SECURITIES PURCHASE AGREEMENT
Exhibit
10.14
This
Securities Purchase Agreement (this “Agreement”)
is
made as of this 28th
day of
January, 2005, by and among Flagship Healthcare Management, Inc., a
Delaware corporation
(together with any predecessors or successors thereto as the context requires,
the “Company”)
and
the investors named in Exhibit A
attached
hereto, as amended from time to time in accordance with Section 1.4 below (the
“Investors”).
Except as otherwise indicated herein, capitalized terms used herein are defined
in Section 5 hereof.
SECTION
1
PURCHASE
AND SALE
1.1 Description
of Series B Preferred Stock.
The
Company has authorized the issuance and sale to the Investors of shares of
its
Series B Convertible Preferred Stock, $0.001 par value per share (the
“Series
B Preferred Stock”),
with
the rights, preferences and other terms set forth in the Certificate of
Designation for Series B Preferred Stock of the Amended and Restated Certificate
of Incorporation, as amended attached hereto as Exhibit
B,
which
are convertible into shares of the Company’s common stock, $0.001 par value per
share (the “Common
Stock”).
For
purposes of this Agreement, the shares of Common Stock issuable upon conversion
of the Series B Preferred Stock are referred to as the “Conversion
Shares.”
1.2 Sale
and Purchase.
Upon
the terms and subject to the conditions contained herein, and in reliance on
the
representations and warranties set forth in Sections 2 and 3, at each Closing
(as defined in Sections 1.3 and 1.4 hereof), each of the Investors shall
purchase from the Company, and the Company shall issue and sell to each of
the
Investors the number of shares of Series B Preferred Stock set forth opposite
the name of such Investor on Exhibit
A
for the
purchase price of $0.65 per share.
1.3 Initial
Closing.
The
initial closing of the purchase and sale of the securities under Section 1.2
hereof (the “Initial Closing”)
shall
take place at the offices of Blank Rome LLP, located at One Xxxxx Square,
Philadelphia, Pennsylvania, at 10:00 a.m. prevailing Eastern Time, on the date
hereof or such other time and place as shall be agreed upon by the Company
and
the Investors (the “Closing
Date”).
At
the Initial Closing, the Company shall issue and deliver stock certificates
representing the applicable number of shares of Series B Preferred Stock to
be
sold by the Company under Section 1.2 hereof to each of the Investors on
Exhibit
A,
free
and clear of any and all Liens against payment of the full purchase price
therefor by or on behalf of such Investor to the Company by check or wire
transfer of immediately available funds.
1.4 Additional
Closings.
On or
prior to the date which is forty-five (45) days following the Initial Closing,
subject to the terms of this Section 1.4, the Company may effect additional
closings (the “Additional
Closings”
and
together with the Initial Closing, the “Closings”)
for
the aggregate sale and purchase of up to but not in excess of 7,692,308 shares
of Series B Preferred Stock (including the number of shares of Series B
Preferred Stock sold and purchased at the Initial Closing) at the price per
share of $0.65 pursuant to and in accordance with this Agreement. The
purchasers of the shares of Series B Preferred Stock at the Additional Closings
shall be referred to as the “Additional
Investors”,
and
each individually as an “Additional
Investor”.
Each
Additional Investor must be an “accredited investor” (as such term is defined
under the Securities Act of 1933, as amended). At each Additional Closing,
the
Company will issue and deliver certificates evidencing the shares of Series
B
Preferred Stock sold at such Additional Closing registered in the name of the
applicable Additional Investor (with appropriate legends affixed thereto
required by this Agreement and, to the extent applicable, the Related Agreements
(as defined in Section 2.1 below)) against delivery by such Additional Investor
of (i) such Additional Investor’s aggregate purchase price therefor by check or
wire transfer of immediately available funds, and (ii) a counterpart signature
page to this Agreement and each Related Agreement (to the extent applicable)
in
such form as shall be reasonably determined by the Company. Upon consummation
of
the Additional Closings in accordance with this Section 1.4, each Additional
Investor shall be deemed an Investor for all purposes of this Agreement and
Exhibit
A
shall be
amended to reflect the purchase and sale of such shares of Series B Preferred
Stock.
1.5 Use
of Proceeds by the Company from the Closings.
The
Company shall use the proceeds from the sale of Series B Preferred Stock
hereunder to pay all transaction fees incurred by the Company in connection
with
the transactions contemplated under this Agreement and to fund the Company’s
working capital needs.
SECTION
2
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
In
order
to induce the Investors to enter into this Agreement and consummate the
transactions contemplated hereby, the Company hereby makes to the Investors
the
representations and warranties contained in this Section 2. Such
representations and warranties are subject to the qualifications and exceptions
set forth in the disclosure schedule delivered to the Investors pursuant to
this
Agreement (the “Disclosure
Schedule”).
2.1 Organization
and Corporate Power.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of Delaware, and is duly qualified or registered to do business
as a foreign corporation in each jurisdiction in which the failure to be so
qualified would have a Material Adverse Effect. The Company has all required
corporate power and authority to carry on its business as presently conducted,
to enter into and perform this Agreement, the Amendment to Registration Rights
Agreement and the Amendment to Stockholders Agreement (collectively, the
“Related
Agreements”)
to
which it is a party and to carry out the transactions contemplated hereby and
thereby. The copies of the Amended and Restated Certificate of Incorporation,
as
amended and Bylaws of the Company, as amended to date (the “Certificate
of Incorporation”
and
“Bylaws,”
respectively), which are attached hereto as Exhibit
C,
are
correct and complete at the date hereof, and the Company is not in violation
of
any term of its Certificate of Incorporation or Bylaws. Except as set forth
in
Section
2.1 of the Disclosure Schedule,
the
Company is not in violation of any term or provision of any agreement,
instrument, judgment, decree, order, statute, rule or government regulation
applicable to it and which is actively enforced or to which it is a party that
would have a Material Adverse Effect.
2.2 Authorization
and Non-Contravention.
This
Agreement and all documents executed pursuant hereto are valid and binding
obligations of the Company, enforceable in accordance with their terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights
generally or by equitable principles, (b) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies, and (c) to the extent that the enforceability of the indemnification
provisions herein and in the Registration Rights Agreement may be limited by
applicable law. The execution, delivery and performance of this Agreement,
the
Related Agreements and all agreements, documents and instruments contemplated
hereby, the sale and delivery of the Series B Preferred Stock and, upon
conversion of the Series B Preferred Stock, the issuance of the Conversion
Shares, have been duly authorized by all necessary corporate or other action
of
the Company. The execution of this Agreement, the sale and delivery of the
Series B Preferred Stock and, upon conversion of the Series B Preferred Stock,
the issuance of the Conversion Shares, and the performance of any transaction
contemplated hereby or by the Related Agreements will not (i) violate, conflict
with or result in a default under any contract or obligation to which the
Company is a party or by which it or its assets are bound, or any provision
of
the Certificate of Incorporation or Bylaws of the Company, or cause the creation
of any encumbrance upon any of the material assets of the Company; (ii) violate
or result in a violation of, or constitute a default (whether after the giving
of notice, lapse of time or both) under, any provision of any law, regulation
or
rule, or any order of, or any restriction imposed by any court or other
governmental agency applicable to the Company; (iii) require from the Company
any notice to, declaration or filing with, or consent or approval of, any
governmental authority or other third party other than pursuant to state
securities or blue sky laws; or (iv) accelerate any obligation under, or give
rise to a right of termination of, any agreement, permit, license or
authorization to which the Company is a party or by which the Company is bound,
except for such violations, conflicts, defaults and rights of acceleration
that
would not have a Material Adverse Effect.
2.3 Corporate
Records.
The
corporate record books of the Company accurately record all corporate action
taken by its stockholders, board of directors and committees thereof. The copies
of the corporate records of the Company, as made available to the Investors
for
review, are true and complete copies of the originals of such
documents.
2.4 Capitalization.
As of
the Initial Closing and after giving effect to the transactions contemplated
hereby, the authorized capital stock of the Company will consist
of:
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70,000,000
shares of Common Stock, par value $0.001, of which (a) 31,536,060
shares are issued and outstanding, (b) 10,948,906 shares are reserved
for
issuance upon conversion of the Series A Preferred Stock, (c) 5,000,000
shares are currently reserved for issuance under the Company’s 2004 Stock
Option and Grant Plan (of which, options for 4,091,000 shares are
outstanding), and (d) 7,692,308 shares will be reserved for issuance
upon
conversion of the Series B Preferred
Stock.
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·
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30,000,000
shares of preferred stock, par value $0.001 per share, of which
(i)
10,948,906 shares are designated as Series A Preferred Stock, of
which (a)
7,798,059 shares are issued and outstanding and (b) 1,328,468 shares
are
reserved for issuance upon exercise of Warrants for Series A Preferred
Stock and (ii) 7,692,308 shares are designated as Series B Preferred
Stock, of which, the number of shares indicated on Exhibit
A
hereto will be issued and outstanding.
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Immediately
prior to the Initial Closing and without giving effect to the transactions
contemplated hereby, the outstanding shares of Common Stock and Series A
Preferred Stock will be held beneficially and of record by the Persons
identified in Section 2.4
of the Disclosure Schedule
in the
amounts indicated thereon. Except as set forth in Section
2.4 of the Disclosure Schedule,
the
Company has never adopted or maintained any formal stock incentive plan or
other
plan providing for equity compensation of any Person. Except as set forth in
Section
2.4 of the Disclosure Schedule,
there
are no outstanding subscriptions, options, warrants, commitments, preemptive
rights, agreements, arrangements or commitments of any kind for or relating
to
the issuance or sale of, or outstanding securities convertible into or
exchangeable for, any shares of capital stock of any class or other equity
interests of the Company. Other than as set forth in Section
2.4 of the Disclosure Schedule
or the
Certificate of Incorporation, the Company has no obligation to purchase, redeem
or otherwise acquire any of its capital stock or any interests therein. As
of
the Initial Closing, and after giving effect to the transactions contemplated
hereby, all of the outstanding shares of capital stock of the Company will
have
been duly and validly authorized and issued and will be fully paid and
non-assessable and will have been offered, issued, sold and delivered in
compliance with applicable federal and state securities laws and not subject
to
any preemptive rights. The Company has duly and validly authorized and reserved
7,692,308 shares of Common Stock for issuance upon conversion of the Series
B
Preferred Stock and the shares of Common Stock so issued will, upon such
conversion, be validly issued, fully paid and non-assessable. The relative
rights, preferences and other provisions relating to the Series B Preferred
Stock are as set forth in Exhibit B
attached
hereto. As of the Initial Closing and after giving effect to the transactions
contemplated hereby, except as set forth in (i) Section
2.4 of the Disclosure Schedule,
(ii)
the Certificate of Incorporation, (iii) the Stockholders Agreement or (iv)
the
Registration Rights Agreement, there are (x) no preemptive rights, rights of
first refusal, put or call rights or obligations or anti-dilution rights with
respect to the issuance, sale or redemption of the Company’s capital stock, (y)
no rights to have the Company’s capital stock registered for sale to the public
in connection with the laws of any jurisdiction and (z) no documents,
instruments or agreements relating to the voting of the Company’s voting
securities or restrictions on the transfer of the Company’s capital
stock.
2.5 Subsidiaries.
The
Company does not have and has not had any direct or indirect
Subsidiaries.
2.6 Financial
Statements.
Section
2.6 of the Disclosure Schedule
sets
forth (i) unaudited balance sheets as of December 31, 2003 and as of November
30, 2004, and (ii) unaudited statements of operations for the period from the
Company’s inception through December 31, 2003 and for the eleven (11) months
ended November 30, 2004 (the “Financial
Statements”).
2.7 Absence
of Undisclosed Liabilities.
The
Company does not have any material liabilities or obligations of any nature
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, or liabilities for Taxes due or then accrued
or to become due, regardless of whether claims in respect thereof had been
asserted as of such date), except liabilities or obligations incurred in the
ordinary course of business or otherwise disclosed in Section
2.7 of the Disclosure Schedule
or the
Financial Statements. For purposes of this Section 2.7, “material”
liability or obligation shall mean a transaction involving potential commitment
or payment by the Company in excess of $25,000.
2.8 Accounts
Payable.
Except
as set forth in Section 2.8
of the Disclosure Schedule,
all
accounts payable of the Company arose in bona fide arms’ length transactions in
the ordinary course of business and no account payable is delinquent by more
than sixty (60) days in its payment. Since inception, the Company has paid
its
accounts payable in the ordinary course and in a manner which is consistent
with
its past practices.
2.9 Transactions
with Affiliates.
Except
for their ongoing, regular employment relationships with the Company and as
set
forth in Section 2.9
of the Disclosure Schedule,
there
are no loans, leases or other transactions or continuing transactions between
the Company and any present or former stockholder, director, officer or employee
of the Company, or any member of such officer’s, director’s, employee’s or
stockholder’s immediate family, or any Person controlled by such officer,
director, employee or stockholder or his or her immediate family.
2.10 Title
to Properties.
Section
2.10 of the Disclosure Schedule
sets
forth the addresses and uses of all real property that the Company owns, leases
or subleases. To the Company’s knowledge, the Company has good, valid and (if
applicable) marketable title to all of its assets, free and clear of all Liens,
restrictions or encumbrances, and none of such assets is subject to any
mortgage, pledge, Lien or conditional sale agreement. Such assets constitute
all
property which is necessary to the business of the Company as presently
conducted and all equipment included therein is in good condition and repair
(ordinary wear and tear excepted).
2.11 Tax
Matters.
The
Company has timely and properly filed all material federal, state, local and
foreign tax returns required to be filed by it through the date hereof and
has
paid or caused to be paid all material Taxes required to be paid by it through
the date hereof, except Taxes which are the subject of a good faith dispute
or
have not yet accrued or otherwise become due. All material Taxes and other
assessments and levies which the Company was or is required to withhold or
collect have been withheld and collected and have been paid over to the proper
governmental authorities. Except as set forth in Section 2.11
of the Disclosure Schedule,
(i) the Company has never received written notice of any audit or of any
proposed deficiencies from the Internal Revenue Service (the “IRS”)
or any
other taxing authority (other than routine audits undertaken in the ordinary
course and which have been resolved on or prior to the date hereof);
(ii) there are in effect no waivers of applicable statutes of limitations
with respect to any Taxes owed by the Company for any year; and
(iii) neither the IRS nor any other taxing authority is now asserting or
threatening to assert against the Company any deficiency or claim for additional
Taxes or interest thereon or penalties in connection therewith in respect of
the
income or sales of the Company.
2.12 Certain
Contracts and Arrangements.
Except
as set forth in Section 2.12
of the Disclosure Schedule
(with
true and correct copies made available to the Investors and/or their counsel),
the Company is not a party or subject to or bound by:
(a) any
contract or agreement involving potential commitment or payment by the Company
in excess of $25,000 or which is otherwise material and not entered into in
the
ordinary course of business;
(b) any
contract, lease or agreement involving payments in excess of $25,000 which
is
not cancelable by the Company without penalty on not less than 60 days
notice;
(c) any
contract containing covenants directly or explicitly limiting the freedom of
the
Company to compete in any line of business or with any Person or to offer any
of
its products;
(d) any
contract or agreement principally relating to the licensing, distribution,
development, purchase, sale or servicing of its products requiring payments
during the term in excess of $25,000;
(e) any
indenture, mortgage, promissory note, loan agreement, guaranty or other
agreement or commitment for borrowing or any pledge or security arrangement
in
excess of $25,000;
(f) any
employment contracts, non-competition agreements, invention assignments,
severance or other agreements with officers, directors, Key Employees,
stockholders or consultants of the Company or their respective
Affiliates;
(g) any
material royalty, dividend or similar arrangement based on the revenues or
profits of the Company or any material contract or agreement involving fixed
price or fixed volume arrangements;
(h) any
material joint venture, partnership, manufacturer, development, distribution,
supply or similar agreement; or
(i) any
acquisition, merger or similar agreement.
To
the
Company’s knowledge, all such contracts, agreements, leases and instruments are
valid and are in full force and effect and constitute legal, valid and binding
obligations of the Company, and are enforceable in accordance with their
respective terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally or by equitable principles, (b) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies, and (c) to the extent that the
enforceability of any indemnification provisions therein may be limited by
applicable law. The Company has not received any written notice, and has no
knowledge of any threat, to terminate any such contracts, agreements, leases
or
instruments other than such terminations that would not have a Material Adverse
Effect. The Company is not in default in complying with any provisions of any
such contract, agreement, lease or instrument, and no condition or event or
fact
exists which, with written notice, lapse of time or both, would constitute
a
default thereunder on the part of the Company, except for any such default,
condition, event or fact that would not have a Material Adverse
Effect.
2.13 Intellectual
Property Rights.
To the
Company’s knowledge with respect to patents, trademarks, services marks and
trade names only (but without having conducted any special investigation or
patent or trademark search), the Company has sufficient title and ownership
of
all Intellectual Property Rights necessary for its business as now conducted
and
as proposed to be conducted without any violation or infringement of the rights
of others. Section
2.13 of the Disclosure Schedule
contains
a complete list of patents and pending patent applications and registrations
and
applications for trademarks, copyrights and domain names of, or exclusively
licensed to, the Company. The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the Intellectual Property Rights of any other
person or entity and the Company is not aware of any basis for such an
allegation or of any reason to believe that such an allegation may be
forthcoming. The Company is not aware that any of its employees is obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any court
or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or that would conflict with
the
Company’s business as presently conducted or as proposed to be conducted.
Neither the execution nor delivery of this Agreement or the Related Agreements,
nor the carrying on of the Company’s business by the employees of the Company,
nor the conduct of the Company’s business as proposed will, to the Company’s
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. The Company
does
not believe it is or will be necessary to utilize any inventions of any of
its
employees (or people it currently intends to hire) made prior to or outside
the
scope of their employment by the Company.
2.14 Litigation.
There
is no litigation or governmental or administrative proceeding or investigation
pending or threatened against the Company or affecting the properties or assets
of the Company. Section
2.14 of the Disclosure Schedule
includes
a description of all litigation, claims, proceedings or investigations involving
the Company occurring, arising or existing since the Company’s
inception.
2.15 Labor
Matters.
The
Company is not delinquent in payments to any of its employees, consultants
or
independent contractors for any wages, salaries, commissions, bonuses or other
direct compensation for any service performed for it to the date hereof or
amounts required to be reimbursed to such employees, consultants or independent
contractors. Except as set forth in Section
2.15 of the Disclosure Schedule
or as
required by law, upon termination of the employment of any such employees,
consultants or independent contractors, no severance or other payments will
become due. Except as set forth in Section
2.15 of the Disclosure Schedule,
the
Company has no policy, practice, plan or program of paying severance pay or
any
form of severance compensation in connection with the termination of employment
services. The Company is and since its inception has been in compliance with
all
applicable laws and regulations respecting labor, employment, fair employment
practices, terms and conditions of employment and wages and hours. There are
no
charges of employment discrimination, sexual harassment or unfair labor
practices, pending or to the Company’s knowledge, threatened against or
involving the Company. The Company is, and at all times has been, in compliance
with the requirements of the Immigration Reform Control Act of 1986 except
for
such failures to comply that would not have a Material Adverse
Effect.
2.16 Employee
Benefit Programs.
Section
2.16 of the Disclosure Schedule
sets
forth a list of every Employee Program that has been maintained by the Company
or to which the Company has contributed at any time since its inception and
(i)
is subject to ERISA, (ii) involves the issuance of options or other securities,
or (iii) is otherwise material. The terms and operation of each Employee Program
comply with all applicable laws and regulations relating to such Employee
Program except to the extent that any instances of non-compliance would not
result in a Material Adverse Effect.
2.17 Insurance.
The
physical properties, assets, business, operations, employees, officers and
directors of the Company are insured by the Company, to the extent disclosed
in
Section
2.17 of the Disclosure Schedule.
Except
claims for health care benefits in the ordinary course, there is no claim by
the
Company pending under any such policies. Said insurance policies and
arrangements are in full force and effect, all premiums with respect thereto
are
currently paid, and the Company is in compliance in all material respects with
the terms thereof. Said insurance is sufficient for compliance by the Company
with all requirements of applicable law and all agreements and leases to which
it is a party. Each such insurance policy shall continue to be in full force
and
effect immediately following consummation of the transactions contemplated
by
this Agreement. To the Company’s knowledge, there is no threatened termination
of any such policies or arrangements.
2.18 Permits;
Compliance with Laws.
The
Company has all Permits necessary to permit it to own its property and to
conduct its business as it is presently conducted and all such Permits are
valid
and in full force and effect, except where the failure to obtain such a Permit
or its invalidity, in whole or in part, would not have a Material Adverse
Effect. No Permit is subject to termination as a result of the execution of
this
Agreement or consummation of the transactions contemplated hereby. The Company
is in compliance with all applicable statutes, ordinances, orders, rules and
regulations promulgated and enforced by any federal, state, municipal or other
governmental authority, which apply to the conduct of its business, except
where
the failure to so comply would not have a Material Adverse Effect.
2.19 Investment
Banking; Brokerage.
There
are no claims for investment banking fees, brokerage commissions, finder’s fees
or similar compensation (exclusive of professional fees to lawyers and
accountants) in connection with the transactions contemplated by this Agreement
payable by the Company or based on any arrangement or agreement made by or
on
behalf of the Company.
2.20 Disclosure.
Except
as set forth in Section
2.20 of the Disclosure Schedule,
this
Agreement, the Disclosure Schedule and the certificates and statements furnished
pursuant to this Agreement by or on behalf of the Company do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading in the light
of
the circumstances under which they were made.
SECTION
3
REPRESENTATIONS
AND WARRANTIES OF THE INVESTORS
As
a
material inducement to the Company to enter into this Agreement and consummate
the transactions contemplated hereby, each Investor hereby makes to the Company
the representation and warranties contained in this Section 3.
3.1 Investment
Status.
Each
Investor represents that it is an “accredited investor” as such term is defined
in Rule 501 under the Securities Act. Each Investor represents to the Company
that it is purchasing the Series B Preferred Stock for its own account, for
investment only and not with a view to, or any present intention of, effecting
a
distribution of such securities or any part thereof except pursuant to a
registration statement or an available exemption under applicable law. Each
such
Investor acknowledges that such securities have not been registered under the
Securities Act or the securities laws of any state or other jurisdiction and
cannot be disposed of unless they are subsequently registered under the
Securities Act and any applicable state laws or unless an exemption from such
registration is available. Each such Investor (a) has knowledge and experience
in financial and business matters so as to be capable of evaluating and
understanding the merits and risks of an investment in the Company, (b) has
received certain information concerning the Company and has had the opportunity
to obtain additional information as desired in order to evaluate the merits
and
the risks inherent of an investment in the Company and (c) is able to bear
the
economic risk of its investment in the Company and the Series B Preferred Stock
and, if issued, the Conversion Shares in that, among other factors, such
Investor can afford to hold the Series B Stock and the Conversion Shares for
an
indefinite period and can afford a complete loss of its investment in the
Company.
3.2 Authority.
Each
Investor represents that it has full right, authority and power under its
charter, bylaws or governing partnership or operating agreement, as applicable,
to enter into this Agreement and each agreement, document and instrument to
be
executed and delivered by or on behalf of such Investor pursuant to or as
contemplated by this Agreement and to carry out the transactions contemplated
hereby and thereby, and the execution, delivery and performance by such Investor
of this Agreement and each such other agreement, document and instrument have
been duly authorized by all necessary action under such Investor’s charter,
bylaws or governing partnership or operating agreement, as applicable. This
Agreement and each agreement, document and instrument executed and delivered
by
each Investor pursuant to or as contemplated by this Agreement constitute,
or
when executed and delivered will constitute, valid and binding obligations
of
each of the Investors enforceable in accordance with their respective terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally or by equitable principles, (b) as limited by laws
relating to the availability of specific performance, injunctive relief or
other
equitable remedies, and (c) to the extent that the enforceability of the
indemnification provisions herein and in the Registration Rights Agreement
may
be limited by applicable law.
3.3 Investment
Banking; Brokerage Fees.
No
Investor has incurred or become liable for any broker’s or finder’s fee, banking
fees or similar compensation relating to or in connection with the transactions
contemplated hereby.
SECTION
4
CONDITIONS
OF PURCHASE BY THE INVESTORS AT CLOSING
Each
Investor’s obligation to purchase and pay for the Series B Preferred Stock to be
purchased by it hereunder shall be subject to compliance by the Company with
the
agreements herein contained and to the fulfillment to the Investors’
satisfaction, or the waiver by the Investors, on or before and at the Closing
Date of the following conditions:
4.1 Satisfaction
of Conditions.
The
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the Closing Date and each of the conditions
specified in this Section 4 shall have been satisfied or waived in writing
by
the Investors.
4.2 Opinion
of Counsel.
The
Investors shall have received from Blank Rome LLP an opinion dated as of the
Closing Date substantially in the form attached hereto as Exhibit D.
4.3 Authorization.
The
Board of Directors and appropriate stockholders of the Company shall have duly
adopted resolutions in the form reasonably satisfactory to the Investors and
shall have taken all action necessary for the purpose of authorizing the Company
to consummate all of the transactions contemplated hereby (including, without
limitation, the issuance of the Series B Preferred Stock and the Conversion
Shares as contemplated hereunder).
4.4 Certificate
of Incorporation.
The
Company shall have delivered to the Investors a copy of the Company’s
Certificate of Incorporation certified as of a recent date by the Delaware
Secretary of State.
4.5 Delivery
of Documents.
The
Company shall have executed and/or delivered to the Investors (or shall have
caused to be executed and delivered to the Investors by the appropriate Persons)
the following:
(a) Certificates
for the Series B Preferred Stock to be purchased hereunder;
(b) Certificates
issued by (i) the Secretary of State of the State of Delaware certifying that
the Company has legal existence and is in good standing; and (ii) the Secretary
of State (or similar authority) of each jurisdiction in which the Company has
qualified to do business as a foreign corporation as to such foreign
qualification; and
(c) A
certificate of the Secretary of the Company which shall certify (i) the
resolutions adopted by the Board of Directors and stockholders as contemplated
in Section 4.3 hereof, (ii) the Company’s Bylaws and (iii) the names of the
officers of the Company authorized to sign this Agreement and the Related
Agreements, together with the true signatures of such officers.
4.6 Registration
Rights Agreement.
The
Company and a majority of the holders of the Series A Preferred Stock shall
have
entered into the Amendment to the Registration Rights Agreement in substantially
the form attached hereto as Exhibit E
and the
Investors shall have executed joinders to the Registration Rights Agreement,
as
amended in substantially the form attached hereto as part of Exhibit
E.
4.7 Stockholders
Agreement.
The
Company and a majority of the holders of the Series A Preferred Stock shall
have
entered into the Amendment to Stockholders Agreement in substantially the form
attached hereto as Exhibit F
and the
Investors shall have executed joinders to the Stockholders Agreement, as amended
in substantially the form attached hereto as part of Exhibit
F.
4.8 All
Proceedings Satisfactory.
All
corporate and other proceedings taken prior to or at the Initial Closing in
connection with the transactions contemplated by this Agreement, and all
documents and instruments related thereto, shall be reasonably satisfactory
in
form and substance to the Investors and the issuance and sale of the Series
B
Preferred Stock hereunder shall be made in compliance with applicable federal
and state laws.
4.9 No
Violation or Injunction.
The
consummation of the transactions contemplated by this Agreement shall not be
in
violation of any law or regulation, including applicable “Blue Sky” laws, and
shall not be subject to any injunction, stay or restraining order.
4.10 Consents
and Waivers.
The
Company shall have made all filings with and notifications of governmental
authorities, regulatory agencies and other entities required to be made by
such
parties in connection with the execution and delivery of this Agreement, the
performance of the transactions contemplated hereby and the continued operation
of the business of the Company subsequent to the Initial Closing.
4.11 Confidentiality
and Invention Assignment Agreements.
All Key
Employees shall have entered into agreements containing non-competition,
confidentiality and inventions assignment provisions with the Company in the
form attached hereto as Exhibit G
(the
“Non-Competition,
Confidentiality and Inventions Assignment Agreement”).
SECTION
5
DEFINITIONS
Unless
the context specifically requires otherwise, capitalized terms used in this
Agreement shall have the meaning specified below:
“Code”
means
the Internal Revenue Code of 1986, as amended.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, and the
regulations promulgated thereunder.
“Employee
Program”
means
any employee benefit or welfare plan, stock option, bonus or incentive plan,
severance pay policy or agreement, deferred compensation agreement or any
similar plan or agreement.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Intellectual
Property Rights”
means
all intellectual property rights, including all patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service xxxx applications, domain names, copyrights, copyright applications,
computer programs and other computer software (including, without limitation,
all source and object code, algorithms, architecture, structure, display
screens, layouts and development tools) and trade secrets.
“Key
Employees”
means
Xx. Xxxx X. Xxxxx, Xx. Xxxxxxx X. X’Xxxxx, Xx. Xxxxxxxx Xxxxxxxxxx, Mr. Xxxxxxx
Xxxxxx and Xx. Xxxxxxx Xxxxx.
“Lien”
means
any liens, claims, options, charges, pledges, security interests, voting
agreements, trusts, encumbrances, rights or restrictions of any
nature.
“Material
Adverse Effect”
means
any change or effect that is materially adverse to the properties, assets,
business, financial condition or results of operations of the
Company.
“Permits”
means
any franchises, authorizations, approvals, orders, consents, licenses,
certificates, permits, registrations, qualifications or other rights and
privileges.
“Person”
means
any individual, corporation, partnership, joint venture, trust or unincorporated
organization or any government or any agency or political subdivision
thereof.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, as amended, attached as Exhibit
E
hereto,
dated as of February 20, 2004, by and among the Company and the Series A
Preferred Stock investors.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Stockholders
Agreement”
means
the Stockholders Agreement, as amended, attached as Exhibit
F
hereto,
dated as of February 20, 2004 executed by and among the Company, the
Stockholders (as defined therein) and the Series A Preferred Stock
investors.
“Subsidiary”
means
any corporation more than 50% of the outstanding voting securities of which,
or
any partnership, joint venture or other entity more than 50% of the total equity
interest of which, is directly or indirectly owned by the Company or any other
entity otherwise controlled by or under common control with the
Company.
“Taxes”
means
any federal, state, local, foreign or other taxes, including without limitation
income taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross
receipts taxes, franchise taxes, employment and payroll related taxes,
withholding taxes, stamp taxes, transfer taxes and property taxes, whether
or
not measured in whole or in part by net income.
SECTION
6
GENERAL
6.1 Amendments,
Waivers and Consents.
For the
purposes of this Agreement and all agreements executed pursuant hereto, no
course of dealing between or among any of the parties hereto and no delay on
the
part of any party hereto in exercising any rights hereunder or thereunder shall
operate as a waiver of the rights hereof and thereof. No provision hereof may
be
waived otherwise than by a written instrument signed by the party or parties
so
waiving such covenant or other provision. No amendment to this Agreement may
be
made without the written consent of the Company and the Investors (in accordance
with the immediately succeeding sentence). Any actions required to be taken
or
consents, approvals, votes or waivers required or contemplated to be given
by
the Investors herein shall require a vote of a majority of the Investors based
on the relative holdings of Series B Preferred Stock or Conversion Shares of
the
Investors as a group at the relevant time and any such action by such percentage
of Investors shall bind all of the Investors. The Company agrees to pay the
reasonable fees and out-of-pocket expenses of the Investor's counsel in
connection with the waiver or amendment of any provision of this Agreement
and
any agreement executed pursuant hereto.
6.2 Survival
of Representations Warranties and Covenants.
All
covenants, agreements, representations and warranties of the Company and the
Investors made herein and in the certificates, lists, exhibits, schedules or
other written information delivered or furnished to any Investor in connection
herewith are material, shall be deemed to have been relied upon by the party
or
parties to whom they are made and shall survive the Initial Closing and any
Additional Closings regardless of any investigation on the part of such party
or
its representatives for a period of twelve (12) months following the date
hereof.
6.3 Legend
on Securities.
The
Company and the Investors acknowledge and agree that the following legend (or
one substantially similar thereto) and, to the extent applicable, such other
legends as required pursuant to any Related Agreement shall be typed on each
certificate evidencing any of the Series B Preferred Stock issued hereunder
held
at any time by an Investor:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
EXCEPT
(1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
WHICH
IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES AND
IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY LAWS.
6.4 Governing
Law.
This
Agreement shall be deemed to be a contract made under, and shall be construed
in
accordance with, the laws of the State of Delaware, without giving effect to
conflict of laws principles thereof. Each party hereto hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial
by
jury in respect of any litigation directly or indirectly arising out of, under
or in connection with this Agreement. Each party hereto (i) certifies that
no
representative, agent or attorney of the other party has represented, expressly
or otherwise, that the other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (ii) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this Section.
6.5 Section
Headings and Gender.
The
descriptive headings in this Agreement have been inserted for convenience only
and shall not be deemed to limit or otherwise affect the construction of any
provision thereof or hereof. The use in this Agreement of the masculine pronoun
in reference to a party hereto shall be deemed to include the feminine or
neuter, and vice versa, as the context may require.
6.6 Counterparts.
This
Agreement may be executed in multiple counterparts, each of which shall
constitute but one and the same instrument. One or more counterparts of this
Agreement may be delivered via telecopier, with the intention that they shall
have the same effect as an original counterpart hereof.
6.7 Notices
and Demands.
Any
notice or demand which is required or provided to be given under this Agreement
shall be deemed to have been sufficiently given or served and received for
all
purposes when delivered by hand, facsimile, or five (5) days after being sent
by
certified or registered mail, postage and charges prepaid, return receipt
requested, or two (2) days after being sent by overnight delivery providing
receipt of delivery, to:
(a) if
to the
Company, 000 Xxxxxxx Xxxxxx, 00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Fax: (000) 000-0000 or at such other address or
facsimile number designated by the Company to the Investors in writing with
a
copy to Blank Rome LLP, Xxx Xxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000,
Fax:
(000) 000-0000, Attn: Xxxxxxx X. Xxxxxx.
(b) if
to the
Investors, at the mailing addresses or facsimile numbers as shown on the
signature pages attached hereto, or at such other address or facsimile number
designated by an Investor to the Company in writing.
6.8 Remedies;
Severability.
It is
specifically understood and agreed that any breach of the provisions of this
Agreement by any Person subject hereto will result in irreparable injury to
the
other parties hereto, that the remedy at law alone will be an inadequate remedy
for such breach, and that, in addition to any other remedies which they may
have, such other parties may enforce their respective rights by actions for
specific performance (to the extent permitted by law). The Company may refuse
to
recognize any unauthorized transferee as one of its stockholders for any
purpose, including, without limitation, for purposes of dividend and voting
rights, until the relevant party or parties have complied with all applicable
provisions of this Agreement, the Stockholders Agreement and the Registration
Rights Agreement. Whenever possible, each provision of this Agreement shall
be
interpreted in such a manner as to be effective and valid under applicable
law,
but if any provision of this Agreement shall be deemed prohibited or invalid
under such applicable law, such provision shall be ineffective to the extent
of
such prohibition or invalidity, and such prohibition or invalidity shall not
invalidate the remainder of such provision or the other provisions of this
Agreement.
6.9 Integration.
This
Agreement, including the exhibits, schedules, documents and instruments referred
to herein, constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
6.10 Expenses.
Each
party shall bear its own costs and expenses incurred in connection with this
transaction.
[Signature
Pages Follow]
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed and delivered by their proper and duly authorized
representatives as of the day and year first above written.
COMPANY:
FLAGSHIP
HEALTHCARE MANAGEMENT, INC.
By:
/s/
Xxxx X. Xxxxx
Name:
Xxxx X. Xxxxx
Title:
Chief Executive Officer
INVESTOR:
__________________________________
Name:
Address:
