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ORION HEALTHCORP INC - 8-K - 20041221 - EXHIBIT_10
EXHIBIT 10.3
LOAN AND SECURITY AGREEMENT
ORION HEALTHCORP, INC.
AND CERTAIN OF ITS AFFILIATES AND SUBSIDIARIES
AND
SUCH OTHER PERSONS JOINED HERETO AS BORROWERS FROM TIME TO TIME,
AS BORROWERS,
WITH
HEALTHCARE BUSINESS CREDIT CORPORATION
AS LENDER
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND INTERPRETATION....................................... 1
1.1 Terms Defined.................................................. 1
1.2 Matters of Construction........................................ 11
1.3 Accounting Principles.......................................... 11
1.4 Fiscal Quarters................................................ 11
SECTION 2. THE LOANS............................................................ 11
2.1 Credit Facility - Description.................................. 11
2.2 Funding Procedures............................................. 12
2.3 Interest and Fees.............................................. 13
2.4 Additional Interest Provisions................................. 14
2.5 Payments....................................................... 15
2.6 Use of Proceeds................................................ 16
2.7 Lockboxes and Collections...................................... 16
2.8 Fees........................................................... 17
SECTION 3. COLLATERAL........................................................... 18
3.1 Description.................................................... 18
3.2 Lien Documents................................................. 18
3.3 Other Actions.................................................. 18
3.4 Searches....................................................... 19
3.5 Good Standing Certificates..................................... 19
3.6 Filing Security Agreement...................................... 19
3.7 Power of Attorney.............................................. 19
3.8 Guaranty Agreement............................................. 20
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES......................... 20
4.1 Resolutions, Opinions, and Other Documents..................... 20
4.2 Additional Preconditions to Loans.............................. 21
4.3 Absence of Certain Events...................................... 22
4.4 Compliance with this Agreement................................. 22
4.5 Closing Certificate............................................ 22
4.6 Closing........................................................ 23
4.7 Non-Waiver of Rights........................................... 23
SECTION 5. REPRESENTATIONS AND WARRANTIES....................................... 23
5.1 Organization and Validity...................................... 23
5.2 Places of Business............................................. 24
5.3 Operation of Facilities........................................ 24
5.4 Pending Litigation............................................. 24
5.5 Medicaid and Medicare Cost Reporting........................... 24
5.6 Title to Collateral............................................ 24
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5.7 Governmental Consent........................................... 25
5.8 Taxes.......................................................... 25
5.9 Financial Statements........................................... 25
5.10 Full Disclosure................................................ 25
5.11 Guarantees, Contracts, etc..................................... 25
5.12 Compliance with Laws........................................... 26
5.13 Other Associations............................................. 26
5.14 Environmental Matters.......................................... 26
5.15 Capital Stock and Equity Interests............................. 26
5.16 Lockboxes...................................................... 27
5.17 Borrowing Base Reports......................................... 27
5.18 Security Interest.............................................. 27
5.19 Accounts....................................................... 27
5.20 Pension Plans.................................................. 27
5.21 Representations and Warranties for each Loan................... 27
5.22 Interrelatedness of Borrowers.................................. 30
5.23 Commercial Tort Claims......................................... 30
5.24 Letter of Credit Rights........................................ 30
5.25 Intellectual Property.......................................... 30
5.26 Solvency....................................................... 30
5.27 Acquisition Documents.......................................... 30
5.28 DVI Documents.................................................. 31
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS................................... 31
6.1 Payment of Taxes and Claims.................................... 31
6.2 Maintenance of Insurance, Financial Records and Existence...... 31
6.3 Business Conducted............................................. 32
6.4 Litigation..................................................... 32
6.5 Taxes.......................................................... 32
6.6 Financial Covenants............................................ 32
6.7 Financial and Business Information............................. 34
6.8 Officers' Certificates......................................... 35
6.9 Inspection..................................................... 35
6.10 Tax Returns and Reports........................................ 35
6.11 Material Adverse Developments.................................. 36
6.12 Places of Business............................................. 36
6.13 Notice of Action............................................... 36
6.14 Verification of Information.................................... 36
6.15 Value Track System(TM)......................................... 36
6.16 Commercial Tort Claim.......................................... 36
6.17 First Street, Southeast and West Loop.......................... 37
SECTION 7. BORROWERS' NEGATIVE COVENANTS...................................... 37
7.1 Merger, Consolidation, Dissolution or Liquidation.............. 37
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7.2 Liens and Encumbrances......................................... 37
7.3 Negative Pledge................................................ 37
7.4 Transactions With Affiliates or Subsidiaries................... 37
7.5 Guarantees..................................................... 38
7.6 Indebtedness................................................... 38
7.7 Loans to Other Persons......................................... 38
7.8 Change in Ownership/Management................................. 38
7.9 Subordinated Debt Payments..................................... 38
7.10 Distributions.................................................. 38
SECTION 8. DEFAULT............................................................ 39
8.1 Events of Default.............................................. 39
8.2 Cure........................................................... 41
8.3 Rights and Remedies on Default................................. 41
8.4 Nature of Remedies............................................. 43
8.5 Set-Off........................................................ 43
SECTION 9. MISCELLANEOUS...................................................... 43
9.1 GOVERNING LAW.................................................. 43
9.2 Integrated Agreement........................................... 43
9.3 Waiver and Indemnity........................................... 43
9.4 Time........................................................... 44
9.5 Expenses of Lender............................................. 44
9.6 Confidentiality................................................ 44
9.7 Notices........................................................ 45
9.8 Brokerage...................................................... 45
9.9 Headings....................................................... 45
9.10 Survival....................................................... 45
9.11 Successors and Assigns......................................... 45
9.12 Duplicate Originals............................................ 46
9.13 Modification................................................... 46
9.14 Signatories.................................................... 46
9.15 Third Parties.................................................. 46
9.16 Waivers........................................................ 46
9.17 CONSENT TO JURISDICTION........................................ 47
9.18 WAIVER OF JURY TRIAL........................................... 47
9.19 Publication.................................................... 47
9.20 Discharge of Taxes, Borrower's Obligations, Etc................ 47
9.21 Injunctive Relief.............................................. 48
SECTION 10. SPECIAL INTER-BORROWER PROVISIONS................................. 48
10.1 Certain Borrower Acknowledgments and Agreements................ 48
10.2 Maximum Amount Of Joint and Several Liability.................. 49
10.3 Authorization of Orion by Borrowers............................ 49
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EXHIBIT LIST
Exhibit 1.1 -- Projections
Exhibit 2.1(b) -- Form of Revolving Credit Note
Exhibit 2.2(b) -- Form of Borrowing Base Certificate
Exhibit 2.2(c) -- Loan Request
Exhibit 4.1 -- Form of Opinion of Counsel
Exhibit 4.2A -- Notice Letter Re: Commercial Obligors
Exhibit 4.2B -- Notice Letter Re: Government Obligors
Exhibit 6.8 -- Officer's Certificate
Schedule 1 -- Ineligible Obligors and Concentration Limits
Schedule 2 -- Wholly Owned and Controlled Borrowers
-- Borrower Managed Physician Groups
-- Borrowers' States of Qualifications
-- Jurisdictions of organization/Chief Executive Office
-- Places of Business/Other Names
-- Provider Identification Numbers
-- Pending Litigation
-- Permitted Liens
-- Fiscal Year End
-- Organization Number/Tax I.D. Numbers
-- Existing Guaranties, Investments and Borrowings
-- Other Associations
-- Environmental Matters
-- Capital Stock
-- Commercial Tort Claims
-- Letter of Credit Rights
-- Intellectual Property
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("AGREEMENT") is dated this 15th day
of December 2004, by and among ORION HEALTHCORP, INC. a Delaware corporation
("Orion"), BAYTOWN SURGICARE, INC., a Texas corporation, BELLAIRE ASC L.P., a
Texas limited partnership, BELLAIRE SURGICARE, INC., a Texas corporation, DENNIS
CAIN MANAGEMENT, L.L.C., a Texas limited liability company, DENNIS CAIN
PHYSICIAN SOLUTIONS, LTD., a Texas limited partnership ("DCPS"), INTEGRATED
PHYSICIAN SOLUTIONS, INC., a Delaware corporation ("IPS"), INTEGRIMED, INC., a
Nevada corporation ("IntegriMED"), MEDICAL BILLING SERVICES, INC., a Texas
corporation ("MBS"), SAN JACINTO SURGERY CENTER, LTD., a Texas limited
partnership ("San Jacinto"), SURGICARE MEMORIAL VILLAGE, L.P., a Texas limited
partnership, TASC ANESTHESIA, LLC, an Ohio limited liability company, TOWN &
COUNTRY SURGICARE, INC., a Texas corporation, TUSCARAWAS AMBULATORY SURGERY
CENTER, LLC, an Ohio limited liability company, TUSCARAWAS OPEN MRI, LP, an Ohio
limited partnership, and such other Persons joined hereto as a Borrower from
time to time (together with Orion, DCPS, IPS, IntegriMED, MBS and San Jacinto,
"BORROWERS" and each individually a "BORROWER") and HEALTHCARE BUSINESS CREDIT
CORPORATION, a Delaware corporation as lender ("Lender").
BACKGROUND
A. Borrowers have requested that Lender make available to them, on a
joint and several basis, a Credit Facility in the maximum amount of $4,000,000
which will be secured by a first priority perfected security interest in the
Accounts and other Collateral of Borrowers. Lender is willing to make the Credit
Facility available to Borrowers pursuant to the terms and provisions hereinafter
set forth.
B. The parties desire to set forth the terms and conditions of their
relationship to writing.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: As used in this Agreement, the following terms have
the following respective meanings:
"ACCOUNT(s)" means (a) all accounts, payment intangibles,
instruments, chattel paper and all other rights of Borrowers to receive
payments, including without limitation, the third party reimbursable portion of
accounts receivable owing to a Borrower and accounts, payment intangibles,
instruments chattel paper and all other rights to receive payment assigned to
Borrower (or in which a Borrower is granted a first priority perfected security
interest) by a Borrower Managed Physician Group, arising out of the delivery by
such Borrower or a Borrower Managed Physician Group of medical, surgical,
diagnostic, treatment or other professional or medical or healthcare related
services and/or the supply of goods related to any of such services (whether
such services are supplied by a Borrower or a third party), including without
limitation all health-care-insurance-receivables and all other rights to
reimbursement under any agreements with an Obligor, and fees, costs and
reimbursement under Management Service Agreements, (b) all accounts, general
intangibles, rights,
remedies, guarantees, supporting obligations, letter of credit rights, and
security interests in respect of the foregoing and, all rights of enforcement
and collection, all books and records evidencing or related to the foregoing,
and all rights under this Agreement in respect of the foregoing, (c) all
information and data compiled or derived by such Borrower in respect of such
accounts receivable (other than any such information and data subject to legal
restrictions of patient confidentiality), and (d) all proceeds of any of the
foregoing.
"ACCOUNTS DETAIL FILE" has the meaning set forth in Section
2.2(b) hereof.
"ACQUISITION DOCUMENTS" means (a) that certain Agreement and
Plan of Merger by and among Surgicare, Inc., IPS Acquisition, Inc. and
Integrated Physician Solutions, Inc., dated as of February 9, 2003, as amended
by that certain First Amendment to Agreement and Plan of Merger dated July 16,
2004, and that certain Second Amendment to Agreement and Plan of Merger dated
September 9, 2004, and (b) that certain Agreement and Plan of Merger by and
among Surgicare, Inc., DCPS/MBS Acquisition, Inc., Dennis Cain Physician
Solutions, Ltd., Medical Billing Services, Inc., and the Sellers party thereto
dated as of July 16, 2004, as amended by that certain First Amendment to
Agreement and Plan of Merger dated September 9, 2004 and by that certain Second
Amendment to Agreement and Plan of Merger dated December 15, 2004.
"ACQUISITION TRANSACTION" means the transactions contemplated
by the Acquisition Documents.
"ADVANCE(s)" means any monies advanced or credit extended,
including without limitation the Loans to or for the benefit of Borrowers, or
any of them by Lender, under the Credit Facility.
"ADVANCE RATE" means 85% or such other percentage(s) resulting
from an adjustment pursuant to Section 2.1(d) below.
"AFFILIATE" means with respect to any Person (the "SPECIFIED
PERSON"), (a) any Person which directly or indirectly controls, or is controlled
by, or is under common control with, the Specified Person, and (b) any partner,
director or officer (or, in the case of a Person which is not a corporation, any
individual having analogous powers) of the Specified Person or of a Person who
is an Affiliate of the Specified Person within the meaning of the preceding
clause (a). For purposes of the preceding sentence, "control" of a Person shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, or direct or indirect
ownership (beneficially or of record) of, or direct or indirect power to vote,
10% or more of the outstanding shares of any class of capital stock of such
Person (or in the case of a Person that is not a corporation, 10% or more of any
class of partnership or other equity interest).
"AUTHORIZED OFFICER" means any officer, member or partner of a
Borrower authorized by specific resolution of Borrower to request Loans as set
forth in the incumbency certificate referred to in Section 4.1(d) of this
Agreement.
"BILLING DATE" means (a) the last Business Day of the week in
which goods or the services giving rise to the corresponding Account were
rendered or provided in the case of out patient
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services and (b) the earlier of the discharge date or the regular monthly
billing date for billing the respective Obligor, or if none, the last business
day of a calendar month, in the case of inpatient services.
"BORROWER MANAGED PHYSICIAN GROUP" means each physician group
managed by IPS pursuant to a Management Service Agreement as set forth on
Schedule 2 attached hereto and made a part hereof.
"BORROWING BASE" means, at any date, an amount equal to the
lesser of (a) the Revolving Loan Commitment, or (b) the product of (i) the
applicable Advance Rate then in effect, times (ii) the Estimated Net Value of
all Eligible Accounts as of such date.
"BORROWING BASE DEFICIENCY" means, as of any date, the amount,
if any, by which (a) the aggregate amount of all Advances outstanding as of such
date exceeds (b) the Borrowing Base as of such date.
"BORROWING BASE EXCESS" means, as of any date, the amount, if
any, by which (a) the Borrowing Base as of such date exceeds (b) the aggregate
amount of all Advances outstanding as of such date.
"BORROWING BASE REPORT" has the meaning set forth in Section
2.2(b) hereof.
"BUSINESS ASSOCIATE AGREEMENT" means that certain Business
Associate Agreement among Borrowers and Lender of even date herewith, as the
same may be modified, amended, restated or replaced from time to time.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
any day on which banking institutions in Philadelphia, Pennsylvania or New York
City, New York are permitted or required by law, executive order or governmental
decree to remain closed or a day on which Lender is closed for business.
"BUSINESS SERVICES AGREEMENTS(s)" means, collectively and
individually, those certain Business Services Agreements between IPS or
IntegriMED and each of its customers.
"CHAMPUS" means the Civilian Health and Medical Program of the
Uniformed Service, a part of TRICARE, a medical benefits program supervised by
the U.S. Department of Defense.
"CHANGE OF CONTROL" means:
(a) with respect to Orion, (i) a transaction or series of
related transactions pursuant to which any Person (other than Guarantor) or
group of related Persons acquires or would acquire (upon completion of such
transaction or series of transactions) shares (or securities exercisable for or
convertible into shares) representing more than fifty percent (50%) of the
outstanding common stock of Orion, pursuant to a tender offer or exchange offer
or otherwise, (ii) a merger, consolidation, share exchange or other business
combination involving Orion, if, upon consummation of such transaction, the
Persons who were stockholders of Orion immediately prior to such transaction
continue to hold,
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following such transaction, less than fifty percent (50%) of the outstanding
equity securities of the entity surviving such merger, consolidation or
reorganization, or the parent of such entity, or (iii) any other transaction or
series of related transactions pursuant to which any Person or related group of
Persons acquires or would acquire (upon completion of such transaction or series
of transactions) control of Orion's board of directors or by which nominees of
any such Person or group of Persons are (or would be) elected or appointed to a
majority of the seats on the board of directors of Orion; or
(b) Continuing Directors do not constitute a majority of the
members of the board of directors of Orion; or
(c) Orion ceases to directly or indirectly own and control all
of the issued and outstanding capital stock of any of the Wholly Owned
Borrowers; or
(d) Orion or one of the Wholly Owned Borrowers ceases to be
the sole general partner or sole managing member of any of the Controlled
Borrowers or ceases to have the right or ability by voting power, contract or
otherwise to control any Controlled Borrower.
"CLOSING" has the meaning set forth in Section 4.6 hereof.
"CLOSING DATE" has the meaning set forth in Section 4.6
hereof.
"COLLATERAL" has the meaning set forth in Section 3.1 hereof.
"COLLECTIONS" means with respect to any Account, all cash
collections on such Account.
"COLLECTION ACCOUNT" has the meaning set forth in Section
2.7(a) hereof.
"COMMERCIAL LOCKBOX" means a lockbox in the name of Lender (or
a nominee of Lender) and maintained at the Lockbox Bank, or such other bank as
is acceptable to Lender, to which Collections on all Accounts, other than
Government Accounts, are sent.
"COMMITMENT FEE" has the meaning set forth in Section 2.8
hereof.
"CONCENTRATION LIMITS" means the various financial tests,
expressed as percentages of the then current ENV of all Eligible Accounts,
described on SCHEDULE 1 as in effect from time to time.
"CONTINUING DIRECTOR" means (a) any member of the board of
directors of Orion who was a director of Orion on the Closing Date, and (b) any
individual who becomes a member of the board of directors of Orion after the
Closing Date if such individual was appointed or nominated for election to the
board of directors of Orion by a majority of the Continuing Directors, but
excluding any such individual originally proposed for election in opposition to
the board of directors of Orion in office at the Closing Date in an actual or
threatened election contest relating to the election of the directors (as such
terms are used in Rule 14a-11 under the Securities Exchange Act of 1934, as
amended) of Orion and whose initial assumption of office resulted from such
contest or the settlement thereof.
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"CONTRACT" means an agreement by which an Obligor is obligated
to pay for services rendered to patients of Borrower.
"CONTROLLED BORROWERS" means, collectively, those Borrowers
the sole general partnership interest or sole managing member interest, as
applicable, of which is owned by Orion or one of the Wholly Owned Borrowers as
listed on Schedule 2 hereto.
"CREDIT FACILITY" has the meaning set forth in Section 2.1(a)
hereof.
"DEBT SERVICE COVERAGE RATIO" means the ratio of (a) the sum
of (i) net income, plus (ii) interest expense, plus (iii) taxes, plus (iv)
depreciation and amortization expenses, to (b) the sum of (i) interest expense,
plus (ii) taxes, plus (iii) the current portion of long-term Indebtedness, plus
(iv) the current portion of lease payments under capitalized leases, plus (v)
Distributions, all as determined for Borrowers on a consolidated basis
(including San Jacinto), in accordance with generally accepted accounting
principles consistently applied, on a rolling four quarter basis; provided
however, that such calculation as of the fiscal quarter ending December 31, 2004
shall be for the most recent fiscal quarterly period ending on such date on a
cumulative, annualized basis; such calculation for the fiscal quarter ending
March 31, 2005 shall be for the two (2) most recent fiscal quarterly periods
ending on such date on a cumulative, annualized basis and such calculation for
the fiscal quarter ending June 30, 2005 shall be for the three (3) most recent
fiscal quarterly periods ending on such date on a cumulative, annualized basis.
"DEFAULT RATE" means the lesser of (a) the Highest Lawful Rate
or (b) 300 basis points above the interest rate otherwise applicable on the
Loans.
"DEFAULTED ACCOUNT" means an Account as to which (a) the
initial ENV has not been received in full as Collections within 150 days of the
Billing Date, or (b) Lender reasonably deems uncollectible because of the
bankruptcy or insolvency of the Obligor or any other reason.
"DEPOSITORY AGREEMENT(S)" means those certain Depository
Agreements entered into in connection with this Agreement among Borrowers,
Lender and the Lockbox Bank, relating to the Commercial Lockbox and the
Government Lockbox, as applicable.
"DESIGNATED FUNDING DATE" has the meaning set forth in Section
2.2(a) hereof.
"DISTRIBUTION" means (a) dividends or other distributions on
capital stock or partnership or other equity interests of a Borrower; (b) the
redemption, repurchase or acquisition of such stock or partnership or other
equity interests or of warrants, rights or other options to purchase such stock
or partnership or other equity interest; and (c) loans made to any Shareholders,
officers, directors and/or Affiliates of such Borrower.
"DOWNLOAD DATE" has the meaning set forth in Section 2.2(b)
hereof.
"DVI DOCUMENTS" means, collectively, (a) that certain Restated
Loan Agreement by and between DVI Business Credit Receivables Corp III and
Surgicare, Inc. and Integrated Physician Solutions, Inc., dated June 18, 2004,
as amended by that certain Amendment No. 1 to Restated Loan Agreement dated
September 10, 2004 among DVI Business Credit Receivables Corp. III, Surgicare,
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Inc., and Integrated Physician Solutions, Inc. (the "REC III Restated Loan
Agreement"); (b) that certain Restated Loan Agreement by and among the special
purpose entities set forth on Schedule I thereto and Surgicare, Inc. and
Integrated Physician Solutions, Inc., dated June 18, 2004, as amended by that
certain Amendment to No. 1 to Restated Loan Agreement dated August 13, 2004
among the special purpose entities a party thereto, Surgicare, Inc., and
Integrated Physician Solutions, Inc. (the "SPE Restated Loan Agreement," and
together with the REC III Restated Loan Agreement, the "Restated DVI Loan
Agreements"); (c) the Promissory Notes executed and delivered by Orion in
connection with the Restated DVI Loan Agreements; and (d) the Restated Security
Agreement executed and delivered by Orion in connection with the SPE Restated
Loan Agreement.
"ELIGIBLE ACCOUNT" means an Account of a Borrower (other than
DCPS, MBS or IntegriMED):
(a) which is a liability of an Obligor which is (i) a
commercial insurance company acceptable to Lender, organized under the laws of
any jurisdiction in the United States, having its principal office in the United
States, other than those listed on SCHEDULE 1 as ineligible, (ii) a Blue
Cross/Blue Shield Plan other than those listed on SCHEDULE 1 as ineligible,
(iii) CHAMPUS, Medicare or Medicaid, or (iv) a HMO, PPO, or an institutional
Obligor acceptable to Lender, or any other type of obligor, not included in the
categories of obligors listed in the foregoing clauses (i) - (iii), organized
under the laws of any jurisdiction in the United States, having its principal
office in the United States, and is listed on SCHEDULE 1 as an eligible Obligor,
(b) the Obligor of which is not an Affiliate of
Borrower,
(c) if the Obligor of which is a Notice Obligor, such
Notice Obligor has received, within seven (7) days of the date hereof, a letter
substantially in the form of EXHIBIT 4.2A, (in the case of all Accounts other
than Government Accounts), or a letter substantially in the form of EXHIBIT 4.2B
(in the case of all Government Accounts),
(d) in an amount, as relating to an individual
patient, not less than $5 nor more than $50,000, denominated and payable in
dollars in the United States,
(e) as to which the representations and warranties of
Section 5.21 hereof are true,
(f) which, if such Account is in the form of a cost
report receivable owing from any governmental agency, Lender has agreed to
include it in the Borrowing Base,
(g) which (i) does not arise from the delivery of
cosmetic surgery services and (ii) is not a workers' compensation claim (unless
expressly approved by Lender) and (iii) does not arise from any services
delivered for injury sustained in a motor vehicle accident (unless the Obligor
on such Account is a type of Obligor permitted pursuant to clause (a) of this
definition) and (iv) is not an Individual Payor Account,
(h) which is not outstanding more than (i) 180 days
past the Billing Date in the case of Accounts that have been billed, and (ii) 45
days past the date the corresponding
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services and/or goods were provided in the case of Accounts that have not been
billed; provided that in no event may the Account be outstanding more than 225
days past the date the corresponding services and/or goods were provided,
(i) the Obligor on which does not have fifty percent
(50%) or more of its Accounts owing to Borrowers constituting Defaulted
Accounts,
(j) to the extent such Account does not include late
charges or finance charges, and
(l) which complies with such other criteria and
requirements as may be specified from time to time by Lender in its reasonable
discretion.
"EQUITY OPTION" means the option of Guarantor to purchase
additional shares of Orion's Class A Common Stock pursuant to Section 2.4 of
that certain Amended and Restated Subscription Agreement dated February 9, 2004
between Borrower and Guarantor.
"ESTIMATED NET VALUE" or "ENV" means on any date of
calculation with respect to any Account an amount equal to the anticipated cash
collections as calculated by Lender using the Value Track System(TM) (which
system periodically adjusts such amount to reflect Lender's evaluation of the
performance of similar Accounts and to reflect payments received with respect
thereto), except that if Lender determines that all Obligor payments with
respect to an Account have been made or if an Account has become a Defaulted
Account, the ENV of such Account shall be zero.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.1
hereof.
"EXCESS LIQUIDITY" means the difference between the sum of (a)
(i) cash, plus (ii) investments readily convertible into cash, plus (iii) rights
to call contributions to capital, minus (b) the sum of (i) current obligations,
plus (ii) commitments to make investments.
"EXPENSES" has the meaning set forth in Section 9.5 hereof.
"FIXED COSTS" means all general and administrative costs
including without limitation, charges for bad debt, property taxes, facility
rent, facility repairs and maintenance fees, professional fees, insurance costs,
utilities expenses, office expenses, depreciation and amortization, and other
administrative costs, as such terms are used in the Projections.
"FUNDING DATE" has the meaning set forth in Section 2.2(a)
hereof.
"GAAP" means generally accepted accounting principles,
consistently applied.
"GOVERNMENT ACCOUNTS" means Accounts on which any federal or
state governmental unit or any intermediary for federal or state governmental
unit is the Obligor.
"GOVERNMENT LOCKBOX" means a lockbox and/or deposit account in
the name of Borrower(s) maintained at the Lockbox Bank, or such other bank as is
acceptable to Lender, to which Collections on all Government Accounts are sent.
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"GUARANTOR" means, collectively and individually as context
requires, Brantley Capital Corporation, a Maryland corporation, and Brantley
Capital Partners IV, LP, a Delaware limited partnership, each with a principal
place of business at Lakepoint, 3201 Enterprise Parkway, Suite 350, Beachwood,
Ohio 44122.
"GUARANTY AGREEMENT" has the meaning set forth in Section 3.8
hereof.
"HAZARDOUS SUBSTANCES" means any substances defined or
designated as hazardous or toxic waste, hazardous or toxic material, hazardous
or toxic substance or similar term, by any environmental statute, rule or
regulation of any governmental entity presently in effect and applicable to such
real property.
"HIGHEST LAWFUL RATE" has the meaning set forth in Section
2.4(c) hereof.
"INDEBTEDNESS" of a Person at a particular date shall mean all
liabilities and obligations of such Person, including without limitation, those
which in accordance with GAAP would be classified upon a balance sheet as
liabilities and all other indebtedness, debt and other similar monetary
obligations of such Person whether direct or guaranteed, contingent or
liquidated, matured or unmatured and all premiums, if any, due at the required
prepayment dates of such any indebtedness, and all indebtedness secured by a
lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"INDIVIDUAL PAYOR ACCOUNT" means an Account owing by an
Obligor who is the individual patient or Person who received the goods or
services rendered.
"INITIAL TERM" has the meaning set forth in Section 2.1(c)
hereof.
"JCAHO" means the Joint Commission for Accreditation of
Healthcare Organizations, a nationally recognized organization providing
accreditations to hospitals and other healthcare facilities, or any successor
entity charged with performing its functions.
"LOAN(s)" has the meaning set forth in Section 2.1(a) hereof.
"LOAN DOCUMENTS" means this Agreement, the Revolving Credit
Note, Guaranty Agreement, Depository Agreements and all agreements relating to
the Government Lockbox and the Commercial Lockbox, all financing statements, the
Subordination Agreement and any other agreements, instruments, documents and
certificates delivered in connection with this Agreement.
"LOAN REQUEST" has the meaning set forth in Section 2.2(c)
hereof.
"LOCKBOX BANK" means Bank One or such other bank that is
reasonably acceptable to Lender.
8
"MANAGEMENT SERVICE AGREEMENT(s)" means, collectively and
individually, those certain Management Service Agreements between IPS and each
Borrower Managed Physician Group.
"MATURITY DATE" has the meaning set forth in Section 2.1(c).
"NET REVENUE" means gross charges less contractual allowances,
as such terms are used in the Projections.
"NOTICE OBLIGOR" shall mean, with respect to IPS, the
applicable Medicare and Medicaid intermediaries and, with respect to the Surgery
Entities, Obligors representing the Obligors on the top 80% of the gross value
of each Surgery Entity's Accounts, and such other Obligors as Lender may from
time to time, in its reasonable discretion, determine.
"OBLIGATIONS" means all now existing or hereafter arising
debts, obligations, covenants, and duties of payment or performance of every
kind, matured or unmatured, direct or contingent, owing, arising, due, or
payable to Lender, by or from Borrowers, or any of them, whether arising out of
this Agreement or any other Loan Document or otherwise, including, without
limitation, all obligations to repay principal of and interest on all the Loans,
and to pay interest, fees, costs, charges, expenses, professional fees, and all
sums chargeable to Borrowers, or any of them, under the Loan Documents, whether
or not evidenced by any note or other instrument.
"OBLIGOR" means the party primarily obligated to pay an
Account.
"OPERATING INCOME" means, for any period the difference
between (a) Net Revenue; minus (b) the sum of (i) Variable Costs, plus, (ii)
Fixed Costs.
"PERMITTED LIENS" has the meaning set forth in Section 5.6
hereof.
"PERSON" means any individual, corporation, partnership,
limited liability partnership, limited liability company, association, trust,
unincorporated organization, joint venture, court or government or political
subdivision or agency thereof, or other entity.
"PRIME RATE" means the highest per annum rate of interest
referenced as the "Prime Rate" as reported in the Money Rates Section of The
Wall Street Journal, on the date of determination. If The Wall Street Journal is
not published on such Business Day or does not report such rate, such rate shall
be as reported by such other publication or source as the Lender may select.
"PROJECTIONS" means the projections of Borrowers attached
hereto as Exhibit 1.1.
"PROPERTY" means an interest of Borrowers, or any of them, in
any kind of property or asset, whether real, personal or mixed, or tangible or
intangible.
"REVOLVING CREDIT NOTE" has the meaning set forth in Section
2.1(b) hereof.
9
"REVOLVING LOAN COMMITMENT" means an amount equal to Four
Million Dollars ($4,000,000).
"SECURITIES" has the meaning set forth in Section 6.14 hereof.
"SELLERS" means, collectively, Dennis Cain, Valerie Cain, Tom
M. Smith, John Pruitt and Jane Barnes.
"SHAREHOLDER" means, as applicable, a shareholder, member or
partner of Borrower.
"SUBORDINATED DEBT" means debt or other obligations of a
Borrower that is subordinated to the Obligations of the Borrowers to Lender on
terms and conditions that are satisfactory to the Lender in its sole discretion;
including without limitation indebtedness owed to the Sellers and indebtedness
arising under the DVI Documents.
"SUBORDINATION AGREEMENT" means, collectively and individually
as context may require, those certain Subordination Agreements executed by the
holders of the Subordinated Debt (including US Bank and Sellers) in favor of
Lender.
"SUBSIDIARY CUSTOMER CONTRACTS" means, collectively and
individually as context may require, the customer agreements of MBS and DCPS,
including without limitation, the Business Office Service Agreements, Business
Office Service Contract and Agreements, and Practice Management Services
Agreements between DCPS and its customers and Medical Billing Facility
Management Services Agreement, Billing and Collection Services Agreements and
Data and Insurance Processing Services Agreements between MBS and its customers.
"SURGERY ENTITIES" means, collectively, Baytown SurgiCare,
Inc., Bellaire ASC, L.P., Bellaire Surgicare, Inc., San Jacinto Surgery Center,
Ltd., SurgiCare Memorial Village, L.P., TASC Anesthesia, LLC, Town & Country
SurgiCare, Inc., Tuscarawas Ambulatory Surgical Center, LLC, and Tuscarawas Open
MRI, LP.
"TERMINATION FEE" has the meaning set forth in Section 2.3(c)
hereof.
"TRICARE" means the medical program for active duty members,
qualified family members, CHAMPUS eligible retirees and their family members and
survivors, of all uniformed services.
"UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform
Commercial Code as in effect from time to time in the State of New Jersey.
"UNMATURED EVENT OF DEFAULT" means an event which with the
passage of time, giving of notice or both, would become an Event of Default.
"UNUSED LINE FEE" has the meaning set forth in Section 2.3(d).
"VALUE TRACK SYSTEM(TM)" means the proprietary business system
used by Lender to value and record the status of Accounts.
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"VARIABLE COSTS" means the direct cost of services delivered
to patients, including without limitation, the costs of labor and supplies and
other clinical and surgical costs related to patient care.
"WHOLLY OWNED BORROWERS" means, collectively, those Borrowers
which are wholly owned by Orion or another Borrower as shown on Schedule 2
hereto.
1.2 Matters of Construction: The terms "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Lender and/or, where
applicable, a Borrower, is a party, including, without limitation, references to
any of the Loan Documents, shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof.
1.3 Accounting Principles: Where the character or amount of any asset
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP, to the
extent applicable, except as otherwise expressly provided in this Agreement.
1.4 Fiscal Quarters: For the purposes hereof, "fiscal quarter" shall
mean each quarterly accounting period during any fiscal year; provided that, all
references to the fiscal quarter ending March 31, June 30, September 30 or
December 31 shall mean the first, second, third or fourth fiscal quarter of the
applicable fiscal year, respectively, irrespective of the actual date on which
such fiscal quarter may end.
SECTION 2. THE LOANS
2.1 Credit Facility - Description:
(a) Subject to the terms and conditions of this Agreement,
Lender hereby establishes for the joint and several benefit of Borrowers, a
credit facility ("CREDIT FACILITY") which shall include Advances which may be
extended by Lender to or for the benefit of Borrowers from time to time
hereunder in the form of revolving credit loans ("LOANS"). The aggregate
outstanding amount of all Advances, shall not at any time exceed the Borrowing
Base. In no event shall the initial principal amount of any Loan be less than
$25,000. Subject to such limitation, the outstanding balance of all Advances may
fluctuate from time to time, to be reduced by repayments made by Borrowers, to
be increased by future Advances which may be made by Lender. If the aggregate
outstanding amount of all Advances exceeds the Borrowing Base, Borrowers shall
immediately repay such excess in full. Lender has the right at any time, and
from time to time, in its reasonable discretion (but without any obligation) to
set aside reasonable reserves against the Borrowing Base in such amounts as it
may deem appropriate. The Obligations of Borrowers under
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the Credit Facility and this Agreement are joint and several and shall at all
times be absolute and unconditional.
(b) At Closing, Borrowers shall execute and deliver a
promissory note to Lender in the principal amount of the Four Million Dollars
($4,000,000) (as may be amended, modified or replaced from time to time, the
"REVOLVING CREDIT NOTE"). The Revolving Credit Note shall evidence Borrowers
joint and several, absolute and unconditional obligation to repay Lender for all
Loans made by Lender under the Credit Facility, with interest as herein and
therein provided. Each and every Loan under the Credit Facility shall be deemed
evidenced by the Revolving Credit Note, which is deemed incorporated herein by
reference and made a part hereof. The Revolving Credit Note shall be
substantially in the form set forth in EXHIBIT 2.1(b) attached hereto and made a
part hereof.
(c) The term ("INITIAL TERM") of the Credit Facility shall
expire on December 15, 2006. All Loans shall be repaid on or before the earlier
of the last day of the Initial Term or upon termination of the Credit Facility
or termination of this Agreement ("MATURITY DATE"). After the Maturity Date no
further Loans shall be available from Lender.
(d) From time to time, upon not less than three (3) Business
Days notice to Borrowers, Lender may adjust the Advance Rate in order to
reflect, in Lender's reasonable judgment, the experience with Borrowers
(including by way of illustration, to adjust for any known or potential offsets
by Medicare or Medicaid) or the aggregate amount or percentage of the
Collections with respect to the Accounts.
2.2 Funding Procedures:
(a) Subject to the terms and conditions of this Agreement and
so long as no Event of Default or Unmatured Event of Default has occurred
hereunder, Lender will make Loans to Borrowers once a week, on a specified
Business Day of each week (such day to be mutually agreeable to Borrowers and
Lender ("DESIGNATED FUNDING DATE") whether or not Borrowers have requested a
Loan to be made on such date or on such other day of the week as Borrowers may
request such day along with the Designated Funding Date are referred to herein
as the "FUNDING DATE".
(b) Not later than 11:00 A.M. (Eastern Time) three (3)
Business Days prior to each Designated Funding Date ("DOWNLOAD DATE"), Borrowers
will deliver to Lender the computer file data associated with the Accounts,
which shall include without limitation, the information (including changes in
the Obligor reimbursement rates and changes in federal or state laws or
regulations affecting payment for medical services) required by Lender to enable
Lender to process and value the outstanding Accounts of Borrowers on Lender's
Value Track System(TM), as well as bill and collect such Accounts following an
Event of Default ("ACCOUNTS DETAIL FILE"). Upon completion of the processing of
the data with respect to such Accounts, Lender will prepare and deliver to
Borrowers by no later than 5:00 p.m. (Eastern Time) on the first Business Day
following the Download Date (or if such Accounts Detail File is not delivered
until after 11:00 A.M. (Eastern Time) on the Download Date, the second Business
Day following the Download Date), a report
12
regarding the Borrowing Base then in effect, which shall be substantially in the
form of EXHIBIT 2.2(b) (a "BORROWING BASE REPORT").
(c) On the Funding Date, Borrowers will sign and return the
Borrowing Base Report to Lender. If Borrowers are requesting that a Loan be made
on such Funding Date, Borrowers shall also deliver to Lender, concurrently with
the Borrowing Base Report, a written request for such Loan substantially in the
form of EXHIBIT 2.2(c) (a "LOAN REQUEST"). The Borrowing Base Report and Loan
Request may be delivered via telecopy and Borrowers acknowledge that Lenders may
rely on Borrowers signatures by facsimile, which shall be legally binding upon
Borrowers.
(d) Subject to the terms and conditions of this Agreement, if
the Borrowing Base Report (if applicable) and Loan Request are delivered to
Lender before 11:00 A.M. on the Funding Date, Lender will advance on the Funding
Date (or the next Business Day if the Borrowing Base Report and Loan Request are
delivered after 11:00 A.M. (Eastern Time)) to Borrowers a Loan in the amount
equal to the lesser of (i) the amount of the Loan requested by Borrowers in the
Loan Request, or (ii) the Borrowing Base Excess as of such date. Any Advances
made by Lender hereunder shall be treated for all purposes as, and shall accrue
interest at the same rate applicable to, Loans.
(e) Lender's determination of the Estimated Net Value of the
Eligible Accounts and other amounts to be determined or calculated under this
Agreement shall, in the absence of manifest error, be binding and conclusive.
2.3 Interest and Fees:
(a) Each Loan shall bear interest on the outstanding principal
amount thereof from the date made until such Loan is paid in full, at a rate per
annum equal to the lesser of (a) the Highest Lawful Rate or (b) the Prime Rate
plus three percent (3.00%) The interest rate on all amounts outstanding under
the Credit Facility shall be adjusted weekly based on the Prime Rate as of each
Designated Funding Date.
(b) If any Event of Default shall occur and be continuing, the
rate of interest applicable to each Loan then outstanding shall be the Default
Rate. The Default Rate shall apply from the date of the Event of Default until
the date such Event of Default is waived, and interest accruing at the Default
Rate shall be payable upon demand.
(c) Should the Credit Facility be terminated for any reason
prior to the last day of the Initial Term, in addition to repayment of all
Obligations then outstanding and termination of Lender's commitment hereunder,
Borrowers shall unconditionally be obligated to pay at the time of such
termination, a fee ("TERMINATION FEE") in an amount equal to the following
percentage of the Revolving Loan Commitment: three percent (3.0%), if such early
termination occurs on or prior to the first anniversary date of this Agreement;
two percent (2.0%) if such early termination occurs after the first anniversary
date of this Agreement but on or before the second anniversary of this
Agreement; and one percent (1.0%) if such early termination occurs after the
second anniversary of the date of this Agreement but prior to the last day of
the Initial Term. Borrowers acknowledge that
13
the Termination Fee is an estimate of Lender's damages in the event of early
termination and is not a penalty. In the event of termination of the Credit
Facility, all of the Obligations shall be immediately due and payable upon the
termination date stated in any notice of termination. All undertakings,
agreements, covenants, warranties and representations of Borrowers contained in
the Loan Documents shall survive any such termination, and Lender shall retain
its security interests in the Collateral and all of its rights and remedies
under the Loan Documents notwithstanding such termination until Borrowers have
paid the Obligations to Lender, in full, in immediately available funds,
together with the applicable Termination Fee, if any. Notwithstanding the
payment in full of the Obligations, Lender shall not be required to terminate
its security interests in the Collateral unless either (1) the Obligations have
been indefeasibly paid and satisfied in full pursuant to the Guaranty Agreement,
or (2) if the Obligations have been satisfied by means other than Lender's
rights under the Guaranty Agreement, with respect to any loss or damage Lender
may incur as a result of dishonored checks or other items of payment received by
Lender from Borrowers or any Obligor and applied to the Obligations, Lender
shall, at its option, (i) have received a written agreement executed by
Borrowers and by any Person whose loans or other advances to Borrowers are used
in whole or in part to satisfy the Obligations, indemnifying Lender from any
such loss or damage; or (ii) have retained such monetary reserves and security
interests on the Collateral for such period of time as Lender, in its reasonable
discretion, may deem necessary to protect Lender from any such loss or damage.
(d) Borrowers shall unconditionally pay to Lender a fee
("UNUSED LINE FEE") equal to one half of one percent (0.50%) per annum of the
unused portion of the Credit Facility. The unused portion of the Credit Facility
shall be the difference between the Revolving Loan Commitment and the average
daily outstanding balance of the Loans during each month (or portion thereof),
which fees shall be calculated and payable monthly, in arrears, and shall be due
and payable on the first Designated Funding Date of each calendar month.
2.4 Additional Interest Provisions:
(a) Calculation of Interest: Interest on the Loans shall be
based on a year of three hundred sixty (360) days and charged for the actual
number of days elapsed.
(b) Continuation of Interest Charges: All contractual rates of
interest chargeable on outstanding Loans shall continue to accrue and be paid
even after default, maturity, acceleration, termination of the Credit Facility,
judgment, bankruptcy, insolvency proceedings of any kind or the happening of any
event or occurrence similar or dissimilar.
(c) Applicable Interest Limitations: Borrowers and Lender
intend to conform strictly to the usury laws in force that apply to the
transactions evidenced or contemplated hereby. Accordingly, all agreements among
Borrowers and Lender, whether now existing or hereafter arising and whether
written or oral, are hereby limited so that in no contingency, whether by reason
of acceleration of the maturity of the Revolving Credit Note, or otherwise,
shall the interest (and all other sums that are deemed to be interest)
contracted for, charged, received, paid or agreed to be paid exceed the Highest
Lawful Rate (as defined below). Borrowers and Lender stipulate and agree that
the terms and provisions contained in this Agreement and the Loan Documents are
not intended to and shall never be construed to create a contract to pay for the
use, forbearance or
14
detention of money in an amount in excess of the maximum amount permitted to be
charged by applicable law, if any.
Anything in this Agreement or the other Loan Documents to the
contrary notwithstanding, neither Borrowers nor any other party now or hereafter
becoming liable for payment of the Revolving Credit Note shall ever be required
to pay interest on or with respect to the Revolving Credit Note or any other
obligation hereunder at a rate in excess of the Highest Lawful Rate, and if the
effective rate of interest that would otherwise be payable under this Agreement
or on or with respect to the Revolving Credit Note would exceed the Highest
Lawful Rate, or if Lender shall receive anything of value that is deemed or
determined to constitute interest that would increase the effective rate of
interest payable under this Agreement or on or with respect to the Revolving
Credit Note or the Loan Documents to a rate in excess of the Highest Lawful
Rate, then (a) the amount of interest that would otherwise be payable under this
Agreement, the Revolving Credit Note or the Loan Documents shall be reduced to
the amount allowed at the Highest Lawful Rate under applicable law, and (b) any
unearned interest paid by the Borrowers or any interest paid by Borrowers in
excess of the Highest Lawful Rate shall, at the option of the Lender, be either
refunded to Borrowers or credited on the principal of such Revolving Credit
Note. It is further agreed that, without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received by
Lender, or under this Agreement, that are made for the purpose of determining
whether such rate exceeds the Highest Lawful Rate, shall be made, to the extent
permitted by applicable law (now or, to the extent permitted by law, hereafter
enacted) governing the Highest Lawful Rate, by (i) characterizing any
nonprincipal payment as an expense, fee or premium rather than as interest, and
(ii) amortizing, prorating, allocating and spreading in equal parts during the
period of the full term of the Revolving Credit Note (including the period of
any renewal or extension thereof), all interest at any time contracted for,
charged or received by such registered holder in connection therewith. As used
herein, the term "Highest Lawful Rate" means the maximum nonusurious rate of
interest permitted from time to time to be contracted for, taken, charged or
received with respect to the Revolving Credit Note by Lender, under applicable
law as in effect with respect to this Agreement or the Revolving Credit Note.
2.5 Payments:
(a) All accrued interest on the Loans shall be due and payable
weekly on the Designated Funding Date. Any Unused Line Fees shall be due and
payable monthly on the first Designated Funding Date of each month with respect
to Unused Line Fees which accrued during the prior month.
(b) If at any time the aggregate principal amount of all
Advances outstanding exceeds the Borrowing Base then in effect, Borrowers shall
immediately make such principal prepayments of the Loans (subject to the terms
of Sections 2.3(c) and 2.3(d)), as is necessary to eliminate such excess.
(c) The entire principal balance of all of the Advances,
together with all unpaid accrued interest thereon and the Termination Fee, if
any, and any unpaid Unused Line Fees, shall be due and payable on the Maturity
Date.
15
(d) Subject to the terms of Sections 2.3(c) and 2.3(d) above,
Borrowers may prepay the principal of the Loans on any Designated Funding Date
by giving Lender written notice of the proposed prepayment two Business Days'
prior to such Designated Funding Date.
(e) All payments and prepayments shall be applied first to any
unpaid interest and fees and thereafter to the principal of the Loans and to
other amounts due Lender, in the order provided in Section 2.7(f) hereof. Except
as otherwise provided herein, all payments of principal, interest, fees, or
other amounts payable by Borrowers hereunder shall be remitted to Lender in
immediately available funds not later than 11:00 a.m. (Eastern Time) on the day
due. Whenever any payment is stated as due on a day which is not a Business Day,
the maturity of such payment shall be extended to the next succeeding Business
Day and interest shall continue to accrue during such extension.
2.6 Use of Proceeds: The extensions of credit under and proceeds of the
Credit Facility shall be used to repay existing Indebtedness of Borrowers and
for working capital and general business purposes.
2.7 Lockboxes and Collections:
(a) Borrowers (other than DCPS, MBS and IntegriMED) will enter
into lockbox agreements in respect of the Government Lockbox and Commercial
Lockbox in such form and with the Lockbox Bank or such other bank as is
acceptable to Lender. Borrowers shall instruct the Lockbox Bank maintaining the
Government Lockbox that all collections sent to the Government Lockbox shall be
deposited into a bank account at the Lockbox Bank in which Lender has a first
priority perfected security interest and all Collections sent to the Commercial
Lockbox shall be deposited into a bank account at the Lockbox Bank in the name
of Lender. Borrower shall also instruct the Lockbox Bank to initiate, or accept
an initiation from Lender which effectuates, a daily transfer of all available
funds to an account of Lender to be designated by Lender ("COLLECTION ACCOUNT").
(b) Borrowers (other than DCPS, MBS and IntegriMED) will cause
all Collections with respect to all of the Accounts, other than Government
Accounts, to be sent directly to the Commercial Lockbox, and will cause all
Collections with respect to all of the Government Accounts to be sent directly
to the Government Lockbox (which may be effectuated by electronic transfer
directly to the Government Lockbox). In the event that a Borrower receives any
Collections that should have been sent to the Commercial Lockbox or the
Government Lockbox, such Borrower will, promptly upon receipt and in any event
within one Business Day of receipt, forward such Collections directly to the
Commercial Lockbox or Government Lockbox, as applicable, in the form received,
and if requested by Lender, promptly notify Lender of such event. Until so
forwarded, such Collections not generated from Government Accounts shall be held
in trust for the benefit of Lender.
(c) No Borrower shall withdraw any amounts from the accounts
into which the Collections remitted to the Commercial Lockbox are deposited nor
shall any Borrower change the procedures under the agreements governing the
Commercial Lockbox and related accounts.
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(d) Borrowers will cooperate with Lender in the identification
and reconciliation on a daily basis of all amounts received in the Commercial
Lockbox and the Government Lockbox. If more than five percent (5%) of the
Collections since the most recent Funding Date is not identified or reconciled
to the satisfaction of Lender within ten (10) Business Days of receipt, Lender
shall not be obligated to make further Loans until such amount is identified or
is reconciled to the reasonable satisfaction of Lender, as the case may be. In
addition, if any such amount cannot be identified or reconciled to the
reasonable satisfaction of Lender, Lender may utilize its own staff or, if it
deems necessary, engage an outside auditor, in either case at Borrowers' expense
(which in the case of Lender's own staff shall be in accordance with Lender's
then prevailing customary charges (plus expenses), to make such examination and
report as may be necessary to identify and reconcile such amount.
(e) No Borrower will send to or deposit in the Commercial
Lockbox or the Government Lockbox any funds other than payments made with
respect to Accounts.
(f) Prior to the occurrence of an Event of Default, on each
Designated Funding Date, Lender shall cause all Collections deposited and/or
transferred to the Collection Account since the last Designated Funding Date to
be disbursed in the following order of priority:
(i) to Lender, any costs and Expenses of Lender
required to be paid or reimbursed by Borrowers under this Agreement or under any
of the other Loan Documents;
(ii) to Lender, an amount equal to the unpaid accrued
interest on the aggregate outstanding Advances as of such Designated Funding
Date;
(iii) to Lender, an amount equal to any unpaid
accrued Unused Line Fees which are then due and payable as of such Designated
Funding Date;
(iv) to Lender, the amount of any Borrowing Base
Deficiency, if any;
(v) to Lender, to the aggregate outstanding amount of
the Loans and any and all other fees due and payable hereunder in such order as
Lender may determine in its discretion; and
(vi) subject to Sections 2.3(c) and (d), to Lender,
the amount of any prepayment of principal of which Borrowers have given notice
to Lender in accordance with Section 2.5(d) hereof.
In addition, promptly upon request of Borrowers, so long as no Event of
Default shall have occurred, Lender shall disburse to Borrowers the amount, if
any, by which the collected balance in the Collection Account exceeds the
aggregate outstanding principal amount of the Advances and all interest and
other amounts that will be payable on the next Designated Funding Date.
Following the occurrence of an Event of Default, Lender may apply all
Collections to Borrowers' Obligations in such order as Lender may in its sole
discretion determine.
2.8 Fees: Lender has fully earned a non-refundable commitment fee
("COMMITMENT FEE") equal to Forty Thousand Dollars ($40,000) Lender acknowledges
receipt of one half of the
17
Commitment Fee ($20,000). Borrowers agree and acknowledge that the balance of
the Commitment Fee ($20,000) is due and payable on or before Closing.
SECTION 3. COLLATERAL
3.1 Description: To secure the payment, promptly when due, and the
punctual performance, of all of the Obligations, each Borrower assigns to
Lender, and grants to it a security interest in all of its right, title and
interest in and to the following property of such Borrower: (i) all accounts,
payment intangibles, instruments and other rights to receive payments of
Borrower (including without limitation the Accounts and rights to receive
payments in connection with and/or pursuant to Business Services Agreements,
Management Service Agreements, and/or Subsidiary Customer Contracts), whether
now existing or hereafter arising or acquired, (ii) all general intangibles
(including without limitation, contract rights and intellectual property),
chattel paper, documents, supporting obligations, letter of credit rights,
commercial tort claims, investment property, rights, remedies, guarantees and
collateral evidencing, securing or otherwise relating to or associated with the
foregoing, including without limitation all rights of enforcement and
collection, (iii) all Commercial Lockboxes, all Government Lockboxes, all
Collection Accounts and other deposit accounts into which any of the Collections
or Advances are deposited, all funds received thereby or deposited therein, and
any checks or instruments from time to time representing or evidencing the same,
(iv) all books and records of Borrower evidencing or relating to or associated
with any of the foregoing, (v) all information and data compiled or derived by
Borrower with respect to any of the foregoing (other than any such information
and data subject to legal restrictions of patient confidentiality), and (vi) all
collections, receipts and other proceeds (cash and noncash) derived from any of
the foregoing (collectively, the "COLLATERAL").
3.2 Lien Documents: At Closing and thereafter as Lender deems
necessary, each Borrower shall execute (if required) and deliver to Lender, or
shall have executed (if required) and delivered (all in form and substance
reasonably satisfactory to Lender):
(a) Financing Statements - Financing statements pursuant to
the UCC, which Lender may file in the jurisdiction where such Borrower is
organized and in any other jurisdiction that Lender deems appropriate; and
(b) Other Agreements - Any other agreements, documents,
instruments and writings, including, without limitation, security agreements,
deposit account control agreements, and assignment agreements, reasonably
required by Lender to evidence, perfect or protect Lender's liens and security
interest in the Collateral or as Lender may reasonably request from time to
time, including, without limitation, a waiver agreement from each landlord with
respect to any real property of Borrower, in form and substance satisfactory to
Lender.
3.3 Other Actions:
(a) In addition to the foregoing, each Borrower shall do
anything further that may be lawfully and reasonably required by Lender to
perfect its security interests and to effectuate the intentions and objectives
of this Agreement, including, but not limited to, the execution (if required)
and delivery of continuation statements, amendments to financing statements,
security
18
agreements, contracts and any other documents required hereunder. At Lender's
request, each Borrower shall also immediately deliver (with execution by such
Borrower of all necessary documents or forms to reflect Lender's security
interest therein) to Lender, all items for which Lender must or may receive
possession to obtain a perfected security interest.
(b) Lender is hereby authorized to file financing statements
naming Borrower as debtor, in accordance with the Uniform Commercial Code, and
if necessary, to the extent applicable, to otherwise file financing statements
without Borrower's signature if permitted by law. Each Borrower hereby
authorizes Lender to file all financing statements and amendments to financing
statements describing the Collateral in any filing office as Lender, in its
sole, discretion may determine, including financing statements describing the
Collateral and containing language indicating that the acquisition by a third
party of any right, title or interest in or to the Collateral without Lender's
consent shall be a violation of Lender's rights. Borrowers agree to comply with
the requirements of all federal and state laws and requests of Lender in order
for Lender to have and maintain a valid and perfected first priority security
interest in the Collateral including, without limitation, executing and causing
any other Person to execute such documents as Lender may require to obtain
Control (as defined in the UCC) over all deposit accounts, electronic chattel
paper, letter-of-credit rights and investment property.
3.4 Searches: Lender shall, prior to or at Closing, and thereafter as
Lender may reasonably request from time to time, at Borrowers' expense, obtain
the following searches (the results of which are to be consistent with the
warranties made by Borrowers in this Agreement):
(a) UCC Searches: With respect to each Borrower, UCC searches
with the Secretary of State and local filing office of each state where such
Borrower maintains its chief executive office, its jurisdiction of organization
and/or a place of business or assets;
(b) Judgments, Etc.: Judgment, federal tax lien and corporate
tax lien searches against each Borrower, in all applicable filing offices of
each state searched under subparagraph (a) above.
3.5 Good Standing Certificates: Borrowers shall, prior to or at Closing
and at its expense, obtain and deliver to Lender good standing or equivalent
certificates showing each Borrower to be in good standing in its state of
incorporation or organization and authorized to transact business as a foreign
corporation or entity in each other state or foreign country in which it is
doing and presently intends to do business for which such Borrower's failure to
be so qualified might have a material adverse effect on such Borrower's
business, financial condition, Property or Lender's rights hereunder.
3.6 Filing Security Agreement: A carbon, photographic or other
reproduction or other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing statement.
3.7 Power of Attorney: Each of the officers of Lender is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
each Borrower (without requiring any of them to act as such) with full power of
substitution to do the following (such power to be deemed
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coupled with an interest): (1) endorse the name of such Borrower upon any and
all checks, drafts, money orders and other instruments for the payment of monies
that are payable to such Borrower and constitute collections on the Collateral;
(2) execute in the name of such Borrower any financing statements, schedules,
assignments, instruments, documents and statements that such Borrower is
obligated to give Lender hereunder or is necessary to perfect Lender's security
interest or lien in the Collateral; (3) to verify validity, amount or any other
matter relating to the Collateral by mail, telephone, telecopy or otherwise; and
(4) do such other and further acts and deeds in the name of such Borrower that
Lender may reasonably deem necessary or desirable to enforce its right with
respect to any Collateral.
3.8 Guaranty Agreement: At the Closing, Borrowers shall cause each
Guarantor to execute and deliver a guaranty agreement (collectively and
individually as context may require, "GUARANTY AGREEMENT") in the form and
substance satisfactory to Lender, pursuant to which Guarantors shall absolutely
and unconditionally guarantee all of the Obligations of Borrowers to Lender.
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement and the making of each Loan are subject to
the following conditions precedent (all documents to be in form and substance
satisfactory to Lender and Lender's counsel):
4.1 Resolutions, Opinions, and Other Documents: Prior to the Closing,
Borrowers shall have delivered to Lender the following:
(a) this Agreement and the Revolving Credit Note, each
properly executed;
(b) each document and agreement required to be executed under
any provision of this Agreement or any of the other Loan Documents;
(c) certified copies of (i) resolutions of each Borrower's
board of directors, or manager, as applicable authorizing the execution of this
Agreement, the Revolving Credit Note, and each other document to which it is a
party, required to be delivered by any Section hereof and (ii) each Borrower's
Articles of Incorporation and By laws or certificate of organization and
operating agreement (as applicable);
(d) incumbency certificates identifying all Authorized
Officers of each Borrower, with specimen signatures;
(e) a written opinion of Borrowers' independent counsel
addressed to Lender in the form attached hereto as EXHIBIT 4.1, which shall
include without limitation, an opinion that Lender has a perfected security
interest in the Collateral;
(f) payment by Borrowers of all Expenses associated with the
Credit Facility incurred to the Closing Date and the Commitment Fee;
(g) the Business Associate Agreement properly executed;
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(h) the Lockbox Agreements required pursuant to Section 2.7
hereof;
(i) Uniform Commercial Code, judgment, federal and state tax
lien searches pursuant to Section 3.4 above;
(j) to the extent applicable, payoff letters and Lender shall
have received releases from all Persons having a security interest or other
interest in the Collateral, together with all UCC-3 terminations or partial
releases necessary to terminate such Persons' interests in the Collateral;
(k) certification by Borrowers that all past due payroll and
unemployment taxes have been paid in full and that Borrowers remain current on
such taxes;
(l) copies of each of the accreditations, licenses,
certifications required by Section 5.3 below, and all Contracts requested by
Lender;
(m) the fully executed Subordination Agreements;
(n) evidence of receipt by Borrowers of an equity investment
by Brantley Capital Partners IV, LP, Brantley Capital Corporation and certain
other investors in an amount not less than Eight Million Dollars ($8,000,000);
(o) fully executed copies of the Acquisition Documents and
evidence that the Acquisition Transactions have been consummated (including
without limitation, appropriate opinions of counsel);
(p) fully executed copies of the DVI Documents and evidence
that the transactions contemplated thereby have been consummated;
(q) fully executed copies of the documents evidencing the
Equity Option;
(r) proforma consolidating balance sheet and projections of
Borrowers, reflecting the effect of the Acquisition Transactions and monthly and
year to date consolidated and consolidating financial statements for the most
recent quarter end prior to Closing (within 15 days prior to closing or such
shorter period as Lender may determine);
(s) background checks on the senior management of Borrowers;
(t) Landlord Waivers with respect to the location of
Borrowers' chief executive office and each other location where any books and
records of Borrowers relating to the Collateral may be kept; and
(u) all other documents, information and reports required or
requested to be executed and/or delivered by Borrowers under any provision of
this Agreement or any of the Loan Documents.
4.2 Additional Preconditions to Loans: Lender's obligation to make the
initial Loan and each subsequent Loan shall be subject to the satisfaction of
each of the following conditions:
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(a) After giving effect to each such Loan:
(i) the aggregate principal amount of all Advances
outstanding shall not exceed the Borrowing Base then in effect;
(ii) the ENV of all Eligible Accounts shall not
exceed any of the Concentration Limits; and
(iii) the amount of outstanding Advances supported by
the ENV of all Eligible Accounts included in the Borrowing Base which have not
been billed shall at no time exceed an amount equal to fifty percent (50%) of
outstanding Advances supported by the ENV of all Eligible Accounts included in
the Borrowing Base which have been billed.
(b) All representations and warranties of Borrowers shall be
deemed reaffirmed as of the making of such Loan and shall be true both before
and after giving effect to such Loan, and no Event of Default or Unmatured Event
of Default shall have occurred and be continuing, Borrowers shall be in
compliance with this Agreement and the other Loan Documents, and Borrowers shall
have certified such matters to Lender.
(c) Each Borrower shall have signed and delivered to Lender
notices, in the form of EXHIBIT 4.2A, directing the Notice Obligors (other than
Obligors with respect to Government Accounts) to make payment to the Commercial
Lockbox; and, in the form of EXHIBIT 4.2B, directing the Notice Obligors with
respect to Government Accounts to make payment to the Government Lockbox.
(d) Borrowers shall have taken all actions necessary to permit
Lender to record all of the Eligible Accounts in Lender's Value Track
System(TM).
(e) The lockbox arrangements required by Section 2.7 hereof
shall be in effect, and the amounts received in the lockboxes shall have been
identified or reconciled to Lender's satisfaction, as required by Section 2.7(d)
hereof.
(f) Borrowers shall have taken such other actions, including
the delivery of documents and opinions as Lender may reasonably request.
4.3 Absence of Certain Events: As of the Closing Date and prior to each
Loan, no Event of Default or Unmatured Event of Default hereunder shall have
occurred and be continuing.
4.4 Compliance with this Agreement: Borrowers shall have performed and
complied with all agreements, covenants and conditions contained herein
including, without limitation, the provisions of Sections 6 and 7 hereof, which
are required to be performed or complied with by Borrowers before or at the
Closing Date and as of the date of each Loan.
4.5 Closing Certificate: Lender shall have received a certificate dated
the Closing Date and signed by the chief financial officer of Borrowers
certifying that all of the conditions specified in this Section have been
fulfilled and that there has not occurred any material adverse change in the
operations and conditions (financial or otherwise) of Borrowers since September
30, 2004.
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4.6 Closing: Subject to the conditions of this Section 4, the Credit
Facility shall be made available on the date ("CLOSING Date") this Agreement is
executed and all of the conditions contained in Section 4.1 hereof are completed
("CLOSING").
4.7 Non-Waiver of Rights: By completing the Closing hereunder, or by
making Advances hereunder, Lender does not thereby waive a breach of any
warranty, representation or covenant made by Borrowers hereunder or under any
agreement, document, or instrument delivered to Lender or otherwise referred to
herein, and any claims and rights of Lender resulting from any breach or
misrepresentation by Borrowers are specifically reserved by Lender.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Lender to complete the Closing and make the Loans under the
Credit Facility to Borrowers, Borrowers warrant and represent to Lender that:
5.1 Organization and Validity:
(a) Each Borrower is duly organized as either a partnership,
corporation or limited liability company and validly existing under the laws of
its state of organization, incorporation or formation, is duly qualified, is
validly existing and, to the extent applicable, in good standing and has lawful
power and authority to engage in the business it conducts in each state and
other jurisdiction where the nature and extent of its business requires
qualification, except where the failure to so qualify would not have a material
adverse effect on such Borrower's business, financial condition, Property or
prospects. A list of all states and other jurisdictions where each Borrower is
qualified to do business is attached hereto as SCHEDULE 2 and made a part
hereof.
(b) The making and performance of this Agreement and related
agreements, and each document required by any Section hereof will not violate
any law, government rule or regulation, or the charter, minutes, partnership
agreement, operating agreement or bylaw provisions of any Borrower violate or
result in a default (immediately or with the passage of time) under any
contract, agreement or instrument to which Borrower is a party, or by which a
Borrower is bound. No Borrower is in violation of nor has knowingly caused any
Person to violate any term of any agreement or instrument to which it or such
Person is a party or by which it may be bound or of its charter, minutes,
partnership agreement, operating agreement or bylaws, which violation could have
a material adverse effect on any Borrower's business, financial condition,
Property or prospects.
(c) Each Borrower has all requisite power and authority to
enter into and perform this Agreement and the other Loan Documents and to incur
the obligations herein provided for, and has taken all proper and necessary
action to authorize the execution, delivery and performance of this Agreement
and the other Loan Documents.
(d) This Agreement, the Revolving Credit Note and the other
Loan Documents required to be executed and delivered by any Borrower(s)
hereunder, when delivered, will be valid and binding upon all such Borrowers a
party thereto and enforceable in accordance with their respective terms.
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5.2 Places of Business: Each Borrower's jurisdiction of organization is
as set forth in SCHEDULE 2 and each Borrower's chief executive office and the
only other places of business of each such Borrower are located at the
corresponding addresses set forth on SCHEDULE 2. Except as disclosed on SCHEDULE
2: (i) no Borrower has been organized in any other jurisdiction nor changed any
such location in the last five years, (ii) no Borrower has changed its name in
the last five years, and (iii) during such period no Borrower used, nor does any
Borrower now use, any fictitious or trade name.
5.3 Operation of Facilities: Other than IntegriMED, MBS and DCPS, each
Borrower leases and operates facilities to provide health care services and (a)
except as set forth on Schedule 2, maintains Medicare and Medicaid provider
status and is the holder of the provider identification numbers identified on
Schedule 2 hereto, all of which are current and valid and such Borrower has not
allowed, permitted, authorized or caused any other Person to use any such
provider identification number, and (b) except as set forth on Schedule 2, has
obtained all material licenses, accreditations, certificates of need and
approvals of governmental authorities and all other Persons necessary for such
Borrower to own its assets, to carry on its business, to execute, deliver and
perform the Loan Documents, and to receive payments from the Obligors and, if
organized as a not-for-profit entity, has and maintains its status, if any, as
an organization exempt from federal taxation under Section 501(c)(3) of the
Internal Revenue Code. No Borrower has been notified by any such governmental
authority or other Person during the immediately preceding 24 month period that
such party has rescinded or not renewed, or intends to rescind or not renew, any
such license or approval.
5.4 Pending Litigation: There are no judgments or judicial or
administrative orders, proceedings or investigations (civil or criminal)
pending, or to the knowledge of any Borrower, threatened, against any Borrower
in any court or before any governmental authority or arbitration board or
tribunal, other than as set forth on SCHEDULE 2 hereto, none of which, if
adversely determined would have a material adverse effect on such Borrower. No
Borrower is in default with respect to any order of any court, governmental
authority, regulatory agency or arbitration board or tribunal. No Borrower is
aware of any Shareholder or executive officer of any Borrower who has been
indicted or convicted in connection with or is engaging in any criminal conduct,
or is currently subject to any lawsuit or proceeding or under investigation in
connection with any anti-racketeering or other criminal conduct.
5.5 Medicaid and Medicare Cost Reporting: The Medicaid and Medicare
cost reports of each facility and of the home office of each Borrower for all
cost reporting periods have been submitted when and as required to (i) as to
Medicaid, the state agency, or other CMS-designated agent or agent of such state
agency, charged with such responsibility or (ii) as to Medicare, the Medicare
intermediary or other CMS-designated agent charged with such responsibility. No
cost report indicates and no audit has resulted in any determination that any
Borrower was overpaid for Medicaid and Medicare by $100,000 or more in any of
the most recent three fiscal years covered by such audit.
5.6 Title to Collateral: Each Borrower has good and marketable title to
all the Collateral it respectively purports to own, free from liens, claims and
encumbrances, except those of Lender and those listed on SCHEDULE 2 hereto
("PERMITTED LIENS").
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5.7 Governmental Consent: Neither the nature of any Borrower or of any
Borrower's business or Property, nor any relationship between any Borrower and
any other Person, nor any circumstance affecting any Borrower in connection with
the execution, issuance and/or delivery of this Agreement or the Revolving
Credit Note is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority on the
part of any such Borrower in connection with the execution and delivery of this
Agreement or the issuance or delivery of the Revolving Credit Note or other Loan
Documents.
5.8 Taxes: All tax returns required to be filed by Borrowers, or any of
them, in any jurisdiction have in fact been filed, and all taxes, assessments,
fees and other governmental charges upon Borrowers, or any of them, or upon any
of their respective Property, income or franchises, which are shown to be due
and payable on such returns have been paid, except for those taxes being
contested in good faith with due diligence by appropriate proceedings and for
which appropriate reserves have been maintained under GAAP. No Borrower is aware
of any proposed additional tax assessment or tax to be assessed against or
applicable to any Borrower that might have a material adverse effect on such
Borrower's business, financial condition, Property or prospects.
5.9 Financial Statements: Borrowers' annual audited consolidated and
consolidating balance sheet as of December 31, 2003, accompanied by reports
thereon from Borrowers' independent certified public accountants, and the
quarterly consolidated balance sheet as of June 30, 2004 and the related income
statements and statements of cash flows as of such dates (complete copies of
which have been delivered to Lender), have been prepared in accordance with GAAP
and present fairly, accurately and completely the financial position of
Borrowers as of such dates and the results of their operations for such periods.
The fiscal year for each Borrower currently ends on the date set forth on
SCHEDULE 2 hereto. Each Borrower's federal tax identification number and
organization number are as set forth on SCHEDULE 2 hereto.
5.10 Full Disclosure: Neither the financial statements referred to in
Section 5.9, nor this Agreement or related agreements and documents or any
written statement furnished by any Borrower to Lender in connection with the
negotiation of the Credit Facility and contained in any financial statements or
documents relating to any Borrower contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained therein
or herein not misleading. The financial projections provided to Lender
("Financial Projections") are based on the Borrowers' experience in the industry
and on assumptions of fact and opinion as to future events which the Borrowers,
as of the date hereof, believe to be reasonable, but which the Borrowers cannot
and do not assure or guarantee the attainment of in any manner.
5.11 Guarantees, Contracts, etc.:
(a) No Borrower owns nor holds partnership interests or equity
or long term debt investments in, has any outstanding advances to, or serves as
guarantor, surety or accommodation maker for the obligations of, or has any
outstanding borrowings from, any Person except as described in SCHEDULE 2
hereto.
25
(b) No Borrower is a party to any contract or agreement, or
subject to any charter or other entity restriction, which materially and
adversely affects its business, financial condition, Property or prospects.
(c) Except as otherwise specifically provided in this
Agreement, no Borrower has agreed or consented to cause or permit any of the
Collateral whether now owned or hereafter acquired to be subject in the future
(upon the happening of a contingency or otherwise) to a lien or encumbrance not
permitted by this Agreement.
5.12 Compliance with Laws:
(a) No Borrower is in violation of, has received written
notice that it is in violation of, or has knowingly caused any Person to
violate, any applicable statute, regulation or ordinance of the United States of
America, or of any state, city, town, municipality, county or of any other
jurisdiction, or of any agency, or department thereof, (including without
limitation, environmental laws and regulations), which may materially and
adversely affect its business, financial condition, Property or prospects.
(b) Each Borrower is current with all reports and documents
required to be filed with any state or federal securities commission (if any) or
similar agency and is in full compliance in all material respects with all
applicable rules and regulations of such commissions, except where the failure
to file such reports and documents would not have a material adverse effect on
such Borrower's financial condition, Property or prospects.
5.13 Other Associations: No Borrower is engaged in nor has an interest
in any joint venture or partnership with any other Person or has any
subsidiaries or Affiliates, except as described on SCHEDULE 2 hereto.
5.14 Environmental Matters: Except as disclosed on SCHEDULE 2 hereto
and other than supplies, medicines and other substances and materials used in
the ordinary course of delivery of medical services to patients, no Borrower has
knowledge:
(a) of the presence of any Hazardous Substances on any of the
real property where any Borrower maintains operations or has its personal
property, or
(b) of any on-site spills, releases, discharges, disposal or
storage of Hazardous Substances that have occurred or are presently occurring on
any of such real property where any Collateral is located, or
(c) of any spills, releases, discharges or disposal of
Hazardous Substances that have occurred, are presently occurring on any other
real property as a result of the conduct, action or activities of any Borrower.
5.15 Capital Stock and Equity Interests: The authorized and outstanding
shares of capital stock and other equity interests of each Borrower is as set
forth on SCHEDULE 2 hereto. All of the capital stock and equity interests of
each Borrower have been duly and validly authorized and issued and is fully paid
and non-assessable and have been sold and delivered to the holders thereof in
26
compliance with, or under valid exemption from, all Federal and state laws and
the rules and regulations of all regulatory bodies thereof governing the sale
and delivery of securities. Except for the rights and obligations set forth in
SCHEDULE 2, there are no subscriptions, warrants, options, calls, commitments,
rights or agreements by which any Borrower or any of the Shareholders of any
Borrower is bound relating to the issuance, transfer, voting or redemption of
shares of its capital stock, membership units or any pre-emptive rights held by
any Person with respect to the shares of capital stock or membership units of
any such Borrower. Except as set forth in SCHEDULE 2, no Borrower has issued any
securities convertible into or exchangeable for shares of its capital stock or
membership units or any options, warrants or other rights to acquire such shares
or membership units or securities convertible into or exchangeable for such
shares.
5.16 Lockboxes: The Government Lockbox and the Commercial Lockbox are
the only lockbox accounts maintained by Borrowers, and each Obligor of an
Eligible Account has been directed by the notice attached as EXHIBIT 4.2A to
this Agreement, and is required to, remit all payments with respect to such
Account for deposit in the Commercial Lockbox (other than the Obligors of
Government Accounts which have been directed by the notice attached as EXHIBIT
4.2B to this Agreement to remit all payments with respect to such Accounts for
deposit in the Government Lockbox).
5.17 Borrowing Base Reports: Each Borrowing Base Report signed by
Borrowers, on behalf of Borrowers, contains and will contain an accurate summary
of all Eligible Accounts of Borrowers contained in the Borrowing Base as of its
date.
5.18 Security Interest: Each Borrower has granted to Lender a valid,
perfected first priority and only security interest in the Accounts and the
other Collateral subject to no other liens, claims or encumbrances, other than
Permitted Liens.
5.19 Accounts:
(a) No Borrower has done nor shall do anything to interfere
with the collection of the Accounts and no Borrower shall amend or waive the
terms or conditions of any Account or any related Contract in any materially
adverse manner without Lender's prior written consent.
(b) Each Borrower has made and will continue to make all
payments to Obligors necessary to prevent any Obligor from offsetting any
earlier overpayment to such Borrower against any amounts such Obligor owes on an
Account.
5.20 Pension Plans: Each pension or profit sharing plan, if any, to
which any Borrower is a party has been and will be funded in accordance with the
obligations of such Borrower(s) set forth in such plan.
5.21 Representations and Warranties for each Loan: As of each date that
Borrowers shall request any Loan, each Borrower shall be deemed to make, with
respect to each Eligible Account included in the Borrowing Base, each of the
following representations and warranties:
(a) Such Account satisfies each of the conditions of an
Eligible Account.
27
(b) All information relating to such Account that has been
delivered to Lender is true and correct in all material respects. With respect
to each such Account that has been billed, the corresponding Borrower has
delivered to the Obligor all requested supporting claim documents and all
information set forth in the bill and supporting claim documents is true,
complete and correct in all material respects.
(c) There is no lien or adverse claim in favor of any third
party, nor any filing against any Borrower, as debtor, covering or purporting to
cover any interest in such Account.
(d) Such Account is (i) payable in an amount not less than its
Estimated Net Value by the Obligor identified by Borrowers as being obligated to
do so, and is recognized as such by the Obligor, (ii) the legally enforceable
obligation of such Obligor, and (iii) an account receivable or general
intangible within the meaning of the UCC of the state in which the corresponding
Borrower has its chief executive office, or is a right to payment under a policy
of insurance or proceeds thereof, and is not evidenced by any instrument or
chattel paper. There is no payor other than the Obligor identified by Borrowers
as the payor primarily liable on such Account.
(e) No such Account (i) requires the approval of any third
person for such Account to be assigned to Lender hereunder, (ii) is subject to
any legal action, proceeding or investigation (pending or threatened), dispute,
set-off, counterclaim, defense, abatement, suspension, deferment, deductible,
reduction or termination by the Obligor, or (iii) is past, or within 180 days
of, the statutory limit for collection applicable to the Obligor.
(f) Such Borrower does not have any guaranty of, letter of
credit support for, or collateral security for, such Account, other than any
such guaranty, letter of credit or collateral security as has been assigned to
Lender.
(g) The services constituting the basis of such Account (i)
were medically necessary for the patient and (ii) at the time such services were
rendered, were fully covered by the insurance policy or Contract obligating the
applicable Obligor to make payment with respect to such Account (and the
corresponding Borrower has verified such determination), and (iii) the patient
received such services in the ordinary course of such Borrower's business.
(h) The fees and charges charged for the services constituting
the basis for such Account were when rendered and are currently consistent with
(i) the usual, customary and reasonable fees charged by Borrowers or (ii)
pursuant to negotiated fee contracts, or imposed fee schedules, with or by the
applicable Obligors.
(i) The Obligor with respect to such Account is located in the
United States, and is (i) a party which in the ordinary course of its business
or activities agrees to pay for healthcare services received by individuals,
including, commercial insurance companies and non-profit insurance companies
issuing health, or other types of insurance, employers or unions, self-insured
healthcare organizations, preferred provider organizations, and health insured,
prepaid maintenance organizations, (ii) a state, an agency or instrumentality of
a state or a political subdivision of a state, or (iii) the United States or an
agency or instrumentality of the United States.
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(j) The insurance policy or Contract obligating an Obligor to
make payment (i) does not prohibit the transfer of such payment obligation from
the patient to the corresponding Borrower and (ii) is and was in full force and
effect and applicable to the patient at the time the services constituting the
basis for such Account were performed.
(k) The representations and warranties made by Borrowers in
the Loan Documents and all financial or other information delivered to Lender
with respect to Borrowers and such Account do not contain any untrue statement
of material fact or omit to state a material fact necessary to make the
statement made not misleading.
(l) If requested by Lender, a copy of each related Contract to
which each Borrower is a party has been delivered to Lender unless any such
Borrower shall have, prior to the related Funding Date, certified in an
Officer's Certificate that such delivery is prohibited by the terms of the
Contract or by law, and the circumstances of such prohibition.
(m) If such Account has not been billed, the services giving
rise to such Account have been properly recorded in the corresponding Borrower's
accounting system.
(n) Such Account was (or if unbilled, will be) in any event
billed no later than 45 days after the date the services or goods giving rise to
such Account were rendered as provided, as applicable, and each bill contains an
express direction requiring the Obligor to remit payments to either the
Government Lockbox or Commercial Lockbox, as applicable.
(o) Such Account has an Estimated Net Value which, when added
to the Estimated Net Value of all other Accounts owing by the same Obligor and
which constitute Eligible Accounts hereunder, does not exceed any applicable
Concentration Limit.
(p) Neither such Account nor the related Contract contravenes
any laws, rules or regulations applicable thereto (including, without
limitation, laws, rules and regulations relating to usury, consumer protection,
truth-in-lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and no party to such
related Contract is in violation of any such law, rule or regulation in
connection with such Contract.
(q) As of the applicable Funding Date, to the best of
Borrowers' knowledge, no Obligor on such Account is bankrupt, insolvent, or is
unable to make payment of its obligations when due, and no other fact exists
which would cause any Borrower reasonably to expect that the amount billed to
the related Obligor for such Account will not be paid in full when due.
(r) If such Account is an Account of IPS, such Account and the
right to bill and collect such Account has been (i) validly assigned by the
provider of the services giving rise to such Account to a Borrower Managed
Physician Group, and (ii) validly assigned by the Borrower Managed Physician
Group to IPS. Each such assignment has been duly and properly perfected and is
not subject to any adverse liens, claims or encumbrances (other then such
assignment and the security interest granted to Lender hereunder).
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5.22 Interrelatedness of Borrowers: The business operations of each
Borrower are interrelated and complement one another, and such companies have a
common business purpose, with intercompany bookkeeping and accounting
adjustments used to separate their respective Properties, liabilities and
transactions. To permit their uninterrupted and continuous operation, such
companies now require and will from time to time hereafter require funds for
general business purposes. The proceeds of Advances under the Credit Facility
will directly or indirectly benefit each Borrower hereunder severally and
jointly, regardless of which Borrower requests or receives part or all of the
proceeds of such Loan.
5.23 Commercial Tort Claims: Borrowers have no commercial tort claims
against any third parties, except as shown on SCHEDULE 2 hereto.
5.24 Letter of Credit Rights: Borrowers have no letter of credit rights
except as shown on SCHEDULE 2 hereto.
5.25 Intellectual Property: Except for "shrink-wrap" software licenses
and as shown on SCHEDULE 2 attached hereto and made part hereof, (i) Borrowers
do not require any copyrights, patents, trademarks or other intellectual
property, or any license(s) to use any patents, trademarks or other intellectual
property in order to provide services to their customers or to bill Obligors and
collect therefrom, in the ordinary course of business, and (ii) Lender will not
require any copyrights, patents, trademarks or other intellectual property or
any licenses to use the same in order to provide such services or bill and
collect the Accounts, after the occurrence of an Event of Default.
5.26 Solvency: On the Closing Date, and immediately prior to and after
giving effect to each borrowing hereunder and the use of the proceeds thereof,
with respect to the Borrowers taken as a whole and measured on a consolidated
basis (a) the fair value of the Borrowers' assets is greater than the amount of
their liabilities (including disputed, contingent and unliquidated liabilities)
as such value is established and liabilities evaluated, (b) the present fair
saleable value of their assets is not less than the amount that will be required
to pay the probable liability on their debts as they become absolute and
matured, (c) the Borrowers are able to realize upon their assets and pay their
debts and other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business, (d) the Borrowers
do not intend to, and do not believe that they will, incur debts or liabilities
beyond their ability to pay as such debts and liabilities mature, and (e) the
Borrowers are not engaged in business or a transaction, and are not about to
engage in business or a transaction, for which their property would constitute
unreasonably small capital.
5.27 Acquisition Documents: Lender has received complete copies of the
Acquisition Documents (including all exhibits, schedules and disclosure letters
referred to therein or delivered pursuant thereto, if any) and all amendments
thereto, waivers relating thereto and other side letters or agreements affecting
the terms thereof. No such documents or agreements have been amended or
supplemented, nor have any of the provisions thereof been waived except pursuant
to a written agreement or instrument which has heretofore been delivered to
Lender. The Acquisition Transactions have been consummated in accordance with
the Acquisition Documents and applicable law.
30
5.28 DVI Documents: Lender has received complete copies of the DVI
Documents (including all exhibits, schedules and disclosure letters referred to
therein or delivered pursuant thereto, if any) and all amendments thereto,
waivers relating thereto and other side letters or agreements affecting the
terms thereof. No such documents or agreements have been amended or
supplemented, nor have any of the provisions thereof been waived except pursuant
to a written agreement or instrument which has heretofore been delivered to
Lender.
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS
Each Borrower covenants that until all of Borrowers' Obligations to
Lender are paid and satisfied in full and the Credit Facility has been
terminated:
6.1 Payment of Taxes and Claims: Each Borrower shall pay, before they
become delinquent, all taxes, assessments and governmental charges or levies
imposed upon it or upon such Borrower's Property, except for those being
contested in good faith with due diligence by appropriate proceedings and for
which appropriate reserves have been maintained under GAAP.
6.2 Maintenance of Insurance, Financial Records and Existence:
(a) Property Insurance - Borrowers shall maintain or cause to
be maintained insurance on its Property against fire, flood, casualty and such
other hazards in such amounts, with such deductibles and with such insurers as
are customarily used by companies operating in the same industry as Borrowers
The policies of all such casualty insurance shall contain standard Lender Loss
Payable and additional insured clauses issued in favor of Lender pursuant to
which all losses thereunder shall be paid to Lender as Lender's interests may
appear. Such policies shall expressly provide that the requisite insurance
cannot be altered or canceled without thirty (30) days prior written notice to
Lender and shall insure Lender notwithstanding the act or neglect of the
insured. At or prior to Closing, Borrowers shall furnish Lender with insurance
certificates certified as true and correct and being in full force and effect as
of the Closing Date or such other evidence of insurance as Lender may require.
In the event Borrowers fail to procure or cause to be procured any such
insurance or to timely pay or cause to be paid the premium(s) on any such
insurance, after five (5) days notice to the Borrowers unless Lender, in its
reasonable judgment, determines that immediate action is necessary to preserve
or protect its rights hereunder or in the Collateral, Lender may do so for
Borrowers, but Borrowers shall continue to be liable for the same. Borrowers
further covenant that all insurance premiums owing under its current casualty
policy have been paid. Borrowers also agree to notify Lender, promptly, upon
Borrowers' receipt of a notice of termination, cancellation or non-renewal from
its insurance company of any such policy. Each Borrower hereby appoints Lender
as its attorney-in-fact, exercisable at Lender's option, to endorse any check
which may be payable to such Borrower in order to collect the proceeds of such
insurance.
(b) Public Liability and Business Interruption Insurance -
Borrowers shall maintain, and shall deliver to Lender upon Lender's request
evidence of public liability and business interruption insurance in such amounts
as is customary for companies in the same or similar businesses located in the
same or similar area.
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(c) Financial Records - Borrowers shall keep current and
accurate books of records and accounts in which full and correct entries will be
made of all of its business transactions, and will reflect in its financial
statements adequate accruals and appropriations to reserves, all in accordance
with GAAP. Lender hereby acknowledges and approves the planned change by MBS in
its fiscal year from September 30th to December 31st in connection with the
Acquisition Transactions. No Borrower shall change its respective fiscal year
end date without the prior written notice to Lender.
(d) Existence and Rights - Each Borrower shall do (or cause to
be done) all things necessary to preserve and keep in full force and effect its
legal existence, good standing, rights and franchises.
(e) Compliance with Laws - Each Borrower shall be in
compliance with any and all laws, ordinances, governmental rules and
regulations, and court or administrative orders or decrees to which it is
subject, whether federal, state or local (including without limitation all
environmental or environmental-related laws, statutes, ordinances, rules,
regulations and notices), and shall obtain and maintain any and all licenses,
permits, franchises, certificates of need or other governmental authorizations
necessary to the ownership of its Property or to the conduct of its businesses,
which violation or failure to obtain may materially adversely affect the
business, Property, financial conditions or prospects of such Borrower, the
Collateral, or Lender's rights with respect to the Collateral.
6.3 Business Conducted: Each Borrower shall continue in the business
presently operated by it using its best efforts to maintain its customers. No
Borrower shall engage, directly or indirectly, in any material respect in any
line of business substantially different from the businesses conducted by it
immediately prior to the Closing Date.
6.4 Litigation: Borrowers shall give prompt notice to Lender of any
litigation claiming in excess of $50,000 from Borrowers, or any of them, or
which may otherwise have a material adverse effect on the business, financial
condition, Property or prospects of Borrowers, or any of them.
6.5 Taxes: Borrowers shall pay all taxes (other than taxes based upon
or measured by Lender's income or revenues), if any, in connection with the
Loans and/or the recording of any financing statements or other Loan Documents.
The Obligations of Borrowers under this section shall survive the payment of
Borrowers' Obligations under this Agreement and the termination of this
Agreement.
6.6 Financial Covenants: Borrowers shall perform and comply with each
of the following financial covenants as reflected and computed from their
financial statements:
(a) Debt Service Coverage Ratio. Commencing with the fiscal
quarter ending June 30, 2005, Borrowers shall maintain at all times, a Debt
Service Coverage Ratio, measured quarterly at the end of each fiscal quarter as
follows:
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Fiscal Quarter Ratio
-------------- -----
For the fiscal quarter ending
June 30, 2005 1.00 to 1.00
For the fiscal quarter ending
September 30, 2005 1.10 to 1.00
For the fiscal quarter ending
December 31, 2005 1.20 to 1.00
For the fiscal quarter ending March 31, 2006
and each fiscal quarter thereafter 1.25 to 1.00
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(b) Minimum Operating Income (SurgiCare). For each of the
fiscal quarters ending June 30, 2005 through December 31, 2005, Surgery Entities
shall maintain a minimum Operating Income, before allocation of corporate
overhead, measured quarterly as of the end of the such fiscal quarters as
follows:
Fiscal Quarter Amount
-------------- ------
For the fiscal quarter ending
June 30, 2005 $ 820,571
For the fiscal quarter ending
September 30, 2005 $ 870,418
For the fiscal quarter ending
December 31, 2005 $1,064,856
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(c) Minimum Operating Income (IntegriMED). For each of the
fiscal quarters ending June 30, 2005 through December 31, 2005, IntegriMED shall
maintain a minimum Operating Income, before allocation of corporate overhead,
measured quarterly as of the end of the such fiscal quarters as follows:
Fiscal Quarter Amount
-------------- ------
For the fiscal quarter ending
June 30, 2005 ($172,144)
For the fiscal quarter ending
September 30, 2005 ($63,025)
For the fiscal quarter ending
December 30, 2005 $ 63,460
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33
(d) Excess Liquidity: Until such time as Guarantor has been
released in writing by Lender from the Guaranty Agreement, Guarantor shall
maintain at all times Excess Liquidity in an amount not less than Five Million
Dollars ($5,000,000).
6.7 Financial and Business Information: Borrowers shall deliver to
Lender the following (all to be in form and substance satisfactory to Lender):
(a) Financial Statements and Collateral Reports:
(i) as soon as available but in any event, within one
hundred and twenty (120) days after the end of each fiscal year of Borrowers,
deliver (A) financial statements of Borrowers for such year which present fairly
Borrowers' financial condition including the balance sheet of Borrowers as at
the end of such fiscal year and a statement of cash flows and income statement
for such fiscal year, all on a consolidated and consolidating basis, setting
forth in the consolidated statements in comparative form, the corresponding
figures as at the end of and for the previous fiscal year, all in reasonable
detail, including all supporting schedules, and audited by independent public
accountants of recognized standing, selected by Borrowers and reasonably
satisfactory to Lender, and prepared in accordance with GAAP and (B) so long as
San Jacinto is not consolidated with Borrowers in accordance with GAAP,
internally prepared financial statements of San Jacinto for such year which
present fairly San Jacinto's financial condition including balance sheet of San
Jacinto as at the end of such fiscal year and a statement of cash flows and
income statement for such fiscal year, all on a consolidated with Borrowers and
consolidating basis, setting forth in the consolidated statements in comparative
form, the corresponding figures as at the end of and for the previous fiscal
year, all in reasonable detail, including all supporting schedules, and prepared
in accordance with GAAP;
(ii) as soon as available but in any event within
forty-five (45) days after the end of each fiscal quarter, deliver to Lender
Borrowers' internally prepared quarterly consolidated and consolidating
financial statements, along with year to date information, including a balance
sheet, income statement, statement of cash flows and a report of the variation
of actual results to Projections, with respect to the periods measured;
(iii) promptly upon request, deliver such other
information concerning Borrowers as Lender may from time to time request,
including Medicare and Medicaid cost reports and audits, annual reports,
security law filings and reports to any security holders; and
(iv) at least thirty (30) days prior to the first day
of each fiscal year, annual consolidated and consolidating projections for
Borrowers for such year, including a balance sheet, income statement and
statement of cash flow and a Borrowing Base Availability projections, all
prepared on a monthly basis; and
(v) contemporaneously with delivery of the annual
financial statements referred to in clause (i) above, census data for each
Borrower and a good standing certificate from each Borrower's jurisdiction of
organization evidencing that such Borrower remain in good standing in, and
continue to be organized under the laws of, such jurisdiction; and
34
(vi) such other data, reports, statements and
information (financial or otherwise), as Lender may reasonably request.
(b) Notice of Event of Default - promptly upon becoming aware
of the existence of any condition or event which constitutes a default or an
Event of Default or Unmatured Event of Default under this Agreement, a written
notice specifying the nature and period of existence thereof and what action
Borrowers are taking (and propose to take) with respect thereto;
(c) Notice of Claimed Default - promptly upon receipt by any
Borrower, notice of default, oral or written, given to such Borrower by any
creditor for borrowed money in excess of $50,000.
6.8 Officers' Certificates: Along with the set of financial statements
delivered to Lender at the end of each fiscal quarter and fiscal year pursuant
to Section 6.7(a) hereof, deliver to Lender a certificate (in the form of
EXHIBIT 6.8 attached hereto and made a part hereof) from the chief financial
officer of Borrowers setting forth:
(a) Covenant Compliance - the information (including detailed
calculations) required in order to establish whether Borrowers are in compliance
with the requirements of Sections 6.6 as of the end of the period covered by the
financial statements then being furnished (and any exhibits appended thereto)
under Section 6.7; and
(b) Event of Default - that the signer in his capacity as an
officer of Borrowers has reviewed the relevant terms of this Agreement, and has
made (or caused to be made under his supervision) a review of the transactions
and conditions of Borrowers from the beginning of the accounting period covered
by the financial statements being delivered therewith to the date of the
certificate, and that such review has not disclosed the existence during such
period of any condition or event which constitutes an Event of Default or
Unmatured Event of Default or if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action Borrowers
have taken or propose to take with respect thereto.
6.9 Inspection: Borrowers will permit any of Lender's officers or other
representatives to visit and inspect any Borrower's location(s) or where any
Collateral is kept during regular business hours to examine and audit all of
such Borrower's books of account, records, reports and other papers, to make
copies and extracts therefrom and to discuss its affairs, finances and accounts
with its officers, employees and independent certified public accountants and
attorneys. Borrowers shall pay to Lender all reasonable fees based on standard
rates for such inspections, currently at the rate of $850 per day, per person
(plus out-of-pocket expenses); provided however, so long as no Event of Default
or Unmatured Event of Default has occurred, Borrowers shall only be required to
pay Lender's inspection fees or other audit expenses for two (2) inspections per
fiscal year.
6.10 Tax Returns and Reports: At Lender's request from time to time,
Borrowers shall promptly furnish Lender with copies of the annual federal and
state income tax returns of Borrowers.
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6.11 Material Adverse Developments: Each Borrower agrees that
immediately upon it or any of its officers becoming aware of any development or
other information which would reasonably be expected to materially and adversely
affect the businesses, financial condition, Property, prospects of a Borrower or
a Borrower's ability to perform under this Agreement, it shall give to Lender
telephonic or facsimile notice specifying the nature of such development or
information and such anticipated effect. In addition, such verbal communication
shall be confirmed by written notice thereof to Lender on the next Business Day
after such verbal notice is given.
6.12 Places of Business: Each Borrower shall give thirty (30) days
prior written notice to Lender of any changes (a) its jurisdiction of
organization, (b) in the location of any of its chief executive office or any
other places of business, or the establishment of any new, or the discontinuance
of any existing place of business, and (c) its name.
6.13 Notice of Action: Each Borrower will promptly notify Lender in the
event of any legal action, dispute, setoff, counterclaim, defense or reduction
that is or may be asserted by an Obligor with respect to any Account that may
have a material adverse effect on the collectibility of such Account or all
Accounts collectively.
6.14 Verification of Information: At the request of Lender, Borrowers
will promptly provide and verify the accuracy of information concerning
Borrowers and their Affiliates of the type provided to Lender in connection with
Lender's decision to enter into this Agreement and such other information
concerning Borrowers and their Affiliates as Lender may reasonably request in
connection with any offering documents with respect to the contemplated
securitization of, and sale of securities backed by, the Eligible Accounts (the
"SECURITIES"), including, without limitation, all information necessary to
provide full and complete disclosure of all material facts pertaining to an
investment in the Securities in compliance with federal and state securities and
blue sky laws, and such information may be published in such offering documents
and relied upon by Lender and any party arranging the offering of such
Securities by Lender or its assignee. Such information will be true and complete
in all material respects and will not omit to state a material fact necessary to
make the statements contained in such information, in light of the circumstances
under which they were made, not misleading.
6.15 Value Track System(TM): Borrowers shall permit Lender to interface
its Value Track System(TM) to Borrowers' data files and will assist Lender in
completing and maintaining such interface such that the interface can interpret,
track and reconcile the Accounts Detail File provided by Borrowers.
6.16 Commercial Tort Claim: Borrowers shall provide written notice to
Lender of any commercial tort claim to which a Borrower is or becomes a party or
which otherwise inures to the benefit of a Borrower. Such notice shall contain a
sufficient description of such commercial tort claim including the parties, the
court in which the claim was commenced (if applicable), the docket number
assigned to the case (if applicable), and a detailed explanation of the events
giving rise to such claim. Borrowers shall grant Lender a security interest in
such commercial tort claim to secure payment of the Obligations. Borrowers shall
execute and deliver such instruments, documents and agreements as Lender may
require in order to obtain and perfect such security interest including, without
limitation, a security agreement or amendment to this Agreement all in form and
substance
36
satisfactory to Lender. Each Borrower authorizes Lender to file (without such
Borrower's signature) financing statements or amendments to existing financing
statements as Lender deems necessary to perfect the security interest in such
commercial tort claim.
6.17 First Street, Southeast and West Loop: Neither First Street
SurgiCare, LP, Southeast SurgiCare, Inc. nor West Loop SurgiCare, Inc. owns any
assets or conducts any business. Within thirty (30) days of the date hereof,
each of First Street SurgiCare, LP, Southeast SurgiCare, Inc. and West Loop
SurgiCare, Inc. shall be dissolved.
SECTION 7. BORROWERS' NEGATIVE COVENANTS
Each Borrower covenants that until all of Borrowers' Obligations to
Lender are paid and satisfied in full and the Credit Facility has been
terminated, that:
7.1 Merger, Consolidation, Dissolution or Liquidation:
(a) No Borrower shall sell, lease, license, transfer or
otherwise dispose of its Property other than inventory sold in the ordinary
course or ordinary operation of such Borrower's business, without Lender's prior
written consent.
(b) No Borrower shall merge or consolidate with, or acquire,
any other Person or commence a dissolution or liquidation, other than through a
merger or other consolidation with another Borrower, without Lender's prior
written consent.
7.2 Liens and Encumbrances: No Borrower shall: (i) execute a negative
pledge agreement with any Person covering any of the Collateral, or (ii) cause
or permit or agree or consent to cause or permit in the future (upon the
happening of a contingency or otherwise) the Collateral, whether now owned or
hereafter acquired, to be subject to any lien, claim or encumbrance other than
those of Lender and Permitted Liens.
7.3 Negative Pledge: Other than capital stock of Orion that is publicly
traded, no Borrower shall permit a lien or security interest to exist on its
common stock, partnership interests or membership units nor shall any such
Borrower permit, pledge or grant a lien or security interest to exist on the
common stock, partnership interests or membership units of its subsidiaries
and/or Affiliates.
7.4 Transactions With Affiliates or Subsidiaries:
(a) No Borrower shall enter into any transaction with any
subsidiary or other Affiliate (other than another Borrower) including, without
limitation, the purchase, sale, lease or exchange of Property, or the loaning,
capitalization or giving of funds to any such Affiliate or any subsidiary,
unless (i) such subsidiary or Affiliate is engaged in a business substantially
related to the business conducted by such Borrower and (ii) the transaction is
in the ordinary course of and pursuant to the reasonable requirements of such
Borrower's business and upon terms substantially the same and no less favorable
to such Borrower as it would obtain in a comparable arm's-length transactions
with any Person not an Affiliate or a subsidiary and (iii) such transaction is
not prohibited hereunder.
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(b) Subject in any event to the limitations of Section 7.4(a)
above and except with the prior written consent of Lender, which consent shall
not be unreasonably withheld, no Borrower shall create or acquire any subsidiary
unless such subsidiary engages in a business substantially related to the
business of such Borrower as conducted immediately prior to the Closing Date,
and if required by Lender, such subsidiary becomes a Borrower hereunder.
7.5 Guarantees: No Borrower shall become or be liable, directly or
indirectly, primary or secondary, matured or contingent, in any manner, whether
as guarantor, surety, accommodation maker, or otherwise, for the existing or
future indebtedness of any kind of any other Person, except endorsements in the
ordinary course of business of negotiable instruments for deposit or collection.
7.6 Indebtedness: Without Lender's prior written consent, no Borrower
shall create, incur, assume or suffer to exist any Indebtedness (exclusive of
trade debt) except (subject to compliance with Section 6.6 hereof):
(a) Indebtedness to Lender,
(b) Indebtedness specifically identified on SCHEDULE 2 hereto
and any refinancings, refundings, renewals, or extensions thereof;
(c) Indebtedness constituting purchase money indebtedness for
the financing of capital expenditures so long as such Indebtedness is secured
only by a security interest in the equipment being financed and so long as such
Indebtedness does not cause, or result in, an Event of Default or Unmatured
Event of Default;
(d) Indebtedness of any Borrower to any other Borrower; and
(e) Indebtedness constituting Subordinated Debt.
7.7 Loans to Other Persons: No Borrower shall make or be permitted to
have outstanding any loans, advances or extensions of credit to any Person
(other than another Borrower).
7.8 Change in Ownership/Management: No Borrower shall permit a Change
of Control. In addition, unless consented to by Lender, or if a replacement
acceptable to Lender is employed within 90 days of any terminations, Terrence
Bauer and Keith G. LeBlanc shall continue as senior management of Borrowers
actively involved in the date to day management of such Borrowers as Chief
Executive Officer of Orion and President of Orion, respectively.
7.9 Subordinated Debt Payments: No Borrower shall make any payment in
contravention of the terms and conditions of the Subordination Agreements.
7.10 Distributions: Borrowers shall not declare or pay or make any
forms of Distributions to its Shareholders, Affiliates, officers or directors or
their respective successors or assigns, provided however that so long as no
Event of Default or Unmatured Event of Default has occurred or would result from
the making of such payment, the Surgery Entities may make
38
Distributions to certain of their respective limited partners as required by the
terms of their respective limited partnership agreements.
SECTION 8. DEFAULT
8.1 Events of Default: Each of the following events shall constitute an
event of default ("EVENT OF DEFAULT") and Lender shall thereupon have the option
to declare the Obligations immediately due and payable, all without demand,
notice, presentment or protest or further action of any kind (it also being
understood that the occurrence of any of the events or conditions set forth in
subparagraphs (j), (k), (l) or (r) shall automatically cause an acceleration of
the Obligations without notice or demand):
(a) Payments - if Borrowers fail to make any payment of
principal or interest on the date when such payment is due and payable and such
failure continues for a period of two (2) Business Day; provided, however, that
the two (2) Business Day grace period shall not be applicable if such payments
are due and payable due to maturity, acceleration or demand, whether following
an Event of Default or otherwise; or
(b) Other Charges - if Borrowers fail to pay any other
charges, fees, Expenses or other monetary obligations owing to Lender, arising
out of or incurred in connection with this Agreement on the date when such
payment is due and payable, whether upon maturity, acceleration, demand or
otherwise and such failure continues for a period of five (5) Business Days
after the earlier of a Borrower becoming aware of such failure or a Borrower
receiving written notice of such failure; provided, however, that the five (5)
Business Day grace period shall not be applicable if such payments are due and
payable due to maturity, acceleration or demand, whether following an Event of
Default, or otherwise; or
(c) Particular Covenant Defaults - if any Borrower fails to
perform, comply with or observe any covenant or undertaking contained in this
Agreement not otherwise described in this Section 8.1, and such failure
continues for a period of ten (10) Business Days after the earlier of a Borrower
becoming aware of such failure or a Borrower receiving written notice of such
failure; or
(d) Financial Information - if any statement, report,
financial statement, or certificate made or delivered by a Borrower or any of
their officers, employees or agents, to Lender is not true and correct, in all
material respects, when made; or
(e) Uninsured Loss - if there shall occur any uninsured damage
to or loss, theft, or destruction in excess of $50,000 with respect to any
portion of any Borrower's Property; or
(f) Warranties or Representations - if any warranty,
representation or other statement by or on behalf of Borrowers, or any of them,
contained in or pursuant to this Agreement, or in any document, agreement or
instrument furnished in compliance with, relating to, or in reference to this
Agreement, is false, erroneous, or misleading in any material respect when made;
or
39
(g) Agreements with Others - if Borrowers, or any of them,
shall default beyond any grace period under any agreement with respect to any
Indebtedness and (i) such default consists of the failure to pay any principal,
premium or interest with respect to such Indebtedness or (ii) such default
consists of the failure to perform any covenant or agreement with respect to
such Indebtedness, if the effect of such default is to cause or permit such
Indebtedness to become due prior to its maturity date or prior to its regularly
scheduled date of payment;
(h) Other Agreements with Lender - if Borrowers, or any of
them, breach or violate the terms of, or if a default or an event of default,
occurs under, any other existing or future agreement (related or unrelated)
between or among Borrowers, or any of them and Lender; or
(i) Judgments - if any final judgment for the payment of money
in excess of $50,000 shall be rendered against Borrowers, or any of them, which
is not fully and unconditionally covered by insurance or an appeal bond, or for
which such Person has not established a cash or cash equivalent reserve in the
amount of such judgment;
(j) Assignment for Benefit of Creditors, etc. - if Borrowers,
or any of them, make or propose an assignment for the benefit of creditors
generally, offers a composition or extension to creditors, or makes or sends
notice of an intended bulk sale of any business or assets now or hereafter owned
or conducted by any Borrower which might materially and adversely affect such
Person; or
(k) Bankruptcy, Dissolution, etc. - upon the commencement of
any action for the dissolution or liquidation of Borrowers, or any of them, or
the commencement of any proceeding to avoid any transaction entered into by
Borrowers, or any of them, or the commencement of any case or proceeding for
reorganization or liquidation of Borrowers', or any of their debts under the
Bankruptcy Code or any other state or federal law, now or hereafter enacted for
the relief of debtors, whether instituted by or against any Borrower; provided,
however, that Borrowers shall have forty-five (45) days to obtain the dismissal
or discharge of involuntary proceedings filed against a Borrower, it being
understood that during such forty-five (45) day period, Lender shall be not
obligated to make Advances hereunder and Lender may seek adequate protection in
any bankruptcy proceeding; or
(l) Receiver - upon the appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for Borrowers, or any of
them, or for any of any such Borrower's Property; or
(m) Execution Process, Seizure, etc. - the issuance of any
execution or distraint process against any Borrower, or any of them, or any
Property of any such Borrower is seized by any governmental entity, federal,
state or local; or
(n) Termination of Business - if Borrowers, or any of them,
cease any material portion of their business operations as presently conducted;
or
(o) Pension Benefits, etc. - if Borrowers, or any of them,
fail to comply with ERISA, so that grounds exist to permit the appointment of a
trustee under ERISA to administer
40
Borrower's employee plans or to allow the Pension Benefit Guaranty Corporation
to institute proceedings to appoint a trustee to administer such plan(s), or to
permit the entry of a Lien to secure any deficiency or claim; or
(p) Investigations - confirmed evidence received by Lender
that reasonably leads it to believe Borrowers, or any of them, may have directly
or indirectly been engaged in any type of activity which would be reasonably
likely to result in the forfeiture of any Property of Borrowers, or any of them,
to any governmental entity, federal, state or local; or
(q) Material Adverse Events -
(i) Lender reasonably determines that an event which
adversely affects the collectibility of a material portion of the Accounts has
occurred; or
(ii) a material adverse change occurs in the business
or condition of Borrowers, or any of them; or
(r) Lockbox Instructions - any instruction or agreement
regarding the Commercial Lockbox or the Government Lockbox or the bank accounts
related thereto is amended or terminated without the written consent of Lender,
or if any Borrower fails, within two (2) Business Day of receipt, to forward
Collections it receives with respect to any Accounts to the Commercial Lockbox
or the Government Lockbox, as the case may be; or
(s) Guaranty Agreement. - any breach or default occurs under
the Guaranty Agreement or if the Guaranty Agreement or the obligations to
perform thereunder are terminated without the prior written consent of Lender;
or
(t) DVI Documents. - any breach, default or event of default
occurs under any of the DVI Documents.
8.2 Cure: Nothing contained in this Agreement or the Loan Documents
shall be deemed to compel Lender to accept a cure of any Event of Default
hereunder.
8.3 Rights and Remedies on Default:
(a) In addition to all other rights, options and remedies
granted or available to Lender under this Agreement or the Loan Documents, or
otherwise available at law or in equity, upon or at any time after the
occurrence and during the continuance of an Event of Default or Unmatured Event
of Default, Lender may, in its discretion, withhold or cease making Advances
under the Credit Facility.
(b) In addition to all other rights, options and remedies
granted or available to Lender under this Agreement or the Loan Documents (each
of which is also then exercisable by Lender), Lender may, in its discretion,
upon or at any time after the occurrence of an Event of Default, terminate the
Credit Facility (it also being understood that the occurrence of any of the
events or conditions set forth in subparagraphs (j), (k) or (l) of Section 8.1
hereof shall automatically cause a termination of the Credit Facility without
notice or demand).
41
(c) In addition to all other rights, options and remedies
granted or available to Lender under this Agreement or the Loan Documents (each
of which is also then exercisable by Lender), Lender may, upon or at any time
after the occurrence of an Event of Default, exercise all rights under the UCC
and any other applicable law or in equity, and under all Loan Documents
permitted to be exercised after the occurrence of an Event of Default, including
the following rights and remedies (which list is given by way of example and is
not intended to be an exhaustive list of all such rights and remedies):
(i) Subject to all applicable laws and regulations
governing payment of Medicare and Medicaid receivables, the right to "take
possession" of the Collateral, and notify all Obligors of Lender's security
interest in the Collateral and require payment under the Accounts and in
connection with or pursuant to Management Service Agreements and/or Business
Services Agreement to be made directly to Lender and Lender may, in its own name
or in the name of the applicable Borrower, exercise all rights of a secured
party with respect to the Collateral and collect, sue for and receive payment on
all Accounts, and settle, compromise and adjust the same on any terms as may be
satisfactory to Lender, in its sole and absolute discretion for any reason or
without reason and Lender may do all of the foregoing with or without judicial
process (including without limitation notifying the United States postal
authorities to redirect mail addressed to Borrowers, or any of them, to an
address designated by Lender); or
(ii) Require Borrowers at Borrowers' expense, to
assemble all or any part of the Collateral and make it available to Lender at
any place designated by Lender, which may include providing Lender or any entity
designated by Lender with access (either remote or direct) to Borrowers'
information system for purposes of monitoring, posting payments and rebilling
Accounts to the extent deemed desirable by Lender in its sole discretion; or
(iii) The right to reduce or modify the Revolving
Loan Commitment, Borrowing Base or any portion thereof or the Advance Rates or
to modify the terms and conditions upon which Lender may be willing to consider
making Advances under the Credit Facility or to take additional reserves in the
Borrowing Base for any reason.
(d) Borrowers hereby agree that a notice received by them at
least ten (10) days before the time of any intended public sale or of the time
after which any private sale or other disposition of the Collateral is to be
made, shall be deemed to be reasonable notice of such sale or other disposition.
If permitted by applicable law, any Collateral which threatens to speedily
decline in value or which is sold on a recognized market may be sold immediately
by Lender without prior notice to Borrowers. Each Borrower covenants and agrees
not to interfere with or impose any obstacle to Lender's exercise of its rights
and remedies with respect to the Collateral.
(e) Lender is hereby granted, until the Obligations are paid
in full and all obligations of Lender hereunder are terminated, a worldwide
license to use, after the occurrence and during the continuance of an Event of
Default and without charge, all of Borrowers' labels, trademarks (and associated
goodwill), copyrights, patents and advertising matter, as they pertain to the
Collateral, in completing production of, advertising for sale and selling of any
Collateral.
42
8.4 Nature of Remedies: All rights and remedies granted Lender
hereunder and under the Loan Documents, or otherwise available at law or in
equity, shall be deemed concurrent and cumulative, and not alternative remedies,
and Lender may proceed with any number of remedies at the same time until all
Obligations are satisfied in full. The exercise of any one right or remedy shall
not be deemed a waiver or release of any other right or remedy, and Lender, upon
or at any time after the occurrence of an Event of Default, may proceed against
Borrowers, or any of them, at any time, under any agreement, with any available
remedy and in any order.
8.5 Set-Off: If any bank account or other Property held by or with
Lender, or any Affiliate of Lender, or any participant in the Loans, is attached
or otherwise liened or levied upon by any third party, Lender (and such
participant) shall have and be deemed to have, without notice to Borrowers, the
immediate right of set-off and may apply the funds or other amounts or property
thus set off against any of Borrowers' Obligations hereunder.
SECTION 9. MISCELLANEOUS
9.1 GOVERNING LAW: THIS AGREEMENT, AND ALL MATTERS ARISING OUT OF OR
RELATING TO THIS AGREEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW JERSEY. THE PROVISIONS OF THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN
ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL
CONTINUE IN FULL FORCE AND EFFECT.
9.2 Integrated Agreement: The Revolving Credit Note, the other Loan
Documents, all related agreements, and this Agreement shall be construed as
integrated and complementary of each other, and as augmenting and not
restricting Lender's rights and remedies. If, after applying the foregoing, an
inconsistency still exists, the provisions of this Agreement shall constitute an
amendment thereto and shall control.
9.3 Waiver and Indemnity:
(a) No omission or delay by Lender in exercising any right or
power under this Agreement or any related agreements and documents will impair
such right or power or be construed to be a waiver of any default, or Event of
Default or an acquiescence therein, and any single or partial exercise of any
such right or power will not preclude other or further exercise thereof or the
exercise of any other right, and as to any Borrower no waiver will be valid
unless in writing and signed by Lender and then only to the extent specified.
(b) Each Borrower releases and shall indemnify, defend and
hold harmless Lender, and its respective officers, employees and agents, of and
from any claims, demands, liabilities, obligations, judgments, injuries, losses,
damages and costs and expenses (including, without limitation, reasonable legal
fees) resulting from (i) acts or conduct of a Borrower under, pursuant or
related to this Agreement and the other Loan Documents, (ii) any Borrower's
breach, or alleged breach, or violation of any representation, warranty,
covenant or undertaking contained in
43
this Agreement or the other Loan Documents, and (iii) any Borrower's failure, or
alleged failure, to comply with any or all laws, statutes, ordinances,
governmental rules, regulations or standards, whether federal, state or local,
or court or administrative orders or decrees (including without limitation
environmental laws, etc.), and all costs, expenses, fines, penalties or other
damages resulting therefrom, unless resulting from acts or conduct of Lender
constituting willful misconduct or gross negligence.
(c) Lender shall not be liable for, and Borrowers hereby agree
that Lender's liability in the event of a breach by Lender of this Agreement
shall be limited to Borrowers' direct damages suffered and shall not extend to,
any consequential or incidental damages. In the event Borrowers bring suit
against Lender in connection with the transactions contemplated hereunder, and
Lender is found not to be liable, Borrowers shall indemnify and hold Lender
harmless from all costs and expenses, including attorneys' fees, incurred by
Lender in connection with such suit.
9.4 Time: Whenever Borrowers, or any of them, shall be required to make
any payment, or perform any act, on a day which is not a Business Day, such
payment may be made, or such act may be performed, on the next succeeding
Business Day. Time is of the essence in Borrowers' performance under all
provisions of this Agreement and all related agreements and documents.
9.5 Expenses of Lender:
(a) At Closing and from time to time thereafter, Borrowers
will pay all reasonable expenses of Lender on demand (including, without
limitation, search costs, audit fees, appraisal fees, and the fees and expenses
of legal counsel for Lender) relating to this Agreement, and all related
agreements and documents, including, without limitation, expenses incurred in
the analysis, negotiation, preparation, closing, administration and enforcement
of this Agreement and the other Loan Documents, the enforcement, protection and
defense of the rights of Lender in and to the Loans and Collateral or otherwise
hereunder, and any reasonable expenses relating to extensions, amendments,
waivers or consents pursuant to the provisions hereof, or any related agreements
and documents or relating to agreements with other creditors, or termination of
this Agreement (collectively, the "EXPENSES"). Any Expenses not paid upon demand
by Lender shall bear interest at the highest per annum rate of interest
applicable to the Loans.
(b) In addition, at any time following the date of this
Agreement, Borrowers effect any changes which results in a change in the format
or sequence of Borrowers' data, Borrowers shall pay to Lender its reasonable
charge for implementing such changes as are necessary to accommodate the changes
in the format or sequence of the data such that the Value Track System(TM) is
capable of importing such data, including an hourly fee of $125.
9.6 Confidentiality: Except as provided in Section 9.19 hereof or to
the extent required by law or applicable regulations, Borrowers and Lender agree
to maintain the confidentiality of this Agreement and not to disclose the
contents hereof or provide a copy hereof to any third party, except (i)
accountants, lawyers and financial advisers of the parties who are informed of
and agree to be bound by this Section 9.6, and (ii) that copies hereof may be
provided to any assignee or participant (or potential assignee or participant)
of Lender's interests herein, any investors or prospective investors who acquire
or may acquire Securities backed by Accounts and any parties
44
which facilitate the issuance of such Securities, including rating agencies,
guarantors and insurers. Lender agrees to maintain the confidentiality of
patient information obtained as a result of its interests in, or duties with
respect to, the Accounts and as otherwise may be required pursuant to the
Business Associate Agreement.
9.7 Notices:
(a) Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed given if delivered in person
or if sent by telecopy or by nationally recognized overnight courier, or via
first class, Certified or Registered mail, postage prepaid, to the address of
such party set forth on the signature pages hereof, unless such address is
changed by written notice hereunder.
(b) Any notice sent by Lender or Borrowers, or any of them, by
any of the above methods shall be deemed to be given when so received.
(c) Lender shall be fully entitled to rely upon any facsimile
transmission or other writing purported to be sent by any Authorized Officer
(whether requesting an Advance or otherwise) as being genuine and authorized.
9.8 Brokerage: Borrowers represent that Borrowers have not committed
Lender to the payment of any brokerage fee, commission or charge in connection
with this transaction. If any such claim is made on Lender by any broker, finder
or agent or other Person, each Borrower hereby indemnifies, defends and saves
Lender harmless against such claim and further will defend, with counsel
satisfactory to Lender, any action or actions to recover on such claim, at
Borrowers' own cost and expense, including Lender's reasonable counsel fees.
Each Borrower further agrees that until any such claim or demand is adjudicated
in Lender's favor, the amount demanded shall be deemed an Obligation of
Borrowers under this Agreement.
9.9 Headings: The headings of any paragraph or Section of this
Agreement are for convenience only and shall not be used to interpret any
provision of this Agreement.
9.10 Survival: All warranties, representations, and covenants made by
any or all Borrowers and/herein, or in any agreement referred to herein or on
any certificate, document or other instrument delivered by it or on its behalf
under this Agreement, shall be considered to have been relied upon by Lender,
and shall survive the delivery to Lender of the Revolving Credit Note,
regardless of any investigation made by Lender or on its behalf. All statements
in any such certificate or other instrument prepared and/or delivered for the
benefit of Lender shall constitute warranties and representations by Borrowers
hereunder. Except as otherwise expressly provided herein, all covenants made by
any or all Borrowers hereunder or under any other agreement or instrument shall
be deemed continuing until all Obligations are satisfied in full.
9.11 Successors and Assigns: This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties. No
Borrower may transfer, assign or delegate any of its duties or obligations
hereunder, without the prior written consent of Lender. In the event Lender
sells the Loans in their entirety, or conveys all of its rights hereunder in
connection
45
with the sale of all of the assets or voting stock of Lender, to a third party
other than an affiliate or subsidiary of Lender, Borrowers shall not be
obligated to pay Termination Fee pursuant to Section 2.3(c).
9.12 Duplicate Originals: Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. This
Agreement may be executed in counterparts, all of which counterparts taken
together shall constitute one completed fully executed document.
9.13 Modification: No modification hereof or any agreement referred to
herein shall be binding or enforceable unless in writing and signed by Borrowers
and Lender.
9.14 Signatories: Each individual signatory hereto represents and
warrants that he is duly authorized to execute this Agreement on behalf of his
principal and that he executes the Agreement in such capacity and not as a
party.
9.15 Third Parties: No rights are intended to be created hereunder, or
under any related agreements or documents for the benefit of any third party
donee, creditor or incidental beneficiary of any Borrower. Nothing contained in
this Agreement shall be construed as a delegation to Lender of any Borrower's
duty of performance, including, without limitation, such Borrower's duties under
any account or contract with any other Person.
9.16 Waivers:
(a) Borrowers each hereby irrevocably, unconditionally and
fully subordinate in favor of Lender, any and all rights they or any of them,
may have at any time (whether arising directly or indirectly, by operation of
law or contract) to assert or receive payment on any claim against each other or
any of them, on account of payments made under this Agreement, including without
limitation, any and all rights of subrogation, reimbursement, exoneration,
contribution or indemnity. Each Borrower waives any event or circumstances which
might constitute a legal or equitable defense of, or discharge of, such
Borrower. Furthermore, each Borrower agrees that if any payment on the
Obligations is recovered from or repaid by Lender in whole or in part in any
bankruptcy, insolvency or similar proceeding instituted by or against any
Borrower, the remaining Borrowers and/shall be obligated to the same extent as
if the recovered or repaid payment had never been originally made on such
Obligation. Each Borrower consents and agrees that Lender shall be under no
obligation to marshal any assets or Collateral in favor of such Borrower or
against or in payment of any or all of the Obligations.
(b) Each Borrower hereby consents and agrees that Lender, at
any time or from time to time in its discretion may: (i) settle, compromise or
grant releases for liabilities of other Borrowers, and/or any other Person or
Persons liable for any Obligations, (ii) exchange, release, surrender, sell,
subordinate or compromise any Collateral of any party now or hereafter securing
any of the Obligations, and (iii) following an Event of Default, apply any and
all payments received at any time against the Obligations in any order as Lender
may determine; all of the foregoing in such manner and upon such terms as Lender
may see fit, without notice to or further consent from such
46
Borrower who hereby agrees and shall remain bound upon this Agreement
notwithstanding any such action on Lender's part.
(c) The liability of each Borrower hereunder is absolute and
unconditional and shall not be reduced, impaired or affected in any way by
reason of (i) any failure to obtain, retain or preserve, or the lack of prior
enforcement of, any rights against any Person or Persons (including other
Borrowers), or in any Property, (ii) the invalidity or unenforceability of any
Obligations or rights in any Collateral, (iii) any delay in making demand upon
other Borrowers or any delay in enforcing, or any failure to enforce, any rights
against other Borrowers or in any Collateral even if such rights are thereby
lost, (iv) any failure, neglect or omission to obtain, perfect or retain any
lien upon, protect, exercise rights against, or realize on, any Property of any
Borrower, or any other party securing the Obligations, (v) the existence or
non-existence of any defenses which may be available to the other Borrowers with
respect to the Obligations, or (vi) the commencement of any bankruptcy,
reorganization, liquidation, dissolution or receivership proceeding or case
filed by or against any of Borrowers.
9.17 CONSENT TO JURISDICTION: EACH BORROWER AND LENDER HEREBY
IRREVOCABLY CONSENT TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED IN THE STATE OF NEW JERSEY IN ANY AND ALL ACTIONS AND PROCEEDINGS
WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENT OR UNDERTAKING. BORROWERS
WAIVE ANY OBJECTION TO IMPROPER VENUE AND FORUM NON-CONVENIENS TO PROCEEDINGS IN
ANY SUCH COURT AND ALL RIGHTS TO TRANSFER FOR ANY REASON. EACH BORROWER
IRREVOCABLY AGREES TO SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED TO THE ADDRESS OF THE APPROPRIATE PARTY SET FORTH HEREIN.
9.18 WAIVER OF JURY TRIAL: EACH BORROWER AND LENDER HEREBY WAIVE ANY
AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION
COMMENCED BY OR AGAINST LENDER WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO OR UNDER THE LOAN DOCUMENTS, WHETHER SOUNDING IN TORT, CONTRACT
OR OTHERWISE.
9.19 Publication: Borrowers grant Lender the right to publish and/or
advertise information to the effect that this transaction has closed, which
information may include, without limit, (i) the names of Borrowers and Lender,
(ii) the size of the transaction and (iii) those items of information commonly
included within a "tombstone advertisement" of the type customarily published in
financial or business periodicals.
9.20 Discharge of Taxes, Borrower's Obligations, Etc.: Lender, in its
sole discretion, shall have the right at any time, and from time to time, with
prior notice to Borrowers, if Borrowers fail to do so five (5) Business Days
after requested in writing to do so by Lender, to: (a) pay for the performance
of any of Borrowers' obligations hereunder, and (b) discharge taxes or liens, at
any time levied or placed on any of Borrowers' Property in violation of this
Agreement unless Borrowers are in good faith with due diligence by appropriate
proceedings contesting such taxes or liens and have established appropriate
reserves therefor under GAAP. Expenses and advances shall be deemed Advances
hereunder and shall be
47
deemed Advances hereunder and shall bear interest at the highest rate applied to
the Loans until reimbursed to Lender. Such payments and advances made by Lender
shall not be construed as a waiver by Lender of an Event of Default under this
Agreement.
9.21 Injunctive Relief: The parties acknowledge and agree that, in the
event of a breach or threatened breach of any party's obligations hereunder, may
have no adequate remedy in money damages and, accordingly, shall be entitled to
an injunction (including without limitation, a temporary restraining order,
preliminary injunction, writ of attachment, or order compelling an audit)
against such breach or threatened breach, including without limitation,
maintaining the cash management and collection procedure described herein.
However, no specification in this Agreement of a specific legal or equitable
remedy shall be construed as a waiver or prohibition against any other legal or
equitable remedies in the event of a breach or threatened breach of any
provision of this Agreement.
SECTION 10. SPECIAL INTER-BORROWER PROVISIONS
10.1 Certain Borrower Acknowledgments and Agreements:
(a) Each Borrower acknowledges that it will enjoy significant
benefits from the business conducted by the other Borrowers because of, inter
alia, their combined ability to bargain with other Persons including without
limitation their ability to receive the Credit Facility on favorable terms
granted by this Agreement and other Loan Documents which would not have been
available to an individual Borrower acting alone. Each Borrower has determined
that it is in its best interest to procure the Credit Facility which each
Borrower may utilize directly and which receive the credit support of the other
Borrowers as contemplated by this Agreement and the other Loan Documents.
(b) Lender has advised Borrowers that it is unwilling to enter
into this Agreement and the other Loan Documents and make available the Credit
Facility extended hereby to any Borrower unless each Borrower agrees, among
other things, to be jointly and severally liable for the due and proper payment
of the Obligations of each Borrower under this Agreement and other Loan
Documents. Each Borrower has determined that it is in its best interest and in
pursuit of its purposes that it so induce Lender to extend credit pursuant to
this Agreement and the other documents executed in connection herewith (i)
because of the desirability to each Borrower of the Credit Facility, the
interest rates and the modes of borrowing available hereunder, (ii) because each
Borrower may engage in transactions jointly with other Borrowers and (iii)
because each Borrower may require, from time to time, access to funds under this
Agreement for the purposes herein set forth.
(c) Each Borrower has determined that it has and, after giving
effect to the transactions contemplated by this Agreement and the other Loan
Documents (including, without limitation, the inter-Borrower arrangement set
forth in this Section 10.1) will have, assets having a fair saleable value in
excess of the amount required to pay its probable liability on its existing
debts as they fall due for payment and that the sum of its debts is not and will
not then be greater than all of its Property at a fair valuation, that such
Borrower has, and will have, access to adequate capital for the conduct of its
business and the ability to pay its debts from time to time incurred in
48
connection therewith as such debts mature and that the value of the benefits to
be derived by such Borrower from the access to funds under this Agreement
(including, without limitation, the inter-Borrower arrangement set forth in this
Section 10.1) is reasonably equivalent to the obligations undertaken pursuant
hereto.
(d) Orion (on behalf of each Borrower) shall maintain records
specifying (a) all Obligations incurred by each Borrower, (b) the date of such
incurrence, (c) the date and amount of any payments made in respect of such
Obligations and (d) all inter-Borrower obligations pursuant to this Section 10.
Orion shall make copies of such records available to Lender, upon request.
10.2 Maximum Amount Of Joint and Several Liability: To the extent that
applicable law otherwise would render the full amount of the joint and several
obligations of any Borrower hereunder and under the other Loan Documents invalid
or unenforceable, such Borrower's obligations hereunder and under the other Loan
Documents shall be limited to the maximum amount which does not result in such
invalidity or unenforceability, provided, however, that each Borrower's
obligations hereunder and under the other Loan Documents shall be presumptively
valid and enforceable to their fullest extent in accordance with the terms
hereof or thereof, as if this Section 10.2 were not a part of this Agreement.
10.3 Authorization of Orion by Borrowers:
(a) Each of Borrowers hereby irrevocably authorizes Orion to
give notices, make requests, make payments, receive payments and notices, give
receipts and execute agreements, make agreements or take any other action
whatever on behalf of such Borrower under and with respect to any Loan Document
and each Borrower shall be bound thereby. This authorization is coupled with an
interest and shall be irrevocable, and Lender may rely on any notice, request,
information supplied by Orion every document executed by Orion every agreement
made by Orion or other action taken by Orion in respect of Borrowers or any
thereof as if the same were supplied, made or taken by any or all Borrowers.
Without limiting the generality of the foregoing, the failure of one or more
Borrowers to join in the execution of any writing in connection herewith shall
not, unless the context clearly requires, relieve any such Borrower from
obligations in respect of such writing.
(b) Borrowers acknowledge that the credit provided hereunder
is on terms more favorable than any Borrower acting alone would receive and that
each Borrower benefits directly and indirectly from all Advances hereunder. Each
of Borrowers, shall be jointly and severally liable for all Obligations,
regardless of, inter alia, which Borrower requested (or received the proceeds
of) a particular Advance.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
49
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
BORROWERS:
Address for notices to Borrowers:
c/o Orion HealthCorp, Inc. ORION HEALTHCORP, INC.
1805 Old Alabama Road, Suite 350
Roswell, Georgia 30076 By: /s/ Terrence L. Bauer
Attn: Stephen Murdock ---------------------------
Fax: 678-832-1888 Name: Terrence L. Bauer
Title: Chief Executive Officer
|
BAYTOWN SURGICARE, INC.
By: /s/ Keith LeBlanc
---------------------------
Name: Keith LeBlanc
Title: President
|
BELLAIRE ASC L.P.
By: Bellaire SurgiCare, Inc.
its general partner
By: /s/ Keith LeBlanc
------------------------
Name: Keith LeBlanc
Title: President
|
BELLAIRE SURGICARE, INC.
By: /s/ Keith LeBlanc
---------------------------
Name: Keith LeBlanc
Title: President
|
DENNIS CAIN MANAGEMENT, L.L.C.
By: /s/ Keith LeBlanc
---------------------------
Name: Keith LeBlanc
Title: Manager
|
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
S-1
DENNIS CAIN PHYSICIAN SOLUTIONS,
LTD.
By: Dennis Cain Management,
L.L.C., its general
By: /s/ Keith LeBlanc
-----------------------
Name: Keith LeBlanc
Title: Manager
|
INTEGRATED PHYSICIAN SOLUTIONS,
INC.
By: /s/ Terrence L. Bauer
---------------------------
Name: Terrence L. Bauer
Title: President and Chief
Executive Officer
|
INTEGRIMED, INC.
By: /s/ Terrence L. Bauer
---------------------------
Name: Terrence L. Bauer
Title: President
|
MEDICAL BILLING SERVICES, INC.
By: /s/ Stephen Murdock
---------------------------
Name: Stephen Murdock
Title: Chief Financial Officer
|
SAN JACINTO SURGERY CENTER, LTD.
By: Baytown SurgiCare, Inc., its
general partner
By: /s/ Keith LeBlanc
-----------------------
Name: Keith LeBlanc
Title: President
|
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
S-2
SURGICARE MEMORIAL VILLAGE, L.P.
By: Town & Country SurgiCare,
Inc., its general partner
By: /s/ Keith LeBlanc
-----------------------
Name: Keith LeBlanc
Title: President
|
TASC ANESTHESIA, LLC
By: Tuscarawas Ambulatory Surgery
Center, LLC, its Manager
By: /s/ Keith LeBlanc
-----------------------
Name: Keith LeBlanc
Title: Manager
|
TOWN & COUNTRY SURGICARE, INC.
By: /s/ Keith LeBlanc
---------------------------
Name: Keith LeBlanc
Title: President
|
TUSCARAWAS AMBULATORY SURGERY
CENTER, LLC
By: /s/ Keith LeBlanc
-----------------------
Name: Keith LeBlanc
Title: Manager
|
TUSCARAWAS OPEN MRI, LP
By: Orion HealthCorp, Inc., its
general partner
By: /s/ Terrence L. Bauer
-----------------------
Name: Terrence L. Bauer
Title: Chief Executive
Officer
|
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
S-3
LENDER:
Address for notices to Lender: HEALTHCARE BUSINESS CREDIT
Healthcare Business Credit Corporation CORPORATION
305 Fellowship Road, Suite 300
Mount Laurel, NJ 08054 By: /s/ Stacy L. Allen
Attn: Bernard J. Lajeunesse, President ___________________________
Fax: 856-222-0568
Name: Stacy L. Allen
___________________________
Title: Vice President
___________________________
|
EXHIBIT 10.4
GUARANTY AGREEMENT
To: Healthcare Business Credit Corporation Date: December 15, 2004
305 Fellowship Road, Suite 300
Mt. Laurel, NJ 08054
To induce you to establish and/or continue financing arrangements with
and consider making or continuing certain loans and extending or continuing to
extend credit from time to time to Orion HealthCorp, Inc., Baytown SurgiCare,
Inc., Bellaire ASC L.P., Bellaire SurgiCare, Inc., Dennis Cain Management,
L.L.C., Dennis Cain Physician Solutions, Ltd., Integrated Physician Solutions,
Inc., IntegriMED, Inc., Medical Billing Services, Inc., San Jacinto Surgery
Center, Ltd., SurgiCare Memorial Village, L.P., TASC Anesthesia, LLC, Town &
Country SurgiCare, Inc., Tuscarawas Ambulatory Surgery Center, LLC, and
Tuscarawas Open MRI, LP, and certain affiliated entities that may from time to
time become a Borrower under the Loan Agreement (as defined below)
(individually, each a "Borrower" and collectively, "Borrowers") the Undersigned,
intending to be legally bound hereby guarantees the unconditional payment and
performance to you of all of the Obligations of Borrowers to you (including,
without limitation, interest owing to you after the commencement of a bankruptcy
proceeding at the rate specified in the Loan Agreement, whether or not such
claim is an allowable claim in such proceeding). Notwithstanding the foregoing,
the Undersigned's liability shall be limited to (A) the amount of the
Obligations due and owing as of the Guaranty Payment Date (as defined below) in
an amount not to exceed Three Million Two Hundred Seventy Two Thousand Seven
Hundred Twenty Seven Dollars ($3,272,727.00), plus (B) interest on the
Obligations after the Guaranty Payment Date and any and all fees, costs and
expenses, including, without limitation, reasonable attorneys' fees, incurred by
you at any time to enforce, protect, preserve, or defend your rights hereunder
and with respect to any property securing this Guaranty Agreement ("Liability
Limit"). All payments hereunder shall be made in lawful money of the United
States, in immediately available funds. Unless otherwise defined herein, all
capitalized terms shall have the respective meanings given to such terms in that
certain Loan and Security Agreement dated the date hereof among Borrowers and
you (as it may hereafter be supplemented, amended or replaced from time to time,
the "Loan Agreement").
For purposes hereof, "Guaranty Payment Date" shall mean the earliest to
occur of: (i) the ninetieth (90th) day following the date that the Obligations
are accelerated or otherwise become immediately due and payable, (ii) the
ninetieth (90th) day following the last day of the Initial Term, (iii) the date
Borrowers, or any of them, become the subject of any assignment for the benefit
of creditors, bankruptcy, liquidation or other insolvency proceeding, (iv) the
date on which substantially all of the assets or stock, membership or other
equity interests of Borrowers, or any of them, is sold unless otherwise
consented to by you in writing and (v) the date on which you determine, in your
reasonable business judgment that you have substantially completed your
collection and liquidation efforts with respect to the Collateral.
Each of the Undersigned further undertakes and agrees as follows:
(1) The Undersigned represents and warrants that:
(a) The Undersigned's execution and performance of this
Guaranty Agreement shall not (i) violate or result in a default or breach
(immediately or with the passage of time) under any contract, agreement or
instrument to which the Undersigned is a party, or by which the
1
Undersigned is bound, (ii) violate or result in a default or breach under any
order, decree, award, injunction, judgment, law, regulation or rule, (iii) cause
or result in the imposition or creation of any lien upon any property of the
Undersigned, or (iv) if applicable, violate or result in a breach of the
articles of incorporation, by-laws or partnership agreement of the Undersigned.
(b) The Undersigned has the full power and capacity to enter
into and perform under this Guaranty Agreement.
(c) No consent, license or approval of, or filing or
registration with, any governmental authority is necessary for the execution and
performance hereof by the Undersigned.
(d) This Guaranty Agreement constitutes the valid and binding
obligation of the Undersigned enforceable in accordance with its terms, except
as such enforceability may be limited by creditors' rights generally and general
principles of equity.
(e) This Guaranty Agreement promotes and furthers the business
and interests of the Undersigned and the creation of the obligations hereunder
will result in direct financial benefit to the Undersigned.
(2) The Undersigned hereby waives notice of (a) acceptance of this
Guaranty Agreement, (b) the existence or incurring from time to time of any
Obligations guaranteed hereunder, (c) the existence of any Event of Default, the
making of demand, or the taking of any action by you, under the Loan Agreement,
and (d) demand and default hereunder.
(3) The Undersigned hereby consents and agrees that you may at any time
or from time to time in your discretion (a) extend or change the time of
payment, and/or the manner, place or terms of payment of any or all Obligations,
(b) amend, supplement or replace the Loan Agreement or any related agreements,
(c) renew, extend, modify, increase (without limit of any kind and whether
related or unrelated) or decrease loans and extensions of credit to Borrower,
(d) modify the terms and conditions under which loans and extensions of credit
may be made to Borrower, (e) settle, compromise or grant releases for
liabilities of Borrower, and/or any other person or persons liable with
Undersigned for, any Obligations, (f) exchange, release, surrender, sell,
subordinate, or compromise any collateral of any party now or hereafter securing
any of the Obligations, and (g) apply any and all payments received by you at
any time against the Obligations in any order as you may determine; all of the
foregoing in such manner and upon such terms as you may see fit, and without
notice to or further consent from the Undersigned, who hereby agrees to be and
shall remain bound upon this Guaranty Agreement notwithstanding any such action
on your part. The Undersigned also waives any defense, right of setoff, claim or
counterclaim whatsoever and any and all other rights, benefits, protections and
other defenses available to the Undersigned now or at any time hereafter.
(4) The liability of the Undersigned hereunder is absolute and
unconditional and shall not be reduced, impaired or affected in any way by
reason of (a) any failure to obtain, retain or preserve, or the lack of prior
enforcement of, any rights against any person or persons (including Borrower and
the Undersigned) or in any property, (b) the invalidity or unenforceability of
any Obligations or rights in any Collateral, (c) any delay in making demand upon
Borrower or any delay in enforcing, or any failure to enforce, any rights
against Borrower, or in any Collateral even if such rights are thereby lost, (d)
any failure, neglect or omission on your part to obtain, perfect or retain
2
any lien upon, protect, exercise rights against, or realize on, any property of
Borrower, the Undersigned, or any other party securing the Obligations, (e) the
existence or nonexistence of any defenses which may be available to the
Borrower, with respect to the Obligations, or (f) the commencement of any
bankruptcy, reorganization, liquidation, dissolution or receivership proceeding
or case filed by or against Borrower.
(5) If any or all payments made from time to time to you with respect
to any obligation hereby guaranteed are recovered from, or repaid by, you in
whole or in part in any bankruptcy, reorganization, insolvency or similar
proceeding instituted by or against Borrower or either of them, this Guaranty
Agreement shall continue to be fully applicable to such obligation to the same
extent as if the recovered or repaid payment(s) had never been originally made
on such obligation.
(6) All rights and remedies hereunder and under the Loan Agreement, and
related agreements, are cumulative and not alternative. You may proceed in any
order from time to time against Borrower and/or any other obligor of Borrower's
Obligations (other than the Undersigned) and their respective assets. From and
after the Guaranty Payment Date you shall not have any obligation to proceed
against, or exhaust any or all of your rights against Borrower or any other
obligor of Borrower's Obligations and their respective assets, prior to
proceeding against the Undersigned hereunder.
(7) Any and all rights of any nature of the Undersigned to subrogation,
reimbursement or indemnity and any right of the Undersigned to recourse to any
assets or property of Borrower for any reason are hereby unconditionally waived,
until such time as the Obligations of Borrower to Lender are indefeasibly paid
and satisfied in full.
(8) Your books and records of any and all of Borrower's Obligations,
absent manifest error, shall be prima facie evidence against the Undersigned of
the indebtedness due you or to become due to you hereunder.
(9) This Guaranty Agreement shall constitute a continuing guaranty
obligation with respect to all Obligations from time to time incurred or arising
and the liability of the Undersigned under this Guaranty Agreement may not be
revoked or terminated.
(10) The Undersigned agrees that you shall have a right of setoff
against any and all property of the Undersigned now or at any time in your
possession, including, without limitation, deposit accounts, and the proceeds
thereof, as security for the obligations of the Undersigned hereunder.
(11) If an Event of Default occurs under the Loan Agreement, then all
of the Undersigned's liabilities of every kind or nature to you hereunder shall,
at your option, become immediately due and payable and you may at any time and
from time to time after the occurrence of the Guaranty Payment Date take any
and/or all actions and enforce all rights and remedies available hereunder or
under applicable law to collect the Undersigned's liabilities hereunder.
(12) Failure or delay in exercising any right or remedy against the
Undersigned hereunder shall not be deemed a waiver thereof or preclude the
exercise of any other right or remedy hereunder. No waiver of any breach of or
provision of this Guaranty Agreement shall be construed as a waiver of any
subsequent breach or of any other provision. The invalidity or unenforceability
of
3
any provision hereof shall not affect the remaining provisions which shall
remain in full force and effect.
(13) This Guaranty Agreement shall (a) be legally binding upon the
Undersigned, and the Undersigned's successors and assigns, provided that the
Undersigned's obligations hereunder may not be delegated or assigned without
your prior written consent and (b) benefit any and all of your successors and
assigns. Signature by facsimile shall bind the Undersigned.
(14) This Guaranty Agreement embodies the whole agreement and
understanding of the parties hereto relative to the subject matter hereof. No
modification or waiver of any provision hereof shall be enforceable unless
approved by you in writing.
(15) This Guaranty Agreement shall in all respects be interpreted,
construed and governed by the substantive laws of the State of New York. The
Undersigned irrevocably (a) submits to the jurisdiction of the state courts of
the State of New Jersey and the United States District Court for the District of
New Jersey for the purposes of any litigation or proceeding hereunder or
concerning the terms hereof and (b) WAIVES THE RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY LITIGATION OR PROCEEDING HEREUNDER OR CONCERNING THE TERMS
HEREOF.
(16) (a) In any action or proceeding brought by you to enforce the
terms hereof, the Undersigned waives personal service of the summons, complaint,
and any motion or other process, and agrees that notice thereof may be served by
registered or certified mail, return receipt requested or by nationally
recognized overnight courier at the address of the Undersigned set forth below.
Such service shall be deemed made on the date of delivery at such address.
(b) Any and all notices which may be given to the Undersigned
by you hereunder shall be sent to the Undersigned at the address of the
Undersigned set forth below and shall be deemed given to and received (on the
date delivered) by the Undersigned if personally delivered or if sent by
facsimile transmission or if sent in the manner provided for service of process
in paragraph 16(a) above or as otherwise provided in accordance with terms of
the Loan Agreement.
(17) The Undersigned covenants and agrees that the Undersigned shall
maintain at all times Excess Liquidity in an amount not less than Five Million
Dollars ($5,000,000). For the purposes hereof, "Excess Liquidity" shall mean the
difference between (a) the sum of (i) cash, plus (ii) investments readily
convertible to cash, plus (iii) rights to call contributions to capital, minus
(b) the sum of (i) current obligations plus (ii) commitments to make
investments.
(18) Within forty-five (45) days of the end of each fiscal quarter of
the Undersigned, the Undersigned shall deliver to you financial reports and
other certificates evidencing the Excess Liquidity of the Undersigned, in form
and substance reasonably satisfactory to you.
(19) Simultaneously with the delivery of the financial reports
delivered pursuant to paragraph 18 above, the Undersigned shall deliver to you a
certificate (in the form of Exhibit A attached hereto and made a part hereof)
from the Chief Financial Officer of the Undersigned setting forth the
information (including detailed calculations) required in order to establish
whether the Undersigned is in compliance with the requirements of paragraph 17
as of the end of the period covered by the financial statements then being
furnished (and any exhibits appended thereto) under paragraph 18.
4
DATED the date and year first above written:
BRANTLEY PARTNERS IV, L.P.
By: Brantley Venture Management IV,
L.P., its general partner
By: /s/ Paul H. Cascio
-----------------------
Name: Paul H. Cascio
Title: Authorized Signatory
|
Address: Lakepoint
3201 Enterprise Parkway, Suite 350
Beachwood, Ohio 44122
5
EXHIBIT A
COMPLIANCE CERTIFICATE
Healthcare Business Credit Corporation
305 Fellowship Road, Suite 300
Mount Laurel, NJ 08054
The undersigned, the _____________ of Brantley Capital Partners IV, LP
("Guarantor"), in accordance with the requirements of paragraph 19 of that
certain Guaranty Agreement dated _____________, 2004 executed by Guarantor in
favor of Lender ("Guaranty Agreement") and that certain Loan and Security
Agreement dated __________, 2004, among Orion HealthCorp, Inc., Baytown
SurgiCare, Inc., Bellaire ASC L.P., Bellaire SurgiCare, Inc., Dennis Cain
Management, L.L.C., Dennis Cain Physician Solutions, Ltd., Integrated Physician
Solutions, Inc., IntegriMED, Inc., Medical Billing Services, Inc., San Jacinto
Surgery Center, Ltd., SurgiCare Memorial Village, L.P., Southeast SurgiCare,
Inc., TASC Anesthesia, LLC, Town & Country SurgiCare, Inc., Tuscarawas
Ambulatory Surgery Center, LLC, and Tuscarawas Open MRI, LP (collectively,
"Borrower") and Healthcare Business Credit Corporation ("Lender") ("Loan
Agreement"). Capitalized terms used in this Certificate, unless otherwise
defined herein, shall have the meanings ascribed to them in the Guaranty
Agreement.
1. Based upon my review of the of Guarantor for the [fiscal year]
[quarterly period] ending ______________, copies of which along with
calculations for the covenant are attached hereto, I hereby certify that:
a. Excess Liquidity is ___________________.
2. All warranties and representations set forth in the Guaranty
Agreement and all related agreements, instruments and documents are true and
correct as of the date hereof.
Very truly yours,
By: ____________________________
Name: __________________________
Title: _________________________
EXHIBIT 10.5
GUARANTY AGREEMENT
To: Healthcare Business Credit Corporation Date: December 15, 2004
305 Fellowship Road, Suite 300
Mt. Laurel, NJ 08054
To induce you to establish and/or continue financing arrangements with
and consider making or continuing certain loans and extending or continuing to
extend credit from time to time to Orion HealthCorp, Inc., Baytown SurgiCare,
Inc., Bellaire ASC L.P., Bellaire SurgiCare, Inc., Dennis Cain Management,
L.L.C., Dennis Cain Physician Solutions, Ltd., Integrated Physician Solutions,
Inc., IntegriMED, Inc., Medical Billing Services, Inc., San Jacinto Surgery
Center, Ltd., SurgiCare Memorial Village, L.P., TASC Anesthesia, LLC, Town &
Country SurgiCare, Inc., Tuscarawas Ambulatory Surgery Center, LLC, and
Tuscarawas Open MRI, LP, and certain affiliated entities that may from time to
time become a Borrower under the Loan Agreement (as defined below)
(individually, each a "Borrower" and collectively, "Borrowers") the Undersigned,
intending to be legally bound hereby guarantees the unconditional payment and
performance to you of all of the Obligations of Borrowers to you (including,
without limitation, interest owing to you after the commencement of a bankruptcy
proceeding at the rate specified in the Loan Agreement, whether or not such
claim is an allowable claim in such proceeding). Notwithstanding the foregoing,
the Undersigned's liability shall be limited to (A) the amount of the
Obligations due and owing as of the Guaranty Payment Date (as defined below) in
an amount not to exceed Seven Hundred Twenty Seven Thousand Two Hundred Seventy
Three Dollars ($727,273.00), plus (B) interest on the Obligations after the
Guaranty Payment Date and any and all fees, costs and expenses, including,
without limitation, reasonable attorneys' fees, incurred by you at any time to
enforce, protect, preserve, or defend your rights hereunder and with respect to
any property securing this Guaranty Agreement ("Liability Limit"). All payments
hereunder shall be made in lawful money of the United States, in immediately
available funds. Unless otherwise defined herein, all capitalized terms shall
have the respective meanings given to such terms in that certain Loan and
Security Agreement dated the date hereof among Borrowers and you (as it may
hereafter be supplemented, amended or replaced from time to time, the "Loan
Agreement").
For purposes hereof, "Guaranty Payment Date" shall mean the earliest to
occur of: (i) the ninetieth (90th) day following the date that the Obligations
are accelerated or otherwise become immediately due and payable, (ii) the
ninetieth (90th) day following the last day of the Initial Term, (iii) the date
Borrowers, or any of them, become the subject of any assignment for the benefit
of creditors, bankruptcy, liquidation or other insolvency proceeding, (iv) the
date on which substantially all of the assets or stock, membership or other
equity interests of Borrowers, or any of them, is sold unless otherwise
consented to by you in writing and (v) the date on which you determine, in your
reasonable business judgment that you have substantially completed your
collection and liquidation efforts with respect to the Collateral.
Each of the Undersigned further undertakes and agrees as follows:
(1) The Undersigned represents and warrants that:
(a) The Undersigned's execution and performance of this
Guaranty Agreement shall not (i) violate or result in a default or breach
(immediately or with the passage of time) under any contract, agreement or
instrument to which the
1
Undersigned is a party, or by which the Undersigned is bound, (ii) violate or
result in a default or breach under any order, decree, award, injunction,
judgment, law, regulation or rule, (iii) cause or result in the imposition or
creation of any lien upon any property of the Undersigned, or (iv) if
applicable, violate or result in a breach of the articles of incorporation,
by-laws or partnership agreement of the Undersigned.
(b) The Undersigned has the full power and capacity to enter
into and perform under this Guaranty Agreement.
(c) No consent, license or approval of, or filing or
registration with, any governmental authority is necessary for the execution and
performance hereof by the Undersigned.
(d) This Guaranty Agreement constitutes the valid and binding
obligation of the Undersigned enforceable in accordance with its terms, except
as such enforceability may be limited by creditors' rights generally and general
principles of equity.
(e) This Guaranty Agreement promotes and furthers the business
and interests of the Undersigned and the creation of the obligations hereunder
will result in direct financial benefit to the Undersigned.
(2) The Undersigned hereby waives notice of (a) acceptance of this
Guaranty Agreement, (b) the existence or incurring from time to time of any
Obligations guaranteed hereunder, (c) the existence of any Event of Default, the
making of demand, or the taking of any action by you, under the Loan Agreement,
and (d) demand and default hereunder.
(3) The Undersigned hereby consents and agrees that you may at any time
or from time to time in your discretion (a) extend or change the time of
payment, and/or the manner, place or terms of payment of any or all Obligations,
(b) amend, supplement or replace the Loan Agreement or any related agreements,
(c) renew, extend, modify, increase (without limit of any kind and whether
related or unrelated) or decrease loans and extensions of credit to Borrower,
(d) modify the terms and conditions under which loans and extensions of credit
may be made to Borrower, (e) settle, compromise or grant releases for
liabilities of Borrower, and/or any other person or persons liable with
Undersigned for, any Obligations, (f) exchange, release, surrender, sell,
subordinate, or compromise any collateral of any party now or hereafter securing
any of the Obligations, and (g) apply any and all payments received by you at
any time against the Obligations in any order as you may determine; all of the
foregoing in such manner and upon such terms as you may see fit, and without
notice to or further consent from the Undersigned, who hereby agrees to be and
shall remain bound upon this Guaranty Agreement notwithstanding any such action
on your part. The Undersigned also waives any defense, right of setoff, claim or
counterclaim whatsoever and any and all other rights, benefits, protections and
other defenses available to the Undersigned now or at any time hereafter.
(4) The liability of the Undersigned hereunder is absolute and
unconditional and shall not be reduced, impaired or affected in any way by
reason of (a) any failure to obtain, retain or preserve, or the lack of prior
enforcement of, any rights against any person or persons (including Borrower and
the Undersigned) or in any property, (b) the invalidity or unenforceability of
any Obligations or rights in any Collateral, (c) any delay in making demand upon
Borrower or any delay in enforcing, or any failure to enforce, any rights
against Borrower, or in any Collateral even if such rights are thereby lost, (d)
any failure, neglect or omission on your part to obtain, perfect or retain
2
any lien upon, protect, exercise rights against, or realize on, any property of
Borrower, the Undersigned, or any other party securing the Obligations, (e) the
existence or nonexistence of any defenses which may be available to the
Borrower, with respect to the Obligations, or (f) the commencement of any
bankruptcy, reorganization, liquidation, dissolution or receivership proceeding
or case filed by or against Borrower.
(5) If any or all payments made from time to time to you with respect
to any obligation hereby guaranteed are recovered from, or repaid by, you in
whole or in part in any bankruptcy, reorganization, insolvency or similar
proceeding instituted by or against Borrower or either of them, this Guaranty
Agreement shall continue to be fully applicable to such obligation to the same
extent as if the recovered or repaid payment(s) had never been originally made
on such obligation.
(6) All rights and remedies hereunder and under the Loan Agreement, and
related agreements, are cumulative and not alternative. You may proceed in any
order from time to time against Borrower and/or any other obligor of Borrower's
Obligations (other than the Undersigned) and their respective assets. From and
after the Guaranty Payment Date you shall not have any obligation to proceed
against, or exhaust any or all of your rights against Borrower or any other
obligor of Borrower's Obligations and their respective assets, prior to
proceeding against the Undersigned hereunder.
(7) Any and all rights of any nature of the Undersigned to subrogation,
reimbursement or indemnity and any right of the Undersigned to recourse to any
assets or property of Borrower for any reason are hereby unconditionally waived,
until such time as the Obligations of Borrower to Lender are indefeasibly paid
and satisfied in full.
(8) Your books and records of any and all of Borrower's Obligations,
absent manifest error, shall be prima facie evidence against the Undersigned of
the indebtedness due you or to become due to you hereunder.
(9) This Guaranty Agreement shall constitute a continuing guaranty
obligation with respect to all Obligations from time to time incurred or arising
and the liability of the Undersigned under this Guaranty Agreement may not be
revoked or terminated.
(10) The Undersigned agrees that you shall have a right of setoff
against any and all property of the Undersigned now or at any time in your
possession, including, without limitation, deposit accounts, and the proceeds
thereof, as security for the obligations of the Undersigned hereunder.
(11) If an Event of Default occurs under the Loan Agreement, then all
of the Undersigned's liabilities of every kind or nature to you hereunder shall,
at your option, become immediately due and payable and you may at any time and
from time to time after the occurrence of the Guaranty Payment Date take any
and/or all actions and enforce all rights and remedies available hereunder or
under applicable law to collect the Undersigned's liabilities hereunder.
(12) Failure or delay in exercising any right or remedy against the
Undersigned hereunder shall not be deemed a waiver thereof or preclude the
exercise of any other right or remedy hereunder. No waiver of any breach of or
provision of this Guaranty Agreement shall be construed as a waiver of any
subsequent breach or of any other provision. The invalidity or unenforceability
of
3
any provision hereof shall not affect the remaining provisions which shall
remain in full force and effect.
(13) This Guaranty Agreement shall (a) be legally binding upon the
Undersigned, and the Undersigned's successors and assigns, provided that the
Undersigned's obligations hereunder may not be delegated or assigned without
your prior written consent and (b) benefit any and all of your successors and
assigns. Signature by facsimile shall bind the Undersigned.
(14) This Guaranty Agreement embodies the whole agreement and
understanding of the parties hereto relative to the subject matter hereof. No
modification or waiver of any provision hereof shall be enforceable unless
approved by you in writing.
(15) This Guaranty Agreement shall in all respects be interpreted,
construed and governed by the substantive laws of the State of New York. The
Undersigned irrevocably (a) submits to the jurisdiction of the state courts of
the State of New Jersey and the United States District Court for the District of
New Jersey for the purposes of any litigation or proceeding hereunder or
concerning the terms hereof and (b) WAIVES THE RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY LITIGATION OR PROCEEDING HEREUNDER OR CONCERNING THE TERMS
HEREOF.
(16) (a) In any action or proceeding brought by you to enforce the
terms hereof, the Undersigned waives personal service of the summons, complaint,
and any motion or other process, and agrees that notice thereof may be served by
registered or certified mail, return receipt requested or by nationally
recognized overnight courier at the address of the Undersigned set forth below.
Such service shall be deemed made on the date of delivery at such address.
(b) Any and all notices which may be given to the Undersigned
by you hereunder shall be sent to the Undersigned at the address of the
Undersigned set forth below and shall be deemed given to and received (on the
date delivered) by the Undersigned if personally delivered or if sent by
facsimile transmission or if sent in the manner provided for service of process
in paragraph 16(a) above or as otherwise provided in accordance with terms of
the Loan Agreement.
[Remainder of Page Intentionally Left Blank]
4
DATED the date and year first above written:
BRANTLEY CAPITAL CORPORATION
By: /s/ Paul H. Cascio
---------------------
Name: Paul H. Cascio
Title: Vice President
|
Address: Lakepoint
3201 Enterprise Parkway, Suite 350
Beachwood, Ohio 44122
5
Exhibit 10.6
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REQUIREMENT UNDER SUCH ACT.
20,455 Warrants
COMMON STOCK WARRANT CERTIFICATE
To subscribe for and purchase shares of Class A Common Stock,
par value $0.001, of
ORION HEALTHCORP, INC.
THIS CERTIFIES that, for valued received, Brantley Partners IV, L.P., or
its registered successors and assigns, is the owner of the number of warrants
(the "Warrants") set forth above, each to purchase from Orion HealthCorp, Inc.,
a Delaware corporation (herein called the "Company"), at any time but in any
event no later than 5:00 p.m., New York time on December 15, 2009 (the
"Expiration Date"), one share of Class A Common Stock, par value $0.001 per
share, of the Company at an initial exercise price of $0.01, subject to
adjustment from time to time pursuant to the provisions of Section 2. The
Warrants evidenced by the Warrant Certificate may be exercised, if at all, only
in whole and not in part. For purposes of this Warrant Certificate, the term
"Common Shares" shall mean the class of capital stock of the Company designated
Class A Common Stock, par value $0.001 per share, pursuant to the Company's
Amended and Restated Certificate of Incorporation, as from time to time in
effect, and any other class of capital stock of the Company resulting from
successive changes or reclassification of the Class A Common Stock.
1. Exercise of Warrants.
(a) The Warrants evidenced hereby may be exercised at any time
through the Expiration Date by the registered holder hereof, in whole but
not in part, by the surrender of this Warrant Certificate, duly endorsed
(unless endorsement is waived by the Company), at the principal office of
the Company (or at such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at such
holder's last address appearing on the books of the Company) and upon
payment of the aggregate Exercise Price (as defined below) of the Common
Shares purchased. The certificate(s) for such Common Shares shall be
delivered to the registered holder hereof within a reasonable time, not
exceeding three (3) business days, after Warrants evidenced hereby shall
have been so exercised. No fractional Common Shares of the Company, or
scrips for any such fractional shares, shall be issued upon the exercise
of any Warrants; but the holder hereof shall be entitled to cash equal to
such fraction multiplied by the then Current Market Value of a Common
Share.
(b) In the event the Current Market Value of a Common Share
exceeds the Exercise Price on the business day immediately prior to the
exercise of the Warrants, the Holder may exercise the Warrants held by
such holder, without the payment of any additional consideration, for a
number of Common Shares determined by dividing (i) the result of the
difference between such Current Market Value and the Exercise Price times
the number of Common Shares into which the Warrants held by such Holder
are exercisable by (ii) such Current Market Value.
(c) For the purpose of any computation of Current Market Value
under this Warrant, the Current Market Value per Common Share at any date
shall be (x) the closing price on the business day immediately prior to
the exercise of the Warrants pursuant to Section 1(b) and (y) in all other
cases, the average of the daily closing prices for the 20 consecutive
trading days ending on the last full trading day on the exchange or market
specified in the second succeeding sentence prior to the Time of
Determination. The term "Time of Determination" as used herein shall be
the time and date of the earlier to occur of (A) the date as of which the
Current Market Value is to be computed and (B) the last full trading day
on such exchange or market before the commencement of "ex-dividend"
trading in the Common Stock relating to the event giving rise to the
adjustment required by Section 2. The closing price for any day shall be
the last reported sale price regular way or, in case no such reported sale
takes place on such day, the average of the closing bid and asked prices
regular way for such day, in each case (1) on the principal national
securities exchange on which the Common Shares listed or to which such
shares are admitted to trading or (2) if the Common Shares are not listed
or admitted to trading on a national securities exchange, in the
over-the-counter market as reported by NASDAQ or any comparable system or
(3) if the Common Shares are not listed on NASDAQ or a comparable system,
as furnished by two members of the NASD selected from time to time in good
faith by the Board of Directors of the Company for that purpose. In the
absence of all of the foregoing, or if for any other reason the Current
Market Value per share cannot be determined pursuant to the foregoing
provisions of this Section 1(c), the Current Market Value per share shall
be the fair market value thereof as determined in good faith by the Board
of Directors of the Company.
2. Adjustment in Exercise Price and Number of Shares. The initial
exercise price of $0.01 per share shall be subject to adjustment from time to
time as hereinafter provided (such price, as last adjusted, being herein called
the "Exercise Price"). Upon each adjustment of the Exercise Price, the holder of
this Warrant Certificate shall thereafter be entitled to purchase at the
Exercise Price resulting from such adjustment, the number of shares obtained by
dividing the product of the number of shares purchasable pursuant hereto
immediately prior to such adjustment and the Exercise Price immediately
preceding such adjustment by the Exercise Price resulting from such adjustment.
(a) Subdivision or Combination of Stock. If and whenever the
Company shall at any time subdivide its outstanding Common Shares into a
greater number of shares, the Exercise Price in effect immediately prior
to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding Common Shares of the
Company shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be
proportionately increased.
(b) Stock Dividends. If and whenever at any time the Company shall
declare a dividend or make any other distribution upon any class or series
of stock of the Company payable in Common Shares, the Exercise Price in
effect immediately prior to such dividend or distribution shall be
proportionately reduced as if such dividend or distribution had been made
by way of a subdivision pursuant to Section 2(a) above.
(c) Reorganization, Reclassification, Consolidation, Merger. If
any capital reorganization, reclassification of the capital stock of the
Company, consolidation or merger of the Company with another corporation,
or sale, transfer or other disposition of all or substantially all of the
Company's properties to another corporation shall be effected, then,
lawful and adequate provision shall be made whereby each holder of
Warrants shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions herein specified and in lieu of
the Common Shares immediately theretofore issuable upon exercise or the
Warrants, such shares of stock, securities or properties (including cash
paid as partial consideration) (collectively, the "Substitute Securities")
as may be issuable or payable with respect to or in exchange for a number
of outstanding Common Shares equal to the number of Common Shares issuable
upon exercise of the Warrants immediately prior to such reorganization,
reclassification, consolidation, merger, sale, transfer or other
disposition, and in any such case, appropriate provision shall be made
with respect to the rights and interests of each holder of Warrants to the
end that the provisions hereof shall thereafter be applicable, as nearly
equivalent as may be practicable in relation to any Substitute Securities
thereafter deliverable upon the exercise thereof. The above provisions of
this Section 2(c) shall similarly apply to successive reorganizations,
reclassification, consolidations, mergers, sales, transfers or
dispositions.
3. Company to Provide Stock. The Company covenants and agrees that all
the Common Shares which may be issued upon the exercise of the Warrants
evidenced hereby upon the due exercise, including the receipt by the Company of
the aggregate Exercise Price for all Warrants exercised, will be duly
authorized, validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof to the registered
holder hereof other than those which the Company shall promptly pay or
discharge. The Company further covenants and agrees that during the period
within which the Warrants evidenced hereby may be exercised, the Company will at
all times reserve such number of Common Shares as may be sufficient to permit
the exercise in full of the Warrants hereby.
4. Other Notices. If any time prior to the Expiration of the Warrants
evidenced hereby:
(a) The Company shall declare any dividend on the Common Shares
payable in shares of capital stock of the Company other than Common
Shares; or
- 3 -
(b) The Company shall issue any options, warrants or rights pro
rata to all holders of Common Shares entitling them to subscribe for or
purchase any shares of stock of the Company or to receive any other
rights; or
(c) The Company shall distribute pro rata to all holders of Common
Shares evidences of its indebtedness or assets (including cash
distributions); or
(d) There shall occur any reclassification of the Common Shares,
or any consolidation or merger of the Company with or into another
corporation (other than a consolidation or merger in which the Company is
the continuing corporation and which does not result in any
reclassification of the Common Stock) or a sale or transfer to another
corporation of all or substantially all of the properties of the Company;
or
(e) There shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company;
then, and in each of such cases, the Company shall mail to the registered holder
hereof at its last address appearing on the books of the Company, a reasonable
time (and, in any event, at least fifteen (15) business days) prior to the
applicable record date (or determination date) mentioned below, a notice
stating, to the extent such information is available, (i) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights,
or, if a record is not to be taken, the date as of which the holders of Common
Shares or of record to be entitled to such dividend, distribution or rights are
to be determined, or (ii) the date on which such liquidation, dissolution or
winding up is expected to become effective and the date as of which it is
expected that holders of Common Shares of record shall be entitled to exchange
their Common Shares for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up.
5. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate, and in the case of any such loss, theft or destruction
of this Warrant Certificate, on delivery of an indemnity agreement reasonably
satisfactory in form and substance to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant Certificate, unless
the Company has received notice that any such Warrant Certificate has been
acquired by a bona fide purchase, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant Certificate of like tenor.
6. Registered Holder. The registered holder of this Warrant Certificate
shall be deemed the owner hereof and of the Warrants evidenced hereby for all
purposes. The registered holder of this Warrant Certificate shall not be
entitled by virtue of ownership of this Warrant Certificate to any rights
whatsoever as a shareholder of the Company.
7. Amendments and Waivers. Any provision in this Warrant Certificate to
the contrary notwithstanding, changes in or additions to this Warrant
Certificate may be made and compliance with any covenant or provision herein set
forth may be omitted or waived if the Company shall obtain consent thereto in
writing from the holder hereof.
- 4 -
8. Transfer.
(a) None of this Warrant Certificate and the Warrants evidenced
hereby nor any Common Shares issued or exercise hereof may be sold,
transferred, pledged, hypothecated or otherwise disposed of unless and
until: (i) there is then in effect a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), covering such
proposed disposition and such disposition is made in accordance with such
registration statement and all applicable state securities laws; or (ii)
(A) the transferor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and (B) if reasonably
requested by the Company, such transferor shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such securities under
the Securities Act and that all requisite action has been or will, on a
timely basis, be taken under any applicable state securities laws in
connection with such disposition; and (iii) the proposed transferee shall
have agreed in writing to be bound by the terms and provisions of this
Section 8.
(b) Notwithstanding the provisions of Section 8(a), no such
registration statement or opinion of counsel shall be necessary for a
transfer pursuant to Rule 144(k) promulgated under the Securities Act, or
a transfer to an entity wholly owned by such transferor, if the transferee
agrees in writing to be subject to the terms hereof to the same extent as
if such transferee were an original holder of this certificate.
(c) This Warrant Certificate may be transferred only in whole and
not in part.
IN WITNESS WHEREOF, Orion HealthCorp, Inc. has caused this Warrant
Certificate to be signed by a duly authorized officer under seal, and this
Warrant Certificate to be dated December 15, 2004.
ORION HEALTHCORP, INC.
By: /s/ Keith LeBlanc
-----------------
Title: President
|
- 5 -
EXHIBIT 10.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REQUIREMENT UNDER SUCH ACT.
4,545 Warrants
COMMON STOCK WARRANT CERTIFICATE
To subscribe for and purchase shares of Class A Common Stock, par value $0.001,
of
ORION HEALTHCORP, INC.
THIS CERTIFIES that, for valued received, Brantley Capital Corporation,
or its registered successors and assigns, is the owner of the number of warrants
(the "Warrants") set forth above, each to purchase from Orion HealthCorp, Inc.,
a Delaware corporation (herein called the "Company"), at any time but in any
event no later than 5:00 p.m., New York time on December 15, 2009 (the
"Expiration Date"), one share of Class A Common Stock, par value $0.001 per
share, of the Company at an initial exercise price of $0.01, subject to
adjustment from time to time pursuant to the provisions of Section 2. The
Warrants evidenced by the Warrant Certificate may be exercised, if at all, only
in whole and not in part. For purposes of this Warrant Certificate, the term
"Common Shares" shall mean the class of capital stock of the Company designated
Class A Common Stock, par value $0.001 per share, pursuant to the Company's
Amended and Restated Certificate of Incorporation, as from time to time in
effect, and any other class of capital stock of the Company resulting from
successive changes or reclassification of the Class A Common Stock.
1. Exercise of Warrants.
(a) The Warrants evidenced hereby may be exercised at any time
through the Expiration Date by the registered holder hereof, in whole
but not in part, by the surrender of this Warrant Certificate, duly
endorsed (unless endorsement is waived by the Company), at the
principal office of the Company (or at such other office or agency of
the Company as it may designate by notice in writing to the registered
holder hereof at such holder's last address appearing on the books of
the Company) and upon payment of the aggregate Exercise Price (as
defined below) of the Common Shares purchased. The certificate(s) for
such Common Shares shall be delivered to the registered holder hereof
within a reasonable time, not exceeding three (3) business days, after
Warrants evidenced hereby shall have been so exercised. No fractional
Common Shares of the Company, or scrips for any such fractional shares,
shall be issued upon the exercise of any Warrants; but the holder
hereof shall be entitled to cash equal to such fraction multiplied by
the then Current Market Value of a Common Share.
(b) In the event the Current Market Value of a Common Share
exceeds the Exercise Price on the business day immediately prior to the
exercise of the Warrants, the Holder may exercise the Warrants held by
such holder, without the payment of any additional consideration, for a
number of Common Shares determined by dividing (i) the result of the
difference between such Current Market Value and the Exercise Price
times the number of Common Shares into which the Warrants held by such
Holder are exercisable by (ii) such Current Market Value.
(c) For the purpose of any computation of Current Market Value
under this Warrant, the Current Market Value per Common Share at any
date shall be (x) the closing price on the business day immediately
prior to the exercise of the Warrants pursuant to Section 1(b) and (y)
in all other cases, the average of the daily closing prices for the 20
consecutive trading days ending on the last full trading day on the
exchange or market specified in the second succeeding sentence prior to
the Time of Determination. The term "Time of Determination" as used
herein shall be the time and date of the earlier to occur of (A) the
date as of which the Current Market Value is to be computed and (B) the
last full trading day on such exchange or market before the
commencement of "ex-dividend" trading in the Common Stock relating to
the event giving rise to the adjustment required by Section 2. The
closing price for any day shall be the last reported sale price regular
way or, in case no such reported sale takes place on such day, the
average of the closing bid and asked prices regular way for such day,
in each case (1) on the principal national securities exchange on which
the Common Shares listed or to which such shares are admitted to
trading or (2) if the Common Shares are not listed or admitted to
trading on a national securities exchange, in the over-the-counter
market as reported by NASDAQ or any comparable system or (3) if the
Common Shares are not listed on NASDAQ or a comparable system, as
furnished by two members of the NASD selected from time to time in good
faith by the Board of Directors of the Company for that purpose. In the
absence of all of the foregoing, or if for any other reason the Current
Market Value per share cannot be determined pursuant to the foregoing
provisions of this Section 1(c), the Current Market Value per share
shall be the fair market value thereof as determined in good faith by
the Board of Directors of the Company.
2. Adjustment in Exercise Price and Number of Shares. The initial
exercise price of $0.01 per share shall be subject to adjustment from time to
time as hereinafter provided (such price, as last adjusted, being herein called
the "Exercise Price"). Upon each adjustment of the Exercise Price, the holder of
this Warrant Certificate shall thereafter be entitled to purchase at the
Exercise Price resulting from such adjustment, the number of shares obtained by
dividing the product of the number of shares purchasable pursuant hereto
immediately prior to such adjustment and the Exercise Price immediately
preceding such adjustment by the Exercise Price resulting from such adjustment.
(a) Subdivision or Combination of Stock. If and whenever the
Company shall at any time subdivide its outstanding Common Shares into
a greater number of shares, the Exercise Price in effect immediately
prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding Common Shares of the
Company shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be
proportionately increased.
(b) Stock Dividends. If and whenever at any time the Company
shall declare a dividend or make any other distribution upon any class
or series of stock of the Company payable in Common Shares, the
Exercise Price in effect immediately prior to such dividend or
distribution shall be proportionately reduced as if such dividend or
distribution had been made by way of a subdivision pursuant to Section
2(a) above.
(c) Reorganization, Reclassification, Consolidation, Merger.
If any capital reorganization, reclassification of the capital stock of
the Company, consolidation or merger of the Company with another
corporation, or sale, transfer or other disposition of all or
substantially all of the Company's properties to another corporation
shall be effected, then, lawful and adequate provision shall be made
whereby each holder of Warrants shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions
herein specified and in lieu of the Common Shares immediately
theretofore issuable upon exercise or the Warrants, such shares of
stock, securities or properties (including cash paid as partial
consideration) (collectively, the "Substitute Securities") as may be
issuable or payable with respect to or in exchange for a number of
outstanding Common Shares equal to the number of Common Shares issuable
upon exercise of the Warrants immediately prior to such reorganization,
reclassification, consolidation, merger, sale, transfer or other
disposition, and in any such case, appropriate provision shall be made
with respect to the rights and interests of each holder of Warrants to
the end that the provisions hereof shall thereafter be applicable, as
nearly equivalent as may be practicable in relation to any Substitute
Securities thereafter deliverable upon the exercise thereof. The above
provisions of this Section 2(c) shall similarly apply to successive
reorganizations, reclassification, consolidations, mergers, sales,
transfers or dispositions.
3. Company to Provide Stock. The Company covenants and agrees that all
the Common Shares which may be issued upon the exercise of the Warrants
evidenced hereby upon the due exercise, including the receipt by the Company of
the aggregate Exercise Price for all Warrants exercised, will be duly
authorized, validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof to the registered
holder hereof other than those which the Company shall promptly pay or
discharge. The Company further covenants and agrees that during the period
within which the Warrants evidenced hereby may be exercised, the Company will at
all times reserve such number of Common Shares as may be sufficient to permit
the exercise in full of the Warrants hereby.
4. Other Notices. If any time prior to the Expiration of the Warrants
evidenced hereby:
(a) The Company shall declare any dividend on the Common
Shares payable in shares of capital stock of the Company other than
Common Shares; or
- 3-
(b) The Company shall issue any options, warrants or rights
pro rata to all holders of Common Shares entitling them to subscribe
for or purchase any shares of stock of the Company or to receive any
other rights; or
(c) The Company shall distribute pro rata to all holders of
Common Shares evidences of its indebtedness or assets (including cash
distributions); or
(d) There shall occur any reclassification of the Common
Shares, or any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the
Company is the continuing corporation and which does not result in any
reclassification of the Common Stock) or a sale or transfer to another
corporation of all or substantially all of the properties of the
Company; or
(e) There shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company;
then, and in each of such cases, the Company shall mail to the registered holder
hereof at its last address appearing on the books of the Company, a reasonable
time (and, in any event, at least fifteen (15) business days) prior to the
applicable record date (or determination date) mentioned below, a notice
stating, to the extent such information is available, (i) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights,
or, if a record is not to be taken, the date as of which the holders of Common
Shares or of record to be entitled to such dividend, distribution or rights are
to be determined, or (ii) the date on which such liquidation, dissolution or
winding up is expected to become effective and the date as of which it is
expected that holders of Common Shares of record shall be entitled to exchange
their Common Shares for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up.
5. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate, and in the case of any such loss, theft or destruction
of this Warrant Certificate, on delivery of an indemnity agreement reasonably
satisfactory in form and substance to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant Certificate, unless
the Company has received notice that any such Warrant Certificate has been
acquired by a bona fide purchase, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant Certificate of like tenor.
6. Registered Holder. The registered holder of this Warrant Certificate
shall be deemed the owner hereof and of the Warrants evidenced hereby for all
purposes. The registered holder of this Warrant Certificate shall not be
entitled by virtue of ownership of this Warrant Certificate to any rights
whatsoever as a shareholder of the Company.
7. Amendments and Waivers. Any provision in this Warrant Certificate to
the contrary notwithstanding, changes in or additions to this Warrant
Certificate may be made and compliance with any covenant or provision herein set
forth may be omitted or waived if the Company shall obtain consent thereto in
writing from the holder hereof.
- 4-
8. Transfer.
(a) None of this Warrant Certificate and the Warrants
evidenced hereby nor any Common Shares issued or exercise hereof may be
sold, transferred, pledged, hypothecated or otherwise disposed of
unless and until: (i) there is then in effect a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"),
covering such proposed disposition and such disposition is made in
accordance with such registration statement and all applicable state
securities laws; or (ii) (A) the transferor shall have notified the
Company of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the proposed
disposition, and (B) if reasonably requested by the Company, such
transferor shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not
require registration of such securities under the Securities Act and
that all requisite action has been or will, on a timely basis, be taken
under any applicable state securities laws in connection with such
disposition; and (iii) the proposed transferee shall have agreed in
writing to be bound by the terms and provisions of this Section 8.
(b) Notwithstanding the provisions of Section 8(a), no such
registration statement or opinion of counsel shall be necessary for a
transfer pursuant to Rule 144(k) promulgated under the Securities Act,
or a transfer to an entity wholly owned by such transferor, if the
transferee agrees in writing to be subject to the terms hereof to the
same extent as if such transferee were an original holder of this
certificate.
(c) This Warrant Certificate may be transferred only in whole
and not in part.
IN WITNESS WHEREOF, Orion HealthCorp, Inc. has caused this Warrant
Certificate to be signed by a duly authorized officer under seal, and this
Warrant Certificate to be dated December 15, 2004.
ORION HEALTHCORP, INC.
By: /s/ Keith LeBlanc
----------------------
Title: President
|
- 5-
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of December 15,
2004, between Orion HealthCorp, Inc., a Delaware corporation, with an executive
office located at 1805 Old Alabama Road, Suite 350, Roswell, Georgia 30076
(together with its successors and assigns permitted under this Agreement, the
"Company"), and Terrence L. Bauer, who resides at the address set forth on
Schedule I hereto (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive desire to enter into an employment
arrangement; and
WHEREAS, the Company has determined that it is in the best interests of
the Company and its stockholders to enter into this Agreement setting forth the
obligations and duties of both the Company and the Executive; and
WHEREAS, the Company wishes to assure itself of the services of the
Executive for the period hereinafter provided, and the Executive is willing to
be employed by the Company for said period, upon the terms and conditions
provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually, a
"Party" and together, the "Parties") agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company, on the terms and conditions set
forth herein.
2. Term. Subject to the provisions for earlier termination as hereinafter
provided, the term of this Employment Agreement will begin on the date hereof
and will continue for five (5) years hereafter (the "Initial Term of
Employment"). This Agreement will be automatically renewed at the end of the
Initial Term of Employment and each successive renewal term thereafter for
successive two (2) year terms unless either party sends written notice of
termination to the other party not less than one hundred and eighty (180) days
prior to the expiration of the then current Term of Employment (as hereinafter
defined). The Initial Term of Employment together with any renewal terms is
referred to herein as the "Term of Employment." The nonrenewal of the term of
this Agreement by the Company will not be a termination without Cause (as
defined in Section 8(c)).
3. Position and Duties; Place of Performance.
(a) The Executive will serve as Chief Executive Officer of the
Company and will perform all duties customarily attendant to the position
of Chief Executive Officer and such other duties as may reasonably be
assigned from time-to-time by the Board of
Directors (the "Board") that are consistent with his position as Chief
Executive Officer. The Executive will report solely to the Board or any
subcommittees thereof.
(b) The Executive will devote his full business time and best
efforts to his employment and perform diligently such duties as are
consistent with his capacity as Chief Executive Officer of the Company and
such other duties as the Board reasonably determines that are consistent
with his position. The Executive will devote his entire working time and
attention to the performance of his responsibilities hereunder; provided,
the Executive may make personal investments, engage in outside
non-competitive business activities or engage in other activities for any
charitable or other non-profit institution, provided that such activities
do not interfere with the performance of the Executive's duties hereunder.
(c) In connection with the Executive's employment by the Company,
the Executive will be based at the Company's place of business which on
the date hereof is located in Atlanta, Georgia, or such other location as
may, subject to Section 8(d), be designated from time to time by the
Board.
4. Base Salary. The Executive will receive from the Company an annual base
salary of Two Hundred Forty Thousand Dollars ($240,000) (as from time to time
adjusted, the "Base Salary"), payable in accordance with the standard practice
of the Company with respect to the payment of salaries of its employees. The
Board will review the Base Salary annually, and may, in its reasonable
discretion, adjust the Base Salary.
5. Annual Bonus. The Executive may be paid a bonus annually based upon the
attainment of objectives determined by the Board after consultation with the
Executive. Within 90 days after the start of each fiscal year, the Board will
communicate to the Executive the objectives applicable to such fiscal year and,
unless the Board and the Executive shall mutually agree otherwise, such
objectives shall apply to such fiscal year.
6. Other Benefits.
(a) During the Term of Employment, the Executive will be provided
with such medical, hospitalization, insurance, pension plan, profit
sharing and employee benefits, cell phone and such other similar
employment privileges and benefits ("Benefits") as are afforded generally
from time to time to other executive employees of the Company, and four
(4) weeks paid vacation each year.
(b) During the term of this Agreement, the Executive shall receive
Five Hundred Dollars ($500) per month (pre-tax) as an automobile
allowance. The Company shall pay all reasonable maintenance and repair
expenses with respect to the automobile used primarily for business
purposes by the Executive, procure and maintain in force collision,
comprehensive, and liability insurance coverage with respect to the
automobile, and pay operating expenses with respect to the automobile.
2
7. Expense Reimbursement. During the Term of Employment, the Executive
will be entitled to prompt reimbursement by the Company for all reasonable
out-of-pocket expenses incurred by him in performing services under this
Agreement, upon submission of such accounts and records as may be required under
Company policy.
8. Termination of Employment. The Executive's employment may be terminated
under the following circumstances:
(a) Death. The Executive's employment is terminated upon his death.
(b) Disability. The Executive's employment may be terminated by the
Company due to illness or other physical or mental disability of the
Executive, resulting in his inability to perform substantially his duties
under this Agreement for a period of ninety (90) or more consecutive days
or for one hundred eighty (180) days in the aggregate during any
consecutive twelve (12) month period ("Disability").
(c) Cause. The Executive's employment may be terminated by the
Company for Cause. For purposes of this Agreement, the Company will have
"Cause" to terminate the Executive's employment upon:
(i) the Executive's indictment for any crime involving monies
or other property or any felony, crime or any offense of moral
turpitude, or his commission of fraud, embezzlement, theft,
dishonesty, willful misconduct or deliberate injury to the Company
or its subsidiaries;
(ii) the Executive's intentional or grossly negligent refusal
or failure to perform his duties or carry out directions of the
Company's Board, which refusal or failure remains uncured or
continues more than thirty (30) days after notice from the Company
specifying in reasonable detail the nature of the breach, or recurs
within such period;
(iii) the Executive's breach of any of his fiduciary duties to
the Company or making of a willful misrepresentation or omission,
which breach or misrepresentation or omission might reasonably be
expected to have a material adverse effect on the Company's business
and which remains uncured or continues more than thirty (30) days
after notice from the Company specifying in reasonable detail the
nature of the breach or misrepresentation or omission, or recurs
within such period;
(iv) the Executive's breach of any material provision of this
Agreement, which breach, if curable, remains uncured or continues
more than thirty (30) days after notice from the Company specifying
in reasonable detail the nature of the breach, or recurs within such
period; or
3
(v) any misappropriation by the Executive of funds or property
of the Company or any affiliate of the Company.
Any termination for "Cause" will not be in limitation of any other right
or remedy the Company may have under this Agreement or otherwise.
(d) Good Reason. The Executive may terminate his employment under
this Agreement for Good Reason. For purposes of this Agreement, the
Executive will have "Good Reason" to terminate the Executive's employment
upon the occurrence of any of the following circumstances, without the
Executive's express written consent: (i) a material diminution in the
Executive's position or authority (except during periods when the
Executive is unable to perform all or substantially all of the Executive's
duties and/or responsibilities as a result of the Executive's illness
(either physical or mental) or other incapacity); (ii) a requirement by
the Company that the Executive change the Executive's principal place of
business to a place more than thirty (30) miles from its location on the
date of this Agreement; (iii) a termination of employment by the Executive
within ninety (90) days following a Change in Control (as defined below),
provided, that Good Reason will not exist if the Executive has accepted or
agreed to continue employment following the Change of Control with the
surviving or successor entity and such surviving or successor entity has
agreed to continue or assume this Agreement, provided, further, in the
event of a Change of Control, the Executive is under no obligation to
continue or accept employment with the surviving or successor entity and
may instead elect to terminate his employment for Good Reason upon such
Change of Control; (iv) a breach of this Agreement by the Company which is
not cured within thirty (30) days of written notice by the Company; or (v)
any reduction in the Executive's Base Salary. The Executive's right to
terminate employment pursuant to this subsection 8(d) will not be affected
by the Executive's Disability. The Executive's continued employment will
not constitute consent to, or a waiver of rights with respect to, any
circumstance constituting consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason; provided, however, that the
Executive will be deemed to have waived his rights pursuant to
circumstances constituting Good Reason if he has not provided to the
Company a Notice of Termination (as defined below) within ninety (90) days
following his knowledge of the circumstances constituting Good Reason. A
waiver with respect to the circumstances constituting Good Reason will not
act as a waiver with respect to other future circumstances constituting
Good Reason.
Any termination of the Executive's employment by the Executive must
be communicated by written Notice of Termination to the Company in
accordance with Section 19. For purposes of this Agreement, a "Notice of
Termination" means a notice which indicates the specific termination
provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated.
For purposes of this Agreement, a "Change in Control" will occur:
(i) upon the sale or other disposition of 50% or more of the consolidated
assets of the Company taken
4
as a whole; (ii) if shares representing a majority of the voting power of
the Company are acquired by a person or group (as such term is used in
Rule 13d-5 promulgated under the Securities Exchange Act of 1934, as
amended) of persons other than the holders of the capital stock of the
Company as of the date of this Agreement; (iii) upon a merger or
consolidation pursuant to which the holders of the equity securities of
the Company before the merger or consolidation do not own equity
securities representing a majority of the voting power of the surviving
entity after the merger or consolidation; or (iv) upon approval by the
shareholders of the Company of a complete liquidation or dissolution of
the Company.
9. Compensation Upon Termination.
(a) If the Executive's employment is terminated as a result of the
Executive's death or Disability, he, or his estate, will be entitled to:
(i) any Base Salary earned but not yet paid;
(ii) any bonus awarded pursuant to Section 5 of this Agreement
but not yet paid, payable as soon as administratively feasible
following termination of employment;
(iii) a prorated bonus for the year in which his employment
terminates, prorated based on the number of days worked, minus any
bonus payments made pursuant to Section 5 of this Agreement in
respect of the year containing the date of termination, payable as
soon as administratively feasible following the end of the then
current fiscal year of the Company;
(iv) reimbursement in accordance with this Agreement of any
business expense incurred by the Executive but not yet paid, payable
as soon as administratively feasible following termination of
employment; and
(v) other benefits accrued and earned by the Executive through
the date of his death or Disability in accordance with applicable
plans and programs of the Company.
(b) If the Executive's employment is terminated by the Company for
Cause, or by the Executive other than for Good Reason, or as a result of
notice of nonrenewal provided by the Company or the Executive under
Section 2, he will be entitled to:
(i) any Base Salary earned but not yet paid;
(ii) reimbursement in accordance with this Agreement of any
business expense incurred by the Executive but not yet paid, payable
as soon as administratively feasible following termination of
employment;
5
(iii) other benefits accrued and earned by the Executive
through the date of his termination in accordance with applicable
plans and programs of the Company;
(iv) if the Executive's employment is terminated as a result
of notice of nonrenewal provided by the Executive under Section 2,
he will be entitled to a prorated bonus for the year in which his
employment terminates, prorated based on the number of days worked,
minus any bonus payments made pursuant to Section 5 of this
Agreement in respect of the year containing the date of termination,
payable as soon as administratively feasible following the end of
the then current fiscal year of the Company; and
(v) if the Executive's employment is terminated as a result of
notice of nonrenewal provided by the Company under Section 2, he
will be entitled to full vesting of any unvested equity incentives,
including without limitation stock options, restricted stock and
deferred restricted stock units.
(c) If the Executive's employment is terminated by the Company
without Cause, or by the Executive for Good Reason, he will be entitled
to:
(i) any Base Salary earned but not yet paid;
(ii) any bonus awarded pursuant to Section 5 of this Agreement
but not yet paid, payable as soon as administratively feasible
following termination of employment;
(iii) continuation of his Base Salary, at the rate in effect
on the date of his termination of employment (which, in the case of
a termination of the Executive for Good Reason pursuant to Section
8(d)(v), shall be deemed to be the rate in effect prior to giving
any effect to the reduction in Base Salary giving rise to such Good
Reason), until the expiration of the Non-Competition Period (as
defined below);
(iv) the greater of: (A) a prorated bonus for the year in
which employment terminates, prorated based on the number of days
worked, or (B) an amount equal to fifty percent (50%) of the average
of the bonus payments made pursuant to Section 5 of this Agreement
during the two (2) calendar years preceding such termination, if
any, minus any bonus payments made pursuant to Section 5 of this
Agreement in respect of the year containing the date of termination,
payable in either event as soon as administratively feasible
following the end of the then fiscal year of the Company; provided,
however, that this clause (iv) shall not be applicable in the event
that the Executive's employment is terminated upon notice of
nonrenewal provided by the Company under Section 2;
6
(v) until the expiration of the Non-Competition Period,
subject to any employee contribution applicable to the Executive on
the date of termination, continued participation in all of the
Company's group medical and dental insurance plans in which he was
participating on the date of his termination of employment, provided
that the Executive is entitled to continue such participation under
applicable law and plan terms;
(vi) reimbursement in accordance with this Agreement of any
business expenses incurred by the Executive but not yet paid to him
on the date of his termination of employment, payable as soon as
administratively feasible following termination of employment; and
(vii) full vesting of any unvested equity incentives,
including without limitation stock options, restricted stock and
deferred restricted stock units.
In the event that, under the terms of any employee benefit plan
referred to in subsection 9(c)(v) above, the Executive may not continue
his participation, he will be provided with the after-tax economic
equivalent of the benefits provided under any plan in which he was
previously eligible to participate for the period specified in subsection
9(c)(v) above. The economic equivalent of any benefit foregone will be
deemed to be the cost that would be incurred by the Executive in obtaining
such benefit on the lowest available individual basis.
(d) Any amounts due under this Section 9 are in the nature of
severance payments or liquidated damages or both, and will fully
compensate the Executive and his dependents or beneficiaries, as the case
may be, for any and all direct damages and consequential damages that any
of them may suffer as a result of termination of the Executive's
employment, and they are not in the nature of a penalty.
(e) Notwithstanding anything contained herein, any obligation of the
Company to the Executive under Sections 9(c)(iii), (iv), (v) and (vii) is
conditioned upon (i) the Executive signing a release of claims in the form
attached hereto as Exhibit A (the "Employee Release") within twenty-one
days (or such greater period as the Company may specify) following the
later of the date on which the Executive (or, in the case of termination
by the Executive for Good Reason, the Company) receives notice of
termination of employment or the date the Executive receives a copy of the
Employee Release and upon the Executive not revoking the Employee Release
in a timely manner thereafter and (ii) the Executive's continuing
compliance with the provisions of Section 10. If the Executive breaches
any provision of Section 10, upon written notice of such breach and
request for repayment from the Company, the Executive shall promptly pay
to the Company an amount equal to the sum of any cash payments previously
paid to the Executive pursuant to Sections 9(c)(iii), (iv), (v) and (vii).
Any such repayment shall not be the exclusive remedy for any such breach
and the Company shall retain all rights to pursue other available remedies
(whether at law or equity) for any such breach.
7
10. Confidentiality and Non-Competition.
(a) The Executive acknowledges that he has had or will have
unlimited access to confidential information and business methods relating
to the Company's business and operations and that the Company would be
irreparably injured and the goodwill of the Company would be irreparably
damaged if the Executive were to breach the covenants set forth in this
Section 10. The Executive further acknowledges that the covenants set
forth in this Section 10 are reasonable in scope and duration and do not
unreasonably restrict the Executive's association with other business
entities, either as an employee or otherwise as set forth herein.
(b) During the Term of Employment and thereafter, except as may be
required by law or necessary in connection with any dealings with any
public agency or authority or in the ordinary course of business during
the Term of Employment pursuant to customary non-disclosure agreements,
the Executive will not disclose, disseminate, divulge, discuss, copy or
otherwise use or suffer to be used, including but not limited to in
competition with, or in a manner harmful to the interests of, the Company,
any confidential information (written or oral) respecting any material
aspect of the Company's business, excepting only use of such data or
information as is (i) at the time disclosed, through no act or failure to
act on the part of the Executive, generally known or available; (ii)
furnished to the Executive by a third party as a matter of right and
without restriction on disclosure; or (iii) required to be disclosed by
court order. Upon termination of the Term of Employment, the Executive
will return to the Company any and all materials in tangible or electronic
form containing confidential information belonging to the Company.
(c) During the Term of Employment and the Non-Competition Period,
the Executive will not in the states of California, Florida, Georgia,
Illinois, Iowa, New Jersey, Ohio or Texas, directly or indirectly, whether
as an individual on the Executive's own account, or as a shareholder,
partner, member, joint venturer, director, officer, employee, consultant,
creditor and/or agent, of any person, firm or organization or otherwise:
(i) own, manage, control or participate in the ownership,
management or control of, or be employed or engaged by or otherwise
affiliated or associated as a consultant, independent contractor or
otherwise with, any other corporation, partnership, proprietorship,
firm, association or other business entity or otherwise engage in
any business that is engaged in the business of the Company or any
of the Company's subsidiaries (collectively, "Subsidiaries"), as
such business is conducted on the applicable date during the Term of
Employment, or in the case of the Non-Competition Period, as of the
date the Executive ceases to be employed by the Company, in any
capacity, including as a consultant;
(ii) directly or indirectly solicit, encourage or induce any
person who is a present or future employee, officer, agent,
affiliate or customer of the Company or
8
any Subsidiary to terminate or materially alter such person's
relationship with the Company or such Subsidiary;
(iii) induce any supplier of the Company or any Subsidiary, to
refuse to do business with the Company or any Subsidiary, on as
favorable terms as previously done with the Company or any
Subsidiary, as the case may be; or
(iv) engage in disparagement (which will not include the
providing of accurate information without invidious intent) of the
Company or any Subsidiary by any means to any person.
For purposes of this Agreement, "Non-Competition Period" shall mean the
period during the Term of Employment and thereafter until the second
anniversary of the date of termination of the Executive's employment with
the Company; provided, however, that the Company may, by written notice to
the Executive (whether given before or after the date of termination of
the Executive's employment with the Company), shorten the portion of the
Non-Competition Period occurring following the date of termination of the
Executive's employment with the Company to any date specified in such
notice which occurs on or after the earlier of (x) the second anniversary
of the date of termination of the Executive's employment with the Company
and (y) the date of expiration of the then current Term of Employment.
Notwithstanding the foregoing, in the event that the Company or the
Executive provides notice of nonrenewal under Section 2, then: (1) the
Company shall have the option to continue to pay the Executive his Base
Salary, at the rate in effect on the date of his termination of
employment, until the expiration of the Non-Competition Period; (2) if the
Company exercises such option, it may discontinue the payment of Base
Salary at any time; (3) the Executive shall be subject to Section 10(c)(i)
only for so long as the Company continues to pay the Executive his Base
Salary; and (4) if the Company stops paying the Executive his Base Salary,
then the Executive shall no longer be subject to Section 10(c)(i), but
shall remain subject to the rest of this Section 10.
(d) Notwithstanding anything herein to the contrary, the Executive
will be permitted to own shares of any class of capital stock of any
publicly held corporation so long as the aggregate holdings of the
Executive represent less than one percent (1%) of the outstanding shares
of such class of capital stock.
11. Rights and Remedies Upon Breach.
(a) The Executive expressly agrees and understands that the remedy
at law for any breach by the Executive of Section 10 will be inadequate
and that the damages flowing from such breach are not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged that
upon adequate proof of the Executive's violation of Section 10, the
Company will be entitled, among other remedies, to injunctive relief and
may obtain a temporary restraining order restraining any threatened or
further breach. Nothing in this Section 11(a) will be deemed to limit the
Company's
9
remedies at law or in equity for any breach by the Executive of any of the
provisions of this Agreement which may be pursued or availed of by the
Company.
(b) In the event any court of competent jurisdiction determines that
the specified time period or geographical area set forth in Section 10 is
unreasonable, arbitrary or against public policy, then a lesser time
period or geographical area that is determined by the court to be
reasonable, non-arbitrary and not against public policy may be enforced.
12. Withholding Taxes. All payments to the Executive or his beneficiary
will be subject to withholding on account of federal, state and local taxes as
required by law. If any payment hereunder is insufficient to provide the amount
of such taxes required to be withheld, the Company may withhold such taxes from
any other payment due the Executive or his beneficiary.
13. Assignability; Binding Nature. This Agreement will be binding upon and
inure to the benefit of the Parties and their respective successors, heirs (in
the case of the Executive) and assigns. No rights or obligations of the Company
under this Agreement may be assigned or transferred by the Company except that
such rights or obligations may be assigned or transferred pursuant to (i) a
merger or consolidation in which the Company is not the continuing entity or
(ii) a sale or liquidation of all or substantially all of the assets of the
Company, provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company, as contained in
this Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale of assets or liquidation as described in the
preceding sentence, it will use its best efforts to cause such assignee or
transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder. No obligations of the Executive under this Agreement may be
assigned or transferred by the Executive.
14. Entire Agreement. Except to the extent otherwise provided herein, this
Agreement contains the entire understanding and agreement between the Parties
concerning the subject matter hereof and supersedes any prior agreements,
whether written or oral, between the Parties concerning the subject matter
hereof.
15. Amendment or Waiver. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by both the Executive
and an authorized officer of the Company. No waiver by either Party of any
breach by the other Party of any condition or provision contained in this
Agreement to be performed by such other Party will be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Executive or an
authorized officer of the Company, as the case may be.
16. Severability. In the event that any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining
10
provisions of this Agreement will be unaffected thereby and will remain in full
force and effect to the fullest extent permitted by law.
17. Survivorship. The respective rights and obligations of the Parties
hereunder will survive any termination of the Executive's employment with the
Company to the extent necessary to the intended preservation of such rights and
obligations as described in this Agreement.
18. Governing Law. This Agreement will be governed by and construed and
interpreted in accordance with the laws of the State of Georgia, without
reference to principles of conflict of laws.
19. Notices. Any notice given to either Party must be in writing and will
be deemed to have been given when delivered personally or one (1) day after
having been sent by overnight courier service or three (3) days after having
been sent by certified or registered mail, postage prepaid, return receipt
requested, duly addressed to the Party concerned at the address indicated below
or to such changed address as such Party may subsequently give such notice of:
If to the Company or the Board: Orion HealthCorp, Inc.
1805 Old Alabama Road
Suite 350
Roswell, Georgia 30076
With a copy to: Brantley Partners
3201 Enterprise Parkway, Suite 350
Beachwood, Ohio 44122
Attention: Paul H. Cascio
and: Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Winthrop G. Minot, Esq.
If to the Executive: Terrence L. Bauer
Address set forth on Schedule I hereto
|
20. Headings. The headings of the sections contained in this Agreement are
for convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
11
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date and year first above written.
ORION HEALTHCORP, INC.
By: /s/ Keith LeBlanc
--------------------------
Name: Keith LeBlanc
Title: President
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TERRENCE L. BAUER
By: /s/ Terrence L. Bauer
--------------------------
|
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of December 15,
2004, between Orion HealthCorp, Inc., a Delaware corporation, with an executive
office located at 10700 Richmond Avenue, Suite 300, Houston, Texas 77042
(together with its successors and assigns permitted under this Agreement, the
"Company"), and Keith G. LeBlanc, who resides at the address set forth on
Schedule I hereto (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive desire to enter into an employment
arrangement; and
WHEREAS, the Company has determined that it is in the best interests of
the Company and its stockholders to enter into this Agreement setting forth the
obligations and duties of both the Company and the Executive; and
WHEREAS, the Company wishes to assure itself of the services of the
Executive for the period hereinafter provided, and the Executive is willing to
be employed by the Company for said period, upon the terms and conditions
provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually, a
"Party" and together, the "Parties") agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company, on the terms and conditions set
forth herein.
2. Term. Subject to the provisions for earlier termination as hereinafter
provided, the term of this Employment Agreement will begin on the date hereof
and will continue for five (5) years hereafter (the "Initial Term of
Employment"). This Agreement will be automatically renewed at the end of the
Initial Term of Employment and each successive renewal term thereafter for
successive two (2) year terms unless either party sends written notice of
termination to the other party not less than one hundred and eighty (180) days
prior to the expiration of the then current Term of Employment (as hereinafter
defined). The Initial Term of Employment together with any renewal terms is
referred to herein as the "Term of Employment." The nonrenewal of the term of
this Agreement by the Company will not be a termination without Cause (as
defined in Section 8(c)).
3. Position and Duties; Place of Performance.
(a) The Executive will serve as President of the Company and will
perform all duties customarily attendant to the position of President and
such other duties as may reasonably be assigned from time-to-time by the
Board of Directors (the "Board") that are
consistent with his position as President. The Executive will report
solely to the Board or any subcommittees thereof.
(b) The Executive will devote his full business time and best
efforts to his employment and perform diligently such duties as are
consistent with his capacity as President of the Company and such other
duties as the Board reasonably determines that are consistent with his
position. The Executive will devote his entire working time and attention
to the performance of his responsibilities hereunder; provided, the
Executive may make personal investments, engage in outside non-competitive
business activities or engage in other activities for any charitable or
other non-profit institution, provided that such activities do not
interfere with the performance of the Executive's duties hereunder.
(c) In connection with the Executive's employment by the Company,
the Executive will be based at the Company's place of business which on
the date hereof is located in Houston, Texas, or such other location as
may, subject to Section 8(d), be designated from time to time by the
Board.
4. Base Salary. The Executive will receive from the Company an annual base
salary of Two Hundred Forty Thousand Dollars ($240,000) (as from time to time
adjusted, the "Base Salary"), payable in accordance with the standard practice
of the Company with respect to the payment of salaries of its employees. The
Board will review the Base Salary annually, and may, in its reasonable
discretion, adjust the Base Salary.
5. Annual Bonus. The Executive may be paid a bonus annually based upon the
attainment of objectives determined by the Board after consultation with the
Executive. Within 90 days after the start of each fiscal year, the Board will
communicate to the Executive the objectives applicable to such fiscal year and,
unless the Board and the Executive shall mutually agree otherwise, such
objectives shall apply to such fiscal year.
6. Other Benefits.
(a) During the Term of Employment, the Executive will be provided
with such medical, hospitalization, insurance, pension plan, profit
sharing and employee benefits, cell phone and such other similar
employment privileges and benefits ("Benefits") as are afforded generally
from time to time to other executive employees of the Company, and four
(4) weeks paid vacation each year.
(b) During the term of this Agreement, the Executive shall receive
Five Hundred Dollars ($500) per month (pre-tax) as an automobile
allowance. The Company shall pay all reasonable maintenance and repair
expenses with respect to the automobile used primarily for business
purposes by the Executive, procure and maintain in force collision,
comprehensive, and liability insurance coverage with respect to the
automobile, and pay operating expenses with respect to the automobile.
2
7. Expense Reimbursement. During the Term of Employment, the Executive
will be entitled to prompt reimbursement by the Company for all reasonable
out-of-pocket expenses incurred by him in performing services under this
Agreement, upon submission of such accounts and records as may be required under
Company policy.
8. Termination of Employment. The Executive's employment may be terminated
under the following circumstances:
(a) Death. The Executive's employment is terminated upon his death.
(b) Disability. The Executive's employment may be terminated by the
Company due to illness or other physical or mental disability of the
Executive, resulting in his inability to perform substantially his duties
under this Agreement for a period of ninety (90) or more consecutive days
or for one hundred eighty (180) days in the aggregate during any
consecutive twelve (12) month period ("Disability").
(c) Cause. The Executive's employment may be terminated by the
Company for Cause. For purposes of this Agreement, the Company will have
"Cause" to terminate the Executive's employment upon:
(i) the Executive's indictment for any crime involving monies
or other property or any felony, crime or any offense of moral
turpitude, or his commission of fraud, embezzlement, theft,
dishonesty, willful misconduct or deliberate injury to the Company
or its subsidiaries;
(ii) the Executive's intentional or grossly negligent refusal
or failure to perform his duties or carry out directions of the
Company's Board, which refusal or failure remains uncured or
continues more than thirty (30) days after notice from the Company
specifying in reasonable detail the nature of the breach, or recurs
within such period;
(iii) the Executive's breach of any of his fiduciary duties to
the Company or making of a willful misrepresentation or omission,
which breach or misrepresentation or omission might reasonably be
expected to have a material adverse effect on the Company's business
and which remains uncured or continues more than thirty (30) days
after notice from the Company specifying in reasonable detail the
nature of the breach or misrepresentation or omission, or recurs
within such period;
(iv) the Executive's breach of any material provision of this
Agreement, which breach, if curable, remains uncured or continues
more than thirty (30) days after notice from the Company specifying
in reasonable detail the nature of the breach, or recurs within such
period; or
3
(v) any misappropriation by the Executive of funds or property
of the Company or any affiliate of the Company.
Any termination for "Cause" will not be in limitation of any other right
or remedy the Company may have under this Agreement or otherwise.
(d) Good Reason. The Executive may terminate his employment under
this Agreement for Good Reason. For purposes of this Agreement, the
Executive will have "Good Reason" to terminate the Executive's employment
upon the occurrence of any of the following circumstances, without the
Executive's express written consent: (i) a material diminution in the
Executive's position or authority (except during periods when the
Executive is unable to perform all or substantially all of the Executive's
duties and/or responsibilities as a result of the Executive's illness
(either physical or mental) or other incapacity); (ii) a requirement by
the Company that the Executive change the Executive's principal place of
business to a place more than thirty (30) miles from its location on the
date of this Agreement; (iii) a termination of employment by the Executive
within ninety (90) days following a Change in Control (as defined below),
provided, that Good Reason will not exist if the Executive has accepted or
agreed to continue employment following the Change of Control with the
surviving or successor entity and such surviving or successor entity has
agreed to continue or assume this Agreement, provided, further, in the
event of a Change of Control, the Executive is under no obligation to
continue or accept employment with the surviving or successor entity and
may instead elect to terminate his employment for Good Reason upon such
Change of Control; (iv) a breach of this Agreement by the Company which is
not cured within thirty (30) days of written notice by the Company; or (v)
any reduction in the Executive's Base Salary. The Executive's right to
terminate employment pursuant to this subsection 8(d) will not be affected
by the Executive's Disability. The Executive's continued employment will
not constitute consent to, or a waiver of rights with respect to, any
circumstance constituting consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason; provided, however, that the
Executive will be deemed to have waived his rights pursuant to
circumstances constituting Good Reason if he has not provided to the
Company a Notice of Termination (as defined below) within ninety (90) days
following his knowledge of the circumstances constituting Good Reason. A
waiver with respect to the circumstances constituting Good Reason will not
act as a waiver with respect to other future circumstances constituting
Good Reason.
Any termination of the Executive's employment by the Executive must
be communicated by written Notice of Termination to the Company in
accordance with Section 19. For purposes of this Agreement, a "Notice of
Termination" means a notice which indicates the specific termination
provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated.
For purposes of this Agreement, a "Change in Control" will occur:
(i) upon the sale or other disposition of 50% or more of the consolidated
assets of the Company taken
4
as a whole; (ii) if shares representing a majority of the voting power of
the Company are acquired by a person or group (as such term is used in
Rule 13d-5 promulgated under the Securities Exchange Act of 1934, as
amended) of persons other than the holders of the capital stock of the
Company as of the date of this Agreement; (iii) upon a merger or
consolidation pursuant to which the holders of the equity securities of
the Company before the merger or consolidation do not own equity
securities representing a majority of the voting power of the surviving
entity after the merger or consolidation; or (iv) upon approval by the
shareholders of the Company of a complete liquidation or dissolution of
the Company.
9. Compensation Upon Termination.
(a) If the Executive's employment is terminated as a result of the
Executive's death or Disability, he, or his estate, will be entitled to:
(i) any Base Salary earned but not yet paid;
(ii) any bonus awarded pursuant to Section 5 of this Agreement
but not yet paid, payable as soon as administratively feasible
following termination of employment;
(iii) a prorated bonus for the year in which his employment
terminates, prorated based on the number of days worked, minus any
bonus payments made pursuant to Section 5 of this Agreement in
respect of the year containing the date of termination, payable as
soon as administratively feasible following the end of the then
current fiscal year of the Company;
(iv) reimbursement in accordance with this Agreement of any
business expense incurred by the Executive but not yet paid, payable
as soon as administratively feasible following termination of
employment; and
(v) other benefits accrued and earned by the Executive through
the date of his death or Disability in accordance with applicable
plans and programs of the Company.
(b) If the Executive's employment is terminated by the Company for
Cause, or by the Executive other than for Good Reason, or as a result of
notice of nonrenewal provided by the Company or the Executive under
Section 2, he will be entitled to:
(i) any Base Salary earned but not yet paid;
(ii) reimbursement in accordance with this Agreement of any
business expense incurred by the Executive but not yet paid, payable
as soon as administratively feasible following termination of
employment;
5
(iii) other benefits accrued and earned by the Executive
through the date of his termination in accordance with applicable
plans and programs of the Company;
(iv) if the Executive's employment is terminated as a result
of notice of nonrenewal provided by the Executive under Section 2,
he will be entitled to a prorated bonus for the year in which his
employment terminates, prorated based on the number of days worked,
minus any bonus payments made pursuant to Section 5 of this
Agreement in respect of the year containing the date of termination,
payable as soon as administratively feasible following the end of
the then current fiscal year of the Company; and
(v) if the Executive's employment is terminated as a result of
notice of nonrenewal provided by the Company under Section 2, he
will be entitled to full vesting of any unvested equity incentives,
including without limitation stock options, restricted stock and
deferred restricted stock units.
(c) If the Executive's employment is terminated by the Company
without Cause, or by the Executive for Good Reason, he will be entitled
to:
(i) any Base Salary earned but not yet paid;
(ii) any bonus awarded pursuant to Section 5 of this Agreement
but not yet paid, payable as soon as administratively feasible
following termination of employment;
(iii) continuation of his Base Salary, at the rate in effect
on the date of his termination of employment (which, in the case of
a termination of the Executive for Good Reason pursuant to Section
8(d)(v), shall be deemed to be the rate in effect prior to giving
any effect to the reduction in Base Salary giving rise to such Good
Reason), until the expiration of the Non-Competition Period (as
defined below);
(iv) the greater of: (A) a prorated bonus for the year in
which employment terminates, prorated based on the number of days
worked, or (B) an amount equal to fifty percent (50%) of the average
of the bonus payments made pursuant to Section 5 of this Agreement
during the two (2) calendar years preceding such termination, if
any, minus any bonus payments made pursuant to Section 5 of this
Agreement in respect of the year containing the date of termination,
payable in either event as soon as administratively feasible
following the end of the then fiscal year of the Company; provided,
however, that this clause (iv) shall not be applicable in the event
that the Executive's employment is terminated upon notice of
nonrenewal provided by the Company under Section 2;
6
(v) until the expiration of the Non-Competition Period,
subject to any employee contribution applicable to the Executive on
the date of termination, continued participation in all of the
Company's group medical and dental insurance plans in which he was
participating on the date of his termination of employment, provided
that the Executive is entitled to continue such participation under
applicable law and plan terms;
(vi) reimbursement in accordance with this Agreement of any
business expenses incurred by the Executive but not yet paid to him
on the date of his termination of employment, payable as soon as
administratively feasible following termination of employment; and
(vii) full vesting of any unvested equity incentives,
including without limitation stock options, restricted stock and
deferred restricted stock units.
In the event that, under the terms of any employee benefit plan
referred to in subsection 9(c)(v) above, the Executive may not continue
his participation, he will be provided with the after-tax economic
equivalent of the benefits provided under any plan in which he was
previously eligible to participate for the period specified in subsection
9(c)(v) above. The economic equivalent of any benefit foregone will be
deemed to be the cost that would be incurred by the Executive in obtaining
such benefit on the lowest available individual basis.
(d) Any amounts due under this Section 9 are in the nature of
severance payments or liquidated damages or both, and will fully
compensate the Executive and his dependents or beneficiaries, as the case
may be, for any and all direct damages and consequential damages that any
of them may suffer as a result of termination of the Executive's
employment, and they are not in the nature of a penalty.
(e) Notwithstanding anything contained herein, any obligation of the
Company to the Executive under Sections 9(c)(iii), (iv), (v) and (vii) is
conditioned upon (i) the Executive signing a release of claims in the form
attached hereto as Exhibit A (the "Employee Release") within twenty-one
days (or such greater period as the Company may specify) following the
later of the date on which the Executive (or, in the case of termination
by the Executive for Good Reason, the Company) receives notice of
termination of employment or the date the Executive receives a copy of the
Employee Release and upon the Executive not revoking the Employee Release
in a timely manner thereafter and (ii) the Executive's continuing
compliance with the provisions of Section 10. If the Executive breaches
any provision of Section 10, upon written notice of such breach and
request for repayment from the Company, the Executive shall promptly pay
to the Company an amount equal to the sum of any cash payments previously
paid to the Executive pursuant to Sections 9(c)(iii), (iv), (v) and (vii).
Any such repayment shall not be the exclusive remedy for any such breach
and the Company shall retain all rights to pursue other available remedies
(whether at law or equity) for any such breach.
7
10. Confidentiality and Non-Competition.
(a) The Executive acknowledges that he has had or will have
unlimited access to confidential information and business methods relating
to the Company's business and operations and that the Company would be
irreparably injured and the goodwill of the Company would be irreparably
damaged if the Executive were to breach the covenants set forth in this
Section 10. The Executive further acknowledges that the covenants set
forth in this Section 10 are reasonable in scope and duration and do not
unreasonably restrict the Executive's association with other business
entities, either as an employee or otherwise as set forth herein.
(b) During the Term of Employment and thereafter, except as may be
required by law or necessary in connection with any dealings with any
public agency or authority or in the ordinary course of business during
the Term of Employment pursuant to customary non-disclosure agreements,
the Executive will not disclose, disseminate, divulge, discuss, copy or
otherwise use or suffer to be used, including but not limited to in
competition with, or in a manner harmful to the interests of, the Company,
any confidential information (written or oral) respecting any material
aspect of the Company's business, excepting only use of such data or
information as is (i) at the time disclosed, through no act or failure to
act on the part of the Executive, generally known or available; (ii)
furnished to the Executive by a third party as a matter of right and
without restriction on disclosure; or (iii) required to be disclosed by
court order. Upon termination of the Term of Employment, the Executive
will return to the Company any and all materials in tangible or electronic
form containing confidential information belonging to the Company.
(c) During the Term of Employment and the Non-Competition Period,
the Executive will not in the states of California, Florida, Georgia,
Illinois, Iowa, New Jersey, Ohio or Texas, directly or indirectly, whether
as an individual on the Executive's own account, or as a shareholder,
partner, member, joint venturer, director, officer, employee, consultant,
creditor and/or agent, of any person, firm or organization or otherwise:
(i) own, manage, control or participate in the ownership,
management or control of, or be employed or engaged by or otherwise
affiliated or associated as a consultant, independent contractor or
otherwise with, any other corporation, partnership, proprietorship,
firm, association or other business entity or otherwise engage in
any business that is engaged in the business of the Company or any
of the Company's subsidiaries (collectively, "Subsidiaries"), as
such business is conducted on the applicable date during the Term of
Employment, or in the case of the Non-Competition Period, as of the
date the Executive ceases to be employed by the Company, in any
capacity, including as a consultant;
(ii) directly or indirectly solicit, encourage or induce any
person who is a present or future employee, officer, agent,
affiliate or customer of the Company or
8
any Subsidiary to terminate or materially alter such person's
relationship with the Company or such Subsidiary;
(iii) induce any supplier of the Company or any Subsidiary, to
refuse to do business with the Company or any Subsidiary, on as
favorable terms as previously done with the Company or any
Subsidiary, as the case may be; or
(iv) engage in disparagement (which will not include the
providing of accurate information without invidious intent) of the
Company or any Subsidiary by any means to any person.
For purposes of this Agreement, "Non-Competition Period" shall mean the
period during the Term of Employment and thereafter until the second
anniversary of the date of termination of the Executive's employment with
the Company; provided, however, that the Company may, by written notice to
the Executive (whether given before or after the date of termination of
the Executive's employment with the Company), shorten the portion of the
Non-Competition Period occurring following the date of termination of the
Executive's employment with the Company to any date specified in such
notice which occurs on or after the earlier of (x) the second anniversary
of the date of termination of the Executive's employment with the Company
and (y) the date of expiration of the then current Term of Employment.
Notwithstanding the foregoing, in the event that the Company or the
Executive provides notice of nonrenewal under Section 2, then: (1) the
Company shall have the option to continue to pay the Executive his Base
Salary, at the rate in effect on the date of his termination of
employment, until the expiration of the Non-Competition Period; (2) if the
Company exercises such option, it may discontinue the payment of Base
Salary at any time; (3) the Executive shall be subject to Section 10(c)(i)
only for so long as the Company continues to pay the Executive his Base
Salary; and (4) if the Company stops paying the Executive his Base Salary,
then the Executive shall no longer be subject to Section 10(c)(i), but
shall remain subject to the rest of this Section 10.
(d) Notwithstanding anything herein to the contrary, the Executive
will be permitted to own shares of any class of capital stock of any
publicly held corporation so long as the aggregate holdings of the
Executive represent less than one percent (1%) of the outstanding shares
of such class of capital stock.
11. Rights and Remedies Upon Breach.
(a) The Executive expressly agrees and understands that the remedy
at law for any breach by the Executive of Section 10 will be inadequate
and that the damages flowing from such breach are not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged that
upon adequate proof of the Executive's violation of Section 10, the
Company will be entitled, among other remedies, to injunctive relief and
may obtain a temporary restraining order restraining any threatened or
further breach. Nothing in this Section 11(a) will be deemed to limit the
Company's
9
remedies at law or in equity for any breach by the Executive of any of the
provisions of this Agreement which may be pursued or availed of by the
Company.
(b) In the event any court of competent jurisdiction determines that
the specified time period or geographical area set forth in Section 10 is
unreasonable, arbitrary or against public policy, then a lesser time
period or geographical area that is determined by the court to be
reasonable, non-arbitrary and not against public policy may be enforced.
12. Withholding Taxes. All payments to the Executive or his beneficiary
will be subject to withholding on account of federal, state and local taxes as
required by law. If any payment hereunder is insufficient to provide the amount
of such taxes required to be withheld, the Company may withhold such taxes from
any other payment due the Executive or his beneficiary.
13. Assignability; Binding Nature. This Agreement will be binding upon and
inure to the benefit of the Parties and their respective successors, heirs (in
the case of the Executive) and assigns. No rights or obligations of the Company
under this Agreement may be assigned or transferred by the Company except that
such rights or obligations may be assigned or transferred pursuant to (i) a
merger or consolidation in which the Company is not the continuing entity or
(ii) a sale or liquidation of all or substantially all of the assets of the
Company, provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company, as contained in
this Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale of assets or liquidation as described in the
preceding sentence, it will use its best efforts to cause such assignee or
transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder. No obligations of the Executive under this Agreement may be
assigned or transferred by the Executive.
14. Entire Agreement. Except to the extent otherwise provided herein, this
Agreement contains the entire understanding and agreement between the Parties
concerning the subject matter hereof and supersedes any prior agreements,
whether written or oral, between the Parties concerning the subject matter
hereof.
15. Amendment or Waiver. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by both the Executive
and an authorized officer of the Company. No waiver by either Party of any
breach by the other Party of any condition or provision contained in this
Agreement to be performed by such other Party will be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Executive or an
authorized officer of the Company, as the case may be.
16. Severability. In the event that any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining
10
provisions of this Agreement will be unaffected thereby and will remain in full
force and effect to the fullest extent permitted by law.
17. Survivorship. The respective rights and obligations of the Parties
hereunder will survive any termination of the Executive's employment with the
Company to the extent necessary to the intended preservation of such rights and
obligations as described in this Agreement.
18. Governing Law. This Agreement will be governed by and construed and
interpreted in accordance with the laws of the State of Texas, without reference
to principles of conflict of laws.
19. Notices. Any notice given to either Party must be in writing and will
be deemed to have been given when delivered personally or one (1) day after
having been sent by overnight courier service or three (3) days after having
been sent by certified or registered mail, postage prepaid, return receipt
requested, duly addressed to the Party concerned at the address indicated below
or to such changed address as such Party may subsequently give such notice of:
If to the Company or the Board: Orion HealthCorp, Inc.
10700 Richmond Avenue
Suite 300
Houston, Texas 77042
With a copy to: Brantley Partners
3201 Enterprise Parkway, Suite 350
Beachwood, Ohio 44122
Attention: Paul H. Cascio
and: Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Winthrop G. Minot, Esq.
If to the Executive: Keith G. LeBlanc
Address set forth on Schedule I hereto
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20. Headings. The headings of the sections contained in this Agreement are
for convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
11
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date and year first above written.
ORION HEALTHCORP, INC.
By: /s/ Terrence L. Bauer
-----------------------------------
Name: Terrence L. Bauer
Title: Chief Executive Officer
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KEITH G. LEBLANC
By: /s/ Keith G. LeBlanc
----------------------------------
|
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of December 15,
2004, between Orion HealthCorp, Inc., a Delaware corporation, with an executive
office located at 1805 Old Alabama Road, Suite 350, Roswell, Georgia 30076
(together with its successors and assigns permitted under this Agreement, the
"Company"), and Stephen H. Murdock, who resides at the address set forth on
Schedule I hereto (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive desire to enter into an employment
arrangement; and
WHEREAS, the Company has determined that it is in the best interests of
the Company and its stockholders to enter into this Agreement setting forth the
obligations and duties of both the Company and the Executive; and
WHEREAS, the Company wishes to assure itself of the services of the
Executive for the period hereinafter provided, and the Executive is willing to
be employed by the Company for said period, upon the terms and conditions
provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually, a
"Party" and together, the "Parties") agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company, on the terms and conditions set
forth herein.
2. Term. Subject to the provisions for earlier termination as hereinafter
provided, the term of this Employment Agreement will begin on the date hereof
and will continue for five (5) years hereafter (the "Initial Term of
Employment"). This Agreement will be automatically renewed at the end of the
Initial Term of Employment and each successive renewal term thereafter for
successive two (2) year terms unless either party sends written notice of
termination to the other party not less than one hundred and eighty (180) days
prior to the expiration of the then current Term of Employment (as hereinafter
defined). The Initial Term of Employment together with any renewal terms is
referred to herein as the "Term of Employment." The nonrenewal of the term of
this Agreement by the Company will not be a termination without Cause (as
defined in Section 8(c)).
3. Position and Duties; Place of Performance.
(a) The Executive will serve as Chief Financial Officer of the
Company and will perform all duties customarily attendant to the position
of Chief Financial Officer and such other duties as may reasonably be
assigned from time-to-time by the Board of Directors (the "Board") that
are consistent with his position as Chief Financial Officer.
(b) The Executive will devote his full business time and best
efforts to his employment and perform diligently such duties as are
consistent with his capacity as Chief Financial Officer of the Company and
such other duties as the Board reasonably determines that are consistent
with his position. The Executive will devote his entire working time and
attention to the performance of his responsibilities hereunder; provided,
the Executive may make personal investments, engage in outside
non-competitive business activities or engage in other activities for any
charitable or other non-profit institution, provided that such activities
do not interfere with the performance of the Executive's duties hereunder.
(c) In connection with the Executive's employment by the Company,
the Executive will be based at the Company's place of business which on
the date hereof is located in Atlanta, Georgia, or such other location as
may, subject to Section 8(d), be designated from time to time by the
Board.
4. Base Salary. The Executive will receive from the Company an annual base
salary of One Hundred Seventy-Five Thousand Dollars ($175,000) (as from time to
time adjusted, the "Base Salary"), payable in accordance with the standard
practice of the Company with respect to the payment of salaries of its
employees. The Board will review the Base Salary annually, and may, in its
reasonable discretion, adjust the Base Salary.
5. Annual Bonus. The Executive may be paid a bonus annually based upon the
attainment of objectives determined by the Board after consultation with the
Executive. Within 90 days after the start of each fiscal year, the Board will
communicate to the Executive the objectives applicable to such fiscal year and,
unless the Board and the Executive shall mutually agree otherwise, such
objectives shall apply to such fiscal year.
6. Other Benefits.
(a) During the Term of Employment, the Executive will be provided
with such medical, hospitalization, insurance, pension plan, profit
sharing and employee benefits, cell phone and such other similar
employment privileges and benefits ("Benefits") as are afforded generally
from time to time to other executive employees of the Company, and four
(4) weeks paid vacation each year.
(b) During the term of this Agreement, the Executive shall receive
Five Hundred Dollars ($500) per month (pre-tax) as an automobile
allowance. The Company shall pay all reasonable maintenance and repair
expenses with respect to the automobile used primarily for business
purposes by the Executive, procure and maintain in force collision,
comprehensive, and liability insurance coverage with respect to the
automobile, and pay operating expenses with respect to the automobile.
7. Expense Reimbursement. During the Term of Employment, the Executive
will be entitled to prompt reimbursement by the Company for all reasonable
out-of-pocket expenses
2
incurred by him in performing services under this Agreement, upon submission of
such accounts and records as may be required under Company policy.
8. Termination of Employment. The Executive's employment may be terminated
under the following circumstances:
(a) Death. The Executive's employment is terminated upon his death.
(b) Disability. The Executive's employment may be terminated by the
Company due to illness or other physical or mental disability of the
Executive, resulting in his inability to perform substantially his duties
under this Agreement for a period of ninety (90) or more consecutive days
or for one hundred eighty (180) days in the aggregate during any
consecutive twelve (12) month period ("Disability").
(c) Cause. The Executive's employment may be terminated by the
Company for Cause. For purposes of this Agreement, the Company will have
"Cause" to terminate the Executive's employment upon:
(i) the Executive's indictment for any crime involving monies
or other property or any felony, crime or any offense of moral
turpitude, or his commission of fraud, embezzlement, theft,
dishonesty, willful misconduct or deliberate injury to the Company
or its subsidiaries;
(ii) the Executive's intentional or grossly negligent refusal
or failure to perform his duties or carry out directions of the
Company's chief executive officer or Board, which refusal or failure
remains uncured or continues more than thirty (30) days after notice
from the Company specifying in reasonable detail the nature of the
breach, or recurs within such period;
(iii) the Executive's breach of any of his fiduciary duties to
the Company or making of a willful misrepresentation or omission,
which breach or misrepresentation or omission might reasonably be
expected to have a material adverse effect on the Company's business
and which remains uncured or continues more than thirty (30) days
after notice from the Company specifying in reasonable detail the
nature of the breach or misrepresentation or omission, or recurs
within such period;
(iv) the Executive's breach of any material provision of this
Agreement, which breach, if curable, remains uncured or continues
more than thirty (30) days after notice from the Company specifying
in reasonable detail the nature of the breach, or recurs within such
period; or
(v) any misappropriation by the Executive of funds or property
of the Company or any affiliate of the Company.
3
Any termination for "Cause" will not be in limitation of any other right
or remedy the Company may have under this Agreement or otherwise.
(d) Good Reason. The Executive may terminate his employment under
this Agreement for Good Reason. For purposes of this Agreement, the
Executive will have "Good Reason" to terminate the Executive's employment
upon the occurrence of any of the following circumstances, without the
Executive's express written consent: (i) a material diminution in the
Executive's position or authority (except during periods when the
Executive is unable to perform all or substantially all of the Executive's
duties and/or responsibilities as a result of the Executive's illness
(either physical or mental) or other incapacity); (ii) a requirement by
the Company that the Executive change the Executive's principal place of
business to a place more than thirty (30) miles from its location on the
date of this Agreement; (iii) a termination of employment by the Executive
within ninety (90) days following a Change in Control (as defined below),
provided, that Good Reason will not exist if the Executive has accepted or
agreed to continue employment following the Change of Control with the
surviving or successor entity and such surviving or successor entity has
agreed to continue or assume this Agreement, provided, further, in the
event of a Change of Control, the Executive is under no obligation to
continue or accept employment with the surviving or successor entity and
may instead elect to terminate his employment for Good Reason upon such
Change of Control; (iv) a breach of this Agreement by the Company which is
not cured within thirty (30) days of written notice by the Company; or (v)
any reduction in the Executive's Base Salary. The Executive's right to
terminate employment pursuant to this subsection 8(d) will not be affected
by the Executive's Disability. The Executive's continued employment will
not constitute consent to, or a waiver of rights with respect to, any
circumstance constituting consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason; provided, however, that the
Executive will be deemed to have waived his rights pursuant to
circumstances constituting Good Reason if he has not provided to the
Company a Notice of Termination (as defined below) within ninety (90) days
following his knowledge of the circumstances constituting Good Reason. A
waiver with respect to the circumstances constituting Good Reason will not
act as a waiver with respect to other future circumstances constituting
Good Reason.
Any termination of the Executive's employment by the Executive must
be communicated by written Notice of Termination to the Company in
accordance with Section 19. For purposes of this Agreement, a "Notice of
Termination" means a notice which indicates the specific termination
provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated.
For purposes of this Agreement, a "Change in Control" will occur:
(i) upon the sale or other disposition of 50% or more of the consolidated
assets of the Company taken as a whole; (ii) if shares representing a
majority of the voting power of the Company are acquired by a person or
group (as such term is used in Rule 13d-5 promulgated under the Securities
Exchange Act of 1934, as amended) of persons other than the holders of the
4
capital stock of the Company as of the date of this Agreement; (iii) upon
a merger or consolidation pursuant to which the holders of the equity
securities of the Company before the merger or consolidation do not own
equity securities representing a majority of the voting power of the
surviving entity after the merger or consolidation; or (iv) upon approval
by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
9. Compensation Upon Termination.
(a) If the Executive's employment is terminated as a result of the
Executive's death or Disability, he, or his estate, will be entitled to:
(i) any Base Salary earned but not yet paid;
(ii) any bonus awarded pursuant to Section 5 of this Agreement
but not yet paid, payable as soon as administratively feasible
following termination of employment;
(iii) a prorated bonus for the year in which his employment
terminates, prorated based on the number of days worked, minus any
bonus payments made pursuant to Section 5 of this Agreement in
respect of the year containing the date of termination, payable as
soon as administratively feasible following the end of the then
current fiscal year of the Company;
(iv) reimbursement in accordance with this Agreement of any
business expense incurred by the Executive but not yet paid, payable
as soon as administratively feasible following termination of
employment; and
(v) other benefits accrued and earned by the Executive through
the date of his death or Disability in accordance with applicable
plans and programs of the Company.
(b) If the Executive's employment is terminated by the Company for
Cause, or by the Executive other than for Good Reason, or as a result of
notice of nonrenewal provided by the Company or the Executive under
Section 2, he will be entitled to:
(i) any Base Salary earned but not yet paid;
(ii) reimbursement in accordance with this Agreement of any
business expense incurred by the Executive but not yet paid, payable
as soon as administratively feasible following termination of
employment;
(iii) other benefits accrued and earned by the Executive
through the date of his termination in accordance with applicable
plans and programs of the Company;
5
(iv) if the Executive's employment is terminated as a result
of notice of nonrenewal provided by the Executive under Section 2,
he will be entitled to a prorated bonus for the year in which his
employment terminates, prorated based on the number of days worked,
minus any bonus payments made pursuant to Section 5 of this
Agreement in respect of the year containing the date of termination,
payable as soon as administratively feasible following the end of
the then current fiscal year of the Company; and
(v) if the Executive's employment is terminated as a result of
notice of nonrenewal provided by the Company under Section 2, he
will be entitled to full vesting of any unvested equity incentives,
including without limitation stock options, restricted stock and
deferred restricted stock units.
(c) If the Executive's employment is terminated by the Company
without Cause, or by the Executive for Good Reason, he will be entitled
to:
(i) any Base Salary earned but not yet paid;
(ii) any bonus awarded pursuant to Section 5 of this Agreement
but not yet paid, payable as soon as administratively feasible
following termination of employment;
(iii) continuation of his Base Salary, at the rate in effect
on the date of his termination of employment (which, in the case of
a termination of the Executive for Good Reason pursuant to Section
8(d)(v), shall be deemed to be the rate in effect prior to giving
any effect to the reduction in Base Salary giving rise to such Good
Reason), until the expiration of the Non-Competition Period (as
defined below);
(iv) the greater of: (A) a prorated bonus for the year in
which employment terminates, prorated based on the number of days
worked, or (B) an amount equal to fifty percent (50%) of the average
of the bonus payments made pursuant to Section 5 of this Agreement
during the two (2) calendar years preceding such termination, if
any, minus any bonus payments made pursuant to Section 5 of this
Agreement in respect of the year containing the date of termination,
payable in either event as soon as administratively feasible
following the end of the then fiscal year of the Company; provided,
however, that this clause (iv) shall not be applicable in the event
that the Executive's employment is terminated upon notice of
nonrenewal provided by the Company under Section 2;
(v) until the expiration of the Non-Competition Period,
subject to any employee contribution applicable to the Executive on
the date of termination, continued participation in all of the
Company's group medical and dental insurance plans in which he was
participating on the date of his termination of
6
employment, provided that the Executive is entitled to continue such
participation under applicable law and plan terms;
(vi) reimbursement in accordance with this Agreement of any
business expenses incurred by the Executive but not yet paid to him
on the date of his termination of employment, payable as soon as
administratively feasible following termination of employment; and
(vii) full vesting of any unvested equity incentives,
including without limitation stock options, restricted stock and
deferred restricted stock units.
In the event that, under the terms of any employee benefit plan
referred to in subsection 9(c)(v) above, the Executive may not continue
his participation, he will be provided with the after-tax economic
equivalent of the benefits provided under any plan in which he was
previously eligible to participate for the period specified in subsection
9(c)(v) above. The economic equivalent of any benefit foregone will be
deemed to be the cost that would be incurred by the Executive in obtaining
such benefit on the lowest available individual basis.
(d) Any amounts due under this Section 9 are in the nature of
severance payments or liquidated damages or both, and will fully
compensate the Executive and his dependents or beneficiaries, as the case
may be, for any and all direct damages and consequential damages that any
of them may suffer as a result of termination of the Executive's
employment, and they are not in the nature of a penalty.
(e) Notwithstanding anything contained herein, any obligation of the
Company to the Executive under Sections 9(c)(iii), (iv), (v) and (vii) is
conditioned upon (i) the Executive signing a release of claims in the form
attached hereto as Exhibit A (the "Employee Release") within twenty-one
days (or such greater period as the Company may specify) following the
later of the date on which the Executive (or, in the case of termination
by the Executive for Good Reason, the Company) receives notice of
termination of employment or the date the Executive receives a copy of the
Employee Release and upon the Executive not revoking the Employee Release
in a timely manner thereafter and (ii) the Executive's continuing
compliance with the provisions of Section 10. If the Executive breaches
any provision of Section 10, upon written notice of such breach and
request for repayment from the Company, the Executive shall promptly pay
to the Company an amount equal to the sum of any cash payments previously
paid to the Executive pursuant to Sections 9(c)(iii), (iv), (v) and (vii).
Any such repayment shall not be the exclusive remedy for any such breach
and the Company shall retain all rights to pursue other available remedies
(whether at law or equity) for any such breach.
10. Confidentiality and Non-Competition.
(a) The Executive acknowledges that he has had or will have
unlimited access to confidential information and business methods relating
to the Company's business and
7
operations and that the Company would be irreparably injured and the
goodwill of the Company would be irreparably damaged if the Executive were
to breach the covenants set forth in this Section 10. The Executive
further acknowledges that the covenants set forth in this Section 10 are
reasonable in scope and duration and do not unreasonably restrict the
Executive's association with other business entities, either as an
employee or otherwise as set forth herein.
(b) During the Term of Employment and thereafter, except as may be
required by law or necessary in connection with any dealings with any
public agency or authority or in the ordinary course of business during
the Term of Employment pursuant to customary non-disclosure agreements,
the Executive will not disclose, disseminate, divulge, discuss, copy or
otherwise use or suffer to be used, including but not limited to in
competition with, or in a manner harmful to the interests of, the Company,
any confidential information (written or oral) respecting any material
aspect of the Company's business, excepting only use of such data or
information as is (i) at the time disclosed, through no act or failure to
act on the part of the Executive, generally known or available; (ii)
furnished to the Executive by a third party as a matter of right and
without restriction on disclosure; or (iii) required to be disclosed by
court order. Upon termination of the Term of Employment, the Executive
will return to the Company any and all materials in tangible or electronic
form containing confidential information belonging to the Company.
(c) During the Term of Employment and the Non-Competition Period,
the Executive will not in the states of California, Florida, Georgia,
Illinois, Iowa, New Jersey, Ohio or Texas, directly or indirectly, whether
as an individual on the Executive's own account, or as a shareholder,
partner, member, joint venturer, director, officer, employee, consultant,
creditor and/or agent, of any person, firm or organization or otherwise:
(i) own, manage, control or participate in the ownership,
management or control of, or be employed or engaged by or otherwise
affiliated or associated as a consultant, independent contractor or
otherwise with, any other corporation, partnership, proprietorship,
firm, association or other business entity or otherwise engage in
any business that is engaged in the business of the Company or any
of the Company's subsidiaries (collectively, "Subsidiaries"), as
such business is conducted on the applicable date during the Term of
Employment, or in the case of the Non-Competition Period, as of the
date the Executive ceases to be employed by the Company, in any
capacity, including as a consultant;
(ii) directly or indirectly solicit, encourage or induce any
person who is a present or future employee, officer, agent,
affiliate or customer of the Company or any Subsidiary to terminate
or materially alter such person's relationship with the Company or
such Subsidiary;
8
(iii) induce any supplier of the Company or any Subsidiary, to
refuse to do business with the Company or any Subsidiary, on as
favorable terms as previously done with the Company or any
Subsidiary, as the case may be; or
(iv) engage in disparagement (which will not include the
providing of accurate information without invidious intent) of the
Company or any Subsidiary by any means to any person.
For purposes of this Agreement, "Non-Competition Period" shall mean the
period during the Term of Employment and thereafter until the second
anniversary of the date of termination of the Executive's employment with
the Company; provided, however, that the Company may, by written notice to
the Executive (whether given before or after the date of termination of
the Executive's employment with the Company), shorten the portion of the
Non-Competition Period occurring following the date of termination of the
Executive's employment with the Company to any date specified in such
notice which occurs on or after the earlier of (x) the second anniversary
of the date of termination of the Executive's employment with the Company
and (y) the date of expiration of the then current Term of Employment.
Notwithstanding the foregoing, in the event that the Company or the
Executive provides notice of nonrenewal under Section 2, then: (1) the
Company shall have the option to continue to pay the Executive his Base
Salary, at the rate in effect on the date of his termination of
employment, until the expiration of the Non-Competition Period; (2) if the
Company exercises such option, it may discontinue the payment of Base
Salary at any time; (3) the Executive shall be subject to Section 10(c)(i)
only for so long as the Company continues to pay the Executive his Base
Salary; and (4) if the Company stops paying the Executive his Base Salary,
then the Executive shall no longer be subject to Section 10(c)(i), but
shall remain subject to the rest of this Section 10.
(d) Notwithstanding anything herein to the contrary, the Executive
will be permitted to own shares of any class of capital stock of any
publicly held corporation so long as the aggregate holdings of the
Executive represent less than one percent (1%) of the outstanding shares
of such class of capital stock.
11. Rights and Remedies Upon Breach.
(a) The Executive expressly agrees and understands that the remedy
at law for any breach by the Executive of Section 10 will be inadequate
and that the damages flowing from such breach are not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged that
upon adequate proof of the Executive's violation of Section 10, the
Company will be entitled, among other remedies, to injunctive relief and
may obtain a temporary restraining order restraining any threatened or
further breach. Nothing in this Section 11(a) will be deemed to limit the
Company's remedies at law or in equity for any breach by the Executive of
any of the provisions of this Agreement which may be pursued or availed of
by the Company.
9
(b) In the event any court of competent jurisdiction determines that
the specified time period or geographical area set forth in Section 10 is
unreasonable, arbitrary or against public policy, then a lesser time
period or geographical area that is determined by the court to be
reasonable, non-arbitrary and not against public policy may be enforced.
12. Withholding Taxes. All payments to the Executive or his beneficiary
will be subject to withholding on account of federal, state and local taxes as
required by law. If any payment hereunder is insufficient to provide the amount
of such taxes required to be withheld, the Company may withhold such taxes from
any other payment due the Executive or his beneficiary.
13. Assignability; Binding Nature. This Agreement will be binding upon and
inure to the benefit of the Parties and their respective successors, heirs (in
the case of the Executive) and assigns. No rights or obligations of the Company
under this Agreement may be assigned or transferred by the Company except that
such rights or obligations may be assigned or transferred pursuant to (i) a
merger or consolidation in which the Company is not the continuing entity or
(ii) a sale or liquidation of all or substantially all of the assets of the
Company, provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company, as contained in
this Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale of assets or liquidation as described in the
preceding sentence, it will use its best efforts to cause such assignee or
transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder. No obligations of the Executive under this Agreement may be
assigned or transferred by the Executive.
14. Entire Agreement. Except to the extent otherwise provided herein, this
Agreement contains the entire understanding and agreement between the Parties
concerning the subject matter hereof and supersedes any prior agreements,
whether written or oral, between the Parties concerning the subject matter
hereof.
15. Amendment or Waiver. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by both the Executive
and an authorized officer of the Company. No waiver by either Party of any
breach by the other Party of any condition or provision contained in this
Agreement to be performed by such other Party will be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Executive or an
authorized officer of the Company, as the case may be.
16. Severability. In the event that any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining provisions of this Agreement will be unaffected
thereby and will remain in full force and effect to the fullest extent permitted
by law.
10
17. Survivorship. The respective rights and obligations of the Parties
hereunder will survive any termination of the Executive's employment with the
Company to the extent necessary to the intended preservation of such rights and
obligations as described in this Agreement.
18. Governing Law. This Agreement will be governed by and construed and
interpreted in accordance with the laws of the State of Georgia, without
reference to principles of conflict of laws.
19. Notices. Any notice given to either Party must be in writing and will
be deemed to have been given when delivered personally or one (1) day after
having been sent by overnight courier service or three (3) days after having
been sent by certified or registered mail, postage prepaid, return receipt
requested, duly addressed to the Party concerned at the address indicated below
or to such changed address as such Party may subsequently give such notice of:
If to the Company or the Board: Orion HealthCorp, Inc.
1805 Old Alabama Road
Suite 350
Roswell, Georgia 30076
With a copy to: Brantley Partners
3201 Enterprise Parkway, Suite 350
Beachwood, Ohio 44122
Attention: Paul H. Cascio
and: Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Winthrop G. Minot, Esq.
If to the Executive: Stephen H. Murdock
Address set forth on Schedule I hereto
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20. Headings. The headings of the sections contained in this Agreement are
for convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date and year first above written.
ORION HEALTHCORP, INC.
By: /s/ Terrence L. Bauer
----------------------------------
Name: Terrence L. Bauer
Title: Chief Executive Officer
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STEPHEN H. MURDOCK
By: /s/ Stephen H. Murdock
------------------------------
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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of December 15,
2004, between Orion HealthCorp, Inc., a Delaware corporation, with an executive
office located at 10700 Richmond Avenue, Suite 300, Houston, Texas 77042
(together with its successors and assigns permitted under this Agreement, the
"Company"), Medical Billing Services, Inc., a Texas corporation, with an
executive office located at 10700 Richmond Avenue, Suite 320, Houston, Texas
77042 (together with its successors and assigns permitted under this Agreement,
"Newco"), and Dennis Cain, who resides at the address set forth on Schedule I
hereto (the "Executive").
WITNESSETH:
WHEREAS, the Company, Newco and the Executive desire to enter into an
employment arrangement; and
WHEREAS, the Company and Newco have determined that it is in the best
interests of the Company, Newco and the stockholders of the Company to enter
into this Agreement setting forth the obligations and duties of each of the
Company, Newco and the Executive; and
WHEREAS, the Company and Newco wish to assure themselves of the services
of the Executive for the period hereinafter provided, and the Executive is
willing to be employed by Newco for said period, upon the terms and conditions
provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company, Newco and the Executive
(individually, a "Party" and together, the "Parties") agree as follows:
1. Employment. Newco hereby agrees to employ the Executive, and the
Executive hereby agrees to serve Newco, on the terms and conditions set forth
herein. The Executive acknowledges that this Agreement is the only employment
agreement to which he is a party as of the date hereof.
2. Term. Subject to the provisions for earlier termination as hereinafter
provided, the term of this Employment Agreement will begin on the date hereof
and will continue for five (5) years hereafter (the "Initial Term of
Employment"). This Agreement will be automatically renewed at the end of the
Initial Term of Employment and each successive renewal term thereafter for
successive two (2) year terms unless either party sends written notice of
termination to the other party not less than ninety (90) days prior to the
expiration of the then current Term of Employment (as hereinafter defined). The
Initial Term of Employment together with any renewal terms is referred to herein
as the "Term of Employment." The nonrenewal of the term of this Agreement by the
Company will not be a termination without Cause (as defined in Section 8(c)).
3. Position and Duties; Place of Performance.
(a) The Executive will serve as Chief Executive Officer of Newco and
will perform all duties customarily attendant to the position of Chief
Executive Officer and such other duties as may reasonably be assigned from
time-to-time by the Board of Directors of the Company (the "Board") that
are consistent with his position as Chief Executive Officer.
(b) The Executive will devote his full business time and best
efforts to his employment and perform diligently such duties as are
consistent with his capacity as Chief Executive Officer of Newco and such
other duties as the Board reasonably determines that are consistent with
his position. The Executive will devote his entire working time and
attention to the performance of his responsibilities hereunder; provided,
the Executive may make personal investments, engage in outside
non-competitive business activities or engage in other activities for any
charitable or other non-profit institution, provided that such activities
do not interfere with the performance of the Executive's duties hereunder.
(c) In connection with the Executive's employment by Newco, the
Executive will be based at Newco's place of business which on the date
hereof is located in Houston, Texas, or such other location as may,
subject to Section 8(d), be designated from time to time by the Board.
4. Base Salary. The Executive will receive from Newco or the Company an
annual base salary of One Hundred Seventy-Five Thousand Dollars ($175,000) (as
from time to time adjusted, the "Base Salary"), payable in accordance with the
standard practice of Newco or the Company with respect to the payment of
salaries of its employees. The Board will review the Base Salary annually, and
may, in its reasonable discretion, adjust the Base Salary.
5. Annual Bonus. (a) General. The Executive may be paid a bonus annually
based upon the attainment of objectives determined by the Board after
consultation with the Executive. Within 90 days after the start of each fiscal
year, the Board will communicate to the Executive the objectives applicable to
such fiscal year and, unless the Board and the Executive shall mutually agree
otherwise, such objectives shall apply to such fiscal year. For the year ended
December 31, 2005, if the Executive is employed by Newco on December 31, 2005,
the Executive shall be entitled to receive a bonus payment equal to 12.5% of the
amount, if any, by which Newco EBITDA for the 2005 fiscal year (on a pro forma
combined basis, assuming that Newco had been formed on December 31, 2004)
exceeds $1,200,000, up to a maximum bonus payment of $175,000; provided,
however, the Executive may elect not to receive a bonus payment with respect to
any fiscal year by providing written notice of such election to the Company at
any time prior to such payment. For purposes of this Agreement, "Newco EBITDA"
shall mean, with respect to a fiscal year of Newco, the sum of (without
duplication) (a) Newco Net Income for such fiscal year and (b) to the extent
Newco Net Income has been reduced thereby, (i) all income taxes of Newco
recorded as a tax provision in accordance with GAAP for such period, (ii) Newco
Interest Expense, (iii) Newco Non-Cash Charges and (iv) all
2
management fees required to be paid by Newco to the Company, all as determined
in accordance with GAAP. The components of Newco EBITDA will be determined by
the Company's independent auditor in accordance with GAAP, subject to Section
5(c) below.
(b) Definitions. "Newco Interest Expense" shall mean, with respect to a
fiscal year of Newco, the sum of (without duplication) (a) the aggregate of the
interest expense of Newco for such fiscal year determined in accordance with
GAAP and (b) the interest component of capitalized lease obligations accrued by
Newco during such period as determined in accordance with GAAP, less (c) the
amount of any interest income received by Newco during such fiscal period.
"Newco Net Income" shall mean, with respect to a fiscal year of Newco, the
aggregate net income (or loss) of Newco for such fiscal year, determined in
accordance with GAAP.
"Newco Non-Cash Charges" shall mean, with respect to a fiscal year of
Newco, the aggregate depreciation and amortization of Newco reducing Newco Net
Income for such fiscal year (including any depreciation or amortization of the
Company or any of its Subsidiaries other than Newco that was allocated to Newco,
if applicable).
"GAAP" shall mean United States generally accepted accounting principles
as set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in other such
statements by such other entity as have been approved by a significant segment
of the accounting profession, as in effect for the relevant time period.
(c) Disputes. The determination of Newco EBITDA for the year ended
December 31, 2005, and any disputes in respect thereof, shall be handled in the
manner specified in Sections 2.07(a) and (b) of the Amended and Restated
Agreement and Plan of Merger dated as of July 16, 2004 among the Company,
DCPS/MBS Acquisition, Inc., Dennis Cain Physician Solutions, Ltd., Medical
Billing Services, Inc. and the sellers party thereto, as amended (the "Merger
Agreement").
6. Other Benefits.
(a) During the Term of Employment, the Executive will be provided
with such medical, hospitalization, insurance, pension plan, equity
incentive, profit sharing and employee benefits, cell phone and such other
similar employment privileges and benefits ("Benefits") as are afforded
generally from time to time to executive employees of the Company, and
four (4) weeks paid vacation each year.
(b) During the term of this Agreement, the Executive shall receive
Two Thousand Eighty-Three Dollars and Thirty-Three Cents ($2,083.33) per
month (pre-tax) as a personal expense allowance.
3
7. Expense Reimbursement. During the Term of Employment, the Executive
will be entitled to prompt reimbursement by Newco or the Company for all
reasonable out-of-pocket expenses incurred by him in performing services under
this Agreement, upon submission of such accounts and records as may be required
under Company policy.
8. Termination of Employment. The Executive's employment may be terminated
under the following circumstances:
(a) Death. The Executive's employment is terminated upon his death.
(b) Disability. The Executive's employment may be terminated by the
Company due to illness or other physical or mental disability of the
Executive, resulting in his inability to perform substantially his duties
under this Agreement for a period of ninety (90) or more consecutive days
or for one hundred eighty (180) days in the aggregate during any
consecutive twelve (12) month period ("Disability").
(c) Cause. The Executive's employment may be terminated by the
Company for Cause. For purposes of this Agreement, the Company will have
"Cause" to terminate the Executive's employment upon:
(i) the Executive's indictment for any crime involving monies
or other property or any felony, crime or any offense of moral
turpitude, or his commission of fraud, embezzlement, theft,
dishonesty, willful misconduct or deliberate injury to the Company
or its subsidiaries;
(ii) the Executive's intentional or grossly negligent refusal
or failure to perform his duties or carry out written directions of
the Company's chief executive officer or Board, which refusal or
failure remains uncured or continues more than thirty (30) days
after written notice from the Company specifying in reasonable
detail the nature of the breach, or recurs within such period;
(iii) the Executive's breach of any of his fiduciary duties to
Newco or the Company or making of a willful misrepresentation or
omission, which breach or misrepresentation or omission might
reasonably be expected to have a material adverse effect on Newco's
or the Company's business and which remains uncured or continues
more than thirty (30) days after written notice from the Company
specifying in reasonable detail the nature of the breach or
misrepresentation or omission, or recurs within such period;
(iv) the Executive's breach of any material provision of this
Agreement, which breach, if curable, remains uncured or continues
more than thirty (30) days after written notice from the Company
specifying in reasonable detail the nature of the breach, or recurs
within such period; or
4
(v) any misappropriation by the Executive of funds or property
of the Company or any affiliate of the Company.
Any termination for "Cause" will not be in limitation of any other right
or remedy the Company or Newco may have under this Agreement or otherwise.
(d) Good Reason. The Executive may terminate his employment under
this Agreement for Good Reason. For purposes of this Agreement, the
Executive will have "Good Reason" to terminate the Executive's employment
upon the occurrence of any of the following circumstances, without the
Executive's express written consent: (i) a material diminution in the
Executive's position or authority (except during periods when the
Executive is unable to perform all or substantially all of the Executive's
duties and/or responsibilities as a result of the Executive's illness
(either physical or mental) or other incapacity); (ii) a requirement by
the Company that the Executive change the Executive's principal place of
business to a place more than thirty (30) miles from its location on the
date of this Agreement; (iii) a termination of employment by the Executive
within ninety (90) days following a Change in Control (as defined below),
provided, that Good Reason will not exist if the Executive has accepted or
agreed to continue employment following the Change of Control with the
surviving or successor entity and such surviving or successor entity has
agreed to continue or assume this Agreement, provided, further, in the
event of a Change of Control, the Executive is under no obligation to
continue or accept employment with the surviving or successor entity and
may instead elect to terminate his employment for Good Reason upon such
Change of Control; (iv) a breach of this Agreement by Newco or the Company
which is not cured within thirty (30) days of written notice by the
Executive; (v) any reduction in the Executive's Base Salary or any change
adverse to the Executive in the bonus objectives applicable to a fiscal
year after the communication of such objectives to the Executive pursuant
to Section 5(a); or (vi) a failure by the Company (a "Payment Default") to
pay any amounts due to a DCPS Seller (as defined in the Merger Agreement)
pursuant to (A) Section 2.07(c) of the Merger Agreement or (B) the DCPS
Notes (as defined in the Merger Agreement), in either case within 180 days
of such payment becoming due. The Executive's right to terminate
employment pursuant to this subsection 8(d) will not be affected by the
Executive's Disability. The Executive's continued employment will not
constitute consent to, or a waiver of rights with respect to, any
circumstance constituting consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason; provided, however, that the
Executive will be deemed to have waived his rights pursuant to
circumstances constituting Good Reason if he has not provided to the
Company a Notice of Termination (as defined below) within ninety (90) days
following his knowledge of the circumstances constituting Good Reason. A
waiver with respect to the circumstances constituting Good Reason will not
act as a waiver with respect to other future circumstances constituting
Good Reason.
Any termination of the Executive's employment by the Executive must
be communicated by written Notice of Termination to the Company in
accordance with Section 19. For purposes of this Agreement, a "Notice of
Termination" means a notice
5
which indicates the specific termination provision in this Agreement
relied upon and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
For purposes of this Agreement, a "Change in Control" will occur:
(i) upon the sale or other disposition of 50% or more of the consolidated
assets of the Company taken as a whole; (ii) if shares representing a
majority of the voting power of the Company are acquired by a person or
group (as such term is used in Rule 13d-5 promulgated under the Securities
Exchange Act of 1934, as amended) of persons other than the holders of the
capital stock of the Company as of the date of this Agreement; (iii) upon
a merger or consolidation pursuant to which the holders of the equity
securities of the Company before the merger or consolidation do not own
equity securities representing a majority of the voting power of the
surviving entity after the merger or consolidation; or (iv) upon approval
by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
9. Compensation Upon Termination.
(a) If the Executive's employment is terminated as a result of the
Executive's death or Disability, he, or his estate, will be entitled to:
(i) any Base Salary earned but not yet paid;
(ii) any bonus awarded pursuant to Section 5 of this Agreement
but not yet paid, payable as soon as administratively feasible
following termination of employment;
(iii) a prorated bonus for the year in which his employment
terminates, prorated based on the number of days worked, minus any
bonus payments made pursuant to Section 5 of this Agreement in
respect of the year containing the date of termination, payable as
soon as administratively feasible following the end of the then
current fiscal year of the Company;
(iv) reimbursement in accordance with this Agreement of any
business expense incurred by the Executive but not yet paid, payable
as soon as administratively feasible following termination of
employment; and
(v) other benefits accrued and earned by the Executive through
the date of his death or Disability in accordance with applicable
plans and programs of the Company.
(b) If the Executive's employment is terminated by the Company for
Cause, or by the Executive other than for Good Reason, or as a result of
notice of nonrenewal provided by the Company or the Executive under
Section 2, he will be entitled to:
6
(i) any Base Salary earned but not yet paid;
(ii) reimbursement in accordance with this Agreement of any
business expense incurred by the Executive but not yet paid, payable
as soon as administratively feasible following termination of
employment;
(iii) other benefits accrued and earned by the Executive
through the date of his termination in accordance with applicable
plans and programs of the Company;
(iv) if the Executive's employment is terminated as a result
of notice of nonrenewal provided by the Executive under Section 2,
he will be entitled to a prorated bonus for the year in which his
employment terminates, prorated based on the number of days worked,
minus any bonus payments made pursuant to Section 5 of this
Agreement in respect of the year containing the date of termination,
payable as soon as administratively feasible following the end of
the then current fiscal year of the Company; and
(v) if the Executive's employment is terminated as a result of
notice of nonrenewal provided by the Company under Section 2, he
will be entitled to full vesting of any unvested equity incentives,
including without limitation stock options, restricted stock and
deferred restricted stock units.
(c) If the Executive's employment is terminated by the Company
without Cause, or by the Executive for Good Reason, he will be entitled
to:
(i) any Base Salary earned but not yet paid;
(ii) any bonus awarded pursuant to Section 5 of this Agreement
but not yet paid, payable as soon as administratively feasible
following termination of employment;
(iii) continuation of his Base Salary, at the rate in effect
on the date of his termination of employment (which, in the case of
a termination of the Executive for Good Reason pursuant to Section
8(d)(v), shall be deemed to be the rate in effect prior to giving
any effect to the reduction in Base Salary giving rise to such Good
Reason), until the expiration of the Non-Competition Period (as
defined below);
(iv) the greater of: (A) a prorated bonus for the year in
which employment terminates, prorated based on the number of days
worked, or (B) an amount equal to fifty percent (50%) of the average
of the bonus payments made pursuant to Section 5 of this Agreement
during the two (2) calendar years preceding such termination, if
any, minus any bonus payments made pursuant to Section 5 of this
Agreement in respect of the year containing the date of termination,
payable in
7
either event as soon as administratively feasible following the end
of the then fiscal year of the Company; provided, however, that this
clause (iv) shall not be applicable in the event that the
Executive's employment is terminated upon notice of nonrenewal
provided by the Company under Section 2;
(v) until the expiration of the Non-Competition Period,
subject to any employee contribution applicable to the Executive on
the date of termination, continued participation in all of the
Company's group medical and dental insurance plans in which he was
participating on the date of his termination of employment, provided
that the Executive is entitled to continue such participation under
applicable law and plan terms;
(vi) reimbursement in accordance with this Agreement of any
business expenses incurred by the Executive but not yet paid to him
on the date of his termination of employment, payable as soon as
administratively feasible following termination of employment; and
(vii) full vesting of any unvested equity incentives,
including without limitation stock options, restricted stock and
deferred restricted stock units.
In the event that, under the terms of any employee benefit plan
referred to in subsection 9(c)(v) above, the Executive may not continue
his participation, he will be provided with the after-tax economic
equivalent of the benefits provided under any plan in which he was
previously eligible to participate for the period specified in subsection
9(c)(v) above. The economic equivalent of any benefit foregone will be
deemed to be the cost that would be incurred by the Executive in obtaining
such benefit on the lowest available individual basis.
(d) Any amounts due under this Section 9 are in the nature of
severance payments or liquidated damages or both, and, to the extent
received by the Executive, will fully compensate the Executive and his
dependents or beneficiaries, as the case may be, for any and all direct
damages and consequential damages that any of them may suffer as a result
of termination of the Executive's employment, and they are not in the
nature of a penalty.
(e) Notwithstanding anything contained herein, any obligation of the
Company or Newco to the Executive under Sections 9(c)(iii), (iv), (v) and
(vii) is conditioned upon (i) the Executive signing a release of claims in
the form attached hereto as Exhibit A (the "Employee Release") within
twenty-one days (or such greater period as the Company may specify)
following the later of the date on which the Executive (or, in the case of
termination by the Executive for Good Reason, the Company) receives notice
of termination of employment or the date the Executive receives a copy of
the Employee Release and upon the Executive not revoking the Employee
Release in a timely manner thereafter and (ii) the Executive's continuing
compliance with the provisions of Section 10. If the Executive breaches
any provision of Section 10, upon written notice of such
8
breach and request for repayment from the Company, the Executive shall
promptly pay to the Company an amount equal to the sum of any cash
payments previously paid to the Executive pursuant to Sections 9(c)(iii),
(iv), (v) and (vii). Any such repayment shall not be the exclusive remedy
for any such breach and the Company and Newco shall retain all rights to
pursue other available remedies (whether at law or equity) for any such
breach.
10. Confidentiality and Non-Competition.
(a) The Executive acknowledges that he has had or will have
unlimited access to confidential information and business methods relating
to the Company's and Newco's business and operations and that the Company
and Newco would be irreparably injured and the goodwill of the Company and
Newco would be irreparably damaged if the Executive were to breach the
covenants set forth in this Section 10. The Executive further acknowledges
that the covenants set forth in this Section 10 are reasonable in scope
and duration and do not unreasonably restrict the Executive's association
with other business entities, either as an employee or otherwise as set
forth herein.
(b) During the Term of Employment and thereafter, except as may be
required by law or necessary in connection with any dealings with any
public agency or authority or in the ordinary course of business during
the Term of Employment pursuant to customary non-disclosure agreements,
the Executive will not disclose, disseminate, divulge, discuss, copy or
otherwise use or suffer to be used, including but not limited to in
competition with, or in a manner harmful to the interests of, the Company
or Newco, any confidential information (written or oral) respecting any
material aspect of the Company's or Newco's business, excepting only use
of such data or information as is (i) at the time disclosed, through no
act or failure to act on the part of the Executive, generally known or
available; (ii) furnished to the Executive by a third party as a matter of
right and without restriction on disclosure; or (iii) required to be
disclosed by court order. Upon termination of the Term of Employment, the
Executive will return to the Company any and all materials in tangible or
electronic form containing confidential information belonging to the
Company or Newco.
(c) During the Term of Employment and continuing until the earlier
of the termination of the Non-Competition Period or the date on which the
Executive terminates his employment with Newco for Good Reason upon a
Payment Default, the Executive will not in the states of California,
Florida, Georgia, Illinois, Iowa, New Jersey, Ohio or Texas, directly or
indirectly, whether as an individual on the Executive's own account, or as
a shareholder, partner, member, joint venturer, director, officer,
employee, consultant, creditor and/or agent, of any person, firm or
organization or otherwise:
(i) own, manage, control or participate in the ownership,
management or control of, or be employed or engaged by or otherwise
affiliated or associated as a consultant, independent contractor or
otherwise with, any other corporation, partnership, proprietorship,
firm, association or other business entity or otherwise engage in
any business that is engaged in the business of the Company or any
of
9
the Company's subsidiaries (collectively, "Subsidiaries"), as such
business is conducted on the applicable date during the Term of
Employment, or in the case of the Non-Competition Period, as of the
date the Executive ceases to be employed by Newco, in any capacity,
including as a consultant;
(ii) directly or indirectly solicit, encourage or induce any
person who is a present or future employee, officer, agent,
affiliate or customer of the Company or any Subsidiary to terminate
or materially alter such person's relationship with the Company or
such Subsidiary;
(iii) induce any supplier of the Company or any Subsidiary, to
refuse to do business with the Company or any Subsidiary, on as
favorable terms as previously done with the Company or any
Subsidiary, as the case may be; or
(iv) engage in disparagement (which will not include the
providing of accurate information without invidious intent) of the
Company or any Subsidiary by any means to any person.
For purposes of this Agreement, "Non-Competition Period" shall mean the
period during the Term of Employment and thereafter until the second
anniversary of the date of termination of the Executive's employment with
Newco; provided, however, that the Company may, by written notice to the
Executive (whether given before or after the date of termination of the
Executive's employment with Newco), shorten the portion of the
Non-Competition Period occurring following the date of termination of the
Executive's employment with Newco to any date specified in such notice
which occurs on or after the earlier of (x) the second anniversary of the
date of termination of the Executive's employment with Newco and (y) the
date of expiration of the then current Term of Employment. Notwithstanding
anything herein to the contrary, the Non-Competition Period shall
terminate if the Company and Newco fail to pay any amounts due to the
Executive under this Agreement within sixty (60) days of such payment
being due. Notwithstanding the foregoing, in the event that the Company or
the Executive provides notice of nonrenewal under Section 2, then: (1) the
Company shall have the option to continue to pay the Executive his Base
Salary, at the rate in effect on the date of his termination of
employment, until the expiration of the Non-Competition Period; (2) if the
Company exercises such option, it may discontinue the payment of Base
Salary at any time; (3) the Executive shall be subject to Section 10(c)(i)
only for so long as the Company continues to pay the Executive his Base
Salary; and (4) if the Company stops paying the Executive his Base Salary,
then the Executive shall no longer be subject to Section 10(c)(i), but
shall remain subject to the rest of this Section 10.
(d) Notwithstanding anything herein to the contrary, the Executive
will be permitted to own shares of any class of capital stock of any
publicly held corporation so long as the aggregate holdings of the
Executive represent less than one percent (1%) of the outstanding shares
of such class of capital stock.
10
11. Rights and Remedies Upon Breach.
(a) The Executive expressly agrees and understands that the remedy
at law for any breach by the Executive of Section 10 will be inadequate
and that the damages flowing from such breach are not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged that
upon adequate proof of the Executive's violation of Section 10, the
Company and Newco will be entitled, among other remedies, to injunctive
relief and may obtain a temporary restraining order restraining any
threatened or further breach. Nothing in this Section 11(a) will be deemed
to limit the Company's or Newco's remedies at law or in equity for any
breach by the Executive of any of the provisions of this Agreement which
may be pursued or availed of by the Company or Newco.
(b) In the event any court of competent jurisdiction determines that
the specified time period or geographical area set forth in Section 10 is
unreasonable, arbitrary or against public policy, then a lesser time
period or geographical area that is determined by the court to be
reasonable, non-arbitrary and not against public policy may be enforced.
12. Withholding Taxes. All payments to the Executive or his beneficiary
will be subject to withholding on account of federal, state and local taxes as
required by law. If any payment hereunder is insufficient to provide the amount
of such taxes required to be withheld, the Company or Newco may withhold such
taxes from any other payment due the Executive or his beneficiary.
13. Assignability; Binding Nature. This Agreement will be binding upon and
inure to the benefit of the Parties and their respective successors, heirs (in
the case of the Executive) and assigns. No rights or obligations of the Company
or Newco under this Agreement may be assigned or transferred by the Company or
Newco except that such rights or obligations may be assigned or transferred
pursuant to (i) a merger or consolidation in which the Company or Newco is not
the continuing entity or (ii) a sale or liquidation of all or substantially all
of the assets of the Company or Newco, provided that the assignee or transferee
is the successor to all or substantially all of the assets of the Company or
Newco, as applicable, and such assignee or transferee assumes the liabilities,
obligations and duties of the Company or Newco, as applicable, as contained in
this Agreement, either contractually or as a matter of law. Each of the Company
and Newco further agrees that, in the event of a sale of assets or liquidation
as described in the preceding sentence, it will use its best efforts to cause
such assignee or transferee to expressly assume the liabilities, obligations and
duties of the Company or Newco, as applicable, hereunder. No obligations of the
Executive under this Agreement may be assigned or transferred by the Executive.
Notwithstanding anything to the contrary contained in this Agreement, if the
Sellers exercise the ROFR (as defined in Section 6.11 of the Merger Agreement)
and purchase the capital stock or assets of Newco pursuant thereto, this
Agreement shall immediately terminate without further obligation on the part of
any party hereto; provided, however, that the Executive
11
shall continue to be bound by the provisions of Sections 10(a) and 10(b) with
respect to confidential information of the Company.
14. Entire Agreement. Except to the extent otherwise provided herein, this
Agreement contains the entire understanding and agreement between the Parties
concerning the subject matter hereof and supersedes any prior agreements,
whether written or oral, between the Parties concerning the subject matter
hereof.
15. Amendment or Waiver. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by both the Executive
and an authorized officer of the Company. No waiver by either Party of any
breach by the other Party of any condition or provision contained in this
Agreement to be performed by such other Party will be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Executive or an
authorized officer of the Company, as the case may be.
16. Severability. In the event that any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining provisions of this Agreement will be unaffected
thereby and will remain in full force and effect to the fullest extent permitted
by law.
17. Survivorship. The respective rights and obligations of the Parties
hereunder will survive any termination of the Executive's employment with Newco
to the extent necessary to the intended preservation of such rights and
obligations as described in this Agreement.
18. Governing Law. This Agreement will be governed by and construed and
interpreted in accordance with the laws of the State of Texas, without reference
to principles of conflict of laws.
19. Notices. Any notice given to any Party must be in writing and will be
deemed to have been given when delivered personally or one (1) day after having
been sent by overnight courier service or three (3) days after having been sent
by certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the Party concerned at the address indicated below or to such
changed address as such Party may subsequently give such notice of:
If to the Company, Newco Orion HealthCorp, Inc.
or the Board: 10700 Richmond Avenue
Suite 300
Houston, Texas 77042
With a copy to: Brantley Partners
3201 Enterprise Parkway, Suite 350
Beachwood, Ohio 44122
Attention: Paul H. Cascio
12
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and: Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Winthrop G. Minot, Esq.
If to the Executive: Dennis Cain
Address set forth on Schedule I hereto
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20. Headings. The headings of the sections contained in this Agreement are
for convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
13
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date and year first above written.
ORION HEALTHCORP, INC.
By: /s/ Keith LeBlanc
-----------------------------
Name: Keith LeBlanc
Title: President
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MEDICAL BILLING SERVICES, INC.
By: /s/ Tommy M. Smith
-----------------------------
Name: Tommy M. Smith
Title: President
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DENNIS CAIN
By: /s/ Dennis Cain
-----------------------------
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EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of December 15,
2004, between Orion HealthCorp, Inc., a Delaware corporation, with an executive
office located at 10700 Richmond Avenue, Suite 300, Houston, Texas 77042
(together with its successors and assigns permitted under this Agreement, the
"Company"), Medical Billing Services, Inc., a Texas corporation, with an
executive office located at 10700 Richmond Avenue, Suite 320, Houston, Texas
77042 (together with its successors and assigns permitted under this Agreement,
"Newco"), and Tom M. Smith, who resides at the address set forth on Schedule I
hereto (the "Executive").
WITNESSETH:
WHEREAS, the Company, Newco and the Executive desire to enter into an
employment arrangement; and
WHEREAS, the Company and Newco have determined that it is in the best
interests of the Company, Newco and the stockholders of the Company to enter
into this Agreement setting forth the obligations and duties of each of the
Company, Newco and the Executive; and
WHEREAS, the Company and Newco wish to assure themselves of the services
of the Executive for the period hereinafter provided, and the Executive is
willing to be employed by Newco for said period, upon the terms and conditions
provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company, Newco and the Executive
(individually, a "Party" and together, the "Parties") agree as follows:
1. Employment. Newco hereby agrees to employ the Executive, and the
Executive hereby agrees to serve Newco, on the terms and conditions set forth
herein. The Executive acknowledges that this Agreement is the only employment
agreement to which he is a party as of the date hereof.
2. Term. Subject to the provisions for earlier termination as hereinafter
provided, the term of this Employment Agreement will begin on the date hereof
and will continue for five (5) years hereafter (the "Initial Term of
Employment"). This Agreement will be automatically renewed at the end of the
Initial Term of Employment and each successive renewal term thereafter for
successive two (2) year terms unless either party sends written notice of
termination to the other party not less than ninety (90) days prior to the
expiration of the then current Term of Employment (as hereinafter defined). The
Initial Term of Employment together with any renewal terms is referred to herein
as the "Term of Employment." The nonrenewal of the term of this Agreement by the
Company will not be a termination without Cause (as defined in Section 8(c)).
3. Position and Duties; Place of Performance.
(a) The Executive will serve as President and Chief Operating
Officer of Newco and will perform all duties customarily attendant to the
position of President and Chief Operating Officer and such other duties as
may reasonably be assigned from time-to-time by the Board of Directors of
the Company (the "Board") that are consistent with his position as
President and Chief Operating Officer.
(b) The Executive will devote his full business time and best
efforts to his employment and perform diligently such duties as are
consistent with his capacity as President and Chief Operating Officer of
Newco and such other duties as the Board reasonably determines that are
consistent with his position. The Executive will devote his entire working
time and attention to the performance of his responsibilities hereunder;
provided, the Executive may make personal investments, engage in outside
non-competitive business activities or engage in other activities for any
charitable or other non-profit institution, provided that such activities
do not interfere with the performance of the Executive's duties hereunder.
(c) In connection with the Executive's employment by Newco, the
Executive will be based at Newco's place of business which on the date
hereof is located in Houston, Texas, or such other location as may,
subject to Section 8(d), be designated from time to time by the Board.
4. Base Salary. The Executive will receive from Newco or the Company an
annual base salary of One Hundred Seventy-Five Thousand Dollars ($175,000) (as
from time to time adjusted, the "Base Salary"), payable in accordance with the
standard practice of Newco or the Company with respect to the payment of
salaries of its employees. The Board will review the Base Salary annually, and
may, in its reasonable discretion, adjust the Base Salary.
5. Annual Bonus. (a) General. The Executive may be paid a bonus annually
based upon the attainment of objectives determined by the Board after
consultation with the Executive. Within 90 days after the start of each fiscal
year, the Board will communicate to the Executive the objectives applicable to
such fiscal year and, unless the Board and the Executive shall mutually agree
otherwise, such objectives shall apply to such fiscal year. For the year ended
December 31, 2005, if the Executive is employed by Newco on December 31, 2005,
the Executive shall be entitled to receive a bonus payment equal to 12.5% of the
amount, if any, by which Newco EBITDA for the 2005 fiscal year (on a pro forma
combined basis, assuming that Newco had been formed on December 31, 2004)
exceeds $1,200,000, up to a maximum bonus payment of $175,000; provided,
however, the Executive may elect not to receive a bonus payment with respect to
any fiscal year by providing written notice of such election to the Company at
any time prior to such payment. For purposes of this Agreement, "Newco EBITDA"
shall mean, with respect to a fiscal year of Newco, the sum of (without
duplication) (a) Newco Net Income for such fiscal year and (b) to the extent
Newco Net Income has been reduced thereby, (i) all income taxes of Newco
recorded as a tax provision in accordance with GAAP for
2
such period, (ii) Newco Interest Expense, (iii) Newco Non-Cash Charges and (iv)
all management fees required to be paid by Newco to the Company, all as
determined in accordance with GAAP. The components of Newco EBITDA will be
determined by the Company's independent auditor in accordance with GAAP, subject
to Section 5(c) below.
(b) Definitions. "Newco Interest Expense" shall mean, with respect to a
fiscal year of Newco, the sum of (without duplication) (a) the aggregate of the
interest expense of Newco for such fiscal year determined in accordance with
GAAP and (b) the interest component of capitalized lease obligations accrued by
Newco during such period as determined in accordance with GAAP, less (c) the
amount of any interest income received by Newco during such fiscal period.
"Newco Net Income" shall mean, with respect to a fiscal year of Newco, the
aggregate net income (or loss) of Newco for such fiscal year, determined in
accordance with GAAP.
"Newco Non-Cash Charges" shall mean, with respect to a fiscal year of
Newco, the aggregate depreciation and amortization of Newco reducing Newco Net
Income for such fiscal year (including any depreciation or amortization of the
Company or any of its Subsidiaries other than Newco that was allocated to Newco,
if applicable).
"GAAP" shall mean United States generally accepted accounting principles
as set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in other such
statements by such other entity as have been approved by a significant segment
of the accounting profession, as in effect for the relevant time period.
(c) Disputes. The determination of Newco EBITDA for the year ended
December 31, 2005, and any disputes in respect thereof, shall be handled in the
manner specified in Sections 2.07(a) and (b) of the Amended and Restated
Agreement and Plan of Merger dated as of July 16, 2004 among the Company,
DCPS/MBS Acquisition, Inc., Dennis Cain Physician Solutions, Ltd., Medical
Billing Services, Inc. and the sellers party thereto, as amended (the "Merger
Agreement").
6. Other Benefits.
(a) During the Term of Employment, the Executive will be provided
with such medical, hospitalization, insurance, pension plan, equity
incentive, profit sharing and employee benefits, cell phone and such other
similar employment privileges and benefits ("Benefits") as are afforded
generally from time to time to executive employees of the Company, and
four (4) weeks paid vacation each year.
(b) During the term of this Agreement, the Executive shall receive
Two Thousand Eighty-Three Dollars and Thirty-Three Cents ($2,083.33) per
month (pre-tax) as a personal expense allowance.
3
7. Expense Reimbursement. During the Term of Employment, the Executive
will be entitled to prompt reimbursement by Newco or the Company for all
reasonable out-of-pocket expenses incurred by him in performing services under
this Agreement, upon submission of such accounts and records as may be required
under Company policy.
8. Termination of Employment. The Executive's employment may be terminated
under the following circumstances:
(a) Death. The Executive's employment is terminated upon his death.
(b) Disability. The Executive's employment may be terminated by the
Company due to illness or other physical or mental disability of the
Executive, resulting in his inability to perform substantially his duties
under this Agreement for a period of ninety (90) or more consecutive days
or for one hundred eighty (180) days in the aggregate during any
consecutive twelve (12) month period ("Disability").
(c) Cause. The Executive's employment may be terminated by the
Company for Cause. For purposes of this Agreement, the Company will have
"Cause" to terminate the Executive's employment upon:
(i) the Executive's indictment for any crime involving monies
or other property or any felony, crime or any offense of moral
turpitude, or his commission of fraud, embezzlement, theft,
dishonesty, willful misconduct or deliberate injury to the Company
or its subsidiaries;
(ii) the Executive's intentional or grossly negligent refusal
or failure to perform his duties or carry out written directions of
the Company's chief executive officer or Board, which refusal or
failure remains uncured or continues more than thirty (30) days
after written notice from the Company specifying in reasonable
detail the nature of the breach, or recurs within such period;
(iii) the Executive's breach of any of his fiduciary duties to
Newco or the Company or making of a willful misrepresentation or
omission, which breach or misrepresentation or omission might
reasonably be expected to have a material adverse effect on Newco's
or the Company's business and which remains uncured or continues
more than thirty (30) days after written notice from the Company
specifying in reasonable detail the nature of the breach or
misrepresentation or omission, or recurs within such period;
(iv) the Executive's breach of any material provision of this
Agreement, which breach, if curable, remains uncured or continues
more than thirty (30) days after written notice from the Company
specifying in reasonable detail the nature of the breach, or recurs
within such period; or
4
(v) any misappropriation by the Executive of funds or property
of the Company or any affiliate of the Company.
Any termination for "Cause" will not be in limitation of any other right
or remedy the Company or Newco may have under this Agreement or otherwise.
(d) Good Reason. The Executive may terminate his employment under
this Agreement for Good Reason. For purposes of this Agreement, the
Executive will have "Good Reason" to terminate the Executive's employment
upon the occurrence of any of the following circumstances, without the
Executive's express written consent: (i) a material diminution in the
Executive's position or authority (except during periods when the
Executive is unable to perform all or substantially all of the Executive's
duties and/or responsibilities as a result of the Executive's illness
(either physical or mental) or other incapacity); (ii) a requirement by
the Company that the Executive change the Executive's principal place of
business to a place more than thirty (30) miles from its location on the
date of this Agreement; (iii) a termination of employment by the Executive
within ninety (90) days following a Change in Control (as defined below),
provided, that Good Reason will not exist if the Executive has accepted or
agreed to continue employment following the Change of Control with the
surviving or successor entity and such surviving or successor entity has
agreed to continue or assume this Agreement, provided, further, in the
event of a Change of Control, the Executive is under no obligation to
continue or accept employment with the surviving or successor entity and
may instead elect to terminate his employment for Good Reason upon such
Change of Control; (iv) a breach of this Agreement by Newco or the Company
which is not cured within thirty (30) days of written notice by the
Executive; (v) any reduction in the Executive's Base Salary or any change
adverse to the Executive in the bonus objectives applicable to a fiscal
year after the communication of such objectives to the Executive pursuant
to Section 5(a); or (vi) a failure by the Company (a "Payment Default") to
pay any amounts due to an MBS Seller (as defined in the Merger Agreement)
pursuant to (A) Section 2.07(c) of the Merger Agreement or (B) the MBS
Notes (as defined in the Merger Agreement), in either case within 180 days
of such payment becoming due. The Executive's right to terminate
employment pursuant to this subsection 8(d) will not be affected by the
Executive's Disability. The Executive's continued employment will not
constitute consent to, or a waiver of rights with respect to, any
circumstance constituting consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason; provided, however, that the
Executive will be deemed to have waived his rights pursuant to
circumstances constituting Good Reason if he has not provided to the
Company a Notice of Termination (as defined below) within ninety (90) days
following his knowledge of the circumstances constituting Good Reason. A
waiver with respect to the circumstances constituting Good Reason will not
act as a waiver with respect to other future circumstances constituting
Good Reason.
Any termination of the Executive's employment by the Executive must
be communicated by written Notice of Termination to the Company in
accordance with Section 19. For purposes of this Agreement, a "Notice of
Termination" means a notice
5
which indicates the specific termination provision in this Agreement
relied upon and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
For purposes of this Agreement, a "Change in Control" will occur:
(i) upon the sale or other disposition of 50% or more of the consolidated
assets of the Company taken as a whole; (ii) if shares representing a
majority of the voting power of the Company are acquired by a person or
group (as such term is used in Rule 13d-5 promulgated under the Securities
Exchange Act of 1934, as amended) of persons other than the holders of the
capital stock of the Company as of the date of this Agreement; (iii) upon
a merger or consolidation pursuant to which the holders of the equity
securities of the Company before the merger or consolidation do not own
equity securities representing a majority of the voting power of the
surviving entity after the merger or consolidation; or (iv) upon approval
by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
9. Compensation Upon Termination.
(a) If the Executive's employment is terminated as a result of the
Executive's death or Disability, he, or his estate, will be entitled to:
(i) any Base Salary earned but not yet paid;
(ii) any bonus awarded pursuant to Section 5 of this Agreement
but not yet paid, payable as soon as administratively feasible
following termination of employment;
(iii) a prorated bonus for the year in which his employment
terminates, prorated based on the number of days worked, minus any
bonus payments made pursuant to Section 5 of this Agreement in
respect of the year containing the date of termination, payable as
soon as administratively feasible following the end of the then
current fiscal year of the Company;
(iv) reimbursement in accordance with this Agreement of any
business expense incurred by the Executive but not yet paid, payable
as soon as administratively feasible following termination of
employment; and
(v) other benefits accrued and earned by the Executive through
the date of his death or Disability in accordance with applicable
plans and programs of the Company.
(b) If the Executive's employment is terminated by the Company for
Cause, or by the Executive other than for Good Reason, or as a result of
notice of nonrenewal provided by the Company or the Executive under
Section 2, he will be entitled to:
6
(i) any Base Salary earned but not yet paid;
(ii) reimbursement in accordance with this Agreement of any
business expense incurred by the Executive but not yet paid, payable
as soon as administratively feasible following termination of
employment;
(iii) other benefits accrued and earned by the Executive
through the date of his termination in accordance with applicable
plans and programs of the Company;
(iv) if the Executive's employment is terminated as a result
of notice of nonrenewal provided by the Executive under Section 2,
he will be entitled to a prorated bonus for the year in which his
employment terminates, prorated based on the number of days worked,
minus any bonus payments made pursuant to Section 5 of this
Agreement in respect of the year containing the date of termination,
payable as soon as administratively feasible following the end of
the then current fiscal year of the Company; and
(v) if the Executive's employment is terminated as a result of
notice of nonrenewal provided by the Company under Section 2, he
will be entitled to full vesting of any unvested equity incentives,
including without limitation stock options, restricted stock and
deferred restricted stock units.
(c) If the Executive's employment is terminated by the Company
without Cause, or by the Executive for Good Reason, he will be entitled
to:
(i) any Base Salary earned but not yet paid;
(ii) any bonus awarded pursuant to Section 5 of this Agreement
but not yet paid, payable as soon as administratively feasible
following termination of employment;
(iii) continuation of his Base Salary, at the rate in effect
on the date of his termination of employment (which, in the case of
a termination of the Executive for Good Reason pursuant to Section
8(d)(v), shall be deemed to be the rate in effect prior to giving
any effect to the reduction in Base Salary giving rise to such Good
Reason), until the expiration of the Non-Competition Period (as
defined below);
(iv) the greater of: (A) a prorated bonus for the year in
which employment terminates, prorated based on the number of days
worked, or (B) an amount equal to fifty percent (50%) of the average
of the bonus payments made pursuant to Section 5 of this Agreement
during the two (2) calendar years preceding such termination, if
any, minus any bonus payments made pursuant to Section 5 of this
Agreement in respect of the year containing the date of termination,
payable in
7
either event as soon as administratively feasible following the end
of the then fiscal year of the Company; provided, however, that this
clause (iv) shall not be applicable in the event that the
Executive's employment is terminated upon notice of nonrenewal
provided by the Company under Section 2;
(v) until the expiration of the Non-Competition Period,
subject to any employee contribution applicable to the Executive on
the date of termination, continued participation in all of the
Company's group medical and dental insurance plans in which he was
participating on the date of his termination of employment, provided
that the Executive is entitled to continue such participation under
applicable law and plan terms;
(vi) reimbursement in accordance with this Agreement of any
business expenses incurred by the Executive but not yet paid to him
on the date of his termination of employment, payable as soon as
administratively feasible following termination of employment; and
(vii) full vesting of any unvested equity incentives,
including without limitation stock options, restricted stock and
deferred restricted stock units.
In the event that, under the terms of any employee benefit plan
referred to in subsection 9(c)(v) above, the Executive may not continue
his participation, he will be provided with the after-tax economic
equivalent of the benefits provided under any plan in which he was
previously eligible to participate for the period specified in subsection
9(c)(v) above. The economic equivalent of any benefit foregone will be
deemed to be the cost that would be incurred by the Executive in obtaining
such benefit on the lowest available individual basis.
(d) Any amounts due under this Section 9 are in the nature of
severance payments or liquidated damages or both, and, to the extent
received by the Executive, will fully compensate the Executive and his
dependents or beneficiaries, as the case may be, for any and all direct
damages and consequential damages that any of them may suffer as a result
of termination of the Executive's employment, and they are not in the
nature of a penalty.
(e) Notwithstanding anything contained herein, any obligation of the
Company or Newco to the Executive under Sections 9(c)(iii), (iv), (v) and
(vii) is conditioned upon (i) the Executive signing a release of claims in
the form attached hereto as Exhibit A (the "Employee Release") within
twenty-one days (or such greater period as the Company may specify)
following the later of the date on which the Executive (or, in the case of
termination by the Executive for Good Reason, the Company) receives notice
of termination of employment or the date the Executive receives a copy of
the Employee Release and upon the Executive not revoking the Employee
Release in a timely manner thereafter and (ii) the Executive's continuing
compliance with the provisions of Section 10. If the Executive breaches
any provision of Section 10, upon written notice of such
8
breach and request for repayment from the Company, the Executive shall
promptly pay to the Company an amount equal to the sum of any cash
payments previously paid to the Executive pursuant to Sections 9(c)(iii),
(iv), (v) and (vii). Any such repayment shall not be the exclusive remedy
for any such breach and the Company and Newco shall retain all rights to
pursue other available remedies (whether at law or equity) for any such
breach.
10. Confidentiality and Non-Competition.
(a) The Executive acknowledges that he has had or will have
unlimited access to confidential information and business methods relating
to the Company's and Newco's business and operations and that the Company
and Newco would be irreparably injured and the goodwill of the Company and
Newco would be irreparably damaged if the Executive were to breach the
covenants set forth in this Section 10. The Executive further acknowledges
that the covenants set forth in this Section 10 are reasonable in scope
and duration and do not unreasonably restrict the Executive's association
with other business entities, either as an employee or otherwise as set
forth herein.
(b) During the Term of Employment and thereafter, except as may be
required by law or necessary in connection with any dealings with any
public agency or authority or in the ordinary course of business during
the Term of Employment pursuant to customary non-disclosure agreements,
the Executive will not disclose, disseminate, divulge, discuss, copy or
otherwise use or suffer to be used, including but not limited to in
competition with, or in a manner harmful to the interests of, the Company
or Newco, any confidential information (written or oral) respecting any
material aspect of the Company's or Newco's business, excepting only use
of such data or information as is (i) at the time disclosed, through no
act or failure to act on the part of the Executive, generally known or
available; (ii) furnished to the Executive by a third party as a matter of
right and without restriction on disclosure; or (iii) required to be
disclosed by court order. Upon termination of the Term of Employment, the
Executive will return to the Company any and all materials in tangible or
electronic form containing confidential information belonging to the
Company or Newco.
(c) During the Term of Employment and continuing until the earlier
of the termination of the Non-Competition Period or the date on which the
Executive terminates his employment with Newco for Good Reason upon a
Payment Default, the Executive will not in the states of California,
Florida, Georgia, Illinois, Iowa, New Jersey, Ohio or Texas, directly or
indirectly, whether as an individual on the Executive's own account, or as
a shareholder, partner, member, joint venturer, director, officer,
employee, consultant, creditor and/or agent, of any person, firm or
organization or otherwise:
(i) own, manage, control or participate in the ownership,
management or control of, or be employed or engaged by or otherwise
affiliated or associated as a consultant, independent contractor or
otherwise with, any other corporation, partnership, proprietorship,
firm, association or other business entity or otherwise engage in
any business that is engaged in the business of the Company or any
of
9
the Company's subsidiaries (collectively, "Subsidiaries"), as such
business is conducted on the applicable date during the Term of
Employment, or in the case of the Non-Competition Period, as of the
date the Executive ceases to be employed by Newco, in any capacity,
including as a consultant;
(ii) directly or indirectly solicit, encourage or induce any
person who is a present or future employee, officer, agent,
affiliate or customer of the Company or any Subsidiary to terminate
or materially alter such person's relationship with the Company or
such Subsidiary;
(iii) induce any supplier of the Company or any Subsidiary, to
refuse to do business with the Company or any Subsidiary, on as
favorable terms as previously done with the Company or any
Subsidiary, as the case may be; or
(iv) engage in disparagement (which will not include the
providing of accurate information without invidious intent) of the
Company or any Subsidiary by any means to any person.
For purposes of this Agreement, "Non-Competition Period" shall mean the
period during the Term of Employment and thereafter until the second
anniversary of the date of termination of the Executive's employment with
Newco; provided, however, that the Company may, by written notice to the
Executive (whether given before or after the date of termination of the
Executive's employment with Newco), shorten the portion of the
Non-Competition Period occurring following the date of termination of the
Executive's employment with Newco to any date specified in such notice
which occurs on or after the earlier of (x) the second anniversary of the
date of termination of the Executive's employment with Newco and (y) the
date of expiration of the then current Term of Employment. Notwithstanding
anything herein to the contrary, the Non-Competition Period shall
terminate if the Company and Newco fail to pay any amounts due to the
Executive under this Agreement within sixty (60) days of such payment
being due. Notwithstanding the foregoing, in the event that the Company or
the Executive provides notice of nonrenewal under Section 2, then: (1) the
Company shall have the option to continue to pay the Executive his Base
Salary, at the rate in effect on the date of his termination of
employment, until the expiration of the Non-Competition Period; (2) if the
Company exercises such option, it may discontinue the payment of Base
Salary at any time; (3) the Executive shall be subject to Section 10(c)(i)
only for so long as the Company continues to pay the Executive his Base
Salary; and (4) if the Company stops paying the Executive his Base Salary,
then the Executive shall no longer be subject to Section 10(c)(i), but
shall remain subject to the rest of this Section 10.
(d) Notwithstanding anything herein to the contrary, the Executive
will be permitted to own shares of any class of capital stock of any
publicly held corporation so long as the aggregate holdings of the
Executive represent less than one percent (1%) of the outstanding shares
of such class of capital stock.
10
11. Rights and Remedies Upon Breach.
(a) The Executive expressly agrees and understands that the remedy
at law for any breach by the Executive of Section 10 will be inadequate
and that the damages flowing from such breach are not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged that
upon adequate proof of the Executive's violation of Section 10, the
Company and Newco will be entitled, among other remedies, to injunctive
relief and may obtain a temporary restraining order restraining any
threatened or further breach. Nothing in this Section 11(a) will be deemed
to limit the Company's or Newco's remedies at law or in equity for any
breach by the Executive of any of the provisions of this Agreement which
may be pursued or availed of by the Company or Newco.
(b) In the event any court of competent jurisdiction determines that
the specified time period or geographical area set forth in Section 10 is
unreasonable, arbitrary or against public policy, then a lesser time
period or geographical area that is determined by the court to be
reasonable, non-arbitrary and not against public policy may be enforced.
12. Withholding Taxes. All payments to the Executive or his beneficiary
will be subject to withholding on account of federal, state and local taxes as
required by law. If any payment hereunder is insufficient to provide the amount
of such taxes required to be withheld, the Company or Newco may withhold such
taxes from any other payment due the Executive or his beneficiary.
13. Assignability; Binding Nature. This Agreement will be binding upon and
inure to the benefit of the Parties and their respective successors, heirs (in
the case of the Executive) and assigns. No rights or obligations of the Company
or Newco under this Agreement may be assigned or transferred by the Company or
Newco except that such rights or obligations may be assigned or transferred
pursuant to (i) a merger or consolidation in which the Company or Newco is not
the continuing entity or (ii) a sale or liquidation of all or substantially all
of the assets of the Company or Newco, provided that the assignee or transferee
is the successor to all or substantially all of the assets of the Company or
Newco, as applicable, and such assignee or transferee assumes the liabilities,
obligations and duties of the Company or Newco, as applicable, as contained in
this Agreement, either contractually or as a matter of law. Each of the Company
and Newco further agrees that, in the event of a sale of assets or liquidation
as described in the preceding sentence, it will use its best efforts to cause
such assignee or transferee to expressly assume the liabilities, obligations and
duties of the Company or Newco, as applicable, hereunder. No obligations of the
Executive under this Agreement may be assigned or transferred by the Executive.
Notwithstanding anything to the contrary contained in this Agreement, if the
Sellers exercise the ROFR (as defined in Section 6.11 of the Merger Agreement)
and purchase the capital stock or assets of Newco pursuant thereto, this
Agreement shall immediately terminate without further obligation on the part of
any party hereto; provided, however, that the Executive shall continue to be
bound by the provisions of Sections 10(a) and 10(b) with respect to confidential
information of the Company.
11
14. Entire Agreement. Except to the extent otherwise provided herein, this
Agreement contains the entire understanding and agreement between the Parties
concerning the subject matter hereof and supersedes any prior agreements,
whether written or oral, between the Parties concerning the subject matter
hereof.
15. Amendment or Waiver. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by both the Executive
and an authorized officer of the Company. No waiver by either Party of any
breach by the other Party of any condition or provision contained in this
Agreement to be performed by such other Party will be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Executive or an
authorized officer of the Company, as the case may be.
16. Severability. In the event that any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining provisions of this Agreement will be unaffected
thereby and will remain in full force and effect to the fullest extent permitted
by law.
17. Survivorship. The respective rights and obligations of the Parties
hereunder will survive any termination of the Executive's employment with Newco
to the extent necessary to the intended preservation of such rights and
obligations as described in this Agreement.
18. Governing Law. This Agreement will be governed by and construed and
interpreted in accordance with the laws of the State of Texas, without reference
to principles of conflict of laws.
19. Notices. Any notice given to any Party must be in writing and will be
deemed to have been given when delivered personally or one (1) day after having
been sent by overnight courier service or three (3) days after having been sent
by certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the Party concerned at the address indicated below or to such
changed address as such Party may subsequently give such notice of:
If to the Company, Newco Orion HealthCorp, Inc.
or the Board: 10700 Richmond Avenue
Suite 300
Houston, Texas 77042
With a copy to: Brantley Partners
3201 Enterprise Parkway, Suite 350
Beachwood, Ohio 44122
Attention: Paul H. Cascio
12
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and: Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Winthrop G. Minot, Esq.
If to the Executive: Tom M. Smith
Address set forth on Schedule I hereto
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20. Headings. The headings of the sections contained in this Agreement are
for convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date and year first above written.
ORION HEALTHCORP, INC.
By: /s/ Keith LeBlanc
----------------------------------------
Name: Keith LeBlanc
Title: President
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MEDICAL BILLING SERVICES, INC.
By: /s/ Dennis Cain
----------------------------------------
Name: Dennis Cain
Title: Chief Executive Officer
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TOM M. SMITH
By: /s/ Tom M. Smith
----------------------------------------
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EXHIBIT 10.13
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of December 15, 2004 by and among Orion HealthCorp, Inc., a Delaware corporation
formerly known as SurgiCare, Inc. (the "Company") and the investors set forth on
Schedule I hereto (the "Investors").
RECITALS
WHEREAS, the Investors have agreed to purchase shares of Class B Common
Stock (as defined below) from the Company pursuant to an Amended and Restated
Stock Subscription Agreement dated as of February 9, 2004 (as amended and
supplemented from time to time, the "Stock Subscription Agreement");
WHEREAS, contemporaneously with the closing under the Stock
Subscription Agreement, certain stockholders and debt holders (collectively, the
"IPS Stockholders") of Integrated Physician Solutions, Inc., a Delaware
corporation, will receive shares of Class A Common Stock (as defined below) from
the Company pursuant to an Amended and Restated Agreement and Plan of Merger
dated as of February 9, 2004 (as amended from time to time, the "IPS Merger
Agreement") and an Amended and Restated Debt Exchange Agreement dated as of
February 9, 2004 (as amended from time to time, the "Debt Exchange Agreement");
WHEREAS, contemporaneously with the closing under the Stock
Subscription Agreement, certain holders of equity interests (collectively, the
"DCPS/MBS Equity Holders") in Medical Billing Services, Inc., a Texas
corporation, and Dennis Cain Physician Solutions, Ltd., a Texas limited
partnership, will receive shares of Class C Common Stock from the Company
pursuant to an Amended and Restated Agreement and Plan of Merger dated as of
July 16, 2004 (as amended from time to time, the "DCPS/MBS Merger Agreement");
and
WHEREAS, the Company and the Investors wish to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and obligations
contained herein, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms will have
the following respective meanings:
"Agreement" is defined in the Preamble.
"Best Efforts" means the commercially reasonable efforts that a prudent
Person desirous of achieving a result would use in similar circumstances to
ensure that such result is achieved as expeditiously as reasonably possible.
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which banks in the State of New York are generally closed for business.
"Class A Common Stock" means the Class A Common Stock, $0.001 par
value, of the Company.
"Class B Common Stock" means the Class B Common Stock, $0.001 par
value, of the Company.
"Class C Common Stock" means the Class C Common Stock, $0.001 par
value, of the Company.
"Commission" means the U.S. Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act or the
Exchange Act.
"Company" is defined in the Preamble.
"Covered Person" is defined in Section 6.1 of this Agreement.
"DCPS/MBS Equity Holders" is defined in the recitals.
"DCPS/MBS Merger Agreement" is defined in the recitals.
"Debt Exchange Agreement" is defined in the recitals.
"Effectiveness Period" means the period beginning on the date on which
a Registration Statement is declared effective and ending on the date on which
the Selling Holders shall have sold or otherwise disposed of all the Registrable
Shares included in the Registration Statement.
"Exchange Act" means the Securities Exchange Act of 1934, and any
successor to such statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be amended and in
effect.
"First Year Registration" is defined in Section 2.3.
"Holder" means any Person owning Registrable Shares or any Permitted
Transferee thereof in accordance with Section 7.2 hereof.
"Investors" is defined in the Preamble.
"IPS Merger Agreement" is defined in the recitals.
"IPS Stockholders" is defined in the recitals.
"Majority in Interest of the Registrable Shares" means the Holders of
greater than 50% of all Registrable Shares (or, where reference is made to a
Majority in Interest of Registrable Shares proposed to be included in a
Registration Statement, the Holders of greater than 50% of the Registrable
Shares so proposed to be included), deeming for such purposes all shares of
Class B Common Stock and Class C Common Stock to have been converted into Class
A Common
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Stock, at the applicable conversion ratios immediately prior to the applicable
time of determination.
"Permitted Transferee" is defined in Section 7.2.
"Person" means any individual, partnership, corporation, company,
association, trust, joint venture, limited liability company, unincorporated
organization, entity or division, or any government, governmental department or
agency or political subdivision thereof.
"Public Offering" means a public offering and sale of Class A Common
Stock for cash pursuant to an effective Registration Statement.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing one or more Registration Statements or similar
documents in compliance with the Securities Act and any applicable rules and
regulations promulgated thereunder (including, in the case of a Registration
Statement on Form S-3, Rule 415) and the automatic effectiveness or the
declaration or ordering of effectiveness of such Registration Statement or
similar document by the Commission.
"Registrable Shares" means, subject to Section 2.3 hereof, any shares
of Class A Common Stock (including Class A Common Stock into which shares of
Class B Common Stock or other Company securities are convertible) currently
issued or issued at any future time to the Investors or a Permitted Transferee,
including by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation, other
reorganization or otherwise. Registrable Shares will cease to be Registrable
Shares pursuant to the provisions of Section 5.4 hereof.
"Registration Expenses" means all expenses incurred by the Company in
complying with Sections 2 and 3 hereof, including, without limitation, all
registration and filing fees, listing fees, all fees and expenses of complying
with securities or blue sky laws, all printing expenses, fees and disbursements
of counsel for the Company and its independent public accountants, including the
expenses of any special audits required by or incident to such performance and
compliance, and legal fees and disbursements of the Selling Holders, but
excluding underwriting discounts, selling commissions, applicable transfer
taxes, if any.
"Registration Statement" means a registration statement filed by the
Company with the Commission for a Public Offering under the Securities Act
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose).
"Rule 144" means Rule 144 promulgated under the Securities Act, and any
successor rule or regulation thereto, and in the case of any referenced section
of such rule, any successor section thereto, collectively and as from time to
time amended and in effect.
"Rule 415" means Rule 415 promulgated under the Securities Act, or any
successor rule or regulation providing for offering securities on a continuous
or delayed basis.
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"Securities Act" means the Securities Act of 1933, and any successor to
such statute, and the rules and regulations of the Commission issued under such
Act, as they each may, from time to time, be amended and in effect.
"Selling Holder" means any Holder on whose behalf Registrable Shares
are registered pursuant to Section 2 or 3 hereof.
"Stock Subscription Agreement" is defined in the recitals.
2. REQUIRED REGISTRATIONS.
2.1. Demand Registrations. At any time after the date hereof, a Holder
or Holders holding in the aggregate at least 50 percent of the Registrable
Shares may, by written notice to the Company, request that the Company effect
the registration for a Public Offering on Form S-1 (or any other form that
includes substantially the same information as would be required to be included
in a Registration Statement on such form as currently constituted) of
Registrable Shares having an anticipated net aggregate offering price of at
least $5,000,000.
2.2. Registration on Form S-3. At any time that the Company is eligible
to file a Registration Statement on Form S-3 (or any successor form relating to
secondary offerings), a Holder or Holders of the Registrable Shares may, by
written notice to the Company, request that the Company effect the registration
on Form S-3 (or any successor form) of Registrable Shares having an anticipated
net aggregate offering price of at least $500,000.
2.3. Notice to Other Holders of Registrable Shares. Promptly after
receipt of notice requesting registration pursuant to Section 2.1 or 2.2, the
Company will give written notice of such requested registration to all other
holders of Registrable Shares. Subject to the limitations set forth in Sections
2.4 and 5.2, as applicable, the Company will use its Best Efforts to effect the
registration under the Securities Act of the Registrable Shares which the
Company has been requested to register by the Holders requesting such
registration and all other Registrable Shares which the Company has been
requested to register by other holders of Registrable Shares by notice delivered
to the Company within 20 days after the giving of such notice by the Company.
Solely with respect to any registration requested pursuant to Section 2.1 or 2.2
(or a registration under Section 3 in which other Registrable Shares are
participating) prior to the first anniversary of the date of this Agreement (a
"First Year Registration"), and solely for purposes of this Section 2.3 and
Sections 3, 4.1-4.7, 4.9, 4.11, 4.14-4.17, 5.1-5.4 and 6 the term "Registrable
Shares" shall include any shares of Class A Common Stock issued to the IPS
Stockholders pursuant to the IPS Merger Agreement or the Debt Exchange Agreement
and any shares of Class A Common Stock issued to the DCPS/MBS Equity Holders
pursuant to the DCPS/MBS Merger Agreement (including Class A Common Stock into
which shares of Class C Common Stock are convertible), so long as such shares
are held by such IPS Stockholders or DCPS/MBS Equity Holders, as applicable. Any
IPS Stockholder or DCPS/MBS Equity Holder that requests to have Registrable
Shares included in a First Year Registration shall be deemed upon such request
to have agreed to all provisions of this Agreement applicable to Selling Holders
in such First Year Registration, and such IPS Stockholder's or DCPS/MBS Equity
Holder's participation in such registration shall be conditioned upon compliance
with all such provisions. The IPS
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Stockholders and the DCPS/MBS Equity Holders are intended third-party
beneficiaries of this Agreement to the extent applicable to them.
2.4. Time Limitation. The Company will not be required to effect any
registration pursuant to Section 2.1 within six months after the effective date
of any Registration Statement that was requested pursuant to Section 2.1.
2.5. Selection of Underwriter. If a Majority in Interest of the
Registrable Shares intend to distribute the Registrable Shares in an
underwritten offering, they will so advise the Company in their request. A
Majority in Interest of the Registrable Shares making such request will have the
right to designate the managing underwriter, subject to the approval of the
Company, which approval may not be unreasonably withheld.
3. INCIDENTAL REGISTRATION.
3.1. Company Registration. If at any time the Company proposes to
register any of its equity securities under the Securities Act, for its own
account (other than a Registration Statement on Form S-4 or S-8 or any successor
thereto) or for the account of any holder of its securities other than
Registrable Shares, then at least 20 days prior to the anticipated filing date
of the applicable Registration Statement the Company will give written notice to
all Holders (which notice will describe the proposed registration and state the
intended method of disposition and provide such Holders the opportunity to
register the number of Registrable Shares as each such Holder may request,
subject in each case to the terms of this Agreement) of such proposed filing,
and upon the written request of a Holder or Holders given within 20 days after
the Company provides such notice, the Company will use its Best Efforts to cause
all Registrable Shares that the Company has been requested to register to be
registered under the Securities Act to the extent necessary to permit their sale
or other disposition in accordance with the intended methods of distribution
specified in the request of such Holder(s); provided that, the Company will have
the right to postpone or withdraw any registration initiated by the Company
pursuant to this Section 3.1 without obligation to any Holder; provided,
further, that in the case of a proposed underwritten offering, the Company shall
use its Best Efforts to cause the managing underwriter or underwriters to permit
each of the Holders who have requested in writing to participate in the offering
to include such Holder's Registrable Shares in such offering on the same terms
and conditions as are applicable to the securities of the Company or other
stockholders, as the case may be, included therein.
3.2. Excluded Transactions. The Company will not be obligated to effect
any registration of Registrable Shares under this Section 3 incidental to the
registration of any of its securities in connection with: (a) a registration on
Form S-8 relating to employee benefit plans or dividend reinvestment plans; or
(b) a registration on Form S-4 relating to the acquisition or merger after the
date hereof by the Company or any of its subsidiaries of or with any other
businesses.
4. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of this Agreement to use its Best Efforts to effect the registration
of any of the Registrable Shares under the Securities Act, the Company and the
Selling Holders will take the actions described below in this Section 4.
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4.1. Registration Statement. The Company will prepare and (in the case
of a registration pursuant to Section 2 hereof, promptly and in any event within
60 days after the end of the period within which requests for registration may
be delivered to the Company) file with the Commission a Registration Statement
with respect to such Registrable Shares and use its Best Efforts to cause such
Registration Statement to become effective within 60 days after the filing of
such Registration Statement. Such Registration Statement shall be for an
offering to be made on a continuous or delayed basis (a so-called "shelf
registration statement") if (i) the Company is eligible for the use thereof and
(ii) the Holders requesting such registration have asked for a shelf
registration statement, and the Company shall keep such Registration Statement
effective pursuant to Rule 415 for the Effectiveness Period.
4.2. Amendments and Supplements. The Company will 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
during the Effectiveness Period, and during such period to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Shares and other securities, if any, covered by such Registration
Statement until the end of the Effectiveness Period.
4.3. Cooperation. The Company will use its Best Efforts to cooperate
with the Selling Holders in the disposition of the Registrable Shares covered by
such Registration Statement, including without limitation in the case of an
underwritten offering pursuant to Section 2.1 entering into and performing
customary agreements (including an underwriting agreement in customary form with
the managing underwriter) and causing key executives of the Company and its
subsidiaries to participate under the direction of the managing underwriter in a
"road show" scheduled by such managing underwriter in such locations and of such
duration as in the judgment of such managing underwriter are appropriate for
such underwritten offering.
4.4. Copies of Prospectus. The Company will furnish to each Selling
Holder, without charge, (i) promptly after such Registration Statement is filed
with the Commission, such reasonable numbers of copies of the prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and any amendments thereto, including financial statements and
schedules and all exhibits, (ii) upon the effectiveness of such Registration
Statement, such number of copies of the prospectus included in such Registration
Statement, including all amendments and supplements thereto, and (iii) such
other documents, in each case, as the Selling Holder may reasonably request in
order to facilitate the public sale or other disposition of the Registrable
Shares owned by the Selling Holder.
4.5. Blue Sky Qualification. The Company will use its Best Efforts to
register or qualify the Registrable Shares covered by the Registration Statement
under the securities or "blue sky" laws of such states or jurisdictions in the
United States as the Selling Holders reasonably request, and do any and all
other acts and things that may be necessary or desirable to enable the Selling
Holders to consummate the public sale or other disposition in such jurisdictions
of the Registrable Shares covered by the Registration Statement, including
preparing and filing in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Effectiveness Period (in the case of a shelf
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registration statement); provided, however, that the Company will not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction in
which it would not otherwise be so subject. The Company shall promptly notify
each Selling Holder of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any
Registrable Shares for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
4.6. Opinion of Counsel; Comfort Letter. In the case of an underwritten
offering, the Company will use its Best Efforts to obtain all legal opinions,
auditors' consents and comfort letters and experts' cooperation as may be
required, including furnishing to each Selling Holder of such Registrable Shares
a signed counterpart, addressed or confirmed to such Selling Holder, of (a) an
opinion of counsel for the Company and (b) a "cold comfort" letter signed by the
independent public accountants who have certified the Company's financial
statements included in such Registration Statement, covering substantially the
same matters as are customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to underwriters in underwritten public offerings
of securities.
4.7. Listing and Transfer Agent. The Company will cause all Registrable
Shares covered by the Registration Statement to be listed on each securities
exchange or automated quotation system on which the Class A Common Stock is then
listed. The Company will provide and cause to be maintained a transfer agent and
registrar for all Registrable Shares covered by the Registration Statement not
later than the effective date of such Registration Statement. The Company will
pay all fees and expenses in connection with satisfying its obligations under
this Section 4.7.
4.8. General Compliance with Federal Securities Laws; Section 11(a)
Earning Statement. The Company will use its Best Efforts to comply with the
Securities Act, the Exchange Act and any other applicable rules and regulations
of the Commission, and make available to its securities holders, as soon as
reasonably practicable, an earning statement covering the period of at least 12
months after the effective date of such Registration Statement, which earnings
statement shall be in a form complying with and satisfying Section 11(a) of the
Securities Act and any applicable regulations thereunder, including the
provisions of Rule 158.
4.9. Notice of Prospectus Defects. The Company will immediately notify
the Selling Holders of the happening of any event, as a result of which the
prospectus included or to be included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing (provided
that such notice shall not contain any material, non-public information). The
Company will promptly revise such prospectus as may be necessary so that such
prospectus shall not include an untrue statement of a material fact or omit to
state such a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances then
existing. The Company will promptly deliver copies of such revised prospectus to
the Selling Holders. Following receipt of the revised prospectus, the Selling
Holders will be free to resume making offers of the Registrable Shares. The
Company will
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extend the period during which the Registration Statement must be kept effective
pursuant to this Agreement by the number of days during the period from and
including the date of giving such notice to and including the date when the
Selling Holders shall have received copies of the revised prospectus.
4.10. Company Lock-Up. In the case of an underwritten offering
requested to be effected by the Holders hereunder, the Company will refrain,
without the consent of the managing underwriter, for a period from 15 days
before the effective date of the registration sale until 90 days after such
effective date, from directly or indirectly selling, offering to sell, granting
any option for the sale of, or otherwise disposing of any common equity or
securities convertible into common equity other than pursuant to Company
employee equity plans.
4.11. Delay of Registration and Suspension of Offering. If at any time
(a) after a request to effect a registration pursuant to Section 2 of this
Agreement or (b) after a Registration Statement has become effective, the
Company is engaged in any plan, proposal or agreement with respect to any
financing, acquisition, recapitalization, reorganization or other material
transaction or development the public disclosure of which would be would be
detrimental to the Company, then the Company may direct that such request be
delayed or that use of the prospectus contained in the Registration Statement be
suspended, as applicable, for a period of up to 30 days. The Company will notify
all Holders requesting the registration or all Selling Holders, as the case may
be, of the delay or suspension. In the case of notice suspending an effective
Registration Statement, each Selling Holder will immediately discontinue any
sales of Registrable Shares pursuant to such Registration Statement until such
Selling Holder has received copies of a supplemented or amended prospectus or
until such Selling Holder is advised in writing by the Company that the
then-current prospectus may be used and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such prospectus. The Company may exercise the rights provided by this Section
4.11 on only one occasion within any 365-day period.
4.12. Participation by Selling Security Holders. In connection with the
preparation and filing of each Registration Statement, and before filing any
such Registration Statement or any other document in connection therewith, the
Company must give the participating Holders and their underwriters, if any, and
their respective counsel and accountants, the opportunity to participate in the
preparation of such Registration Statement, each prospectus included therein or
filed with the Commission, each amendment thereof or supplement thereto and any
related underwriting agreement or other document to be filed, and give each of
the aforementioned Persons such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders, underwriters, counsel or
accountants, to conduct a reasonable investigation within the meaning of the
Securities Act.
4.13. Requests by Selling Holders. If requested by a Selling Holder,
the Company shall (i) as soon as practicable incorporate in a prospectus
supplement or post-effective amendment such information as a Selling Holder
reasonably requests to be included therein relating to the sale and distribution
of Registrable Shares, including, without limitation, information with respect
to the number of Registrable Shares being offered or sold, the purchase price
being paid therefor and any other terms of the offering of the Registrable
Shares to be sold in such other
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offering provided that such information is required to be included in the
Registration Statement by the Securities Act; (ii) as soon as practicable make
all required filings of such prospectus supplement or post-effective amendment
after being notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and (iii) as soon as practicable,
supplement or make amendments to any Registration Statement if reasonably
requested by a Selling Holder of such Registrable Shares.
4.14. Stop Orders. The Company shall use its Best Efforts to prevent
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Shares for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify each Selling Holder of the issuance
of such order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
4.15. Certificates. The Company shall reasonably cooperate with the
Selling Holders and, to the extent applicable, facilitate the timely preparation
and delivery of certificates representing the Registrable Shares to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Selling Holders may
reasonably request and registered in such names as the Selling Holders may
request.
4.16. Notice of Effectiveness. Within two business days after a
Registration Statement that includes the Registrable Shares is declared
effective by the Commission, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Shares (with copies to the Selling Holders) written confirmation that such
Registration Statement has been declared effective by the Commission.
4.17. Governmental Approvals. The Company shall use its Best Efforts to
cause the Registrable Shares covered by the Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable Shares.
5. CERTAIN OTHER PROVISIONS.
5.1. Additional Procedures. Selling Holders will take all such actions
and execute all such documents and instruments that are reasonably requested by
the Company to effect the sale of their shares in such Public Offering,
including, without limitation, being parties to the underwriting agreement
entered into by the Company and any other Selling Holders in connection
therewith; provided, however, that the aggregate amount of any liability of any
Selling Holder pursuant to such underwriting or other agreement will not exceed
such Selling Holder's net proceeds from such offering. In addition, each Selling
Holder will furnish to the Company such information regarding such Selling
Holder and the distribution proposed by such Selling Holder as the Company may
reasonably request in writing and as will be required in connection with any
registration, qualification or compliance referred to in Section 4.
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5.2. Underwriter's Cutback. Notwithstanding any other provision of this
Agreement, if the managing underwriter determines that the inclusion of all
shares requested to be registered in an underwritten offering would adversely
affect the offering, the Company may limit the number of Registrable Shares to
be included in the Registration Statement for such offering. If the registration
has been requested by the Holders pursuant to Section 2 hereof, the number of
shares that are entitled to be included in the registration and underwriting
will be reduced in the following manner: (a) first, shares of Company equity
securities, other than Registrable Shares, requested to be included in such
registration by shareholders will be excluded, (b) second, shares of Company
equity securities that the Company desires to include in such registration will
be excluded and (c) third, Registrable Shares requested to be included in such
registration by the Holders will be excluded. If the registration has been
initiated other than pursuant to Section 2 hereof, the number of shares that are
entitled to be included in the Registration Statement for such offering will be
reduced in the following manner: (x) first, shares of Company equity securities,
other than Registrable Shares, requested to be included in such registration by
shareholders will be excluded, (y) second, Registrable Shares requested to be
included in such registration by Holders will be excluded and (z) third, shares
of Company equity securities that the Company desires to include in such
registration will be excluded. To the extent that the underwriters do not deem
it necessary to exclude all of the shares requested to be registered by any
category of shareholders contemplated above, the number of shares that may be
included in the registration will be allocated to the members of such category
requesting registration in proportion, as nearly as practicable, to the
respective number of shares of Class A Common Stock (assuming conversion of any
convertible securities held by such shareholders) that they held at the time the
Company gives the notice specified in Section 2 or 3.
5.3. Registration Expenses. The Company hereby agrees to pay all
Registration Expenses in connection with all registrations effected pursuant to
this Agreement. The Company, however, shall not be required to pay for any
expenses of a registration requested pursuant to Sections 2.1 or 2.2 hereof if
the registration request is withdrawn at any time at the request of Holders of a
majority of the Registrable Shares to be included in such registration (in which
case all Holders requesting such withdrawal shall bear such expenses). However,
if the requesting Holders have learned of information (other than information
known to them at the time they made their request) that, in the good faith
judgment of the requesting Holders, is reasonably likely to have a material
adverse effect on the business or prospects of the Company, then the Holders
shall not be required to pay any of such expenses in the case of a registration
requested pursuant to Section 2.1 or 2.2.
5.4. Termination of Status as Registrable Shares. Registrable Shares
will cease to be Registrable Shares and cease to have the rights accorded to
such shares under this Agreement upon the earliest to occur of the following
events: (x) such shares shall have been sold pursuant to an effective
Registration Statement under the Securities Act or (y) such shares shall have
been sold pursuant to a transaction under Rule 144.
5.5. Limitations on Subsequent Registration Rights. The Company will
not, without the prior written consent of Holders of at least a majority of the
Registrable Shares, enter into any agreements with any holder or prospective
holder of Company securities that grant such holder or prospective holder rights
to include securities of the Company in any Registration Statement, unless such
rights are subordinated to the rights granted to the Holders under this
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Agreement, including, without limitation, by providing that (a) the holders of
such subordinated rights may not request a registration until at least 180 days
after the date on which the Holders can request a registration pursuant to
Section 2.1 and 2.2 and (b) the holders of such subordinated rights shall have
the number of shares of their Company securities requested to be included in a
Registration Statement reduced pursuant to any underwriters' cut-back provision
before the Holders suffer any reduction in the number of Registrable Shares that
they are permitted to include in such registration .
6. INDEMNIFICATION.
6.1. Company Indemnification. In the event of any registration of any
of the Registrable Shares under the Securities Act pursuant to this Agreement,
then to the extent permitted by law, the Company will indemnify and hold
harmless each Selling Holder, its partners, directors and officers and each
other Person, if any, who controls such Selling Holder within the meaning of the
Securities Act or the Exchange Act (each such Person being a "Covered Person")
against any losses, claims, damages or liabilities, joint or several, to which
such Covered Person may become subject under the Securities Act, the Exchange
Act, state securities laws or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
(a) any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary or final prospectus
contained in the Registration Statement, or any amendment or supplement to such
Registration Statement or (b) the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Company will reimburse such Covered Person for
any legal or any other expenses reasonably incurred by such Covered Person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable to
any Covered Person in any such case (x) to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
omission made in such Registration Statement or prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of such Covered Person
specifically for use in the preparation thereof or (y) in the case of a sale
directly by a Selling Holder (including a sale of such Registrable Shares
through any underwriter retained by such Selling Holder engaging in a
distribution solely on behalf of such Selling Holder), such untrue statement or
omission was contained in a preliminary prospectus and corrected in a final or
amended prospectus, and such Selling Holder failed to deliver a copy of the
final or amended prospectus at or prior to the confirmation of the sale of the
Registrable Shares to the person asserting any such loss, claim, damage or
liability in any case in which such delivery is required by the Securities Act.
6.2. Seller Indemnification. In the event of any registration of any of
the Registrable Shares under the Securities Act pursuant to this Agreement, then
to the extent permitted by law, each Selling Holder will indemnify and hold
harmless the Company, each of its directors and officers and each Person (other
than such Selling Holder), if any, who controls the Company within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages
or liabilities to which the Company, such directors and officers, or controlling
person may become subject under the Securities Act, Exchange Act, state
securities laws or otherwise,
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insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (a) any untrue statement of a material
fact contained in any Registration Statement under which such Registrable Shares
were registered under the Securities Act, any preliminary or final prospectus
contained in the Registration Statement, or any amendment or supplement to the
Registration Statement or (b) the omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
the statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of such Selling
Holder, specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided, however,
that the obligations of such Selling Holder hereunder will be limited to an
amount equal to the net proceeds to such Selling Holder (after deducting all
underwriter's discounts and commissions and all other expenses paid by such
Holder in connection with the registration in question) from the disposition of
Registrable Shares pursuant to such registration.
6.3. Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim of the type referred to in the foregoing provisions of this Section 6,
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party, give written notice to each such indemnifying party of
the commencement of such action; provided, however, that the failure of any
indemnified party to give such notice will not relieve such indemnifying party
of its obligations under this Section 6, except to the extent that such
indemnifying party is materially prejudiced by such failure. In case any such
action is brought against an indemnified party, each indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and (subject to
the following sentence) after notice from an indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof. The indemnified party may participate in such defense at such
party's expense; provided, however, that the indemnifying party will pay such
expense if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
conflict of interests between the indemnified party and any other party
represented by such counsel in such proceeding; provided, further, that in no
event will the indemnifying party be required to pay the expenses of more than
one law firm as counsel for all indemnified parties pursuant to this sentence.
If, within 30 days after receipt of the notice, such indemnifying party has not
elected to assume the defense of the action, such indemnifying party will be
responsible for any legal or other expenses reasonably incurred by such
indemnified party in connection with the defense of the action, suit,
investigation, inquiry or proceeding. An indemnifying party may, in the defense
of any such claim or litigation, consent to the entry of a judgment or enter
into a settlement without the consent of the indemnified party only if such
judgment or settlement contains a general release of the indemnified party in
respect of such claims or litigation.
6.4. Contribution. If the indemnification provided for in Sections 6.1
or 6.2 hereof is unavailable to a party that would have been an indemnified
party under any such Section in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each party that would have been an indemnifying party thereunder will, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such
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indemnified party as a result of such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) in such proportion as is appropriate
to reflect the relative fault of such indemnifying party on the one hand and
such indemnified party on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof). The relative fault will be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such indemnifying party or
such indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 6.4 were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
considerations referred to in the preceding sentence. The amount paid or payable
by a contributing party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to in this
Section 6.4 will include any legal or other 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) will be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
7. MISCELLANEOUS.
7.1. Reports under the Exchange Act. With a view to making available to
the Holders the benefits of Rule 144 and any other rule or regulation of the
Commission that may at any time permit such Holder to sell securities of the
Company to the public without registration and with a view to making it possible
for Holders to register the Registrable Shares pursuant to a registration
statement on Form S-3, the Company agrees from the date hereof to use its best
efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act
and the Exchange Act, so long as the Company remains subject to such
requirements and the filing of such reports and other documents are
required for the applicable provisions of Rule 144 to apply;
(c) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act
and the Exchange Act and take such other actions as will permit Holders
to use Form S-3 for the resale of their Registrable Shares; and .
(d) furnish to any Holder forthwith upon request (i) a written
statement by the Company as to its compliance with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, or
as to its qualification as a registrant whose securities may be resold
pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy
of the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company and (iii) such
other information as may be reasonably requested
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in availing any Holder of any rule or regulation of the Commission that
permits the selling of any such securities without registration or
pursuant to such form.
7.2. Transfer of Rights. The rights to cause the Company to register
Registrable Shares pursuant to Sections 2 and 3 may be assigned by any Holder to
a Permitted Transferee (as defined below), and by such Permitted Transferee to a
subsequent Permitted Transferee, but only if such rights are transferred (a) to
an affiliate or partner of such Holder or Permitted Transferee or a trustee or
an account managed or advised by a manager or adviser of such Holder or
Permitted Transferee or (b) in connection with the sale or other transfer of not
less than an aggregate of 100,000 Registrable Shares or some lesser number, if
such lesser number represents all the Registrable Shares then held by such
Holder. Any transferee to whom rights under this Agreement are transferred will
(x) as a condition to such transfer, deliver to the Company a written instrument
by which such transferee agrees to be bound by the obligations imposed upon
Holders under this Agreement to the same extent as if such transferee were a
Holder under this Agreement and (y) be deemed to be a Holder hereunder. Any
Person to whom rights under this Agreement are transferred in accordance with
this Section 7.2 shall be a "Permitted Transferee."
7.3. Governing Law. This Agreement, the rights of the parties and all
claims, actions, causes of action, suits, litigation, controversies, hearings,
charges, complaints or proceedings arising in whole or in part under or in
connection herewith, will be governed by and construed in accordance with the
domestic substantive laws of the State of New York, without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the laws of any other jurisdiction.
7.4. Entire Agreement; Amendment and Waiver. This Agreement, together
with any documents, instruments and certificates explicitly referred to herein,
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes any and all prior discussions,
negotiations, proposals, undertakings, understandings and agreements, whether
written or oral, with respect thereto. Any term of this Agreement may be amended
or terminated and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and a Majority in
Interest of the Registrable Shares; provided, however, that any such amendment
or waiver treats all holders the same (without regard to any differences in
effect that such amendment or waiver may have on the Holders due to the
differing amounts of Registrable Shares held by such Holders). Any such
amendment, termination or waiver will be binding on all Holders.
7.5. Notices. All notices, requests, demands, claims and other
communications required or permitted to be delivered, given or otherwise
provided under this Agreement must be in writing and must be delivered, given or
otherwise provided:
(a) by hand (in which case, it will be effective upon
delivery);
(b) by facsimile (in which case, it will be effective upon
receipt of confirmation of good transmission); or
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(c) by overnight delivery by a nationally recognized courier
service (in which case, it will be effective on the Business Day after
being deposited with such courier service;
in each case, to the address (or facsimile number) listed below:
If to the Company, to it at:
10700 Richmond Avenue, Suite 300
Houston, TX 77042
Facsimile number: (713) 722-0921
Attention: Keith LeBlanc
with a copy to:
Strasburger & Price, LLP
1401 McKinney, Suite 2200
Houston, Texas 77010.4035
Facsimile number: (713) 951-5660
Attention: Ivan Wood Jr., Esq.
If to the Investors, to them at the addresses set forth on Schedule II hereto
with a copy to:
Ropes & Gray, LLP
One International Place
Boston, Massachusetts 02110
Telephone number: (617) 951-7000
Facsimile number: (617) 951-7050
Attention: Winthrop G. Minot, Esq.
Each of the parties to this Agreement may specify a different address or
facsimile number by giving notice in accordance with this Section 7.5 to each of
the other parties hereto.
7.6. Binding Effect; Assignment. This Agreement will be binding upon
and inure to the benefit of the personal representatives, successors and assigns
of the respective parties hereto.
7.7. Severability. If any provision of this Agreement is found by any
court of competent jurisdiction to be invalid or unenforceable, the parties
hereby waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision will, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable, and, as modified, will be
enforced as any other provision hereof, all the other provisions hereof
continuing in full force and effect.
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7.8. Headings. The headings contained in this Agreement are for
convenience purposes only and will not in any way affect the meaning or
interpretation hereof.
7.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Orion HealthCorp, Inc.
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
ORION HEALTHCORP, INC.
By: /s/ Keith LeBlanc
----------------------------------
Name: Keith LeBlanc
Title: President
|
Orion HealthCorp, Inc.
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
BRANTLEY PARTNERS IV, L.P.
By: Brantley Venture Management IV,
L.P., its general partner
By: /s/ Paul H. Cascio
----------------------------------
Name: Paul H. Cascio
Title: Authorized Signatory
|
Orion HealthCorp, Inc.
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
CROSSROADS CORNERSTONE
DIRECT/CO-INVEStMENT FUND V, L.P.
By: Crossroads Corporate Investors,
L.P., general partner
By: /s/ Brad K. Heppner
----------------------------------
Brad K. Heppner
Chief Executive Officer
|
CROSSROADS 1999 SERIES DIRECT/CO-
INVESTMENT PORTFOLIO A, L.P.
By: Crossroads Corporate Investors
II, L.P., general partner
By: /s/ Brad K. Heppner
---------------------------------
Brad K. Heppner
Chief Executive Officer
|
Orion HealthCorp, Inc.
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
BRANTLEY CAPITAL CORPORATION
By: /s/ Paul H. Cascio
----------------------------------
Name: Paul H. Cascio
Title: Vice President
|
Orion HealthCorp, Inc.
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
JEFFREY J. PENSO
/s/ Jeffrey J. Penso
--------------------------------------
Jeffrey J. Penso
|
Orion HealthCorp, Inc.
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
MBM COMMUNITY, LLC
By: /s/ Michael A. Mineo
----------------------------------
Name: Michael A. Mineo
Title: Authorized Signatory
|
Orion HealthCorp, Inc.
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
STRANCOINVESTMENTS, LTD.
By: /s/ Ghazwa Yousif
----------------------------------
Name: Ghazwa Yousif
Title: Director
|
Orion HealthCorp, Inc.
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
ROBERT AND MARGEE HELMS FAMILY
PARTNERSHIP, LTD.
By: /s/ Robert N. Helms, Jr
----------------------------------
Name: Robert N. Helms, Jr.
Title: Managing Partner
|
Orion HealthCorp, Inc.
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
LAUREN WEINER
/s/ Lauren Weiner
--------------------------------------
Lauren Weiner
|
Orion HealthCorp, Inc.
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
MICHAEL RUNYON
/s/ Michael Runyon
--------------------------------------
Michael Runyon
|
Orion HealthCorp, Inc.
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first above written.
SPARROW FUND, LP
By: /s/ Michael Runyon
----------------------------------
Name: Michael Runyon
Title: General Partner
|
Orion HealthCorp, Inc.
Registration Rights Agreement
SCHEDULE I
INVESTORS
Brantley Partners IV, L.P.
Brantley Capital Corporation
Crossroads Cornerstone Direct/Co-investment Fund V, L.P.
Crossroads 1999 Series Direct/Co-investment Portfolio A, L.P.
Robert and Margee Helms Family Partnership, Ltd.
Jeffrey J. Penso
Michael Runyon
StrancoInvestments, ltd.
MBM Community, LLC
Lauren Weiner
Sparrow Fund, LP
EXHIBIT 10.14
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement") is made as of December
15, 2004 by and among:
(i) Orion HealthCorp, Inc., a Delaware corporation (the
"Company");
(ii) each of Brantley Partners IV, L.P. ("Brantley IV"), Brantley
Venture Partners III, L.P. ("Brantley III") and Brantley
Capital Corporation ("Brantley Capital"; and, collectively
with Brantley IV and Brantley III, the "Investors"); and
(iii) such other Persons who from time to time become party hereto
by executing a counterpart signature page hereof and are
designated by the Board as "Other Holders" (the "Other
Holders"; and, collectively with the Investors, the
"Stockholders").
Recitals
1. On or about the date hereof, the Company is issuing shares of its
Common Stock to the Investors.
2. After giving effect to such issuance, the Investors will control a
majority of the voting power of the Common Stock.
3. The parties believe that it is in the best interests of the Company
and the Stockholders to set forth their agreements on certain matters.
Agreement
Therefore, the parties hereto hereby agree as follows:
1. EFFECTIVENESS; DEFINITIONS.
1.1. Closing. This Agreement shall become effective upon consummation
of the closing (the "Closing") under the Amended and Restated Subscription
Agreement dated as of February 9, 2004, as from time to time in effect.
1.2. Definitions. Certain terms are used in this Agreement as
specifically defined herein. These definitions are set forth or referred to in
Section 6 hereof.
2. VOTING AGREEMENT.
2.1. Election of Directors. Each holder of Shares hereby agrees to cast
all votes to which such holder is entitled in respect of the Shares, whether at
any annual or special meeting, by written consent or otherwise, (a) to fix the
number of members of the board of directors of the Company (the "Board") at five
or such other number as may be specified from time to time by
the Majority Investors, (b) to elect as a member of the Board such individual,
if any, as shall have been nominated by Brantley IV, (c) to elect as a member of
the Board such individual, if any, as shall have been nominated by Brantley III
and (d) to elect as a member of the Board such individual, if any, as shall have
been nominated by Brantley Capital.
2.2. The Company. The Company agrees not to give effect to any action
by any holder of Shares or any other Person which is in contravention of this
Section 2.
2.3. Period. The foregoing provisions of this Section 2 shall expire on
the earlier of (a) a Change of Control and (b) the last date permitted by law.
3. REMEDIES. The Company and each holder of Shares shall have all
remedies available at law, in equity or otherwise in the event of any breach or
violation of this Agreement or any default hereunder by the Company or any
holder of Shares. The parties acknowledge and agree that in the event of any
breach of this Agreement, in addition to any other remedies which may be
available, each of the parties hereto shall be entitled to specific performance
of the obligations of the other parties hereto and, in addition, to such other
equitable remedies (including, without limitation, preliminary or temporary
relief) as may be appropriate in the circumstances.
4. LEGENDS. Each certificate representing Shares shall have the
following legend endorsed conspicuously thereupon:
The voting of the shares of stock represented by this
certificate are subject to the provisions of a Stockholders Agreement
to which the issuer and certain of its stockholders are party, a copy
of which may be inspected at the principal office of the issuer or
obtained from the issuer without charge.
Each certificate representing Investor Shares shall also have the
following legend endorsed conspicuously thereupon:
The shares of stock represented by this certificate were
originally issued to, or issued with respect to shares originally
issued to, the following Investor: __________.
Each certificate representing Other Holder Shares shall also have the
following legend endorsed conspicuously thereupon:
The shares of stock represented by this certificate were
originally issued to, or issued with respect to shares originally
issued to, the following Other Holder: ______.
Any person who acquires Shares which are not subject to all or part of
the terms of this Agreement shall have the right to have such legend (or the
applicable portion thereof) removed from certificates representing such Shares.
5. AMENDMENT, TERMINATION, ETC.
5.1. Oral Modifications. This Agreement may not be orally amended,
modified, extended or terminated, nor shall any oral waiver of any of its terms
be effective.
-2-
5.2. Written Modifications. This Agreement may be amended, modified,
extended or terminated, and the provisions hereof may be waived, only by an
agreement in writing signed by the Majority Investors; provided, however, that
(a) the consent of the Majority Other Holders shall be required for any
amendment, modification, extension, termination or waiver which has a material
adverse effect on the rights of the holders of Other Holder Shares as such under
this Agreement. Each such amendment, modification, extension, termination and
waiver shall be binding upon each party hereto and each holder of Shares subject
hereto. In addition, each party hereto and each holder of Shares subject hereto
may waive any right hereunder by an instrument in writing signed by such party
or holder.
5.3. Effect of Termination. No termination under this Agreement shall
relieve any Person of liability for breach prior to termination.
6. DEFINITIONS. For purposes of this Agreement:
6.1. Certain Matters of Construction. In addition to the definitions
referred to or set forth below in this Section 6:
(a) The words "hereof", "herein", "hereunder" and words of
similar import shall refer to this Agreement as a whole and not to any
particular Section or provision of this Agreement, and reference to a
particular Section of this Agreement shall include all subsections
thereof;
(b) Definitions shall be equally applicable to both nouns and
verbs and the singular and plural forms of the terms defined; and
(c) The masculine, feminine and neuter genders shall each
include the other.
6.2. Definitions. The following terms shall have the following
meanings:
"Affiliate" shall mean, with respect to any specified Person, (a) any
other Person which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person (for the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise) and (b) with respect to any natural
Person, any Member of the Immediate Family of such natural Person.
"Agreement" shall have the meaning set forth in the Preamble.
"Board" shall have the meaning set forth in Section 2.1.
"Brantley III" shall have the meaning set forth in the Preamble.
"Brantley IV" shall have the meaning set forth in the Preamble.
-3-
"Brantley Capital" shall have the meaning set forth in the Preamble.
"Change of Control" shall mean (a) any change in the ownership of the
capital stock of the Company if, immediately after giving effect thereto, any
Person (or group of Persons acting in concert pursuant to an agreement) other
than the Investors and their Affiliates will have the direct or indirect power
to elect a majority of the members of the Board or (b) any change in the
ownership of the capital stock of the Company if, immediately after giving
effect thereto, the Investors and their Affiliates shall own less than 25% of
the Equivalent Shares.
"Class A Stock" shall mean the Class A Common Stock, par value $.001
per share, of the Company.
"Class B Stock" shall mean the Class B Common Stock, par value $.001
per share, of the Company.
"Class C Stock" shall mean the Class C Common Stock, par value $.001
per share, of the Company.
"Closing" shall have the meaning set forth in Section 1.1.
"Common Stock" shall mean the common stock of the Company including
without limitation the Class A Stock, the Class B Stock and the Class C Stock.
"Company" shall have the meaning set forth in the Preamble.
"Convertible Securities" shall mean any evidence of indebtedness,
shares of stock (other than Common Stock) or other securities (other than
Options and Warrants) which are directly or indirectly convertible into or
exchangeable or exercisable for shares of Common Stock.
"Equivalent Shares" shall mean, at any date of determination, (a) as to
any outstanding shares of Common Stock, such number of shares of Common Stock
and (b) as to any outstanding Options, Warrants or Convertible Securities which
constitute Shares, the maximum number of shares of Common Stock for which or
into which such Options, Warrants or Convertible Securities may at the time be
exercised, converted or exchanged (or which will become exercisable, convertible
or exchangeable on or prior to, or by reason of, the transaction or circumstance
in connection with which the number of Equivalent Shares is to be determined).
"Investor Shares" shall mean (a) all shares of Common Stock originally
issued to, or issued with respect to shares originally issued to, or held by, an
Investor, whenever issued, including, without limitation, all shares of Common
Stock issued upon the exercise, conversion or exchange of any Options, Warrants
or Convertible Securities and (b) all Options, Warrants and Convertible
Securities originally granted or issued to an Investor (treating such Options,
Warrants and Convertible Securities as a number of Shares equal to the number of
Equivalent Shares represented by such Options, Warrants and Convertible
Securities for all purposes of this Agreement except as otherwise specifically
set forth herein).
"Investors" shall have the meaning set forth in the Preamble.
-4-
"Majority Investors" shall mean, as of any date, the holders of a
majority of the Investor Shares outstanding on such date.
"Majority Other Holders" shall mean, as of any date, the holders of a
majority of the Other Holder Shares outstanding on such date.
"Members of the Immediate Family" shall mean, with respect to any
individual, each spouse or child or other descendants of such individual, each
trust created solely for the benefit of one or more of the aforementioned
Persons and their spouses and each custodian or guardian of any property of one
or more of the aforementioned Persons in his capacity as such custodian or
guardian.
"Options" shall mean any options to subscribe for, purchase or
otherwise directly acquire Common Stock.
"Other Holder Shares" shall mean (a) all shares of Common Stock
originally issued to, or issued with respect to shares originally issued to, or
held by, an Other Holder, whenever issued, including without limitation all
shares of Common Stock issued upon the exercise, conversion or exchange of any
Options, Warrants or Convertible Securities and (b) all Options, Warrants and
Convertible Securities originally granted or issued to an Other Holder (treating
such Options, Warrants and Convertible Securities as a number of Shares equal to
the number of Equivalent Shares represented by such Options, Warrants and
Convertible Securities for all purposes of this Agreement except as otherwise
specifically set forth herein).
"Person" shall mean any individual, partnership, corporation, company,
association, trust, joint venture, limited liability company, unincorporated
organization, entity or division, or any government, governmental department or
agency or political subdivision thereof.
"Shares" shall mean all Investor Shares and Other Holder Shares.
"Stockholders" shall have the meaning set forth in the Preamble.
"Transfer" shall mean any sale, pledge, assignment, encumbrance or
other transfer or disposition of any Shares to any other Person, whether
directly, indirectly, voluntarily, involuntarily, by operation of law, pursuant
to judicial process or otherwise.
"Warrants" shall mean any warrants to subscribe for, purchase or
otherwise directly acquire Common Stock.
7. MISCELLANEOUS.
7.1. Authority; Effect. Each party hereto represents and warrants to
and agrees with each other party that the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized on behalf of such party and do not violate any agreement or
other instrument applicable to such party or by which its assets are bound. This
Agreement does not, and shall not be construed to, give rise to the creation of
a
-5-
partnership among any of the parties hereto, or to constitute any of such
parties members of a joint venture or other association.
7.2. Notices. Any notices and other communications required or
permitted in this Agreement shall be effective if in writing and (a) delivered
personally or (b) sent (i) by Federal Express, DHL or UPS or (ii) by registered
or certified mail, postage prepaid, in each case, addressed as follows:
If to the Company, to it at:
Orion HealthCorp, Inc.
1805 Old Alabama Road
Suite 350
Roswell, Georgia 30076
If to an Investor, to it at:
c/o Brantley Partners
3201 Enterprise Parkway, Suite 350
Beachwood, Ohio 44122
Attention: Paul H. Cascio
with a copy to:
Ropes & Gray LLP
One International Place
Boston, Massachusetts 02110
Attention: Winthrop G. Minot, Esq.
If to an Other Investor to it at the address set forth in the stock
record book of the Company.
Notice to the holder of record of any shares of capital stock shall be
deemed to be notice to the holder of such shares for all purposes hereof.
Unless otherwise specified herein, such notices or other communications
shall be deemed effective (a) on the date received, if personally delivered, (b)
two business days after being sent by Federal Express, DHL or UPS and (c) three
business days after deposit with the U.S. Postal Service, if sent by registered
or certified mail. Each of the parties hereto shall be entitled to specify a
different address by giving notice as aforesaid to each of the other parties
hereto.
7.3. Binding Effect, Etc. Except for restrictions on Transfer of Shares
set forth in other agreements, plans or other documents, this Agreement
constitutes the entire agreement of the parties with respect to its subject
matter, supersedes all prior or contemporaneous oral or written agreements or
discussions with respect to such subject matter, and shall be binding upon
-6-
and inure to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns.
7.4. Descriptive Headings. The descriptive headings of this Agreement
are for convenience of reference only, are not to be considered a part hereof
and shall not be construed to define or limit any of the terms or provisions
hereof.
7.5. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one instrument.
7.6. Severability. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, such provision shall
be construed by modifying or limiting it so as to be valid and enforceable to
the maximum extent compatible with, and possible under, applicable law. The
provisions hereof are severable, and in the event any provision hereof should be
held invalid or unenforceable in any respect, it shall not invalidate, render
unenforceable or otherwise affect any other provision hereof.
8. GOVERNING LAW.
8.1. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic substantive laws of the State of New York
without giving effect to any choice or conflict of laws provision or rule that
would cause the application of the domestic substantive laws of any other
jurisdiction.
8.2. Consent to Jurisdiction. Each party to this Agreement, by its
execution hereof, (a) hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the State of New York for the purpose
of any action, claim, cause of action or suit (in contract, tort or otherwise),
inquiry, proceeding or investigation arising out of or based upon this Agreement
or relating to the subject matter hereof, (b) hereby waives to the extent not
prohibited by applicable law, and agrees not to assert, and agrees not to allow
any of its subsidiaries to assert, by way of motion, as a defense or otherwise,
in any such action, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune
from attachment or execution, that any such proceeding brought in one of the
above-named courts is improper, or that this Agreement or the subject matter
hereof or thereof may not be enforced in or by such court and (c) hereby agrees
not to commence or maintain any action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation arising out
of or based upon this Agreement or relating to the subject matter hereof or
thereof other than before one of the above-named courts nor to make any motion
or take any other action seeking or intending to cause the transfer or removal
of any such action, claim, cause of action or suit (in contract, tort or
otherwise), inquiry, proceeding or investigation to any court other than one of
the above-named courts whether on the grounds of inconvenient forum or
otherwise. Notwithstanding the foregoing, to the extent that any party hereto is
or becomes a party in any litigation in connection with which it may assert
indemnification rights set forth in this agreement, the court in which such
litigation is being heard shall be deemed to be included in clause (a) above.
Each party hereto hereby consents to service of process in any such proceeding
-7-
in any manner permitted by Delaware law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 7.2 hereof is reasonably calculated to give actual notice.
8.3. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT
IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF
ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR
INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS
CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.
EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES
HERETO THAT THIS SECTION 8.3 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY
ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 8.3 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO
TRIAL BY JURY.
8.4. Exercise of Rights and Remedies. No delay of or omission in the
exercise of any right, power or remedy accruing to any party as a result of any
breach or default by any other party under this Agreement shall impair any such
right, power or remedy, nor shall it be construed as a waiver of or acquiescence
in any such breach or default, or of any similar breach or default occurring
later; nor shall any such delay, omission nor waiver of any single breach or
default be deemed a waiver of any other breach or default occurring before or
after that waiver.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-8-
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Agreement (or caused this Agreement to be executed on its behalf by its officer
or representative thereunto duly authorized) under seal as of the date first
above written.
THE COMPANY: ORION HEALTHCORP, INC.
By: /s/ Keith G. LeBlanc
---------------------------------
Name: Keith G. LeBlanc
Title: President
THE INVESTORS: BRANTLEY PARTNERS IV, L.P.
By: Brantley Venture Management IV,
L.P., its general partner
By: /s/ Paul H. Cascio
---------------------------------
Name: Paul H. Cascio
Title: Authorized Signatory
BRANTLEY VENTURE PARTNERS III, L.P.
By: Brantley Venture Management III,
L.P., its general partner
By: /s/ Paul H. Cascio
---------------------------------
Name: Paul H. Cascio
Title: Authorized Signatory
BRANTLEY CAPITAL CORPORATION
By: /s/ Paul H. Cascio
---------------------------------
Name: Paul H. Cascio
Title: Vice President
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