of September 16, 1999. The Disclosure Schedule sets
forth the current outstanding principal balance due under the Credit Agreement
and the dates when such amounts are due. The Company has obtained all consents
required under the Credit Agreement to complete the sale of Common Stock
hereunder. True and complete copies of the Credit Agreement and all amendments
thereto have been delivered to the Purchasers.
3.33. Subsidiary. On the date hereof, the Company beneficially owns all of
the capital stock of ProviderWeb.net and Health Care Ratings, Inc.
(collectively, the "Subsidiary"). The Company is the beneficial owner of all of
the capital stock of the Subsidiary. The Disclosure Schedule sets forth all
agreements pertaining to the acquisition of the capital stock of the Subsidiary
(the "Subsidiary Contracts"). Each of the Subsidiary Contracts is valid, binding
and in full force and effect (assuming due authorization and execution by the
other parties thereto), and is enforceable by the Company in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other laws from time to
time in effect that affect creditors' rights generally and subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Company has performed all material
obligations required to be performed by it to date under each of the Subsidiary
Contracts and is not (with or without the lapse of time or giving of notice or
both) in breach or default in any respect thereunder and, to the knowledge of
the Company, no other party to any of the Subsidiary Contracts is (with or
without the lapse of time or the giving of notice or both) in breach or default
in any respect thereunder. Copies of the Subsidiary Contracts have been
delivered or made available to the Purchaser and its counsel.
- 11 -
12
3.34. NASD Approval. The Company has received from the NASD written
approval that the Company may rely on NASD Rule 4310(c)(25)(ii) and be excepted
from obtaining shareholder approval for the transactions contemplated by this
Agreement. The Company has fully complied with the requirements set forth in
NASD Rule 4310(c)(25)(ii) for being excepted from the shareholder approval
requirements set forth in NASD Rule 4310(c)(25)(ii) other than mailing to its
shareholders a letter (i) alerting the shareholders to its omission to seek the
shareholder approval that would otherwise be required and (ii) indicating that
the Company's Audit Committee has expressly approved the Company's omission to
seek shareholder approval, for the transactions contemplated by this Agreement
(the "Shareholder Letter").
3.35. Management Investment. Kerry Hicks, David Hicks, Paul Davis and
Patrick Jaeckle (collectively, the "Founders") have entered into a stock
purchase agreement in the form attached hereto as Exhibit B (the "Management
Investment Agreement").
3.36. Disclosure. Neither this Agreement, nor any certificate or statement
furnished to the Purchasers by the Company pursuant to this Agreement, contains
any untrue statement of a material fact, and none of this Agreement, such
certificates or statements omits to state a material fact necessary in order to
make the statements contained herein or therein not misleading in the light of
the circumstances under which they were made. The Company has not provided any
material information or disclosure to one Purchaser that it has not also
provided to the other Purchasers.
SECTION IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, hereby represents and warrants,
on the date hereof and as of the closing date applicable to such Purchaser, to
the Company with respect to the purchase of the Shares and the Warrants as
follows:
4.1. Experience. It has substantial experience in evaluating and
investigating private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
4.2. Investment. It is acquiring the Shares, the Warrants, and the Warrant
Stock for investment for its own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution thereof. It
understands that the Shares, the Warrants, and the Warrant Stock have not been,
and will not be, registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein.
4.3. Rule 144. It acknowledges that the Shares, the Warrants, and the
Warrant Stock must be held indefinitely unless (a) subsequently registered under
the Securities Act, (b) an
- 12 -
13
exemption from such registration is available, or (c) sold or transferred
pursuant to Rule 144 promulgated under the Securities Act ("Rule 144"). It is
aware of the provisions of Rule 144 which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being effected through a
"broker's transaction" or in transactions directly with a "market maker," the
number of shares being sold during any three-month period not exceeding
specified limitations and the filing of a Form 144 with the Securities and
Exchange Commission.
4.4. Access to Data. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and has
had the opportunity to review the Company's facilities. It has also had an
opportunity to ask questions of officers of the Company, which questions were
answered to its satisfaction. It understands that such discussions, as well as
any written information issued by the Company, were intended to describe certain
aspects of the Company's business and prospects but were not a thorough or
exhaustive description.
4.5. Authorization. This Agreement when executed and delivered by the
Purchaser will constitute a valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms. All corporate
action on the part of the Purchaser, its directors and shareholders necessary
for the authorization, execution, delivery and performance of this Agreement by
the Purchaser, and the performance of all of the Purchaser's obligations
hereunder has been taken or will be taken prior to the Closing.
4.6. Brokers or Finders. The Company will not incur, directly or
indirectly, as a result of any action taken by the Purchaser, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement.
4.7. Accredited Investor. Purchaser is an "accredited investor" as such
term is defined in the Securities Act of 1933, as amended.
4.8. SEC Filings. The Purchaser has reviewed all public filings of the
Company that have been filed with the Securities and Exchange Commission by the
Company within the past year.
SECTION V
PURCHASERS' CONDITIONS TO CLOSING
The Purchasers' obligations to purchase the Shares and the Warrants at the
Closing are subject to the fulfillment of the following conditions, the waiver
of which shall not be effective against such Purchaser without a consent in
writing thereto:
- 13 -
14
5.1. Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date.
5.2. Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed or complied with by the Company on or prior to the
Closing Date shall have been performed or complied with.
5.3. Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate of the Company, executed by the Chairman of the
Company, dated the Closing Date, and certifying, among other things, to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4. Compliance with State Securities Laws. The Company shall have obtained
all permits and qualifications required by any state for the offer and sale of
the Shares, the Warrants, and the Warrant Stock, or shall have the availability
of exemptions therefrom.
5.5. Secretary's Certificate. The Company shall deliver to each Purchaser
copies of all resolutions of the Company's board of directors or shareholders
necessary to approve the Agreement, the issuance of the Shares and the Warrants,
and the Warrant Stock, and all other transactions contemplated hereby, certified
by the Secretary of the Company as of the Closing Date.
5.6. Qualifications and Consents. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state and all consents of third parties that are required in connection
with the lawful issuance and sale of the Shares, the Warrants, and the Warrant
Stock and the transactions contemplated hereby, shall have been duly obtained
and shall be effective on and as of the Closing Date, and a copy thereof shall
have been delivered to each Purchaser.
5.7. Legal Opinions. The Purchasers shall have received an opinion of
counsel to the Company, dated as of the Closing Date, in form attached hereto as
Exhibit C.
5.8. Good Standing. A good standing certificate, dated no more than ten
(10) days prior to the Closing Date, for the Company issued by the Delaware
Secretary of State shall be delivered to each Purchaser.
5.9. Directors. Effective as of the Closing Date, the Company's Board of
Directors shall have been expanded to include two additional people who shall be
designated by Essex and Invesco. If either Essex or Invesco elect not to
designate a director, then Essex and/or Invesco, as applicable, shall have the
right to receive notice of all Board meetings and have a representative attend
and observe all such meetings.
5.10. Co-Sale and Voting Agreement. The Company, each Purchaser, Kerry
Hicks and Patrick Jaeckle shall have executed the Co-Sale and Voting Agreement
attached hereto as Exhibit D. The Company will cause each of its directors and
executive officers to enter into a
- 14 -
15
voting agreement containing the terms set forth in Section 2 of the Amended and
Restated Co-Sale and Voting Agreement.
5.11. Non-Competition Agreement. Kerry Hicks and Patrick Jaeckle shall have
executed a Non-Competition Agreement in a form approved by the Purchasers.
5.12. Proprietary Information Agreement. Each officer and employee of the
Company responsible for proprietary information shall have executed a
Proprietary Information Agreement in a form approved by the Purchasers.
5.13. Pay Expenses. The Company will pay the legal fees and other
out-of-pocket expenses incurred by the Purchasers in connection with due
diligence and the preparation of this Agreement, and all brokerage or finders
fees related to the consummation of the transactions contemplated hereby.
5.14. Management Investment. The Management Investment Agreement shall not
been amended, modified or supplemented without the written consent of the
Purchasers, and the transactions contemplated by the Management Investment
Agreement to be performed on or prior to the Closing shall have been fully
performed and consummated.
5.15. NASD Compliance. The Company shall have mailed the Shareholder Letter
to its shareholders on the first Business Day immediately subsequent to the date
hereof and all waiting periods with respect to the Shareholder Letter that are
set forth in NASD Rule 4310(c)(25)(ii) shall have passed. The Company shall have
fully complied with the requirements set forth in NASD Rule 4310(c)(25)(ii) for
being excepted from the shareholder approval requirements set forth in such rule
with respect to the transactions contemplated hereby.
5.16. Voting Agreements. Prior to the Closing, the Company will cause each
of its directors and executive officers to enter into a voting agreement
containing the terms set forth in Section 2 of the Co-Sale and Voting Agreement.
5.17. Credit Agreement. The Company shall have entered into an amendment to
its credit agreement which shall be satisfactory to the Purchasers.
SECTION VI
COMPANY'S CONDITIONS TO CLOSING
The Company's obligation to sell and issue the Shares and the Warrants at
the Closing are subject to the fulfillment of the following conditions:
6.1. Representations. The representations made by the Purchasers in Section
4 hereof shall be true and correct when made, and shall be true and correct on
the Closing Date.
- 15 -
16
6.2. Compliance with State Securities Laws. The Company shall have obtained
all permits and qualifications required by any state for the offer and sale of
the Shares, the Warrants, and the Warrant Stock, or shall have the availability
of exemptions therefrom.
6.3. Compliance Certificate. The Purchasers shall have executed and
delivered to the Company a certificate of the Purchasers, dated the Closing
Date, and certifying, among other things, that the representations made by the
Purchasers in Section 4 hereof are true and correct when made, and shall be true
and correct on the Closing Date, and that all covenants, agreements and
conditions contained in this Agreement to be performed by the Purchasers on or
prior to the Closing Date shall have been performed or complied with.
SECTION VII
REGISTRATION RIGHTS
7.1. Definitions. As used in this Section VII:
(a) the terms "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments filed
or required to be filed) and the declaration or ordering of effectiveness
of such registration statement;
(b) the term "Registrable Securities" means (i) shares of Common
Stock issued to the Purchasers and/ or Warrant Stock whether then issued or
issuable and (ii) any capital stock of the Company issued as a dividend or
other distribution with respect to, or in exchange for or in replacement
of, the shares referred to in clause (i) above;
(c) the term, "Holder" shall mean any holder of Registrable
Securities;
(d) "SEC" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act;
(e) "Registration Expenses" shall mean all expenses incurred by the
Company in compliance with this Section 7, including, without limitation,
all registration and filing fees, printing expenses, reasonable fees and
disbursements of counsel for the Company, reasonable fees and disbursements
of one counsel for the Holders, blue sky fees and expenses and the expense
of any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company);
(f) "Registration Statement" shall mean, unless the context
indicates otherwise, the resale registration statement on Form S-1 filed by
the Company pursuant to Rule 415 under the Securities Act covering the
Registrable Securities
- 16 -
17
or the resale registration statement on Form S-3 filed by the Company in
replacement of, or as an amendment to, the Form S-1 registration statement;
and
(g) "Securities" shall have the meaning set forth in Section 2(l)
of the Securities Act.
7.2. Resale Registration on Form S-1. Within sixty days after the Closing
Date, the Company shall prepare and file with the SEC a shelf registration
statement on Form S-1 pursuant to Rule 415 under the Securities Act, covering
the resale of the Registrable Securities. The Company shall use its best efforts
to cause the Registration Statement to be declared effective pursuant to Rule
415 by the SEC within one hundred twenty (120) days after the Closing Date. A
draft of the Registration Statement shall be provided to each Purchaser for its
review and comment at least five (5) days prior to filing with the SEC.
7.3. Resale Registration on Form S-3. The Company shall use its best
efforts to qualify for registration on Form S-3 (or a successor short-form
registration statement, "Form S-3") for secondary sales. After the Company has
qualified for the use of Form S-3, any Holder of Registrable Securities shall
have the right to request that the Registration Statement be replaced by, or
amended to, a shelf registration statement on Form S-3 or the Company itself may
replace the Registration Statement with, or amend the Registration Statement to,
a shelf registration statement on Form S-3. Subject to the foregoing, the
Company will use its best efforts to effect promptly the registration of all
shares of Registrable Securities on Form S-3. If the Company registers the
Registrable Securities on Form S-3 and subsequently becomes ineligible to use
such form, then the Company will use its best efforts to promptly register the
Registrable Securities on a registration statement on Form S-1 or other
available form and will file any amendments or supplements to such registration
statement as may be necessary to allow the Purchaser to meet the prospectus
delivery requirements of the Securities Act in connection with its sales of
Registrable Securities under such registration statement.
7.4. Registration Procedures.
(a) The Company will:
(i) use its best efforts to cause the Registration Statement to
become effective within 120 days of the Closing Date and remain effective
until the Registrable Securities may be sold pursuant to Rule 144(k) under
the Securities Act, and promptly notify the Holders (x) when such
Registration Statement becomes effective, (y) when any amendment to such
Registration Statement becomes effective and (z) of any request by the SEC
for any amendment or supplement to such Registration Statement or any
prospectus relating thereto or for additional information.
(ii) promptly prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective.
- 17 -
18
(iii) furnish to the Holders copies of the Registration Statement
as filed and thereafter, such number of copies of the Registration
Statement, each amendment and supplement thereto, the prospectus included
in such registration statement (including each preliminary prospectus),
reports on Form 10-K, 10-Q and 8-K (or their equivalents) which the Company
shall have filed with the SEC and financial statements, reports and proxy
statements mailed to shareholders of the Company as the Holders may
reasonably request in order to facilitate the disposition of the
Registrable Securities being offered by the Holders;
(iv) use its best efforts to register or qualify, not later than
the effective date of any filed Registration Statement, the Registrable
Securities covered by the Registration Statement under the securities or
"blue sky" laws of such jurisdictions as the Holder may reasonably request;
(v) during the period when the registration statement is required
to be effective, notify the Holders of the happening of any event as a
result of which the prospectus included in the Registration Statement
contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statement therein not misleading, and the Company will forthwith prepare a
supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading;
(vi) cause such Registrable Securities to be traded on each
securities exchange or automated interdealer quotation system on which
similar Securities issued by the Company are then traded, provided that the
Company is eligible to do so under applicable listing requirements; and
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to the holders of the
Company's Securities, as soon as reasonably practicable, an earnings
statement governing a period of 12 months, beginning after the effective
date of the Registration Statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Act.
(b) The Holder shall timely furnish to the Company any such information
regarding the distribution of such Registrable Securities as the Company may
from time to time reasonably request.
(c) Each of the Holders agree that upon the receipt of any notice from the
Company of the happening of any event of the kind described in paragraph
(a)(viii) above, it will forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement until
- 18 -
19
receipt by the Holders of the copies of the supplemented or amended prospectus
contemplated by paragraph (a)(viii) above.
7.5. Piggy-back Registration.
(a) If the Company shall determine to register any of its Securities in
connection with an underwritten public offering by the Company, then the Company
will:
(i) promptly give to each of the Holders a written notice thereof;
and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in the underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by the Holders within 20 business days after receipt of the
written notice from the Company described in clause (i) above, except as
the number of such Registrable Securities may be limited by Section 7.5(b)
below. Such written request may specify all or a part of the Holders'
Registrable Securities.
(b) Underwriting. In the event the Company provides the notice described in
Section 7.5(a)(i), the right of each of the Holders to registration pursuant to
this Section 7.5 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided therein. The Holders shall and it shall be a
condition of their participation in any such registration and underwriting that
any other shareholders distributing Securities through such underwriting also
enter into an underwriting agreement in customary form (including, without
limitation, such indemnity and contribution provisions as the underwriter or
underwriters customarily require) with the underwriter or underwriters selected
by the Company. Notwithstanding any other provision of this Section 7.5, if the
managing underwriter or representative of the managing underwriter advises the
Company in writing that marketing factors require a limitation on the number of
shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of Securities
requesting registration, and the number of Securities that are entitled to be
included in the registration and underwriting shall be allocated in the
following manner: first, the holders of the Securities that demanded such
registration shall be entitled to register all of their shares, to the extent
permitted; and, second, the number of shares that may be included in the
registration and underwriting by each of the Holders and the holders of
Securities that are also contractually entitled to piggy-back upon such
registration shall be reduced, on a pro rata basis (based on the total number of
Common Stock equivalents owned by each), by such minimum number of shares as is
necessary to comply with any limitations imposed by the underwriters upon the
number of shares to be registered. If any holder of Securities disapproves of
the terms of any such underwriting, he may elect to withdraw therefrom by
promptly providing written notice to the Company and the underwriter; provided,
however, that no holder may withdraw following the second business day preceding
effectiveness of the registration statement. Any Registrable
- 19 -
20
Securities or other Securities excluded in accordance with this Section 7.5(b)
or withdrawn from such underwriting shall be withdrawn from such registration.
(c) The Company shall obtain the Purchasers' prior written consent before
granting any demand or piggy-back registration rights that have priority over or
parity with the registration rights granted herein to the Holders.
7.6. Indemnification.
(a) The Company will indemnify each of the Holders, as applicable, each of
its officers, directors and partners, and each person controlling each of the
Holders, with respect to each registration which has been effected pursuant to
this Section VII, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus or other
document (including any related registration statement, notification or the
like) incident to any such registration or qualification, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration or qualification, and
will reimburse each of the Holders, each of its officers, directors and
partners, and each person controlling each of the Holders, each such underwriter
and each person who controls any such underwriter, for any legal and any other
expense reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action; provided that the Company will
not be liable in any such case to any Holder or underwriter or person
controlling such Holder or underwriter to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission based upon information furnished in writing to the Company by such
Holder or underwriter or person controlling such Holder or underwriter and
stated to be specifically for use therein; and further provided that the Company
shall not be liable hereunder, whether to the Holders, any underwriter or any
other third party, or any such party's officers, directors, partners or persons
controlling such parties, for the failure of such party to comply with such
party's prospectus delivery requirements.
(b) Each of the Holders will, if Registrable Securities held by it are
included in the Securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's Securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act and the rules and
regulations thereunder, each other Holder and each of their officers, directors,
and partners, and each person controlling such other Holder against all claims,
losses, damages, and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document made by each Holder, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading by
- 20 -
21
such Holder, and will reimburse the Company and such other Holders, directors,
officers, partners, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with information furnished in writing to the Company by such
Holder and stated to be specifically for use therein; provided, however, that
the obligations of each of the Holders hereunder shall be limited to an amount
equal to the net proceeds to such Holder of Securities sold pursuant to such
registration.
(c) Each party entitled to indemnification under this Section 7.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom provided that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at the Indemnified Party's expense (unless (i) the employment of counsel
by such Indemnified Party has been authorized by the Indemnifying Party, or (ii)
the Indemnified Party shall have reasonably concluded that there may be a
conflict of interest between the Indemnifying Party and the Indemnified Party in
the defense of such action, in each of which cases the fees and expenses of one
counsel for all Holders (in addition to local counsel) shall be at the expense
of the Indemnifying Party), and provided further that the failure of any
Indemnified Party to give notice as provided herein, shall not relieve the
Indemnifying Party of its obligations under this Section VII unless the failure
to give such notice materially prejudices the Indemnifying Party. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 7.6 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue
- 21 -
22
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, and the amount of the net
proceeds to such Holder of Securities sold pursuant to such registration.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution relating to obligations among the parties
hereto and the underwriters contained in a negotiated underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall be controlling.
7.7. Information by the Holders. Each of the Holders shall furnish to the
Company such information regarding such Holder and the distribution proposed by
such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section VII.
7.8. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC which may permit the sale of the
restricted securities to the public without registration, the Company agrees to:
(a) use its best efforts to make and keep public information
available as those terms are understood and defined in Rule 144 at all
times;
(b) use its best efforts to file with the SEC in a timely manner
all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject
to such reporting requirements; and
(c) so long as any Purchaser owns any Registrable Securities,
furnish to the Purchaser upon request, a written statement by the Company
as to its compliance with the current information requirements of Rule 144,
a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed as the Purchaser may reasonably
request in availing itself of any rule or regulation of the SEC allowing
the Purchaser to sell restricted securities without registration.
7.9. Assignability of Registration Rights. The Registration Rights granted
pursuant to this Section 7 shall be assignable at the option of each of the
Holders, in whole or in part, to any transferee of Registrable Securities.
- 22 -
23
SECTION VIII
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as set forth in the Section 8 for,
unless expressly otherwise indicated in this Section 8, a period commencing on
the Closing Date and ending upon the third anniversary of the Closing Date.
Notwithstanding the foregoing, this Agreement shall terminate on the closing
date of a Change of Control Transaction. A "Change of Control Transaction" shall
mean (i) a transaction in which all of the shares of Common Stock are exchanged
for cash or other securities of a third party and such transaction results in
the holders of Common Stock holding less than fifty percent (50%) of the voting
power of the surviving entity, or (ii) the sale or transfer of all or
substantially all of the Company's assets.
8.1. Interim Conduct of Business. From the date hereof until the Closing,
the Company and the Founders shall preserve and maintain the Company, and shall
operate the Company and its subsidiaries consistent with past practice and in
the ordinary course of business, except as specifically provided herein. Without
limiting the generality of the foregoing, except as otherwise required hereby or
agreed to in writing by the Purchasers from the date hereof until the Closing,
the Company shall:
(a) not declare, set aside or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase or
otherwise acquire any of the capital stock;
(b) maintain the assets and facilities of the Company in good
repair, order and condition, reasonable wear and tear excepted;
(c) comply in all material respects with its obligations under all
material contracts and agreements;
(d) preserve the goodwill of customers and suppliers and others
having business relationships with the Company;
(e) maintain its books, accounts and records in the usual, regular
and ordinary manner on a basis consistent with past practice; and
(f) not take or omit to take any action which could have a Material
Adverse Effect or knowingly cause any representation or warranty herein to
become and false.
8.2. Information. From the date hereof through the Closing, the Company
shall promptly notify the Purchasers of any event that has had or could have a
Material Adverse Effect or has caused or could cause a representation or
warranty to become incorrect and shall keep the Purchasers fully informed of
such events and permit the Purchasers' representatives to participate in a
reasonable manner in discussions relating thereto.
- 23 -
24
8.3. Further Assurances; Cooperation. From time to time at a Purchaser's
request and without further consideration, the Company shall execute,
acknowledge and deliver such documents, instruments or assurances and take such
other actions as any Purchaser may reasonably request with respect to the
transaction contemplated hereby.
8.4. Notices and Consents. The Company will cause each of the Company's and
its subsidiaries to give any notice to third parties, and will cause each of the
Company and its subsidiaries to use its commercially reasonable efforts to
obtain any necessary third party consents, that any Purchaser may request in
connection with the consummation of the transactions contemplated hereby. The
Company will give any notices to, make any filings with, and use its
commercially reasonable efforts to obtain any authorizations, consents, and
approvals of governments and governmental agencies that are necessary to
consummate the transactions contemplated hereby.
8.5. Exclusivity. From the date hereof through the Closing Date, the
Company will not (i) solicit, initiate, or encourage the submission of any
proposal or offer from any person or entity relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets, of any of the Company and its subsidiaries (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing.
8.6. Punctual Payment. The Company will and it will cause each of its
subsidiaries, if any, to (i) pay and discharge any and all indebtedness payable
or guaranteed by the Company, as the case may be, and any interest thereon, on
or before the due date (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) or within any applicable notice or cure
period in accordance with the agreement, document or instrument relating to such
indebtedness or guarantee and (ii) faithfully perform, observe and discharge all
covenants, conditions and obligations which are imposed upon the Company or any
subsidiary, by any and all agreements, documents, instruments and indentures
evidencing, securing or otherwise relating to such indebtedness or guarantee.
8.7. Records and Accounts. The Company and each of its subsidiaries will
keep true and accurate records and books of account in which full, true and
correct entries will be made in accordance with generally accepted accounting
principles and maintain adequate accounts and reserves for all taxes (including
income taxes), all depreciation, depletion, obsolescence and amortization of its
properties, all contingencies, and all other reserves.
8.8. Insurance, Indemnification. The Company and each of its subsidiaries
will maintain with financially sound and reputable insurance companies, funds or
underwriters insurance of the kinds, covering the risks and in the relative
proportionate amounts usually carried by reasonable and prudent companies
conducting businesses similar to that of the Company, including (without
limitation) general and product liability insurance satisfactory to Purchasers
and fire and hazard insurance. In addition, the Company shall use its best
efforts to purchase and maintain with a
- 24 -
25
reputable insurer a term life insurance policy in the amount of at least $
1,000,000 on the life of each key officer, as determined by the Board of
Directors, with the death benefits payable to the Company. The Company shall
purchase and maintain a directors' and officers' liability insurance policy and
shall indemnify each director to the full extent permitted or required by the
Delaware General Corporation Law.
8.9. Taxes. The Company will, and will cause each of its subsidiaries to,
pay and discharge, or cause to be paid and discharged, before the same shall
become overdue, all taxes, assessments and other governmental charges imposed
upon the Company and any subsidiary and their real properties, sales and
activities, or any part thereof, or upon the income or profits therefor;
provided, however, that any such tax, assessment, charge, levy or claim need not
be paid if the validity or amount thereof shall currently be contested in good
faith by appropriate proceedings and if the Company or any subsidiary, as the
case may be, shall have set aside on its books adequate reserves with respect
thereto; and provided, further, that the Company and each of its subsidiaries
will pay or cause to be paid all such taxes, assessments, charges, levies or
claims forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor.
8.10. Payment of Claims. The Company will, and it will cause each of its
subsidiaries to, promptly pay and discharge (i) all trade accounts payable in
accordance with usual and customary business practices and (ii) all claims for
work, labor or materials which if unpaid might become a lien upon any of its
property or assets; provided, however, that neither the Company nor any
subsidiary shall be required to pay any such account payable or claim the
payment of which is being contested in good faith and by appropriate proceedings
being diligently conducted and for which adequate reserves in accordance with
generally accepted accounting principles have been provided, except that Company
or such subsidiary, as the case may be, shall pay or cause to be paid all such
accounts payable and claims forthwith upon the commencement of proceedings to
foreclose any lien which is attached as security therefor, unless such
foreclosure is stayed by the filing of an appropriate bond in a manner
reasonably satisfactory to the Purchasers.
8.11. Corporate Existence. The Company will, and it will cause each of its
subsidiaries to, do all things necessary to (i) preserve and keep in full force
and effect at all times its corporate existence and (ii) be duly qualified to do
business in all jurisdictions where the nature of its business or its ownership
of property requires such qualification.
8.12. Maintenance of Property, Limitation on Leases. The Company will, and
it will cause each of its subsidiaries to, at all times, preserve and maintain
all of the property used or useful in the conduct of its business in good
condition, working order and repair, ordinary wear and tear excepted.
8.13. Compliance with Laws and Regulations. The Company will, and it will
cause any subsidiaries to, comply with any and all laws, ordinances and
governmental and regulatory rules and regulations to which the Company or such
subsidiary, as the case may be, is subject and
- 25 -
26
obtain any and all licenses, permits, franchises and other governmental and
regulatory authorizations necessary to the ownership of its properties or to the
conduct of its business.
8.14. Environmental Matters. The Company will, and it will cause each of
its subsidiaries to, at all times comply with all environmental and occupational
safety and health laws. Upon obtaining knowledge thereof, the Company shall give
each Purchaser prompt written notice of (i) any claim or any other action or
investigation with respect to the existence or potential existence of any
hazardous substances instituted or threatened with respect to the Company or any
subsidiaries or any of the properties or facilities owned, leased or operated by
the Company or any subsidiaries, and (ii) any condition or occurrence on any of
the properties or facilities owned, leased or operated by the Company which
constitutes a violation of any environmental laws or which gives rise to a
reporting obligation or requires removal or remediation under any environmental
laws. Within ninety (90) days after the giving of any such notice, the Company
shall deliver to each Purchaser, the Company's plan with respect to removal or
remediation and the Company agrees to take all action which is reasonably
necessary in connection with such action, investigation, condition or occurrence
in accordance with such plan with due diligence and to complete such removal or
remediation as promptly as possible and in all events within the time required
by any environmental laws or any other applicable law, rule or regulation. The
Company shall promptly provide each Purchaser with copies of all documentation
relating thereto, and such other information with respect to environmental
matters as any Purchaser may request from time to time.
8.15. ERISA Compliance. If the Company, any of its subsidiaries or any of
its affiliates for ERISA purposes (an "ERISA Affiliate") shall have any pension
plan, the Company, such subsidiary or such ERISA Affiliate, as the case may be,
shall comply in all with all requirements of ERISA relating to such pension
plan. Without limiting the generality of the foregoing, the Company will not,
and it will not cause or permit any subsidiaries or any ERISA Affiliate to:
(i) permit any pension plan maintained by the Company, any
subsidiaries or any ERISA Affiliate to engage in any nonexempt "prohibited
transaction," as such term is defined in Section 4975 of the Code;
(ii) permit any pension plan maintained by the Company, any
subsidiaries or any ERISA Affiliate to incur any "accumulated funding
deficiency", as such term is defined in Section 302 of ERISA, 29 U.S.C.
Section 1082, whether or not waived;
(iii) terminate any pension plan in a manner which could result in
the imposition of a Lien on any property of the Company, any subsidiaries
or any ERISA Affiliate pursuant to Section 4068 of ERISA, 29 U.S.C. Section
1368;
(iv) take any action which would constitute a complete or partial
withdrawal from a Multiemplover Plan within the meaning of Sections 4203 or
4205 of Title IV of ERISA;
- 26 -
27
(v) permit any condition to exist in connection with any pension
plan which might constitute grounds for the PBGC to institute proceedings
to have such pension plan terminated or a trustee appointed to administer
such pension plan; or
(vi) engage in, or permit to exist or occur, any other condition,
event or transaction with respect to any pension plan which could result in
the incurrence by the Company, any subsidiaries or any ERISA Affiliate of
any liability, fine or penalty.
8.16. Further Assurances. The Company will cooperate with the Purchasers
and execute such further instruments and documents as the Purchasers shall
reasonably request to carry out the transactions contemplated by this Agreement.
8.17. Transactions with Affiliates and Related Parties. The Company shall
not, and will not permit any of its subsidiaries to, enter into or be a party to
any transaction or arrangement with any Affiliate (as defined below) (including,
without limitation, the purchase from, sale to or exchange of property with, or
the rendering of any service by or for, any Affiliate) or, any shareholder,
employee or officer which is not an Affiliate, except in the ordinary course of
business and pursuant to the reasonable requirements of the Company's business
and upon fair and reasonable terms no less favorable to the Company or any
subsidiary than would be obtained in a comparable arm's length transaction with
a third party not an Affiliate. Notwithstanding any provision of this Agreement
to the contrary, neither the Company nor any subsidiary shall make any loans or
advances to any employee, officer or family member or relative, or related party
of any officer, employee or shareholder of the Company or to any Affiliate
(except for the advance of business and travel expenses incurred by employees of
the Company and its Subsidiaries in the ordinary course of business).
"Affiliate" means any entity or person that controls, is controlled by, or is
under common control with the Company, with control meaning the beneficial
ownership of or the ability to vote over 20% of the voting interests of an
entity.
8.18. Board Representation. The Company will use its best efforts to cause
a designee of Essex to be nominated and elected to its Board of Directors until
the later of (i) the fifth anniversary of the Closing Date, and (ii) the date on
which Essex fails to own in the aggregate more than 5% of the issued and
outstanding Common Stock. The Company will use its best efforts to cause a
designee of Invesco to be nominated and elected to its Board of Directors until
the later of (i) the fifth anniversary of the Closing Date or (ii) the date on
which Invesco fails to own in the aggregate more than 5% of the issued and
outstanding Common Stock. The Company will cause each of its directors and
executive officers to enter into a voting agreement containing the terms set
forth in Section 2 of the Co-Sale and Voting Agreement. If either Essex or
Invesco decide not to designate a person to be elected to the Board of
Directors, then the Company shall provide Essex or Invesco, as applicable, with
all notices to Board meetings and permit a person designated by such
Purchaser(s) to attend and observe all formal and informal Board meetings.
- 27 -
28
8.19. The Company will take such action as shall be required to cause the
Board of Directors of the Company to meet with such frequency as a majority of
the Board of Directors shall determine, but not less often than quarterly. The
Company will pay all customary and reasonable expenses (including, but not
limited to, travel expenses) of the directors incurred in connection with their
duties as directors and attendance at meetings of the Board of Directors or any
Committees thereof.
8.20. Board Committees. The Company's Compensation Committee shall include
the two directors who are the designees of Essex and Invesco. The Company's
Audit Committee shall include the two directors who are the designees of Essex
and Invesco. If Essex or Invesco decides not to designate a person to be elected
to the Board of Directors, then the Audit and Compensation Committees shall
provide Essex or Invesco, as applicable, with all notices to the committee
meetings and permit a person designated by Essex and a person designated by
Invesco to attend and observe all formal and informal Audit and Compensation
Committee meetings.
8.21. Annual Operating Plan and Capital Budget. Each year, the Company
shall submit to its Board of Directors at least sixty (60) days prior to the end
of the then current fiscal year of the Company a detailed annual operating plan
and capital budget for the coming fiscal year, with such plan and budget to be
approved by the Board of Directors at least thirty (30) days prior to the end of
the then current fiscal year of the Company. The Company shall not make any
capital expenditure which is not included in such approved budget or engage in
any search for any new executive employee without the prior consent of the Board
of Directors.
8.22. Proprietary Information Agreement. Each officer and employee of the
Company responsible for proprietary information shall execute a Proprietary
Information Agreement in the form attached hereto as Exhibit I attached hereto.
The Company shall obtain such agreements from its present officers and employees
on or prior to the Closing Date.
8.23. Intellectual Property. The Company will take all necessary actions to
secure, register and protect the Company's interest in any future intellectual
property rights and will continue to do so with respect to current and future
intellectual property rights so as not to adversely affect the validity or
enforceability of the Company's intellectual property rights.
8.24. Subscription Rights. The Company hereby grants each Purchaser the
right to subscribe to additional securities to preserve its percentage interest
in the Company on the following terms and conditions:
(a) As to each Purchaser, the subscription right granted hereby
shall be in effect for two years after the Closing Date.
(b) If at any time this subscription right is in effect, the Board
of Directors of the Company shall authorize the issuance of shares of
Common Stock or the issuance of warrants, rights, options or shares of
capital stock or securities exercisable for or convertible into Common
Stock (except, in each case, for issuances (i) to employees, consultants,
scientific advisors, officers, directors, or vendors (including equipment
lessors) of the Company pursuant to stock option,
- 28 -
29
stock purchase, stock bonus or stock incentive plans or pursuant to written
contracts relating to the employment, engagement or compensation of such
persons or entities, (ii) in connection with the acquisition by the Company
of another entity, (iii) any Warrant Stock issued upon exercise of the
Warrants, (iv) in connection with a public offering, (v) in connection with
the exercise of any outstanding options, warrants or other rights to
acquire Common Stock which are outstanding as of the Closing Date and which
are disclosed in the Disclosure Schedules, or (vi) of an aggregate of
165,000 shares of Common Stock to the lenders a party to the Credit
Agreement solely to the extent required under the Credit Agreement
Amendment), then prior to the issuance of such securities, the Company
shall, with respect to each such issuance and each such time, offer each
Purchaser the right to purchase, on the same or equivalent terms, that
number of authorized but unissued shares of Common Stock and other
securities convertible into or exercisable for Common Stock in the same
proportions as are proposed to be issued as shall be necessary to maintain
its percentage interest in the Company at that percentage (the "Target
Percentage") as shall equal such Purchaser's percentage interest in the
Common Stock of the Company existing immediately prior to the proposed
issuance of such securities. In each such case, the calculation of the
Target Percentage shall be based on the total number of shares of Common
Stock that would be outstanding (i) upon conversion of any outstanding
securities of the Company convertible into Common Stock, (ii) upon exercise
of any then outstanding warrants of the Company and (iii) upon exercise of
any then outstanding stock options or stock purchase rights of the Company.
(c) Unless otherwise agreed to by all of the Purchasers, any offer
of Common Stock (or other securities) to the Purchasers under this
subscription right shall be made by notice in writing at least thirty (30)
days prior to the date on which the Company intends to issue and sell
securities to any person other than any Purchaser. Such notice shall set
forth the price, terms and other relevant conditions upon which such
Securities are proposed to be sold, as well as the amount of securities
offered to the Purchasers under this subscription right. Not later than
twenty (20) days after receipt of such notice, each Purchaser shall notify
the Company in writing whether it elects to purchase all or any of the
securities offered to it pursuant to such notice, stating the amount of
such securities it wishes to purchase. If a Purchaser elects to
participate, such Purchaser shall be required to purchase any combination
of securities being offered in the same proportions as are being sold to
other investors. If a Purchaser shall elect to purchase any securities
pursuant to the notice from the Company, the securities which it elects to
purchase shall be issued and sold to it by the Company at the same price
per share as is specified in the notice.
(d) In the event the Purchasers fail to exercise their subscription
rights within said twenty (20) day period, the Company shall have one
hundred twenty (120) days thereafter to sell or enter into any agreement
(pursuant to which the sale of securities covered thereby shall be closed,
if at all, within forty-five (45)
- 29 -
30
days from the date of said agreement) to sell the securities in respect of
which such Purchasers' subscription rights were not exercised, at a price
and upon terms no more favorable to the purchasers) thereof than those
specified in the Company's notice to such Purchasers. In the event the
Company has not sold such securities within such 120-day period or entered
into an agreement to sell the securities within such 120-day period, the
Company shall not thereafter issue or sell such securities, without first
offering such securities to the Purchasers in the manner provided above.
8.25. Consultation. If the Company desires to retain the extraordinary
services of any Purchaser to serve as a special consultant to the Company in
mergers and acquisitions or financial consulting, such engagement shall be
approved by a majority of the disinterested members of the Board of Directors.
If such engagement is so approved, such Purchaser shall be paid all of its
out-of-pocket expenses currently and any other reasonable fee approved by the
Board of Directors on a non-contingent basis.
8.26. Dividends and Redemptions. For two years from the date hereof and so
long as any Share, Warrant or Warrant Stock is outstanding, the Company shall
not declare, set aside or pay any dividend or make any distribution in respect
of its Common Stock, or redeem, purchase or otherwise acquire any of its Common
Stock except for the repurchase of Common Stock from Physician Practices in
connection with settling disputes or restructuring outstanding Physician
Agreements.
8.27. Trading Market. As long as the Purchasers own Common Stock, Warrants
or Warrant Stock, the Company shall use its best efforts to cause its Common
Stock to continue to be traded on the Nasdaq Stock Market or cause the Common
Stock to be listed on the New York Stock Exchange or the Nasdaq Stock Market.
8.28. Reporting Stock. So long as any Purchaser beneficially owns any
Shares, Warrants or Warrant Stock, the Company shall timely file all reports
required to be filed with the SEC pursuant to the Exchange Act, and the Company
shall not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
8.29. Additional Issuance of Common Stock. For a period of 12 months from
the Closing Date, whenever the Warrant Price of the Warrants is reduced in
accordance with Section 2.2.1 of the Warrants, the Company shall issue to the
Purchaser an additional number of shares of Common Stock at a purchase price of
$.001 per share equal to (a)(1) 2,500,000 plus the number of shares of Common
Stock previously issued under this Section 8.29, multiplied by (2) a fraction,
the numerator of which is the Warrant Price immediately prior to such event and
the denominator of which is the Warrant Price immediately after such event, less
(b) 2,500,000 plus the number of shares of Common Stock previously issued under
this Section 8.29.
- 30 -
31
SECTION IX
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH SECURITIES ACT
9.1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
An "affiliate" of a person is another person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first person.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
"Restricted Securities" shall mean the securities of the Company required
to bear the legend set forth in Section 9.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the SEC thereunder, all
as the same shall be in effect at the time.
9.2. Restrictions on Transferability. Each Purchaser covenants that it will
not sell or otherwise transfer any of the Shares or Warrant Stock acquired
hereunder (other than pursuant to Rule 144 or any similar or analogous rule or
rules) except pursuant to an effective registration under the Securities Act or
in a transaction which, in the opinion of counsel reasonably satisfactory to the
Company, qualifies as an exempt transaction under the Securities Act and the
rules and regulations promulgated thereunder.
9.3. Restrictive Legend. Each certificate representing (i) the Shares or
Warrant Stock, and (ii) any other securities issued in respect of the Shares,
Warrants or Warrant Stock upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 9.4 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED (OTHER THAN PURSUANT TO RULE 144
OR ANY SIMILAR OR ANALOGOUS RULE OR RULES) IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF
THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND
- 31 -
32
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
Each Purchaser and holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Shares or the
Warrant Stock in order to implement the restrictions on transfer established in
this Section 9.
9.4. Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 9.4. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities (other than
(i) transfers not involving a change in beneficial ownership or (ii)
transactions involving the distribution without consideration of Restricted
Securities by any of the Purchasers to any of its partners, or retired partners,
or to the estate of any of its partners or retired partners), unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at such holder's expense by either (i) unqualified written opinion
of legal counsel who shall, and whose legal opinion shall be, reasonably
satisfactory to the Company addressed to the Company, to the effect that the
proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the SEC
to the effect that the transfer of such securities without registration will not
result in a recommendation by the staff of the SEC that action be taken with
respect thereto, whereupon the holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms of
the notice delivered by the holder to the Company. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear, except if
such transfer is made pursuant to Rule 144, the appropriate restrictive legend
set forth in Section 9.3 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and the Company
such legend is not required in order to establish compliance with any provision
of the Securities Act.
SECTION X
TERMINATION
10.1. Consummation. Subject to the terms and conditions provided herein,
each party agrees to use all reasonable commercial efforts to take, or cause to
be taken all actions and to do, or cause to be done all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement in accordance with its
terms.
10.2. Termination or Abandonment. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated and abandoned
at any time prior to the Closing:
- 32 -
33
(a) by the mutual written consent of the Company and the Purchasers;
(b) by either the Purchasers or the Company if any court of competent
jurisdiction or governmental body, authority or agency having jurisdiction shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and nonappealable;
(c) by either party if the Closing shall not have occurred within fifteen
(15) days of the date of this Agreement.
10.3. Effect of Termination. If any party terminates this Agreement
pursuant to Section 10.2 above, all obligations of the parties hereunder shall
terminate without any liability of any party to any other party (except for any
liability of any party then in breach in which case the nonbreaching party
reserves the right to seek all available remedies); provided, however, that the
provisions of Section 10.3 and Section 11 shall survive termination of this
Agreement. Nothing in this Section 10.3 shall relieve any party from liability
for any willful or intentional breach of this Agreement.
SECTION XI
MISCELLANEOUS
11.1. Governing Law. This Agreement shall be governed in all respects by
the internal laws of the State of Delaware.
11.2. Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchaser and the
closing of the transactions contemplated hereby for a period of two years from
the date of such closing.
11.3. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of each Purchaser to purchase the Shares
shall not be assignable without the consent of the Company.
11.4. Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, Purchasers owning more than fifty (50%) of the Shares and the
Warrant Stock may, with the Company's prior written consent, waive, modify or
amend on behalf of all Purchasers, any provisions hereof.
- 33 -
34
11.5. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at such Purchaser's address set forth on the
signature page hereof, or at such other address as the Purchaser shall have
furnished to the Company in writing, or (b) if to any other holder of any
Shares, Warrants or Warrant Stock, at such address as such holder shall have
furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Shares, Warrants or Warrant Stock who has so furnished an address to the
Company, or (c) if to the Company, one copy should be sent to its address set
forth on the cover page of this Agreement and addressed to the attention of the
Corporate Secretary, or at such other address as the Company shall have
furnished to the Purchasers.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
11.6. Delays or Omissions. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any holder of any
Shares, upon any breach or default of the Company under this Agreement, shall
impair any such right, power or remedy of such holder nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Except as provided in Section 10.4
hereof, any waiver, provisions or conditions of this agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
11.7. Expenses. Each of the Company and the Purchasers shall bear their own
expenses incurred on their behalf with respect to this Agreement and the
transactions contemplated hereby, including, but not limited to, the fees and
disbursements of Purchasers' legal counsel and out-of-pocket expenses. In
addition, the Company shall pay for all broker and finders fees incurred by the
Company as a result of the consummation of the transactions contemplated hereby.
11.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
11.9. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
- 34 -
35
11.10. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
11.11. Announcement. No announcement of the terms of this Agreement or the
transactions contemplated hereby shall be made by any party without the written
approval of the other party (which consent shall not be unreasonably withheld)
until the Closing, except for information required to be sent to stockholders of
the Company to obtain stockholder approval as required by the NASD.
11.12. Injunctive Relief. The parties hereto acknowledge and agree that any
breach of this Agreement by a party will cause irreparable injury to the other
party and that any damages will not provide an adequate remedy to the injured
party. Consequently, each party shall have the right to seek and obtain
injunctive or other equitable relief to enforce any of its rights or the
obligations of any of the other parties contained in this Agreement.
- 35 -
36
The foregoing Agreement is hereby executed as of the date first above
written.
HEALTHGRADES.COM, INC.
By: /s/ Patrick M. Jaeckle
-----------------------------------
Address:
ESSEX WOODLANDS HEALTH VENTURES
FUND, IV. L.P.
By its general partner:
ESSEX WOODLANDS HEALTH VENTURES,
IV. L.L.C.
By: /s/ Marc Sandnoff
-----------------------------------
Name: Marc Sandnoff
---------------------------------
Managing Director
Address:
CHANCELLOR V., L.P.
By: IPC Direct Associates V, L.L.C.
Its General Partner
By: INVESCO Private Capital, Inc.
Its Managing Member
By: /s/ Howard E. Goldstein
-----------------------------------
Its:
-----------------------------
Address:
- 36 -
37
PUNK, ZIEGEL & COMPANY INVESTORS,
L.L.C.
By: /s/ John L. Bligh
-----------------------------------
Name: John L. Bligh
---------------------------------
Title: Administrative Member
--------------------------------
Address:
PAINEWEBBER, AS CUSTODIAN FOR
WILLIAM J. PUNK, I.R.A.
By: /s/ William J. Punk
-----------------------------------
Name: William J. Punk
---------------------------------
Title:
--------------------------------
Address:
- 37 -
38
EXHIBIT A
FORM OF WARRANT
39
EXHIBIT B
HEALTHGRADES.COM, INC.
STOCK AND WARRANT PURCHASE AGREEMENT
This STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") is entered
into as of March 16, 2000, by and among HealthGrades.Com, Inc., a Delaware
corporation (the "Company"), and Kerry Hicks ("Khicks"), David Hicks ("Dhicks"),
Paul Davis ("Davis") and Patrick Jaeckle ("Jaeckle", and collectively with
Dhicks, Khicks and Davis, the "Purchasers").
RECITALS
WHEREAS, the Company desires to issue and sell up to one million six
hundred thousand shares of the Company's common stock (the "Common Stock") and
warrants substantially in the form attached hereto as Exhibit A (the "Warrants")
to purchase up to an additional five hundred sixty thousand (560,000) shares of
Common to Purchasers on the terms and conditions set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1 . AGREEMENT TO SELL AND PURCHASE.
1 . 1 Sale and Purchase. Subject to the terms and conditions
hereof, the Company hereby agrees to issue and sell to Purchasers, and
Purchasers agree to purchase from the Company, for an aggregate purchase price
of three million two hundred thousand dollars ($3,200,000), 1,600,000 shares of
Common Stock and Warrants to purchase up to 560,000 additional shares of Common
Stock , with the Purchasers each purchasing the number of shares of Common Stock
and Warrants as listed in Schedule I.
2. CLOSING, DELIVERIES AND PAYMENT.
2. 1 Closing. The closing (the "Closing") shall take place at
1 :00 p.m. on the date hereof, at the offices of the Company, or at such other
time or place as the Company and Purchaser may mutually agree (such date is
hereinafter referred to as the "Closing Date").
2. 1 . 1 At the Closing, subject to the terms and conditions
hereof, the Company shall deliver to each Purchaser a Warrant entitling
Purchaser to purchase the number of shares of Common Stock specified therein and
a certificate or certificates for the number of shares of Common Stock purchased
by such Purchaser. Each Purchaser shall deliver to the Company his portion of
the purchase price set forth opposite the applicable Purchaser's name on
Schedule I by wire transfer of immediately available funds, or by canceling
existing indebtedness
40
of the Company to such Purchaser as evidenced by certain promissory notes each
dated December 31, 1999.
3. MISCELLANEOUS.
3 . 1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Colorado as such laws are applied to
agreements between Colorado residents entered into and performed entirely in the
State of Colorado.
3 .2 Entire Agreement. This Agreement, the Exhibits and
Schedules hereto, constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties
covenants and agreements except as specifically set forth herein and therein.
3.3 Severability. In case any provision of the Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
3.4 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be an original, but which shall together
constitute one instrument.
2
41
IN WITNESS WHEREOF, the parties hereto have executed the STOCK AND
WARRANT PURCHASE AGREEMENT as of the date set forth in the first paragraph
hereof.
COMPANY:
HEALTHGRADES.COM, INC.
By: /s/ Bill Riesenecker
Name: Bill Riesenecker
Title: SVP, Corporate Operations
PURCHASERS:
/s/ Kerry Hicks
-------------------------
Kerry Hicks
/s/ David Hicks
-------------------------
David Hicks
/s/ Paul Davis
-------------------------
Paul Davis
/s/ Patrick Jaeckle
-------------------------
Patrick Jaeckle
3
42
EXHIBIT C
FORM OF LEGAL OPINION
43
EXHIBIT D
COSALE AND VOTING AGREEMENT
This CoSale and Voting Agreement (this "Agreement") is made as
of March __, 2000 among HealthGrades.com, Inc., a Delaware corporation (the
"Company"), Essex Woodlands Health Ventures Fund IV, L.P., an Illinois
partnership ("Essex"), PaineWebber, as custodian for William J. Punk, I.R.A.
("PW"), Punk, Ziegal & Company Investors, L.L.C. ("Punk"), and Chancellor V, L.
P. ("Invesco" and with Punk, PW and Essex collectively the "Investors"), Kerry
Hicks ("Hicks"), Paul Davis ("Davis"), David Hicks ("D. Hicks") and Patrick
Jaeckle ("Jaeckle" and with Hicks, Davis and D. Hicks collectively, the
"Founders") (the Investors and the Founders are sometimes referred to herein as
the "Shareholders").
RECITALS
A. The Founders own certain outstanding shares of Common Stock, par
value $0.001 per share ("Common Stock"), of the Company.
B. The Investors have purchased shares of Common Stock and warrants
(the "Warrants") to purchase Common Stock (the "Equity Securities") pursuant to
a Amended and Restated Stock Purchase Agreement dated March 3, 2000.
C. In order to induce the Investors to purchase the Common Stock, the
Shareholders have agreed to provide certain co-sale and voting rights with
respect to their holdings of the Company's Common Stock.
NOW, THEREFORE, in consideration of the mutual promises and other
consideration hereinafter set forth, the adequacy and receipt of which is hereby
acknowledged by the parties hereto, the parties agree as follows:
1. Right of Co-Sale.
1.1. The Right. If at any time any Founder (a "Selling Founder")
proposes to sell shares of Common Stock pursuant to a bona fide offer from a
party or parties other than other Founders or any of the Investors and such sale
is a private transaction, then the Selling Founder shall provide notice of such
proposed sale to the Investors, such notice containing (i) notice that the
Selling Founder intends on selling his shares, (ii) the material terms and
conditions of such sale, (iii) any written materials or agreements setting forth
the agreement between the Selling Founder and the purchaser, and (iv) each
Investor's "pro rata portion" (as defined below) in the sale (assuming all
Investors elect to be Co-Sellers). The Investors shall be entitled to sell their
pro rata portion on the same terms and conditions as the Selling Founder. If any
of the Investors notifies the Selling Founder in writing within 10 days after
receipt of the notification of such proposed sale from the Selling Founder, such
Investor or Investors (the "Co-Seller") shall have the right to sell up to its
pro rata portion of Common Stock which the Selling Founder proposes to sell to
such third party; whereupon the Selling Founder shall assign so much of his
interest in the agreement of sale as is proportionate to each Co-Seller's pro
rata portion in the sale of Common Stock (or such lesser amount if so elected by
such Co-Seller) and each Co-Seller shall
44
assume its respective part of the obligations of the Selling Founder under such
agreement, provided, however, no Co-Seller shall be required to give any
covenants, representations or warranties other than with respect to title to its
Equity Securities. For the purposes of this Section 1.1 the "pro rata portion"
which each Co-Seller shall be entitled to sell shall be an amount of Equity
Securities (assuming the issuance of all shares of Common Stock, issuable upon
exercise of the Warrants) equal to a fraction of the total amount of Common
Stock proposed to be sold, the numerator of which is the aggregate of all Equity
Securities (assuming the conversion of all such securities to Common Stock)
which are then held by such Co-Seller and the denominator is the aggregate of
all Common Stock then held by the Selling Founder and all Equity Securities
(assuming the conversion of all such securities to Common Stock) then held by
all Co-Sellers who have elected to exercise their co-sale rights. Each of the
Investors shall notify the Selling Founder whether it elects to sell an amount
equal to or less than its pro rata portion of the Common Stock so offered
1.2. Failure to Notify. If within 10 days after the Selling Founder
gives the aforesaid notice to Investors, none of the Investors notifies the
Selling Founder that it desires to sell any or all of its pro rata portion of
the Common Stock described in such notice at the price and on the terms and
conditions set forth therein, then the Selling Founder may sell during the
120-day period immediately following the expiration of such 10-day period such
Common Stock as to which the Investors did not indicate a desire to sell to
other persons at the same price and upon the same terms and conditions as those
set forth in the notice. In the event the Selling Founder has not sold the
Common Stock on the same terms and conditions as those set forth in the notice
within such 120-day period, the Selling Founder shall not thereafter sell any
Common Stock without first notifying the Investors in the manner provided above.
1.3. Limitations to Right of Co-Sale. Without regard and not subject to
the provisions of this Agreement:
(a) a Founder may sell or otherwise assign for consideration or
gift Common Stock to any or all of his ancestors, descendants, spouse,
employees of the Company or to a custodian, trustee (including a
trustee of a voting trust), executor, or other fiduciary for the
account of or a trust for the benefit of his ancestors, descendants or
spouse, provided that each such transferee or assignee, prior to the
completion of the sale, transfer, gift or assignment, shall have
executed documents assuming the obligations of a Founder under this
Agreement with respect to the transferred securities;
(b) a Founder may sell shares of Common Stock, the proceeds of
which are used to exercise stock options issued under the Company's
stock option plan;
(c) a Founder may pledge and/or sell shares of Common Stock to
the Company; and
(d) a Founder may sell shares of Common Stock in the open
market in amounts not to exceed the limitations permitted under Rule
144.
-2-
45
2. Voting.
2.1. Designees to Board of Directors. The Shareholders agree to vote
all securities of the Company over which they have voting control and to take
all other necessary or desirable actions within their control (whether as
shareholders, directors or officers of the Company or otherwise, and including
without limitation attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special board and shareholder meetings),
so that:
(a) The Company shall have a Board of Directors comprising of
no more than eight (8) members;
(b) At the option of Essex, one designee of Essex and, at the
option of Invesco, one designee of Invesco shall be elected to the
Board of Directors; and
(c) In the event that a director designated by Essex or Invesco
for any reason ceases to serve as a member of the Board of Directors
during his or her term of office, at the option of Essex or Invesco, as
applicable, the resulting vacancy on the Board of Directors shall be
filled by a designee of Essex or Invesco, as applicable.
3. Committees.
3.1. Audit Committee. At the option of Essex and Invesco, as
applicable, the directors designated by Essex and Invesco shall serve as members
of the Audit Committee of the Company.
3.2. Compensation Committee. At the option of Essex and Invesco, as
applicable, the directors designated by Essex and Invesco shall serve as members
of the Compensation Committee.
4. Miscellaneous.
4.1. Legends. All instruments evidencing Equity Securities held by
Shareholders shall be legended, describing the obligations of Shareholders under
this Agreement.
4.2. Effectiveness and Termination. This Agreement, and the respective
rights and obligations of the Shareholders hereto, shall become effective on the
date hereof, and shall terminate:
(a) with respect to Section 1 above, upon the earlier of: (i)
when the Investors cease to own in the aggregate five percent (5%) or
more of the issued and outstanding shares of Common Stock of the
Company, and (ii) on the third anniversary of the date hereof;
(b) with respect to Sections 2 and 3 above and the obligation
to elect Essex to the Board of Directors and the Audit and Compensation
Committee,
-3-
46
upon the later of (i) the fifth anniversary of the date hereof, and
(ii) the date on which Essex fails to own in the aggregate more than 5%
of the issued and outstanding Common Stock;
(c) with respect to Sections 2 and 3 above and the obligation
to elect Invesco to the Board of Directors and the Audit and
Compensation Committee, upon the later of (i) the fifth anniversary of
the date hereof, and (ii) the date on which Invesco fails to own in the
aggregate more than 5% of the issued and outstanding Common Stock; and
(d) notwithstanding anything contained herein to the contrary,
this Agreement will terminate upon a Change of Control Transaction. A
"Change of Control Transaction" shall mean (i) a transaction in which
all of the shares of Common Stock are exchanged for cash or other
securities of a third party and such transaction results in the holders
of Common Stock holding less than fifty percent (50%) of the voting
power of the surviving entity, or (ii) the sale or transfer of all or
substantially all of the Company's assets.
4.3. Notices. All communications (other than those sent to shareholders
generally) provided for hereunder shall be in writing and delivered or mailed by
registered or certified mail, or by reputable overnight delivery, to the notice
addresses set forth in that Stock Purchase Agreement or, with respect to the
Founders, to the then current address set forth on the books and records of the
Company.
4.4. Successors and Assigns. This Agreement shall be binding upon the
Company, the Shareholders and their successors and assigns and shall inure to
the Investors' benefit and to the benefit of the Investors' respective
successors and assigns.
4.5. Complete Agreement; Amendments. This Agreement constitutes the
full and complete agreement of the parties hereto with respect to the subject
matter hereof. This Agreement supersedes and takes the place of all prior
agreements relating to its subject matter. No amendment, modification or
termination of any provisions of this Agreement shall be valid unless in writing
and signed by the Company and each of the Shareholders.
4.6. Severability. Should any part of this Agreement for any reason be
declared invalid, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in force and effect as if this
Agreement had been executed with the invalid portion thereof eliminated and it
is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part, parts, or portion which may, for any reason, be hereafter declared
invalid.
4.7. Specific Performance. In addition to any and all other remedies
that may be available at law, in the event of any breach of this Agreement, each
party hereto shall be entitled to specific performance of the agreements and
obligations of the Company and the other parties hereto hereunder and to such
other injunctive or other equitable relief as may be granted by a court of
competent jurisdiction.
-4-
47
4.8. Governing Law. This Agreement and securities issued and sold
hereunder shall be governed by and construed in accordance with the internal
laws of the State of Delaware.
4.9. Captions. The descriptive headings of the various paragraphs or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
4.10. Number and Gender. Where required by the context, singular words
or pronouns shall be construed as plural, plural words and pronouns shall be
construed as singular and the gender of personal pronouns shall be construed as
either masculine, feminine or neuter.
4.11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one Agreement binding on all the
parties hereto.
[The remainder of this page is intentionally left blank.]
-5-
48
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
HEALTHGRADES.COM, INC.
By: /s/ Patrick M. Jaeckle
--------------------------------
Patrick M. Jaeckle
President
FOUNDERS:
/s/ Kerry Hick
-----------------------------------
Kerry Hicks
/s/ Patrick Jaeckle
-----------------------------------
Patrick Jaeckle
/s/ David Hicks
-----------------------------------
David Hicks
/s/ Paul Davis
-----------------------------------
Paul Davis
INVESTORS:
ESSEX WOODLANDS HEALTH VENTURES
FUND, IV. L.P.
By its general partner:
ESSEX WOODLANDS HEALTH VENTURES,
IV. L.L.C.
By: /s/ Marc Sandroff
--------------------------------
Marc Sandroff
Managing Director
-6-
49
CHANCELLOR V., L.P.
By: IPC Direct Associates V, L.L.C.
Its General Partner
By: INVESCO Private Capital, Inc.
Its Managing Member
By:/s/ Howard E. Goldstein
--------------------------------
Howard E. Goldstein
Managing Director
PUNK, ZIEGEL & COMPANY INVESTORS,
L.L.C.
By: /s/ John L. Bligh
--------------------------------
John L. Bligh
Administrative Member
PAINEWEBBER, AS CUSTODIAN FOR
WILLIAM J. PUNK, I.R.A.
By: /s/ William J. Punk
--------------------------------
William J. Punk
-7-
50
Exhibit A - Form of Warrant and Exhibit C - Legal Opinion to the Amended and
Restated Stock Purchase Agreement have not been included in this filing. These
exhibits will be furnished supplementally to the Commission upon its request.
51
SCHEDULE 1.1
Purchase Price
--------------
ESSEX:
3,000,000 shares of Common Stock
Warrants to purchase 1,050,000 shares of Common Stock $6,000,000
INVESCO:
4,215,000 shares of Common Stock
Warrants to purchase 1,475,250 shares of Common Stock $8,430,000
Punk, Ziegal & Company Investors, L.L.C.:
160,000 shares of Common Stock
Warrants to purchase 56,000 shares of Common Stock $320,000
PaineWebber, as custodian for William J. Punk, I.R.A:
25,000 shares of Common Stock
Warrants to purchase 8,750 shares of Common Stock $50,000