EXHIBIT 10.1 EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated
effective as of July 18, 2008, among Integrated Healthcare Holdings, Inc., a
Nevada corporation (the "COMPANY"), Kali P. Chaudhuri, M.D., an individual
("INVESTOR"), and William E. Thomas, an individual ("THOMAS") (for purposes of
Articles IV and VI only).
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below)
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
Investor the Purchase Right (defined below) and the Shares (defined below), and
Investor desires to purchase and receive the Purchase Right, as more fully
described in this Agreement.
As a condition and inducement to Investor entering into this Agreement
and incurring the obligations and taking the actions set forth herein,
concurrently with the execution and delivery of this Agreement, the Company,
Lenders (defined below), Healthcare Financial (defined below) and the Subsidiary
Borrowers (defined below) are entering into the Payoff Agreement (defined
below). In addition, Investor is exercising the Exercised Warrants (defined
below) and entering into the Option and Standstill Agreement (defined below)
concurrent with his entry into this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and Investor agree as
follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
"4.95% WARRANT" means a warrant dated October 9, 2007 issued
to Healthcare Financial to purchase a minimum of 16,880,484 shares of common
stock (subject to certain adjustments described in the warrant) of the Company,
as amended by amendment no. 1 dated effective as of the effective date of this
Agreement.
"$10.7 MILLION CREDIT FACILITY" means the Credit Agreement
dated effective October 9, 2007 among the Company and the Subsidiary Borrowers,
as borrowers; the Credit Parties, as credit parties; West Coast and OC-PIN as
guarantors; and MPFC III, as lender, and related documents.
"$10.7 MILLION NOTE" means the $10,700,000 Convertible Term
Note dated October 9, 2007, executed by the Company and the Subsidiary
Borrowers, jointly and severally as maker, payable to the order of MPFC III or
its successors, nominees or assigns, as holder.
"31.09% WARRANT" means a warrant dated December 12, 2005
issued to Healthcare Financial to purchase a minimum of 26,097,561 shares of
common stock (subject to certain adjustments described in the warrant) of the
Company, as amended by amendment no. 1 dated effective as of April 6, 2006,
amendment no. 2 dated October 9, 2007 and amendment no. 3 dated effective as of
the effective date of this Agreement.
"$50 MILLION CREDIT FACILITY" means the $50,000,000 revolving
credit facility and related documents among Borrower, Subsidiaries, MPFC I, and
the Credit Parties.
"$80 MILLION CREDIT FACILITY" means the $80,000,000 credit
facility and related documents among Borrower, Subsidiaries, MPFC II, and the
Credit Parties.
"ACTION" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed under Rule
144.
"BUSINESS DAY" means any day except Saturday, Sunday and any
day that is a federal legal holiday or a day on which banking institutions in
the State of California are authorized or required by law or other governmental
action to close.
"CALIFORNIA COURTS" means the state and federal courts sitting
in the County of Orange, State of California.
"CLOSING" means the closing of the purchase and sale of the
Securities pursuant to Article II.
"CLOSING DATE" means the date on which all of the conditions
set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as
the parties may agree, but no later than the Outside Date.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $0.001 per share, and any securities into which such common stock may
hereafter be reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the Company
or any Subsidiary which entitle the holder thereof to acquire Common Stock at
any time, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"COMPANY COUNSEL" means Reed Smith LLP and Lionel Sawyer &
Collins.
"COMPANY DELIVERABLES" has the meaning set forth in Section
2.2(a).
"CREDIT FACILITIES" means the $10.7 Million Credit Facility,
the $80 Million Credit Facility and the $50 Million Credit Facility.
"CREDIT PARTIES" means Pacific Coast Holdings Investment, LLC,
a California limited liability company, West Coast, Ganesha Realty, LLC, a
California limited liability company, and OC-PIN.
"DISCLOSURE MATERIALS" has the meaning set forth in Section
3.1(h).
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"LATEST FORM 10-K" means the annual report on Form 10-K for
the fiscal year ended March 31, 2008, filed by the Company on July 14, 2008.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISED WARRANTS" means the Stock Purchase Warrant dated
January 31, 2005 issued by the Company to Investor initially with respect to
60,000,000 shares of Common Stock, together with the Stock Purchase Warrant
dated January 31, 2005 issued by the Company to Thomas initially with respect to
14,700,000 shares of Common Stock and assigned to Investor by Thomas as to the
remaining underlying 4,895,712 shares of Common Stock.
"GAAP" means U.S. generally accepted accounting principles.
"HEALTHCARE FINANCIAL" means Healthcare Financial Management
& Acquisitions, Inc., a Nevada corporation.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in
Section 3.1(p).
"INVESTMENT AMOUNT" means $6,968,268.01.
"INVESTOR PARTY" has the meaning set forth in Section 4.6.
"LENDERS" means MPFC I, MPFC II and MPFC III.
"LIEN" means any lien, charge, encumbrance, security interest,
right of first refusal or other restrictions of any kind.
"MATERIAL ADVERSE EFFECT" means any of (i) a material and
adverse effect on the legality, validity or enforceability of any Transaction
Document or any of the Credit Facilities, (ii) a material and adverse effect on
the results of operations, assets, prospects, business or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) an
adverse impairment to the Company's ability to perform on a timely basis its
obligations under any Transaction Document or any of the Credit Facilities.
"MPFC I" means Medical Provider Financial Corporation I, a
Nevada corporation.
"MPFC II" means Medical Provider Financial Corporation II, a
Nevada corporation.
"MPFC III" means Medical Provider Financial Corporation III, a
Nevada corporation.
"OC-PIN" means Orange County Physicians Investment Network,
LLC, a Nevada limited liability company.
"OPTION AND STANDSTILL AGREEMENT" means the Option and
Standstill Agreement among MPFC I, MPFC II, Healthcare Financial and Investor.
"OUTSIDE DATE" means 5:00 p.m. California time on January 10,
2009.
"PAYOFF AGREEMENT" means the Early Loan Payoff Agreement dated
effective as of the effective date hereof, among the Company, the Subsidiary
Borrowers, Healthcare Financial and Lenders.
"PER SHARE PURCHASE PRICE" equals $0.11.
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"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PURCHASE RIGHT" means Investor's right, in his sole
discretion, to purchase the Shares pursuant to this Agreement.
"RESCISSION AGREEMENT" means the Rescission, Restructuring and
Assignment Agreement dated as of January 27, 2005 among the Company, Investor,
Thomas, OC-PIN and Anil V. Shah, M.D.
"REGISTRABLE SECURITIES" means the Shares, the Warrant Shares,
the shares issued or issuable at any time upon exercise by Investor and/or
Thomas under the Exercised Warrants, and any securities issued or issuable upon
any stock dividend, stock split, recapitalization, merger, consolidation or
similar event with respect to such shares of Common Stock.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"SEC REPORTS" has the meaning set forth in Section 3.1(h).
"SECURITIES" means the Shares, the Warrants and the Warrant
Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the shares of Common Stock issued or issuable
to Investor pursuant to this Agreement (excluding any Warrant Shares).
"SUBSIDIARY" means each of the Subsidiary Borrowers and each
"significant subsidiary" as defined in Rule 1-02(w) of the Regulation S-X
promulgated by the Commission under the Exchange Act.
"SUBSIDIARY BORROWERS" are each of the following California
corporations: WMC-SA, Inc., WMC-A, Inc., Chapman Medical Center, Inc. and
Coastal Communities Hospital, Inc.
"TRADING DAY" means (i) a day on which the Common Stock is
traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the
Common Stock is not listed on a Trading Market (other than the OTC Bulletin
Board), a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is
not quoted on any Trading Market, a day on which the Common Stock is quoted in
the over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); PROVIDED, that if the Common Stock is not listed or quoted
as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a
Business Day.
"TRADING MARKET" means whichever of the New York Stock
Exchange, the American Stock Exchange, the NASDAQ Stock Market, or the OTC
Bulletin Board on which the Common Stock is principally listed or quoted for
trading on the date in question.
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"TRANSACTION DOCUMENTS" means this Agreement, the Payoff
Agreement and any other documents or agreements executed in connection with the
transactions contemplated hereunder and thereunder.
"WARRANTS" means the 4.95% Warrant and the 31.09% Warrant.
"WARRANT SHARES" means the shares of Common Stock issuable
upon exercise of the Warrants.
"WEST COAST" means West Coast Holdings, LLC, a California
limited liability company.
ARTICLE II.
EXECUTION, PURCHASE AND SALE
2.1 EXECUTION AND INITIAL DELIVERIES.
(a) Concurrent with the full execution of this Agreement,
Investor shall deliver or cause to be delivered to the Company:
(i) $50,000.00 in United States dollars and in
immediately available funds, in consideration for Investor's receipt of the
Purchase Right; and
(ii) exercise notices covering the exercise of each
of the Exercised Warrants in full, together with a copy of the executed
Assignment of Warrant dated January 31, 2005 issued to Thomas; and
(iii) funds in the aggregate amount of $3,731,731.95,
in United States dollars and in immediately available funds, representing the
exercise price under the Exercised Warrants.
(b) Concurrent with the full execution of this Agreement, the
Company hereby grants the Purchase Right to Investor and shall deliver or cause
to be delivered to Investor:
(i) irrevocable instructions to the Company's
transfer agent to promptly deliver a certificate or certificates in
denominations requested by Investor evidencing an aggregate of 24,878,213 shares
of Common Stock issuable to Investor upon exercise of the Exercised Warrants,
registered in the name of Investor;
(ii) a copy of the Payoff Agreement, duly executed by
the Company, the Subsidiary Borrowers, Healthcare Financial and Lenders;
(iii) the legal opinions of Company Counsel, in
agreed forms, addressed to Investor and Thomas;
(iv) certifications acknowledging and agreeing that
the execution of the Transaction Documents, the consummation of the transactions
contemplated thereby, and/or the exercise of the Exercised Warrants or the
Warrants will not give rise to or trigger any severance, termination or other
rights or obligations of the Company under any employment, consulting or similar
agreements or arrangements to which the Company, any member of the Board of
Directors of the Company, Bruce Mogel, Steve Blake, Dan Brothman, Scott
Schoeffel or Jerry Kanaly is a party or is otherwise bound, duly executed by
each party to such agreements or arrangements; and
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(v) resolutions of the Board of Directors or
Compensation Committee of the Board of Directors of the Company, as appropriate,
affirming all outstanding awards under the Company's 2006 Stock Incentive Plan
and any ensuring no such awards are affected by the execution of the Transaction
Documents, the consummation of the transactions contemplated thereby, and/or the
exercise of the Exercised Warrants or Warrants, which resolutions are certified
by the Secretary of the Company.
2.2 CLOSING AND CLOSING DELIVERIES. Subject to the terms and conditions
set forth in this Agreement, at the Closing the Company shall issue and sell to
Investor, and Investor shall purchase from the Company, the Shares representing
the Investment Amount. The Closing, if any, shall take place at the offices of
Rutan & Tucker, LLP, 611 Anton Boulevard, Suite 1400, Costa Mesa, California
92626 on the Closing Date or at such other location or time as the parties may
agree.
(a) At the Closing, the Company shall deliver or cause to be
delivered to Investor the following (the "COMPANY DELIVERABLES"):
(i) irrevocable instructions to the Company's
transfer agent to promptly deliver a certificate or certificates in
denominations requested by Investor evidencing an aggregate number of Shares
equal to the Investment Amount divided by the Per Share Purchase Price (i.e.,
63,347,891 Shares), registered in the name of Investor;
(ii) the legal opinions of Company Counsel addressed
to Investor and in such forms as are reasonably requested by Investor; and
(iii) certificates of officers as required under
Section 5.1 of this Agreement.
(b) At the Closing, Investor shall deliver or cause to be
delivered to the Company the Investment Amount, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
makes the following representations and warranties to Investor:
(a) SUBSIDIARIES AND VENTURES. The Company has no direct or
indirect Subsidiaries other than as specified in the SEC Reports. Except as
pledged to Lenders under the Credit Facilities, the Company owns, directly or
indirectly, all of the capital stock of each Subsidiary free and clear of any
and all Liens. All of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights. Neither the Company nor any Subsidiary owns an
interest in, participates in or engages in any joint venture, partnership or
similar arrangement with any Person.
(b) ORGANIZATION AND QUALIFICATION. The Company and each
Subsidiary are duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. The Company and each Subsidiary are
duly qualified to conduct its respective businesses and are in good standing as
a foreign corporation or other entity in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
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necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents to which it is a party and
otherwise to carry out its obligations thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the consummation by it of
the transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company in connection therewith. Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company, to the extent required,
and, when delivered in accordance with the terms hereof and thereof, will
constitute the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
(d) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(e) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than those that have been made or obtained prior to
the date of this Agreement and the following, which will be timely made or
obtained: (i) the filing with the Commission of one or more registration
statements in accordance with Article IV, (ii) filings required by state
securities laws, (iii) the filing of a Notice of Sale of Securities on Form D
with the Commission under Regulation D of the Securities Act, (iv) the filings
required in accordance with Section 4.5, (v) notification to the Company's
transfer agent of the issuance of the Shares and Warrant Shares, and (vi)
certain approvals or notices that the Company obtained from or submitted to
governmental authorities relating to the operation by the Company of general
acute care hospitals must be updated any time there is a material change of
ownership of the Company, including a new stockholder who owns 10% or more of
the outstanding shares of the Company.
(f) ISSUANCE OF THE SECURITIES. The Securities have been duly
authorized and the Warrants have been duly and validly issued and, when issued
and paid for in accordance with the Transaction Documents and the Warrants, the
Shares and the Warrant Shares will be duly and validly issued, fully paid and
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nonassessable, and free and clear of all Liens. The Company has reserved from
its duly authorized capital stock the shares of Common Stock issuable pursuant
to this Agreement and the Warrants in order to issue the Shares and the Warrant
Shares, assuming the payoff of the $10.7 Million Note in accordance with the
terms of the Payoff Agreement, which payoff will be timely made if and when the
Closing occurs.
(g) CAPITALIZATION. The only class of capital stock that the
Company is authorized to issue is Common Stock. The total number of shares of
Common Stock outstanding is 137,095,716, excluding the issuances of Shares and
Warrant Shares being made hereunder. The total number of shares of Common Stock
issuable upon full exercise of options outstanding under the Company's option
plan (whether or not vested or exercisable) is 7,445,000. Other than rights
granted to Investor and Thomas pursuant to the Rescission Agreement, no
securities of the Company are entitled to preemptive or similar rights, and no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. Other than the Warrants, the Exercised Warrants, the
7,445,000 options, the $10.7 Million Note and the Purchase Right granted
hereunder, there are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Securities will not, immediately or with the passage
of time, obligate the Company to issue shares of Common Stock or other
securities to any Person (other than Investor) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion, exchange or
reset price under such securities, except as set forth in the first paragraph of
Section 3 of each of the Warrants.
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed
all reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials collectively referred to
herein as the "SEC REPORTS" and, together with the Schedules to this Agreement
(if any), the "DISCLOSURE MATERIALS") on a timely basis or has timely filed a
valid extension of such time of filing and has filed any such SEC Reports prior
to the expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(i) MATERIAL CHANGES. Since March 31, 2008, which is the date
of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in the SEC Reports, (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
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incurred any liabilities (contingent or otherwise) other than (A) trade
payables, accrued expenses and other liabilities incurred in the ordinary course
of business consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential treatment of
information.
(j) LITIGATION. To the Company's knowledge, other than Orange
County Superior Court Case No. 00108983 filed July 8, 2008 by OC-PIN against the
Company and Orange County Superior Court Case No. 00109286 filed July 15, 2008
by OC-PIN against the Company and Bruce Mogel, there is no Action which (i)
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) except as set forth in the Latest Form 10-K
could, if there were an unfavorable decision, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. Except as
disclosed in the Latest Form 10-K and except for Case No. 00109286 referenced
above, there is no litigation pending or, to the Company's knowledge threatened,
that is material and required to be disclosed in the Latest Form 10-K or any
current report on Form 8-K or quarterly report on Form 10-Q for any subsequent
period. Except as set forth in the Latest Form 10-K and except for Case No.
00109286 referenced above, none of the litigation matters seek injunctive relief
against, or allege criminal misconduct of, the Company, any Subsidiary, or to
the Company's knowledge, any of the Company's other Affiliates. Neither the
Company nor any Subsidiary, nor any director or officer thereof (in his or her
capacity as such), is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty, except for the Actions specifically disclosed in the
SEC Reports. To the knowledge of the Company, there is not pending any
investigation by the Commission involving the Company or any current or former
director or officer of the Company (in his or her capacity as such). The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(k) LABOR RELATIONS. Unless and except as set forth in the
Latest Form 10-K, no material labor dispute exists or, to the knowledge of the
Company, is threatened with respect to any of the employees of the Company or
any Subsidiary. Hours worked by and payment made to employees of the Company and
each Subsidiary comply in all material respects with the Fair Labor Standards
Act and other applicable laws, except where the failure to so comply would not
have or reasonably be expected result in a Material Adverse Effect. There are no
complaints or charges against the Company or any Subsidiary pending or, to the
knowledge of the Company, threatened to be filed with any governmental authority
or arbitrator based on, arising out of, in connection with, or otherwise
relating to the employment or termination of employment by the Company or any
Subsidiary of any individual which would be reasonably likely to have a Material
Adverse Effect.
(l) COMPLIANCE. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
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in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect. The Company is in compliance
with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended,
and the rules and regulations thereunder, that are applicable to it.
(m) REGULATORY PERMITS. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such permits.
(n) TITLE TO ASSETS. Neither the Company nor any of the
Subsidiaries has title to any real property. The Company and the Subsidiaries
have title to all personal property owned by them that is material to their
respective businesses, in each case free and clear of all Liens, except for
Liens in favor of Lenders under the Credit Facilities and Liens as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
the Subsidiaries. To the Company's knowledge, any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.
(o) INSURANCE. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. The Company has no reason to believe
that it will not be able to renew its and the Subsidiaries' existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business on terms
consistent with market for the Company's and such Subsidiaries' respective lines
of business.
(p) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except for the
transactions contemplated hereby and as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company, is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner. The execution of the
Transactions Documents, the consummation of the transactions contemplated
thereby, and/or the exercise of the Exercised Warrants or the Warrants will not
give rise to or trigger any severance, termination or other rights or
obligations of the Company under any employment, consulting or similar
agreements or arrangements to which the Company is a party or is otherwise
bound, except with respect to rights or obligations under agreements or
arrangements with individuals other than members of the Board of Directors of
the Company or the executives named in Section 2.1(b)(iv) where such rights or
obligations could not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.
(q) INTERNAL ACCOUNTING CONTROLS. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
10
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for the Company
and designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company's Form 10-K or 10-Q, as the case may be, is
being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures in accordance with Item
307 of Regulation S-K under the Exchange Act for the year ended March 31, 2008
(such date, the "EVALUATION DATE"). The Company presented in the Latest Form
10-K the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Except as disclosed in the Latest Form 10-K, since the
Evaluation Date, there have been no changes in the Company's internal controls
(as such term is defined in Item 308(c) of Regulation S-K under the Exchange
Act) that have materially affected or are reasonably likely to materially
affect, the Company's internal controls.
(r) SOLVENCY. Based on the financial condition of the Company
as of the Closing Date (and assuming that the Closing shall have occurred), the
Company's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted, including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, and projected
capital requirements and capital availability thereof. The Company does not
intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).
(s) CERTAIN FEES. Except for $30,000 payable to De Joya
Griffith & Company, LLC, no brokerage or finder's fees or commissions are or
will be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by this Agreement. Investor shall have no
obligation with respect to any fees or with respect to any claims (other than
such fees or commissions owed by Investor pursuant to agreements made by
Investor, which fees or commissions shall be the sole responsibility of
Investor) made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
(t) CERTAIN REGISTRATION MATTERS. Assuming the accuracy of
Investor's representations and warranties set forth in Section 3.2(b)(iv)-(iv),
no registration under the Securities Act is required for the offer and sale of
the Shares by the Company. Subject to Rule 415 under the Securities Act, which
may limit the amount of shares eligible to be registered by the Company for
resale by Investor at a particular point in time, the Company is eligible to
register the resale of the Registrable Securities by Investor on Form S-1
promulgated under the Securities Act. Except for the registration rights granted
to Healthcare Financial as specified in the Warrants and except for the
registration rights that were granted to MPFC III as specified in the $10.7
Million Note and are terminated upon the closing of the Payoff Agreement, the
Company has not granted or agreed to grant to any Person any rights (including
"piggyback" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.
(u) LISTING AND MAINTENANCE REQUIREMENTS. The Company has not,
in the two years preceding the date hereof, received notice from any Trading
Market to the effect that the Company is not in compliance with the listing or
maintenance requirements thereof. The Company is, and has no reason to believe
that it will not in the foreseeable future continue to be, in compliance with
the listing and maintenance requirements for continued listing of the Common
Stock on the Trading Market on which the Common Stock is currently listed or
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quoted. The issuance and sale of the Securities under the Transaction Documents
and Warrants does not contravene the rules and regulations of the Trading Market
on which the Common Stock is currently listed or quoted, and no approval of the
stockholders of the Company is required for the Company to issue and deliver to
Investor the Securities contemplated by Transaction Documents and Warrants.
(v) INVESTMENT COMPANY. Except to the extent caused by the
actions or status of the Investor, the Company is not, and is not an Affiliate
of, and immediately following the Closing will not have become, an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(w) NO ADDITIONAL AGREEMENTS. The Company does not have any
agreement or understanding with Investor with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents. The Company acknowledges and agrees that Investor has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2.
(x) DISCLOSURE. All Disclosure Materials provided to Investor
regarding the Company, its business and the transactions contemplated hereby,
furnished by the Company (including the Company's representations and warranties
set forth in the Transaction Documents and Warrants) are true and correct and do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
3.2 REPRESENTATIONS AND WARRANTIES OF INVESTOR.
(a) Upon execution of this Agreement, Investor represents and
warrants to the Company that this Agreement has been duly executed by Investor,
and when delivered by Investor in accordance with the terms hereof, will
constitute the valid and legally binding obligation of Investor, enforceable
against him in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
(b) Upon Closing of this Agreement, Investor shall represent
and warrant to the Company as follows:
(i) INVESTMENT INTENT. Investor is acquiring the
Shares as principal for his own account for investment purposes only and not
with a view to or for distributing or reselling such Shares or any part thereof,
without prejudice, however, to Investor's right at all times to sell or
otherwise dispose of all or any part of such Shares in compliance with
applicable federal and state securities laws. Subject to the immediately
preceding sentence, nothing contained herein shall be deemed a representation or
warranty by Investor to hold the Shares for any period of time. Investor is
acquiring the Shares hereunder in the ordinary course of his business. Investor
does not have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Shares.
(ii) INVESTOR STATUS. At the time Investor was
offered the Shares, he was, and at the Closing he is, an "accredited investor"
as defined in Rule 501(a) under the Securities Act. Investor is not a registered
broker-dealer under Section 15 of the Exchange Act.
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(iii) GENERAL SOLICITATION. Investor is not
purchasing the Shares as a result of any advertisement, article, notice or other
communication regarding the Shares published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(iv) ACCESS TO INFORMATION. Investor acknowledges
that he has been afforded (i) the opportunity to ask such questions as he has
deemed necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Shares and the merits
and risks of investing in the Shares; (ii) access to information about the
Company and the Subsidiaries and their respective financial condition, results
of operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of Investor or his representatives or
counsel shall modify, amend or affect Investor's right to rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents and
Warrants.
(v) BLUE SKY. The state shown in the address for
notice set forth under Investor's name on Investor's signature page hereof is
Investor's state of residence for Blue Sky purposes.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 LEGEND RESTRICTION.
(a) The Shares may only be disposed of in compliance with
state and federal securities laws. Certificates evidencing the Shares will
contain the following legend, until such time as the legend is not required
under Section 4.1(b):
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH
SECURITIES.
The Company acknowledges and agrees that Investor may from
time to time pledge, and/or grant a security interest in some or all of the
Securities pursuant to a bona fide margin agreement in connection with a bona
fide margin account and, if required under the terms of such agreement or
account, Investor may transfer pledged or secured Securities to the pledgees or
secured parties. Such a pledge or transfer would not be subject to approval or
consent of the Company and no legal opinion of legal counsel to the pledgee,
secured party or pledgor shall be required in connection with the pledge. The
Company will execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection with a pledge
or transfer of the Securities including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the Securities Act or
13
other applicable provision of the Securities Act to appropriately amend the list
of selling stockholders thereunder.
(b) Except as set forth in Section 4.1(c), certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including
the legend set forth in Section 4.1(a)): (i) following a sale or transfer of
such Shares or Warrant Shares pursuant to an effective registration statement,
or (ii) following a sale or transfer of such Shares or Warrant Shares pursuant
to Rule 144 (assuming the transferor is not an Affiliate of the Company), or
(iii) while such Shares or Warrant Shares are eligible for sale without
restriction under Rule 144. The Company may not make any notation on its records
or give instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section, except for stop transfer
instructions for Affiliates of the Company.
(c) The Shares shall contain the following restrictive legend
until expiration or earlier termination of the Irrevocable Proxy made as of July
2, 2007 by and between Bruce Mogel and Investor, at which time the Company shall
cause removal of the legend upon written request of Investor:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF AN IRREVOCABLE PROXY WHICH GRANTS TO
ANOTHER PARTY THE RIGHT TO VOTE THE SHARES REPRESENTED HEREBY.
ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE
DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH IRREVOCABLE PROXY. A COPY OF SUCH
IRREVOCABLE PROXY WILL BE FURNISHED TO THE RECORD HOLDER OF
THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.
4.2 REGISTRATION RIGHTS. At the Closing, the following provisions shall
supersede and replace the registration provisions contained or incorporated by
reference in the Rescission Agreement:
(a) The Company shall file registration statements under the
Securities Act covering the resale of all or any portion of the Registrable
Securities requested in writing by Investor or Thomas to be registered from time
to time (or such lesser number of Registrable Securities as is required by the
Commission pursuant to Rule 415 under the Securities Act). If Investor and
Thomas determine that the distribution of the Registrable Securities will be
made by means of an underwriting, then the underwriter will be selected by
Investor and Thomas and shall be reasonably acceptable to the Company, and
Investor and Thomas shall (together with the Company as provided hereinbelow)
enter into an underwriting agreement in a customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding any other provision
of this Section 4.2, if the underwriter advises Investor and Thomas in writing
that marketing factors require a limitation of the number of shares to be
underwritten, the number of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification of the
Registrable Securities with respect to the registration, including (without
limitation) all registration, filing, and qualification fees, printing and
accounting fees relating thereto and the fees and disbursements of one counsel
for Investor and Thomas selected by them.
(b) The Company covenants and agrees with Investor, Thomas
(and any subsequent holder(s) of Registrable Securities (each a "HOLDER")) that,
if the Company proposes to file a registration statement under the Securities
Act (including, without limitation, relating to a primary offering of Common
Stock by the Company or shall receive a demand for registration from any
stockholder), then the Company shall in each case give prompt written notice of
such proposed filing to each Holder at least sixty (60) days before the proposed
filing date and, by such notice, shall offer to each Holder the opportunity to
14
include in such registration statement the number of Registrable Securities as
such Holder may request in writing. The Company shall permit, or shall cause the
managing underwriter of a proposed underwritten offering to permit, the Holders
from whom such written requests have been received to include such number of
Registrable Securities (the "PIGGYBACK SHARES") in the proposed offering on
terms and conditions no less favorable to the Holders as the terms and
conditions applicable to securities of the Company included therein or as
applicable to securities of any person other than the Company and the Holders of
Piggyback Shares if the securities of any such person are included therein;
PROVIDED, HOWEVER, that the Company shall not be required to honor any such
request that is received more than sixty (60) days after the proper giving of
the Company's notice. Notwithstanding any other provision of this Section
4.2(b), if the underwriter advises the Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, the Company
will promptly give Investor and Thomas written notice of such advice (such
notice to state the basis of such belief and the approximate number of such
securities which may be so included without having such effect), and the number
of Piggyback Shares held by the Holders to be included in such underwriting
shall not be reduced unless all other securities, other than securities to be
offered for the accounts of Healthcare Financial, Lenders and/or their
affiliates ("LENDER SHARES"), the Holders and the Company, are first entirely
excluded from the underwriting, and unless the number of Lender Shares, on the
one hand, and Piggyback Shares on the other hand, are cut back on a pro rata
basis based on the number of Lender Shares and/or Piggyback Shares requested to
be included in such offering. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification of the
Registrable Securities with respect to the registrations pursuant to this
Section 4.2 for each Holder, including (without limitation) all registration,
filing, and qualification fees, printing and accounting fees relating or
apportionable thereto, and the fees and disbursements of one counsel for the
selling Holders selected by them. If the Company decides not to proceed with the
piggyback offering, the Company will have no obligation to proceed with the
offering of the Piggyback Shares. Each Holder may elect to withdraw his request
for inclusion of his Piggyback Shares by giving written notice to the Company of
his request to withdraw prior to the effectiveness of the registration
statement. Notwithstanding any such withdrawal, the Company shall pay expenses
incurred by the Holder in connection with the registration as provided in this
Section 4.2.
(c) To the fullest extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, members, officers,
directors and stockholders of each Holder, legal counsel and accountants for
each Holder, any underwriter (as defined in the Securities Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Exchange Act, against any Violation (as
defined below), and the Company will pay to each such Holder, underwriter,
controlling person or other aforementioned person, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action as such expenses are incurred;
PROVIDED, HOWEVER, that the Company shall not be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation that occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by any such Holder, underwriter, controlling person or other
aforementioned person. The term "VIOLATION" means losses, claims, damages, or
liabilities (joint or several) to which an indemnified party becomes subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations: (i) any untrue statement or alleged untrue statement of
a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by any other
party hereto, of the Securities Act, the Exchange Act, any state securities law
or any rule or regulation promulgated under the Securities Act, the Exchange Act
or any state securities law.
15
(d) Each Holder of Registrable Securities who participates in
a registration pursuant to Section 4.2 shall, severally and not jointly,
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed any such registration statement, and each person, if
any, who controls the Company within the meaning of the Securities Act, against
any Violation insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of, or are based upon, any untrue or alleged
untrue statement of any material fact contained in any such registration
statement, or final prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any such registration statement, or final prospectus, or
any amendment or supplement thereto, in reliance upon and in conformity with
written information furnished by such Holder expressly for use in the
preparation thereof; and will reimburse any legal or other expenses reasonably
incurred by the Company, or any such director, officer or controlling person in
connection with investigating or defending against any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the aggregate amount payable by a
Holder pursuant to this Section 4.2(d) shall not exceed the net proceeds
received by such Holder in the registered offering out of which its obligations
pursuant to this Section 4.2(d) arise.
(e) Promptly after receipt by an indemnified party under this
Section 4.2 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 4.2, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in and to assume the
defense thereof with counsel mutually satisfactory to the parties; PROVIDED,
HOWEVER, that an indemnified party shall have the right to retain its own
counsel, with the reasonably incurred fees and expenses of one such counsel for
all indemnified parties to be reimbursed by the indemnifying party if
representation of any such indemnified party by the counsel retained by the
indemnifying party would be inappropriate under applicable standards of
professional conduct due to actual or potential conflicting interests between
such indemnified party and any other party represented by such counsel in such
proceeding. Except as specified in the immediately preceding sentence, after
notice from an indemnifying party to an indemnified party of such indemnifying
party's election to assume the defense pursuant to the immediately preceding
sentence, such indemnifying party shall not be liable to the indemnified party
under this Section 4.2 for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of liability to the indemnified party under this
Section 4.2 with respect to such action, except to the extent the indemnifying
party is materially prejudiced as a result of not receiving such notice, and
shall not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 4.2 or with respect to any other action except
to the extent the indemnifying party is materially prejudiced as a result of not
receiving such notice. No indemnifying party shall, without the written consent
of the indemnified party, which consent will not be unreasonably withheld,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(f) If the indemnification provided for in this Section 4.2 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (c) or (d) of this Section 4.2 in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
16
each indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue statement of a material fact or omission to state a material
fact relates to information about such indemnifying party or indemnified party
supplied by such indemnifying party or by such indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section 4.2(f)
were determined by PRO RATA allocation (even if the Holders or any underwriters,
selling agents or other securities professionals or all of them were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 4.2. In
no event shall the liability of any Holder be greater in amount than the amount
of net proceeds received by such Holder upon such sale or the amount for which
such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for under this Section 4.2 had
been available under the circumstances. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The obligations of the Holders
and any underwriters, selling agents or other securities professionals in this
Section 4.2(f) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.
(g) The obligations of an indemnifying party under this
Section 4.2 shall be in addition to any liability that the indemnifying party
may otherwise have to any indemnified party under Section 4.6 or otherwise. The
remedies provided in this Section 4.2 are not exclusive and shall not limit any
rights or remedies that may otherwise be available to an indemnified party at
law or in equity.
4.3 ADDITIONAL REGISTRATION PROCEDURES.
(a) If and whenever the Company is required to effect the
registration of any Registrable Securities pursuant to Section 4.2, the Company
shall use its best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof as expeditiously as practicable, and in connection with any such
request:
(i) The Company shall, as expeditiously as possible,
prepare and file with the Commission a registration statement on any form for
which the Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of the Registrable
Securities to be registered thereunder in accordance with the intended method of
distribution thereof, and use its best efforts to cause such filed registration
statement to become and remain effective.
(ii) The Company shall, prior to filing a
registration statement or prospectus or any amendment or supplement thereto,
furnish without charge to each Holder for whom shares are being registered (each
a "PARTICIPATING Holder") and legal counsel for Participating Holders, copies of
such registration statement as proposed to be filed, each amendment and
supplement to such registration statement (in each case including all exhibits
thereto and documents incorporated by reference therein), the prospectus
included in such registration statement (including each preliminary prospectus),
17
and such other documents as each Participating Holder may request in order to
facilitate the disposition of the Registrable Securities owned by them.
(iii) The Company shall prepare and file with the
Commission such amendments, including post-effective amendments, and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and in
compliance with the provisions of the Securities Act until all Registrable
Securities and other securities covered by such registration statement have been
disposed of in accordance with the intended methods of disposition set forth in
such registration statement (which period shall not exceed the sum of nine
months plus any period during which any such disposition is interfered with by
any stop order, injunction or other order or requirement of the Commission or
any governmental agency or court) or such securities have been withdrawn).
(iv) After the filing of the registration statement,
the Company shall promptly, and in no event more than one Business Day, notify
the Participating Holders, and confirm such advice in writing, (A) when such
registration statement becomes effective, (B) when any post-effective amendment
to such registration statement becomes effective, (C) of any stop order issued
or threatened by the Commission (and the Company shall take all actions required
to prevent the entry of such stop order or to remove it if entered) and (D) of
any request by the Commission for any amendment or supplement to such
registration statement or any prospectus relating thereto or for additional
information or of the occurrence of an event requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities covered by such Registration
Statement, such prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and promptly make
available to the Participating Holders any such supplement or amendment; except
that before filing with the Commission a registration statement or prospectus or
any amendment or supplement thereto, including documents incorporated by
reference, the Company shall furnish to the Participating Holders and their
legal counsel, copies of all such documents proposed to be filed sufficiently in
advance of filing to provide Participating Holders, any underwriters and legal
counsel with a reasonable opportunity to review such documents and comment
thereon, and the Company shall not file any registration statement or prospectus
or amendment or supplement thereto, including documents incorporated by
reference to which a Participating Holder or legal counsel representing a
Participating Holder shall object on a timely basis in light of the requirements
of the Securities Act or any other applicable laws and regulations.
(v) The Company shall use its best efforts to (A)
register or qualify the Registrable Securities covered by the registration
statement under such securities or blue sky laws of such jurisdictions in the
United States as the Participating Holders (in light of their intended plans of
distribution) request and (B) cause such Registrable Securities covered by the
registration statement to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary by
virtue of the business and operations of the Company and do any and all other
acts and things that may be necessary or advisable to enable the Participating
Holders to consummate the disposition of the Registrable Securities owned by
them in such jurisdictions; PROVIDED, HOWEVER, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this provision, or subject itself
to taxation in any such jurisdiction.
(vi) The Company shall enter into customary
agreements (including, if applicable, an underwriting agreement in customary
form) and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities. Each
Participating Holder may, at his option, require that any or all of the
representations, warranties and covenants of the Company in any underwriting
agreement to or for the benefit of any underwriters also be made to and for his
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benefit. Each Participating Holder shall not be required to make any
representations or warranties in the underwriting agreement except with respect
to the Participating Holder's organization, good standing, authority, title to
Registrable Securities, lack of conflict of such sale with the Participating
Holder's material agreements and organizational documents, and with respect to
written information relating to the Participating Holder that the Participating
Holder has furnished expressly for inclusion in such registration statement.
(vii) The Chief Executive Officer and President of
the Company, the Chief Financial Officer of the Company, any Senior Vice
President of the Company and other members of the management of the Company
shall cooperate fully in any offering of Registrable Securities hereunder, which
cooperation shall include, without limitation, the preparation of the
Registration Statement and all other offering materials and related documents,
and participation in meetings with underwriters, attorneys, accountants and
potential investors.
(viii) The Company shall make available for
inspection by each Participating Holder, any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other professional retained by any Participating Holder or any such
underwriter (collectively, the "INSPECTORS"), all financial and other records,
pertinent corporate documents and properties of the Company, as shall be
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
requested by any Inspectors in connection with such registration statement.
(ix) The Company shall furnish to each Participating
Holder a signed counterpart, addressed to such Participating Holder, of (A) any
opinion of counsel to the Company delivered to any underwriter and (B) any
comfort letter from the Company's independent public accountants delivered to
any underwriter. If no legal opinion is delivered to any underwriter, the
Company shall furnish to each Participating Holder, at any time that the
Participating Holder elects to use a prospectus, an opinion of counsel to the
Company to the effect that the registration statement containing such prospectus
has been declared effective and that no stop order is in effect.
(x) The Company shall comply with all applicable
rules and regulations of the Commission and the Securities Act, and make
available to its stockholders, as soon as practicable, an earnings statement
covering a period of twelve months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
(xi) The Company shall use its best efforts to cause
all such Registrable Securities registered pursuant to this Agreement to be
listed on such exchanges or otherwise designated for trading in the same manner
as similar securities issued by the Company are then listed or designated or, if
no such similar securities are then listed or designated, in a manner
satisfactory to Purchaser.
(xii) Each Participating Holder agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in clause 4.3(a)(iv)(D), the Participating Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until the Participating Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
that clause, and, if so directed by the Company, the Participating Holder will
deliver to the Company all copies, other than permanent file copies then in the
Participating Holder's possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. If the Company
gives such notice, the Company shall extend the period during which such
registration statement shall be maintained effective by the number of days
during the period from and including the date of the giving of notice pursuant
to clause 4.3(a)(iv)(D) to the date when the Company shall make available to
19
Purchaser a prospectus supplemented or amended to conform with the requirements
of that clause.
(xiii) From and after the date of this Agreement, the
Company shall not, without the prior written consent of Investor and Thomas, (A)
enter into any agreement granting demand registration rights with respect to its
Common Stock or other securities, (B) enter into any agreement granting
piggyback registration rights with respect to the Common Stock or other
securities which are inconsistent with or superior to the rights granted to
Investor and Thomas hereunder; or (C) amend any agreement in effect as of the
date hereof which grants registration rights to any other person or entity so as
to cause such registration rights to be inconsistent with or superior to the
rights granted to Investor and Thomas hereunder or to otherwise adversely affect
the registration rights granted to Investor and Thomas hereunder.
(b) As long as Investor owns any of the Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as Investor
owns any of the Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to Investor and make publicly
available in accordance with Rule 144(c) such information as is required for
Investor to sell the Shares and Warrant Shares under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell the Shares and Warrant Shares without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144.
4.4 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to Investor, or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market in a manner that would require
stockholder approval of the sale of the securities to Investor.
4.5 SECURITIES LAWS DISCLOSURE; PUBLICITY. By 6:00 a.m. (California
time) on the Trading Day following the execution of this Agreement, and by 6:00
a.m. (California time) on the Trading Day following the Closing Date, the
Company shall issue press releases disclosing the transactions contemplated
hereby and the Closing. On the Trading Day following the execution of this
Agreement, the Company will file a Current Report on Form 8-K disclosing the
material terms of the Transaction Documents (and attach as exhibits thereto the
Transaction Documents), and on the Trading Day following the Closing Date, the
Company will file an additional Current Report on Form 8-K to disclose the
Closing. In addition, the Company will make such other filings and notices in
the manner and time required by the Commission and the Trading Market on which
the Common Stock is listed. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of Investor, or include the name of Investor in any
filing with the Commission (other than in a registration statement filed
pursuant to Section 4.2 and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the Exchange
Act) or any regulatory agency or Trading Market, without the prior written
consent of Investor, except to the extent such disclosure is required by law or
Trading Market regulations.
4.6 INDEMNIFICATION OF INVESTOR.
(a) In addition to the indemnity provided in Section 4.2, the
Company will indemnify and hold Investor and his partners, employees,
consultants and agents (each, an "INVESTOR PARTY") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
20
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation (collectively, "Losses")
that any such Investor Party suffers or incurs as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document.
(b) In addition to the indemnity provided in Section 4.2,
Investor will indemnify and hold the Company and its directors, officers,
stockholders, partners, employees and agents (each, a "COMPANY PARTY") harmless
from any and all Losses that any such Company Party suffers or incurs as a
result of or relating to any misrepresentation, breach or inaccuracy of any
representation, warranty, covenant or agreement made by Investor in any
Transaction Document.
(c) The provisions contained in Sections 4.2 relating to
conduct of indemnification proceedings and contribution shall apply to any
indemnification required under this Section 4.6 as if those provisions were set
forth herein. The indemnification and contribution agreements contained or
incorporated into this Section 4.6 are in addition to any liability that the
Investor Party and Company Party may have to one another.
4.7 LISTING OF SECURITIES. The Company agrees, (i) if the Company
applies to have the Common Stock traded on any other Trading Market, it will
include in such application the Shares and Warrant Shares, and will take such
other action as is necessary or desirable to cause the Shares and Warrant Shares
to be listed on such other Trading Market as promptly as possible, and (ii) it
will take all action reasonably necessary to continue the listing and trading of
its Common Stock on a Trading Market and will comply in all material respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the Trading Market.
4.8 USE OF PROCEEDS. The Company will use all of the proceeds from the
exercise of the Exercised Warrants to repay a portion of the $10.7 Million Note
concurrent with the execution of this Agreement in accordance with the terms of
the Payoff Agreement. The Company will use the proceeds from the sale, if any,
of the Shares hereunder (plus additional funds of the Company as needed) to
repay the balance of the $10.7 Million Note and any then outstanding obligations
under the $10.7 Million Credit Facility concurrent with the Closing in
accordance with the terms of the Payoff Agreement.
4.9 PRE-EMPTIVE RIGHTS. The Company hereby grants to Investor and
Thomas pre-emptive rights with respect to issuances, on or after the date of
this Agreement, by the Company of its equity securities or securities or rights
convertible into or exercisable for equity securities, where issuance of those
securities or rights would result in dilution of Investor's or Thomas's
beneficial ownership (as calculated by Investor or Thomas for purposes of
Section 13(d) of the Exchange Act) of the Common Stock of the Company on a
fully-diluted basis taking into account all Common Stock Equivalents (each a
"POST-TRANSACTION PERCENTAGE") to less than his respective beneficial ownership
of the Common Stock of the Company on a fully-diluted basis taking into account
all Common Stock Equivalents immediately prior to the consummation of the
proposed issuance (each a "PRE-TRANSACTION PERCENTAGE"). Each time the Company
proposes to issue or offer any shares of, or securities or rights convertible
into or exercisable for any shares of, any class of the Company's equity
securities (the "NEW Shares") that would reduce Investor's or Thomas's
Post-Transaction Percentage to below his respective Pre-Transaction Percentage,
the Company shall first make a written offer (the "OFFER NOTICE") to Investor
and Thomas of such portion of the New Shares that would maintain Investor's and
Thomas's Post-Transaction Percentage at a minimum of their respective
Pre-Transaction Percentage (the "PRO RATA SHARE"). The Offer Notice would state
the Company's (A) bona fide intention to issue or offer the New Shares, (B) the
identity of the Person(s) to whom the New Shares are to be issued or offered,
(C) the number of New Shares to be issued or offered, and (D) the price and
terms upon which it proposes to issue or offer the New Shares. Investor and/or
Thomas may, by written notice to the Company delivered within thirty (30) days
21
of their respective receipt of the Offer Notice, elect to purchase, at the price
and on the terms specified in the Offer Notice, up to the Pro Rata Share. The
closing of the sale of such portion of the Pro Rata Share as Investor and/or
Thomas elect to purchase shall occur simultaneously with the issuance or sale of
the New Shares to other Person(s) identified in the Offer Notice, no earlier
than forty-five (45) days following Investor's and Thomas's receipt of the Offer
Notice (unless a shorter period of time is agreed to by Investor and Thomas in
their sole discretion), and the Pro Rata Share shall be priced equal to the
lowest price paid by any of the other Person(s) identified in the Offer Notice,
including any who may be receiving or purchasing New Shares by virtue of similar
pre-emptive or other purchase rights. If the Company does not consummate the
issuance or sale of the New Shares within sixty (60) days following Investor's
and Thomas's receipt of the Offer Notice, then the New Shares shall not be
offered, issued or sold unless again offered to Investor and Thomas in
accordance with this Section 4.9. Upon execution of this Agreement, the
pre-emptive rights contained in this Section 4.9 shall supersede and replace the
pre-emptive rights contained or incorporated by reference in the Rescission
Agreement.
4.10 CREDIT FACILITIES. The Company hereby agrees to provide Investor
and Thomas with written notice of any default under the Credit Facilities no
later than one Business Day after the Company receives from or provides to the
Lenders or their affiliates or representatives written notice of the default.
4.11 OPTION AND STANDSTILL AGREEMENT; RELEASE, WAIVER AND COVENANT NOT
TO SUE. The Company acknowledges and does not object to Investor's entry into
the Option and Standstill Agreement and the consummation of the transactions
contemplated thereby. The Company, on behalf of itself, each Subsidiary and any
related or affiliated entity or person, together with their respective officers,
directors, shareholders, members, managers, employees, agents, representatives,
successors and assigns (collectively the "RELEASING PARTIES"), fully, forever
and irrevocably release, waive and relinquish any claim or cause of action
(collectively, "RELEASED CLAIMS") that the Releasing Parties now have or in the
future may have against the Investor, Thomas or any related or affiliated entity
or person, or their respective officers, directors, shareholders, members,
managers, employees, agents, representatives, successors and assigns
(collectively the "RELEASED PARTIES") relating to or arising from the
negotiation, execution and consummation of the transactions under the Option and
Standstill Agreement, and/or to the effect that any of the Released Parties
utilized threats, coercion, undue influence or other methods of causing the
Releasing Parties to voluntarily or involuntarily agree to the releases,
waivers, and covenants not to sue set forth herein or that any of the Released
Parties was party to or acted or failed to act in a manner which directly or
indirectly gave rise to a principal-agent relationship with any of the Releasing
Parties. Each of the Releasing Parties hereby promises, covenants and agrees not
to sue any of the Released Parties, and not to bring any legal action or
proceeding of any kind against any of the Released Parties, in any court or
administrative proceeding, in any venue, which legal action or proceeding
violates any covenant, condition, representation or warranty made by the
Releasing Parties in this Agreement, or directly or indirectly seeks to (a)
impose or bring any Released Claims on or against any of the Released Parties,
or (b) obtain or impose on any of the Released Parties any temporary restraining
order, preliminary injunction, permanent injunction, or any other equitable,
provisional or injunctive relief based on acts or omissions relating to or
arising from the Released Claims. The foregoing releases, waivers and covenants
not to sue are permanent and shall survive the expiration or termination of this
Agreement.
ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING
5.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF INVESTOR TO PURCHASE THE
SHARES. The obligation of Investor to acquire the Shares at the Closing pursuant
to the Purchase Right is subject to the satisfaction or waiver by Investor, at
or before the Closing, of each of the following conditions:
22
(a) ELECTION TO EXERCISE PURCHASE RIGHT. Investor shall have
elected, in his sole discretion, to exercise the Purchase Right, as follows:
(i) at any time on or after August 1, 2008, Investor
may provide written notice to the Company of his intention to purchase the
Shares pursuant to the Purchase Right ("ELECTION NOTICE");
(ii) at any time on or after August 1, 2008 that the
Company is able to satisfy all of the conditions precedent to Closing set forth
in Sections 5.1(b)-(i), the Company may provide Investor with written notice
("ELECTION REQUEST") requesting that Investor, in his sole discretion, provide
the Company with an Election Notice within ten business days after Investor's
receipt of the Election Request, which Election Request shall be accompanied by
a signed certification, dated the date of the Election Request, in the form
described in Section 5.1(g);
(iii) if Investor provides to the Company an Election
Notice pursuant to Sections 5.1(a)(i) or 5.1(a)(ii), then the Closing shall
occur on a date mutually acceptable to Investor and the Company, which date
shall be within 30 days after the Company's receipt of the Election Notice and
shall be subject to the fulfillment of the conditions precedent to Closing
contained in this Article V;
(iv) if Investor provides to the Company an Election
Notice but the Company is unable to fulfill all of the conditions precedent to
Closing contained in Sections 5.1(b)-(i), then the Purchase Right shall continue
in full force and effect until the Outside Date; and
(v) if the Company provides to Investor an Election
Request but Investor reasonably believes that the Company is or at the Closing
will be unable to fulfill all of the conditions precedent to Closing contained
in Sections 5.1(b)-(i), then Investor shall notify the Company in writing
("DISAGREEMENT NOTICE") of his belief within ten business days after Investor's
receipt of the Election Request, and the Purchase Right shall continue in full
force and effect until the Outside Date.
(vi) if the Company provides to Investor an Election
Request but (X) Investor does not timely provide a Disagreement Notice, (Y)
Investor does not timely provide an Election Notice in response to the Election
Request, or (Z) if all conditions precedent to Closing contained in this Article
V have been satisfied but Investor fails to close within the timeframe set forth
in Section 5.1(a)(iii), then the Purchase Right shall lapse.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained herein shall be true and correct in
all material respects as of the date when made and as of the Closing as
though made on and as of such date, and Investor shall have received a
certificate, dated the date of the Closing, signed on behalf of the
Company by the Chief Executive Officer and Chief Financial Officer of
the Company to the foregoing effect;
(c) PERFORMANCE. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed,
satisfied or complied with by it at or prior to the Closing, and
Investor shall have received a certificate, dated the date of the
Closing, signed on behalf of the Company by the Chief Executive Officer
and Chief Financial Officer of the Company to the foregoing effect;
(d) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction that prohibits the consummation of any of the
transactions contemplated by the Transaction Documents or Warrants;
23
(e) NO SUSPENSIONS OF TRADING IN COMMON STOCK; LISTING.
Trading in the Common Stock shall not have been suspended by the Commission or
any Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
a Trading Market;
(f) COMPANY DELIVERABLES. The Company shall have delivered the
Company Deliverables in accordance with Section 2.2(a);
(g) NO MATERIAL ADVERSE EFFECT. At and from the date(s) of any
Election Notices and Election Requests, and through the Closing, there shall not
have occurred or exist any change, circumstance or event concerning the Company
or any of its Subsidiaries that has had or could be reasonably likely to have a
Material Adverse Effect, and Investor shall have received a certificate, dated
the date of the Closing, signed on behalf of the Company by the Chief Executive
Officer and Chief Financial Officer of the Company to the foregoing effect to
such officers' knowledge;
(h) OTHER AGREEMENTS. The Payoff Agreement and the Option and
Standstill Agreement shall be in full force and effect and the parties thereto
shall be in compliance with their obligations thereunder; and
(i) OC-PIN LITIGATION. The Company shall have resolved Orange
County Superior Court Case No. 00108983 filed July 8, 2008 by OC-PIN against the
Company, and any cases and claims arising out of the allegation that OC-PIN
holds a right to receive or acquire securities of the Company, in a manner such
that OC-PIN does not receive additional shares, warrants or other rights to
receive Common Stock.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO SELL THE
SHARES. The obligation of the Company to sell the Shares at the Closing is
subject to the satisfaction or waiver by the Company, at or before the Closing,
of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Investor contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date;
(b) PERFORMANCE. Investor shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by Investor at or prior to the Closing;
(c) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents; and
(d) INVESTOR DELIVERABLE. Investor shall have delivered the
Investment Amount in accordance with Section 2.2(b).
ARTICLE VI.
MISCELLANEOUS
6.1 FEES AND EXPENSES. Except as otherwise specified in this Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
24
the Transaction Documents. The Company shall pay all stamp and other taxes and
duties levied in connection with the sale of the Shares to Investor.
6.2 ENTIRE AGREEMENT. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements, understandings,
discussions and representations, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
6.3 NOTICES. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile (provided the sender receives
a machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section prior to 5:00 p.m. (California time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 5:00
p.m. (California time) on any Trading Day, (c) the Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices and communications shall be as
follows:
If to the Company: Integrated Healthcare Holdings, Inc.
1301 N. Tustin Ave.
Santa Ana, CA 92705
Attn: Chief Executive Officer
Facsimile: (714) 953-2595
With a copy to: Reed Smith LLP
355 South Grand Ave., Suite 2900
Los Angeles, CA 90071
Attn.: Allen Z. Sussman, Esq.
Facsimile: (213) 457-8080
If to Investor: Kali P. Chaudhuri, M.D.
c/o Strategic Global Management, Inc.
6800 Indiana Avenue, Suite 130
Riverside, CA 92506
Facsimile No. (951) 766-9944
With copies to: Rutan & Tucker, LLP
611 Anton Blvd., Suite 1400
Costa Mesa, CA 92626
Attn: Gregg Amber, Esq.
Facsimile No. (714) 546-9035
Strategic Global Management, Inc.
6800 Indiana Avenue, Suite 130
Riverside, CA 92506
Attn: William E. Thomas, Esq.
Facsimile No. (951) 766-9944
25
If to Thomas: William E. Thomas, Esq.
c/o Strategic Global Management, Inc.
6800 Indiana Avenue, Suite 130
Riverside, CA 92506
Facsimile No. (951) 766-9944
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
6.4 AMENDMENTS; WAIVERS; NO ADDITIONAL CONSIDERATION. No provision of
this Agreement may be waived or amended except in a written instrument signed by
the Company and Investor. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
6.5 TERMINATION. This Agreement may be terminated prior to Closing:
(a) by written agreement of Investor and the Company; and
(b) by the Company or Investor upon written notice to the
other, if the Closing shall not have taken place by the Outside Date; PROVIDED,
that the right to terminate this Agreement under this Section 6.5(b) shall not
be available to any Person whose failure to comply with its or his obligations
under this Agreement has been the cause of or resulted in the failure of the
Closing to occur on or before such time.
Upon a termination in accordance with this Section 6.5, the Company and Investor
shall not have any further obligation or liability (including as arising from
such termination) to the other as a result therefrom.
6.6 CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
6.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of Investor. Investor may assign any or all of
his rights under this Agreement to any Person to whom Investor assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to "Investor."
6.8 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.6 (as to each
Investor Party).
6.9 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
California, without regard to the principles of conflicts of law thereof. Each
26
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its or his
respective Affiliates, employees or agents) shall be commenced exclusively in
the California Courts. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the California Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of the any
of the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such California Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its or his reasonable attorneys' fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such Proceeding.
6.10 SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery of the
Securities.
6.11 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
6.12 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.13 RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever Investor exercises a right, election, demand or
option under a Transaction Document and the Company does not timely perform its
related obligations within the periods therein provided, then Investor may
rescind or withdraw, in his sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to his future actions and rights.
6.14 REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument. If a replacement certificate or instrument evidencing any
Securities is requested due to a mutilation thereof, the Company may require
delivery of such mutilated certificate or instrument as a condition precedent to
any issuance of a replacement.
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6.15 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, Investor and
the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
6.16 PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to Investor pursuant to any Transaction Document or Investor
enforces or exercises his rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
INTEGRATED HEALTHCARE HOLDINGS, INC.
By: /s/ Bruce MogeL
----------------------------------
Name: Bruce Mogel
Title: Chief Executive Officer
INVESTOR
/s/ Kali P. Chaudhuri, M.D.
---------------------------------------
Kali P. Chaudhuri, M.D.
DELIVERY INSTRUCTIONS
(IF DIFFERENT FROM ADDRESS FOR NOTICES)
c/o:
----------------------------------
Street:
--------------------------------
City/State/Zip:
-----------------------
Attention:
----------------------------
Tel:
------------------------------
For purposes of Articles IV and VI, I hereby agree to the rights and
obligations as set forth in Article IV and the miscellaneous provisions set
forth in Article VI. Except as expressly set forth in the preceding sentence, I
am not a party to this Agreement and have given no representations, warranties
or assurances to any person.
THOMAS
/s/ William E. Thomas
------------------------------------
William E. Thomas
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OPTION AND STANDSTILL AGREEMENT
This Option and Standstill Agreement (this "AGREEMENT"), dated
effective as of July 18, 2008, is made by and among Medical Provider Financial
Corporation I, a Nevada corporation ("MPFC I"), Medical Provider Financial
Corporation II, a Nevada corporation ("MPFC II"), Medical Provider Financial
Corporation III, a Nevada corporation ("MPFC III"), Healthcare Financial
Management & Acquisitions, Inc., a Nevada corporation ("OPTIONOR") and Kali P.
Chaudhuri, M.D., an individual (the "OPTIONEE").
WHEREAS, the Optionor is currently the holder of (a) a warrant dated
October 9, 2007 issued to Optionor (the "4.95% WARRANT") to purchase a minimum
of 16,880,484 shares of common stock (subject to certain adjustments described
in the warrant) of Integrated Healthcare Holdings, Inc., a Nevada corporation
("IHHI"), as amended as set forth in EXHIBIT A to the Early Loan Payoff
Agreement, and (b) a warrant dated December 12, 2005 issued to Optionor (the
"31.09% WARRANT") to purchase a minimum of 26,097,561 shares of common stock
(subject to certain adjustments described in the warrant) of IHHI, as amended by
amendment no. 1 dated effective as of April 26, 2006 and amendment no. 2 dated
effective as October 9, 2007, and as amended as set forth in EXHIBIT B to the
Early Loan Payoff Agreement.
WHEREAS, Optionor desires to sell to Optionee and Optionee desires to
purchase from Optionor an option to purchase the 4.95% Warrant and the 31.09%
Warrant on the terms and conditions set forth herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
"$10.7 MILLION CREDIT FACILITY" means the $10,700,000 Credit
Agreement and related documents, dated October 9, 2007, among the Borrowers,
MPFC III, and the Credit Parties.
"$50 MILLION CREDIT FACILITY" means the $50,000,000 Revolving
Credit Agreement, dated October 9, 2007, and related documents among the
Borrowers, MPFC I, and the Credit Parties.
"$80 MILLION CREDIT FACILITY" means the $80,000,000 Credit
Agreement and related documents, dated October 9, 2007, among the Borrowers,
MPFC II, and the Credit Parties.
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"BORROWERS" means collectively the following California
corporations: IHHI, WMC-SA, Inc., WMC-A, Inc., Chapman Medical Center, Inc. and
Coastal Communities Hospital, Inc.
"BUSINESS DAY" means any day except Saturday, Sunday and any
day that is a federal legal holiday or a day on which banking institutions in
the State of California are authorized or required by law or other governmental
action to close.
"CREDIT FACILITIES" means the $10.7 Million Credit Facility,
$80 Million Credit Facility and the $50 Million Credit Facility.
"CREDIT PARTIES" means Pacific Coast Holdings Investment, LLC,
a California limited liability company, West Coast, Ganesha Realty, LLC, a
California limited liability company, and OC-PIN.
"EARLY LOAN PAYOFF AGREEMENT" means that certain Early Loan
Payoff Agreement dated effective as of the effective date of this Agreement, by
and among the Borrowers, MPFC I, MPFC II, MPFC III and Optionor.
"OC-PIN" means Orange County Physicians Investment Network,
LLC, a Nevada limited liability company.
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"WARRANTS" means the 4.95% Warrant and the 31.09% Warrant.
"WEST COAST" means West Coast Holdings, LLC, a California
limited liability company.
ARTICLE II.
OPTION AND STANDSTILL AGREEMENTS REGARDING WARRANTS
2.1 OPTION TO PURCHASE WARRANT.
(a) Subject to the terms and conditions contained herein,
Optionor hereby grants to Optionee the right and option ("OPTION") to purchase
from Optionor the Warrants, to the extent not then exercised, sold, transferred,
assigned or hypothecated by Optionor as permitted in Section 2.2 below, for an
aggregate purchase price of Ten Thousand Dollars ($10,000.00) ("PURCHASE
PRICE"). In consideration for the grant of the Option, Optionee shall pay
Optionor an Option fee of One Hundred Dollars ($100.00) upon execution and
delivery of this Agreement.
(b) The Option may be exercised at any time from and after
payment in full of all amounts due and owing from the Borrowers to MPFC III
under the $10.7 Million Credit Facility, to MPFC II under the $80 Million Credit
Facility and to MPFC I under the $50 Million Credit Facility (the "FINAL PAYMENT
DATE") until the date which is six (6) years following the Final Payment Date.
31
(c) Promptly upon exercise of the Option via delivery of
written notice and payment of the Purchase Price to Optionor, Optionor shall
transfer to the Optionee the Warrants, or the remainder thereof, and will
deliver to the Optionee (with copies to IHHI) duly executed warrant assignments
and any additional deliveries required to transfer to the Optionee the Warrants,
or remainder thereof, provided that Optionee agrees to be bound by all of the
terms of the Warrants as the Holder thereunder.
2.2 STANDSTILL; EXCEPTIONS. Prior to expiration of the Option, Optionor
agrees not to amend or terminate either the 4.95% Warrant or the 31.09% Warrant
(except as explicitly set forth in EXHIBIT A and EXHIBIT B attached to the Early
Loan Payoff Agreement on the effective date of this Agreement) without the prior
written consent of the Optionee, which may be granted or withheld in the
Optionee's sole discretion. Prior to expiration of the Option, Optionor shall
not exercise, sell, transfer, assign or hypothecate either Warrant except during
such time or times as (a) IHHI is then in payment default (after the expiration
of all applicable cure periods) under any of the Credit Facilities and (b) the
Optionee has been provided in writing with a notice of such payment default and
a forty-five (45) day opportunity following Optionee's receipt of such notice of
payment default to assist IHHI in curing such payment default. To Optionor's
knowledge, IHHI is not in payment default as of the effective date of this
Agreement under any of the Credit Facilities.
2.3 NO CHANGE OF CONTROL OR DEFAULT. To the extent that the
transactions contemplated herein, including without limitation, the Option, or
any other concurrent, previous or future acquisition or disposition of voting or
dispositive power over or a pecuniary interest in IHHI's securities by the
Optionee or William E. Thomas, or their respective affiliates (through a
purchase, a sale, an exercise, a grant, modification, revocation or expiration
of a proxy, or otherwise), constituted, constitutes or would constitute a
"Change of Control", "Default", "Event of Default" or other breach under any of
the Credit Facilities or the Warrants, MPFC I, MPFC II, MPFC III and Optionor
each waive such breach or event in connection with such Credit Facilities and
the Warrants.
2.4 NO CONTRAVENTION. MPFC I, MPFC II, MPFC III and Optionor, or any of
them, shall not enter into any arrangement or take any action (including without
limitation, by way of amendment to or termination of the Early Loan Payoff
Agreement or Credit Facilities) which has the effect of modifying, eliminating
or diminishing Optionee's rights under this Agreement without Optionee's prior
written consent, which may be given or withheld in Optionee's sole discretion.
2.5 EARLY LOAN PAYOFF AGREEMENT. Notwithstanding any other provision
hereof, this Agreement shall not become effective unless and until the Early
Loan Payoff Agreement is fully executed and delivered by the parties thereto,
and the First Payoff Amount, as defined therein, has been paid by or on behalf
of Borrowers to MPFC III, as provided therein. Notwithstanding any other
provision hereof, with the exception of Article III hereof, this Agreement shall
terminate and be of no further force or effect if the Second Payoff Amount, as
defined in the Early Loan Payoff Agreement, has not been paid by or on behalf of
Borrowers to MPFC III, as provided in the Early Loan Payoff Agreement, on or
before January 10, 2009.
32
ARTICLE III.
MISCELLANEOUS
3.1 FEES AND EXPENSES. Each party shall pay their own respective fees
and expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of the transactions contemplated in this
Agreement.
3.2 ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings, discussions and representations, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.
3.3 NOTICES. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by any other parties, or whenever any
of the parties desires to give or serve upon any other parties any communication
with respect to this Agreement, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and shall be
deemed to have been validly served, given or delivered: (a) upon the earlier of
actual receipt or three (3) Business Days after deposit in the United States
Mail, registered or certified mail, return receipt requested, with proper
postage prepaid; (b) upon transmission, when sent by telecopy or facsimile
transmission (with such telecopy or facsimile promptly confirmed by delivery of
a copy by personal delivery or United States Mail as otherwise provided in this
SECTION 3.3); (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid; or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number indicated below, or to such other address (or
facsimile number) as may be substituted by notice given as herein provided. The
giving of any notice required hereunder may be waived in writing by the party
entitled to receive such notice. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to any Person to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication. The address for such notices and communications shall be as
follows:
If to MPFC I,
MPFC II, MPFC III
or Optionor: Medical Provider Financial Corporation I
2100 South State College Blvd.
Anaheim, CA 92806
Attn: Sidney Field, CEO, or
Joseph J. Lampariello, President and COO, or
Adam Field, Sr. Vice President Development
Facsimile: (714) 935-3114
33
With a copy to: Sedgwick, Detert, Moran & Arnold LLP
One Market Plaza, Steuart Tower, 8th Floor
San Francisco, CA 94105
Attn: Gary C. Sheppard, Esq.
Facsimile: (415) 781-2635
If to the Optionee: Kali P. Chaudhuri, M.D.
c/o Strategic Global Management, Inc.
6800 Indiana Avenue, Suite 130
Riverside, CA 92506
Facsimile: (951) 766-9944
With copies to: Rutan & Tucker, LLP
611 Anton Blvd., Suite 1400
Costa Mesa, CA 92626
Attn: Gregg Amber, Esq.
Facsimile: (714) 546-9035
and
Strategic Global Management, Inc.
6800 Indiana Avenue, Suite 130
Riverside, CA 92506
Attn: William E. Thomas, Esq.
Facsimile: (951) 766-9944
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
3.4 AMENDMENTS; WAIVERS; NO ADDITIONAL CONSIDERATION. No provision of
this Agreement may be waived or amended except in a written instrument signed by
each of the parties hereto. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
3.5 CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the transaction
documents in connection herewith.
3.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Provided that all amounts due from the Borrowers to MPFC III under the $10.7
Million Credit Facility, to MPFC II under the $80 Million Credit Facility and to
34
MPFC I under the $50 Million Credit Facility are paid off, Optionee may assign
any or all of his rights under this Agreement and the Option to a third party,
provided that such third party agrees in writing to be bound by all of the
provisions hereof that apply to Optionee.
3.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
3.8 GOVERNING LAW. In all respects, including all matters of
construction, validity and performance, this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Nevada
applicable to contracts made and performed in that state and any applicable laws
of the United States of America. Each party hereto hereby consents and agrees
that the state or federal courts located in the State of Nevada, Clark County,
City of Las Vegas, shall have exclusive jurisdiction to hear and determine any
claims or disputes between or among the parties pertaining to this Agreement or
to any matter arising out of or relating to this Agreement; provided, that the
parties hereto each acknowledge that any appeals from those courts may have to
be heard by a court located outside of Clark County, Nevada. Each of the parties
hereto expressly submits and consents in advance to such jurisdiction in any
action or suit commenced in any such court, and each of the parties hereto
hereby waives any objection that any such party may have based upon lack of
personal jurisdiction, improper venue or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Each of the parties hereto hereby agrees that service
of such summons, complaints and other process may be made at the addresses set
forth below their signatures on this Agreement.
3.9 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile or other form of electronic transmission, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or electronic signature page were an original thereof.
3.10 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
3.11 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each party
hereunder will be entitled to specific performance of this Agreement. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and each party hereby agrees to waive in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.
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3.12 ATTORNEYS' FEES. If any action or proceeding is brought by any
party hereto against any other party hereto, the prevailing party shall be
entitled to recover from the other party reasonable attorneys' fees and
statutory and non-statutory costs incurred in connection with the prosecution or
defense of such action.
3.13 TIME OF THE ESSENCE. Time is of the essence in the performance of
each and every term, condition and covenant of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES FOLLOW]
36
IN WITNESS WHEREOF, the parties hereto have caused this Option and
Standstill Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
HEALTHCARE FINANCIAL MANAGEMENT & ACQUISITIONS, INC. KALI P. CHAUDHURI, M.D.
By:_________________________________ _________________________________________
Name: Joseph J. Lampariello
Title: President and COO
MEDICAL PROVIDER FINANCIAL CORPORATION I MEDICAL PROVIDER FINANCIAL CORPORATION II
By:_________________________________ By:_________________________________
Name: Joseph J. Lampariello Name: Joseph J. Lampariello
Title: President and COO Title: President and COO
MEDICAL PROVIDER FINANCIAL CORPORATION III
By:_________________________________
Name: Joseph J. Lampariello
Title: President and COO
37