STOCK PURCHASE AGREEMENT
Exhibit 10.3
THIS STOCK PURCHASE AGREEMENT
(“Agreement”), dated as of the
8th day
of September, 2006, is made and entered into on the terms and
conditions hereinafter set forth, by and among ORION
HEALTHCORP, INC., a Delaware corporation (the
“Company”), PHOENIX LIFE INSURANCE
COMPANY, a New York corporation (“Phoenix”)
and XXXXXXXX PARTNERS IV, L.P., a Delaware limited
partnership (“Xxxxxxxx” and together with
Phoenix, “Investors”).
RECITALS:
1. The Company is a healthcare services organization that
provides outsourced business services to physicians.
2. The Company intends to raise capital in the amount of
$8,000,000 by issuing $4,650,000 of a new series of its common
stock (the “Equity Investment”) and $3,350,000
in subordinated debt (the “Note Purchase”).
3. Investors desire to acquire an aggregate of $4,650,000
of a new series of Class D Common Stock of the Company, par
value $0.001 per share (the “Class D Common
Stock”) on the terms and conditions hereinafter set
forth, and for the purpose hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the agreement of Investors
to make the Equity Investment, the mutual covenants and
agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used
in this Agreement, the following terms have the meanings
specified below:
“Acquisition Targets” shall mean Rand
Medical Billing, Inc., On Line Alternatives, Inc. and On Line
Payroll Services, Inc.
“Agreement” has the meaning set forth in the
Preamble.
“Xxxxxxxx” has the meaning set forth in
the Preamble.
“Xxxxxxxx Capital Shares” means
1,722,983 shares of Class B Common Stock issued in the
name of Xxxxxxxx Capital Corporation.
“Xxxxxxxx Notes” means (i) that
certain Convertible Subordinated Promissory Note dated
June 1, 2005 in the original principal amount of $225,000,
as amended on May 9, 2006 and August 8, 2006, and
(ii) that certain Convertible Subordinated Promissory Note
dated June 1, 2005 in the original principal amount of
$1,025,000, as amended on May 9, 2006 and August 8,
2006.
“Business Day” means any day other than
a Saturday, Sunday or day on which banks in New York City are
authorized or required by law to close.
“Capital Stock” means any and all
shares, interests or equivalents in capital stock (whether
voting or nonvoting, and whether common or preferred) of a
Person, including any and all warrants, rights or options to
purchase any of the foregoing.
“Closing” has the meaning set forth in
Section 4.1.
“Closing Date” has the meaning set forth
in Section 4.1.
“Class A Common Stock” means the
Class A Common Stock, par value $0.001, of the Company.
“Class B Common Stock” means the
Class B Common Stock, par value $0.001, of the Company.
“Class C Common Stock” means the
Class C Common Stock, par value $0.001, of the Company.
“Class D Common Stock” has the
meaning set forth in the Recitals.
“Class D Shares” has the meaning
set forth in Section 2.1.
“Commission” means the Securities and
Exchange Commission or any similar agency then having
jurisdiction to enforce the Securities Act or the Exchange Act.
“Company Board Recommendation” has the
meaning set forth in Section 3.1(cc).
“Company SEC Documents” has the meaning
set forth in Section 3.1(g).
“Equity Investment” has the meaning set
forth in the Recitals.
“Equity Investment Documents” means the
documents and agreements entered into in connection with the
Equity Investment.
“Exchange Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
of the Commission thereunder.
“Financial Statements” has the meaning
set forth in Section 3.1(g).
“Fiscal Year” means the Company’s
Fiscal Year, which is the period of twelve consecutive calendar
months ending on December 31.
“GAAP” means generally accepted
accounting principles in the United States applied on a
consistent basis.
“Governmental Authority” means any
federal, state, municipal, national, foreign or other
governmental department, commission, board, bureau, court,
agency or instrumentality or political subdivision thereof or
any entity or officer exercising executive, legislative,
judicial, regulatory or administrative functions of or
pertaining to any government or any court, in each case whether
associated with a state of the United States, the District of
Columbia or a foreign entity or government.
“Indemnified Party” has the meaning set
forth in Section 5.1(a).
“Investors” has the meaning set forth in
the Preamble.
“Lien” means any mortgage, pledge,
hypothecation, assignment, deposit arrangement, security
interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any financing or similar
statement or notice filed under the Uniform Commercial Code as
adopted and in effect in the relevant jurisdiction or other
similar recording or notice statute, and any lease in the nature
thereof).
“Losses” has the meaning set forth in
Section 5.1(a).
“Material Adverse Change” or
“Material Adverse Effect” means
(a) a material adverse change in, or a material adverse
effect upon, the business, assets, liabilities (actual or
contingent), operations or financial condition of a Person and
its Subsidiaries, taken as a whole; (b) a material adverse
change in, or a material adverse effect upon, the ability of a
Person and its Subsidiaries, taken as a whole, to perform the
material obligations under any Equity Investment Document; or
(c) a material adverse change in, or a material adverse
effect upon the legality, validity, binding effect or
enforceability against such Person of any Equity Investment
Document to which it is a party.
“Note Purchase” has the meaning set
forth in the Recitals.
“Note Purchase Documents” means the
documents and agreements entered into in connection with the
Note Purchase.
“Outstanding Class A Common Stock”
means, as of the close of business on the Business Day that
immediately precedes the Closing Date, the sum of (i) the
then-outstanding shares of Class A Common Stock,
(i) the number of shares of Class A Common Stock into
which the then-outstanding shares of Class B Common
Stock are convertible (excluding the Xxxxxxxx Capital Shares),
(iii) the number of shares of Class A Common Stock
into which the then-outstanding shares of Class C Common
Stock are convertible, (iv) the number of shares of
Class A Common Stock into which the Class D Shares
would be convertible, assuming that such shares were issued as
of such date, (v) the number of shares of Class A
Common Stock into which the Xxxxxxxx Notes are convertible,
(vi) the number of shares of Class A Common Stock
issuable upon exercise of the warrants and options of the
Company specified on Schedule 1.1, solely to the
extent that the exercise price of such warrants or options are
equal to or less than the closing price of the Class A
Common Stock as listed on the American Stock Exchange as of such
date and (vii) the total number of shares of Class A
Common Stock that have been granted as restricted stock units of
the Company as specified on Schedule 1.1.
“Person” means any corporation,
association, joint venture, partnership, limited liability
company, organization, business, individual, trust, government
or agency or political subdivision thereof or any other legal
entity.
“Phoenix” has the meaning set forth in
the Preamble.
“Properly Contested” means, in the case
of any taxes that are not paid as and when due or payable by
reason of the Company’s bona fide dispute concerning its
liability to pay same or concerning the amount thereof,
(i) such taxes are being properly contested in good faith
by appropriate proceedings promptly instituted and diligently
conducted; (ii) the Company has established appropriate
reserves as shall be required in conformity with GAAP;
(iii) the non-payment of such taxes will not have a
Material Adverse Effect on the Company; (iv) if the taxes
result from, or are determined by the entry, rendition or
issuance against the Company or any of its assets of a judgment,
writ, order or decree, execution on such judgment, writ, order
or decree is stayed pending a timely appeal or other judicial
review; and (vi) if such contest is abandoned, settled or
determined adversely (in whole or in part) to the Company, the
Company forthwith pays such taxes and all penalties, interest
and other amounts due in connection therewith.
“Proxy Statement” has the meaning set
forth in Section 2.4(a).
“Registration Rights Agreement” has the
meaning set forth in Section 2.3.
“Required Company Stockholder Approval”
has the meaning set forth in
Section 3.1(bb).
“Second Amended and Restated Certificate”
has the meaning set forth in
Section 2.1.
“Securities Act” means the Securities
Act of 1933, as amended, and the rules and regulations of the
Commission thereunder.
“Significant Contracts” has the meaning
set forth in Section 3.1(s).
“Special Committee” has the meaning set
forth in Section 3.1(bb).
“Subsidiary” means any corporation or
other entity of which more than fifty percent (50%) of the
issued and outstanding Capital Stock entitled to vote for the
election of directors or persons performing similar functions
(other than by reason of default in the payment of dividends or
other distributions) is at the time owned directly or indirectly
by a Person
and/or any
Subsidiary of such Person.
1.2 Terms Generally. The
definitions in Section 1.1 apply equally to both the
singular and plural forms of the terms defined. Whenever the
context may require, any pronoun includes the corresponding
masculine, feminine and neuter forms. The words
“include,” “includes” and
“including” are deemed to be followed by the phrase
“without limitation.” All references herein to
Articles, Sections, Exhibits and Schedules are deemed references
to Articles and Sections of, and Exhibits and Schedules to, this
Agreement unless the context shall otherwise require. Except as
otherwise expressly provided herein, any reference in this
Agreement to any Loan Document means such document as amended,
restated, supplemented or otherwise modified from time to time.
ARTICLE 2
PURCHASE
AND SALE; STOCKHOLDER APPROVAL
2.1 Sale and Issuance of the Class D
Shares. Subject to the terms and conditions
contained herein, on the Closing Date:
(a) Phoenix will pay to the Company Three Million Dollars
($3,000,000) and the Company will issue and sell to Phoenix that
number of shares of Class D Common Stock representing
twelve and one half percent (12.5%) of the Outstanding
Class A Common Stock; and
(b) Xxxxxxxx will pay to the Company One Million Six
Hundred Fifty Thousand Dollars ($1,650,000) and the Company will
issue and sell to Xxxxxxxx that number of shares of Class D
Common Stock representing six and eight hundred seventy five
one-thousandths percent (6.875%) of the Outstanding Class A
Common Stock.
The shares of Class D Common Stock being issued and sold to
Phoenix and Xxxxxxxx are collectively referred to in this
Agreement as the “Class D Shares”. The voting
powers, preferences and other rights of the Class D Common
Stock, and the qualifications, limitations or restrictions
thereof, are set forth in the proposed Second Amended and
Restated Certificate of Incorporation of the Company (the
“Second Amended and Restated Certificate”), a
draft copy of which is attached as Exhibit A to this
Agreement.
2.2 Reservation of
Shares. The Company shall at all times
reserve and keep available out of its authorized shares of
Class A Common Stock, solely for the purpose of the
issuance and delivery of the shares of Class A Common Stock
issuable upon conversion of the Class D Shares, the maximum
number of shares of Class A Common Stock that may be
issuable or deliverable thereupon.
2.3 Registration Rights. On
the Closing Date, the Company shall grant to Investor the right
to have the Class A Common Stock issuable upon conversion
of the Class D Shares registered under the Securities Act,
pursuant to the terms of a Registration Rights Agreement,
substantially in the form of Exhibit B attached
hereto (the “Registration Rights Agreement”).
2.4 Stockholder Approval.
(a) To the extent that stockholder approval of the issuance
of the Class D Shares
and/or the
issuance of the warrants as part of the Note Purchase is
required by the rules of the American Stock Exchange, as
promptly as practicable after the execution of this Agreement,
the Company will prepare and file with the Commission a proxy
statement setting forth the time and place for holding of a
special meeting of the stockholders of the Company for the
purpose of obtaining the Required Company Stockholder Approval
(the “Proxy Statement”). The Company will
respond promptly to any comments of the Commission and will use
all reasonable efforts to cause the Proxy Statement to be mailed
to the Company’s stockholders at the earliest practicable
time.
(b) The Company Board Recommendation shall be included in
the Proxy Statement, except that the Board of Directors of the
Company may withdraw or modify in a manner adverse to Investors
such recommendation only if the Special Committee determines, in
good faith, after consultation with outside legal counsel, that
such action is required in order for the directors of the
Company to comply with their fiduciary duties to the
stockholders of the Company.
2.5 Termination of Purchase
Right. Upon Closing and sale and issuance of
the Class D Shares, the right of Xxxxxxxx to purchase
shares of Class A Common Stock for cash in an amount up to
an aggregate of $3,000,000, as set forth in more detail in
Section 2.4 of that certain Amended and Restated Stock
Subscription Agreement, dated February 9, 2004, between the
Company and Xxxxxxxx, as amended, shall terminate.
ARTICLE 3
REPRESENTATIONS
AND WARRANTIES
3.1 The Company’s
Representations. In order to induce Investors
to enter into this Agreement, the Company hereby represents and
warrants to Investors that as of the date hereof and as of the
Closing Date:
(a) Legal Status. The Company is a
corporation duly formed and validly existing under the laws of
the State of Delaware. The Company has the corporate power to
own and operate its properties, to carry on its business as now
conducted and to enter into and to perform its obligations under
this Agreement and the Registration Rights Agreement. The
Company is duly qualified to do business and in good standing in
each state in which a failure to be so qualified would
reasonably be expected to have a Material Adverse Effect on the
Company.
(b) Authorization. The Company has
the requisite corporate power and authority to conduct its
business and affairs as currently conducted. Except for
obtaining the Required Company Stockholder Approval, the Company
has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement, without the
consent or approval of any other person, firm, governmental
agency or other legal entity. Except for obtaining the Required
Company Stockholder Approval and any notices of sale required to
be filed with the Commission under Regulation D of the
Securities Act, or such post-closing filings as may be required
under applicable federal or state securities laws, which will be
timely filed within the applicable periods therefor, the
execution and delivery of this Agreement, the issuance, sale and
delivery of the Class D Shares, the execution and delivery
of the Registration Rights Agreement, and the performance by the
Company of its obligations thereunder are within the corporate
powers of the Company and have been duly authorized by all
necessary corporate action properly taken, and the Company has
received all necessary governmental approvals, if any, that are
required. The officer(s) executing this Agreement and the
Registration Rights Agreement are duly authorized to act on
behalf of the Company.
(c) Validity and Binding
Effect. This Agreement and the Registration
Rights Agreement are the legal, valid and binding obligations of
the Company enforceable in accordance with their respective
terms, subject to limitations imposed by bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of
creditors generally or the application of general equitable
principles.
(d) Capitalization. Attached
hereto as Schedule 3.1(d) is a table showing the
authorized and issued Capital Stock of the Company, as of the
date hereof, on a fully diluted basis. As of the date hereof,
the Company does not have outstanding any interests or
securities convertible or exchangeable for any of its Capital
Stock or containing any profit participation features, and does
not have outstanding any rights or options to subscribe for or
to purchase its Capital Stock or any stock appreciation rights
or phantom stock plans, except as set forth on
Schedule 3.1(d). Schedule 3.1(d)
accurately sets forth the following with respect to all
outstanding options and rights to acquire any of the
Company’s Capital Stock: (i) the total number of
shares (or equivalent) issuable upon exercise of all outstanding
options; (ii) the range of exercise prices for all such
outstanding options; (iii) the number of shares (or
equivalent) issuable, the exercise price and the expiration date
for each such outstanding option; and (iv) with respect to
all outstanding options, warrants and rights to acquire the
Company’s Capital Stock, the number of shares (or
equivalent) covered, the exercise price and the expiration date.
The Company is not subject to any obligation (contingent or
otherwise) to repurchase, redeem, retire or otherwise acquire
any of its Capital Stock or any warrants, options or other
rights to acquire its Capital Stock, except as set forth on
Schedule 3.1(d). The Company has not violated any
applicable federal or state securities laws in connection with
the offer, sale or issuance of any of its Capital Stock, and the
offer, sale and issuance of the Class D Shares hereunder do
not require registration under the Securities Act of 1933, as
amended, or any applicable state securities laws.
(e) No Conflicts. Except as set
forth on Schedule 3.1(e) hereto, consummation of the
transactions contemplated hereby and the issuance of the
Class D Shares do not conflict with, and will not result in
any breach of, or constitute a default or trigger a Lien under,
(i) the certificate of incorporation or bylaws of the
Company, (ii) any mortgage, security deed or agreement,
deed of trust, lease, bank loan or credit agreement, license,
franchise or any other material instrument or agreement to which
the Company or any of its
Subsidiaries is a party or by which the Company, any of its
Subsidiaries or their respective properties may be bound or
affected or to which the Company or any of its Subsidiaries has
not obtained an effective waiver, except where such event would
not reasonably be expected to have a Material Adverse Effect on
the Company or (iii) any federal or state judgment, order,
writ, decree, statute, rule or regulation applicable to the
Company.
(f) Litigation. Except as set
forth on Schedule 3.1(f) hereto, there are no actions,
suits, investigations, criminal prosecutions, civil
investigative demands, impositions of civil fines or penalties,
arbitrations, administrative hearings or other proceedings
pending, or, to the knowledge of the Company, threatened against
or affecting the Company or any of the Company’s property,
any of its Subsidiaries or any property of any of such
Subsidiaries, which, if adversely determined, would reasonably
be expected to have a Material Adverse Effect on the Company, or
involving the validity or enforceability of any of the Equity
Investment Documents at law or in equity, or before any
Governmental Authority. Neither the Company nor any Subsidiary
is subject to any order, writ, injunction, decree or demand of
any court or any Governmental Authority.
(g) SEC Filings. The Company has
furnished or made available to Investor true and complete copies
of all reports or registration statements it has filed with the
Commission under the Securities Act and the Exchange Act for all
periods subsequent to December 14, 2004, all in the form so
filed (collectively, the “Company SEC
Documents”). As of their respective filing dates, the
Company SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as
applicable, and, as of its respective filing date, no Company
SEC Document filed under the Exchange Act contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances in
which they were made, not misleading, except to the extent
corrected by a subsequently filed document with the Commission.
No Company SEC Document filed under the Securities Act contained
an untrue statement of material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading at the time such Company
SEC Documents became effective under the Securities Act. The
Company’s financial statements, including the notes
thereto, included in the Company SEC Documents (the
“Financial Statements”) comply as to form in
all material respects with applicable accounting requirements
and with the published rules and regulations of the Commission
with respect thereto, have been prepared in accordance with GAAP
and present fairly the Company’s consolidated financial
position at the dates thereof and of its operations and cash
flows for the periods specified (subject, in the case of
unaudited statements, to normal audit adjustments and footnote
disclosures). Since the date of the most recent Company SEC
Document, the Company has not effected any change in any method
of accounting or accounting practice, except for any such change
required because of a concurrent change in GAAP.
(h) Other Agreements; No
Defaults. Except as set forth in the Company
SEC Documents or on Schedule 3.1(h), neither the
Company nor any of its Subsidiaries is a party to any indenture,
loan or credit agreement, lease or other agreement or
instrument, or subject to any charter or corporate restriction,
that, if a default occurs thereunder, such default would
reasonably be expected to result in a Material Adverse Change to
the Company. Except as set forth in the Company SEC Documents or
on Schedule 3.1(h), neither the Company nor any of
its Subsidiaries is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument material to its
business to which it is a party, including but not limited to
this Agreement, which would reasonably be expected to result in
a Material Adverse Change to the Company, and no other default
or event has occurred and is continuing that with notice or the
passage of time or both would constitute a default or event of
default under any of the same.
(i) Compliance With Law. The
Company and each of its Subsidiaries have obtained all licenses,
permits, approvals and authorizations necessary or required in
order to conduct their respective business and affairs as
heretofore conducted (other than where the failure to so obtain
would not reasonably be expected to have a Material Adverse
Effect on the Company) and has ensured that all required
licenses are in full force and effect on the Closing Date and
have not been revoked, suspended or otherwise limited. The
Company and each of its Subsidiaries is in compliance with all
laws, regulations, decrees and orders applicable to it
(including but not limited to laws, regulations, decrees and
orders relating to environmental, occupational, and health
standards and controls, antitrust, monopoly, restraint of trade
or unfair competition), except to the extent that
any noncompliance, in the aggregate, cannot reasonably be
expected to have a Material Adverse Effect on the Company.
(j) Statements Not False or
Misleading. No representation or warranty
given as of the date hereof by the Company contained in this
Agreement or any schedule attached hereto or any statement in
any document, certificate or other instrument furnished or to be
furnished by the Company to Investor pursuant hereto, taken as a
whole, contains or will (as of the time so furnished) contain
any untrue statement of a material fact, or omits or will (as of
the time so furnished) omit to state any material fact which is
necessary in order to make the statements contained therein not
misleading.
(k) Valid Issuance of Class D
Shares. The Class D Shares that are
being purchased and acquired by Investors hereunder, when
issued, sold and delivered by the Company in accordance with the
terms of this Agreement for the consideration expressed herein,
will be duly and validly issued, fully paid and nonassessable,
and will be free of restrictions on transfer other than
restrictions on transfer under applicable state and federal
securities laws, including containing the restrictive legend set
forth in Section 3.2(i) hereof.
(l) Fees/Commissions. Except for
fees and expenses that may be owed to Xxxxxxxx, Inc., the
Company has not agreed to pay any finder’s fee, commission,
origination fee or other fee or charge to any person or entity
with respect to the Note Purchase or other transactions
contemplated hereunder.
(m) Limited Offering of
Shares. Assuming the accuracy of the
representations and warranties of Investors contained in
Section 3.2 hereof, the offer and sale of the
Class D Shares is not required to be registered pursuant to
the provisions of Section 6 of the Securities Act or the
registration or qualification provisions of the blue sky laws of
any state. Neither the Company nor any agent on its behalf has
solicited or will solicit any offers to sell or has offered to
sell or will offer to sell all or any part of the Class D
Shares or any other similar securities to any Person so as to
bring the sale of the Class D Shares by the Company within
the registration provisions of the Securities Act or any state
securities laws.
(n) Subsidiaries. Schedule 3.1(n)
hereto is a complete list of each corporation, partnership,
joint venture, limited liability company, or other business
organization in which the Company or any Subsidiary of the
Company owns, directly or indirectly, any Capital Stock or other
equity interest, or with respect to which the Company or any
Subsidiary of the Company, alone or in combination with others,
is in a control position, which list shows the jurisdiction of
incorporation or other organization and the percentage of stock
or other equity interest of each Subsidiary owned by the Company
or such Subsidiary. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and is duly qualified to
transact business as a foreign corporation (or other entity) and
is in good standing (or equivalent) in the jurisdictions listed
on Schedule 3.1(n), which are the only jurisdictions
where the properties owned or leased or the business transacted
by it makes such licensing or qualification to do business as a
foreign corporation (or other entity) necessary, and no other
jurisdiction has demanded, requested or otherwise indicated that
(or inquired whether) it is required so to qualify. The
outstanding Capital Stock of each Subsidiary of the Company is
validly issued, fully paid and nonassessable. Except as set
forth on Schedule 3.1(n), the Company and the
Subsidiaries have good and valid title to the equity interests
in the Subsidiaries shown as owned by each of them on
Schedule 3.1(n), free and clear of all liens,
claims, charges, restrictions, security interests, equities,
proxies, pledges or encumbrances of any kind. Except where
otherwise indicated herein or unless the context otherwise
requires, any reference to the Company herein shall include the
Company and all of its Subsidiaries.
(o) Trademarks, Patents,
Etc. Schedule 3.1(o) is an
accurate and complete list of all patents, trademarks, trade
names, trademark registrations, service names, service marks,
copyrights, licenses, formulae and applications therefor owned
by the Company or any of its Subsidiaries or used or required by
the Company or any of its Subsidiaries in the operation of its
business, title to each of which is, except as set forth on
Schedule 3.1(o) hereto, held by the Company or a
Subsidiary of the Company free and clear of all adverse claims,
liens, security agreements, restrictions or other encumbrances.
Except as set forth on Schedule 3.1(o), the Company
and its Subsidiaries own or possess adequate (and will use their
best efforts to obtain as expediently as possible any
additional) licenses or other rights to use all patents,
trademarks, trade names, service marks, trade secrets or other
intangible property rights and know how necessary to entitle the
Company
or such Subsidiary to conduct its business as presently being
conducted. There is no pending infringement action, lawsuit,
claim or complaint which asserts that the Company’s or any
such Subsidiary’s operations violate or infringe the rights
or the trade names, trademarks, trademark registrations, service
names, service marks or copyrights of others with respect to any
apparatus or method of the Company, any of its Subsidiaries or
any adversely held trademarks, trade names, trademark
registrations, service names, service marks or copyrights, and
neither the Company nor any of its Subsidiaries is in any way
making use of any confidential information or trade secrets of
any person, except with the consent of such person. Except as
set forth on Schedule 3.1(o), the Company and each
of its Subsidiaries have taken reasonable steps to protect its
proprietary information (except disclosure of source codes
pursuant to licensing agreements) and is the lawful owner of the
proprietary information free and clear of any claim of any third
party. As used herein, “proprietary information”
includes without limitation, (i) any computer programming
language, software, hardware, firmware or related documentation,
inventions, technical and nontechnical data related thereto and
(ii) other documentation, inventions and data related to
patterns, plans, methods, techniques, drawings, finances,
customer lists, suppliers, products, special pricing and cost
information, designs, processes, procedures, formulas, research
data owned or used by the Company or any of its Subsidiaries or
marketing studies conducted by the Company or any of its
Subsidiaries, all of which the Company considers to be
commercially important and competitively sensitive and which
generally has not been disclosed to third parties.
(p) Debt. Schedule 3.1(p)
is a complete and correct list of all credit agreements,
indentures, purchase agreements, promissory notes and other
evidences of indebtedness, guaranties, capital leases and other
instruments, agreements and arrangements presently in effect
providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of
credit or for acceptance financing) in respect of which the
Company, any of its Subsidiaries or any of their respective
properties is in any manner directly or contingently obligated,
and the maximum principal or face amounts of the credit in
question that are outstanding and that can be outstanding are
correctly stated, and all Liens of any nature given or agreed to
be given as security therefor are correctly described or
indicated on Schedule 3.1(p).
(q) Taxes. The Company and each of
its Subsidiaries has filed or caused to be filed all tax returns
that are required to be filed (except for returns that have been
appropriately extended by it), and has paid, or will pay when
due, all taxes shown to be due and payable on said returns and
all other taxes, impositions, assessments, fees or other charges
imposed on it by any Governmental Authority, prior to any
delinquency with respect thereto (other than taxes, impositions,
assessments, fees and charges currently being Properly
Contested).
(r) Certain Transactions. Except
as set forth on Schedule 3.1(r) hereto, no officer,
director or, to the knowledge of the Company, any member of
their immediate families, nor any Subsidiary or affiliate of the
Company is, directly or indirectly, interested in any material
contract or agreement with the Company or any Subsidiary. Except
as set forth on Schedule 3.1(r) hereto, the Company
is not indebted, directly or indirectly, to any of its
equityholders, officers or directors or, to the knowledge of the
Company, their respective spouses or children, in any amount
whatsoever, and none of said equityholders, officers or
directors or, to the knowledge of the Company, any members of
their immediate families, are indebted to any of the Company or
any of its Subsidiaries or have any direct or indirect ownership
interest in any firm or corporation with which the Company or
any of its Subsidiaries has a business relationship. Neither the
Company nor any of its Subsidiaries is a guarantor or indemnitor
of any indebtedness of any other person, firm, corporation or
other legal entity.
(s) Significant
Contracts. Schedule 3.1(s) is a
complete and correct list of all contracts, agreements and other
documents pursuant to which the Company or any of its
Subsidiaries receives revenues in excess of $500,000 per
Fiscal Year or has committed to make expenditures in excess of
$500,000 per Fiscal Year (collectively, the
“Significant Contracts”). Each such Significant
Contract is in full force and effect as of the date hereof and
the Company does not know of any reason why any such Significant
Contract would not remain in full force and effect pursuant to
the terms thereof.
(t) Environmental. Except as set
forth on Schedule 3.1(t) or the reports listed therein,
the Company and each of its Subsidiaries has duly complied with,
and its business, operations, assets, equipment, property,
leaseholds or other facilities are in material compliance with,
the provisions of all applicable federal, state and
local environmental, health, and safety laws, codes and
ordinances, and all rules and regulations promulgated
thereunder. Except as set forth on Schedule 3.1(t)
or the reports listed therein, neither the Company nor any
Subsidiary has received written notice of, or knows of, any
violations by the Company or any of its Subsidiaries of any
federal, state or local environmental, health or safety laws,
codes or ordinances, and any rules or regulations promulgated
thereunder with respect to its businesses, operations, assets,
equipment, property, leaseholds, or other facilities.
(u) ERISA. Neither the Company nor
any Subsidiary of the Company has any pension plan that is
sponsored, maintained or contributed to by the Company and that
is subject to the requirements of Title IV of the Employee
Retirement Income Security Act of 1974, 29 U.S.C.
§§ 1001-1461,
as amended from time to time. The Company and each of its
Subsidiaries have operated and administered each of its welfare
and pension plans in compliance with all requirements of the
Employee Retirement Income Security Act of 1974, as amended from
time to time, except for such instances of noncompliance as have
not resulted in and could not reasonably be expected to have a
Material Adverse Effect on the Company.
(v) Title to Properties. The
Company and each of its Subsidiaries have good and marketable
title to, or valid leasehold interests in, all its real
properties and good title to its other assets, free and clear of
all liens other than those liens set forth on
Schedule 3.1(v).
(w) Registration Rights. Except as
set forth on Schedule 3.1(w) hereto, except as
described in the Registration Rights Agreement, the Company is
not under any obligation to register under the Securities Act,
or the Trust Indenture Act of 1939, as amended, any of its
presently outstanding securities or any of its securities that
may subsequently be issued.
(x) Employees. Neither the Company
nor any of its Subsidiaries has had any current strikes, work
stoppages or similar disputes which have resulted in or which
the Company reasonably believes would be expected to have a
Material Adverse Effect on the Company.
(y) Location of Properties, Places of
Business. The only jurisdictions in which the
Company or any of its Subsidiaries maintains any tangible
personal property or carries on business are as listed on
Schedule 3.1(y) hereto. All xxxxxxxx for the supply
of goods and services by the Company and its Subsidiaries are
made from, and require payment to be made to, the chief
executive office of the Company. Except as set forth on
Schedule 3.1(y), neither the Company nor any of its
Subsidiaries has, during the five years preceding the date of
this Agreement, been known as or used any other corporate, trade
or fictitious name, or acquired all or substantially all of the
assets, Capital Stock or operating units of any Person. Neither
the Company nor any of its Subsidiaries has, during the five
years preceding the date of this Agreement, had a business
location at any address other than addresses set forth on
Schedule 3.1(y).
(z) Insurance. The Company and
each of its Subsidiaries carries or is covered by insurance in
such amounts and covering such risks as is adequate for the
conduct of its business and the value of its properties and as
is customary for companies engaged in similar businesses in
similar industries.
(aa) Real
Properties. Schedule 3.1(aa)
hereof sets forth, the address or tax parcel number of each
parcel of real property in which the Company or any of its
Subsidiaries has any estate or interest, together with a
description of the estate or interest (e.g., fee simple,
leasehold, etc.) held by the Company or such Subsidiary. The
Company further represents and warrants that with respect to
each parcel of such real property, neither it nor any of its
Subsidiaries has entered into any leases, subleases or other
arrangements for occupancy of space within such parcel, other
than the leases described in Schedule 3.1(aa) hereof, and
(v) each lease, sublease, or other arrangement in
Schedule 3.1(aa) hereof, is in full force and
effect, and, except as disclosed in Schedule 3.1(aa)
hereof, or as otherwise disclosed to Investor in writing after
the date hereof, there is not continuing any material default on
the part of the Company or any of its Subsidiaries with respect
to each lease, sublease, or other arrangement.
(bb) Fairness Opinion. The Special
Committee of the Company has received the written opinion of
Valuation Research Corporation, an independent financial advisor
to the Company, to the effect that, as of the date of this
Agreement, the price to be paid for the Class D Shares is
fair, from a financial point of view, to the
Company’s stockholders. The Company has provided a copy of
such opinion to Investors, and such opinion has not been
withdrawn or revoked or otherwise modified in any material
respect.
(cc) Special Committee; Board Recommendation;
Required Vote.
(i) The special committee of independent directors of the
Board of Directors of the Company (the “Special
Committee”), at a meeting duly called and held, has, by
unanimous vote of its members, (A) determined that this
Agreement and the transactions contemplated by this Agreement
are advisable and fair to and in the best interests of the
stockholders of the Company, and (B) resolved to recommend
that the stockholders of the Company approve the issuance of the
Class D Shares pursuant to this Agreement (the
“Company Board Recommendation”).
(ii) The affirmative vote of (x) holders of (1) a
majority of the voting power of the outstanding shares of the
Company’s common stock, voting together as a single class,
and (2) a majority of the voting power of the outstanding
shares of the Class B Common Stock and Class C Common
Stock, voting as separate classes, to approve filing of the
Second Amended and Restated Certificate and (y) holders of
a majority of the voting power of the outstanding shares of the
Company’s common stock, voting together as a single class
to approve the issuance of the Class D Shares
(collectively, the “Required Company Stockholder
Approval”), are the only votes of the holders of any
class or series of Capital Stock of the Company necessary to
approve the issuance of the Class D Shares pursuant to this
Agreement.
(dd) Foreign Assets Control Regulations,
Etc.
(i) Except as a result of the identity or status of
Investors, neither the sale of the Class D Shares by the
Company hereunder nor its use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of
the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) or any enabling legislation or executive order relating
thereto.
(ii) Neither the Company nor any of its Subsidiaries is a
Person described or designated in the Specially Designated
Nationals and Blocked Persons List of the Office of Foreign
Assets Control or in Section 1 of Executive Order
No. 13,224 of September 24, 2001, Blocking Property
and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit or Support Terrorism, 66 U.S. Fed. Reg. 49, 079
(2001), as amended and is not a Person that, to its knowledge,
engages in any dealings or transactions with any such Person.
(ee) Status under 1940 Act. The
Company is not subject to regulation under the Investment
Company Act of 1940, as amended.
3.2 Representations of Each
Investor. Each Investor represents and
warrants to the Company (as to itself only) that as of the date
hereof and as of the Closing Date:
(a) Legal Status;
Authorization. Such Investor is (a) a
corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and
(b) has the full power and authority to execute, deliver
and perform its obligations under this Agreement and the
Registration Rights Agreement and to consummate the transactions
contemplated by this Agreement and the Registration Rights
Agreement. The execution, delivery and performance by it of this
Agreement and the Registration Rights Agreement and (a) has
been duly authorized by all necessary action and (b) does
not contravene the terms of its organizational documents, or any
amendment thereof.
(b) Validity and Binding
Effect. This Agreement and the Registration
Rights Agreement are the legal, valid and binding obligations of
such Investor enforceable in accordance with their respective
terms, subject to limitations imposed by bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of
creditors generally or the application of general equitable
principles.
(c) Fees/Commissions. Such
Investor has not agreed to pay any finder’s fee,
commission, origination fee or other fee or charge to any person
or entity with respect to the Equity Investment or other
transactions contemplated hereunder.
(d) Accredited Investor; Purchase Entirely for Own
Account. Such Investor is an “accredited
investor” as that term is defined in Rule 501 of the
Securities Act and, in making the purchase contemplated herein,
it is specifically understood and agreed that such Investor is
acquiring the Class D Shares for the purpose of investment
and not with a view towards the sale or distribution thereof
within the meaning of the Securities Act.
(e) Restricted Securities. Such
Investor understands that the Class D Shares will not be
registered under the Securities Act, by reason of their issuance
by the Company in a transaction exempt from the registration
requirements of the Securities Act, and that it must hold the
Class D Shares indefinitely unless a subsequent disposition
thereof is registered under the Securities Act and applicable
state securities laws or is exempt from registration.
(f) Receipt of Information. Such
Investor has received all the information it considers necessary
or appropriate for deciding whether to purchase the Class D
Shares. Such Investor further represents that it has had an
opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of
the Class D Shares, the business, properties, prospects and
financial condition of the Company and to obtain additional
information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information
furnished to it or to which it had access. The foregoing,
however, does not limit or modify the representations and
warranties of the Company in Section 3.1 of this
Agreement or the right of such Investor to rely thereon. Such
Investor learned of this investment opportunity as a result of
direct contact by the Company or an agent of the Company and not
by means of advertising, publication or other written materials.
(g) Investment Experience. Such
Investor is experienced in evaluating and investing in
securities, of companies in the development state and
acknowledges that it is able to fend for itself, can bear the
economic risk of its investment, and has such knowledge and
experience in financial and business matters that it is capable
of evaluating the merits and risks of the investment in the
Class D Shares. Such Investor also represents that it has
not been organized for the purpose of purchasing the
Class D Shares.
(h) Reliance Upon Investor’s
Representations. Such Investor understands
that the Class D Shares are not registered under the
Securities Act on the ground that the sale provided for in this
Agreement and the issuance of the Class D Shares hereunder
is exempt from registration under the Securities Act pursuant to
Section 4(2) thereof
and/or
Regulation D thereunder, and that the Company’s
reliance on such exemption is based on the representations of
Investors set forth herein. Such Investor realizes that the
basis for the exemption may not be present if, notwithstanding
such representations, such Investor has in mind merely
purchasing the Class D Shares being purchased by it for a
fixed or determinable period in the future, or for a market
rise, or for sale if the market does not rise. Such Investor
does not have any such intention.
(i) Legends. The certificate
evidencing the Class D Shares shall be endorsed with the
legend substantially in the form set forth below, and such
Investor covenants that, except to the extent such restrictions
are waived by the Company, such Investor shall not transfer the
securities represented by any such certificate without complying
with the restrictions on transfer described in the legend
endorsed on such certificate:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD
ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE
COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY (WHICH IN THE CASE OF ANY FINANCIAL INSTITUTIONAL HOLDER
HEREOF MAY BE ITS INTERNAL COUNSEL) THAT REGISTRATION AND
QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT
REQUIRED.”
ARTICLE 4
CLOSING;
CONDITIONS TO CLOSING
4.1 Closing. The purchase
and sale of the Class D Shares shall take place at the
offices of the Company, 0000 Xxx Xxxxxxx Xxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxx 00000 (the “Closing”) on the
third
(3rd)
Business Day after the satisfaction or waiver of the conditions
set forth in this Article 4 (other than any such
conditions that by their terms cannot be satisfied until the
Closing Date, which conditions shall be required to be so
satisfied or waived on the Closing Date), unless another time or
date is agreed to in writing by the parties hereto (the
“Closing Date”). Conditions precedent set forth
in Section 4.2 below may be waived solely by both
Investors in their sole discretion. Conditions precedent set
forth in Section 4.3 below may be waived solely by
the Company in its sole discretion. If the Agreement shall have
been terminated pursuant to Section 6.1 hereof prior
to the Closing Date, no Closing shall occur.
4.2 Conditions to Investors’
Obligations. Investors’ obligations to
purchase and pay for the Class D Shares at the Closing are
subject to Investors determining, in their good faith
discretion, that the following conditions have been satisfied
(or Investors waiving, in their sole discretion, in writing the
conditions that they have determined have not been satisfied),
on or before the Closing Date:
(a) No Material Adverse
Change. Since June 30, 2006, there has
not occurred a Material Adverse Change to the Company or any
Acquisition Target.
(b) Representations, Warranties and
Covenants. Subject to the second sentence of
this clause (b), the representations and warranties of the
Company contained in Article 3 shall be true and
correct in all material respects (without duplication of
materiality qualifiers) on and as of the date when made and on
and as of the Closing Date. The Company shall have delivered to
each of the Investors all revisions to the representations in
Sections 3.1(d), (g), (n), (o), (p), (q), (r), (s), (t),
(v), (x), (y), and (aa) to give effect to the
consummation of the Note Purchase and the acquisition of
the Acquisition Targets, and such revisions shall be in form and
substance satisfactory to the Investors in their good faith
discretion. In addition, the Company will have performed, or
shall have caused to be performed, all agreements, obligations
and covenants required herein to be performed by it on or prior
to the Closing Date.
(c) Consummation of the Note Purchase and the
Acquisitions. On or prior to the Closing
Date, the Note Purchase and the acquisition of the
Acquisition Targets shall have been consummated in accordance
with the terms and conditions of the Note Purchase
Documents, the applicable acquisition agreements and all
applicable laws. On or prior to the Closing Date, the Company
shall have delivered to each Investor pro forma financial
statements of the Company and its Subsidiaries giving effect to
the acquisition of the Acquisition Targets, the consummation of
the Equity Investment and the Note Purchase, the closing of
the senior financing provided for in Section 4.2(h)
below, the retirement of the Xxxxxxxx Capital Shares and the
conversion of the Xxxxxxxx Notes, the Class B Common Stock
and the Class C Common Stock, and such pro forma financial
statements shall be satisfactory to each Investor.
(d) Consent of Third Parties, Governmental
Authorities, etc. The Company shall have
presented evidence satisfactory to Investors to the effect that
(i) all consents, waivers and amendments required in
connection with the consummation of the transactions related to
this Agreement and the transactions contemplated hereby have
been obtained, (ii) the transactions related to issuance of
the Class D Shares shall not violate, or constitute or
trigger the occurrence of a default or an event of default with
respect to, any contractual obligations of the Company or any of
its Subsidiaries and (iii) neither the Company nor any of
its Subsidiaries is in violation of or default under or with
respect to any of its material contractual obligations.
(e) Stockholder Approval. The
Company shall have received the Required Company Stockholder
Approval for the filing of the Second Amended and Restated
Certificate and the consummation of the Equity Investment and
the transactions contemplated by this Agreement on the terms and
conditions approved by the Company Board Recommendation and such
Company Stockholder Approval shall not be subject to any
injunction or court, stock exchange or administrative proceeding
challenging its legality, validity or effectiveness.
(f) Filing of Charter. The Company
shall have filed the Second Amended and Restated Certificate
with, and it shall have been accepted by, the Secretary of State
of Delaware.
(g) Reservation of Shares. The
Company shall have taken all corporate actions to reserve a
sufficient number of shares of the Class A Common Stock for
issuance on conversion of the Class D Shares.
(h) Senior Financing. On or prior
to the Closing Date, the Company shall have consummated a
transaction with one or more lenders for the provision of not
less than $6,500,000 of senior secured financing.
(i) Conversions; Repurchase. On or
before Closing, Xxxxxxxx shall have converted the entire unpaid
principal amount of, and any accrued but unpaid interest on, the
Xxxxxxxx Notes into shares of Class A Common Stock. On or
before Closing, the Company shall have acquired all of the
Xxxxxxxx Capital Shares and have retired the same
and/or all
of the outstanding shares of Class B Common Stock and
Class C Common Stock shall have been either converted into
shares of Class A Common Stock or otherwise redeemed,
repurchased or purchased by the Company.
(j) Equity
Investment. Contemporaneously with Closing,
each other Investor shall have consummated the Equity Investment
in all material respects in accordance with the terms and
conditions of the Equity Investment Documents and all applicable
laws.
(k) Certain Documents. Each of the
Investors shall have received the following closing documents,
in form and substance satisfactory to such Investor, all of
which shall, except as specified below, be fully executed
originals, and shall be in full force and effect:
(i) stock certificates representing the Class D Shares
to be acquired by such Investor hereunder; a Private Placement
Number issued by Standard & Poor’s CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of
the National Association of Insurance Commissioners) shall have
been obtained for each such stock certificate;
(ii) the Registration Rights Agreement, duly executed by
the Company;
(iii) a certificate of the Secretary of State of Delaware
as to the good standing of the Company in such jurisdiction
dated as of a date within five (5) Business Days prior to
the Closing Date;
(iv) a certificate, dated as of the Closing Date, of the
secretary of the Company certifying (A) that the copies of
the certificate of incorporation and the bylaws of the Company,
attached thereto and as amended to date, are true, complete and
correct, (B) that the copies of the resolutions of the
directors of the Company, authorizing the transactions
contemplated by this Agreement and issuance of the Class D
Shares are true, complete and correct, (C) as to the
incumbency of each Person executing this Agreement, and
(D) as to any other matters reasonably requested by
Investors;
(v) a certificate from an officer of the Company, in form
and substance satisfactory to Investors, with respect to the
satisfaction of the requirements under Sections 4.2(a),
(b), (c), (e), (f), (g), (h) and (i) above;
(vi) a legal opinion of the Company’s counsel, in form
and substance satisfactory to Investors; and
(vii) such other documents as such Investor may reasonably
request in connection with this Agreement, and each such
document shall be in form and substance reasonably satisfactory
to such Investor. All fees and expenses of such Investor
required to be paid pursuant to Section 7.2 hereof
shall have been paid. Any withdrawals or modifications referred
to in Section 2.4(b) hereof shall be satisfactory to
such Investor in its sole discretion.
4.3 Conditions to the Company’s
Obligations. The Company’s obligations
to issue and sell the Class D Shares at the Closing are
subject to the Company determining, in its reasonable
discretion, that the following conditions have been satisfied
(or the Company waiving in writing the conditions that it has
determined have not been satisfied), on or before the Closing
Date:
(a) Representations, Warranties and
Covenants. The representations and warranties
of each Investor contained in Article 3 shall be true and
correct in all material respects (without duplication of
materiality
qualifiers) on and as of the Closing Date. In addition,
Investors will have performed, or shall have caused to be
performed, all agreements, obligations and covenants required
herein to be performed by them on or prior to the Closing Date.
(b) Consummation of the
Note Purchase. On or prior to the
Closing Date, the Note Purchase shall have been consummated
in all material respects in accordance with the terms and
conditions of the Note Purchase Documents and all applicable
laws.
(c) Consent of Third Parties, Governmental
Authorities, etc. The Company shall have
received evidence reasonably satisfactory to it to the effect
that (i) all material consents, waivers and amendments
required in connection with the consummation of the transactions
related to this Agreement and the transactions contemplated
hereby have been obtained, (ii) the transactions related to
issuance of the Class D Shares shall not violate, or
constitute or trigger the occurrence of an event of default with
respect to, any contractual obligations of the Company or any of
its Subsidiaries and (iii) neither the Company nor any of
its Subsidiaries is in violation of or default under or with
respect to any of its material contractual obligations.
(d) Stockholder Approval. The
Company shall have received the Required Company Stockholder
Approval for the filing of the Second Amended and Restated
Certificate and the consummation of the Equity Investment and
the transactions contemplated by this Agreement on the terms and
conditions approved by the Company Board Recommendation and such
Company Stockholder Approval shall not be subject to any
injunction or court, stock exchange or administrative proceeding
challenging its legality, validity or effectiveness.
(e) Filing of Charter. The Company
shall have filed the Second Amended and Restated Certificate
with, and it shall have been accepted by, the Secretary of State
of Delaware.
(f) Conversions; Repurchase. On or
before Closing, Xxxxxxxx shall have converted the entire unpaid
principal amount of, and any accrued but unpaid interest on, the
Xxxxxxxx Notes into shares of Class A Common Stock. On or
before Closing, the Company shall have acquired all of the
Xxxxxxxx Capital Shares and have retired the same
and/or all
of the outstanding shares of Class B Common Stock and
Class C Common Stock shall have been either converted into
shares of Class A Common Stock or otherwise redeemed,
repurchased or purchased by the Company.
(g) Certain Documents. The Company
shall have received the following closing documents, in form and
substance satisfactory to the Company, all of which shall,
except as specified below, be fully executed originals, and
shall be in full force and effect:
(i) the Registration Rights Agreement, duly executed by
Investors; and
(ii) such other documents as the Company may reasonably
request in connection with this Agreement, and each such
document shall be in form and substance reasonably satisfactory
to the Company.
ARTICLE 5
INDEMNIFICATION;
SURVIVAL
5.1 General Indemnification.
(a) The Company, without limitation as to time, will defend
and indemnify each of the Investors and their respective
officers, directors, managers, employees, attorneys and agents
(each, an “Indemnified Party”) against, and
hold each Indemnified Party harmless from, all losses, claims,
damages, liabilities, costs (including the costs of preparation
and attorneys’ fees and expenses) (collectively, the
“Losses”) incurred by any Indemnified Party as
a result of, or arising out of, or relating to (A) any
misrepresentation or breach of any representation or warranty
made by the Company herein or (B) any breach of any
covenant or agreement of the Company contained in this
Agreement, other than in either case any Losses resulting from
action on the part of such Indemnified Party to the extent they
are a result of such party’s gross negligence or willful
misconduct. The Company agrees to reimburse each Indemnified
Party promptly for all such Losses as they are incurred by such
Indemnified Party in connection
with the investigation of, preparation for or defense of any
pending or threatened claim or any action or proceeding arising
therefrom. The obligations of the Company under this paragraph
will survive any transfer of the Class D Shares and the
termination of this Agreement. In the event that the foregoing
indemnity is unavailable or insufficient to hold an Indemnified
Party harmless, then the Company will contribute to amounts paid
or payable by such Indemnified Party in respect of such
Indemnified Party’s Losses in such proportions as
appropriately reflect the relative benefits received by and
fault of the Company and such Indemnified Party in connection
with the matters as to which such Losses relate and other
equitable considerations.
(b) If any action, proceeding or investigation is
commenced, as to which any Indemnified Party proposes to demand
indemnification, it shall notify the Company with reasonable
promptness; provided, however, that any failure by
such Indemnified Party to notify the Company shall not relieve
the Company from its obligations hereunder except to the extent
the Company is prejudiced thereby. The Company shall be entitled
to assume the defense of any such action, proceeding or
investigation, including the employment of counsel and the
payment of all fees and expenses. Any Indemnified Party shall
have the right to employ separate counsel in connection with any
such action, proceeding or investigation and to participate in
the defense thereof, but the fees and expenses of such counsel
shall be paid by the Indemnified Party, unless (A) the
Company has failed to assume the defense and employ counsel as
provided herein, (B) the Company has agreed in writing to
pay such fees and expenses of separate counsel or (C) an
action, proceeding, or investigation has been commenced against
both the Indemnified Party
and/or the
Company and representation of both the Company and the
Indemnified Party by the same counsel would be inappropriate
because of actual or potential conflicts of interest between the
parties. In the case of any circumstance described in
clauses (A), (B) or (C) of the immediately
preceding sentence, the Company shall be responsible for the
reasonable fees and expenses of such separate counsel; provided,
however, that the Company shall not in any event be required to
pay the fees and expenses of more than one separate counsel
(and, if deemed necessary by such separate counsel, appropriate
local counsel who shall report to such separate counsel) for any
related Indemnified Parties. The Company shall be liable only
for settlement of any claim against an Indemnified Party made
with the Company’s written consent.
5.2 Limitation of
Damages. Neither Investors nor the Company
shall in any event be liable to the other party for special or
consequential damages arising from this Agreement.
5.3 Survival. All
representations, warranties, covenants and agreements contained
herein or made in writing by the Company or Investors in
connection herewith (except as specifically set forth herein)
shall survive the execution and delivery of this Agreement and
consummation of the Equity Investment.
ARTICLE 6
TERMINATION
6.1 Termination. This
Agreement and the transactions contemplated under it may be
terminated and abandoned at any time prior to the Closing
(notwithstanding the Company’s receipt of the Required
Company Stockholder Approval):
(a) by mutual consent in writing of the Company and each
Investor;
(b) (i) by any Investor, if there has been a breach of
any covenant of the Company hereunder, or a breach of any of the
representations and warranties of the Company made in
Section 3.1 of this Agreement, or the failure of any
condition to Closing set forth in Section 4.2
hereof, or (ii) by the Company, if there has been a breach
of any covenant of any Investor hereunder, a breach of any of
the representations and warranties of any Investor made in
Section 3.2 of this Agreement or a failure of any of
the conditions to Closing set forth in Section 4.3
hereof;
(c) by the Company or any Investor, if there shall be any
law of any competent Governmental Authority that makes
consummation of the transactions contemplated hereby, illegal or
otherwise prohibited or if any order of any competent
Governmental Authority prohibiting such transactions is entered
and such order shall become final and non-appealable; and
(e) by any Investor, if the Closing shall have not occurred
on or prior to December 31, 2006 for any reason whatsoever
other than Investors breaching any of their undertakings
hereunder or acting in bad faith.
6.2 Effect of
Termination. In the event of the termination
of this Agreement pursuant to Section 6.1, this
Agreement, except for the provisions of this
Section 6.2, Article 5, and
Section 7.2, shall become void and have no effect,
without any liability on the party of any party to this
Agreement or their respective directors, officers, or
stockholders. Notwithstanding the foregoing, nothing in this
Section 6.2 shall relieve any party to this Agreement of
liability for willful breach; provided, however, that if
it shall be judicially determined that termination of this
Agreement was caused by a willful breach of this Agreement,
then, as the sole remedy of any party aggrieved by such breach
(all other liability being hereby irrevocably waived by such
aggrieved party and such aggrieved party hereby agrees not to
assert any such other liability or any claim in connection
therewith), the party to this Agreement found to have
intentionally breached this Agreement shall indemnify and hold
harmless such aggrieved party for the
out-of-pocket
costs, feels and expenses of its counsel, accountants, financial
advisors and other experts and advisors incurred in connection
with, as well as its other
out-of-pocket
fees and expenses directly incident to, the negotiation,
preparation and execution of this Agreement and related
documentation and the stockholders’ meeting.
ARTICLE 7
MISCELLANEOUS
7.1 Successors and Assigns Included in
Parties. Whenever in this Agreement one of
the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors in title and assigns of
such parties shall be included, and all covenants and agreements
contained in this Agreement by or on behalf of the Company or by
or on behalf of each Investor shall bind and inure to the
benefit of their respective heirs, legal representatives,
successors in title and assigns, whether so expressed or not.
7.2 Costs and Expenses. The
Company agrees to pay upon demand all reasonable
out-of-pocket
costs and expenses of each of the Investors in connection with
such Investor’s due diligence investigation in connection
with, and the preparation, negotiation, execution, delivery of,
this Agreement, and any amendment, modification or waiver hereof
or thereof or consent with respect hereto or thereto.
7.3 Assignment. No Investor
may assign this Agreement or any rights or obligations
hereunder, other than to affiliates of such Investor, without
the prior written consent of the Company, such consent not to be
unreasonably withheld, conditioned or delayed, provided that any
permitted transferee shall agree in writing to be bound, with
respect to the transferred securities, by the provisions hereof
that apply to Investors. The Company may not assign this
Agreement or any rights or obligations hereunder without the
prior written consent of each Investor, except pursuant to a
merger, recapitalization or other business combination
transaction in which the surviving entity agrees in writing to
assume all of the covenants, liabilities and obligations of the
Company hereunder. Any assignment contrary to the terms hereof
is null and void and of no force and effect. Notwithstanding the
foregoing, nothing in this Agreement is intended to give any
person not named herein the benefit of any legal or equitable
right, remedy or claim under this Agreement, except as expressly
provided herein.
7.4 Severability. If any
provision(s) of this Agreement or the application thereof to any
Person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of
such provisions to other Persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent
permitted by law.
7.5 Article and Section Headings; Defined
Terms. Numbered and titled article and
section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the
provisions of this Agreement.
7.6 Notices. Any and all
notices, elections or demands permitted or required to be made
under this Agreement shall be in writing, signed by the party
giving such notice, election or demand and shall be delivered
personally, telecopied, or sent by certified mail or overnight
via nationally recognized courier service (such as Federal
Express), to the other party at the address set forth below, or
at such other address as may be supplied in writing and of which
receipt has been acknowledged in writing. The date of personal
delivery or telecopy (delivery
receipt confirmed) or two (2) Business Days after the date
of mailing (or the next Business Day after delivery to such
courier service), as the case may be, shall be the date of such
notice, election or demand. For the purposes of this Agreement:
The address of each Investor is:
Phoenix Life Insurance Company
c/o Phoenix Investment Management, LLC
00 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxx, Managing Director
Facsimile: (000) 000-0000
c/o Phoenix Investment Management, LLC
00 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxx, Managing Director
Facsimile: (000) 000-0000
Xxxxxxxx Partners IV, L.P.
Lakepoint
0000 Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
Lakepoint
0000 Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
in either case, with a copy to:
Xxxx Xxxxx Xxxxxx & Xxxxxxx, P.C.
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
The address of the Company is:
Orion HealthCorp, Inc.
0000 Xxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
0000 Xxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxxxxxx Xxxxxx & Aronoff LLP
0000 XX Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxx X. Xxxxxx, Esq.
0000 XX Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxx X. Xxxxxx, Esq.
Facsimile:
(000) 000-0000
7.7 Entire Agreement. This
Agreement and the other written agreements between the Company
and Investors represent the entire agreement between the parties
concerning the subject matter hereof, and all oral discussions
and prior agreements are merged herein; provided, if there is a
conflict between this Agreement and any other document executed
contemporaneously herewith with respect to the Class D
Shares, the provision of this Agreement shall control. The
execution and delivery of this Agreement and the Registration
Rights Agreement by the Company were not based upon any fact or
material provided by Investors, nor was the Company induced or
influenced to enter into this Agreement or the Registration
Rights Agreement by any representation, statement, analysis or
promise by Investors.
7.8 Governing Law; Amendment or Waiver.
(a) This Agreement shall be construed and enforced under
the laws of the State of New York without regard to conflicts of
laws.
(b) This Agreement may be amended, and the Company may take
any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the
prior written consent of Investors to such amendment, action or
omission to act.
7.9 Counterparts This
Agreement may be executed in any number of counterparts
(including by facsimile and by PDF transmission), 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.
7.10 Construction and
Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto
agree that the court interpreting or construing the same shall
not apply a presumption that the terms hereof shall be more
strictly construed against one party by reason of the rule of
construction that a document is to be more strictly construed
against the party that itself or through its agent prepared the
same, it being agreed that the Company, Investors and their
respective agents have participated in the preparation hereof.
7.11 Consent to Jurisdiction; Exclusive
Venue. THE COMPANY HEREBY IRREVOCABLY
CONSENTS TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ALL STATE COURTS
SITTING IN NEW YORK CITY FOR THE PURPOSE OF ANY LITIGATION TO
WHICH ANY INVESTOR MAY BE A PARTY AND WHICH CONCERNS THIS
AGREEMENT. IT IS FURTHER AGREED THAT VENUE FOR ANY SUCH ACTION
SHALL LIE EXCLUSIVELY WITH COURTS SITTING IN NEW YORK CITY,
UNLESS SUCH INVESTOR AGREES TO THE CONTRARY IN WRITING. THE
COMPANY WAIVES ANY OBJECTION BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE
COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT
AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE
THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE
MADE BY COMPLYING WITH THE PROVISIONS FOR GIVING NOTICE AS SET
FORTH IN THIS AGREEMENT. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO AFFECT THE RIGHT OF ANY INVESTOR TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO
PRECLUDE THE ENFORCEMENT BY SUCH INVESTOR OF ANY JUDGMENT OR
ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER
THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION.
7.12 Waiver of Trial by
Jury. EACH OF THE INVESTORS AND THE COMPANY
HEREBY KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COUNSEL
WAIVE TRIAL BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR
COUNTERCLAIMS, WHETHER IN CONTRACT OR TORT OR OTHERWISE, AT LAW
OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT.
[Signature
Page to Follow]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
THE COMPANY:
ORION HEALTHCORP, INC., a Delaware corporation
| By: |
/s/ Xxxxxxxx
X. Xxxxx
|
Name: Xxxxxxxx X. Xxxxx
Title: President and Chief Executive Officer
Title: President and Chief Executive Officer
INVESTORS:
PHOENIX LIFE INSURANCE COMPANY,
a New York corporation
a New York corporation
| By: |
/s/ Xxxx
X. Xxxxx
|
Name: Xxxx
X. Xxxxx
Title: Vice President
Title: Vice President
XXXXXXXX PARTNERS IV, L.P., a Delaware limited partnership
| By: | Xxxxxxxx Venture Management IV, L.P., its general partner |
| By: |
/s/ Xxxx
X. Xxxxxx
|
Name: Xxxx X. Xxxxxx
Title: General Partner
