EXHIBIT 10.3
STOCK AND WARRANT REPURCHASE AGREEMENT
THIS STOCK AND WARRANT REPURCHASE AGREEMENT (this "Agreement") is made
as of March 11, 2003, by and between Chancellor V, L.P., a Delaware limited
partnership ("Chancellor"), and Health Grades, Inc., a Delaware corporation (the
"Company").
WHEREAS, pursuant to the Amended and Restated Stock Purchase Agreement,
dated March 3, 2000, by and among the Company, Chancellor, and certain other
investors (the "Original Purchase Agreement"), and the Letter Agreement, dated
April 16, 2001, by and among the Company, Chancellor and Essex Woodland Health
Ventures Fund IV, L.P. (the "Letter Agreement," and together with the "Original
Purchase Agreement," the "Chancellor Agreements"), Chancellor acquired
12,004,333 shares (the "Shares") of the Company's Common Stock, $0.001 par value
per share (the "Common Stock"), and warrants to purchase an aggregate of
1,971,820 shares of Common Stock (the "Warrants"); and
WHEREAS, Chancellor desires to sell the Shares and Warrants back to the
Company, and the Company desires to repurchase the Shares and Warrants from
Chancellor, for the consideration and on the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Definitions. For convenience, certain terms used in more than one part of
this Agreement are defined below (such terms, as well as any other terms defined
elsewhere in this Agreement, shall be equally applicable to both the singular
and plural forms of the terms defined).
"Contract" means any written or oral contract, note, bond, mortgage,
indenture, lease, license, agreement, instrument or other commitment that is
binding on any person or its property under applicable law.
"Court Order" means any judgment, decree, injunction, order or ruling
of any federal, state, local or foreign court or governmental or regulatory body
or authority that is binding on any person or its property under applicable law.
"Default" means (a) a breach, default or violation, (b) the occurrence
of an event that, with or without the passage of time or the giving of notice,
or both, would constitute a breach, default or violation or (c) with respect to
any Contract, the occurrence of an event that, with or without the passage of
time or the giving of notice, or both, would give rise to a right of
termination, amendment or acceleration.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"Regulation" means any statute, law, ordinance, regulation, order or
rule of any federal, state, local, foreign or other governmental agency or body
or of any other type of regulatory body.
2. Sale and Repurchase of the Shares and Warrant. Chancellor agrees to sell,
transfer and assign the Shares and Warrants to the Company at the Closing (as
defined below), and the Company agrees to repurchase the Shares and Warrants at
the Closing, for an aggregate purchase price of $500,000.00 in cash or by wire
transfer of immediately available funds (the "Purchase Price").
3. Closing. The closing of the sale and repurchase of the Shares and Warrants
(the "Closing") shall be held on March 11, 2003, or such other date as the
parties hereto may agree, at the offices of Morgan, Lewis & Bockius LLP, 1701
Market Street, Philadelphia, PA 19103, or such other place as the parties hereto
may agree. The date on which the Closing occurs is hereinafter referred to as
the "Closing Date."
4. Closing Deliveries.
(a) Chancellor Deliveries at Closing. At the Closing, Chancellor shall
deliver to the Company (i) the certificate(s) representing the Shares, free and
clear of all Encumbrances thereon, other than those imposed by applicable state
and federal securities laws, accompanied by a duly executed stock power in the
form attached hereto as Exhibit A, transferring the Shares to the Company, and
(ii) the Warrants, free and clear of all Encumbrances thereon, other than those
imposed by applicable state and federal securities laws, accompanied by duly
executed forms of assignment in the form attached hereto as Exhibit B
transferring each of the Warrants to the Company.
(b) Company Deliveries at Closing. At the Closing, the Company shall
deliver the Purchase Price to Chancellor by wire transfer of immediately
available funds to an account as provided by Chancellor.
5. Representations and Warranties of Chancellor. As of the date hereof,
Chancellor represents and warrants to the Company as follows:
5.1 Organization. Chancellor is a limited partnership validly existing
and in good standing under the laws of the State of Delaware.
5.2 Authorization; Enforceability. All partnership action on the part
of Chancellor, including its general partner and limited partners, necessary for
the authorization, execution, delivery and performance of this Agreement by
Chancellor, and the consummation of the actions contemplated hereby, has been
taken, and this Agreement, when executed and delivered by Chancellor, shall
constitute the valid and binding obligation of Chancellor, enforceable against
Chancellor in accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, and (b) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
5.3 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby by Chancellor will (i)
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require any filing by Chancellor with a governmental entity or require
Chancellor to obtain any consent or approval by a third party, (ii) conflict
with or result in a breach of any provision of Chancellor's certificate of
limited partnership or partnership agreement, (iii) constitute a Default under
any of the terms, conditions or provisions of any Contract to which Chancellor
is a party, or by which any of its respective properties or assets may be bound
or (iv) violate any Regulation or Court Order to which Chancellor, or any of its
properties or assets, is subject.
5.4 Ownership and Title. Chancellor is, and has at all times since its
acquisition of the Shares and Warrants pursuant to the Chancellor Agreements
been, the sole record and beneficial owner of the Shares and Warrants, free and
clear of all Encumbrances, other than those imposed by applicable state and
federal securities laws. Upon completion of the transactions contemplated
hereby, the Company shall receive valid title to the Shares and Warrants, free
and clear of all Encumbrances, other than those imposed by applicable state and
federal securities laws. The transfer of the Shares and the Warrants is not
subject to any rights of first refusal enforceable against Chancellor.
5.5 SEC Reports. At all times since its acquisition of the Shares and
Warrants pursuant to the Chancellor Agreements, Chancellor has had full access
to copies of the Company's proxy and information statements, periodic reports,
including Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, and
all Current Reports on Form 8-K, and any amendment to the foregoing, in each
case as filed by the Company with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended. Chancellor has
reviewed all public filings of the Company that have been filed by the Company
with the Securities and Exchange Commission within the past twelve months.
6. Representations and Warranties of the Company. As of the date hereof,
the Company represents and warrants to Chancellor as follows:
6.1 Organization. The Company is a corporation validly existing and in
good standing under the laws of the State of Delaware.
6.2 Authorization; Enforceability. All corporate action on the part of
the Company, its officers, directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Company, and the consummation of the actions contemplated hereby, have been
taken, and this Agreement has been duly executed and delivered by the Company
and shall constitute the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, and (b) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
6.3 Consents and Approvals; No Violations. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby by the Company will (i) require any filing by the Company with a
governmental entity or require the Company to obtain any consent or approval by
a third party, except as set forth on Schedule 6.3 hereto, (ii) conflict with or
result in a breach of any provision of the Company's Amended and Restated
Certificate of Incorporation or By-Laws, each as amended to date, (iii)
constitute a Default under
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any of the terms, conditions or provisions of any Contract to which the Company
is a party, or by which any of its respective properties or assets may be bound
or (iv) violate any Regulation, including any applicable provisions of the
Delaware General Corporation Law, or Court Order to which the Company, or any of
its properties or assets, is subject.
6.4 No Shopping. The Company is not currently in discussions or
negotiations with, nor is it subject to any agreement with or considering any
proposal by, any person or entity concerning the sale, lease, exchange or other
disposition of all or substantially all of the assets of the Company or any of
its subsidiaries (other than in connection with a merger of a subsidiary of the
Company with and into the Company), or the merger or consolidation of the
Company or any of its subsidiaries (other than a merger of a subsidiary of the
Company with and into the Company).
6.5 Reports with the Securities and Exchange Commission. None of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001, any subsequently filed Company Quarterly Report on Form 10-Q, Current
Report on Form 8-K or proxy or information statements contained, when filed, any
untrue statement of any material fact and did not omit to state any material
fact necessary to make the statements set forth therein, in light of the
circumstances under which they were made, not misleading. Subsequent to December
31, 2001, the Company has made all filings with the Securities and Exchange
Commission that it is required to make under Sections 13(a), 14(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, and the Company has not
received any request from the Securities and Exchange Commission to file any
amendment or supplement to any of the filings described in this Section 6.5.
7. Waiver and Consent Regarding Original Purchase Agreement.
7.1 Chancellor. By execution of this Agreement, and pursuant to Section
11.4 of the Original Purchase Agreement, Chancellor hereby waives the
application of Sections 8.17 (Transactions with Affiliates and Related Parties)
and 8.26 (Dividends and Redemptions) of the Original Purchase Agreement to the
transactions contemplated hereby, and specifically consents, on behalf of itself
and each of the other investors under the Original Purchase Agreement, to the
Company's repurchase of the Shares and Warrants in accordance with the terms and
conditions of this Agreement. In addition, Chancellor hereby waives any and all
future rights that it may have with respect to Article VIII (Affirmative
Covenants) of the Original Purchase Agreement.
7.2 The Company. By execution of this Agreement, the Company hereby
waives (i) the requirement that Chancellor deliver a legal opinion to the
Company pursuant to Section 9.2 of the Original Purchase Agreement, and (ii) the
notice requirements and related delivery by Chancellor to the Company of a legal
opinion or "no action" letter pursuant to Section 9.4 of the Original Purchase
Agreement, in connection with the transactions contemplated by this Agreement.
8. Release of Claims. (a) Except for those obligations, rights and
remedies created by or arising out of this Agreement, Chancellor hereby fully
and forever releases and discharges the Company and each of its affiliates from
any and all claims, demands, liens, actions, agreements,
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suits, causes of action, obligations, controversies, debts, costs, attorneys'
fees, expenses, damages, judgments, orders and liabilities of whatever kind or
nature in law, equity or otherwise, whether or not now known or suspected, that
have existed or may have existed, or that do exist or that hereafter may exist,
based on any facts, events or omissions occurring from any time on or prior to
the execution of this Agreement that arise out of, concern, pertain or relate in
any way to any rights Chancellor may have against the Company with respect to
its ownership of the Shares and Warrants or under the Chancellor Agreements.
Chancellor acknowledges that there is a possibility that it will discover facts
or incur or suffer claims with respect to the ownership of the Shares and
Warrants that were unknown or unsuspected at the time this Agreement was
executed, and that if known by Chancellor at that time may have materially
affected Chancellor's decision to execute this Agreement. Chancellor
acknowledges and agrees that, because of this Agreement, it is are assuming any
risk of such unknown facts and such unknown and unsuspected claims. It is the
intention of Chancellor, through this Agreement and with the advice of counsel,
fully and finally to settle and release all such matters, and all claims
relative thereto, that do now exist, may exist, or have existed between the
parties hereto.
(b) Except for those obligations, rights and remedies created by or
arising out of this Agreement, the Company hereby fully and forever releases and
discharges Chancellor and each of its affiliates from any and all claims,
demands, liens, actions, agreements, suits, causes of action, obligations,
controversies, debts, costs, attorneys' fees, expenses, damages, judgments,
orders and liabilities of whatever kind or nature in law, equity or otherwise,
whether or not now known or suspected, that have existed or may have existed, or
that do exist or that hereafter may exist, based on any facts, events or
omissions occurring from any time on or prior to the execution of this Agreement
that arise out of, concern, pertain or relate in any way to any rights the
Company may have against Chancellor with respect to the issuance and sale of the
Shares and Warrants to Chancellor under the Chancellor Agreements. The Company
acknowledges that there is a possibility that it will discover facts or incur or
suffer claims with respect to the issuance and sale of the Shares and Warrants
to Chancellor that were unknown or unsuspected at the time this Agreement was
executed, and that if known by the Company at that time may have materially
affected the Company's decision to execute this Agreement. The Company
acknowledges and agrees that, because of this Agreement, it is assuming any risk
of such unknown facts and such unknown and unsuspected claims. It is the
intention of the Company, through this Agreement and with the advice of counsel,
fully and finally to settle and release all such matters, and all claims
relative thereto, that do now exist, may exist, or have existed between the
parties hereto.
9. Chancellor's Conditions to Closing. Chancellor's obligation to sell,
transfer and assign the Shares and Warrants to the Company at the Closing are
subject to the fulfillment of the following conditions:
9.1 Representations. The representations and warranties made by the
Company in Section 6 hereof shall be true and correct when made, and shall be
true and correct on the Closing Date.
9.2 Compliance Certificate. The Company shall have executed and
delivered to Chancellor a certificate dated the Closing Date, signed by the
Chief Executive Officer and Chief
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Financial Officer of the Company on behalf of the Company and certifying that
the representations and warranties made by the Company in Section 6 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 Company on or prior to the Closing Date shall have been
performed or complied with.
9.3 Consents. All consents of third parties that are required in
connection with the repurchase of the Shares and Warrants and the transactions
contemplated hereby shall have been obtained and shall be effective on and as of
the Closing Date, including the consents referred to on Schedule 6.3.
10. Company's Conditions to Closing. The Company's obligation to repurchase
the Shares and Warrants at the Closing are subject to the fulfillment of the
following conditions:
10.1 Representations. The representations and warranties made by
Chancellor in Section 5 hereof shall be true and correct when made, and shall be
true and correct on the Closing Date.
10.2 Compliance Certificate. Chancellor shall have executed and
delivered to the Company a certificate dated the Closing Date, signed by its
general partner and certifying that the representations and warranties made by
Chancellor in Section 5 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 Chancellor on or prior
to the Closing Date shall have been performed or complied with.
11. Miscellaneous.
11.1 Governing Law. This Agreement shall be construed and interpreted
in accordance with the laws of the State of Colorado, regardless of the conflict
of laws principles thereof.
11.2 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.
11.3 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 representations, warranties or covenants except as
specifically set forth herein or therein. This Agreement may be amended,
modified or supplemented only by a written instrument duly executed by each of
the parties hereto.
11.4 Expenses. Each of the Company and Chancellor shall bear their own
expenses incurred on their behalf with respect to this Agreement and the
transactions contemplated hereby,
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including, but not limited to, the fees and disbursements of legal counsel and
out-of-pocket expenses.
11.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
exercising such counterparts, and all of which together shall constitute one and
the same instrument.
[Signatures appear on following page(s)]
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IN WITNESS WHEREOF, this Stock and Warrant Repurchase Agreement has
been executed by the parties hereto as of the day and year first written above.
CHANCELLOR:
CHANCELLOR V., L.P.
By: IPC Direct Associates V, L.L.C.
Its General Partner
By: INVESCO Private Capital, Inc.
Its Managing Member
By:
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Name:
COMPANY:
HEALTH GRADES, INC.
By:
---------------------------------
Name:
Title:
SCHEDULE 6.3
1. Pursuant to Section 7.2 of the Loan and Security Agreement, dated May 10,
2002, between the Company and Silicon Valley Bank (the "Bank"), the Company is
required to obtain the Bank's written consent prior to any redemption or
purchase of capital stock.
2. Pursuant to Section 8.26 of the Original Purchase Agreement, the Company may
not redeem, purchase or otherwise acquire any Common Stock. Section 11.4 of the
Original Purchase Agreement provides that any provision thereof may be amended
or waived, on behalf of all of the investors as signatories thereto, and with
the Company's prior written consent, by Purchasers (as defined in the Original
Purchase Agreement) owning a majority of the Shares and Warrants purchased
pursuant to the Original Purchase Agreement.
EXHIBIT A
STOCK POWER
For value received, Chancellor V, L.P., a Delaware limited partnership
(the "Shareholder"), hereby sells, transfers and assigns unto Health Grades,
Inc., a Delaware corporation ("the Company"), 12,004,333 shares of the Company's
Common Stock, par value $0.001 per share, standing in the Shareholder's name on
the books of the Company by Certificate Nos. SC 0814 and SC 0854 herewith, and
the Shareholder hereby irrevocably constitutes and appoints the Company's
secretary to transfer said stock on the books of the Company with full power of
substitution in the premises.
CHANCELLOR V, L.P.
By: IPC Direct Associates V, L.L.C.
Its General Partner
By: INVESCO Private Capital, Inc.
Its Managing Member
By:
-----------------------------------
Name:
EXHIBIT B
FORM OF ASSIGNMENT
For value received, the undersigned registered holder of the Warrants
listed below hereby sells, transfers and assigns unto Health Grades, Inc. the
right represented by such Warrants to purchase an aggregate total of 1,971,820
shares of Common Stock of Health Grades, Inc. to which such Warrants relate, and
appoints the Secretary of Health Grades, Inc. as attorney-in-fact to make such
transfer on the books of Health Grades, Inc. maintained for such purpose, with
full power of substitution in the premises.
1. Common Stock Purchase Warrant to purchase 1,475,250 shares of Common Stock
dated as of March 16, 2000.
2. Common Stock Purchase Warrant to purchase 292,100 shares of Common Stock
dated as of April 16, 2001.
3. Common Stock Purchase Warrant to purchase 204,470 shares of Common Stock
dated as of October 9, 2001.
CHANCELLOR V, L.P.
By: IPC Direct Associates V, L.L.C.
Its General Partner
By: INVESCO Private Capital, Inc.
Its Managing Member
By:
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Name:
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(Street Address)
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(City) (State) (Zip Code)