-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TwY8VDZInAChq7ryI9vmw3o7QivT+r5B4AP5xk2Aamafoq2nRRdoPqcm4Ub9XWrp 0tmA8vgzcU4rg/igzE8uxQ== 0000904454-99-000054.txt : 19990310 0000904454-99-000054.hdr.sgml : 19990310 ACCESSION NUMBER: 0000904454-99-000054 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MED E AMERICA CORP CENTRAL INDEX KEY: 0001062779 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 113270245 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25327 FILM NUMBER: 99560972 BUSINESS ADDRESS: STREET 1: 90 MERRICK AVENUE SUITE 501 CITY: EAST MEADOW STATE: NY ZIP: 11554 BUSINESS PHONE: 5165424500 MAIL ADDRESS: STREET 1: 90 MERRICK AVENUE STREET 2: SUITE 501 CITY: EAST MEADOW STATE: NY ZIP: 11554 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURI- TIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURI- TIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number 000-25327 MEDE AMERICA CORPORATION (Exact name of registrant as specified in its charter) Delaware 11-3270245 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 90 Merrick Avenue Suite 501 East Meadow, New York 11554 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 516-542-4500 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value, 12,946,124 shares outstanding as of March 5, 1999. MEDE AMERICA CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Balance Sheets as of December 31, 1998 (unaudited) and June 30, 1998 Consolidated Statements of Operations for the Three Months Ended December 31, 1998 (unaudited) and 1997 (unaudited) Consolidated Statements of Operations for the Six Months Ended December 31, 1998 (unaudited) and 1997 (unaudited) Consolidated Statements of Cash Flows for the Six Months Ended December 31, 1998 (unaudited) and 1997 (unaudited) Notes to Consolidated Unaudited Financial Statements ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION ITEM 1. Legal Proceedings ITEM 2. Changes in Securities and Use of Proceeds ITEM 4. Submission of Matters to a Vote of Security Holders ITEM 6. Exhibits and Reports on Form 8-K SIGNATURES PART I. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS MEDE AMERICA CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except per share data) (Unaudited)
Pro Forma Stockholders' Deficit December 31, December 31, June 30, 1998 1998 1998(FN1) ------------ ----------- -------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 2,384 $ 2,950 Accounts receivable, less allowance for doubtful accounts of $468 and $997, respectively 8,838 7,920 Formulary receivables 3,805 2,341 Inventory 184 211 Prepaid expenses and other current assets 629 537 ---------- --------- Total current assets 15,840 13,959 PROPERTY AND EQUIPMENT - Net 5,575 4,711 GOODWILL - Net 42,353 34,753 OTHER INTANGIBLE ASSETS - Net 7,477 5,501 OTHER ASSETS 3,695 470 --------- --------- TOTAL $ 74,940 $ 59,394 ---------- --------- LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable $ 3,580 $ 3,630 Accrued expenses and other current liabilities 8,116 7,715 Current portion of long-term debt 226 269 --------- --------- Total current liabilities 11,922 11,614 --------- --------- LONG-TERM DEBT 55,642 41,055 --------- --------- OTHER LONG-TERM LIABILITIES 184 194 --------- --------- SERIES A REDEEMABLE CUMULATIVE PREFERRED STOCK: $.01 par value; 250 shares authorized; 240 shares issued and outstanding (aggregate liquidation value of $23,996 plus accrued dividends) $ 8,126 32,423 31,223 --------- ---------- --------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIT: Common stock, $.01 par value; 30,000 shares authorized; 5,685 shares outstanding as of December 31, 1998 and June 30, 1998 76 57 57 Additional paid-in capital 51,370 27,092 25,584 Accumulated deficit (52,380) (52,380) (50,243) Deferred compensation -- -- (90) --------- ---------- ---------- Total stockholders' deficit $ (934) (25,231) (24,692) --------- ---------- ---------- TOTAL $ 74,940 $ 59,394 (FN1) The consolidated balance sheet as of June 30, 1998 has been taken from the audited financial statements at that date.
MEDE AMERICA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) (Unaudited)
Three Months Ended December 31, --------------------- 1998 1997 --------- --------- REVENUES $ 12,974 $ 9,849 --------- --------- OPERATING EXPENSES: Operations 4,902 3,942 Sales, marketing and client services 3,201 2,432 Research and development 1,164 1,059 General and administrative 1,315 1,107 Depreciation and amortization 2,191 1,698 --------- --------- Total operating expenses 12,773 10,238 --------- --------- INCOME (LOSS) FROM OPERATIONS 201 (389) INTEREST EXPENSE, Net 1,185 915 --------- --------- LOSS BEFORE PROVISION FOR INCOME TAXES (984) (1,304) PROVISION FOR INCOME TAXES 68 12 --------- --------- NET LOSS (1,052) (1,316) PREFERRED STOCK DIVIDENDS (600) (600) --------- --------- NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (1,652) $(1,916) --------- --------- BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.29) $ (0.34) --------- --------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--BASIC AND DILUTED 5,685 5,679 --------- ---------
MEDE AMERICA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) (Unaudited)
Six Months Ended December 31, --------------------- 1998 1997 --------- --------- REVENUES $ 24,980 $ 19,090 --------- --------- OPERATING EXPENSES: Operations 9,695 8,227 Sales, marketing and client services 6,131 4,817 Research and development 2,270 1,865 General and administrative 2,578 2,168 Depreciation and amortization 4,085 3,396 --------- --------- Total operating expenses 24,759 20,473 --------- --------- INCOME (LOSS) FROM OPERATIONS 221 (1,383) INTEREST EXPENSE, Net 2,274 1,570 --------- --------- LOSS BEFORE PROVISION FOR INCOME TAXES (2,053) (2,953) PROVISION FOR INCOME TAXES 84 24 --------- --------- NET LOSS (2,137) (2,977) PREFERRED STOCK DIVIDENDS (1,200) (1,200) --------- --------- NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (3,337) $ (4,177) --------- --------- BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.59) $ (0.74) --------- --------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING--BASIC AND DILUTED 5,685 5,677 --------- ---------
MEDE AMERICA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six Months Ended December 31, --------------------- 1998 1997 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,137) $ (2,977) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 4,276 3,571 Provision for doubtful accounts 187 34 Non-cash compensation expense 90 -- Changes in operating assets and liabilities net of effects of businesses acquired: Accounts receivable (323) (1,079) Formularly receivables (1,464) (342) Inventory 27 27 Prepaid expenses and other current assets (48) 1 Other assets (846) 10 Accounts payable and accrued expenses and other current liabilities (1,521) (3,747) Other long-term liabilities (10) 552 ---------- -------- Net cash used in operating activities (1,769) (3,950) ---------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Business acquisitions, net of cash acquired (11,428) (10,674) Purchases of property and equipment (798) (304) Additions to goodwill and other intangible assets (584) (234) ---------- -------- Net cash used in investing activities (12,810) (11,212) ---------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds under Credit Facility 14,400 15,175 Principal repayments of debt (132) (260) Principal repayments of capital lease obligations (255) (238) Exercise of stock options -- 38 ---------- -------- Net cash provided by financing activities 14,013 14,715 ---------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (566) (447) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,950 1,919 ---------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,384 $ 1,472 ---------- -------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 2,024 $ 1,408 ---------- -------- Income taxes $ 7 $ 90 ---------- -------- Non-cash investing and financing activities: Assets acquired under capital leases or by incurring debt $ 339 $ -- ---------- -------- Issuance of warrants $ 2,708 $ -- ---------- --------
MEDE AMERICA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION In the opinion of management, the accompanying consolidated unaudited financial statements include all necessary adjustments (consisting of normal recurring accruals) and present fairly the financial position of MEDE AMERICA Corporation (the "Company" or the "Registrant") and subsidiaries as of December 31, 1998 and the results of its operations and cash flows for the three and six months ended December 31, 1998 and 1997 in conformity with generally accepted accounting principles for the interim financial information applied on a consistent basis. The results of operations for the three and six months ended December 31, 1998 are not necessarily indicative of the results to be expected for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in MEDE AMERICA Corporation's Registration Statement on Form S-1 as filed with the Securities and Exchange Commission. 2. TRANSACTION PROCESSING AGREEMENT On July 17, 1998, the Company entered into a transaction processing agreement (the "Processing Agreement") with Medic Computer Systems, Inc. ("Medic"), a subsidiary of Misys plc that develops and licenses software for healthcare providers, principally physicians, MSOs and PPMs. Under the Processing Agreement, the Company will undertake certain software development obligations, and on July 1, 1999 it will become the exclusive processor (subject to certain exceptions) of medical reimbursement claims for Medic's subscribers submitted to payors with whom the Company has or establishes connectivity. Under the Processing Agreement, the Company will be entitled to revenues to be paid by payors (in respect of which a commission is payable to Medic) as well as fees to be paid by Medic. The Processing Agreement sets forth detailed performance criteria and development and implementation timetables. Inability to meet these criteria may result in financial penalties or give Medic a right to terminate this agreement. The Processing Agreement is for a fixed term of five years, with annual renewals thereafter (unless either party elects to terminate). Contemporaneously, to ensure a close working relationship between the parties, on July 17, 1998 the Company granted to Medic a warrant (the "Medic MEDE AMERICA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS Warrant") to acquire 1,250,000 shares of the Company's common stock, at a per share exercise price equal to the price of the common stock to the public in the IPO or, in the event that the IPO was not completed by March 31, 1999 at an exercise price equal to $8 per share. The Medic Warrant vests over a two year period and may be exercised up to five years after issuance. The Medic Warrant was valued at $2,537,000 using the Black-Scholes Option Pricing Model and is recorded in other assets. The Medic Warrant is being amortized over the life of the Processing Agreement, five years. The Medic Warrant contains customary weighted average antidilution provisions. The Company and certain principal stockholders have agreed that following the completion of the IPO and until the earlier of the termination of the Processing Agreement or the disposition by Medic and its affiliates of at least 25% of the shares of common stock issuable under the Medic Warrant, Medic shall have the right to designate one director to the Company's Board of Directors. Medic has not yet named a designee. 3. ACQUISITION In October 1998, the Company acquired all the outstanding shares of capital stock of Healthcare Interchange, Inc. ("HII"), a St. Louis, Missouri-based provider of EDI transaction processing services to hospitals and physician groups in Missouri, Kansas, and Illinois. Prior to the acquisition of HII, two unrelated healthcare services divisions, Intercare and Telemedical, were divested from HII in separate transactions. HII was purchased for a total cash payment of approximately $11.7 million, including transaction expenses, and was financed with borrowings under the Credit Facility. The acquisition was accounted for under the purchase method of accounting. The acquisition was financed with borrowings under the Credit Facility which was amended in October 1998 to increase the total availability to $36.0 million. In connection with such amendment, certain stockholders of the Company were issued warrants to purchase 84,050 common shares in consideration for granting guarantees of all borrowings under the Credit Facility. The following unaudited pro forma information for the six months ended December 31, 1997 includes the operations of the Company, inclusive of the operations of both The Stockton Group, Inc. (which was acquired in November 1997) and HII as if the acquisitions had occurred as of July 1, 1997. The pro forma information for the six months ended December 31, 1998 includes the operations of the Company, inclusive of the operations of HII as if the acquisition had occurred at July 1, 1997. This pro forma information gives effect to the amortization expense associated with goodwill and other intangible MEDE AMERICA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS assets acquired, adjustments related to the fair market value of the assets and liabilities acquired, interest expense related to financing the acquisitions and related income tax effects. Six Months Ended December 31, 1998 1997 ---- ---- (In thousands) Revenues $ 26,756 $ 23,172 --------- --------- Loss from operations (437) (974) --------- --------- Net loss (3,039) (3,214) --------- --------- Net loss applicable to common stock (4,239) (4,414) --------- --------- Basic and diluted net loss per share (0.75) (0.78) --------- --------- 4. INITIAL PUBLIC OFFERING On February 5, 1999, the Company consummated an initial public offering ("IPO") of 5,307,710 shares of common stock at a price of $13.00 per share (including 692,310 shares that were subject to the underwriters' overallotment option, which was exercised in full). The net proceeds to the Company were approximately $62.1 million (after deducting the underwriting discount and offering expenses payable by the Company). The net proceeds to the Company were used to (i) prepay approximately $25.2 million of outstanding principal and accrued interest on its outstanding 10% Senior Subordinated Note due February 1, 2002 and (ii) repay approximately $28.5 million of outstanding indebtedness and accrued interest under its revolving credit facility (the "Credit Facility"). The remaining $8.4 million of net proceeds was used to pay a portion of the accrued dividends on the Company's preferred stock, and the remainder of such accrued dividends ($301,000) was converted into 23,124 shares of Common Stock. In addition, in connection with the IPO, all outstanding shares of preferred stock were converted into 1,845,815 shares of common stock at the IPO price of $13.00 per share. In connection with the prepayment of the Senior Subordinated Note, the Company will record an extraordinary charge of approximately $1.4 million relating to the write-off of the remaining discount on the Senior Subordinated Note. Pro forma stockholders' deficit as of December 31, 1998 reflects the conversion of all outstanding shares of preferred stock plus approximately $301,000 of accrued dividends into common stock at the IPO price of $13.00 per share, and the payment of the remaining $8.1 million of accrued dividends in cash. MEDE AMERICA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS 5. NEW CREDIT FACILITY On January 26, 1999, the Company entered into a Credit Agreement with NationsBank, N.A., as Administrative Agent, and NationsBanc Montgomery Securities LLC, as Syndication Agent (the "New Credit Facility"). The New Credit Facility provides for a $25 million revolving credit facility that matures on January 26, 2002. The New Credit Facility is not guaranteed by any third party, but is secured by substantially all of the Company's assets, including the stock of the Company's subsidiaries. The closing of the New Credit Facility occurred simultaneously with the consummation of the IPO. The New Credit Facility contains various covenants and conditions, including those relating to Year 2000 compliance, acquisitions, changes in control and restrictions on the payments of dividends on the common stock. 6. RECENT ACCOUNTING PRONOUNCEMENT The Company adopted SFAS No. 130, "Reporting Comprehensive Income" in fiscal 1999. For the six months ended December 31, 1998, there were no items of comprehensive income as defined in the pronouncement. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following table sets forth, for the periods indicated, certain items from the consolidated statements of operations of MedE AMERICA Corporation expressed as a percentage of total revenues. Three Months Ended Six Months Ended December 31, December 31, ------------------ ---------------- 1998 1997 1998 1997 ---- ---- ---- ---- Revenues 100% 100% 100% 100% Operating Expenses Operations 38 40 39 43 Sales, marketing and client services 25 25 25 25 Research and development 9 11 9 10 General and administrative 10 11 10 11 Depreciation and amortization 17 17 16 18 THREE AND SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THREE AND SIX MONTHS ENDED DECEMBER 31, 1997 Revenues Revenues in the three and six months ended December 31, 1998 were $13.0 million and $25.0 million, respectively, compared to $9.8 million and 19.1 million, respectively, in the corresponding periods of fiscal 1998, representing increases of 32% and 31%, respectively. The increase in both periods was primarily attributable to incremental revenue from the acquisition of The Stockton Group ("Stockton") in November 1997 and Healthcare Interchange Inc. ("HII") in October 1998, and to the growth of the existing business, partially offset by the loss of revenues from operations that were divested. The Company processed 76.3 million and 142.2 million transactions in the three and six months ended December 31, 1998, respectively, compared to 54.7 million and 104.5 million transactions processed in the corresponding periods of fiscal 1998, representing increases of 40% and 36%, respectively. The increases resulted from the incremental transactions from the acquisition of Stockton and HII, the addition of new clients and the increased transaction volume from existing clients. The average price per transaction received by the Company for the three and six months ended December 31, 1998 declined by 6% and 4%, respectively, compared with the corresponding periods of the prior fiscal year, as a result of a relatively higher proportion of lower-priced Pharmacy division switching transactions compared to the other divisions' higher- priced transactions, and a greater portion of transactions that were processed under contracts with volume-based pricing terms. Operating Expenses Operations expense was $4.9 million and $9.7 million in the three and six months ended December 31, 1998, respectively, compared to $3.9 and $8.2 million in the corresponding periods of fiscal 1998, representing increases of 24% and 18%, respectively. As a percentage of revenues, operations expense decreased from 40% and 43% in the three and six months ended December 31, 1997, respectively, to 38% and 39% in the corresponding periods of fiscal 1999. The increase in operations expense was primarily due to the acquisition of Stockton in November 1997 and HII in October 1998, and to the higher volume of transactions processed. The decrease in operations expense as a percentage of revenues was primarily due to operations leverage from systems consolidation for the recent acquisitions, the effects of ongoing cost reduction programs, and to a lesser extent, the impact of the divested operations, which results were included in the fiscal 1998 periods but not the fiscal 1999 periods. Sales, marketing and client services expense was $3.2 million and $6.1 million in the three and six months ended December 31, 1998, respectively, compared to $2.4 million and $4.8 million in the corresponding periods of fiscal 1998, representing increases of 32% and 27%, respectively. As a percentage of revenues, sales, marketing and client services expense was 25% in each such period. The increase in sales, marketing and client services expense was primarily due to the inclusion of the Stockton and HII acquisitions. Research and development expense was $1.2 million and $2.3 million in the three and six months ended December 31, 1998, respectively, compared to $1.1 million and $1.9 million in the corresponding periods of fiscal 1998, representing increases of 10% and 22%, respectively. As a percentage of revenues, research and development expense decreased from 11% and 10% for the three and six months ended December 31, 1997, respectively, to 9% in the corresponding periods of fiscal 1999. The Company capitalized $227,000 and $466,000 of software development costs in the three and six months ended December 31, 1998, respectively, compared to $101,000 and $194,000 in the corresponding periods of fiscal 1998. The increases in research and development costs in the fiscal 1999 periods were primarily due to development of new and enhanced EDI transaction products and services, development associated with major customer contracts currently expected to roll out in calendar 1999 and the establishment of additional direct payor connections. In addition, Year 2000 compliance expenditures amounted to $380,000 and $512,000 in the three and six months ended December 31, 1998, respectively. There were no such expenditures in the corresponding periods of fiscal 1998. General and administrative expense was $1.3 million and $2.6 million in the three and six months ended December 31, 1998, respectively, compared to $1.1 million and $2.2 million in the corresponding periods of fiscal 1998, representing an increase of 19% for both periods. As a percentage of revenues, general and administrative expense decreased from 11% for the three and six months ended December 31, 1997 to 10% in the corresponding periods of fiscal 1999. Depreciation and amortization expense was $2.2 million and $4.1 million in the three and six months ended December 31, 1998, respectively, compared to $1.7 million and $3.4 million in the corresponding periods of fiscal 1998, representing increases of 29% and 20%, respectively. The increase in depreciation and amortization expense was primarily attributable to the Stockton and HII acquisitions. As a percentage of revenues, depreciation and amortization expense remained constant at 17% in the three month comparison periods and decreased from 18% in the six months ended December 31, 1997 to 16% in the corresponding period of fiscal 1999. LIQUIDITY AND CAPITAL RESOURCES Since inception, the Company has used capital from external sources to fund its internal growth and operations and to make acquisitions. Prior to the IPO, such capital requirements have been provided by (i) the Company's four principal stockholders, through periodic purchases of the Company's debt and equity securities and (ii) its Credit Facility. Since June 30, 1995 an investment fund affiliated with Welsh, Carson, Anderson and Stowe ("WCAS") has purchased a senior subordinated note in the principal amount of $25.0 million and 370,993 shares of Common Stock from the Company for an aggregate $25.0 million, which was used in connection with the acquisition of Time-Share Computer Systems, Inc., to repay borrowings under the Credit Facility and for general working capital purposes. In October 1998, the total availability under the Credit Facility was increased to $36.0 million, and the Company drew down an additional $13.2 million, of which $11.7 million was used to finance the HII acquisition. As of December 31, 1998, the Company had outstanding borrowings of $31.1 million under the Credit Facility. Such borrowings bore interest at a weighted average rate of 6.41% per annum as of December 31, 1998. All indebtedness under the Credit Facility was guaranteed by the Company's four principal stockholders. Subsequent to the December 31, 1998 reporting period, on January 26, 1999, the Company entered into a Credit Agreement (the "New Credit Facility") with NationsBank, N.A., as Administrative Agent, and NationsBanc Montgomery Securities LLC, as Syndication Agent. The New Credit Facility provides for a $25 million revolving credit facility that matures on February 5, 2002. The New Credit Facility is not guaranteed by any third party, but is secured by substantially all of the Company's assets including the stock of the Company's subsidiaries. The New Credit Facility contains various covenants and conditions, including those relating to Year 2000 compliance, changes in control and management and restrictions on the payment of dividends on the Common Stock. The closing of the New Credit Facility occurred simultaneously with the consummation of the IPO. On February 5, 1999, the Company consummated an IPO of 5,307,710 shares of common stock at a price of $13.00 per share (including 692,310 shares that were subject to the underwriters' overallotment option, which was exercised in full). The net proceeds to the Company was approximately $62.1 million (after deducting the underwriting discount and offering expenses payable by the Company). The net proceeds to the Company were used to (i) prepay approximately $25.2 million of outstanding principal and accrued interest on its outstanding 10% Senior Subordinated Note due February 1, 2002 and (ii) repay approximately $28.5 million of outstanding indebtedness and accrued interest under its Credit Facility. The Company used the remaining $8.4 million of net proceeds to pay a portion of outstanding accrued dividends on its preferred stock, and approximately $301,000 of accrued dividends were converted into 23,124 shares of Common Stock. In addition, in connection with the IPO all outstanding shares of preferred stock were converted into 1,845,815 shares of common stock at the IPO price of $13.00 per share. In connection with the prepayment of the Senior Subordinated Note, the Company will record and extraordinary charge of approximately $1.4 million relating to the write-off of the remaining discount on the Senior Subordinated Note. As of December 31, 1998, the Company had cash and cash equivalents of $2.4 million and net working capital of $3.9 million. Net cash used in operations was $1.8 million for the six months ended December 31, 1998. The $1.8 million net cash used in operations in the six months ended December 31, 1998 resulted primarily from increased investments in formularly receivables of $1.5 million (as a result of the Stockton acquisition and growth of the pharmacy business), and other assets of $846,000, as well as a decrease in accounts payable and accrued expenses of $1.5 million due to the timing of payments, partially offset by the $2.4 million of income from operations (after adding back non-cash charges). Cash used for investment purposes was $12.8 million in the six months ended December 31, 1998. Cash used for investment purposes during the six months ended December 31, 1998 was primarily used to acquire HII for $11.4 million (net of cash acquired), and to fund capital expenditures of $798,000 and additions to intangible assets of $584,000. The Company expects to pay $1.8 million of additional contingent consideration relating to the Stockton acquisition by the end of the March 31,1999 quarter and at least $2.0 million per annum for the foresee able future for capital investment to support growth in transaction processing. Cash provided by financing activities was $14.0 million for the six months ended December 31, 1998. Cash provided by financing activities during the six months ended December 31, 1998 was primarily provided from borrowings under the Credit Facility which was partially offset by principal repayments of debt and capital lease obligations. The Company expects to use the New Credit Facility to finance the Company's future acquisitions and for general working capital needs, and subject to satisfaction of the covenants set forth therein, may finance acquisitions through the issuance of additional equity and debt securities. The Company believes that existing cash balances and cash generated by operations in the near term, and the borrowings available under the New Credit Facility, will be sufficient to finance the Company's operations for at least 18 months. However, future acquisitions may require funding beyond the Company's cash resources and currently anticipated capital or operating requirements could change, with the result that the Company may be required to raise additional funds through the public or private sale of additional securities. YEAR 2000 COMPLIANCE ASSESSMENT Since 1996, the Company has specified that all developed software be Year 2000 compliant. In January 1998 the Company performed a product assessment on all legacy products identifying all those that were not Year 2000 compliant, and began the process of renovating its existing non-compliant products (usually in connection with improving product functionality). In August 1998, all Year 2000 remediation programs were centralized under the direction of a Year 2000 Project Manager. Also in 1998 the Company began tracking Year 2000 expenditures as a separate category of expenditures. Total Year 2000 expenditures prior to August 1, 1998 amounted to approximately $225,000; expenditures from August 1, 1998 through December 31, 1998 totaled approximately $287,000. The Company has completed its assessment of whether it will have to modify or replace portions of its software and its products, services and internal systems so that they will function properly with respect to dates in the year 2000 and thereafter. In addition to its general Year 2000 compliance review, the Company has specifically identified several areas which are not Year 2000 compliant as of November 30, 1998: (i) the Company's PBM system in Ohio, (ii) the UNIX operating platform software used in connection with the Company's pharmacy practice management system, and (iii) the UNIX operating platform software utilized in its pharmacy transaction switching. With the exception of the Ohio PBM system, the Company believes its internally developed software and systems are Year 2000 compliant. REMEDIATION AND IMPLEMENTATION The Company has developed a remediation program to correct the Year 2000 problems it has identified. PBM clients who utilize the Company's PBM system in Ohio are being migrated to the PBM system acquired by the Company from Stockton, which the Company considers to be Year 2000 compliant. A testing and migration timetable for all such clients has been developed, with migration activities scheduled for completion in mid-1999. For retail pharmacy practice management clients, the Company's remediation program consists of providing a Year 2000 compliant version of the UNIX software to replace the older non-compliant version (which is no longer being supported by the vendor), as well as software upgrades, with discounted hardware packages to enable such clients to utilize the Year 2000 compliant system. The Company is currently contacting retail pharmacy customers and expects that the implementation of such program will extend throughout calendar 1999. A version of the UNIX operating platform software used in pharmacy transaction switching, which the manufacturer represents to be Year 2000 compliant, was released in December 1998. Testing of that operating platform software on the Company's hardware, with the Company's pharmacy transaction switching software, which had been scheduled for January and February of 1999, is now scheduled for March 1999. During its assessment phase, the Company identified potentially Year 2000 non-compliant "non-information technology" systems (such as embedded microcontrollers). Accordingly, the Company is replacing its older (and potentially non-compliant) computer and telecommunications hardware with hardware that is Year 2000 compliant. These expenditures are being made in the general course of the Company's renovation and modernization program, and as such are accounted for as ordinary capital expenditures instead of Year 2000 expenses. In October 1998 the Company acquired HII. HII's EDI products and services fall into three categories: physician claims processing (small- and large-group), hospital claims processing and claims data transmission (extraction and transmission of claim data to a third party data analyst). Based on its review at the time of the acquisition, the Company determined that none of HII's products is Year 2000 compliant. The Company intends to modify HII's common carrier and Internet-based claims processing system for small physician groups to make it Year 2000 compliant. The Company also intends to modify HII's payor data transmission products to make such products Year 2000 compliant. These modifications are scheduled to be completed by spring 1999. The Company intends to migrate HII's claims processing for hospitals and large physician groups to the Company's MedE Claim product; this migration is scheduled to start in spring 1999 and be completed by mid-1999. The Company can, if necessary, process claims for hospitals and large physician groups through its common carrier and Internet-based claims processing system. Some or all of the Company's revenues from each of the three areas in which Year 2000 problems have been identified, as well as those of HII's clients, are subject to the risk of Year 2000 noncompliance. The total revenue from the Company's PBM services clients was $6,491,000 in fiscal 1998. The total revenue from Pharmacy retail system sales was $511,000 in fiscal 1998. The total revenue derived from Pharmacy switching was $8,183,000 in fiscal 1998. The total claims and related revenue derived from HII was $4,950,000 for the twelve months ended June 30, 1998. Excluding anticipated expenditures associated with ordinary product development, the Company has budgeted approximately $1,210,000 through December 1999 for Year 2000 compliance costs, of which approximately $512,000 had been expended through December 31, 1998. The Company believes that this amount will be sufficient to execute its plan and cover contingency plan costs. The Company believes that it has sufficient resources to implement its plan. However, there can be no assurance that expenditures required to achieve compliance with Year 2000 requirements will not exceed the budgeted amounts. The Company's client base consists of over 65,000 healthcare providers and over 1,000 payors. While the Company has not attempted to assess the readiness of each of these entities, the Company has begun to work with major customers and suppliers to insure that Year 2000 compliance issues will not interrupt the normal activities supported by these relationships. Implementation of Year 2000 compliant software is product- and platform-specific. If the software resides on the host system, all clients will automatically access the new software. Similarly, products that can receive updates remotely will be updated via remote distribution. The existing telephone number for HII's bulletin board program can be automatically redirected to connect to a Company product that is Year 2000 compliant. A small minority of the Company's clients (mostly retail pharmacy clients) will require on-site installation (in most cases, this installation will also provide the clients with the capability to receive future enhancements that will not otherwise be avail able). The Company's Medicare/Medicaid Payors are subject to a Year 2000 compliance program undertaken by the Health Care Financing Administration. Under the HCFA plan, all mission critical systems have been identified, and an Independent Verification and Validation consultant has been retained to perform inspections and testing of all public payors. This plan includes both random and announced system and site testing. CONTINGENCIES The Company believes that the most likely worst case Year 2000 scenario would include the following: (i) one or more parts of the Company's software and operating systems would operate incorrectly; (ii) one or more of the Company's payors would be unable to receive transactions; and (iii) one or more of the Company's providers/clients would not have completed internal Year 2000 conversions. It is possible that failures of the type described in clause (i) of the preceding sentence could cause clients of the Company to either terminate their contracts with the Company and/or sue the Company for damages. Also, if the Company fails to achieve Year 2000 compliance by September 30, 1999, such failure could constitute a default under the New Credit Facility, which could in turn have a material adverse effect on the Company's business, financial condition and results of operations. The Company has completed the assessment of its critical hardware and software and believes that the assessment has revealed all significant Year 2000 problems, that such problems will be capable of remediation, and that the Company's software and hardware will perform substantially as planned when Year 2000 processing begins. Although there can be no assurance that the Company will not experience Year 2000 problems, based on its assessment and remediation program to date, the Company believes that Year 2000 compliance issues will not have a material adverse effect on its business, financial condition or prospects and will not, therefore, result in a default under the Year 2000 compliance covenant in the New Credit Facility. However, due to the uncertainties that are inherent in addressing the Year 2000 problem, there can be no assurance that the Company will not experience unforeseen Year 2000 problems, which problems could have a material adverse effect on the Company's business, financial condition and results of operations. As contingency planning, the Company has three available options should certain functions not operate properly on January 1, 2000. First, the Company has developed its internal systems in such a manner as to allow such systems to accept non-Year 2000 compliant data, and convert such data based on defaults and algorithms developed in conjunction with the providers to Year 2000 compatible formats. This methodology is applicable for claims, eligibility and enrollment transactions. Second, for payors, in the event a payor is unable to accept EDI claims, the Company currently has the capability, internally and, if necessary with support from an outside vendor, to print paper claims forms from supplied provider data and to send those claims in paper form to non-Year 2000 compliant payors. Third, for medical claims, a bulletin board system acquired in the HII transaction could be utilized by clients, with minimal programming set up, as a means of transmitting claims to the Company via common carriers and the Internet. IMPACT OF INFLATION Inflation has not had a material impact on the Company's historical operations or financial condition. RECENT ACCOUNTING PRONOUNCEMENTS Recent pronouncements of the Financial Accounting Standards Board, which are not required to be adopted at this date, include SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", and SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities". These pronouncements are not expected to have a material impact on the Company's financial statements. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This statement is not required to be adopted at this date. The Company is currently evaluating the impact of this statement on its financial statements. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS Information contained or incorporated by reference in this periodic report on Form 10-Q and in other SEC filings by the Company contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 which can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "should", or "anticipates" or the negatives thereof of other variations thereon or comparable terminology, or by discussions of strategy. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to vary materially from those projected in such forward-looking statements. These risks and uncertainties are discussed in more detail in the Company's Registration Statement on Form S-1 which was filed with the Securities and Exchange Commission in connection with the IPO. No assurance can be given that future results covered by the forward-looking statements will be achieved. PART II - OTHER INFORMATION Item 1. Legal Proceedings. On January 27, 1999, the Supreme Court of the State of New York, County of Nassau granted the Company's motion to dismiss in the matter of Oakley v. Latpon R&D et al., a civil proceeding. The action is described in the Company's Registration Statement on Form S-1 (SEC File No. 333-55799). Item 2. Changes in Securities and Use of Proceeds (a) As part of the consummation of its IPO on February 5, 1999, the Company completed a recapitalization which included (i) a 4.5823 for 1 reverse stock split of all outstanding Common Stock that had been declared by the Company's Board of Directors on July 23, 1998, (ii) the issuance of 63,398 shares of Common Stock upon the exercise of certain outstanding Common Stock purchase warrants and (iii) the conversion of the aggregate liquidation value of the Series A Preferred Stock, $.01 par value (the "Preferred Stock"), into an aggregate 1,845,815 shares of Common Stock at price of $13.00 per share (the per share price to the public in the IPO). In addition, in connection with the IPO, the portion of the accrued and unpaid dividends on the Preferred Stock that was not paid in cash, amounting to $301,259, was converted into an aggregate 23,124 shares of Common Stock (at a per share conversion price equal to the price to the public in the IPO). The remainder of the accrued and unpaid dividends on the Preferred Stock (approximately $8.4 million) was paid in cash to the holders of the Preferred Stock out of the proceeds of the exercise of the underwriters' overallotment option in the IPO. (d) On February 5, 1999, the Company completed an IPO of 5,307,710 shares of Common Stock at a price per share of $13.00 (including 692,310 shares that were subject to the underwriters' overallotment option, which was exercised in full). The aggregate offering price was $69,000,230. The amount of all applicable issuance costs and underwriting discounts incurred by the Company was approximately $6,900,000. After deducting issuance costs and expenses, the total net proceeds to the Company was approximately $62,100,000. Of the net proceeds of the IPO, approximately $25.2 million were used by the Company to prepay the outstanding balance (including any accrued interest thereon) of the Senior Subordinated Note held by an investment fund affiliated with WCAS. Investment funds affiliated with WCAS are major stockholders of the Company and two of the Company's directors, Anthony de Nicola and Thomas McInerney, are general partners of WCAS. In addition, together with approximately $3.0 million of borrowings under the New Credit Facility with Nationsbank, N.A., $28.5 million of proceeds from the IPO were used to retire all indebtedness the Company's then existing Credit Facility with the Bank of America, which had been guaranteed by the Company's principal stockholders. The New Credit Facility is not guaranteed by any third party. The effective date of the Company's registration statement on Form S-1 was February 1, 1999, and the Commission file number assigned to the registration statement was 333-55977. The offering was completed upon the sale of all securities registered. Salomon Smith Barney, Bear, Stearns & Co., Inc. and William Blair & Company acted as managing underwriters for the IPO. Item 4. Submission of Matters to a Vote of Security Holders On January 20, 1999, the holders of more than a majority of each class of the Company's capital stock then outstanding approved, by written consent, the amendment to the Company's Amended and Restated Certificate of Incorporation which postponed the payment of the accrued and unpaid dividends on the Preferred Stock, and the conversion of any remaining accrued and unpaid dividends on the Preferred Stock into Common Stock, until the date of exercise or expiration of the Underwriters' overallotment option. See Item 2. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: The following exhibits are filed as a part of this report: Exhibit No. Description 10.1 Underwriting Agreement dated as of February 1, 1999. 10.2 Letter Amendment and Waiver No.1 dated as of February 5, 1999 from MEDE AMERICA Corporation to the banks and other financial institutions parties to the New Credit Facility, NationsBank, N.A., as Administrative and Collateral Agent thereunder, and NationsBanc Montgomery Securities LLC, as Syndication Agent thereunder. 10.3 Letter Amendment and Waiver No.2 dated as of February 25, 1999 from MEDE AMERICA Corporation to the banks and other financial institutions parties to the New Credit Facility, NationsBank, N.A., as Administrative and Collateral Agent thereunder, and NationsBanc Montgomery Securities LLC, as Syndication Agent thereunder. 27.1 Financial Data Schedule relating to the three months ended September 30, 1998. 27.2 Financial Data Schedule relating to the three months ended December 31, 1998. (b) Reports: No reports on Form 8-K have been filed by the Company during the three (3) months ended December 31, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEDE AMERICA CORPORATION (Registrant) By: /s/ Thomas P. Staudt --------------------------- Thomas P. Staudt President and Chief Executive Officer, on behalf of the Registrant By: /s/ Richard P. Bankosky --------------------------- Richard P. Bankosky Chief Financial Officer March 9, 1999 EX-10.1 2 EXHIBIT 10.1 Exhibit 10.1 MedE America Corporation 4,615,400 Shares Common Stock ($.01 par value) Underwriting Agreement New York, New York February 1, 1999 Salomon Smith Barney Inc. Bear, Stearns & Co. Inc. William Blair & Company, L.L.C., As Representatives of the several Underwriters, c/o Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Ladies and Gentlemen: MedE America Corporation, a Delaware corporation (the "Company"), proposes to sell to the several underwriters named in Schedule I hereto (the "Underwriters"), for whom you (the "Representatives") are acting as representatives, 4,615,400 shares of common stock, $.01 par value ("Common Stock") of the Company (said shares to be issued and sold by the Company being hereinafter called the "Underwritten Securities"). The Company also proposes to grant to the Underwriters an option to purchase up to 692,310 additional shares of Common Stock to cover over-allotments (the "Option Securities"; the Option Securities, together with the Underwritten Securities, being hereinafter called the "Securities"). To the extent there are no additional Underwriters listed on Schedule I other than you, the term Representatives as used herein shall mean you, as Underwriters, and the terms Representatives and Underwriters shall mean either the singular or plural as the context requires. Certain terms used herein are defined in Section 17 hereof. As part of the offering contemplated by this Agreement, Salomon Smith Barney has agreed to reserve out of the Shares set forth opposite its name on the Schedule I to this Agreement, up to 5% of the Underwritten Securities, for sale to the Company's employees, officers, and directors and other parties associated with the Company (collectively, "Participants"), as set forth in the Prospectus under the heading "Underwriting" (the "Directed Share Program"). The Shares to be sold by Salomon Smith Barney pursuant to the Directed Share Program (the "Directed Shares") will be sold by Salomon Smith Barney pursuant to this Agreement at the public offering price. Any Directed Shares not orally confirmed for purchase by any Participants by the end of the business day on which this Agreement is executed will be offered to the public by Salomon Smith Barney as set forth in the Prospectus. 1. Representations and Warranties. The Company represents and warrants to, and agrees with, each Underwriter as set forth below in this Section 1. (a) The Company has prepared and filed with the Commission a registration statement (file number 333-55977) on Form S-1, including a related preliminary prospectus, for registration under the Act of the offering and sale of the Securities. The Company has filed one or more amendments thereto, including a related preliminary prospectus, each of which has previously been furnished to you. The Company will next file with the Commission either (1) prior to the Effective Date of such registration statement, a further amendment to such registration statement (including the form of final prospectus) or (2) after the Effective Date of such registration statement, a final prospectus in accordance with Rules 430A and 424(b). In the case of clause (2), the Company has included in such registration statement, as amended at the Effective Date, all information (other than Rule 430A Information) required by the Act and the rules thereunder to be included in such registration statement and the Prospectus. As filed, such amendment and form of final prospectus, or such final prospectus, shall contain all Rule 430A Information, together with all other such required information, and, except to the extent the Representatives shall agree in writing to a modification (which agreement shall not be unreasonably withheld), shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the latest Preliminary Prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein. (b) On the Effective Date, the Registration Statement did or will, and when the Prospectus is first filed (if required) in accordance with Rule 424(b) and on the Closing Date (as defined herein) and on any date on which Option Securities are purchased, if such date is not the Closing Date (a "settlement date"), the Prospectus (and any supplements thereto) will, comply in all material respects with the applicable requirements of the Act and the rules thereunder; on the Effective Date and at the Execution Time, the Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, except for Rule 430A pricing information; and, on the Effective Date, the Prospectus, if not filed pursuant to Rule 424(b), will not, and on the date of any filing pursuant to Rule 424(b) and on the Closing Date and any settlement date, the Prospectus (together with any supplement thereto) will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to the information contained in or omitted from the Registration Statement, or the Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished herein or in writing to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion in the Registration Statement or the Prospectus (or any supplement thereto). (c) Each of the Company and its Subsidiaries (as defined herein) has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized with full corporate power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification, except where the failure as to due qualification to do business would not have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and the Subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto) (a "Material Adverse Effect"); (d) All the outstanding shares of capital stock of the Subsidiaries have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Subsidiaries are owned by the Company directly free and clear of any perfected security interest or any other security interests, claims, liens or encumbrances; (e) The Company's authorized equity capitalization is as set forth in the Prospectus; the capital stock of the Company conforms in all material respects to the description thereof contained in the Prospectus; the outstanding shares of Common Stock have been duly and validly authorized and issued and are fully paid and nonassessable; the Securities have been duly and validly authorized, and, when issued and delivered to and paid for by the Underwriters pursuant to this Agreement, will be fully paid and nonassessable; the Securities are duly listed, and admitted and authorized for trading, subject to official notice of issuance and evidence of satisfactory distribution, on the Nasdaq National Market; the certificates for the Securities are in valid and sufficient form; the holders of outstanding shares of capital stock of the Company are not entitled to preemptive or other rights to subscribe for the Securities except for such rights of WCAS Capital Partners II, L.P. as have been effectively waived; and, except as set forth in the Prospectus, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for, shares of capital stock of or ownership interests in the Company are outstanding; (f) There is no franchise, contract or other document of a character required to be described in the Registration Statement or Prospectus, or to be filed as an exhibit thereto, which is not described or filed as required; and the statements in the Prospectus under the headings "Risk Factors -- Proposed Healthcare Data Confidentiality Legislation," "Business -- Government Regulation" and "Business -- Legal Proceedings" fairly summarize the matters therein described. (g) This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable in accordance with its terms, except as rights to indemnity and contribution hereunder may be limited by federal and state securities laws or principles of public policy and subject to the qualification that the enforceability of the Company's obligations hereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and by general principles of equity. (h) The Company is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as defined in the Investment Company Act of 1940, as amended. (i) No consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein, except such as have been obtained under the Act and such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters in the manner contemplated herein and in the Prospectus. (j) Neither the issue and sale of the Securities nor the consummation of any other of the transactions herein contemplated nor the fulfillment of the terms hereof will conflict with, result in a breach or violation of or the imposition of any lien, charge or encumbrance upon any property or assets of the Company or the Subsidiaries pursuant to, (i) the charter or by-laws of the Company or the Subsidiaries, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or the Subsidiaries are a party or bound or to which its or their property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or the Subsidiaries, of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or the Subsidiaries or any of its or their properties, except as to clauses (ii) and (iii) where such breach, violation, lien, charge or encumbrance would not have a Material Adverse Effect, individually or in the aggregate. (k) No holders of securities of the Company have rights to the registration of such securities under the Registration Statement except for such rights of WCAS Capital Partners II, L.P. as have been effectively waived. (l) The consolidated historical financial statements and schedules of the Company and its consolidated Subsidiaries included in the Prospectus and the Registration Statement present fairly in all material respects the financial condition, results of operations and cash flows of the Company as of the dates and for the periods indicated, comply as to form with the applicable accounting requirements of the Act and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein). The selected financial data set forth under the caption "Selected Consolidated Financial Data" in the Prospectus and Registration Statement fairly present, on the basis stated in the Prospectus and the Registration Statement, the information included therein. The pro forma financial statements included in the Prospectus and the Registration Statement include assumptions that provide a reasonable basis for presenting the significant effects directly attributable to the transactions and events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma adjustments reflect the proper application of those adjustments to the historical financial statement amounts in the pro forma financial statements included in the Prospectus and the Registration Statement. The pro forma financial statements included in the Prospectus and the Registration Statement comply as to form in all material respects with the applicable accounting requirements of Regulation S-X under the Act and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements. (m) No action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or the Subsidiaries or its or their property is pending or, to the best knowledge of the Company, threatened that (i) could reasonably be expected to have a material adverse effect on the performance of this Agreement or the consummation of any of the transactions contemplated hereby or (ii) could reasonably be expected to have a Material Adverse Effect. (n) Each of the Company and the Subsidiaries owns or leases all such properties as are necessary to the conduct of its operations as presently conducted. (o) Neither the Company nor the Subsidiaries is in violation or default of (i) any provision of its charter or bylaws, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or the Subsidiaries or any of its or their properties, as applicable, except as to clauses (ii) and (iii) where such violation or default would not have a Material Adverse Effect, individually or in the aggregate. (p) Deloitte & Touche LLP and KPMG Peat Marwick LLP, each of whom have certified certain financial statements of the Company and its consolidated Subsidiaries and delivered their reports with respect to the audited consolidated financial statements and schedules included in the Prospectus, each are independent public accountants with respect to the Company within the meaning of the Act and the applicable published rules and regulations thereunder. (q) There are no transfer taxes or other similar fees or charges under Federal law or the laws of any state, or any political subdivision thereof, required to be paid in connection with the execution and delivery of this Agreement or the issuance by the Company or sale by the Company of the Securities. (r) The Company has filed all foreign, federal, state and local tax returns that are required to be filed or has requested extensions thereof (except in any case in which the failure so to file would not have a Material Adverse Effect) and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such assessment, fine or penalty that is currently being contested in good faith or as would not have a Material Adverse Effect. (s) No labor problem or dispute with the employees of the Company or the Subsidiaries exists or is threatened or imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or the Subsidiaries' principal suppliers, contractors or customers, that could have a Material Adverse Effect. (t) The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; all policies of insurance and fidelity or surety bonds insuring the Company or the Subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; the Company and the Subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and there are no claims by the Company or the Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; neither the Company nor the Subsidiaries have been refused any insurance coverage sought or applied for; and neither the Company nor the Subsidiaries have any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. (u) The Subsidiaries are not currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on the Subsidiaries' capital stock, from repaying to the Company any loans or advances to the Subsidiaries from the Company or from transferring any of the Subsidiaries' property or assets to the Company, except as described in or contemplated by the Prospectus. (v) The Company and the Subsidiaries possess all licenses, certificates, permits and other authorizations issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor the Subsidiaries have received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect. (w) The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (x) The Company has not taken, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. (y) The Company and the Subsidiaries are (i) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except where such non-compliance with Environmental Laws, failure to receive required permits, licenses or other approvals, or liability would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in the Prospectus, neither the Company nor the Subsidiaries have been named as a "potentially responsible party" under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. (z) In the ordinary course of its business, the Company periodically reviews the effect of Environmental Laws on the business, operations and properties of the Company and the Subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws, or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, have a Material Adverse Effect. (aa) Each of the Company and the Subsidiaries has fulfilled its obligations, if any, under the minimum funding standards of Section 302 of the United States Employee Retirement Income Security Act of 1974 ("ERISA") and the regulations and published interpretations thereunder with respect to each "plan" (as defined in Section 3(3) of ERISA and such regulations and published interpretations) in which employees of the Company and the Subsidiaries are eligible to participate and each such plan is in compliance in all material respects with the presently applicable provisions of ERISA and such regulations and published interpretations. The Company and the Subsidiaries have not incurred any unpaid liability to the Pension Benefit Guaranty Corporation (other than for the payment of premiums in the ordinary course) or to any such plan under Title IV of ERISA. (ab) MedE America of Ohio, an Ohio corporation, Healthcare Interchange, Inc. and Wellmark, Incorporated, a Delaware corporation, are the only subsidiaries of the Company (the "Subsidiaries"). (ac) The Company and the Subsidiaries own, possess, license or have other rights to use, on reasonable terms, all patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property (collectively, the "Intellectual Property") material to the conduct of the Company's business as now conducted or as proposed in the Prospectus to be conducted. Except as set forth in the Prospectus under the caption "Business--Intellectual Property" or as would not have a Material Adverse Effect, (a) other than rights granted by the Company in its ordinary course of business, there are no rights of third parties in Intellectual Property owned by the Company; (b) there is no material infringement by third parties as to Intellectual Property owned by the Company; (c) there is no pending or, to the Company's knowledge, threatened action, suit, proceeding or claim against the Company by others challenging the Company's rights in or to any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim against the Company; (d) there is no pending or, to the Company's knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (e) there is no pending or, to the Company's knowledge, threatened action, suit, proceeding or claim against the Company by others that the Company infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim; (f) there is no U.S. patent or published U.S. patent application which contains claims that dominate or may dominate any Intellectual Property described in the Prospectus as being owned by the Company or that interferes with the issued or pending patents to any such Intellectual Property; and (g) there is no prior art of which the Company is aware that may render any U.S. patent held by the Company invalid or any U.S. patent application held by the Company unpatentable which has not been disclosed to the U.S. Patent and Trademark Office. (ad) The statements contained in the Prospectus under the captions "Risk Factors--Dependence on Intellectual Property; Risk of Infringement," "Business--Intellectual Property" and "Business -- Legal Proceedings," insofar as such statements summarize legal matters, agreements, documents, or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings. (ae) Except as disclosed in the Registration Statement and the Prospectus, the Company (i) does not have any material lending or other relationship with any bank or lending affiliate of an Underwriter and (ii) does not intend to use any of the proceeds from the sale of the Securities hereunder to repay any outstanding debt owed to any affiliate of an Underwriter. (af) The statements contained in the Prospectus under the captions "Risk Factors--Year 2000 Compliance," "Management's Discussion and Analysis of Financial Condition and Results of Operations--Year 2000 Compliance" and "Business--Year 2000 Compliance," are accurate and fair summaries of the Company's efforts to address the risk that the computer hardware and software used by them may be unable to recognize and properly execute date-sensitive functions involving certain dates prior to and any dates after December 31, 1999 (the "Year 2000 Problem") and the Company is in compliance with the directives of the Commission's Release No. 33-7558 relating to Year 2000 compliance. (ag) Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Underwriters in connection with the offering of the Securities shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Underwriter. Furthermore, the Company represents and warrants to Salomon Smith Barney that (i) the Registration Statement, the Prospectus and any preliminary prospectus comply, and any further amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which the Prospectus or any preliminary prospectus, as amended or supplemented, if applicable, are distributed in connection with the Directed Share Program, and that (ii) no authorization, approval, consent, license, order, registration or qualification of or with any government, governmental instrumentality or court, other than such as have been obtained, is necessary under the securities laws and regulations of foreign jurisdictions in which the Directed shares are offered outside the United States. 2. Purchase and Sale. (a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of $12.09 per share, the amount of the Underwritten Securities set forth opposite such Underwriter's name in Schedule I hereto. (b) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to 692,310 Option Securities at the same purchase price per share as the Underwriters shall pay for the Underwritten Securities. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Securities by the Underwriters. Said option may be exercised in whole or in part at any time (but not more than once) on or before the 30th day after the date of the Prospectus upon written or telegraphic notice by the Representatives to the Company setting forth the number of shares of the Option Securities as to which the several Underwriters are exercising the option and the settlement date. The number of Option Securities to be purchased by each Underwriter shall be the same percentage of the total number of shares of the Option Securities to be purchased by the several Underwriters as such Underwriter is purchasing of the Underwritten Securities, subject to such adjustments as you in your absolute discretion shall make to eliminate any fractional shares. 3. Delivery and Payment. Delivery of and payment for the Underwritten Securities and the Option Securities (if the option provided for in Section 2(b) hereof shall have been exercised on or before the third Business Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on February 5, 1999, or at such time on such later date not more than three Business Days after the foregoing date as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being herein called the "Closing Date"). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. Delivery of the Underwritten Securities and the Option Securities shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct. If the option provided for in Section 2(b) hereof is exercised after the third Business Day prior to the Closing Date, the Company will deliver the Option Securities (at the expense of the Company) to the Representatives on the date specified by the Representatives (which date shall be reasonably agreed upon by the Company and the Representative, but in any event within three Business Days after exercise of said option) for the respective accounts of the several Underwriters, against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. If settlement for the Option Securities occurs after the Closing Date, the Company will deliver to the Representatives on the settlement date for the Option Securities, and the obligation of the Underwriters to purchase the Option Securities shall be conditioned upon receipt of, supplemental opinions, certificates and letters confirming as of such date the opinions, certificates and letters delivered on the Closing Date pursuant to Section 6 hereof. 4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Securities for sale to the public as set forth in the Prospectus. 5. Agreements. The Company agrees with the several Underwriters that: (a) The Company will use its best efforts to cause the Registration Statement, if not effective at the Execution Time, and any amendment thereof, to become effective. Prior to the termination of the offering of the Securities, the Company will not file any amendment of the Registration Statement or supplement to the Prospectus or any Rule 462(b) Registration Statement unless the Company has furnished you a copy for your review prior to filing and will not file any such proposed amendment or supplement to which you reasonably object. Subject to the foregoing sentence, if the Registration Statement has become or becomes effective pursuant to Rule 430A, or filing of the Prospectus is otherwise required under Rule 424(b), the Company will cause the Prospectus, properly completed, and any supplement thereto to be filed with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representatives of such timely filing. The Company will promptly advise the Representatives (1) when the Registration Statement, if not effective at the Execution Time, shall have become effective, (2) when the Prospectus, and any supplement thereto, shall have been filed (if required) with the Commission pursuant to Rule 424(b) or when any Rule 462(b) Registration Statement shall have been filed with the Commission, (3) when, prior to termination of the offering of the Securities, any amendment to the Registration Statement shall have been filed or become effective, (4) of any request by the Commission or its staff for any amendment of the Registration Statement, or any Rule 462(b) Registration Statement, or for any supplement to the Prospectus or for any additional information, (5) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for that purpose and (6) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the institution or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if issued, to obtain as soon as possible the withdrawal thereof. (b) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary to amend the Registration Statement or supplement the Prospectus to comply with the Act or the rules thereunder, the Company promptly will (1) notify the Representatives of any such event; (2) prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 5, an amendment or supplement which will correct such statement or omission or effect such compliance; and (3) supply any supplemented Prospectus to you in such quantities as you may reasonably request. (c) As soon as practicable, the Company will make generally available to its security holders and to the Representatives an earnings statement or statements of the Company and the Subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. (d) The Company will furnish to the Representatives and counsel for the Underwriters signed copies of the Registration Statement (including exhibits thereto) and to each other Underwriter a copy of the Registration Statement (without exhibits thereto) and, so long as delivery of a prospectus by an Underwriter or dealer may be required by the Act, as many copies of each Preliminary Prospectus and the Prospectus and any supplement thereto as the Representatives may reasonably request. (e) The Company will arrange, if necessary, for the qualification of the Securities for sale under the laws of such jurisdictions as the Representatives may designate and will maintain such qualifications in effect so long as required for the distribution of the Securities; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject. (f) The Company will not, without the prior written consent of Salomon Smith Barney Inc., sell, offer to sell, solicit an offer to purchase, contract to sell, grant any option to sell, pledge or otherwise dispose of, or file (or participate in the filing of) a registration statement (other than a Registration Statement on Form S-8 or S-4) with the Securities and Exchange Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder with respect to, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for such capital stock, or publicly announce an intention to effect any such transaction, for a period of 180 days after the date of the Final Prospectus, other than shares of Common Stock disposed of as bona fide gifts approved by Salomon Smith Barney Inc. The Company will not take, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. (h) The Company agrees to pay the costs and expenses relating to the following matters: (i) the preparation, printing or reproduction and filing with the Commission of the Registration Statement (including financial statements and exhibits thereto), each Preliminary Prospectus, the Prospectus, and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, each Preliminary Prospectus, the Prospectus, and all amendments or supplements to any of them, as may, in each case, be reasonably requested for use in connection with the offering and sale of the Securities; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Securities, including any stamp or transfer taxes in connection with the original issuance and sale of the Securities; (iv) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Securities; (v) the registration of the Securities under the Exchange Act and the listing of the Securities on the Nasdaq National Market; (vi) any registration or qualification of the Securities for offer and sale under the securities or blue sky laws of the several states (including filing fees and the reasonable fees and expenses of counsel for the Underwriters relating to such registration and qualification); (vii) any filings required to be made with the National Association of Securities Dealers, Inc. (including filing fees and the reasonable fees and expenses of counsel for the Underwriters relating to such filings); (viii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Securities; (ix) the fees and expenses of the Company's accountants and the fees and expenses of counsel (including local and special counsel) for the Company; and (x) all other costs and expenses incident to the performance by the Company of its obligations hereunder. (i) that in connection with the Directed Share Program, the Company will ensure that the Directed Shares will be restricted to the extent required by the National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules from sale, transfer, assignment, pledge or hypothecation for a period of three months following the date of the effectiveness of the Registration Statement. Salomon Smith Barney will notify the Company as to which Participants will need to be so restricted. The Company will direct the transfer restrictions upon such period of time. (j) to pay all fees and disbursements of counsel incurred by the Underwriters in connection with the Directed Share Program and stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Share Program. 6. Conditions to the Obligations of the Underwriters. The obligations of the Underwriters to purchase the Underwritten Securities and the Option Securities, as the case may be, shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time, the Closing Date and any settlement date pursuant to Section 3 hereof, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: (a) If the Registration Statement has not become effective prior to the Execution Time, unless the Representatives agree in writing to a later time, the Registration Statement will become effective not later than (i) 6:00 PM New York City time on the date of determination of the public offering price, if such determination occurred at or prior to 3:00 PM New York City time on such date or (ii) 9:30 AM on the Business Day following the day on which the public offering price was determined, if such determination occurred after 3:00 PM New York City time on such date; if filing of the Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the Prospectus, and any such supplement, will be filed in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened. (b) The Company shall have caused Reboul, MacMurray, Hewitt, Maynard & Kristol, counsel for the Company, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that: (i) each of the Company and the Subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification, except where the failure as to due qualification to do business would not have a Material Adverse Effect, individually or in the aggregate. (ii) all the outstanding shares of capital stock of each of the Subsidiaries have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Subsidiaries are owned by the Company directly free and clear of any perfected security interest and, to the knowledge of such counsel, after due inquiry, any other security interest, claim, lien or encumbrance; (iii) the Company's authorized equity capitalization is as set forth in the Prospectus; the capital stock of the Company conforms in all material respects to the description thereof contained in the Prospectus; the outstanding shares of Common Stock have been duly and validly authorized and issued and are fully paid and nonassessable; the Securities have been duly and validly authorized, and, when issued and delivered to and paid for by the Underwriters pursuant to this Agreement, will be fully paid and nonassessable; the Securities are duly listed, and admitted and authorized for trading, subject to official notice of issuance and evidence of satisfactory distribution, on the Nasdaq National Market; the certificates for the Securities are in valid and sufficient form; the holders of outstanding shares of capital stock of the Company are not entitled to preemptive or other rights to subscribe for the Securities from the Company except for such rights of WCAS Capital Partners II, L.P. as have been effectively waived; and, except as set forth in the Prospectus, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for, shares of capital stock of or ownership interests in the Company are outstanding; (iv) to the knowledge of such counsel, there is no pending or threatened action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or the Subsidiaries or its or their property of a character required to be disclosed in the Registration Statement which is not adequately disclosed in the Prospectus, and to the knowledge of such counsel, there is no franchise, contract or other document of a character required to be described in the Registration Statement or Prospectus, or to be filed as an exhibit thereto, which is not described or filed as required; and the statements included in the Prospectus under the headings "Risk Factors -- Proposed Healthcare Data Confidentiality Legislation," "Risk Factors--Dependence on Intellectual Property; Risk of Infringement," "Business -- Government Regulation," "Business -- Legal Proceedings" and "Business--Intellectual Property" fairly summarize the legal matters therein described; (v) the Registration Statement has become effective under the Act; any required filing of the Prospectus, and any supplements thereto, pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued, no proceedings for that purpose have been instituted or threatened and the Registration Statement and the Prospectus (other than the financial statements and other financial information contained therein, as to which such counsel need express no opinion) comply as to form in all material respects with the applicable requirements of the Act and the rules and regulations thereunder; and such counsel has no reason to believe that on the Effective Date or at the Execution Time the Registration Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus as of its date and on the Closing Date included or includes any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (in each case, other than the financial statements and other financial information contained therein, as to which such counsel need express no opinion); (vi) this Agreement has been duly authorized, executed and delivered by the Company; (vii) the Company is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Prospectus, will not be, an "investment company" as defined in the Investment Company Act of 1940, as amended; (viii) no consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein, except such as have been obtained under the Act and such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters in the manner contemplated in this Agreement and in the Prospectus and such other approvals (specified in such opinion) as have been obtained; (ix) neither the issue and sale of the Securities, nor the consummation of any other of the transactions herein contemplated nor the fulfillment of the terms hereof will conflict with, result in a breach or violation of or imposition of any lien, charge or encumbrance upon any property or assets of the Company or its subsidiaries pursuant to, (i) the charter or by-laws of the Company or the Subsidiaries, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or the Subsidiaries are a party or bound or to which its or their property is subject, to the extent such document is filed with the Commission as an exhibit to the Registration Statement or its existence is otherwise known to such counsel, or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or the Subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or the Subsidiaries or any of their properties; and (x) to the knowledge of such counsel, no holders of securities of the Company have rights to the registration of such securities under the Registration Statement except for such rights of WCAS Capital Partners II, L.P. as have been effectively waived and the rights of Medic Computer Systems, Inc., which rights will not be effective until the exercise of its warrant at least 180 days following the sale of the Securities to the Underwriters. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the States of Delaware and New York or the Federal laws of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (b) include any supplements thereto at the Closing Date. (c) The Representatives shall have received from Dewey Ballantine LLP, counsel for the Underwriters, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Registration Statement, the Prospectus (together with any supplement thereto) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (d) The Company shall have furnished to the Representatives a certificate of the Company, signed by the Chairman of the Board or the President and the principal financial or accounting officer of the Company, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Prospectus, any supplements to the Prospectus and this Agreement and that: (i) the representations and warranties of the Company in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date; (ii) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the Company's knowledge, threatened; and (iii) since the date of the most recent financial statements included in the Prospectus (exclusive of any supplement thereto), there has been no Material Adverse Effect. (e) The Representatives shall have received letters addressed to you dated the date hereof and the Closing Date from Deloitte & Touche LLP and KPMG Peat Marwick LLP, each independent certified public accountants, substantially in the forms heretofore approved by you. (f) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (e) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, business or properties of the Company and the Subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto). (g) The Securities shall have been listed and admitted and authorized for trading on the Nasdaq National Market and satisfactory evidence of such actions shall have been provided to the Representatives. (h) At or prior to the Execution Time, the Company shall have furnished to the Representatives a letter substantially in the form of Exhibit A hereto from each officer, director and certain stockholders of the Company, whose aggregate holdings of Common Stock represent 8,066,277 shares of Common Stock (97.7% of the total outstanding Common Stock), addressed to the Representatives. (i) The Company shall have provided evidence to the Underwriters, in form and substance satisfactory to the Representatives, that concurrently with the Closing (i) the Senior Subordinated Note (as defined in the Prospectus) will be repaid in full and (ii) outstanding indebtedness under the Credit Facility (as defined in the Prospectus) will be reduced in the manner set forth in the Prospectus under the heading "Use of Proceeds" and (iii) the Recapitalization (as defined in the Prospectus) will be completed. (j) The Company shall have provided evidence to the Underwriters, in form and substance satisfactory to the Representatives, that the Amended Credit Facility has been executed on the terms set forth in the Prospectus. (k) The Company shall have provided evidence to the Underwriters, in form and substance satisfactory to the Representatives, that the Company's Certificate of Incorporation has been amended to provide for the issuance of up to 5,000,000 shares of Preferred Stock as set forth in the Prospectus under the headings "Risk Factors--Potential Adverse Effect of Anti-Takeover Provisions," "Description of Capital Stock" and "Description of Capital Stock--Preferred Stock." (l) Prior to the Closing Date, the Company shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request. If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters, this Agreement and all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancelation shall be given to the Company in writing or by telephone or facsimile confirmed in writing. The documents required to be delivered by this Section 6 shall be delivered at the office of Dewey Ballantine LLP, counsel for the Underwriters, at 1301 Avenue of the Americas, New York, New York, on the Closing Date. 7. Reimbursement of Underwriters' Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company will reimburse the Underwriters severally through Salomon Smith Barney on demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities. 8. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person who controls any Underwriter within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Securities as originally filed or in any amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion therein; provided further, that with respect to any untrue statement or omission of material fact made in any Preliminary Prospectus, the indemnity agreement contained in this Section 8(a) shall not inure to the benefit of any Underwriter from whom the person asserting any such loss, claim, damage or liability purchased the securities concerned, to the extent that any such loss, claim, damage or liability of such Underwriter occurs under the circumstance where it shall have been determined by a court of competent jurisdiction by final and nonappealable judgment that (w) the Company had previously furnished copies of the Prospectus to the Representatives, (x) delivery of the Prospectus was required by the Act to be made to such person, (y) the untrue statement or omission of a material fact contained in the Preliminary Prospectus was corrected in the Prospectus and (z) there was not sent or given to such person, at or prior to the written confirmation of the sale of such securities to such person, a copy of the Prospectus. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) The Company agrees to indemnify and hold harmless Salomon Smith Barney and each person, if any, who controls Salomon Smith Barney within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act ("Salomon Smith Barney Entities"), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (i) caused by any untrue statement or alleged untrue statement of a material fact contained in the prospectus wrapper material prepared by or with the consent of the Company for distribution in foreign jurisdictions in connection with the Directed Share Program attached to the Prospectus or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement therein, when considered in conjunction with the Prospectus or any applicable preliminary prospectus, not misleading; (ii) caused by the failure of any Participant to pay for and accept delivery of the shares which immediately following the effective of the Registration Statement, were subject to a properly confirmed agreement to purchase; or (iii) related to, arising out of, or in connection with the Directed Share Program, provided that, the Company shall not be responsible under this subparagraph (iii) for any losses, claim, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the bad faith or gross negligence of Salomon Smith Barney Entities. (c) Each Underwriter severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement, and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with reference to written information relating to such Underwriter furnished to the Company by or on behalf of such Underwriter through the Representatives specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have. The Company acknowledges that the statements set forth in the last paragraph of the cover page regarding delivery of the Securities, the legend in block capital letters on page 2 related to stabilization, syndicate covering transactions and penalty bids and, under the heading "Underwriting" or "Plan of Distribution," (i) the sentences related to concessions and reallowances and (ii) the paragraph related to stabilization, syndicate covering transactions and penalty bids in any Preliminary Prospectus and the Prospectus constitute the only information furnished in writing by or on behalf of the several Underwriters for inclusion in any Preliminary Prospectus or the Prospectus. (d) The Company hereby confirms that at its request Salomon Smith Barney has without compensation acted as "qualified independent underwriter" (in such capacity, the "QIU") within the meaning of Rule 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc. ("Rule 2720") in connection with the offering of the Offered Securities. The Company agrees to indemnify and hold harmless the QIU, the directors, officers, employees and agents of the QIU and each person who controls the QIU within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Securities as originally filed or in any amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of the QIU through the Representatives specifically for inclusion therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (e) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a), (b), (c) or (d) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a), (b), (c) or (d) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would, under any applicable standard of professional conduct as determined by such indemnified party, present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. It is understood, however, that the Company shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such Underwriters and controlling persons, which firm shall be designated in writing by Salomon Smith Barney. Notwithstanding anything contained herein to the contrary, if indemnity may be sought pursuant to Section 8(b) hereof in respect of such action or proceeding, then in addition to such separate firm for the indemnified parties, the indemnifying party shall be liable for the reasonable fees and expenses of not more than one separate firm (in addition to any local counsel) for Salomon Smith Barney for the defense of any losses, claims, damages and liabilities arising out of the Directed Share Program, and all persons, if any, who control Salomon Smith Barney within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act. (f) In the event that the indemnity provided in paragraph (a), (b), (c) or (d) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Underwriters severally agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which the Company and one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Underwriters on the other from the offering of the Securities; provided, however, that in no case shall (i) any Underwriter (except as may be provided in any agreement among underwriters relating to the offering of the Securities) be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such Underwriter hereunder or (ii) the QIU in its capacity as "qualified independent underwriter" (within the meaning of Rule 2720) be responsible for any amount in excess of the compensation received by the QIU for acting in such capacity. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Underwriters severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it, and benefits received by the Underwriters shall be deemed to be equal to the total underwriting discounts and commissions, in each case as set forth on the cover page of the Prospectus. Benefits received by the QIU in its capacity as "qualified independent underwriter" shall be deemed to be equal to the compensation received by the QIU for acting in such capacity. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Underwriters on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (f), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Underwriter within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Underwriter shall have the same rights to contribution as such Underwriter, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (f). 9. Default by an Underwriter. If any one or more Underwriters shall fail to purchase and pay for any of the Securities agreed to be purchased by such Underwriter or Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective proportions which the amount of Securities set forth opposite their names in Schedule I hereto bears to the aggregate amount of Securities set forth opposite the names of all the remaining Underwriters) the Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase; provided, however, that in the event that the aggregate amount of Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate amount of Securities set forth in Schedule I hereto, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Underwriters do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Underwriter or the Company. In the event of a default by any Underwriter as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as the Representatives shall determine in order that the required changes in the Registration Statement and the Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter of its liability, if any, to the Company and any nondefaulting Underwriter for damages occasioned by its default hereunder. 10. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if at any time prior to such time (i) trading in the Company's Common Stock shall have been suspended by the Commission or the Nasdaq National Market or trading in securities generally on the New York Stock Exchange or the Nasdaq National Market shall have been suspended or limited or minimum prices shall have been established on such Exchange or National Market, (ii) a banking moratorium shall have been declared either by Federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war, or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives, impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Prospectus (exclusive of any supplement thereto). 11. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of the officers, directors or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancelation of this Agreement. 12. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or telefaxed to the Salomon Smith Barney General Counsel (fax no.: (212) 816-7912) and confirmed to the General Counsel, Salomon Smith Barney, at 388 Greenwich Street, New York, New York, 10013, Attention: General Counsel; or, if sent to the Company, will be mailed, delivered or telefaxed to (516) 542-4508 and confirmed to it at 90 Merrick Avenue, Suite 501, East Meadow, New York 11554, attention of the Legal Department. 13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder. 14. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York. 15. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement. 16. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof. 17. Definitions. The terms which follow, when used in this Agreement, shall have the meanings indicated. "Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. "Commission" shall mean the Securities and Exchange Commission. "Effective Date" shall mean each date and time that the Registration Statement, any post-effective amendment or amendments thereto and any Rule 462(b) Registration Statement became or become effective. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Execution Time" shall mean the date and time that this Agreement is executed and delivered by the parties hereto. "Preliminary Prospectus" shall mean any preliminary prospectus referred to in paragraph 1(a) above and any preliminary prospectus included in the Registration Statement at the Effective Date that omits Rule 430A Information. "Prospectus" shall mean the prospectus relating to the Securities that is first filed pursuant to Rule 424(b) after the Execution Time or, if no filing pursuant to Rule 424(b) is required, shall mean the form of final prospectus relating to the Securities included in the Registration Statement at the Effective Date. "Registration Statement" shall mean the registration statement referred to in paragraph 1(a) above, including exhibits and financial statements, as amended at the Execution Time (or, if not effective at the Execution Time, in the form in which it shall become effective) and, in the event any post-effective amendment thereto or any Rule 462(b) Registration Statement becomes effective prior to the Closing Date, shall also mean such registration statement as so amended or such Rule 462(b) Registration Statement, as the case may be. Such term shall include any Rule 430A Information deemed to be included therein at the Effective Date as provided by Rule 430A. "Rule 424", "Rule 430A" and "Rule 462" refer to such rules under the Act. "Rule 430A Information" shall mean information with respect to the Securities and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A. "Rule 462(b) Registration Statement" shall mean a registration statement and any amendments thereto filed pursuant to Rule 462(b) relating to the offering covered by the registration statement referred to in Section 1(a) hereof. "Salomon Smith Barney" shall mean Salomon Smith Barney Inc. If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company and the several Underwriters. Very truly yours, MedE America Corporation By: \s\ T P Staudt Name: Thomas P. Staudt Title: CEO The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Salomon Smith Barney Inc. Bear, Stearns & Co. Inc. William Blair & Company, L.L.C. By: Salomon Smith Barney Inc. By: \s\ David Gately Name: David F. Gately Title: Managing Director For themselves and the other several Underwriters named in Schedule I to the foregoing Agreement. SCHEDULE I Number of Underwritten Securities to Underwriters be Purchased - ------------ ------------ Salomon Smith Barney Inc.................................... 1,141,800 Bear, Stearns & Co. Inc. ................................... 1,141,800 William Blair & Company, L.L.C. ............................ 1,141,800 BancBoston Robertson Stephens Inc........................... 70,000 BT Alex. Brown Incorporated................................. 70,000 CIBC Oppenheimer Corp....................................... 70,000 Credit Suisse First Boston Corporation...................... 70,000 Donaldson, Lufkin & Jenrette Securities Corporation......... 70,000 Goldman, Sachs & Co. ....................................... 70,000 Lazard Freres & Co. LLC .................................... 70,000 Morgan Stanley & Co. Incorporated........................... 70,000 Adams, Harkness & Hill, Inc................................. 45,000 Robert W. Baird & Co. Incorporated.......................... 45,000 J.C. Bradford & Co. ........................................ 45,000 Dain Rauscher Wessels, A Division of Dain Rauscher Incorporated (Common Stock).......................... 45,000 Friedman, Billings, Ramsey & Co., Inc....................... 45,000 Gruntal & Co., L.L.C........................................ 45,000 Brenner Securities Corporation.............................. 45,000 Interstate/Johnson Lane Corporation......................... 45,000 Morgan Keegan & Company, Inc................................ 45,000 Needham & Company, Inc. .................................... 45,000 Pacific Growth Equities, Inc................................ 45,000 Pennsylvania Merchant Group Ltd ............................ 45,000 The Robinson-Humphrey Company, LLC.......................... 45,000 SunTrust Equitable Securities Corporation................... 45,000 Total..................................... 4,615,400 [Form of Lock-Up Agreement] EXHIBIT A [Letterhead of officer, director or shareholder of Corporation] MedE AMERICA CORPORATION Initial Public Offering of Common Stock June ___, 1998 Smith Barney Inc. William Blair & Company, L.L.C. Volpe Brown Whelan & Company, LLC c/o Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Ladies and Gentlemen: This letter is being delivered to you in connection with the proposed Underwriting Agreement (the "Underwriting Agreement"), between MedE AMERICA Corporation, a Delaware corporation (the "Company"), and each of you as Underwriters named therein, relating to an underwritten initial public offering of Common Stock, $.01 par value (the "Common Stock"), of the Company. In order to induce you and the other Underwriters to enter into the Underwriting Agreement, the undersigned will not, without the prior written consent of Smith Barney Inc., sell, offer to sell, solicit an offer to purchase, contract to sell, grant any option to sell, pledge or otherwise dispose of, or file (or participate in the filing of) a registration statement with the Securities and Exchange Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder with respect to, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for such capital stock, or publicly announce an intention to effect any such transaction, for a period of 180 days after the date of the Final Prospectus, other than shares of Common Stock disposed of as bona fide gifts approved by Smith Barney Inc. If for any reason the Underwriting Agreement shall be terminated prior to the Closing Date (as defined in the Underwriting Agreement), the agreement set forth above shall likewise be terminated. Yours very truly, __________________________________ Stockholder Name By:_______________________________ Name: Title: Address: EX-10.2 3 EX-10.2 Exhibit 10.2 LETTER AMENDMENT AND WAIVER NO.1 Dated as of February 5, 1999 To the banks and other financial institutions (collectively, the "Lenders") parties to the Credit Agreement referred to below and to NationsBank, N.A., as administrative and collateral agent (the "Administrative Agent") for the Lenders and NationsBanc Montgomery Securities LLC, as Syndication Agent thereunder Ladies and Gentlemen: We refer to the Credit Agreement dated as of January 26, 1999 (as amended, supplemented or otherwise modified through the date hereof, the "Credit Agreement") among the undersigned and you. Capitalized terms not otherwise defined in this Letter Amendment and Waiver No. 1 (the "Letter Amendment") have the same meanings as specified in the Credit Agreement. Section 1. Waiver. The Lender and the Administrative Agent hereby agree that, notwithstanding Section 2.02(b)(A) and (B) of the Credit Agreement, the Borrower may select (i) Eurodollar Rate Advances for fifty percent (50%) of each Working Capital Advance and (ii) Base Rate Advances for the remaining fifty percent (50%) of each Working Capital Advance, in each case, made during the period commencing with the Initial Extension of Credit to the date ending one month thereafter (subject to satisfaction of the notice of borrowing requirements set forth in Section 2.02(a)). Section 2. Amendment to the Credit Agreement. The Credit Agreement is, effective as of the date of this Letter Amendment, hereby amended as follows: (a) The last paragraph of Section 5.01(n)(ii)(J) of the Credit Agreement is amended to insert the word "reasonable" prior to the phrase "best efforts" in the third line therein. (b) Section 5.01(o) of the Credit Agreement is hereby deleted in its entirety. (c) Section 9.07(d) of the Credit Agreement is amended to delete the phrase "[may][shall]" in the seventh line therein and substitute therefor the word "shall". (d) Schedule 4.01(b)to the Credit Agreement is hereby deleted in its entirety and the attached Schedule 4.01(b) is substituted therefor. (e) Schedule 4.01(y) Attachment B to the Credit Agreement is hereby deleted in its entirety and the attached Schedule 4.01(y) Attachment B is substituted therefor. (f) Schedule 5.02(a) to the Credit Agreement is hereby deleted in its entirety and the attached Schedule 5.02(a) is substituted therefor. Section 3. Effectiveness and Effect on the Loan Documents. (a) This Letter Amendment shall become effective as of the date first above written when, and only when, the Administrative Agent shall have received counterparts of this Letter Amendment executed by the Agents, NationsBank N.A., as Lender, the Borrower and the Guarantors. (b) On and after the effectiveness of this Letter Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Letter Amendment. (c) The Credit Agreement, the Notes and each of the other Loan Documents, as specifically amended by this Letter Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Obligations of the Loan Parties under the Loan Documents, in each case as amended by this Letter Amendment. The execution, delivery and effectiveness of this Letter Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under the Credit Agreement or any of the Loan Documents, nor constitute a waiver of any provision of the Credit Agreement any of the Loan Documents. Section 4. Miscellaneous. This Letter Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Letter Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Letter Amendment. Section 5. Governing Law. This Letter Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, MEDE AMERICA CORPORATION, as Borrower By Title: President Name: Thomas P. Staudt Agreed as of the date first above written: NATIONSBANK, N.A., as Administrative Agent and as Lender By Title: NATIONSBANC MONTGOMERY SECURITIES LLC, as Syndication Agent By Title: Section 5. Governing Law. This Letter Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, MEDE AMERICA CORPORATION, as Borrower By Title: Agreed as of the date first above written: NATIONSBANK, N.A., as Administrative Agent and as Lender By Title: Name: Daniel Rencricca NATIONSBANC MONTGOMERY SECURITIES LLC, as Syndication Agent By Title: Name: Daniel Rencricca CONSENT OF GUARANTORS Each of the undersigned, as Guarantors under the Credit Agreement, hereby consents to the Letter Amendment and hereby confirms and agrees that notwithstanding the effectiveness of the Letter Amendment, the Guaranty is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects and the Collateral Documents to which such Guarantor is or will be a party as of the date hereof and all of the Collateral described therein do, and shall continue to, secure the payment of all of the Secured Obligations (as defined therein). MEDE AMERICA CORPORATION OF OHIO, as Guarantor By Title: President Name: Thomas P. Staudt HEALTHCARE INTERCHANGE, INC., as Guarantor By Title: President Name: Thomas P. Staudt Schedule 4.01(b) Subsidiaries LEGAL NAME: Healthcare Interchange, Inc. ("HII") TYPE OF ENTITY: corporation JURISDICTION OF INCORPORATION: Missouri AUTHORIZED EQUITY INTERESTS: 66,250 shares of Class A Common Stock, $1 par value, 66,250 shares of Class B Common Stock, $1 par value, 56,000 shares of Class C Common Stock, $1 par value, and 62,500 shares of Preferred Stock, $1 par value. OUTSTANDING EQUITY INTERESTS: 35,000 shares of Class A Common Stock, 35,000 shares of Class B Common Stock, 20,001 shares of Class C Common Stock and 62,500 shares of Preferred Stock. All outstanding Equity Interests of Healthcare Interchange, Inc. are owned of record and beneficially by the Borrower. LEGAL NAME: MedE America Corporation of Ohio ("MedE Ohio") FORMERLY KNOWN AS: General Computer Corporation TYPE OF ENTITY: corporation JURISDICTION OF INCORPORATION: Ohio AUTHORIZED EQUITY INTERESTS: 10,000,000 shares of Common Stock, $.10 par value, and 1,000,000 shares of Preferred Stock, $.10 par value. OUTSTANDING EQUITY INTERESTS: 100 shares of Common Stock. All outstanding Equity Interests of MedE America Corporation of Ohio are owned of record and beneficially by the Borrower. Schedule 401(y), Parts A and B, Attachment "B"
Capital Leases: Lessor Lease Leased Lease Expira- Monthly Jul-98 Aug-98 Sep-98 Oct-98 Number Equipment Term tion Lease Pmt Alco Capital Resource 16,584 Canon Copier 60 May-98 838 838 838 838 838 CIT 65,222,005 Computer Equip 60 Feb-98 1,169 1,169 1,169 1,169 1,169 CIT 65,222,002 Computer Equip 60 Jul-98 1,056 1,056 CIT 65,222,003 Computer Equip 60 Aug-98 898 898 898 CIT 65,222,004 Computer Equip 60 Sep-98 690 690 690 690 CIT 89953-001*Computer Equip *The total amount of payments under this capital lease is $155,470. Wheeling Nat'l Bank 33908-02 Computer Equip 60 Oct-98 288 288 288 288 288 Wheeling Nat'l Bank 33908-01 Stratapak Drives 60 Sep-98 618 618 618 618 Hewlett Packard 4126-38351 Computer Equip 60 Jun-99 6,638 6,638 6,638 6,638 6,638 Icon cash flow partner 70,239.0 Computer Equip 60 Aug-99 1,191 1,191 1,191 1,191 1,191 Stratus Capital st607-60702 Stratus Equip 18 May-99 7,414 7,414 7,414 7,414 7,414 Sanwa Leasing Corp 0002-1166898 Cust Serv 5 Pentium PC's 36 Jun-99 436 436 436 436 436 Alan Acceptance 626190-20916 Acctg Server/Sales Logics 24 Nov-99 2,657 2,657 2,657 2,657 2,657 Colonial Pacific Alan Accept 20977 Computer Equipment 24 Dec-99 2,016 2,016 2,016 2,016 2,016 Advanta US Bankcorp 001-0236308 Laser Printer Stockton 60 Jan-01 684 684 684 684 684 Colonial Pacific US Bankcorp 126509001 Computer Equipment Stockton 36 Jun-99 1,128 1,128 1,128 1,128 1,128 Dana Commerical 438466 Computer Equipment Stockton 48 Nov-99 874 874 874 874 874 Net Credit May-99 935 935 935 935 935 Data Gen'l MedE Inc. Data Gen'l Equipmt Apr-00 4,037 4,037 4,037 4,037 4,037 Heller Fin'l MPC Data Gen'l Equipmt Aug-98 785 785 785 Mellon leasing MPC Data Gen'l Equipmt Sep-98 4,989 4,989 4,989 4,989 Moleasco (Dental) 4556 Burster 36 Aug-99 274 274 274 274 274 Moleasco (Dental) 4797 Auto Folding Machine 36 Sep-99 199 199 199 199 199 I.C. Capital (Dental) 3339252 Computer Equip 60 Aug-00 2,578 2,578 2,578 2,578 2,578 Data General 36 Jun-01 5,824 5,824 5,824 5,824 5,824 ----- ----- ----- ----- Capital Lease Payments 48,216 47,160 45,477 39,180 ------ ------ ------ ------ Nov-98 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 ------ ------ ------ ------ ------ ------ ------ ------ Alco Capital Resource 838 838 838 838 838 838 838 838 CIT 1,169 1,169 1,169 1,169 CIT CIT CIT CIT Wheeling Nat'l Bank Wheeling Nat'l Bank Hewlett Packard 6,638 6,638 6,638 6,638 6,638 6,638 6,638 6,638 Icon cash flow partner 1,191 1,191 1,191 1,191 1,191 1,191 1,191 1,191 Stratus Capital 7,414 7,414 7,414 7,414 7,414 7,414 7,414 Sanwa Leasing Corp 436 436 436 436 436 436 436 436 Alan Acceptance 2,657 2,657 2,657 2,657 2,657 2,657 2,657 2,657 Colonial Pacific 2,016 2,016 2,016 2,016 2,016 2,016 2,016 2,016 Advanta 684 684 684 684 684 684 684 684 Colonial Pacific 1,128 1,128 1,128 1,128 1,128 1,128 1,128 1,128 Dana Commerical 874 874 874 874 874 874 874 874 Net Credit 935 935 935 935 935 935 935 Data Gen'l 4,037 4,037 4,037 4,037 4,037 4,037 4,037 4,037 Heller Fin'l Mellon leasing Moleasco 274 274 274 274 274 274 274 274 Moleasco 199 199 199 199 199 199 199 199 I.C. Capital (Dental) 2,578 2,578 2,578 2,578 2,578 2,578 2,578 2,578 Data General 5,824 5,824 5,824 5,824 5,824 5,824 5,824 5,824 ----- ----- ----- ----- ----- ----- ----- ----- Capital Lease Payments 38,892 38,892 38,892 38,892 37,723 37,723 37,723 28,536
Schedule 5.02(a) Liens on Collateral The Borrower owns 7 certificates of deposit issued by the Bank of Akron, having an aggregate value at maturity of $268,430. All of the Borrower's right, title and interest in and to such certificates of deposit have been pledged, pursuant to an Assignment of Bank Account, dated March 7, 1995, between Latpon Health Systems Inc. (which subsequently assigned this agreement to the Borrower) and QR Management Services Inc. ("QR"), to secure indebtedness payable to QR (the amount of such indebtedness is less than the value of such certificates). Such indebtedness arose pursuant to an Asset Purchase Agreement, dated as of February 1, 1995, between Latpon and QR. MedE America Corporation of Ohio owns certain real property and improvements in Summit County, Ohio, which it acquired subject to a mortgage granted by the seller, William and Sherry Shultz d/b/a W.E.S. Properties ("WES"), in favor of Park View Federal Savings and Loan Association. Pursuant to that certain pay-off letter dated February 5, 1999 from WES to MedE America Corporation of Ohio and as required by the installment purchase agreement, WES will release all existing liens, security interest and other encumbrances securing any indebtedness, liabilities or obligations relating to such property within 45 days from the date of the Initial Extension of Credit. EX-10.3 4 EXHIBIT 10.3 Exhibit 10.3 LETTER AMENDMENT AND WAIVER NO. 2 UNDER THE LOAN DOCUMENTS Dated as of February 25, 1999 To the banks and other financial institutions (collectively, the "Lenders") parties to the Credit Agreement referred to below and to NationsBank, N.A., as administrative and collateral agent (the "Administrative Agent") for the Lenders and NationsBanc Montgomery Securities LLC, as Syndication Agent thereunder Ladies and Gentlemen: We refer to (i) the Credit Agreement dated as of January 26, 1999 (as amended, supplemented or otherwise modified through the date hereof, the "Credit Agreement") among the undersigned and you and (ii) the Security Agreement dated as of February 5, 1999 (as amended, supplemented or otherwise modified through the date hereof, the "Security Agreement") among the undersigned and you. Capitalized terms not otherwise defined in this Letter Amendment and Waiver No. 2 (the "Letter Amendment") have the same meanings as specified in the Credit Agreement. Section 1. Waiver. (a) The Lender and the Administrative Agent hereby agree that, notwithstanding Section 5.01(n) of the Credit Agreement and Section 5(a) of the Security Agreement each date for delivery of the (i) Mortgages on real property owned by the Borrower and the documents to be delivered in connection therewith set forth in Section 5.01 (n)(ii)(A) through (J) of the Credit Agreement, and (ii) Pledged Account Letters and Commingled Account Letters specified in Section 5(a) of the Security Agreement, is hereby extended until March 31, 1999. (b) The Lender and the Administrative Agent hereby waive the requirement set forth in Section 5.01(n) of the Credit Agreement that the Borrower deliver (i) Mortgages and related documentation for the real properties listed on Schedule 5.01(n) located in Atlanta, Georgia and Mitchel Field, New York that are leased to the Borrower, and (ii) consents from lessors to the terms of such leasehold Mortgages as set forth in Section 5.01(n)(ii)(y) of the Credit Agreement unless specifically requested from time to time by the Administrative Agent. Section 2. Amendment to the Credit Agreement. The Credit Agreement is, effective as of the date of this Letter Amendment, hereby amended as follows: (a) Section 5.04 of the Credit Agreement is amended to delete Section (c) where it appears in the second instance therein in its entirety and to amend the subsection reference for "Excluded Assigned Agreements" from subsection "(d)" to subsection "(e)". Section 3. Effectiveness and Effect on the Loan Documents. (a) This Letter Amendment shall become effective as of the date first above written when, and only when, the Administrative Agent shall have received counterparts of this Letter Amendment executed by the Agents, NationsBank N.A., as Lender, the Borrower and the Guarantors. (b) On and after the effectiveness of this Letter Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder","hereof" or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Letter Amendment. (c) The Credit Agreement, the Notes and each of the other Loan Documents, as specifically amended by this Letter Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Obligations of the Loan Parties under the Loan Documents, in each case as amended by this Letter Amendment. The execution, delivery and effectiveness of this Letter Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under the Credit Agreement or any of the Loan Documents, nor constitute a waiver of any provision of the Credit Agreement or any of the Loan Documents. Section 4. Miscellaneous. This Letter Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Letter Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Letter Amendment. Section 5. Governing Law. This Letter Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, MEDE AMERICA CORPORATION, as Borrower By_______________________________ Title: Agreed as of the date first above written: NATIONSBANK, N.A., as Administrative Agent By:________________________________ Title: NATIONSBANK, N.A., as Lender By:________________________________ Title: 2 Section 5. Governing Law. This Letter Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, MEDE AMERICA CORPORATION, as Borrower By_______________________________ Title: Agreed as of the date first above written: NATIONSBANK, N.A., as Administrative Agent By:________________________________ Title: NATIONSBANK, N.A., as Lender By:________________________________ Title: 3 Section 5. Governing Law. This Letter Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, MEDE AMERICA CORPORATION, as Borrower By_______________________________ Title: Agreed as of the date first above written: NATIONSBANK, N.A., as Administrative Agent By:________________________________ Title: NATIONSBANK, N.A., as Lender By:________________________________ Title: 4 CONSENT OF GUARANTORS Each of the undersigned, as Guarantors under the Credit Agreement, hereby consents to the Letter Amendment and hereby confirms and agrees that notwithstanding the effectiveness of the Letter Agreement, the Guaranty is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects and the Collateral Documents to which such Guarantor is a party and all of the Collateral described therein do, and shall continue to, secure the payment of all of the Secured Obligations (as defined therein). MEDE AMERICA CORPORATION, OF OHIO, as Guarantor By___________________________ Title: HEALTHCARE INTERCHANGE, INC., as Guarantor By___________________________ Title: 5 EX-27.1 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF MEDE AMERICA CORPORATION FOR THE PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-30-1999 SEP-30-1998 3,551 0 12,845 983 250 16,331 10,925 6,040 64,726 14,099 0 31,823 0 57 (23,807) 64,726 12,006 12,006 0 0 11,986 0 1,089 (1,069) 16 (1,085) 0 0 0 (1,085) (.30) (.30)
EX-27.2 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF MEDE AMERICA CORPORATION FOR THE PERIOD ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-30-1999 DEC-31-1998 2,384 0 13,111 468 184 15,840 12,665 7,090 74,940 11,922 0 32,423 0 57 (25,288) 74,940 12,974 12,974 0 0 12,773 0 1,185 (984) 68 (1,052) 0 0 0 (1,052) (.29) (.29)
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