NOTE PURCHASE AGREEMENT
Exhibit 10.4
THIS NOTE 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 between ORION
HEALTHCORP, INC., a Delaware corporation (the
“Company”), and PHOENIX LIFE INSURANCE
COMPANY, a New York corporation
(“Investor”).
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 class of its common
stock (the “Equity Investment”) and $3,350,000
in subordinated debt (the “Note Purchase”).
3. Investor desires to make an investment in the Company in
the form of a senior subordinated unsecured promissory note (the
“Note”) in the aggregate original principal
amount of $3,350,000 on the terms and conditions hereinafter set
forth, and for the purpose hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the agreement of Investor to
make the Note Purchase, 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 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 5.1.
“Closing Date” has the meaning set forth
in Section 5.1.
“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” means the
Class D Common Stock, par value $0.001, of the Company to
be created and issued as part of the Equity Investment.
“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(bb).
“Company SEC Documents” has the meaning
set forth in Section 3.1(g).
“Default” means any event or condition
that constitutes an Event of Default or that with the giving of
notice, the passage of time, or both, would be an Event of
Default.
“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.
“Event of Default” means the events
specified in Section 6.1.
“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.
“Guaranty Obligations” means, without
duplication, any obligations of the Company (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended
to guarantee any Indebtedness of any other Person in any manner,
whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (i) to purchase any
such Indebtedness or any property constituting security
therefor, (ii) to advance or provide funds or other support
for the payment or purchase of any such Indebtedness or to
maintain working capital, solvency or other balance sheet
condition of such other Person (including without limitation
keep well agreements, maintenance agreements, comfort letters or
similar agreements or arrangements) for the benefit of any
holder of Indebtedness of such other Person, (iii) to lease
or purchase property, securities or services primarily for the
purpose of assuring the holder of such Indebtedness, or
(iv) to otherwise assure or hold harmless the holder of
such Indebtedness against loss in respect thereof.
“Indebtedness” means, without
duplication, (a) all obligations of the Company for
borrowed money, (b) all obligations of the Company
evidenced by bonds, debentures, notes or similar instruments, or
upon which interest payments are customarily made, (c) all
obligations of the Company under conditional sale or other title
retention agreements relating to property purchased by the
Company (other than customary reservations or retentions of
title under agreements with suppliers entered into in the
ordinary course of business), (d) all obligations of the
Company issued or assumed as the deferred purchase price of
property or services purchased by such Person which appear as
liabilities on the balance sheet of the Company (other than
trade debt incurred in the ordinary course of business),
(e) all obligations of the Company under any take or pay or
similar arrangements or under commodities agreements,
(f) the implied principal component of all obligations of
the Company under capitalized leases, (g) all obligations
of the Company under any interest rate protection agreement or
foreign currency exchange agreement, (h) the principal
portion of all obligations of the Company as an account party in
respect of letters of credit (other than trade letters of
credit) and bankers’ acceptances, including, without
duplication, all unreimbursed drafts drawn thereunder (less the
amount of any cash collateral securing any such letters of
credit and bankers’ acceptances), (i) the
principal portion of all obligations of the Company under
synthetic leases, (j) all obligations of the Company to
repurchase any securities issued by the Company at any time
prior to
51/2
years from the Closing Date which repurchase obligations are
related to the issuance thereof, including, without limitation,
obligations commonly known as residual equity appreciation
potential shares, (k) the aggregate amount of uncollected
accounts receivable of the Company subject at such time to a
sale of receivables (or similar transaction) to the extent such
transaction is effected with recourse to the Company (whether or
not such transaction would be reflected on the balance sheet of
the Company in accordance with GAAP), (l) all Indebtedness
of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien on, or payable out of the proceeds of
production from, property owned or acquired by the Company,
whether or not the obligations secured thereby have been
assumed, (m) all Guaranty Obligations of the Company with
respect to Indebtedness of another Person, (n) all accounts
payable to trade creditors which are more than 60 days past
due, other than those being Properly Contested, and (o) the
Indebtedness of any partnership or unincorporated joint venture
in which the Company is a general partner or a joint venturer to
the extent such Indebtedness is recourse to the Company.
“Indemnified Party” has the meaning set
forth in Section 7.1(a).
“Intercreditor Agreement” means one or
more agreements among the Company, the Senior Lenders, the
Investor and the holders of certain Junior Indebtedness setting
forth the subordination of the Obligations to the Senior
Indebtedness and the priority of the Obligations to such Junior
Indebtedness.
“Investor” has the meaning set forth in
the Preamble.
“Junior Indebtedness” shall mean the
following Indebtedness (i) all amounts owed to
U.S. Bank Portfolio Services, as successor to DVI Financial
Services, Inc., pursuant to that certain Restated Loan
Agreement, dated June 18, 2004, as amended and as may be
amended from time to time, (ii) all amounts owed under the
various Subordinated Notes Due December 15, 2007 issued by
the Company to the former owners of Medical Billing Solutions,
Inc. and Xxxxxx Xxxx Physician Solutions, Ltd and (iii) any
amounts that may be owed by the Company pursuant to any notes
issued by the Company to the sellers of any businesses acquired
by the Company between the date hereof and the Closing Date.
“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).
“Loan Document(s)” has the meaning set
forth in Section 2.1(b).
“Losses” has the meaning set forth in
Section 7.1(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 Loan 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 Loan Document (other than Uniform Commercial
Code filing statements) to which it is a party.
“Note” has the meaning set forth in the
Recitals, together with any replacement or substitution thereof,
any addition or allonge thereto and any amendment, restatement
or other modification thereto from time to time.
“Note Purchase” has the meaning set
forth in the Recitals.
“Obligations” has the meaning set forth
in Section 2.1(b).
“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 shares of Class D
Common Stock to be issued as part of the Equity Investment 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.
“Properly Contested” means, in the case
of any Indebtedness of the Company (including any taxes) that is
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
Indebtedness is 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 Indebtedness will not have a
Material Adverse Effect on the Company; (iv) if the
Indebtedness results from, or is 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
Indebtedness and all penalties, interest and other amounts due
in connection therewith.
“Proxy Statement” has the meaning set
forth in Section 2.7(a).
“Registration Rights Agreement” has the
meaning set forth in Section 2.6.
“Required Company Stockholder Approval”
has the meaning set forth in
Section 3.1(bb).
“Securities Act” means the Securities
Act of 1933, as amended, and the rules and regulations of the
Commission thereunder.
“Senior Indebtedness” has the meaning to
be set forth in the Intercreditor Agreement to be executed
between Senior Lender(s) and Investor at the Closing.
“Senior Lender” means any Person that
holds Senior Indebtedness.
“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.
“Warrant” has the meaning set forth in
Section 2.4.
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.
1.3 Accounting
Principles. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted,
all accounting determinations hereunder shall be made, and all
financial statements required to be
delivered hereunder after the Closing Date shall be prepared in
accordance with GAAP applied on a basis consistent with the most
recent audited financial statements of the Company delivered to
Investor.
ARTICLE 2
NOTE PURCHASE;
STOCKHOLDER APPROVAL
2.1 Evidence of Investment and
Repayment.
(a) Subject to the terms contained herein and the
satisfaction of the conditions precedent set forth in
Section 5.2 or elsewhere herein or in the other Loan
Documents, on the Closing Date Investor shall purchase the Note
from the Company by wire transfer of immediately available funds
in the amount of Three Million Three Hundred Fifty Thousand
Dollars ($3,350,000) to an account designated by the Company
prior to Closing and, subject to the satisfaction of the
conditions precedents set forth in Section 5.3
hereof, the Company shall sell the Note to the Investor and
issue the Warrant to the Investor. The Note shall be in the
original principal amount of Three Million Three Hundred Fifty
Thousand Dollars ($3,350,000), executed by the Company in favor
of Investor, substantially in the form of Exhibit A
attached hereto.
(b) The Note, this Agreement, and any Intercreditor
Agreement to which the Company and Investor are parties, and any
other instruments and documents executed by the Company, now or
hereafter evidencing or in any way related to the Indebtedness
evidenced by the Note are herein individually referred to as a
“Loan Document” and collectively referred to as
the “Loan Documents”. The term
“Obligations” as used herein shall refer to
(i) the Note, and any renewals or extensions thereof,
(ii) the full and prompt payment and performance of any and
all other Indebtedness and other obligations of the Company to
Investor under the Loan Documents, direct or contingent
(including but not limited to obligations incurred as endorser,
guarantor or surety and including, without limitation, accrued
and unpaid interest, capitalized interest, prepayment premiums
and all costs, fees and expenses provided for hereunder),
however evidenced or denominated, and however and whenever
incurred, including but not limited to Indebtedness incurred
pursuant to any present or future commitment of Investor to the
Company under the Loan Documents and (iii) all future
advances made by Investor for taxes, levies, and insurance and
all reasonable attorneys’ fees, court costs and expenses of
whatever kind incident to the collection of any of said
Indebtedness or other obligations and the enforcement and
protection of the security interest created hereby or by the
other Loan Documents.
(c) All payments of principal and interest due from the
Company hereunder shall be due, without any presentment thereof,
directly to Investor, at Investor’s address set forth in
Section 8.9 or such other address as Investor may
from time to time designate in writing to the Company or, if a
bank account with a United States bank is designated Investor
for or in any written notice to the Company from Investor, the
Company will make such payments in immediately available funds
to such bank account, no later than 2:00 p.m. New York City
local time on the date due, marked for attention as indicated,
or in such other manner or to such other account in any United
States bank as Investor may from time to time direct in writing.
2.2 Optional Prepayment of
Notes. Subject to any terms as may be set
forth in an Intercreditor Agreement from time to time, on and
after the second
(2nd)
anniversary of the Closing Date the Company shall have the right
at any time and from time to time, upon the notice provided for
below, to prepay the Note in whole or in part (and, if prepaid
in part, in a minimum amount of $500,000). In the event of an
optional prepayment made under this Section 2.2, the
Company shall give Investor written notice of such prepayment
not less than 30 nor more than 60 days prior to the
prepayment date, specifying (i) such prepayment date,
(ii) the principal amount of the Note to be prepaid on such
date, and (iii) the accrued interest applicable to the
prepayment, and stating that such prepayment is to be made
pursuant to this Section 2.2. The price of the Note
payable upon an optional prepayment pursuant to this
Section 2.2 shall be an amount, as determined on the
date of prepayment, equal to (x) the then-outstanding
principal
amount of the Note being redeemed multiplied by (y) the
applicable price percentage set forth below, as such amount may
be reduced by Investor, plus (z) all accrued and unpaid
interest on the principal redeemed:
|
Prepayment |
||||
|
Date of Prepayment
|
Price Percentage | |||
|
The second
(2nd)
anniversary of the Closing Date through, but not including the
third
(3rd)
anniversary of the Closing Date
|
103 | % | ||
|
The third
(3rd)
anniversary of the Closing Date through, but not including the
fourth
(4th)
anniversary of the Closing Date
|
102 | % | ||
|
The fourth
(4th)
anniversary of the Closing Date through, but not including the
fifth
(5th)
anniversary of the Closing Date
|
101 | % | ||
|
The fifth
(5th)
anniversary of the Closing Date and thereafter
|
100 | % | ||
All optional prepayments under this Section 2.2
shall be applied first to all costs, expenses, indemnities and
other amounts payable hereunder and under the Note, then to
payment of default interest, if any, then to payment of accrued
interest and thereafter to payment of principal. Any portion of
the Note which has been prepaid may not be reborrowed.
2.3 Purpose of Note Purchase and Use of
Proceeds. The purpose of the
Note Purchase and the use of proceeds shall be to finance
the acquisition of the Acquisition Targets (to be consummated
contemporaneously or substantially contemporaneously with the
Closing) and for working capital purposes and related closing
costs.
2.4 Issuance of Warrant. On
the Closing Date, the Company shall issue to Investor the right
to purchase at any time within five years of the Closing Date,
for a purchase price of $0.01 per share, such number of
shares of the Class A Common Stock equal to one and one
hundred seventeen one-thousandths percent (1.117%) of the
Outstanding Class A Common Stock on the Closing Date,
pursuant to the terms of a Common Stock Purchase Warrant,
substantially in the form of Exhibit B attached
hereto (the “Warrant”). The Warrant is fully
detachable from this Agreement and the Note and may be
transferred separately pursuant to the terms thereof.
2.5 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 exercise of the Warrant, the maximum number of
shares of Class A Common Stock that may be issuable or
deliverable thereupon.
2.6 Registration Rights. On
the Closing Date, the Company shall grant to Investor the right
to have the Class A Common Stock issuable upon exercise of
the Warrant registered under the Securities Act, pursuant to the
terms of a Registration Rights Agreement, substantially in the
form of Exhibit C attached hereto (the
“Registration Rights Agreement”).
2.7 Stockholder Approval.
(a) To the extent that stockholder approval of the issuance
of the Warrant
and/or the
issuance of the Class D Common Stock as part of the Equity
Investment 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 Investor
such recommendation only if the Special Committee of the Company
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.
2.8 Purchase Price
Allocation. On the Closing Date, or within
sixty (60) days thereafter, the Company and Investor shall
mutually agree upon an allocation of the $3,350,000 purchase
price for the Note and the Warrant as
between the Note and the Warrant. The Company and Investor will
report the purchase and sale of the Note and the Warrant in
accordance with such allocation for all federal, state and local
tax purposes.
ARTICLE 3
REPRESENTATIONS
AND WARRANTIES
3.1 The Company’s
Representations. In order to induce Investor
to enter into this Agreement, the Company hereby represents and
warrants to Investor that as of the date hereof, and,
immediately after giving effect to the transactions contemplated
by this Agreement and the other Loan Documents, 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 other Loan Documents to which it is a
party. 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 the Loan Documents and the
Warrant, without the consent or approval of any other person,
firm, governmental agency or other legal entity. Except for
obtaining the Required Company Stockholder Approval, the
execution and delivery of this Agreement, the borrowing
hereunder, the execution and delivery of each Loan Document to
which the Company is a party and the Warrant, 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, the Note, the Warrant and all of the other documents
to be delivered pursuant to the Loan Documents to which the
Company is a party are duly authorized to act on behalf of the
Company.
(c) Validity and Binding
Effect. This Agreement, the Warrant and the
other Loan Documents 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 Note 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 performance of the
Obligations of the Company under and by virtue of the Loan
Documents and the Warrant do not conflict with, and will not
result in any breach of, or constitute a default or trigger a
Lien under, any mortgage, security deed or agreement, deed of
trust, lease, bank loan or credit agreement, corporate charter
or bylaws, agreement or certificate of limited partnership,
limited liability company 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.
(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, 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 Loan
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), except for the
Loan Documents, 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 and the other Loan
Documents, 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) Margin Regulations. The
Company is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock. No proceeds
received pursuant to this Agreement will be used to purchase or
carry any equity security of a class which is registered
pursuant to Section 12 of the Exchange Act.
(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
Note. Assuming the accuracy of the
representations and warranties of Investor contained in
Section 3.2 hereof, the offer and sale of the Note
and the Warrant 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 Note or
Warrant, to any Person so as to bring the sale of the Note
and/or the
Warrant 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 carry or are 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) 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
Warrant pursuant to this Agreement (the “Company Board
Recommendation”).
(ii) The affirmative vote of holders of a majority of the
voting power of the outstanding shares of the Company’s
common stock present at such meeting, voting together as a
single class (the “Required Company Stockholder
Approval”), is the only vote of the holders of any
class or series of Capital Stock of the Company necessary to
approve the issuance of the Warrant pursuant to this Agreement.
(cc) Foreign Assets Control Regulations, Etc.
(i) Except as a result of the identity or status of
Investor, neither the sale of the Note 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.
(dd) Status under 1940 Act. The
Company is not subject to regulation under the Investment
Company Act of 1940, as amended.
3.2 Investor’s
Representations. Investor represents and
warrants to the Company that as of the date hereof, and,
immediately after giving effect to the transactions contemplated
by this Agreement and the other Loan Documents, as of the
Closing Date:
(a) Legal Status;
Authorization. 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 other
Loan Documents and to consummate the transactions contemplated
by this Agreement and the other Loan Documents. The execution,
delivery and performance by it of this Agreement and the other
Loan Documents (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 other Loan
Documents are the legal, valid and binding obligations of
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. 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 Note Purchase or other transactions contemplated
hereunder.
(d) Accredited Investor; Purchase Entirely for Own
Account. 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 Investor is
acquiring the Note 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. Investor understands that the
Note will not be registered under the Securities Act, by reason
of its issuance by the Company in a transaction exempt from the
registration requirements of the
Securities Act, and that it must hold the Note 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. Investor has received all the
information it considers necessary or appropriate for deciding
whether to purchase the Note. 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 Note, 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 Investor to rely thereon. 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. 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 Note. Investor also represents that it has not
been organized for the purpose of purchasing the Note.
ARTICLE 4
POST
CLOSING COVENANTS AND AGREEMENTS
The Company hereby covenants and agrees, that on the Closing
Date and thereafter for so long as this Agreement is in effect
and until the payment in full of all principal and interest
under the Note together with all other Obligations under the
Loan Documents:
4.1 Payment of
Obligations. The Company shall pay the
Indebtedness evidenced by the Note according to the terms
thereof, and shall timely pay or perform, as the case may be,
all of the other Obligations of the Company to Investor,
together with interest thereon, and any extensions,
modifications, consolidations
and/or
renewals thereof and any notes given in payment thereof.
4.2 Financial Statements and Other
Reports. The Company shall furnish to
Investor (a) not later than such time as provided to the
Senior Lenders, such reports delivered by the Company to the
Senior Lenders and (b) a copy of each financial statement
and report that the Company files with the Commission or any
stock exchange. The Company shall furnish to Investor, with
reasonable promptness, such other data and information relating
to the business, operations, affairs, financial condition,
assets or properties of the Company and its Subsidiaries or
relating to the ability of the Company to perform its
obligations hereunder, under the Note or under the other Loan
Documents, as from time to time may be reasonably requested, in
writing, by the Investor.
4.3 Maintenance of Books and Records;
Inspection. The Company shall, and shall
cause each of its Subsidiaries to, maintain its books, accounts
and records in accordance with GAAP, and after reasonable notice
from Investor, permit Investor, its officers and employees and
any professionals designated by Investor in writing, at the
Company’s expense, to visit and inspect any of its or its
Subsidiaries’ properties, corporate books and financial
records, and to discuss its and its Subsidiaries’ accounts,
affairs and finances with the Company or the principal officers
of the Company or any Subsidiary during reasonable business
hours, all at such times as Investor may reasonably request;
provided that no such inspection shall materially
interfere with the conduct of the Company’s or any
Subsidiary’s business, and that prior to an Event of
Default, the Company shall not be responsible for the expenses
of more than two such audits each Fiscal Year.
4.4 Insurance. Without
limiting any of the requirements of any of the other Loan
Documents, the Company shall, and shall cause each of its
Subsidiaries to, maintain, in such form, written by such
companies, in such amounts, for such period, and against such
risks as is customary for entities engaged in comparable
business activities or as otherwise may be reasonably acceptable
to Investor, including, without limitation, (a) to the
extent required by applicable law, worker’s compensation
insurance (or a legally sufficient amount of
self insurance against worker’s compensation liabilities,
with adequate reserves, under a plan approved by Investor, such
approval not to be unreasonably withheld or delayed),
(b) fire and “all risk” casualty insurance on all
its real and personal property, (c) public liability
insurance, and (d) business interruption insurance. At the
request of Investor, the Company will deliver forthwith a
certificate specifying the details of such insurance in effect.
The Company shall promptly provide written notice, in reasonable
detail, to Investor whenever there is any material change to the
Company’s or any Subsidiary’s insurance coverage.
4.5 Taxes and
Assessments. The Company shall, and shall
cause each of its Subsidiaries to, (a) file all tax returns
and appropriate schedules thereto that are required to be filed
under applicable law, prior to the date of delinquency,
(b) pay and discharge all taxes, assessments and
governmental charges or levies imposed upon the Company or any
Subsidiary upon its income and profits or upon any properties
belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and
governmental charges or levies that, if unpaid, would reasonably
be expected to result in a lien or charge upon any of its
properties; provided, however, that the Company or
any Subsidiary in good faith may Properly Contest any such tax,
assessment, governmental charge or levy described in the
foregoing clauses (b) and (c).
4.6 Corporate Existence. The
Company shall, and shall cause each of its Subsidiaries to,
maintain its legal existence and good standing in the state of
its formation, and its qualification and good standing as a
foreign entity in each jurisdiction in which such qualification
is necessary pursuant to applicable law except where the failure
to be qualified and in good standing as a foreign corporation
would not reasonably be expected to result in a Material Adverse
Change to the Company.
4.7 Compliance with Law and Other
Agreements. Except where the failure to do so
would not reasonably be expected to have a Material Adverse
Effect on the Company, the Company shall, and shall cause each
of its Subsidiaries to, maintain its business operations and
property owned or used in connection therewith in compliance
with (a) all applicable federal, state and local laws,
regulations and ordinances governing such business operations
and the use and ownership of such property, and (b) all
agreements, licenses, franchises, indentures and mortgages to
which the Company or any of its Subsidiaries is a party or by
which the Company, any of its Subsidiaries or any of their
respective properties is bound.
4.8 Notice of Default. The
Company shall give written notice to Investor of the occurrence
of any Default or Event of Default under this Agreement or any
default or event of default under any other Loan Document
promptly upon the occurrence thereof.
4.9 Notice of
Litigation. The Company shall give notice, in
writing, to Investor of (a) any actions, suits or
proceedings, instituted by any Person against the Company or any
of its Subsidiaries or affecting any of the assets of the
Company of any of its Subsidiaries wherein the amount at issue
is in excess of $500,000 and after any such action, suit or
proceeding is instituted, information reasonably related thereto
as reasonably requested from time to time by Investor, and
(b) any dispute, investigation, claim, imposition of
criminal or civil fines and penalties or civil investigative
demands, not resolved within 30 days of the commencement
thereof, between the Company or any of its Subsidiaries on the
one hand and any governmental regulatory body on the other hand,
which dispute would reasonably be expected to materially
interfere with the normal operations of the Company and its
Subsidiaries.
4.10 Debt. Without the prior
written consent of Investor, the Company shall not create,
incur, assume or suffer to exist Indebtedness of any description
whatsoever, excluding:
(a) the Indebtedness evidenced by the Note and the other
Loan Documents;
(b) the endorsement of negotiable instruments payable to
the Company for deposit or collection in the ordinary course of
business;
(c) trade payables incurred in the ordinary course of
business;
(d) the Indebtedness listed on Schedule 3.1(l)
hereto and any refinancings, refundings, renewals or extensions
thereof, which do not increase the principal amount or shorten
the maturity thereof, and the interest thereon;
(e) purchase money Indebtedness hereafter incurred by the
Company to finance the purchase of fixed assets used in the
Company’s business; provided that (i) the total
of all such Indebtedness for all such Persons taken together
shall not exceed an aggregate principal amount of $250,000 at
any one time outstanding; (ii) such Indebtedness when
incurred shall not exceed the purchase price of the asset(s)
financed; and (iii) no such Indebtedness shall be
refinanced for a principal amount in excess of the principal
balance outstanding thereon at the time of such
refinancing; and
(f) other Indebtedness relating to capitalized leases,
financing of insurance premiums, capital expenditures and other
unsecured Indebtedness incurred in the ordinary course of
business, in an aggregate amount not to exceed, at any time,
$500,000.
Without the prior written consent of Investor, the Company shall
not permit any of its Subsidiaries to create, incur, assume or
suffer to exist indebtedness of any description whatsoever.
4.11 Inconsistent
Agreements. Without the prior written consent
of Investor, the Company shall not enter into, or permit any of
its Subsidiaries to enter into, any agreement material in amount
containing any provision which would be violated or breached by
the performance by the Company of its respective Obligations
hereunder or under any of the Loan Documents.
4.12 Modification of
Charter. Without the prior written consent of
Investor, the Company will not amend, modify or change any
provision of its certificate of incorporation, bylaws, or the
terms of any class or series of its Capital Stock, other than in
a manner that could not reasonably be expected to adversely
affect Investor in its capacity as a holder of the Note.
4.13 Limitations on
Layering. Notwithstanding the provisions of
Section 4.10, the Company shall not incur, or permit
to exist, any Indebtedness that is subordinate or junior in
right of payment to any Senior Indebtedness and senior in any
respect in right of payment to any Indebtedness arising under
this Agreement and the Note.
4.14 Distributions. Except
for the acquisition of the Xxxxxxxx Capital Shares, the Company
will not, at any time, declare or make or incur any liability to
declare or make any Distribution and will not permit any of its
Subsidiaries to incur any liability with respect to any such
Distributions. “Distribution” means (a) dividends
or other distributions or payments on Capital Stock of the
Company or (b) the redemption or acquisition of such
Capital Stock (except when solely in exchange for such Capital
Stock), unless made, contemporaneously, from the net cash
proceeds of a sale of such Capital Stock; provided,
however, that nothing herein shall prevent or prohibit the
payment of “payable in kind” distributions on the
Capital Stock of the Company as set forth in the Company’s
certificate of incorporation. The Company will not permit any of
its Subsidiaries to declare or pay dividends or other
distributions or payments on its Capital Stock except to the
Company. The Company will not permit any of its Subsidiaries to
redeem or otherwise acquire any of its Capital Stock.
4.15 Affiliates. The Company
will not, and will not permit any of its Subsidiaries to,
directly or indirectly enter into any material transaction or
material group of related transactions (including, without
limitation, the purchase, lease, sale or exchange of properties
of any kind or the rendering of any service) with any affiliate,
except in the ordinary course and pursuant to the reasonable
requirements of the Company’s and such Subsidiary’s
business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a
comparable arm’s-length transaction with a Person not an
affiliate.
ARTICLE 5
CLOSING;
CONDITIONS TO CLOSING
5.1 Closing. The purchase
and sale of the Note 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 5 (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 5.2 below may be waived solely by the
Investor in its sole discretion.
Conditions precedent set forth in Section 5.3 below
may be waived solely by the Company in its sole discretion. If
the Agreement shall have been terminated pursuant to
Section 8.1 hereof prior to the Closing Date, no
Closing shall occur.
5.2 Conditions to Investor’s
Obligations. Investor’s obligations to
purchase and pay for the Note at the Closing are subject to
Investor determining, in its good faith discretion, that the
following conditions have been satisfied (or Investor waiving in
its sole discretion in writing the conditions that it has
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
the Investor 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 Equity Investment and the acquisition of the
Acquisition Targets, and such revisions shall be in form and
substance satisfactory to the Investor in its 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. No Default or Event of Default occurring as
a result of a breach of any covenant set forth in
Article 4 shall exist as of the Closing Date
determined as if this Agreement had been in full force and
effect at all times from and after June 30, 2006.
(c) Consummation of the Equity Investment and the
Acquisitions. On or prior to the Closing
Date, the Equity Investment and the acquisition of the
Acquisition Targets shall have been consummated in accordance
with the terms and conditions of the Equity Investment
Documents, the applicable acquisition agreements and all
applicable laws. On or prior to the Closing Date, the Company
shall have delivered to the 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 Indebtedness, 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 the
Investor.
(d) Consent of Third Parties, Governmental
Authorities, etc. The Company shall have
presented evidence satisfactory to Investor 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 other Loan Documents and the transactions
contemplated hereby and thereby have been obtained,
(ii) the transactions related to the Loan Documents 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 consummation of the Note Purchase 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) Senior Financing and Intercreditor
Agreements. On or prior to the Closing Date,
the Company shall have consummated a transaction with one or
more Senior Lenders for the provision of not less than
$6,500,000 of senior secured financing. The Company and Investor
shall have entered into one or more Intercreditor Agreements
with the Senior Lenders and the holders of certain Junior
Indebtedness, on terms satisfactory to Investor, and each of the
same shall be in full force and effect.
(g) Conversions; Repurchase. On or
before Closing, Xxxxxxxx Partners IV, L.P. 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.
(h) Certain Documents. Investor
shall have received the following closing documents, in form and
substance satisfactory to Investor, all of which shall, except
as specified below, be fully executed originals, and shall be in
full force and effect:
(i) the Note, duly executed by the Company, in form and
substance satisfactory to the Investor; 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 the Note;
(ii) the Warrant, duly executed by the Company; 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 the Warrant;
(iii) the Registration Rights Agreement, duly executed by
the Company;
(iv) an opinion of the Company’s counsel, dated the
Closing Date, as to the Loan Documents, in form and substance
reasonably satisfactory to Investor;
(v) 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;
(vi) 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 each of the Loan Documents
(including the issuance of the Note) are true, complete and
correct, (C) as to the incumbency of each Person executing
this Agreement and each of the Loan Documents on behalf of the
Company, and (D) as to any other matters reasonably
requested by Investor;
(vii) a certificate from an officer of the Company, in form
and substance satisfactory to the Investor, with respect to the
satisfaction of the requirements under Sections 5.2(a),
(b), (c), (e), (f) and (g) above; and
(vii) such other documents as Investor may reasonably
request in connection with this Agreement, and each such
document shall be in form and substance reasonably satisfactory
to Investor. All fees and expenses of Investor required to be
paid pursuant to Section 9.2 hereof shall have been
paid and all actions required under Section 2.5
hereof shall have been undertaken and completed. Any withdrawals
or modifications referred to in Section 2.7(b)
hereof shall be satisfactory to the Investor in its sole
discretion.
5.3 Conditions to the Company’s
Obligations. The Company’s obligations
to issue and sell the Note 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 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, Investor 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.
(b) Consummation of the Equity
Investment. On or prior to the Closing Date,
the Equity Investment shall have been consummated in all
material respects in accordance with the terms and conditions of
the Equity Investment 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 other Loan Documents and the
transactions contemplated hereby and thereby have been obtained,
(ii) the transactions related to the Loan Documents 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 consummation of the Note Purchase 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) Conversions; Repurchase. On or
before Closing, Xxxxxxxx Partners IV, L.P. 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.
(f) 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 the
Investor; 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 6
DEFAULT
AND REMEDIES
6.1 Events of Default. The
occurrence of any of the following shall constitute an Event of
Default hereunder:
(a) Default in the payment of:
(i) Any principal of or premium on the Note when and as the
same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise, and such Default continues
unremedied for a period of three (3) Business Days; or
(ii) Any interest on the Note or any other amount (other
than an amount referred to in (i) above) due under any of
the Loan Documents, when and as the same becomes due and
payable, and such Default continues unremedied for a period of
three (5) Business Days;
(b) Any representation or warranty by the Company as to any
matter hereunder or under any of the other Loan Documents, or
delivery by any of the Company of any schedule, statement,
resolution, report, certificate, notice, instruction or writing
to or furnished to Investor is untrue in any material respect on
the date as of which the facts set forth therein are stated or
certified;
(c) Default shall occur in the performance of (i) any
of the covenants or agreements of the Company contained in
Sections 4.2, 4.6, 4.8, or 4.12 or
(ii) any other covenants or agreements of the Company
contained herein or in any of the other Loan Documents and, in
the case of clause (ii) above, such failure shall continue
for 30 days after the earlier of (a) written notice
thereof has been given by Investor to the Company and
(b) any officer of the Company knows or reasonably should
have known of such failure;
(d) Any of the following events shall have occurred with
respect to the Company or any of its Subsidiaries: (i) the
Company or any of its Subsidiaries shall have made an assignment
for the benefit of its creditors; (ii) the Company or any
of its Subsidiaries shall have admitted in writing its inability
to pay its debts as they become due; (iii) the Company or
any of its Subsidiaries shall have filed a voluntary petition in
bankruptcy; (iv) the Company or any of its Subsidiaries
shall have been adjudicated bankrupt or insolvent; (v) the
Company or any of its Subsidiaries shall have filed any petition
or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any present or future applicable law pertinent to
such circumstances; (vi) the Company or any of its
Subsidiaries shall have filed or shall file any answer admitting
or not contesting the material allegations of a bankruptcy,
insolvency or similar petition filed against the Company;
(vii) the Company or any of its Subsidiaries shall have
sought or consented to, or acquiesced in, the appointment of any
trustee, receiver, or liquidator of it or of all or any
substantial part of its properties; (viii) 60 days
shall have elapsed after the commencement of an action against
the Company or any of its Subsidiaries seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future applicable law
without such action having been dismissed or without all orders
or proceedings thereunder affecting the operations or the
business of the Company or such Subsidiary having been stayed,
or if a stay of any such order or proceedings shall thereafter
be set aside and the action setting it aside shall not be timely
appealed; or (ix) 60 days shall have expired after the
appointment, without the consent or acquiescence of the Company
or any of its Subsidiaries, of any trustee, receiver or
liquidator of the Company or such Subsidiary or of all or any
substantial part of the assets and properties of the Company or
such Subsidiary without such appointment having been vacated.
(e) The occurrence with respect to the Company or any of
its Subsidiaries of any action initiating, or any event that
results in, the dissolution, liquidation, winding up or
termination of the Company or such Subsidiary;
(f) Any judgment in excess of $500,000, to the extent not
fully paid or discharged (excluding any portion thereof that is
covered by an insurance policy issued by an insurance company of
recognized standing and creditworthiness which has acknowledged
the coverage of such policy with respect to such judgment) is
rendered against the Company or any of its Subsidiaries, and the
same shall remain undischarged for a period of 21 consecutive
days during which execution is not effectively stayed, or any
action is legally taken by a judgment creditor to levy upon
assets or properties of the Company or any of its Subsidiaries
to enforce any such judgment;
(g) Any event of default shall occur under the documents
evidencing the Senior Indebtedness, where such event of default
results in the acceleration of the Senior Indebtedness; any
default in the performance of or compliance with any term of any
evidence of any documents or instruments evidencing the Junior
Indebtedness or any other Indebtedness (other than Senior
Indebtedness), which Junior Indebtedness or other Indebtedness
has an aggregate outstanding principal amount of at least
$250,000, and such default shall have continued beyond the
expiration of any applicable grace period provided for in the
documents evidencing such Junior Indebtedness or such other
Indebtedness.
6.2 Acceleration of Maturity;
Remedies. Upon the occurrence and during the
continuance of any Event of Default (a) specified in
Sections 6.1(d) or 6.1(e), the Note shall
automatically become immediately due and payable, together with
interest accrued thereon, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the
Company, (b) specified in Section 6.1(a),
Investor may, at its option, declare by notice in writing to the
Company that the Note to be, and the Note shall thereupon be and
become, immediately due and payable, together with interest
accrued thereon without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the
Company and (c) if such event is an Event of Default (other
than under an Event of Default under any of
Sections 6.1(a), 6.1(d) or 6.1(e)), Investor
may, at its option, declare by notice in writing to the Company
the Note to be, and the Note shall thereupon be and become,
immediately due and payable, together with interest accrued
thereon without presentment, demand, protest or other notice of
any kind, all of which
are hereby waived by the Company. Upon the occurrence of any
such Event of Default and the acceleration of the maturity of
the Indebtedness evidenced by the Note:
(a) Investor shall be immediately entitled to exercise any
and all rights and remedies possessed by Investor pursuant to
the terms of the Note and all of the other Loan
Documents; and
(b) Investor shall have any and all other rights and
remedies that Investor may now or hereafter possess at law, in
equity or by statute.
6.3 Remedies Cumulative; No
Waiver. No right, power or remedy conferred
upon or reserved to Investor by this Agreement or any of the
other Loan Documents is intended to be exclusive of any other
right, power or remedy, but each and every such right, power and
remedy shall be cumulative and concurrent and shall be in
addition to any other right, power and remedy given hereunder,
under any of the other Loan Documents or now or hereafter
existing at law, in equity or by statute. No delay or omission
by Investor to exercise any right, power or remedy accruing upon
the occurrence and during the continuance of any Event of
Default shall exhaust or impair any such right, power or remedy
or shall be construed to be a waiver of any such Event of
Default or an acquiescence therein, and every right, power and
remedy given by this Agreement and the other Loan Documents to
Investor may be exercised from time to time and as often as may
be deemed expedient by Investor.
6.4 Proceeds of
Remedies. Any or all proceeds resulting from
the exercise of any or all of the foregoing remedies shall be
applied as set forth in the Loan Document(s) providing the
remedy or remedies exercised, if none is specified, or if the
remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including without limitation
reasonable attorneys’ fees and disbursements, incurred by
Investor in connection with the exercise of its remedies;
Second, to the reasonable expenses of curing the Default that
has occurred, in the event that Investor elects, in its sole
discretion, to cure the Default that has occurred;
Third, to the payment of the Obligations under the Loan
Documents of the Company, including but not limited to the
payment of the principal of and interest on the Indebtedness
evidenced by the Notes, in such order of priority as Investor
shall determine in its sole discretion; and
Fourth, the remainder, if any, to the Company or to any other
Person lawfully thereunto entitled.
ARTICLE 7
INDEMNIFICATION;
SURVIVAL
7.1 General Indemnification.
(a) The Company, without limitation as to time, will defend
and indemnify Investor and its 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, agreement or Obligation of
the Company contained in any of the Loan Documents, 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 Note 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. The 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 all
Indemnified Parties. The Company shall be liable only for
settlement of any claim against an Indemnified Party made with
the Company’s written consent. Nothing in this
Section 7.1 shall affect, limit or prejudice the
obligations, undertakings and liabilities of the Company to pay
all amounts owing under the Note and all other Obligations under
this Agreement and the other Loan Documents in accordance with
the terms thereof and hereof.
7.2 Limitation of
Damages. Neither Investor nor the Company
shall in any event be liable to the other party for special or
consequential damages arising from this Agreement or otherwise
related to the Obligations under the Loan Documents.
7.3 Survival. All
representations, warranties, covenants and agreements contained
herein or made in writing by the Company or Investor in
connection herewith (except as specifically set forth herein)
shall survive the execution and delivery of this Agreement and
other Loan Documents.
ARTICLE 8
TERMINATION
8.1 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
Investor;
(b) (i) by the 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 5.2
hereof, or (ii) by the Company if there has been a breach
of any covenant of the Investor hereunder, a breach of any of
the representations and warranties of the Investor made in
Section 3.2 of this Agreement or a failure of any of
the conditions to Closing set forth in Section 5.3
hereof;
(c) by Investor, if Investor shall have determined, in its
good faith discretion, in connection with the completion of its
due diligence review of the Company and the Acquisition Targets
that the Company, after giving effect to such acquisitions and
the Equity Investment, is not creditworthy;
(d) by the Company or 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 the Investor if the Closing shall have not occurred
on or prior to December 31, 2006 for any reason whatsoever
other than Investor breaching any of its undertakings hereunder
or acting in bad faith.
8.2 Effect of
Termination. In the event of the termination
of this Agreement pursuant to Section 8.1, this
Agreement, except for the provisions of this
Section 8.2, Article 7 and
Section 9.2, 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 8.2 shall relieve any party to this
Agreement of liability for willful breach; provided,
however, that if it shall be finally 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, fees 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. The Company
agrees that any determination by the Investor to terminate this
Agreement by virtue of the Investor’s determination, in
good faith, that the Company is not creditworthy shall not give
rise to any action by the Company for wrongful termination of
this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 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 Investor shall bind and inure to the benefit of
their respective heirs, legal representatives, successors in
title and assigns, whether so expressed or not.
9.2 Costs and Expenses. The
Company agrees (a) to pay upon demand all reasonable
out-of-pocket
costs and expenses of Investor in connection with
(i) Investor’s due diligence investigation in
connection with, and the preparation, negotiation, execution,
delivery of, this Agreement and the other Loan Documents, and
any amendment, modification or waiver hereof or thereof or
consent with respect hereto or thereto and (ii) the
administration, monitoring and review of the Note (including,
without limitation, reasonable
out-of-pocket
expenses for travel, meals, long distance telephone calls, wire
transfers, facsimile transmissions and copying and with respect
to the engagement of appraisers, consultants, auditors or
similar Persons by Investor at any time, whether before or after
the Closing Date, to render opinions concerning the
Company’s financial condition), (b) to pay upon demand
all reasonable out of pocket costs and expenses of Investor in
connection with (x) any refinancing or restructuring of the
Note Purchase, whether in the nature of a “work
out,” in any insolvency or bankruptcy proceeding or
otherwise and whether or not consummated, and (y) any
amendments, waivers, or extensions and (z) the enforcement,
attempted enforcement or preservation of any rights or remedies
under this Agreement or any of the other Loan Documents, whether
in any action, suit or proceeding (including any bankruptcy or
insolvency proceeding) or otherwise, and (c) to pay and
hold Investor harmless from and against all liability for any
intangibles, documentary, stamp or other similar taxes, fees and
excises, if any, including any interest and penalties, and any
finder’s or brokerage fees, commissions and expenses (other
than any fees, commissions or expenses of finders or brokers
engaged by Investor), that may be payable in connection with the
transactions contemplated by this Agreement and the other Loan
Documents. All such costs or expenses shall constitute a part of
the Obligations under the Loan Documents.
9.3 Assignment.
(a) Investor may not assign this Agreement or any rights or
obligations hereunder, other than to affiliates of 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 Investor. The Company may not
assign this Agreement or any rights or obligations hereunder
without the prior written consent of Investor, except pursuant
to a merger, recapitalization or other business combination
transaction in which the surviving entity is a United States
entity and agrees in writing to assume all of the covenants,
liabilities and obligations of the Company hereunder and with
respect to which the Investor shall have reasonably determined
that such surviving entity has the same or better credit
standing than the Company and provided that, in any case, no
other Default or Event of Default shall then exist and no
blockage, standstill or other similar event shall have been
thereby triggered and still exist in any Intercreditor Agreement
with respect to any Senior Indebtedness. 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.
(b) The Company shall keep at its principal executive
office a register for the registration of transfers of the Note.
The name and address of the holder of the Note, each transfer
thereof and the name and address of each transferee thereof
shall be registered in such register. Prior to due presentment
for registration of transfer, the Person in whose name the Note
shall be registered shall be deemed and treated as the owner and
holder thereof for all purposes hereof, and the Company shall
not be affected by any notice or knowledge to the contrary.
Subject to compliance with applicable restrictions on transfer
pursuant to federal and state securities laws, upon surrender of
the Note at the principal executive office of the Company for
registration of transfer (duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered
holder of such Note or its attorney duly authorized in writing
and accompanied by the address for notices of the transferee of
such Note or part thereof), the Company shall execute and
deliver, at the Company’s expense (except as provided
below), a new Note (as requested by the holder thereof) in
exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note (which shall
include all capitalized interest with respect thereto to the
extent such interest has not already been represented by the
issuance of a new Note). Subject to the requirements set forth
above in this Section 9.3, each such new Note shall
be payable to such Person as such holder may request and shall
be substantially in the form of the old Note being so replaced.
Each such new Note shall be dated and bear interest from the
date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. The Company may require payment of
a sum sufficient to cover any stamp tax or governmental charge
imposed in respect of any such transfer of the Note.
9.4 Time of the
Essence. Time is of the essence with respect
to each and every covenant, agreement and Obligation of the
Company hereunder and under all of the other Loan Documents.
9.5 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.
9.6 Interest and Charges Not to Exceed Maximum
Allowed by Law. Anything in this Agreement,
the Note or any of the other Loan Documents to the contrary
notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Note, acceleration of the
maturity of the unpaid balance of the Note or otherwise, shall
the interest and other charges agreed to be paid to Investor for
the use of the money advanced or to be advanced hereunder exceed
the maximum amounts collectible under applicable laws in effect
from time to time. It is understood and agreed by the parties
that, if for any reason whatsoever the interest or loan charges
paid or contracted to be paid by the Company in respect of the
Indebtedness evidenced by the Note shall exceed the maximum
amounts collectible under applicable laws in effect from time to
time, then ipso facto, the obligation to pay such
interest
and/or loan
charges shall be reduced to the maximum amounts collectible
under applicable laws in effect from time to time, and any
amounts collected by Investor that exceed such maximum amounts
shall be applied to the reduction of the principal balance of
the Indebtedness evidenced by the Note
and/or
refunded to the Company so that at no time shall the interest or
loan charges paid or payable in respect of the Indebtedness
evidenced by the Note exceed the maximum amounts permitted from
time to time by applicable law.
9.7 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.
9.8 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 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
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 & Xxxxxxx LLP
0000 XX Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
0000 XX Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
9.9 Entire Agreement. This
Agreement and the other written agreements between the Company
and Investor 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 Obligations under
the Loan Documents, the provision of this Agreement shall
control. The execution and delivery of this Agreement and the
other Loan Documents by the Company were not based upon any fact
or material provided by Investor, nor was the Company induced or
influenced to enter into this Agreement or the other Loan
Documents by any representation, statement, analysis or promise
by Investor.
9.10 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 Investor to such amendment, action or
omission to act.
9.11 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.
9.12 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, Investor and their
respective agents have participated in the preparation hereof.
9.13 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 INVESTOR MAY BE A PARTY AND WHICH CONCERNS THIS AGREEMENT
OR THE OBLIGATIONS UNDER THE LOAN DOCUMENTS. IT IS FURTHER
AGREED THAT VENUE FOR ANY SUCH ACTION SHALL LIE EXCLUSIVELY WITH
COURTS SITTING IN NEW YORK CITY, UNLESS 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
INVESTOR TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW, OR TO PRECLUDE THE ENFORCEMENT BY 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.
9.14 Waiver of Trial by
Jury. INVESTOR 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 OR THE LOAN DOCUMENTS.
9.15 No Setoffs, etc. All
payments hereunder and under the Note shall be made by the
Company without setoff, offset, deduction or counterclaim, free
and clear of all taxes, levies, imports, duties, fees and
charges, and without any withholding, restriction or conditions
imposed by any governmental authority. If the Company shall be
required by any law to deduct, setoff or withhold any amount
from or in respect of any payment to Investor hereunder or under
the Notes, then the amount so payable to Investor shall be
increased as may be necessary so that, after making all required
deductions, setoffs and withholdings, Investor shall receive an
amount equal to the sum it would have received had no such
deductions, setoffs or withholding been made.
[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
corporation
| By: |
/s/ Xxxxxxxx
X. Xxxxx
|
Name: Xxxxxxxx X. Xxxxx
Title: President and Chief Executive Officer
Title: President and Chief Executive Officer
INVESTOR:
PHOENIX LIFE INSURANCE
COMPANY, a New York corporation
COMPANY, a New York corporation
| By: |
/s/ Xxxx
X. Xxxxx
|
Name: Xxxx X. Xxxxx
Title: Vice President
Title: Vice President
