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EXHIBIT 10.16
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CRESCENT INTERNATIONAL LTD.
AND
PRACTICEWORKS, INC.
DATED AS OF MARCH 5, 2001
This STOCK PURCHASE AGREEMENT is entered into as of the 5th day of
March, 2001 (this "Agreement"), by and between Crescent International Ltd. (the
"Investor"), an entity organized and existing under the laws of Bermuda, and
PracticeWorks, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
and the Investor shall purchase, up to $5,000,000 worth of the Preferred Stock
(as defined below); and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)"), Section 3(a)(9) ("Section 3(a)(9)") and
Regulation D ("Regulation D") of the U.S. Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "Securities Act"),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
in Common Stock to be made hereunder.
NOW, THEREFORE, in consideration of the premises, representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. "Affiliate" shall mean any Person that, directly or
indirectly through one or more intermediaries, controls or is controlled by, or
is under direct or indirect common control with any other Person. For the
purposes of this definition, "control," when used with respect to any Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise, and the term "controls" and "controlled" have meanings correlative
to the foregoing.
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Section 1.2. "Capital Shares" shall mean the Common Stock and
Preferred Stock and any shares of any other class of common stock or preferred
stock whether now or hereafter authorized, having the right to participate in
the distribution of dividends (as and when declared) or assets (upon liquidation
of the Company).
Section 1.3. "Certificate of Designations" shall mean the Certificate
of Designations, Powers, Preferences and Rights of the Company, setting forth
the rights, preferences and limitations of the Preferred Stock, as filed by the
Company with the Secretary of State of the State of Delaware prior to the
Closing Date.
Section 1.4. "Closing" shall mean the closing of the purchase and sale
of the Preferred Stock pursuant to Section 2.1 hereof and the issuance of the
Warrant pursuant to Section 2.2 hereof.
Section 1.5. "Closing Date" shall mean the date of the Closing which
shall take place on (a) the first Trading Day following the last to be fulfilled
or waived of the conditions set forth in Article VII, or (b) such other date as
the parties hereto may agree in writing.
Section 1.6. "Common Stock" shall mean the Company's common stock,
$0.01 par value per share.
Section 1.7. "Conversion Shares" shall mean all shares of Common Stock
into which the Preferred Stock may be converted.
Section 1.8. "Damages" shall mean any and all losses, claims, damages,
liabilities, costs and expenses (including, without limitation, any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any and all reasonable amounts paid in defense or settlement of, any action,
suit or proceeding between any indemnified party and any indemnifying party or
between any indemnified party and any third party, or otherwise, or any claim
asserted).
Section 1.9. "Distribution" shall mean the pro rata distribution to
holders of common stock, par value $0.001 per share, of InfoCure Corporation, a
Delaware corporation and the indirect parent of the Company, of all of the
Common Stock of the Company.
Section 1.10. "Effective Date" shall mean the date on which the SEC has
declared effective the Registration Statement registering resale of Registrable
Securities as set forth in the Registration Rights Agreement.
Section 1.11. "Exchange Act" shall mean the U.S. Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.12. "Legend" shall have the meaning specified in Section 8.1
of this Agreement.
Section 1.13. "Material Adverse Effect" shall mean any effect on the
business, operations, properties, or financial condition of the Company that is
material and adverse to the
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Company or to the Company and such other entities controlling or controlled by
the Company, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform its obligations under any of this Agreement and the
Registration Rights Agreement.
Section 1.14. "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.15. "Outstanding" when used with reference to Common Stock or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not refer to any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.16. "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.17. "Preferred Stock" shall mean shares of Series C
Convertible Preferred Stock, par value $0.01 per share, of the Company.
Section 1.18. "Principal Market" shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market, the American Stock Exchange, the Electronic Bulletin
Board or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock.
Section 1.19. "Registrable Securities" shall mean (i) the Conversion
Shares, (ii) the Warrant Shares and (iii) any securities issued or issuable with
respect to any of the foregoing by way of exchange, stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (w) the applicable Registration Statement has been
declared effective by the SEC and all such Registrable Securities have been
disposed of pursuant to the applicable Registration Statement, (x) all such
Registrable Securities have been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force) under
the Securities Act ("Rule 144") are met, (y) all such Registrable Securities
have been otherwise transferred to holders who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (z) in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to the Investor, all such Registrable
Securities may be sold by the Investor without registration and without any
time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act.
Section 1.20. "Registration Rights Agreement" shall mean the
registration rights agreement by and between the Company and the Investor, in
the form of Exhibit A hereto.
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Section 1.21. "Registration Statement" shall have the meaning set forth
in the Registration Rights Agreement.
Section 1.22. "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.23. "Representative" of a party shall mean any officer,
director, employee, agent, counsel, accountant, financial advisor, consultant or
other representative of such party.
Section 1.24. "SEC" shall mean the U.S. Securities and Exchange
Commission.
Section 1.25. "SEC Documents" shall mean all filings made by the
Company with the SEC pursuant to the Securities Act or the Exchange Act as of
the time in question until such time the Company no longer has an obligation to
maintain the effectiveness of a Registration Statement as set forth in the
Registration Rights Agreement.
Section 1.26. "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.27. "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.28. "Short Sale" shall have the meaning specified in Rule
3b-3 of the Exchange Act.
Section 1.29. "Strategic Investor" shall mean any Person (i) that
intends to participate in the corporate governance of the Company or in the
conduct of its business or (ii) as to whom the Company's Board of Directors has
made a determination in good faith that such Person will develop a material
strategic relationship with the Company, including without limitation an
acquisition of another entity or assets, in connection with and related to the
Company's present or future business.
Section 1.30. "Subsidiary" shall mean any Person in which the Company,
directly or indirectly through Subsidiaries or otherwise, beneficially owns more
than 50% of either the equity interests in, or the voting control of, such
Person.
Section 1.31. "Trading Day" shall mean any day during which the
Principal Market shall be open for business.
Section 1.32. "Underwriter" shall mean any underwriter participating in
any disposition of the Registrable Securities on behalf of the Investor pursuant
to a Registration Statement.
Section 1.33. "Warrant" shall mean the Warrant in the form of Exhibit
B hereto issued by the Company to the Investor pursuant to Section 2.2 of this
Agreement.
Section 1.34. "Warrant Shares" shall mean all shares of Common Stock
issued or issuable pursuant to exercise of the Warrant.
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ARTICLE II
PURCHASE AND SALE OF PREFERRED STOCK; ISSUANCE OF WARRANT
Section 2.1. Investments. The Company shall issue and sell and the
Investor shall purchase, on the Closing Date, 100,000 shares of the Preferred
Stock for an investment amount of $5,000,000.
Section 2.2. Issuance of Warrant. On the Closing Date, the Company
shall issue and deliver to the Investor the Warrant.
Section 2.3. Twenty Percent Limitation. Unless the Company obtains the
requisite approval of its shareholders in accordance with the corporate laws of
Delaware and the applicable rules of the Principal Market, no more than 19.9% of
the Outstanding shares of Common Stock may be issued and sold pursuant to the
conversion of the Preferred Stock or the exercise of the Warrant, provided, that
the Investor has the right to require the Company to seek such shareholder
approval, and upon the written request of the Investor the Company shall as soon
as practicable after such request prepare and file with the SEC a proxy
statement to be distributed to shareholders of the Company for the purpose of
soliciting proxies for use at an annual or special meeting of shareholders of
the Company at which such shareholder approval is sought and in which proxy
statement the Company will recommend to its shareholders the foregoing approval.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1. Intent. The Investor is entering into this Agreement for
its own account, and the Investor has no view to the distribution of the
Registrable Securities, the Warrant or the Preferred Stock and has no present
arrangement (whether or not legally binding) at any time to sell, assign,
transfer, pledge, encumber, hypothecate or otherwise dispose of the Registrable
Securities, the Warrant or the Preferred Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Registrable Securities, the Warrant or the
Preferred Stock for any minimum or other specific term and reserves the right to
dispose of the Registrable Securities, the Warrant or the Preferred Stock at any
time pursuant to the Registration Statement and in accordance with federal and
state securities laws applicable to such disposition.
Section 3.2. Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and the Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Common Stock and the
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Preferred Stock. The Investor acknowledges that an investment in the Common
Stock and the Preferred Stock is speculative and involves a high degree of risk.
Section 3.3. Authority. Each of this Agreement and the Registration
Rights Agreement has been duly authorized by all necessary corporate action and
no further consent or authorization of the Investor, or its Board of Directors
or stockholders is required. Each of this Agreement and the Registration Rights
Agreement was validly executed and delivered by the Investor and each is a valid
and binding agreement of the Investor enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
Section 3.4. Not an Affiliate. The Investor is not an officer, director
or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of
the Company.
Section 3.5. Organization and Standing. The Investor is duly organized,
validly existing, and in good standing under the laws of Bermuda.
Section 3.6. Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument contemplated hereby, and the
consummation of the transactions contemplated thereby, and compliance with the
requirements thereof, will not to the Investor's knowledge (a) violate any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding on
the Investor, (b) violate any provision of any indenture, instrument or
agreement to which the Investor is a party or is subject, or by which the
Investor or any of its assets is bound, (c) conflict with or constitute a
material default thereunder, (d) result in the creation or imposition of any
lien pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by the Investor to any third
party, or (e) require the approval of any third-party (that has not been
obtained) pursuant to any material contract to which the Investor is subject or
to which any of its assets, operations or management may be subject.
Section 3.7. Disclosure; Access to Information. The Investor has
received or had access to all documents, records, books and other information
pertaining to Investor's investment in the Company that have been requested by
Investor. The Investor has received and reviewed copies of the SEC Documents.
Section 3.8. Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising. The
Investor has had an existing business relationship with the Company or its
Affiliates since September 1998 and the Investor did not become aware of the
Company as a result of the Company filing a Form S-1 or Form 10 with the SEC,
pursuant to which the Company plans to effect the Distribution.
Section 3.9. Resale Restrictions. Investor acknowledges that any
Registrable Securities, the Warrant and the Preferred Stock to be acquired by
Investor have not been registered under the federal securities laws or any
applicable state securities laws in reliance
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upon exemptions available for non-public or limited offerings. Investor
understands that it must bear the economic risk of the investment in the
Registrable Securities, the Warrant and the Preferred Stock because the
Registrable Securities, the Warrant and the Preferred Stock have not been so
registered and therefore are subject to restrictions upon transfer such that
they may not be sold or otherwise transferred unless registered under the
applicable securities laws or an exemption from such registration is available.
The Investor will not reoffer, sell, assign, transfer, pledge, encumber,
hypothecate or otherwise dispose of any Registrable Securities, the Warrant or
the Preferred Stock in the absence of an effective registration statement,
qualification or authorization relating thereto under federal and applicable
state securities laws or an opinion of qualified counsel satisfactory to the
Company to the effect that the proposed transaction in the Registrable
Securities, the Warrant or the Preferred Stock will neither constitute or result
in any violation of the federal or state securities laws. Subject to Section 8.1
of this Agreement, any certificate or other document that may be issued
representing any shares of Registrable Securities, the Warrant or the Preferred
Stock may be endorsed with a legend to this effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that except as set forth in
the schedules included in the Company Disclosure Schedule attached hereto:
Section 4.1. Organization of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Except as set forth in the SEC Documents, the Company does not own more than 50%
of the outstanding capital stock of or control any other Person. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement and the Warrant and to issue the
Warrant Shares, the Conversion Shares and the Preferred Stock; (ii) the
execution and delivery of this Agreement and the Registration Rights Agreement,
and the execution, issuance and delivery of the Warrant, by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required; and (iii) each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered, and the Warrant has been duly executed,
issued and delivered, by the Company and constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
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Section 4.3. Corporate Documents. The Company has furnished or made
available to the Investor true and correct copies of the Company's Certificate
of Incorporation, as amended and in effect on the date hereof (the
"Certificate"), and the Company's By-Laws, as amended and in effect on the date
hereof (the "By-Laws").
Section 4.4. Books and Records. The minute books and other similar
records of the Company and its subsidiaries as made available to Investor prior
to the execution of this Agreement contain a true and complete record, in all
material respects, of all action taken at all meetings and by all written
consents in lieu of meetings of the stockholders, the boards of directors and
committees of the boards of directors of the Company and the subsidiaries. The
stock transfer ledgers and other similar records of the Company and the
subsidiaries as made available to Investor prior to the execution of this
Agreement accurately reflect all record transfers prior to the execution of this
Agreement in the capital stock of the Company and the subsidiaries. Neither the
Company nor any subsidiary has any of such minute books, stock transfer ledgers
and other similar records recorded, stored, maintained, operated or otherwise
wholly or partly dependent upon or held by any means (including any electronic,
mechanical or photographic process, whether computerized or not) which
(including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company or a subsidiary.
Section 4.5. Capitalization. As of the date of this Agreement, the
authorized capital stock of the Company consists of 100,000,000 shares of Common
Stock, of which 100 shares are issued and outstanding. There are no options,
warrants, or rights to subscribe to, securities, rights or obligations
convertible into or exchangeable for or giving any right to subscribe for any
shares of capital stock of the Company. All of the outstanding shares of Common
Stock of the Company have been duly and validly authorized and issued and are
fully paid and nonassessable. On the Closing Date, the outstanding capital stock
of the Company will be as set forth on Schedule 4.5, which shall be delivered to
the Investor on the Closing Date, provided that on the Closing Date, the Company
shall have outstanding (i) no more than 32,000 shares of Series A Convertible
Preferred Stock, (ii) no more than 1,000,000 shares of Series B Convertible
Preferred Stock, (iii) no other shares of preferred stock other than the
Preferred Stock and (iv) except as set forth on such Schedule 4.5, no options,
warrants or rights to subscribe to, securities, rights or obligations
convertible into or exchangeable for or giving any right to subscribe for any
shares of preferred stock of the Company.
Section 4.6. Registration and Listing of Common Stock. The Company has
registered its Common Stock pursuant to Section 12(b) or 12(g) of the Exchange
Act and is in full compliance with all reporting requirements of the Exchange
Act, and the Company has applied for the listing or quotation of its Common
Stock, and upon official notice to the Principal Market of the consummation of
the Distribution, such Common Stock will be listed or quoted on the Principal
Market.
Section 4.7. Financial Statements. Prior to the execution of this
Agreement, the Company has delivered to the Investor true and complete copies of
the following financial statements, which reflect the Company's operations as a
division of InfoCure Corporation, a Delaware corporation and the indirect parent
of the Company:
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(a) the audited balance sheets of the Company and its
consolidated subsidiaries as of December 31, 1999 and 1998 and the
related audited consolidated statements of operations, stockholders'
equity and cash flows for each of the fiscal years then ended and the
eleven months ended December 31, 1997, together with a true and correct
copy of the report on such audited information by BDO ▇▇▇▇▇▇▇ LLP, and
all letters from such accountants with respect to the results of such
audits; and
(b) the unaudited balance sheets of the Company and its
consolidated subsidiaries as of September 30, 2000 and the related
unaudited consolidated statements of operations and stockholders'
equity for the portion of the fiscal year then ended.
The financial statements of the Company delivered to the Investor have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
Section 4.8. SEC Documents. The Company has delivered or made available
to the Investor true and complete copies of the SEC Documents (including,
without limitation, proxy information and solicitation materials). The Company
has not provided to the Investor any information that, according to applicable
law, rule or regulation, should have been disclosed publicly prior to the date
hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied as to form and substance in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent
they may include summary notes and may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
Section 4.9. Exemption from Registration; Valid Issuances; New
Issuances. The sale and issuance of the Warrant, the Warrant Shares, the
Preferred Stock and the Conversion Shares in accordance with the terms and on
the basis of the representations and warranties set forth in
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this Agreement, may and will be properly issued pursuant to Section 4(2),
Section 3(a)(9), Regulation D and/or any applicable state law. When issued and
paid for as provided herein, the Warrant, the Warrant Shares, the Preferred
Stock and the Conversion Shares will be duly and validly issued, fully paid, and
nonassessable. Neither the issuance of the Warrant or the Warrant Shares nor the
sales of the Preferred Stock or the Conversion Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement or the Warrant will (i) result in the creation or imposition of
any liens, charges, claims or other encumbrances upon the Warrant Shares, the
Preferred Stock, the Conversion Shares, or any of the assets of the Company, or
(ii) entitle the holders of Outstanding Capital Shares to preemptive or other
rights to subscribe to or acquire the Capital Shares or other securities of the
Company. The Warrant Shares, the Preferred Stock and the Conversion Shares will
not subject the Investor to personal liability by reason of the ownership
thereof. The Warrant Shares, the Preferred Stock and the Conversion Shares have
been duly authorized by the Company, but have not been issued (whether or not
subsequently repurchased by the Company) to any Person, and when issued to the
Investor in accordance with this Agreement and the Warrant will not have been
issued (whether or not subsequently repurchased by the Company) to any Person
other than the Investor.
Section 4.10. No General Solicitation or Advertising. In regard to the
transactions contemplated hereby, neither the Company nor any of its Affiliates
nor any distributor or any person acting on its or their behalf (i) has
conducted or will conduct any general solicitation (as that term is used in Rule
502(c) of Regulation D) or general advertising with respect to any of the
Warrant Shares, the Preferred Stock or the Conversion Shares, or (ii) made any
offers or sales of any security or solicited any offers to buy any security
under any circumstances that would require registration of the Warrant Shares,
the Preferred Stock or the Conversion Shares under the Securities Act.
Section 4.11. No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Warrant Shares, the Preferred Stock and the Conversion Shares do not and
will not (i) result in a violation of the Certificate or By-Laws or (ii)
conflict with, or constitute a material default (or an event that with notice or
lapse of time or both would become a material default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture, instrument or any "lock-up" or similar provision
of any underwriting or similar agreement to which the Company is a party, or
(iii) result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected nor is the Company otherwise in
violation of, conflict with or in default under any of the foregoing (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect); provided, however, that for purposes of the Company's
representations and warranties as to violations of foreign law, rule or
regulation referenced in clause (iii), such representations and warranties are
made only to the best of the Company's knowledge insofar as the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby are or may be affected by
the status of the Investor under or
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pursuant to any such foreign law, rule or regulation. The business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental entity, except for possible violations that either singly or
in the aggregate do not and will not have a Material Adverse Effect. The Company
is not required under federal, state or local law, rule or regulation to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or issue and sell the Warrant
Shares, the Preferred Stock or the Conversion Shares in accordance with the
terms hereof (other than any SEC, NASD or state securities filings that may be
required to be made by the Company subsequent to the Closing, any registration
statement that may be filed pursuant hereto, and any shareholder approval
required by the rules applicable to companies whose common stock trades on the
Principal Market); provided that, for purposes of the representation made in
this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Investor herein. Except as set
forth in the Company Disclosure Schedule, the Company has not entered into any
agreements, arrangements or understandings with any Person other than the
Investor that would in any way restrict or limit the ability of the Company to
(i) issue the Warrant Shares, the Preferred Stock or the Conversion Shares or
(ii) redeem the Preferred Stock in accordance with the Certificate of
Designations.
Section 4.12. No Material Adverse Change. Except as set forth in the
SEC Documents, since December 31, 1999, no event has occurred that would have a
Material Adverse Effect on the Company.
Section 4.13. No Undisclosed Liabilities. Except as set forth in the
SEC Documents, the Company has no liabilities or obligations that are material,
individually or in the aggregate, other than those incurred in the ordinary
course of the Company's businesses since December 31, 1999 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company.
Section 4.14. No Undisclosed Events or Circumstances. Since December
31, 1999, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly disclosed or announced.
Section 4.15. No Integrated Offering. Neither the Company, nor any of
its Affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Warrant, the Warrant Shares, the Preferred Stock or the Conversion Shares under
the Securities Act.
Section 4.16. Litigation and Other Proceedings. Except as set forth in
the SEC Documents, there are no lawsuits or proceedings pending or to the best
knowledge of the Company threatened, against the Company, nor has the Company
received any written or oral notice of any such action, suit, proceeding or
investigation, which have had or might have a Material Adverse Effect. Except as
set forth in the SEC Documents, no judgment, order, writ,
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injunction or decree or award has been issued by or, so far as is known by the
Company, requested of any court, arbitrator or governmental agency which has
resulted in or might result in a Material Adverse Effect.
Section 4.17. No Misleading or Untrue Communication. The Company, any
Person representing the Company and, to the knowledge of the Company, any other
Person selling or offering to sell the Warrant, the Warrant Shares, the
Preferred Stock or the Conversion Shares in connection with the transactions
contemplated by this Agreement, have not made, at any time, any communication in
connection with the offer or sale of the same which contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements, in the light of the circumstances under which they
were made, not misleading.
Section 4.18. Material Non-Public Information. The Company is not in
possession of, nor has the Company or its agents disclosed to the Investor, any
material non-public information that (i) if disclosed, would, or could
reasonably be expected to have, an effect on the price of the Common Stock and
(ii) according to applicable law, rule or regulation, should have been disclosed
publicly by the Company prior to the date hereof but which has not been so
disclosed.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1. Compliance. The Investor's trading activities with respect
to shares of the Company's Preferred Stock, the Warrant Shares and the
Conversion Shares will be in compliance with all applicable state and federal
securities laws, rules and regulations and the rules and regulations of the
Principal Market on which the Company's Common Stock is listed.
Section 5.2. Short Sale. Neither the Investor nor any of its Affiliates
will directly or indirectly engage in any Short Sale of the Preferred Stock, the
Warrant Shares or the Conversion Shares.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect, and the
Company shall comply in all respects with the terms thereof.
Section 6.2. Reservation of Common Stock. As of the date hereof, the
Company has available and the Company shall reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue the Warrant Shares and
the Conversion Shares, such amount of shares of Common Stock to be reserved
shall be calculated based upon the exercise price of the Warrant and the
conversion price of the Preferred Stock set forth in the Certificate of
Designations. The number of shares so reserved from time to time, as theretofore
increased or reduced as hereinafter provided, may be reduced by the number of
shares actually delivered.
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Section 6.3. Listing of Common Stock. The Company shall use its best
efforts to maintain the listing or quotation of the Common Stock on a Principal
Market, and as soon as practicable will cause the Warrant Shares and the
Conversion Shares to be listed on the Principal Market. The Company further
shall, if the Company applies to have the Common Stock traded on any other
Principal Market, include in such application the Warrant Shares and the
Conversion Shares, and shall take such other action as is necessary or desirable
in the opinion of the Investor to cause the Common Stock to be listed on such
other Principal Market as promptly as possible. The Company shall use its best
efforts to continue the listing and trading of its Common Stock on the Principal
Market (including, without limitation, maintaining sufficient net tangible
assets) and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the NASD and the Principal
Market.
Section 6.4. Exchange Act Registration. The Company shall comply with
all applicable requirements set forth in the Registration Rights Agreement,
including without limitation its obligation to file the Registration Statement
with the SEC within the time period set forth in the Registration Rights
Agreement. After the Registration Statement becomes effective, the Company shall
use its best efforts to cause the Common Stock covered by such Registration
Statement to continue to be registered under Section 12(g) or 12(b) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under the Exchange Act, and will use its best efforts not to take
any action or file any document (whether or not permitted by the Exchange Act or
the rules thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under the Exchange Act.
Section 6.5. Legends. The certificates evidencing the Warrant, the
Warrant Shares and the Conversion Shares shall be free of legends, except as
provided for in Article VIII.
Section 6.6. Corporate Existence. The Company shall take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.7. Additional SEC Documents. Until all Registrable Securities
issued or issuable to the Investor pursuant to this Agreement may be sold by the
Investor without registration and without any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act, the Company shall, as and when the originals thereof are
submitted to the SEC for filing, notify the Investor in writing of any SEC
Documents furnished or submitted to the SEC, and upon the request of the
Investor the Company shall deliver to the Investor copies of all SEC Documents
so furnished or submitted to the SEC.
Section 6.8. Notice of Certain Events Affecting Registration. The
Company shall immediately notify the Investor, but in no event later than two
business days by facsimile and by overnight courier, upon the occurrence of any
of the following events in respect of a Registration Statement or related
prospectus in respect of an offering of Registrable Securities: (i) receipt of
any request for additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or related
prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of
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any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in such
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of a Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; (v) the declaration by the SEC of the effectiveness of a
Registration Statement; and (vi) the Company's reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate, and
the Company shall promptly make available to the Investor any such supplement or
amendment to the related prospectus.
Section 6.9. Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to the Investor
such shares of stock and/or securities as the Investor is entitled to receive
pursuant to this Agreement.
Section 6.10. Issuance of Conversion Shares and Warrant Shares. The
sale of the Preferred Stock, the issuance of the Conversion Shares pursuant to
conversion of the Preferred Stock and the issuance of the Warrant Shares
pursuant to exercise of the Warrant shall be made in accordance with the
provisions and requirements of Section 4(2), Section 3(a)(9), Regulation D
and/or any applicable state law.
Section 6.11. Legal Opinion. The Company's independent counsel shall
deliver to the Investor on the Closing Date an opinion in the form of Exhibit C.
Section 6.12. No Similar Arrangement; Right of First Refusal. The
Company shall refrain from entering into any other agreements, arrangements or
understandings granting to the Company the right to sell shares of its
securities to one or more investors, other than a Strategic Investor, in
placements exempt from registration under the Securities Act until 180 calendar
days after the Registration Statement has been declared effective by the SEC
(the "Exclusivity Period"). If the Company, for the purpose of obtaining any
additional financing, wishes to sell shares of its securities in placements
exempt from registration under the Securities Act during the Exclusivity Period
(a "Sale") to a party other than a Strategic Investor and other than the
Investor (the "Third Party"), the Company shall first offer (the "Offer") to the
Investor, in writing, the right to purchase such shares (the "Offered Shares")
at the bona fide price offered by the Third Party (the "Offer Price"). The Offer
shall grant the Investor the right during the five Trading Days immediately
following the date of the Offer to elect to purchase any or all of the Offered
Shares. The Company, in connection with such a Sale, shall refrain from
circumventing or
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attempting to circumvent the Investor's right of first refusal by way of making
such a Sale to any of its Affiliates without first making an Offer to the
Investor. If the Investor fails to exercise its right to purchase any or all of
the Offered Shares, then during the 60 calendar days immediately following the
expiration of such right, the Company shall be free to sell any or all of the
Offered Shares to a purchaser for a purchase price not lower than the Offer
Price payable on terms and conditions that are not more favorable to such
purchaser than those contained in the Offer.
Section 6.13. Third Party Agreements. The Company shall not, without
the prior written consent of the Investor, enter into any agreements,
arrangements or understandings, or amend any existing agreements, arrangements
or understandings, with any Person other than the Investor that would in any way
restrict or limit the ability of the Company to (i) issue the Preferred Stock,
the Conversion Shares or the Warrant Shares or (ii) redeem the Preferred Stock
in accordance with the Certificate of Designations.
Section 6.14. Public Announcements. The Company, its Representatives
and legal advisors, and the Investor will not issue or make any reports,
statements or releases to the public or to any third party with respect to this
Agreement or the transactions contemplated hereby without the consent of both
the Company and the Investor, which consent shall not be unreasonably withheld.
The Company, its Representatives and legal advisers, and the Investor also will
obtain the other party's prior approval of any press release to be issued
announcing the consummation of the transactions contemplated by this Agreement
or in any way referring to the other party or affiliates of the other party. If
either party is unable to obtain the approval of its public report, statement,
or press or other release from the other party and such report, statement, or
press or other release is, in the advice of legal counsel to such party,
required by applicable law or by any rule or regulation of the Principal Market,
in order to discharge such party's disclosure obligations, then such party may
make or issue the legally required report, statement, or press or other release
and promptly furnish the other party with a copy thereof.
ARTICLE VII
CONDITIONS TO CLOSING; TERMINATION
Section 7.1. Conditions to Obligation of the Investor. The obligation
of the Investor to consummate the transactions set forth in this Agreement is
subject to the satisfaction at and as of the Closing of each of the following
conditions:
(a) Certificate of Designations. The Company shall have
duly filed the Certificate of Designations with, and the Certificate of
Designations shall have been accepted by, the Secretary of State of the
State of Delaware.
(b) Delivery of Agreements. The Company shall have
executed and delivered the Registration Rights Agreement.
(c) Consummation of Distribution. The Distribution shall
have been consummated in accordance with the terms set forth in the
Company's SEC Documents, the Common Stock shall have been listed or
quoted on the Principal Market, and the
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Company shall have maintained all requirements for the continued
listing or quotation of the Common Stock on the Principal Market.
(d) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement shall be true
and correct as of the Closing as though such representations and
warranties were made on and as of the Closing, except for those
representations and warranties which address matters only as of a
particular date (which shall be true and correct only as of such date).
(e) Performance of Covenants. The Company shall have
performed or complied in all material respects with all obligations,
conditions and covenants required to be performed and complied with by
it under this Agreement at or prior to the Closing.
(f) Opinion of Counsel. The Investor shall have received
an opinion of the Company's legal counsel in the form of Exhibit C.
Section 7.2. Conditions to Obligation of the Company. The obligation of
the Company to consummate the transactions set forth in this Agreement is
subject to the satisfaction at and as of the Closing of each of the following
conditions:
(a) Delivery of Agreements. The Investor shall have
executed and delivered the Registration Rights Agreement.
(b) Consummation of Distribution. The Distribution shall
have been consummated in accordance with the terms set forth in the
Company's SEC Documents.
(c) Representations and Warranties. The representations
and warranties of the Investor set forth in this Agreement shall be
true and correct as of the Closing as though such representations and
warranties were made on and as of the Closing, except for those
representations and warranties which address matters only as of a
particular date (which shall be true and correct only as of such date).
(d) Performance of Covenants. The Investor shall have
performed or complied in all material respects with all obligations,
conditions and covenants required to be performed and complied with by
it under this Agreement at or prior to the Closing.
Section 7.3. Termination. Notwithstanding anything to the contrary in
this Agreement, this Agreement may be terminated by either party hereto and the
transactions contemplated hereby abandoned if the Closing does not occur on or
prior to March 30, 2001.
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ARTICLE VIII
LEGENDS
Section 8.1. Legends. The Preferred Stock, the Warrant and, unless
otherwise provided below, each certificate representing Registrable Securities
will bear the following legend (the "Legend"):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT
FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS
CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY
SET FORTH IN A STOCK PURCHASE AGREEMENT, DATED AS OF MARCH 5, 2001,
BETWEEN PRACTICEWORKS, INC. AND CRESCENT INTERNATIONAL LTD. A COPY OF
THE PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY
BE OBTAINED FROM PRACTICEWORKS, INC.'S EXECUTIVE OFFICES."
At the Closing, the Company shall issue to the transfer agent for its
Common Stock (and to any substitute or replacement transfer agent for its Common
Stock upon the Company's appointment of any such substitute or replacement
transfer agent) instructions in substantially the form of Exhibit D hereto, with
a copy to the Investor. Other than as required as a result of change in law,
such instructions shall be irrevocable by the Company from and after the date
hereof or from and after the issuance thereof to any such substitute or
replacement transfer agent, as the case may be, except as otherwise expressly
provided in the Registration Rights Agreement. It is the intent and purpose of
such instructions, as provided therein, to require the transfer agent for the
Common Stock from time to time upon transfer of Registrable Securities by the
Investor to issue certificates evidencing such Registrable Securities free of
the Legend during the following periods and under the following circumstances
and without consultation by the transfer agent with the Company or its counsel
and without the need for any further advice or instruction or documentation to
the transfer agent by or from the Company or its counsel or the Investor:
(a) At any time after the applicable Effective Date, upon
surrender of one or more certificates evidencing Preferred Stock or
Registrable Securities that bear the Legend, to the extent accompanied
by a notice requesting the issuance of new certificates free of the
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Legend to replace those surrendered; provided that (i) the applicable
Registration Statement shall then be effective and (ii) if reasonably
requested by the transfer agent the Investor confirms to the transfer
agent that the Investor has transferred the Registrable Securities
pursuant to such Registration Statement and has complied with the
prospectus delivery requirement; or
(b) At any time upon any surrender of one or more
certificates evidencing Registrable Securities that bear the Legend, to
the extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered and
containing representations that the Investor is permitted to dispose of
such Registrable Securities without limitation as to amount or manner
of sale pursuant to Rule 144(k) under the Securities Act.
Section 8.2. No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 8.1 has been or shall be placed on the
share certificates representing the Preferred Stock and Registrable Securities,
and no instructions or "stop transfer orders," so called, "stock transfer
restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Article VIII.
Section 8.3. Investor's Compliance. Nothing in this Article VIII shall
affect in any way the Investor's obligations to comply with all applicable
securities laws.
ARTICLE IX
INDEMNIFICATION; ARBITRATION
Section 9.1. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Investor, its partners, Affiliates, officers, directors, employees, and
duly authorized agents, and each Person or entity, if any, who controls
the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with its controlling persons
from and against any Damages, joint or several, and any action in
respect thereof to which the Investor, its partners, Affiliates,
officers, directors, employees, and duly authorized agents, and any
such controlling person becomes subject to, resulting from, arising out
of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on
the part of the Company contained in this Agreement, as such Damages
are incurred, unless such Damages result primarily from the Investor's
gross negligence, recklessness or bad faith in performing its
obligations under this Agreement; provided, however, that the maximum
aggregate liability of the Company shall be limited to the amount
actually invested by the Investor under this Agreement, and provided,
further, that in no event shall this provision be deemed to limit any
rights to indemnification arising under the Registration Rights
Agreement.
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(b) The Investor agrees to indemnify and hold harmless
the Company, its Affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with its controlling persons
from and against any Damages, joint or several, and any action in
respect thereof to which the Company, its Affiliates, officers,
directors, employees, and duly authorized agents, and any such
controlling person becomes subject to, resulting from, arising out of
or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on
the part of the Investor contained in this Agreement, as such Damages
are incurred, unless such Damages result primarily from the Company's
gross negligence, recklessness or bad faith in performing its
obligations under this Agreement; provided, however, that the maximum
aggregate liability of the Investor shall be limited to the amount by
which the total price at which the Registrable Securities held by the
Investor were sold to the public exceeds the amount actually paid by
the Investor under this Agreement for such Registrable Securities sold
to the public, and provided, further, that in no event shall this
provision be deemed to limit any rights to indemnification arising
under the Registration Rights Agreement.
Section 9.2. Method of Asserting Indemnification Claims. All claims for
indemnification by any Indemnified Party (as defined below) under Section 9.1
shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which
any person claiming indemnification under any provision of Section 9.1
(an "Indemnified Party") might seek indemnity under Section 9.1 is
asserted against or sought to be collected from such Indemnified Party
by a person other than the Company, the Investor or any Affiliate of
the Company (a "Third Party Claim"), the Indemnified Party shall
deliver a written notification, enclosing a copy of all papers served,
if any, and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim for indemnification that is
being asserted under any provision of Section 9.1 against any person
(the "Indemnifying Party"), together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim (a "Claim Notice") with reasonable
promptness to the Indemnifying Party. If the Indemnified Party fails to
provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the
Indemnifying Party shall not be obligated to indemnify the Indemnified
Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been irreparably prejudiced
by such failure of the Indemnified Party. The Indemnifying Party shall
notify the Indemnified Party as soon as practicable within the period
ending 30 calendar days following receipt by the Indemnifying Party of
either a Claim Notice or an Indemnity Notice (as defined below) (the
"Dispute Period") whether the Indemnifying Party disputes its liability
or the amount of its liability to the Indemnified Party under Section
9.1 and whether the Indemnifying Party desires, at its sole cost and
expense, to defend the Indemnified Party against such Third Party
Claim.
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(i) If the Indemnifying Party notifies the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Indemnified Party
with respect to the Third Party Claim pursuant to this Section
9.2(a), then the Indemnifying Party shall have the right to
defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the
Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings shall be vigorously prosecuted
by the Indemnifying Party to a final conclusion or will be
settled at the discretion of the Indemnifying Party (but only
with the consent of the Indemnified Party, in the case of any
settlement that provides for any relief other than the payment
of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party shall not
be indemnified in full pursuant to Section 9.1). The
Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof;
provided, however, that the Indemnified Party may, at the sole
cost and expense of the Indemnified Party, at any time prior
to the Indemnifying Party's delivery of the notice referred to
in the first sentence of this clause (i), file any motion,
answer or other pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and provided further,
that if requested by the Indemnifying Party, the Indemnified
Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the
Indemnifying Party elects to contest. The Indemnified Party
may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party
pursuant to this clause (i), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own
costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Indemnified Party may take
over the control of the defense or settlement of a Third Party
Claim at any time if it irrevocably waives its right to
indemnity under Section 9.1 with respect to such Third Party
Claim.
(ii) If the Indemnifying Party fails to notify
the Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 9.2(a), or if the Indemnifying Party gives
such notice but fails to prosecute vigorously and diligently
or settle the Third Party Claim, or if the Indemnifying Party
fails to give any other notice required to be given within the
Dispute Period, then the Indemnified Party shall have the
right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party
(with the consent of the Indemnifying Party, which consent
will not be unreasonably withheld). The Indemnified Party will
have full control of such defense and proceedings, including
any compromise or settlement thereof; provided, however, that
if requested by the Indemnified Party, the Indemnifying Party
will, at the sole cost and expense of the Indemnifying Party,
provide reasonable cooperation to the Indemnified Party and
its counsel in contesting any Third Party Claim which the
Indemnified Party is
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contesting. Notwithstanding the foregoing provisions of this
clause (ii), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability or the amount of its
liability hereunder to the Indemnified Party with respect to
such Third Party Claim, and if such dispute is resolved in
favor of the Indemnifying Party in the manner provided in
clause (iii) below, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this clause (ii) or of the
Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with
such litigation. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this clause (ii), and the
Indemnifying Party shall bear its own costs and expenses with
respect to such participation.
(iii) If the Indemnifying Party notifies the
Indemnified Party that it does not dispute its liability or
the amount of its liability to the Indemnified Party with
respect to the Third Party Claim under Section 9.1 or fails to
notify the Indemnified Party within the Dispute Period whether
the Indemnifying Party disputes its liability or the amount of
its liability to the Indemnified Party with respect to such
Third Party Claim, the Damages in the amount specified in the
Claim Notice shall be conclusively deemed a liability of the
Indemnifying Party under Section 9.1 and the Indemnifying
Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to
such claim, the Indemnifying Party and the Indemnified Party
shall proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within the
period of 30 calendar days immediately following the Dispute
Period, such dispute shall be resolved by arbitration in
accordance with Section 9.3.
(b) In the event any Indemnified Party should have a
claim under Section 9.1 against the Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver a
written notification of a claim for indemnity under Section 9.1
specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an "Indemnity Notice") with
reasonable promptness to the Indemnifying Party. The failure by any
Indemnified Party to give the Indemnity Notice shall not impair such
party's rights hereunder except to the extent that the Indemnifying
Party demonstrates that it has been irreparably prejudiced thereby. If
the Indemnifying Party notifies the Indemnified Party that it does not
dispute the claim or the amount of the claim described in such
Indemnity Notice or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes the claim or the
amount of the claim described in such Indemnity Notice, the Damages in
the amount specified in the Indemnity Notice will be conclusively
deemed a liability of the Indemnifying Party under Section 9.1 and the
Indemnifying Party shall pay the amount of such Damages to the
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Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to
such claim, the Indemnifying Party and the Indemnified Party shall
proceed in good faith to negotiate a resolution of such dispute, and if
not resolved through negotiations within the period of 30 calendar days
immediately following the Dispute Period, such dispute shall be
resolved by arbitration in accordance with Section 9.3.
Section 9.3. Arbitration. Any controversy, claim or dispute arising out
of or in connection with this Agreement or the Registration Rights Agreement,
including any question regarding its existence, validity, interpretation,
breach, or termination, shall be referred to and finally resolved in accordance
with the International Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitral tribunal may
be entered by any court having jurisdiction thereof or having jurisdiction over
any party or any party's assets.
(a) The tribunal shall consist of three arbitrators, two
of whom shall be appointed by the respective parties and the third, who
shall be the chairperson of the tribunal, by the two party-appointed
arbitrators within 30 days of the last of their appointments. Save
that, if either party should fail to appoint an arbitrator within 30
days of receiving written notice of the appointment of an arbitrator by
the other party, the second arbitrator shall, at the written request of
the party which has already made an appointment, be appointed forthwith
by the American Arbitration Association. Likewise, if the
party-appointed arbitrators fail to make an agreed appointment for the
chairperson within 30 days of the last of their appointments, the
chairperson shall, at the written request of either party, be appointed
forthwith by the American Arbitration Association.
(b) The place of arbitration shall be New York, New York.
(c) This arbitration clause and the conduct of the
arbitral proceedings shall be governed by the Federal Arbitration Act,
9 U.S.C.A. sec. 1 et seq.
(d) The language of the arbitration shall be English.
(e) Nothing in these dispute resolution provisions shall
be construed as preventing either party from seeking conservatory or
similar interim relief in any court of competent jurisdiction.
(f) To the extent practicable, the arbitral tribunal
shall render its award no more than 60 calendar days from the date that
the three member tribunal is constituted. The arbitral tribunal shall
not lose jurisdiction over the matter based on a failure to render an
award within this time period.
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ARTICLE X
MISCELLANEOUS
Section 10.1. Closing Fees and Transaction Costs. In connection with
the execution of this agreement the following Closing Fees and Transaction Costs
(as defined below) are payable by the Company. The Investor is authorized by the
Company to retain and to pay, on behalf of the Company, the Closing Fees and
Transaction Costs to the payee entities in accordance with Schedule 10.1, and
may deduct such amounts from any sums due to the Company on the Closing Date.
(a) Closing Fees. The Company shall pay certain fees (the
"Closing Fees") to the payee entities in accordance with Schedule 10.1.
(b) Transaction Costs. The fees, expenses and
disbursements of the Investor's counsel (the "Investor Legal Fees")
shall be paid as follows: (i) the Investor shall pay the initial
$10,000 of Investor Legal Fees and (ii) the Company shall pay all
Investor Legal Fees in excess of $10,000, provided that the Company's
share of Investor Legal Fees shall not exceed $50,000. The Company
shall pay the Investor due diligence costs in connection with the
consummation of this Agreement and the transactions contemplated hereby
(the "Due Diligence Costs," and together with the Investor Legal Fees,
the "Transaction Costs"), which Due Diligence Costs shall not, when
aggregated with all due diligence costs incurred by the Investor in
connection with the Stock Purchase Agreement, to be entered into on
March 6, 2001, relating to the purchase of Common Stock from time to
time by the Investor, exceed $5,000. The Company shall pay to the
Investor the Company's share of the Transaction Costs on the Closing
Date, to the extent such share of the Transaction Costs can be
determined on the Closing Date. Notwithstanding the foregoing, if the
Distribution shall not have been consummated prior to March 31, 2001,
then the Company shall pay to the Investor the Company's share of the
Transaction Costs on April 1, 2001, to the extent such share of the
Transaction Costs can be determined on April 1, 2001. The Company shall
pay its share of the remaining Transaction Costs to the Investor not
later than ten days after receipt of notice from the Investor that such
amount is due. The Company agrees to pay its own expenses incident to
the performance of its obligations hereunder.
Section 10.2. Brokerage. Except as disclosed in Section 10.1, each of
the parties hereto represents that it has had no dealings in connection with
this transaction with any finder or broker which would impose a legal obligation
to pay any fee or commission. The Company on the one hand, and the Investor, on
the other hand, agree to indemnify the other against and hold the other harmless
from any and all liabilities to any persons claiming brokerage commissions or
finder's fees on account of services purported to have been rendered on behalf
of the indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 10.3. Conversion Notice. Any conversion of the Preferred Stock
shall be effected in accordance with the Certificate of Designations of the
Company. Any conversion notice delivered to the Company by the Investor shall be
in the form of Exhibit E hereto. Any
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conversion notice delivered to the Investor by the Company shall be in the form
of Exhibit F hereto.
Section 10.4. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the third business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company:
PracticeWorks, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Investor:
Crescent International Ltd.
c/o GreenLight (Switzerland) SA
▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇/Maxi Brezzi
Telephone: ▇▇▇ ▇▇ ▇▇▇ ▇▇ ▇▇
Facsimile: ▇▇▇ ▇▇ ▇▇▇ ▇▇ ▇▇
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with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto from time to time may change its address or facsimile
number for notices under this Section by giving at least ten (10) days'
prior written notice of such changed address or facsimile number to the
other party hereto.
Section 10.5. Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
Person. Notwithstanding the foregoing, the Investor's interest in this Agreement
may be assigned at any time, in whole or in part, to any Affiliate of the
Investor upon the prior written consent of the Company, which consent shall not
to be unreasonably withheld provided, however, that any such assignment or
transfer shall relieve the Investor of its duties under this Agreement only upon
performance thereof by any such assignee or transferee.
Section 10.6. Amendment; No Waiver. No party shall be liable or bound
to any other party in any manner by any warranties, representations or covenants
except as specifically set forth in this Agreement. Except as expressly provided
in this Agreement, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
both parties hereto. The failure of the either party to insist on strict
compliance with this Agreement, or to exercise any right or remedy under this
Agreement, shall not constitute a waiver of any rights provided under this
Agreement, nor estop the parties from thereafter demanding full and complete
compliance nor prevent the parties from exercising such a right or remedy in the
future.
Section 10.7. Annexes and Exhibits; Entire Agreement. All annexes and
exhibits to this Agreement are incorporated herein by reference and shall
constitute part of this Agreement. This Agreement and the Registration Rights
Agreement set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written, relating to the subject matter hereof.
Section 10.8. Survival. The provisions of Articles VI, VIII, IX and X
shall survive the Closing.
Section 10.9. Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
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Section 10.10. Title and Subtitles. The titles and subtitles used in
this Agreement are used for the convenience of reference and are not to be
considered in construing or interpreting this Agreement.
Section 10.11. Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 10.12. Choice of Law. This Agreement shall be construed under
the laws of the State of New York.
Section 10.13. Other Expenses. In the event that a dispute between the
parties is not determined by a Board of Arbitration, the non-prevailing party in
any action, suit or proceeding shall bear all investigative, legal and other
expenses reasonably incurred in connection with, and any and all amounts paid in
defense or settlement of such action, suit or proceeding.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
CRESCENT INTERNATIONAL LTD.
By: /s/ ▇▇▇ ▇▇▇▇ /s/ Maxi Brezzi
------------------------------------
▇▇▇ ▇▇▇▇ Maxi Brezzi
Authorized Signatories
PRACTICEWORKS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman