UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES AND EXCHANGE ACT OF 1934
Patient Infosystems, Inc.
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(Name of Issuer)
Common Stock, $.001 par value
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(Title to Class of Securities)
702915109
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(CUSIP NUMBER)
Karen E. Shaff, Esq.
Principal Financial Group, Inc.
711 High Street
Des Moines, IA 50392
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
April 11, 2003
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f), or 240.13d-1(g), check
the following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP No. 70295109
1
1. Names of Reporting Persons, I.R.S. Identification Nos. of above persons
(entities only).
Principal Financial Group, Inc.
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2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ X ]
(b) [ ]
3. SEC Use Only
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4. Source of Funds
00
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to items
2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization
Delaware
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NUMBER OF SHARES 7. Sole Voting Power
BENEFICIALLY OWNED BY
EACH REPORTING PERSON
WITH
------------------------------------------
8. Shared Voting Power
12,838,680
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9. Sole Dispositive Power
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10. Shared Dispositive Power
12,838,680
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
12,838,680
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2
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
[ ]
13. Percent of Class Represented by Amount in Row (11)
53.96%
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14. Type of Reporting Person
HC
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1. Names of Reporting Persons, I.R.S. Identification Nos. of above persons
(entities only).
Principal Financial Services, Inc.
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2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ X ]
(b) [ ]
3. SEC Use Only
--------------------------------------------------------------------------------
4. Source of Funds
00
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to items
2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization
Iowa
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NUMBER OF SHARES 7. Sole Voting Power
BENEFICIALLY OWNED BY
EACH REPORTING PERSON 0
WITH ------------------------------------------
8. Shared Voting Power
12,838,680
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3
9. Sole Dispositive Power
0
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10. Shared Dispositive Power
12,838,680
------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
12,838,680
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12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
[ ]
13. Percent of Class Represented by Amount in Row (11)
53.96%
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14. Type of Reporting Person
HC
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1. Names of Reporting Persons, I.R.S. Identification Nos. of above persons
(entities only).
Principal Life Insurance Company
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2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ X ]
(b) [ ]
3. SEC Use Only
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4. Source of Funds
00
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to items
2(d) or 2(e)
[ ]
4
6. Citizenship or Place of Organization
Iowa
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NUMBER OF SHARES 7. Sole Voting Power
BENEFICIALLY OWNED BY
EACH REPORTING PERSON
WITH
------------------------------------------
8. Shared Voting Power
12,838,680
------------------------------------------
9. Sole Dispositive Power
------------------------------------------
10. Shared Dispositive Power
12,838,680
------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
12,838,680
--------------------------------------------------------------------------------
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
[ ]
13. Percent of Class Represented by Amount in Row (11)
53.96%
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14. Type of Reporting Person
IC
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ITEM 1. SECURITY AND ISSUER.
This statement relates to shares of Series D Preferred Stock, each share
immediately convertible into 120 shares of Common Stock, $.001 par value, of
Patient Infosystems, Inc., whose principal offices are located at 46 Prince
Street, Rochester, NY 14607.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is being filed by: (i) Principal Financial Group, Inc. ("PFG"),
(ii) Principal Financial Services, Inc. ("PFS") and Principal Life Insurance
Company ("PLIC").
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PFG is a corporation incorporated under the laws of the State of Delaware. Its
common stock is publicly traded on the New York Stock Exchange under the ticker
symbol PFG. PFG is a holding company. The address of its principal business and
principal office is 711 High Street, Des Moines, Iowa 50392.
PFS, an Iowa corporation, is a wholly-owned subsidiary of PFG and a holding
company. Its principal business and principal office is located at 711 High
Street, Des Moines, Iowa 50392.
PLIC, a wholly-owned subsidiary of PFS, is a stock insurance company organized
under the laws of the State of Iowa. The principal business activity of PLIC is
the provision of products and services for businesses, groups and individuals
including individual insurance, pension plans and group/employee benefits. The
address of its principal business and principal office is 711 High Street, Des
Moines, Iowa 50392.
By virtue of their ownership and control of PLIC, PFG and PFS have the ultimate
voting and dispositive power with respect to the shares of Patient Infosystems
Series D Preferred Stock held by PLIC and may be deemed indirect beneficial
owners of all the shares of Patient Infosystems Series D Preferred Stock owned
by PLIC within the meaning of Rule 13d-3(a) under the Securities Exchange Act of
1934, as amended (the "Act").
Each of PFG, PFS and PLIC is hereafter referred to individually as a "Reporting
Person" and collectively as "Reporting Persons." As discussed below, the
Reporting Persons collectively may be deemed to be a group, within the meaning
of Rule 13d-5(b)(1) under the Act, beneficially owning, in the aggregate,
106,989 shares of Patient Infosystems Series D Preferred Stock which, upon
conversion to Patient Infosystems Common Stock, would represent approximately
53.96% of the outstanding shares of Patient Infosystems Common Stock within the
meaning of Rule 13d-3(a) and (d) of the Act.
Attached as Exhibit B hereto and incorporated by reference herein is a list of
all Directors and Executive Officers of each Reporting Person. The Directors and
Executive Officers of the Reporting Persons can be contacted at the principle
business address provided above.
To the knowledge of the Reporting Persons, none of the Directors or Executive
Officers of the Reporting Persons has had any transactions in shares of Patient
Infosystems Series D Preferred Stock during the past 60 days, and no Director or
Executive Officer is a beneficial owner of shares of Patient Infosystems Series
D Preferred Stock.
All of the Directors and Executive Officers of the Reporting Persons are United
States citizens, except Victor H. Loewenstein and Elizabeth E. Tallett, both
directors of PFG, PFS and PLIC, who are citizens of the United Kingdom.
During the last five years, none of the Reporting Persons, or the Directors or
Executive Officers of the Reporting Persons, has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
During the last five years, none of the Reporting Persons, or the Directors or
Executive Officers of the Reporting Persons, has been a party of a civil
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proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, or finding any violation with respect to, federal or state
securities law.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The shares were paid for by using working capital of the Reporting Person.
ITEM 4. PURPOSE OF TRANSACTION.
The Reporting Person intends to hold the shares for long-term investment
purposes.
PLIC entered into a Note and Stock Purchase Agreement with Patient Infosystems
pursuant to which PLIC purchased a Note in the amount of $1.5 million as well as
the 106,989 shares of Series D Preferred Stock reported herein. Pursuant to the
Note and Stock Purchase Agreement, PLIC will have the right to convert the Note
into Series D Preferred Stock upon a consummation of a private placement of
Series D Preferred Stock. Patient Infosystems must amend its Certificate of
Incorporation to increase its authorized Common Stock to allow for any
subsequent conversion of Series D Preferred Stock into Common Stock.
PLIC has also entered into a Creditor Agreement with all parties except Patient
Infosystems to the Note and Stock Purchase Agreement. Pursuant to the Creditor
Agreement, PLIC will convert its Note into Series D Preferred Stock upon the
closing of an asset purchase agreement between Patient Infosystems and American
CareSource Corporation.
Other than as set forth above, the Reporting Persons do not have any plans or
proposals which relate to or would result in any of the transactions described
in subparagraphs (a) through (j) of Item 4 of Schedule 13D under the Act. The
Reporting Persons reserve the right to acquire additional securities of Patient
Infosystems, to dispose of securities of Patient Infosystems at any time or to
formulate other purposes, plans or proposals regarding Patient Infosystems or
any of its securities to the extent deemed advisable in light of their
respective general investment and trading policies, market conditions or other
factors.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Beneficial Ownership
The Reporting Persons are the beneficial owners of 106,989 shares
of Series D Preferred Stock each such share immediately
convertible into 120 shares of Common Stock. Based on Patient
Infosystems' most recent public filings, this represents
beneficial ownership of 53.96% of the Patient Infosystems' Common
Stock.
(b) Voting and Dispositive Powers
The Reporting Persons share voting and dispositive power with
respect to the shares of Series D Preferred Stock beneficially
owned by them. 7
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(c) Transactions in Securities of the Company During the Past Sixty
Days.
Other than as set forth herein, the Reporting Persons have not
made any purchase or sales of securities of Patient Infosystems
during the sixty (60) days preceding the date of this Schedule
13D.
(d) Dividends and Proceeds
Other than the Reporting Persons, no person is known to have the
right to receive or the power to direct the receipt of the
dividends from, or the proceeds from the sale of, the Series D
Preferred Stock beneficially owned by the Reporting Persons.
(e) Date Reporting Person Ceased to be Beneficial Owner of More than
5% of the Company's Stock.
N/A
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
The responses to Items 2 and 4 are incorporated herein by reference. The
agreements referenced in Item 4 are attached hereto as Exhibits C and D.
Other than the above mentioned agreements, there are no other contracts,
arrangements, understandings or relationships with respect to Patient
Infosystems securities to which any Reporting Person is a party or by which any
Reporting Person is bound.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A - Joint Filing Agreement
Exhibit B - Directors and Executive Officers
Exhibit C - Form of Note and Stock Purchase Agreement
Exhibit D - Form of Creditor Agreement
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SIGNATURES
After reasonable inquiry and to the best of the Reporting Person's knowledge and
belief, the Reporting Person certifies that the information set forth in this
statement is true, complete and correct.
April 21, 2003
PRINCIPAL FINANCIAL GROUP, INC.
By: /S/ JOYCE N. HOFFMAN
--------------------
Joyce N. Hoffman
Senior Vice President & Corporate Secretary
April 21, 2003
PRINCIPAL FINANCIAL SERVICES, INC.
By: /S/ JOYCE N. HOFFMAN
--------------------
Joyce N. Hoffman
Senior Vice President & Corporate Secretary
April 21, 2003
PRINCIPAL LIFE INSURANCE COMPANY
By: /S/ JOYCE N. HOFFMAN
--------------------
Joyce N. Hoffman
Senior Vice President & Corporate Secretary
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EXHIBIT A
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) under the Securities Exchange Act of
1934, as amended, each of the parties hereto agrees with the other parties that
the statement of Schedule 13D pertaining to certain securities of Patient
Infosystems, Inc. to which this agreement is an exhibit is filed by and on
behalf of each such party and that any amendment thereto will be filed on behalf
of each such party.
Dated: April 21, 2003
PRINCIPAL FINANCIAL GROUP,
INC.
By: /S/ JOYCE N. HOFFMAN
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Joyce N. Hoffman
Senior Vice President &
Corporate Secretary
PRINCIPAL FINANCIAL
SERVICES, INC.
By: /S/ JOYCE N. HOFFMAN
---------------------
Joyce N. Hoffman
Senior Vice President &
Corporate Secretary
PRINCIPAL LIFE INSURANCE
COMPANY
By: /S/ JOYCE N. HOFFMAN
---------------------
Joyce N. Hoffman
Senior Vice President &
Corporate Secretary
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EXHIBIT B
DIRECTORS AND EXECUTIVE OFFICERS
PRINCIPAL FINANCIAL GROUP, INC.
DIRECTORS
B. J. (Betsy) Bernard
J. (Jocelyn) Carter-Miller
G. E. (Gary)Costley
D. J. (Dave) Drury
D. (Dan) Gelatt
J. B. (Barry)Griswell
S. L. (Sandy) Helton
C. S. (Chuck) Johnson
W. T. (Bill) Kerr
R. L. (Dick) Keyser
V. H. (Victor) Loewenstein
F. F. (Federico) Pena
D. M. (Don) Stewart
E. E. (Liz) Tallett
EXECUTIVE OFFICERS
J. B. (Barry) Griswell, Chairman, President and Chief
Executive Officer
J. E. (John) Aschenbrenner, Executive Vice President
M. T. (Mike) Daley, Executive Vice President
M. H. (Mike) Gersie, Executive Vice President and Chief
Financial Officer
J. P. (Jim) McCaughan, Executive Vice President
L. D. (Larry) Zimpleman, Executive Vice President
E. Z. (Ellen) Lamale, Senior Vice President and Chief
Actuary
M. A. (Mary) O'Keefe, Senior Vice President
K. E. (Karen) Shaff, Senior Vice President and General
Counsel
G. P. (Gary) Scholten, Senior Vice President and Chief
Information Officer
N. R. (Norman) Sorensen, Senior Vice President
PRINCIPAL FINANCIAL SERVICES, INC.
DIRECTORS
B. J. (Betsy) Bernard
J. (Jocelyn) Carter-Miller
G. E. (Gary)Costley
D. J. (Dave) Drury
D. (Dan) Gelatt
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J. B. (Barry)Griswell
S. L. (Sandy) Helton
C. S. (Chuck) Johnson
W. T. (Bill) Kerr
R. L. (Dick) Keyser
V. H. (Victor) Loewenstein
F. F. (Federico) Pena
D. M. (Don) Stewart
E. E. (Liz) Tallett
EXECUTIVE OFFICERS
J. B. (Barry) Griswell, Chairman, President and Chief
Executive Officer
J. E. (John) Aschenbrenner, Executive Vice President
M. T. (Mike) Daley, Executive Vice President
M. H. (Mike) Gersie, Executive Vice President and Chief
Financial Officer
J. P. (Jim) McCaughan, Executive Vice President
L. D. (Larry) Zimpleman, Executive Vice President
E. Z. (Ellen) Lamale, Senior Vice President and Chief Actuary
J. M. (Julia) Lawler, Senior Vice President and Chief
Investment Officer
M. A. (Mary) O'Keefe, Senior Vice President
K. E. (Karen) Shaff, Senior Vice President and General Counsel
G. P. (Gary)Scholten, Senior Vice President and Chief
Information Officer
N. R. (Norman) Sorensen, Senior Vice President
PRINCIPAL LIFE INSURANCE COMPANY
DIRECTORS
B. J. (Betsy) Bernard
J. (Jocelyn) Carter-Miller
G. E. (Gary) Costley
D. J. (Dave) Drury
D. (Dan) Gelatt
J. B. (Barry) Griswell
S. L. (Sandy) Helton
C. S. (Chuck) Johnson
W. T. (Bill) Kerr
R. L. (Dick) Keyser
V. H. (Victor) Loewenstein
F. F. (Federico) Pena
D. M. (Don) Stewart
E. E. (Liz) Tallett
EXECUTIVE OFFICERS
J. B. (Barry) Griswell, Chairman, President and Chief
Executive Officer
J. E. (John) Aschenbrenner, Executive Vice President
M. T. (Mike) Daley, Executive Vice President
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M. H. (Mike) Gersie, Executive Vice President and Chief
Financial Officer
J. P. (Jim) McCaughan, Executive Vice President
L. D. (Larry) Zimpleman, Executive Vice President
P. F. (Paul) Bognanno, Senior Vice President
G. M. (Gary) Cain, Senior Vice President
C. R. (Bob) Duncan, Senior Vice President
R. C. (Ralph) Eucher, Senior Vice President
T. J. (Tom) Graf, Senior Vice President
J. N. (Joyce) Hoffman, Senior Vice President and Corporate
Secretary
D. J. (Dan) Houston, Senior Vice President
E. Z. (Ellen) Lamale, Senior Vice President and Chief Actuary
J. M. (Julia) Lawler, Senior Vice President and Chief
Investment Officer
M. A. (Mary) O'Keefe, Senior Vice President
G. P. (Gary) Scholten, Senior Vice President and Chief
Information Officer
K. E. (Karen) Shaff, Senior Vice President and General Counsel
R. A. (Bob) Slepicka, Senior Vice President
N. R. (Norman) Sorensen, Senior Vice President
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EXHIBIT C
NOTE AND STOCK PURCHASE AGREEMENT
THIS NOTE AND STOCK PURCHASE AGREEMENT dated as of April 10, 2003, is by and
among Patient Infosystems, Inc. (the "Issuer") and those investors listed on
SCHEDULE A hereto (each sometimes referred to as a "Holder" and collectively as
the "Holders").
RECITALS
A. The Issuer has requested that the Holders purchase certain notes and stock of
Issuer on the terms and conditions set forth herein.
B. The Holders have agreed to purchase such notes and stock on the terms and
conditions set forth therein.
ACCORDINGLY, the parties hereto hereby agree as follows:
DEFINITIONS
"Amendment" has the meaning set forth in Section 2.02(c).
"Additional Investor" has the meaning set forth in Section 2.01(d).
"Asset Purchase Agreement" means the Asset Purchase Agreement by and among the
Issuer, American CareSource Corporation, certain stockholders of the Issuer and
certain stockholders of American CareSource Corporation dated as of September
23, 2002, as further amended on April 10, 2003.
"Certificate of Designations" has the meaning set forth in Section 2.01(b).
"Collateral" has the meaning set forth in Section 2.02.
"Collateral Agent" has the meaning set forth in ARTICLE VI.
"Commitments" has the meaning set forth in Section 3.15.
"Closing Date" means the date on which all of the conditions set forth in
ARTICLE V shall first have been satisfied.
"Common Stock" means the Common Stock, par value $.01 per share of the Issuer.
"Contractual Obligation" means any provision of any security issued by the
Issuer or of any agreement, instrument or other undertaking to which the Issuer
is a party or by which it or any of its property is bound.
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"Event of Default" has the meaning set forth in ARTICILE VII.
"Governmental Authority" means any nation, government, state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to,
government.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever.
"Lien Subordination Agreement" means the Lien Subordination Agreement by and
among the Holders, Equity Dynamics, Inc., Wells Fargo Bank Iowa, N.A., John
Pappajohn, Derace Schaffer, the Issuer and any Additional Investor of even date
herewith.
"Material Adverse Effect" means a material adverse effect on (i) the business,
operations, property, condition (financial or otherwise) or prospects of the
Issuer, (ii) the ability of the Issuer to perform its obligations under the
Purchase Documents, or (iii) the validity or enforceability of the Purchase
Documents or the rights or remedies of the Holders hereunder or thereunder.
"Meeting" has the meaning set forth in Section 2.01(c).
"Notes" means the notes issued under this Purchase Agreement.
"Person" means an individual, partnership, corporation, business trust, joint
stock company, limited liability company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Proxy Statement" has the meaning set forth in Section 2.01(c).
"Purchase Agreement" means this agreement as modified from time to time.
"Purchase Documents" means the documents listed in Section 0.
"Required Holders" means Holders holding Notes with 50% or more of the aggregate
principal amounts then outstanding under all the Notes.
"Required Shareholder Approval" has the meaning set forth in Section 2.01(c).
"Requirements of Laws" means as to any Person, the organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable or binding upon such Person or any of its property or to
which such Person or any of its material property is subject.
"Responsible Officer" means the chief executive officer, president, vice
president or chief financial officer of the Issuer.
"SEC" means the Securities and Exchange Commission.
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"Segregated Bank Account" means an insured money market account maintained by
Issuer at Citbank, account number 226045172, the proceeds of which shall be the
funds loaned to Issuer by the Holders under the Purchase Agreement and any
proceeds collected by the Issuer from American CareSource Corporation under the
Credit Agreement by and between the Issuer and American CareSource Corporation
of even date herewith.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the Security Agreement by and between the Issuer and
the Holders of even date herewith.
"Series D Preferred Stock" means Series D 9% Cumulative Convertible Preferred
Stock, par value $0.01 per share of the Issuer.
"Stock" means shares of Series D Convertible Preferred Stock, par value $0.01
per share of the Issuer issued under this Purchase Agreement.
"Warrant" shall mean the Warrant to purchase shares of Common Stock of ACS
granted to Issuer by ACS on April 10, 2003.
PURCHASE OF CONVERTIBLE NOTES AND STOCK
SALE AND PURCHASE OF NOTES AND STOCK.
SUBJECT TO THE TERMS AND CONDITIONS HEREOF AND FOR THE CONSIDERATION AND IN
THE AMOUNTS LISTED ON SCHEDULE 0, THE ISSUER AGREES TO ISSUE AND SELL, AND
EACH HOLDER HEREBY AGREES, SEVERALLY AND NOT JOINTLY, TO PURCHASE THE NOTES
AND THE STOCK AS SET FORTH ON SCHEDULE 2.01. ALL PROCEEDS RECEIVED BY
ISSUER FROM HOLDERS SHALL BE DEPOSITED IN THE SEGREGATED BANK ACCOUNT AND
WILL ONLY BE USED BY ISSUER TO FUND THE LOANS TO AMERICAN CARESOURCE
CORPORATION DESCRIBED IN SECTION 2.02, SUBJECT TO THE EXCEPTIONS SET FORTH
IN SECTION 2.07 HEREOF.. THE NOTES SHALL BE SUBSTANTIALLY IN THE FORM
ANNEXED HERETO AS EXHIBIT 2.01(A).
PRIOR TO THE CLOSING DATE, THE ISSUER SHALL HAVE FILED A CERTIFICATE OF
DESIGNATION, POWERS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS
THEREOF OF THE SERIES D PREFERRED STOCK OF PATIENT INFOSYSTEMS, INC. (THE
"CERTIFICATE OF DESIGNATION") SETTING FORTH, AMONG OTHER THINGS, THE TERMS,
DESIGNATIONS, POWERS, PREFERENCES, AND RELATIVE, PARTICIPATING, OPTIONAL,
AND OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS OF THE SERIES D PREFERRED STOCK, IN THE FORM ATTACHED HERETO
AS EXHIBIT 2.01(B). THE SERIES D PREFERRED STOCK SHALL HAVE THE TERMS SET
FORTH IN THE CERTIFICATE OF DESIGNATION.
THE ISSUER SHALL SUBMIT TO THE STOCKHOLDERS OF THE ISSUER FOR APPROVAL AT
EITHER ITS NEXT ANNUAL MEETING OF SHAREHOLDERS OR A SPECIAL MEETING (THE
"MEETING") TO BE CALLED AND HELD AS PROMPTLY AS PRACTICABLE AFTER THE DATE
HEREOF, AMONG OTHER THINGS, AN AMENDMENT OF ITS CERTIFICATE OF
INCORPORATION IN ORDER TO INCREASE ITS AUTHORIZED COMMON STOCK TO
80,000,000 SHARES, NECESSARY TO ALLOW FOR THE ISSUANCE OF THE COMMON STOCK
16
UPON CONVERSION OF THE STOCK (THE "AMENDMENT"). IN CONNECTION WITH SUCH
MEETING, THE ISSUER SHALL PREPARE AND FILE WITH THE SEC A PRELIMINARY PROXY
STATEMENT (THE "PROXY STATEMENT") BY WHICH THE ISSUER'S SHAREHOLDERS WILL
BE ASKED TO APPROVE THE AMENDMENT REFERRED TO HEREIN (THE "REQUIRED
SHAREHOLDER APPROVAL"). THE ISSUER SHALL USE ITS BEST EFFORTS TO RESPOND TO
ANY COMMENTS OF THE SEC, AND TO CAUSE THE PROXY STATEMENT TO BE MAILED TO
THE ISSUER'S SHAREHOLDERS AT THE EARLIEST PRACTICABLE TIME. THE ISSUER WILL
NOTIFY HOLDERS PROMPTLY OF THE RECEIPT OF ANY COMMENTS FROM THE SEC OR ITS
STAFF AND OF ANY REQUEST BY THE SEC OR ITS STAFF OR ANY OTHER GOVERNMENT
OFFICIALS FOR AMENDMENTS OR SUPPLEMENTS TO THE PROXY STATEMENT OR FOR
ADDITIONAL INFORMATION AND WILL SUPPLY HOLDERS WITH COPIES OF ALL
CORRESPONDENCE BETWEEN THE ISSUER OR ANY OF ITS REPRESENTATIVES, ON THE ONE
HAND, AND THE SEC, OR ITS STAFF OR ANY OTHER GOVERNMENT OFFICIALS, ON THE
OTHER HAND, WITH RESPECT TO THE PROXY STATEMENT. THE PROXY STATEMENT SHALL
COMPLY IN ALL MATERIAL RESPECTS WITH ALL APPLICABLE REQUIREMENTS OF LAW.
HOLDERS SHALL PROVIDE THE ISSUER WITH ALL INFORMATION ABOUT HOLDERS
REQUIRED TO BE INCLUDED OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT
AND SHALL OTHERWISE COOPERATE WITH THE ISSUER IN TAKING THE ACTIONS
DESCRIBED IN THIS PARAGRAPH. WHENEVER ANY EVENT OCCURS WHICH IS REQUIRED TO
BE SET FORTH IN AN AMENDMENT OR SUPPLEMENT TO THE PROXY STATEMENT, THE
ISSUER OR HOLDERS, AS THE CASE MAY BE, SHALL PROMPTLY INFORM THE OTHER
PARTY OF SUCH OCCURRENCE AND COOPERATE IN FILING WITH THE SEC OR ITS STAFF
OR ANY OTHER GOVERNMENT OFFICIALS, AND/OR MAILING TO SHAREHOLDERS OF THE
ISSUER, SUCH AMENDMENT OR SUPPLEMENT. THE PROXY STATEMENT SHALL INCLUDE THE
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE ISSUER THAT THE
SHAREHOLDERS OF THE ISSUER VOTE IN FAVOR OF AND APPROVE THE AMENDMENTS;
PROVIDED, HOWEVER, THAT THE BOARD OF DIRECTORS MAY WITHDRAW OR MODIFY ITS
RECOMMENDATION IN A MANNER ADVERSE TO THE HOLDERS ONLY IN THE EVENT THAT
THE BOARD OF DIRECTORS DETERMINES IN GOOD FAITH, AFTER CONSULTATION WITH
AND AFTER CONSIDERING THE ADVICE OF OUTSIDE COUNSEL, THAT IN ORDER TO
COMPLY WITH ITS FIDUCIARY DUTIES TO STOCKHOLDERS UNDER APPLICABLE LAW, IT
IS NECESSARY FOR THE BOARD OF DIRECTORS TO SO WITHDRAW OR MODIFY ITS
RECOMMENDATION.
(d) The Issuer and the Holders agree that this Purchase Agreement shall
be amended to provide for the issuance of additional notes and shares
of Series D Preferred Stock to additional investors as contemplated
hereby under the terms and conditions of this Purchase Agreement up to
the maximum amount set forth in SCHEDULE 2.01 and, without obtaining
the signature, consent or permission of any of the Holders, such
additional investors shall become parties to this Purchase Agreement
and the other Purchase Documents (as applicable) by executing
counterpart signature pages to such agreements. Upon and after the
closing of any such additional investments, the term "Stock" under this
Purchase Agreement shall be deemed to include the shares so issued, the
term "Notes" under this Purchase Agreement shall be deemed to be
include any notes issued for such additional investments and the term
"Holder" shall include any such additional investor.
COLLATERAL SECURITY.
The obligations of the Issuer under this Purchase Agreement and the Notes are
secured by a first priority perfected lien and security interest in a note or
17
series of notes issued to Issuer under the terms of the Credit Agreement by and
between the Issuer and American CareSource Corporation of even date herewith,
the proceeds thereof, the Warrant issued to Issuer by ACS, all rights of Issuer
under the Credit Agreement and the related security agreement by and between the
Issuer and American CareSource Corporation and the proceeds of the Notes issued
to Issuer by Holders as maintained in the Segregated Bank Account (the
"Collateral").
CONVERSION OF NOTES.
Each Holder shall have the right to convert the Notes into Series D Preferred
Stock of the Issuer plus accrued but unpaid interest at the rate equal to the
purchase price of such Series D Preferred Stock upon consummation of the private
placement of such Series D Preferred Stock as contemplated by the Asset Purchase
Agreement or at such other time as agreed upon by the parties.
SALE OF SECURITIES BY ISSUER.
The proceeds of any sale of stock, debt or other securities of the Issuer will
be applied towards repayment of the Notes on a pro rata basis among the Holders,
unless, as to each respective Holder, such Holder agrees to another use in
writing.
PREPAYMENT OF NOTES.
The Notes may be prepaid in whole or in part, on a pro rata basis at any time,
without premium or penalty with respect to each Note, with the written consent
of the Holders.
SEGREGATED BANK ACCOUNT.
Issuer hereby agrees to keep all proceeds from the Purchase Agreement
and Notes in a Segregated Bank Account.
DISTRIBUTION OF FUNDS.
Issuer hereby agrees that distribution of funds from the Segregated
Bank Account shall be made only to, or for the benefit of, American CareSource
Corporation. Notwithstanding the foregoing, (i) the Issuer may at any time
withdraw $2,500 from the Segregated Bank Account (such amount representing
Issuer's funds used to open such Segregated Bank Account), (ii) all accrued
interest from funds deposited into the Segregated Bank Account shall be property
of the Issuer and shall be used by the Issuer at its sole discretion and (iii)
up to $250,000 to be applied by the Issuer for working capital purposes of
Issuer.
LIMITATION ON LOANS WITH CITIBANK.
Issuer shall not enter into any loan, credit agreement or other financing
arrangement with Citibank as long as there are funds in the Segregated Bank
Account.
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REPRESENTATIONS AND WARRANTIES OF ISSUER
To induce the Holders to enter into this Purchase Agreement and to
purchase the Notes and Stock, the Issuer hereby makes the following
representations and warranties to the Holders.
ORGANIZATION, GOOD STANDING, POWER, ETC.
The Issuer (a) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, (b) is not required to be
qualified or authorized to do business as a foreign corporation in any other
jurisdiction by reason of the nature of the business conducted by it or the
properties owned or leased or operated by it, and (c) has all requisite
corporate power and authority, licenses, permits and franchises to own or lease
and operate its properties and carry on its business as presently being
conducted. The Issuer has no operating subsidiaries.
CERTIFICATE OF INCORPORATION AND BY-LAWS.
The Issuer has furnished the Holders with a complete and correct copy
of (a) the Issuer's Certificate of Incorporation, as amended to date, certified
by the Secretary of State of the State of Delaware, and (b) the Issuer's
By-Laws, as amended to date, certified by the Secretary of the Issuer. The
Issuer's Certificate of Incorporation and By-Laws are in full force and effect,
and the Issuer is not in violation of any of the provisions thereof.
CAPITALIZATION.
THE ISSUER'S AUTHORIZED CAPITALIZATION IS AS DISCLOSED ON
SCHEDULE 4.1.7(A) OF THE ASSET PURCHASE AGREEMENT. THE STOCK WHEN ISSUED AND
DELIVERED AS HEREIN PROVIDED, WILL BE VALIDLY ISSUED, FULLY PAID AND
NON-ASSESSABLE. THE ISSUER AGREES THAT, SUBJECT TO RECEIVING THE REQUIRED
SHAREHOLDER APPROVAL, IT WILL AT ALL TIMES HAVE AUTHORIZED AND RESERVED FOR THE
PURPOSES OF ISSUANCE, UPON EXERCISE OF THE CONVERSION RIGHTS OF THE STOCK A
SUFFICIENT NUMBER OF SHARES OF ITS COMMON STOCK TO PROVIDE FOR THE EXERCISE OF
ALL SUCH CONVERSION RIGHTS. ALL OUTSTANDING SHARES OF THE ISSUER ARE VALIDLY
ISSUED, FULLY PAID AND NON-ASSESSABLE.
AGREEMENTS RELATING TO CAPITAL STOCK.
To the best knowledge of the Issuer, other than as provided for in the
Asset Purchase Agreement, there are no agreements or understandings with any
person with respect to the voting of any shares of the Issuer's capital stock on
any matter and the Issuer is not a party to any agreement which imposes any
obligation on the Issuer, or creates any rights in any person, with respect to
capital stock or any other securities of the Issuer.
OPTIONS, WARRANTS, RIGHTS, ETC.
Other than as set forth in SCHEDULE 3.05, the Issuer does not have
outstanding any option, warrant, or other right to purchase or convert any
obligation into any of its capital stock.
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AUTHORIZATION OF AGREEMENT.
The Issuer has the full corporate power and authority to enter into
this Purchase Agreement and to perform its obligations hereunder and the
execution, delivery and performance of this Purchase Agreement and all other
transactions contemplated hereby have been duly authorized by the Issuer. This
Purchase Agreement constitutes a legal, valid and binding obligation of the
Issuer, enforceable in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, moratorium or other similar enforcement of
creditors' rights generally.
EFFECT OF AGREEMENT, ETC.
The execution, delivery and performance of this Purchase Agreement by
the Issuer, and consummation of the transactions contemplated hereby will not,
with or without the giving of notice and the lapse of time, or both (a) violate
any provision of law, statute, rule or regulation to which the Issuer is
subject, (b) violate any judgment, order, writ or decree of any court applicable
to the Issuer, or (c) result in the breach of, or conflict with, any term,
covenant, condition or provision of, result in the modification or termination
of, constitute a default under, or result in the creation or imposition of any
lien, security interest, charge or encumbrance upon, any of the properties or
assets of the Issuer pursuant to any corporate charter, by-laws, commitment,
contract or other agreement or instrument, to which the Issuer is a party or by
which any of its assets or properties is or may be bound or affected.
GOVERNMENT AND OTHER CONSENTS.
No consent, authorization or approval of, or exemption by, any
governmental or public body or authority is required in connection with the
execution, delivery and performance by the Issuer of this Purchase Agreement, or
to the taking by the Issuer of any action herein contemplated.
FINANCIAL STATEMENTS.
The Issuer has delivered to the Holders the financial statements of the
Issuer as of and for the fiscal year ended December 31, 2002, including the
Balance Sheet ("Balance Sheet"), the related statements of income, retained
earnings and stockholders' equity for the fiscal year then ended (the "Balance
Sheet Date") audited by Deloitte & Touche, LLP, independent certified public
accountants, including the related schedules and notes. The foregoing financial
statements (the "Financial Statements") have been prepared in accordance with
generally accepted accounting principles consistently applied, are correct and
complete in all material respects and fairly present in all material respects
the financial position and results of operations of the Issuer as of said dates
and for the periods indicated.
ABSENCE OF UNDISCLOSED LIABILITIES.
The Financial Statements make full and adequate provision for all
material obligations, liabilities and commitments (fixed and contingent) of the
Issuer as of the dates thereof and the Issuer had no material obligations,
liabilities or commitments (fixed or contingent) which were required to be set
20
forth or reserved in the Financial Statements in accordance with generally
accepted accounting principles which were not so set forth or reserved.
ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth in SCHEDULE 3.11, since the Balance Sheet Date, the Issuer
has not:
-------------
(a) incurred any obligation or liability (fixed or contingent) except
(i) trade or business obligations incurred in the ordinary course
of business, none of which is materially adverse, and (ii)
obligations and liabilities under the Commitments set forth in
SCHEDULE 3.15,
(b) suffered any material adverse change in its financial condition,
results of operations, properties, business or business
relationships;
(c) suffered the occurrence of any events which, individually or in
the aggregate, have had, or might reasonably be expected to have,
a material adverse effect on its financial condition, results of
operations, properties, business or business relationships;
(d) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (fixed and contingent), except
(i) current obligations and liabilities fully reflected in the
Balance Sheet, (ii) current obligations and liabilities incurred
since the Balance Sheet Date in the ordinary course of business,
and (iii) obligations and liabilities incurred in carrying out
the transactions contemplated by this Purchase Agreement;
(e) sold, transferred or leased any of its assets or properties or
entered into any transaction other than in the ordinary course of
business;
(f) suffered any loss not in the ordinary course of business; or
(g) declared any dividend or made any payment or distribution to its
stockholders or purchased or redeemed any of its capital stock.
TAX MATTERS.
The Issuer has prepared and filed with the appropriate United States,
state and local government agencies, all tax returns required to be filed; the
Issuer has paid all taxes shown on such tax returns to be payable or which have
come due pursuant to any assessment, deficiency notice, 30-day letter or similar
notice received by it except for taxes reflected in the Balance Sheet; and the
provisions for income taxes payable in the Balance Sheet are sufficient for all
accrued and unpaid taxes, whether or not disputed and for all periods to and
including the Balance Sheet Date. The Federal income tax liability of the Issuer
has not been examined and reported on by the Internal Revenue Service for any
fiscal year(s). The Issuer has not executed or filed with the Internal Revenue
Service or any other taxing authority any agreement extending the period for
21
assessment or collection of any income taxes or is a party to any pending action
or proceeding by any governmental authority for assessment or collection of
taxes, and no claims for assessment or collection of taxes has been asserted
against the Issuer.
TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES, ETC.
Except as indicated on SCHEDULE 3.13, the Issuer has good and
marketable title to all of its assets (tangible and intangible) (including
without limitation the assets reflected in the Balance Sheet, except as since
sold or otherwise disposed of, in the ordinary course of business), free and
clear of all mortgages, claims, liens, charges and encumbrances, except (i) as
referred to in the Balance Sheet or disclosed in the notes thereto, (ii) the
lien of taxes not yet due and payable or being contested in good faith by
appropriate proceedings, (iii) such imperfections of title and encumbrances, if
any, which do not materially detract from the value, or interfere with the use,
of the properties of the Issuer or otherwise materially impair its business
operations. The fixed assets of the Issuer referred to in the Balance Sheet are
all located on real property leased by the Issuer. The leases and other
agreements or instruments under which the Issuer holds, leases or is entitled to
the use of any real or personal property are in full force and effect and all
rentals, royalties or other payments accruing thereunder prior to the date
hereof have been duly paid. The Issuer has not received notice of violation of
any applicable law, ordinance, regulation, order or requirement relating to its
operations, or its owned or leased properties.
CONDITION OF EQUIPMENT, ETC.
The equipment owned, operated, or leased by the Issuer is in good
condition and repair (ordinary wear and tear which are not such as to affect
adversely the operation of its business excepted) and suitable for the uses for
which intended.
AGREEMENTS, PLANS, ARRANGEMENTS, ETC.
Except as set forth in SCHEDULE 3.15, the Issuer is not a
party to, nor are the Issuer or any of its properties or assets bound or
affected by, any written or oral
(a) material lease agreement (whether as lessor or lessee) for an
aggregate amount of more than $25,000 per year relating to real
or personal property;
(b) license agreement, assignment or contract (whether as licensor or
licensee, assignor or assignee) for an aggregate amount of more
than $25,000 per year relating to trademarks, patents or
copyrights (or applications therefor), unpatented designs or
styles, trade secrets, proprietary software programs and systems,
know-how or technical assistance including agreements with
customers of the Issuer granting licenses to use proprietary
software programs and systems other than third party software
licenses agreed to in the ordinary course of the Issuer's
business;
(c) employment agreement not terminable without liability to the
employer upon notice to the employee of not more than 30 days, or
22
employment agreement providing compensation of more than $25,000
per year (including all salary, bonuses and commissions) to any
employee;
(d) agreement, other than any customer contract, in excess of
$100,000 for the purchase or sale of goods, materials, supplies,
services, machinery or capital assets; (e) agreement with any
labor union;
(f) policy of insurance (including surety bonds) in force with
respect to such corporation or any of its properties, assets,
executive officers, agents or employees;
(g) agreement with any distributor, dealer, sales agent or
representative;
(h) agreement guaranteeing, indemnifying or otherwise becoming liable
for the obligations or liabilities of another other than
obligations or liabilities for patent, copyright and trademark
infringement arising out of the Issuer's standard sales
agreements;
(i) agreement for borrowing or lending of money;
(j) agreement with any bank, finance company or similar organization
which acquires from such corporation consumer paper or contracts
for the sale of merchandise on credit;
(k) agreement granting any person a lien, security interest or
mortgage on any property or asset of such corporation, including,
without limitation, any factoring agreement or agreement for the
assignment of accounts receivable;
(l) bonus, deferred compensation, profit sharing, pension,
retirement, stock option, stock purchase, insurance (other than
medical insurance for employees) or other plan, arrangement or
practice providing employee or executive benefits;
(m) advertising agreement with any newspaper, magazine or radio or
television station;
(n) agreement which restricts it from doing business anywhere in the
world;
(o) agreements with any consultant in an aggregate amount of more
than $50,000 per year; or
(p) other material agreements affecting the Issuer or its assets or
business.
23
Correct and complete copies of all such agreements, plans, policies and
arrangements and such other instruments referred to in the foregoing Section
3.15(a) through (p) (or, where they are oral, true and complete written
summaries thereof) (collectively referred to herein as the "Commitments") have
been made available for inspection at the offices of the Issuer. Each of the
Commitments is now valid, in full force and effect and enforceable in accordance
with its terms, and the Issuer has fulfilled, or taken all action reasonably
necessary to enable it to fulfill when due, all of its material obligations
under the Commitments. There has not occurred any default by the Issuer, or any
event caused by the Issuer or any of its employees or agents which with the
lapse of time or the election of any person other than the Issuer, will become a
default, nor to the knowledge of the Issuer has there occurred any default by
others or any event which with the lapse of time or the election of the Issuer
will become a default under any of the Commitments, except defaults, if any,
which will not result in any material loss to or liability of the Issuer.
Neither the Issuer, nor, to the knowledge of the Issuer, any other party, is in
arrears in respect of the performance or satisfaction of the terms or conditions
on its part to be performed or satisfied under any of the Commitments and no
wavier or indulgence has been granted by any of the parties thereto.
PATENTS, TRADEMARKS, COPYRIGHTS, PROPRIETARY SOFTWARE PRODUCTS.
(a) To the knowledge of the Issuer, the Issuer owns or
possesses adequate licenses or other valid rights to use (without the
making of any payment to others or the obligation to grant rights to
others in exchange) all patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, copy rights, know-how,
proprietary software programs and other proprietary information
necessary to the conduct of its business as presently being or proposed
to be conducted; and
(b) the validity of such items and the title thereto of the Issuer have
not been questioned in any litigation to which the Issuer is a party,
nor, to the knowledge of the Issuer, the conduct of the business of the
Issuer as now operated does not conflict with valid patents, patent
rights, proprietary rights, licenses, trademarks, trademark rights,
trade names, trade name rights or copyrights of others in any way
likely to affect adversely in any material manner the business, assets
or condition, financial or otherwise, of the Issuer. No material
infringement of any proprietary right owned or licensed by the Issuer
is known to the Issuer. All patents, patent applications and rights to
inventions or proprietary software products heretofore owned or held by
any officer or shareholder of the Issuer and relating to its business
in any manner have been duly and effectively transferred to the Issuer.
PERMITS, LICENSES, ETC.
To the knowledge of the Issuer, the Issuer does not require any permits,
licenses, orders and approvals of federal, state, local or governmental and
regulatory bodies in order to carry on its businesses as presently conducted.
24
LITIGATION.
There is no claim, action, suit, proceeding, arbitration, investigation or
inquiry pending before any federal, state, municipal, or other court or
governmental or administrative body or agency, or any private arbitration
tribunal, or, to the knowledge of the Issuer, threatened against, relating to or
affecting the Issuer or any of its assets or properties, or the transactions
contemplated by this Purchase Agreement; nor to the knowledge of the Issuer is
there any basis for any such claim, action, suit, proceeding, arbitration,
investigation or inquiry which may have any material adverse effect upon the
assets, properties or business of the Issuer, or the transactions contemplated
by this Purchase Agreement. Neither the Issuer nor any officer, director, or
employee of the Issuer has been permanently or temporarily enjoined by order,
judgment or decree of any court or other tribunal or any agency from engaging in
or continuing any conduct or practice in connection with the business engaged in
by the Issuer. There is not in existence any order, judgment or decree of any
court or other tribunal or any agency enjoining or requiring the Issuer to take
any action of any kind or to which the Issuer, its business, properties or
assets are subject or bound. The Issuer is not in default under any order,
license, regulation or demand of any federal, state or municipal or other
governmental agency or with respect to any order, writ, injunction or decree of
any court.
NO INTEREST IN COMPETITORS, ETC.
Neither the Issuer, nor any affiliate of any of the foregoing, directly or
indirectly, owns any interest in or controls or is an employee, officer,
director, or partner of or participant in or consultant to any corporation,
partnership, limited partnership, joint venture, association, or other entity
which is a competitor, supplier, customer, landlord or tenant of the Issuer.
LOANS WITH CITIBANK.
The Issuer has no loans, credit agreements or other financing arrangements with
Citibank.
REPRESENTATIONS AND WARRANTIES OF HOLDERS
Each Holder hereby represents and warrants to the Issuer, the
following facts and understandings:
OPPORTUNITY TO SPEAK TO ISSUER.
Each Holder acknowledges that it has had a full and complete
opportunity to make inquiries as to the Issuer's plan of operations and that it
fully understands the risks involved in the Issuer.
OPPORTUNITY TO SPEAK TO TAX ADVISOR.
Each Holder has been advised by the Issuer to consult with his own personal tax
advisor to determine the effect of an investment in the Notes and Stock on his
Federal income tax status.
25
OPPORTUNITY TO REVIEW ISSUER'S DOCUMENTS, RECORDS AND BOOKS.
All documents, records and books pertaining to this investment have been made
available for inspection by each Holder or, if applicable, each Holder's
attorney and/or accountant; and each Holder understands that the books and
records of the Issuer will be available during reasonable business hours at its
principal place of business.
RISK OF INVESTMENT.
Each Holder understands that operation of the Issuer's business is subject to
numerous risks. Each Holder is able to bear the economic risk of the investment
(i.e., he can afford a complete loss of his investment). Each Holder is familiar
with the nature of and risks incident to investment in securities, and has
determined (either alone or if need be on the basis of consultation with his
business and tax advisors) that the purchase of the Notes and Stock is
consistent with his investment objectives and income prospects.
SECURITIES ACQUIRED FOR INVESTMENT.
The Notes and shares of Stock acquired by each Holder will be acquired for
investment and not with a view to the resale or distribution of such securities;
and such securities are being acquired by each Holder for his own account and
with his own funds and no person, other than the Holder, has a direct or
indirect beneficial interest in such securities. Each Holder further understands
that holding the investment for any pre-defined period of time does not
constitute holding for investment or an agreement to hold the securities for
investment and not with a view to resale or distribution. Each Holder has
adequate means of providing for his current needs and foreseeable personal
contingencies, has no need for liquidity in this investment, and anticipates no
need now or in the foreseeable future to sell any of the securities which he
hereby purchases.
ACCREDITED INVESTOR.
Each Holder qualifies as one of the following:
(a) Any bank as defined in Section 3(a)(2) of the Securities
Act or any savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; any insurance company as defined in Section
2(13) of the Securities Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of the Investment Company Act of 1940; any Small Business
Investment Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan
established and maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its political subdivisions, for the benefit of
its employees, if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of Title I of the Employment Retirement
Income Security Act of 1974 ("ERISA"), if the investment decision is made by a
plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, a
savings and loan association, insurance company or registered investment
advisor, or if the employee benefit plan has total assets in excess of
26
$5,000,000, or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;
(b) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisors Act of 1940;
(c) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(d) Any director or executive officer of the Issuer;
(e) Any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his or her purchase, exceeds
$1,000,000;
(f) Any natural person who had an individual income in excess
of $200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;
(g) Any trust, with total assets in excess of $5,000,000 not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule 506 of
Regulation D; or
(h) Any entity in which all of the equity owners are
accredited investors.
RESALE OF STOCK
Each Holder understands that the Notes and Stock have not been registered under
the Securities Act, in reliance on an exemption for private offerings. Because
the Issuer has no obligation to effect such registration, each Holder may have
to continue to bear the economic risk of each Holder's investment in the Notes
and Stock for an indefinite period; and each Holder will not be permitted to
transfer the Notes or any shares of Stock in the absence of an opinion of
counsel satisfactory to counsel for the Issuer that registration is not required
under the Securities Act or under applicable state securities laws. Each Holder
understands that this offering of the Notes and Stock has not been registered
with securities agencies of any State in which they are offered in reliance upon
exemptions from registration as a private placement. The offering of the Notes
and Stock has not been approved or disapproved by federal of state security
authorities.
CONDITIONS
The effectiveness of this Purchase Agreement is subject to the
satisfaction on or prior to the Closing Date, of the following conditions
precedent:
27
PURCHASE DOCUMENTS.
The Holders shall have received the following documents executed and delivered
by a Responsible Officer of the Issuer:
THIS PURCHASE AGREEMENT;
THE NOTES;
THE SECURITY AGREEMENT
CERTIFICATES REPRESENTING THE STOCK;
THE LIEN SUBORDINATION AGREEMENT; AND
REGISTRATION RIGHTS AGREEMENT IN THE FORM ATTACHED AS EXHIBIT 5.01 HERETO.
LIEN IN FAVOR OF COLLATERAL AGENT.
The Collateral Agent shall have first priority perfected security interests in
the Collateral.
PROCEEDINGS AND CERTIFICATES.
The Holders shall have received a copy of the resolutions, in form and substance
satisfactory to the Holders, of the Boards of Directors of the Issuer
authorizing (i) the execution, delivery and performance of this Purchase
Agreement, the Notes and any other Purchase Document, (ii) the issuance of the
Stock and (iii) the borrowings contemplated hereunder certified by the Secretary
of the Issuer as of the Closing Date, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded and shall be in form and substance satisfactory to the Holders.
AMENDMENT TO ASSET PURCHASE AGREEMENT
American CareSource Corporation and the Issuer shall have executed an amendment
to the Asset Purchase Agreement including, but not limited to, modifications of
the provisions regarding (i) control of the Board of Directors of the Issuer
after closing, (ii) extension of the repayment of debt to Eric Brauss and his
affiliates, (iii) termination of the Asset Purchase Agreement based on the
filing date of the proxy statement of the Issuer with the Securities and
Exchange Commission and (iv) employment agreements with certain officers of
American CareSource Corporation.
CERTIFICATE OF DESIGNATION
The Issuer shall have filed with the Secretary of State of the State of Delaware
the Certificate of Designations in the form attached as EXHIBIT 2.01(B).
28
COLLATERAL AGENT
COLLATERAL AGENT
EQUITY DYNAMICS, INC. SHALL ACT AS COLLATERAL AGENT AS CONTEMPLATED HEREIN
AND IN THE SECURITY AGREEMENT.
THE REQUIRED HOLDERS SHALL HAVE THE RIGHT TO DIRECT THE COLLATERAL AGENT,
FROM TIME TO TIME, TO CONSENT TO ANY AMENDMENT, MODIFICATION OR SUPPLEMENT
TO OR WAIVER OF ANY PROVISION OF THE SECURITY AGREEMENT AND TO RELEASE ANY
COLLATERAL FROM ANY LIEN OR SECURITY INTEREST HELD BY THE COLLATERAL AGENT;
PROVIDED, HOWEVER, THAT (I) NO SUCH DIRECTION SHALL REQUIRE THE COLLATERAL
AGENT TO CONSENT TO THE MODIFICATION OF ANY PROVISION OR PORTION THEREOF
WHICH (IN THE SOLE JUDGMENT OF THE COLLATERAL AGENT) IS INTENDED TO BENEFIT
THE COLLATERAL AGENT, (II) THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
DECLINE TO FOLLOW ANY SUCH DIRECTION IF THE COLLATERAL AGENT SHALL
DETERMINE IN GOOD FAITH THAT THE DIRECTED ACTION IS NOT PERMITTED BY THE
TERMS OF THE SECURITY AGREEMENT OR MAY NOT LAWFULLY BE TAKEN, AND (III) NO
SUCH DIRECTION SHALL WAIVE OR MODIFY ANY PROVISION OF THE SECURITY
AGREEMENT THE WAIVER OR MODIFICATION OF WHICH REQUIRES THE CONSENT OF ALL
HOLDERS. THE COLLATERAL AGENT MAY RELY ON ANY SUCH DIRECTION GIVEN TO IT BY
THE REQUIRED HOLDERS AND SHALL BE FULLY PROTECTED IN RELYING THEREON, AND
SHALL UNDER NO CIRCUMSTANCES BE LIABLE TO ANY HOLDER OR ANY OTHER PERSON
FOR TAKING OR REFRAINING FROM TAKING ACTION IN ACCORDANCE WITH ANY
DIRECTION OR OTHERWISE IN ACCORDANCE WITH THE SECURITY AGREEMENT.
DUTIES OF COLLATERAL AGENT
THE COLLATERAL AGENT SHALL HAVE AND MAY EXERCISE SUCH POWERS UNDER THE
SECURITY AGREEMENT AS ARE SPECIFICALLY DELEGATED TO THE COLLATERAL AGENT BY
THE TERMS HEREOF AND THEREOF, TOGETHER WITH SUCH POWERS AS ARE REASONABLY
INCIDENTAL THERETO. THE COLLATERAL AGENT SHALL NOT HAVE ANY IMPLIED DUTIES
OR ANY OBLIGATIONS TO TAKE ANY ACTION UNDER THE SECURITY AGREEMENT.
THE COLLATERAL AGENT SHALL BE REQUIRED TO ACT OR TO REFRAIN FROM ACTING
(AND SHALL BE FULLY PROTECTED IN SO ACTING OR REFRAINING FROM ACTING) UPON
THE WRITTEN INSTRUCTIONS, AND THE FURNISHING OF A DEPOSIT IN ACCORDANCE
WITH SECTION 0 HEREOF, OF THE REQUIRED HOLDERS AND SUCH INSTRUCTIONS SHALL
BE BINDING UPON ALL THE HOLDERS; PROVIDED THAT THE COLLATERAL AGENT SHALL
NOT BE REQUIRED TO TAKE ANY ACTION WHICH THE COLLATERAL AGENT IN GOOD FAITH
BELIEVES (I) COULD REASONABLY BE EXPECTED TO EXPOSE IT TO PERSONAL
LIABILITY OR (II) IS CONTRARY TO APPLICABLE LAW.
ABSENT WRITTEN INSTRUCTIONS FROM REQUIRED HOLDERS TO THE CONTRARY AT A TIME
WHEN AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, THE
COLLATERAL AGENT MAY TAKE, BUT SHALL HAVE NO OBLIGATION TO TAKE, ANY AND
ALL ACTIONS UNDER THE SECURITY AGREEMENT OR OTHERWISE AS IT SHALL DEEM TO
BE IN THE BEST INTERESTS OF THE HOLDERS.
29
THE RELATIONSHIP BETWEEN THE COLLATERAL AGENT AND THE HOLDERS IS AND SHALL
BE ONLY TO THE EXTENT EXPLICITLY PROVIDED FOR HEREIN THAT OF AGENT AND
PRINCIPAL AND NOTHING HEREIN CONTAINED SHALL BE CONSTRUED TO IMPOSE ON THE
COLLATERAL AGENT DUTIES AND OBLIGATIONS OTHER THAN THOSE EXPRESSLY PROVIDED
FOR HEREIN. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NEITHER THE
COLLATERAL AGENT NOR ANY OF ITS EMPLOYEES, PARTNERS OR AGENTS SHALL
BE RESPONSIBLE TO THE HOLDERS FOR ANY RECITALS, REPRESENTATIONS OR
WARRANTIES CONTAINED IN, OR FOR THE EXECUTION, VALIDITY, GENUINENESS,
PERFECTION, EFFECTIVENESS OR ENFORCEABILITY OF, THE SECURITY AGREEMENT
(IT BEING EXPRESSLY UNDERSTOOD THAT ANY DETERMINATION OF THE FOREGOING
IS THE RESPONSIBILITY OF THE ISSUER),
BE RESPONSIBLE TO THE HOLDERS FOR THE VALIDITY, GENUINENESS,
PERFECTION, EFFECTIVENESS, ENFORCEABILITY, EXISTENCE, VALUE OR
ENFORCEMENT OF ANY SECURITY INTEREST IN THE COLLATERAL (IT BEING
EXPRESSLY UNDERSTOOD THAT ANY DETERMINATION OF THE FOREGOING IS THE
RESPONSIBILITY OF EACH HOLDER),
BE UNDER ANY DUTY TO INQUIRE INTO OR PASS UPON ANY OF THE FOREGOING
MATTERS, OR TO MAKE ANY INQUIRY CONCERNING THE PERFORMANCE BY ANY
PERSON OF ITS OR THEIR OBLIGATIONS UNDER THE SECURITY AGREEMENT (IT
BEING EXPRESSLY UNDERSTOOD THAT ANY DETERMINATION OF THE FOREGOING IS
THE RESPONSIBILITY OF THE ISSUER),
BE DEEMED TO HAVE KNOWLEDGE OF THE OCCURRENCE OF AN EVENT OF DEFAULT,
UNLESS IT SHALL HAVE RECEIVED WRITTEN NOTICE THEREOF FROM EITHER A
HOLDER OR THE ISSUER,
BE RESPONSIBLE OR LIABLE FOR ANY SHORTAGE, DISCREPANCY, DAMAGE, LOSS OR
DESTRUCTION OF ANY PART OF THE COLLATERAL WHEREVER THE SAME MAY BE
LOCATED REGARDLESS OF THE CAUSE THEREOF UNLESS THE SAME SHALL HAPPEN
SOLELY THROUGH THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
COLLATERAL AGENT AS SHALL HAVE BEEN DETERMINED IN A FINAL NONAPPEALABLE
JUDGMENT OF A COURT OF COMPETENT JURISDICTION,
HAVE ANY LIABILITY FOR ANY ERROR OR OMISSION OR ACTION OR FAILURE TO
ACT OF ANY KIND MADE IN THE SETTLEMENT, COLLECTION OR PAYMENT IN
CONNECTION WITH THE SECURITY AGREEMENT OR ANY OF THE COLLATERAL OR ANY
INSTRUMENT RECEIVED IN PAYMENT THEREFOR OR FOR ANY DAMAGE RESULTING
THEREFROM OTHER THAN AS A SOLE RESULT OF ITS OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT AS SHALL HAVE BEEN DETERMINED IN A FINAL
NONAPPEALABLE JUDGMENT OF A COURT OF COMPETENT JURISDICTION, AND
IN ANY EVENT, BE LIABLE AS SUCH FOR ANY ACTION TAKEN OR OMITTED BY IT,
ABSENT, IN EACH CASE DESCRIBED IN THIS SECTION, ITS GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT AS SHALL HAVE BEEN DETERMINED IN A FINAL
NONAPPEALABLE JUDGMENT OF A COURT OF COMPETENT JURISDICTION.
AGENTS, PARTNERS AND EMPLOYEES OF COLLATERAL AGENT.
The Collateral Agent may execute any of its duties under the Security
Agreement by or through its agents, partners or employees. Neither the
30
Collateral Agent nor any of its agents, partners or employees shall be liable
for any action taken or omitted to be taken by it or them in good faith, be
responsible for the consequence of any oversight or error of judgment or
answerable for any loss unless any of the foregoing shall happen through its or
their gross negligence or willful misconduct as shall have been determined in a
final nonappealable judgment of a court of competent jurisdiction.
RELIANCE ON CERTAIN DOCUMENTS.
The Collateral Agent shall be entitled to rely on any communication,
instrument or document believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons, and with respect to all legal
matters shall be entitled to rely on the advice of legal advisors selected by it
concerning all matters relating to the Security Agreement and its duties
hereunder and thereunder and otherwise shall rely on such experts as it deems
necessary or desirable, and shall not be liable to any Holder or any other
Person for the consequences of such reliance.
COLLATERAL AGENT MAY HAVE SEPARATE RELATIONSHIP WITH OBLIGATION PARTIES.
The Collateral Agent may, notwithstanding the fact that it is the
Collateral Agent, generally engage in any kind of business with any such party
in the same manner and to the same effect as though it were not the Collateral
Agent; and such business shall not constitute a breach of any obligation of the
Collateral Agent to the other Holders.
INDEMNIFICATION OF COLLATERAL AGENT.
Each of the Holders agrees to indemnify the Collateral Agent for any
and all liabilities, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Collateral Agent in its capacity
as the Collateral Agent, in any way relating to or arising out of the Security
Agreement or the transactions contemplated hereby or thereby or the enforcement
of any of the terms hereof or thereof or of any such other documents, PROVIDED
that no Holder shall be liable for any of the foregoing to the extent they arise
from gross negligence or willful misconduct on the part of the Collateral Agent
as shall have been determined in a final nonappealable judgment of a court of
competent jurisdiction. This Section 6.06 shall survive the termination of this
Purchase Agreement. Prior to taking any action hereunder as Collateral Agent,
the Collateral Agent may require each Holder to deposit with it sufficient sums
as it determines in good faith is necessary to protect the Collateral Agent for
costs and expenses associated with taking of action, and the Collateral Agent
shall have no liability hereunder for failure to take such action unless the
Holders promptly deposit such sums.
EVENTS OF DEFAULT
BANKRUPTCY, ETC.
If the Issuer shall commence any case, proceeding or other action (i) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
31
order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (ii) seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any substantial part of
its assets, or the Issuer shall make a general assignment for the benefit of its
creditors; or (iii) there shall be commenced against the Issuer any case,
proceeding or other action of a nature referred to in clause (i) or (ii) above
which (a) results in the entry of an order for relief or any such adjudication
or appointment or (b) remains undismissed, undischarged or unbonded for a period
of 60 days; or (iv) there shall be commenced against the Issuer any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (v) the Issuer shall take any action
in furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii), (iii), or (iv) above; the
Notes (with accrued interest thereon as provided in the Notes) and all other
amounts owing under this Purchase Agreement and the Notes shall immediately
become due and payable without the need for any notice or other action by
Holders.
OTHER EVENTS.
If any of the following events shall occur and be continuing:
32
THE ISSUER SHALL FAIL TO PAY (I) ANY PRINCIPAL OF THE NOTES WHEN DUE IN
ACCORDANCE WITH THE TERMS THEREOF, OR (II) INTEREST ON THE NOTES OR ANY FEE
OR OTHER AMOUNT PAYABLE HEREUNDER WITHIN 5 BUSINESS DAYS WHEN DUE IN
ACCORDANCE WITH THE TERMS THEREOF OR HEREOF; OR
ANY REPRESENTATION OR WARRANTY MADE BY THE ISSUER HEREIN OR IN ANY OTHER
PURCHASE DOCUMENT OR WHICH IS CONTAINED IN ANY CERTIFICATE, DOCUMENT OR
FINANCIAL OR OTHER STATEMENT FURNISHED AT ANY TIME UNDER OR IN CONNECTION
WITH THIS PURCHASE AGREEMENT OR OTHER PURCHASE DOCUMENT SHALL PROVE TO HAVE
BEEN INCORRECT AND THE SUBJECT OF THAT BREACH OF REPRESENTATION OR WARRANTY
HAS A MATERIAL ADVERSE EFFECT ON OR AS OF THE DATE MADE OR DEEMED MADE; OR
THE ISSUER SHALL DEFAULT IN THE OBSERVANCE OR PERFORMANCE OF ANY AGREEMENT
CONTAINED IN THIS PURCHASE AGREEMENT OR THE NOTES WHICH AGREEMENT, BY ITS
NATURE, MAY NOT BE CURED; OR
THE ISSUER SHALL DEFAULT IN THE OBSERVANCE OR PERFORMANCE OF ANY OTHER
AGREEMENT CONTAINED IN THIS PURCHASE AGREEMENT OR ANY OTHER PURCHASE
DOCUMENTS (OTHER THAN AS PROVIDED IN PARAGRAPHS (A) THROUGH (C) OF THIS
SECTION), AND SUCH DEFAULT SHALL CONTINUE UNREMEDIED FOR A PERIOD OF 30
DAYS;
THERE SHALL HAVE OCCURRED AN EVENT OF DEFAULT UNDER THE SECURITY AGREEMENT
BY AND BETWEEN THE ISSUER AND THE HOLDERS OF EVEN DATE; OR
THERE SHALL HAVE OCCURRED AN EVENT OF DEFAULT BY ACS UNDER THE CREDIT
AGREEMENT OR SECURITY AGREEMENT WHETHER OR NOT DECLARED BY THE ISSUER, OR
ANY DEFAULT UNDER OR TERMINATION OF THE ASSET PURCHASE AGREEMENT BY AND
AMONG THE ISSUER, ACS AND THE STOCKHOLDERS SIGNATORY THERETO, DATED AS OF
SEPTEMBER 23, 2002, AS AMENDED AND RESTATED ON APRIL 10, 2003;
then, and in any such event, the Required Holders may by notice of
default to the Issuers, declare the Notes (with accrued interest thereon as
provided in the Notes) and all other amounts owing under this Purchase Agreement
and the Notes to be due and payable forthwith, whereupon the same shall
immediately become due and payable.
WAIVERS OF PRESENTMENT, ETC.
Except as expressly provided above in this Section, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
MISCELLANEOUS
AMENDMENTS AND WAIVERS.
No provision of this Purchase Agreement, the Notes or the Purchase Documents may
be waived, modified or amended without the prior written agreement of Holders
33
and the Issuer. No such waiver, modification or amendment shall extend to or
affect any obligation not expressly waived, modified or amended.
NOTICES.
All notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing, and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of telecopy notice, when received, or, in the case of a nationally
recognized courier service, one business day after delivery to such courier
service, addressed as follows in the case of the Issuer and the Holders or to
such other address as may be hereafter notified by the respective parties hereto
and any future holders of the Notes:
The Issuer: Patient Infosystems, Inc.
46 Prince Street
Rochester, New York 14607
Attn: Kent Tapper
The Holders: To the addresses indicated on SCHEDULE A hereto.
NO WAIVER; CUMULATIVE REMEDIES.
No failure to exercise and no delay in exercising, on the part of any Holder,
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Unless otherwise provided herein, all representations and warranties made
hereunder or under any other Purchase Document and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
for a period of two years following the execution and delivery of this Purchase
Agreement and the Notes and Stock.
34
PAYMENT OF EXPENSES, TAXES AND BROKERS' FEES.
The Issuer agrees that on the Closing Date it shall (i) pay or reimburse the
Holders for all their out-of-pocket costs and expenses incurred in connection
with the development, preparation and execution of, and any amendment,
supplement or modification to, this Purchase Agreement, the Notes, and the other
Purchase Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, provided that any legal fees of the Holders
shall be limited to the reasonable fees and disbursements of counsel to the
Holders, (ii) pay or reimburse each Holder for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Purchase Agreement, the Notes, the other Purchase Documents and any such
other documents, (iii) pay, indemnify, and hold each Holder harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Purchase Agreement, the
Notes, the other Purchase Documents and any such other documents, and (iv) the
Issuer shall be solely responsible for the payment of any brokerage or similar
fees which may become due as the result of the consummation of the transactions
contemplated by this Purchase Agreement.
COUNTERPARTS.
This Purchase Agreement may be executed by one or more of the parties
to this Purchase Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
SEVERABILITY.
Any provision of this Purchase Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
INTEGRATION.
This Purchase Agreement and the other Purchase Documents represent the agreement
of the Issuer and the Holders with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the
Holders relative to subject matter hereof not expressly set forth or referred to
herein or in the other Purchase Documents.
GOVERNING LAW.
THE PUCHASE DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THE
PURCHASE DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF IOWA WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS RULES THEREOF.
35
WAIVERS OF JURY TRIAL.
THE ISSUER AND ANY HOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THE PURCHASE DOCUMENTS AND
FOR ANY COUNTERCLAIM THEREIN.
36
IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
Patient Infosystems, Inc.
By: ________________________
Name: Roger Chaufournier
Title: President
Principal Life Insurance Company
By: ________________________
Name:
Title:
------------------------
John Pappajohn, Individually
Ann Pappajohn Inter Vivos Trust
By: ________________________
Name:
Title:
37
Pappajohn Shriver Eide Nicolas PC
Profit Sharing Plan FBO Socrates G.
Pappajohn
By: ________________________
Name:
Title:
38
Exhibit 2.01(a)
NOTE
DUE SEPTEMBER 30, 2003
$(insert)
Patient Infosystems, Inc., a corporation duly formed under the laws of
the State of Delaware, (the "Issuer"), for value received, hereby jointly and
severally promise to pay to (insert) or registered assigns (the "Holder") the
principal sum of (insert) ($(insert), together with interest, in the manner
provided herein. This Note (this "Note") was issued pursuant to that certain
Note and Stock Purchase Agreement dated April __, 2003 between the Issuer and
the investors listed on SCHEDULE A thereto (the "Purchase Agreement"), and is
entitled to the benefits of the Purchase Agreement. Except as to those terms
otherwise defined in this Note, all capitalized terms used in this Note shall
have the respective meanings ascribed to them in the Purchase Agreement.
PAYMENTS.
All principal amounts then outstanding and unpaid under this Note shall
be paid in full on September 30, 2003 (the "Maturity Date").
INTEREST.
Interest shall accrue on the Prime Rate plus 3% per annum, computed on the basis
of a 360-day year counting the actual number of days elapsed. The Prime Rate
means the prime rate as published from time to time by the Wall Street Journal.
Interest shall be payable upon the Maturity Date or sooner upon the occurrence
of certain events as set forth in the Purchase Agreement.
CONVERSION.
This Note may be convertible at the option of the Holder into shares of Series D
Convertible Preferred Stock of the Issuer upon consummation of the private
placement of such Series D Convertible Preferred Stock as contemplated by the
Asset Purchase Agreement by and among the Issuer, American CareSource
Corporation and certain of their stockholders dated as of September 23, 2002, as
amended on April ___, 2003. Upon conversion, the Holder shall receive such
number of shares of Series D Convertible Preferred Stock of the Issuer as shall
equal the outstanding balance of principal and interest due outstanding upon
this Note on the date of conversion. The Issuer has the option to refuse to
issue fractional shares of Series D Convertible Preferred Stock in which case
the Holder shall receive cash in lieu of such fractional shares.
39
DEFAULT.
In case an Event of Default shall occur and be continuing, the entire unpaid
principal and interest accrued to the date of payment of this Note may become
due and payable in the manner and with the effect provided in the Purchase
Agreement. The Issuer further agrees to pay the Holders fees and expenses as
provided for in the Purchase Agreement.
PREPAYMENT.
This Note may be prepaid, in whole or in part, at any time, without premium or
penalty with the written consent of the Holders.
40
MISCELLANEOUS.
(A) THE ISSUER WILL PAY TO THE HOLDER, IN IMMEDIATELY AVAILABLE FUNDS TO SUCH
ACCOUNT AS THE HOLDER MAY SPECIFY IN WRITING, ALL AMOUNTS PAYABLE TO THE HOLDER
IN RESPECT OF THE PRINCIPAL, INTEREST OR OTHER AMOUNTS DUE UNDER THIS NOTE,
WITHOUT ANY PRESENTATION OF THIS NOTE. EACH SUCH PAYMENT, WHEN PAID, SHALL BE
APPLIED FIRST TO THE FEES AND CHARGES DUE UNDER THIS NOTE, SECOND TO THE PAYMENT
OF INTEREST ACCRUED AND UNPAID ON THIS NOTE, AND THIRD TO THE PAYMENT OF THE
PRINCIPAL HEREOF. ALL PAYMENTS HEREUNDER SHALL BE MADE AT THE HOLDER'S PRINCIPAL
OFFICES. ALL CALCULATIONS AND APPLICATIONS OF AMOUNTS DUE ON ANY DATE, WHETHER
BY ACCELERATION OR OTHERWISE, WILL BE MADE BY THE HOLDER, AND THE ISSUER AGREE
THAT ALL SUCH CALCULATIONS AND APPLICATIONS WILL BE CONCLUSIVE AND BINDING
ABSENT MANIFEST ERROR.
THIS NOTE IS SECURED BY THE COLLATERAL AND OTHER ASSETS, PROPERTY RIGHTS AND
INTERESTS AS DESCRIBED IN THE PURCHASE AGREEMENT.
THE ISSUER AND ALL SURETIES, INDORSERS AND GUARANTORS OF THIS NOTE, TO THE
EXTENT NOT PROHIBITED BY APPLICABLE LAW OR REGULATION, HEREBY WAIVE AS TO THIS
DEBT OR ANY RENEWAL, MODIFICATION, EXTENSION OR REFINANCING THEREOF: (A) DEMAND,
PRESENTMENT, NOTICE OF NON-PAYMENT, PROTEST, NOTICE OF PROTEST, NOTICE OF
DISHONOR, ALL OTHER NOTICE, SUIT AGAINST ANY PARTY, DILIGENCE IN COLLECTION OF
THIS NOTE, THE RELEASE OF ANY PARTY PRIMARILY OR SECONDARILY LIABLE THEREON OR
ANY COLLATERAL PLEDGED AS SECURITY, AND ALL OTHER REQUIREMENTS NECESSARY TO HOLD
ISSUER LIABLE HEREUNDER; AND (B) AGREE AND CONSENT TO ANY ONE OR MORE EXTENSIONS
OR POSTPONEMENTS OF TIME OF PAYMENT OF THIS NOTE OR ANY OTHER INDULGENCES WITH
RESPECT HERETO, WITHOUT NOTICE THEREOF TO ANY OF THEM, AND WITHOUT RELEASE OF
LIABILITY AS TO ISSUER OR ANY OF THEM.
THIS NOTE HAS BEEN ISSUED AND IS TO BE PERFORMED IN THE STATE OF IOWA AND SHALL
BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF IOWA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. IF ANY
PROVISION HEREOF IS IN CONFLICT WITH ANY STATUTE OR RULE OF LAW OF THE STATE OF
IOWA OR ANY OTHER STATE, OR IS OTHERWISE UNENFORCEABLE FOR ANY REASON
WHATSOEVER, THEN SUCH PROVISION SHALL BE DEEMED SEPARABLE FROM AND SHALL NOT
INVALIDATE ANY OTHER PROVISION OF THIS NOTE.
THE ISSUER WAIVES ANY AND ALL RIGHTS THAT IT MAY NOW OR HEREAFTER HAVE UNDER THE
LAWS OF THE UNITED STATES OF AMERICA OR ANY STATE, TO A TRIAL BY JURY OF ANY AND
ALL ISSUES ARISING EITHER DIRECTLY OR INDIRECTLY IN ANY ACTION OR PROCEEDING
BETWEEN THE ISSUER AND THE HOLDER OR ITS SUCCESSORS AND ASSIGNS, OUT OF OR IN
ANY WAY CONNECTED WITH THIS NOTE AND THE OTHER PURCHASE DOCUMENTS. IT IS
INTENDED THAT SAID WAIVER SHALL APPLY TO ANY AND ALL DEFENSES, RIGHTS, AND/OR
COUNTERCLAIMS IN ANY ACTION OR PROCEEDINGS. THIS SECTION IS A MATERIAL
INDUCEMENT TO THE HOLDER TO ENTER INTO THE TRANSACTIONS CONTEMPLATED BY THE
PURCHASE AGREEMENT.
41
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed and
delivered.
DATED: _____________, 2003 PATIENT INFOSYSTEMS, INC.
BY: EXHIBIT DO NOT SIGN
42
Exhibit 2.01(b)
CERTIFICATE OF DESIGNATIONS, POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF
OF THE
SERIES D PREFERRED STOCK
OF
PATIENT INFOSYSTEMS, INC.
43
Exhibit 5.01
PATIENT INFOSYSTEMS, INC.
SERIES D CONVERTIBLE PREFERRED STOCK
REGISTRATION RIGHTS AGREEMENT
44
SCHEDULE A
HOLDER AND ADDRESS OF HOLDER
Principal Life Insurance Company
Attention: Dennis Menken
C/o Principal Global Investors, LLC
801 Grand Avenue
Des Moines, Iowa 50392
John Pappajohn
c/o Equity Dynamics, Inc.
666 Walnut Street, Suite 2116
Des Moines, Iowa 50309
Ann Pappajohn Inter Vivos Trust
C/o Equity Dynamics, Inc.
666 Walnut Street, Suite 2116
Des Moines, Iowa 50309
Pappajohn Shriver Eide Nicolas PC
Profit Sharing Plan FBO Socrates G.
Pappajohn
c/o Socrates Pappajohn
103 East State Street
P.O. Box 1588
Mason City, Iowa 50401-3300
45
SCHEDULE 2.01
Sale and Purchase of Notes and Stock.
Allocation of Notes and Shares of Stock to Holders
HOLDER AND ADDRESS OF HOLDER NOTE AMOUNT SHARES OF STOCK
Principal Life Insurance Company
Attention: Dennis Menken
C/o Principal Global Investors, LLC
801 Grand Avenue
Des Moines, Iowa 50392 $1,500,000.00 106,989
John Pappajohn
c/o Equity Dynamics, Inc.
666 Walnut Street, Suite 2116
Des Moines, Iowa 50309 $ 900,000.00 84,007
Ann Pappajohn Inter Vivos Trust
C/o Equity Dynamics, Inc.
666 Walnut Street, Suite 2116
Des Moines, Iowa 50309 $ 50,000.00 3,566
46
Pappajohn Shriver Eide Nicolas PC Profit
Sharing Plan FBO Socrates G. Pappajohn
c/o Socrates Pappajohn
103 East State Street
P.O. Box 1588
Mason City, Iowa 50401-3300
$ 50,000.00 3,566
---------- -----
Total $2,500,000.00 198,128
============= =======
47
SCHEDULE 3.05
Options Warrants Rights, Etc.
1. The Company has 1,115,140 incentive stock option grants outstanding.
2. The Company has no warrants outstanding.
3. The Company has agreed to convert Debt owed to John Pappajohn and Derace
Schaffer into Common Stock.
4. The Company has 100,000 shares of Series C 9% Cumulative Convertible
Preferred Stock outstanding.
48
SCHEDULE 3.11
Changes or Events
a) None.
b) None.
c) Termination of Contracts by AstraZeneca effective January 1, 2003 and
WellPoint effective July 1, 2003.
d) None.
e) None.
f) Dividends accrued but not declared on the outstanding Series C 9%
Cumulative Convertible Preferred.
49
SCHEDULE 3.13
Liens and Encumbrances
Security Agreements, pledging all the assets of the Issuer to:
John Pappajohn
Derace Schaffer
Wells Fargo of Iowa, N.A.
These parties have entered into a Lien Subordination Agreement.
50
SCHEDULE 3.15
Agreements, Plans and Arrangements
a) Premise Lease with Conifer, Copier Lease with CitiCorp, Equipment Lease
with Pitney Bowes
b) A license have been granted by the Issuer to Greater Rochester Independent
Practice Association for it software product "Case Management Support
System." The Issuer has obtained licenses for Meridian software from
NORTEL, Centramax software from McKesson.
c) Letters of agreement with Nancy Cox and Patrice Sminkey committing the
Issuer to 6 months severance upon termination of employment by the Issuer.
d) None.
e) None.
f) Directors and Officers insurance underwritten by Navigators Insurance
Company, Fiduciary Liability insurance underwritten Legion Insurance
Company, General Liability and Worker Compensation underwritten by St. Paul
Insurance Company and Medical Professional Liability underwritten by
Admiral Insurance Company.
g) Reselling agreements exist with CBCA (formerly USI Administrators), Future
Health, Medecisions and American Care Source.
h) The Issuer accepts liability for its wholly owned subsidiary, Patient
Infosystems Canada, Inc.
i) None other than those contemplated and to be executed at even date with
this agreement.
j) None.
k) As shown in Schedule 3.13.
l) The Issuer has an employee incentive stock option plan and maintains
accrued vacation and commission liability on its balance sheet.
m) None.
n) None.
51
o) None.
p) None.
52
EXHIBIT D
CREDITOR AGREEMENT
PATIENT INFOSYSTEMS, INC.
This creditor agreement ("Agreement") is made this 8th day of April
2003 among John Pappajohn ("Pappajohn"), Principal Life Insurance Company
("Principal"), Ann Pappajohn Intervivos Trust ( "Pappajohn Trust"), and
Pappajohn Shriver Eide Nicholas PC Profit Sharing Plan FBO Socrates G. Pappajohn
("Pappajohn Profit Sharing Plan"). Pappajohn, Principal, Pappajohn Trust, and
Pappajohn Profit Sharing Plan are herein collectively referred to as the
"Investors" and individually as an "Investor" in their capacity as Holders under
certain promissory notes and a certain Note and Stock Purchase Agreement ("Note
Agreement") made to Patient Infosystems, Inc., a Delaware corporation
("Borrower").
RECITALS
WHEREAS, the Borrower has requested that the Investors purchase certain
notes and stock of Borrower for an Aggregate Purchase price of $2,500,000.00 on
terms and conditions set forth in said Note Agreement. The Borrower would not be
able to continue its business without receiving such financing. Borrower has
requested that the Investors make such an investment pursuant to the terms of
the Note Agreement.
WHEREAS, the Borrower needed to obtain new financing of $2,500,000.00
on certain terms and conditions as is set forth in the Note Agreement.
WHEREAS, each Investor has loaned moneys in the aggregate of
$2,500,000.00 under the Note Agreement , and commits to convert such loan into
the Series D Convertible Preferred Stock of the Borrow (the "Series D") at the
closing of the Asset Purchase Agreement by and among the Borrower and American
Care Source dated as of September 23, 2002, as further amended on April __, 2003
(the "Asset Purchase Agreement"), to the following extent:
53
INVESTORS DOLLARS LOANED PROPORTIONATE SHARE
--------- ---------------- -----------------------
Pappajohn $ 900,000.00 36.00%
Principal $1,500,000.00 60.00%
Pappajohn Trust $ 50,000.00 2.00%
Pappajohn Profit
Sharing Plan $ 50,000.00 2.00%
---------------- --------
Total $2,500,000.00 100.0%
Pursuant to individual Promissory Notes which are a part of the Note
Agreement, and pursuant to the Series D funding plan for the Borrower; and
WHEREAS, it is the Investors' desire to execute this Agreement for the
purpose of defining the respective pro rata and proportionate share rights and
in defining their respective rights with respect to the Borrower's assets;
NOW, therefore in consideration of the mutual promises and agreements
contained herein, the parties hereto agree as follows:
1. PROMISE TO CONVERT; SERIES D. Each Investor promises each of other
Investor hereunder that he will convert his proportionate share of the
Promissory Notes in the Series D financing at the closing of the Asset Purchase
Agreement. Any investor who did convert his Promissory Notes into in the Series
D shall have all rights under the provisions of this agreement to demand from
the non converting Investor to perform under this Agreement.
2. PROMISE TO PAY; INDEMNIFICATION. Each Investor promises each other
Investor that he will pay, on demand, his proportionate share to one or more of
the other Investors who have not recovered in proportion under the Note, but in
no event shall the proportionate share of any Investor exceed the percentage
amount of the proportionate share described above. The demand for payment made
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by any Investor to any other Investor shall be made in writing, accompanied by
proof of the demanding party's disproportionate loss.
3. CONTRIBUTION. The Investors, as holders of the notes, agree that the
priorities of the security interest which secure their respective notes and
their rights in and to the collateral shall be equal and that each shall share
and be equal in priority and rights with the other. The Investors further agree
that if any of them shall, through the exercise of any right of counterclaim,
set-off or otherwise, receive payment of a proportion of the aggregate amount of
principal and interest then due with respect to all of the Notes held by such
Investor and other amounts then due to such Investor under the Note Agreement
(collectively, the "Aggregate Amounts Due" to such Investor), which is greater
than the proportion received by the other Investor in respect to the Aggregate
Amounts Due to such other Investor, then the Investor receiving such
proportionately greater payment shall (y) notify the other Investor of such
receipt and (z) purchase participations (which it shall be deemed to have
purchased from the seller simultaneously upon the receipt by such seller of its
portion of such payment) in the Aggregate Amounts Due to the other Investor so
that all such recoveries of Aggregate Amounts Due shall be shared by the
Investors in proportion to the Aggregate Amounts Due them; provided that if all
or part of such proportionately greater payment received by such purchasing
Investor is thereafter recovered from such Investor, such purchase shall be
rescinded and the purchase price paid for such participation shall be returned
to that Investor to the extent of such recovery, but without interest.
4. LEGAL FEES, COSTS AND EXPENSES. A defaulting party will, on demand,
indemnify and hold harmless the other party for and against all reasonable
out-of-pocket expenses, including legal fees incurred by such other party by
reason of enforcement and protection of its rights under this agreement.
5. TERMINATION UPON CONVERSION TO EQUITY. Upon conversion by an
Investor of his investment into Series D of the Borrower, or any other equity
investment of the Borrower permitted by separate agreement of all of the
undersigned, that converting Investors rights and obligations under this
agreement shall terminate. The proportionate share of remaining Investors shall
be readjusted to reflect the withdrawal of any such converting Investors.
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6. MISCELLANEOUS. This agreement may be executed in counterpart. This
agreement remains in full force and effect even if the underlying promissory
notes, security agreements, financing statements, or other documents executed
between the company and the Investors are extended, modified, or changed in any
way. It is the intent of the parties that if additional financing is obtained by
the company pursuant to essentially the same agreement, that this agreement
remains in full force and effect.
This agreement may be specifically modified only by written agreement
and cannot be assigned without the express written permission of the other
parties to this agreement.
Words and phrases contained in this agreement shall be construed as
singular or plural in number and in the masculine, feminine or neutered gender
according to the context in which such words and phrases appear.
This agreement shall be construed under the laws of the State of Iowa.
If for any reason any provision of this agreement shall be inoperative
by the validity and effect of other provisions shall not be affected thereby.
This agreement may be executed in one or more identical counterparts
which when executed by all parties shall constitute one and the same agreement.
The Investors may accept this agreement by sending an executed copy of the
signature page by telefax to each other secured party and by forwarding on the
same to the other parties originally executed signature pages.
This writing contains the entire agreement of the parties, integrates
all terms and conditions mentioned and are incidental to this agreement and
supercedes all prior negotiations and writings and any other previous
understanding regarding the parity between the parties to this agreement. No
modifications or waiver of any provisions of this agreement shall be valid
unless signed in writing by all parties hereto.
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The remainder of this page has been left blank intentionally.
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed, as of the date first above written.
PRINCIPAL LIFE INSURANCE COMPANY
By: _______________________________
Name: Dennis J. Menken
Title: Portfolio Manager
By: _______________________________
Name:
Title:
----------------------------------
John Pappajohn
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Ann Pappajohn Intervivos Trust
By: ______________________________
Authorized Agent
Pappajohn Shriver Eide Nicholas PC Profit Sharing Plan FBO Socrates G.
Pappajohn
By:
---------------------------------------
Authorized Agent
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