To All Noteholders,
For those of you I have not had a chance to meet or talk to, I would like to introduce myself. My name is Robert Lazzara, everyone calls me Bobby. My background includes training in critical care, general surgery, and finally cardiac surgery which I practiced for 20 years. My business background was born in private family enterprises, physician healthcare enterprises, and broadcast media for patient and physician education and engagement. My CV is included in the link below.
I came onboard ORHUB with great enthusiasm having initially been an investor who was introduced to the company and its Surgical Spotlight® product which I believe has the ability to improve healthcare outcomes. Not long after, I joined the company as Chief Medical Officer and subsequently as CEO and Chairman of the Board. My enthusiasm has grown as I see great things ahead for our Company built around our focus on improving outcomes and costs for patients, physicians, ASC’s, hospitals and their extended healthcare systems.
When I became CEO of ORHUB, one of my initial priorities was to explore the possibility of ending the ongoing litigation that has diverted the focus and resources of the Company. I took the time to meet with Mr. Buonincontri, and a group of Noteholders in Arizona. The goal was to move towards settlement, which was in the best interest of the Company. The meeting was positive, and resulted in the signing of a non-binding Letter of Intent (“LOI”) to be used as a template for the final settlement. The LOI, was drafted entirely by Mr. Buonincontri. My interactions with Mr. Buonincontri and the Noteholders were insightful and pleasant, and I was energized during the discussions that we were headed towards a positive resolution.
It is with disappointment that I must report that Mr. Buonincontri pulled out of our negotiations and has confirmed his plan to resume litigation efforts. While this was not the outcome I desired, the Board has a plan to end this litigation and allow the Company to move forward and execute a strategic plan that will benefit all investors.
As Noteholders, you received communications recently from Mr. Buonincontri, where he claims to be acting in the best interest of all investors in the Note. I was actively negotiating with Mr. Buonincontri at the time these emails were sent, but I was not told they were sent, and I was not even told of the issues identified in the communications, which I felt was disingenuous given the fact that we remained in negotiations at the time. I was approached by many investors who were unhappy and had questions about Mr. Buonincontri’s emails. Mr. Buonincontri’s actions in response to the Company’s efforts to negotiate a settlement to end the litigation require my response as CEO and Board Chairman of the Company.
The initial settlement discussions with Mr. Buonincontri required that he and AXT to step away from being Note Agent and not participate in management of any kind for the Company. The purpose of this requirement was to end the litigation completely. During the negotiations, this was made clear to Mr. Buonincontri multiple times.
During negotiations AXT sought for itself that an anticipated note securing payment of attorneys’ fees be given a senior, first lien security interest pursuant to a “Security Agreement” that was prepared by AXT and Buonincontri’s attorneys. As a compromise, and to protect all noteholders equally, the Company agreed to provide a security interest in favor of all Noteholders in the IP for Surgical Spotlight®. In this way, the Company would provide the same security interest to all Noteholders and not just for the interests of AXT and Buonincontri. Another term of the draft agreement we were negotiating was that if there remained Notes after the settlement, the Note Agent moving forward would be an independent third party. Finally, in order to achieve the settlement, we agreed to pay the reasonable fees incurred by AXT and/or Mr. Buonincontri. This was a demand by Mr. Buonincontri, who had incurred significant attorneys’ fees in the litigation. The Company was willing to reimburse appropriate fees with supporting documentation. Mr. Buonincontri seemed to agree with this approach. He also was keen to assist in helping the Company move forward, working with me on a financial plan he had created.
An NDA was executed, the purpose from ORHUB’s position was to allow for provision of additional information to Mr. Buonincontri. However, the document had been edited by Mr. Buonincontri or his counsel, and the changes eliminated the protections of the NDA almost completely, so the Company was unable to provide information to Mr. Buonincontri pursuant to the NDA.
ORHUB’s focus was on bringing the terms of the LOI into a final settlement agreement, but Mr. Buonincontri continued demands about past information and documentation supporting claims in the litigation. However, these requests in the absence of an effective NDA, and concerning issues that were not relevant to the settlement efforts, were divisive, and a diversion from the Company’s goal of settlement. The Company wanted and continues to desire to move forward, act in the best interest of all investors, and not focus on the past, engage in finger pointing, or rehash the potential failings of on all sides that were claimed in the litigation.
Time was of the essence, and in that spirit, a self-imposed deadline was mutually set to get a settlement agreement based on the LOI completed. I tasked Corey Lambrecht, an independent board member of ORHUB, to negotiate with Mr. Buonincontri as often as necessary to get the settlement done. During these negotiations, Mr. Buonincontri repeatedly deviated from the terms of the LOI he authored, making demands and identifying different approaches and requirements that were inconsistent with the LOI. I spoke with Mr. Buonincontri and Mr. Lambrecht daily regarding developments and setbacks, and the Board was apprised of the progress or lack thereof at our weekly board meetings.
With the deadline looming, Mr. Buonincontri asked that we complete the settlement agreement, and he would be responsible for the security agreement. The settlement agreement (a copy of which is attached in the link below) was delivered in a timely manner, and met the intentions of the LOI.
The Security Agreement (a copy of which is attached in the link below) provided by Mr. Buonincontri was completely unacceptable. The document created a minefield of restrictions, with the clear potential that a technical default of any kind would result in the Company and all of its holdings belonging to Mr. Buonincontri and AXT. The Security Agreement was NOT created to protect the interests of Noteholders as a whole—it was inconsistent with the LOI, the initial discussions regarding settlement, and it completely failed to take into account the interests of the Noteholders or of all investors.
Mr. Buonincontri sent a notice to Noteholders the day before the Settlement Agreement and Security Agreement were to be exchanged in final form. Notwithstanding this fact, the Company met its deadline, and continued to attempt to negotiate with Mr. Buonincontri in an effort to save the settlement and to end the litigation. However, Mr. Buonincontri made clear that he was not interested in a reasoned and reasonable settlement. He made demands for continued negotiations that were completely unreasonable.
The Company received no response from Mr. Buonincontri on the day of the deadline and received no response to repeated emails over the weekend. When he finally responded to my emails, Mr. Buonincontri demanded that ORHUB replace its counsel and made other demands which were unrelated to the LOI. When I said that we would not replace counsel based on his demands, he responded that negotiations were done. His attorneys then filed to end the stay of litigation and proceed back to court. I found this to be ludicrous, and an example either of Mr. Buonincontri’s lack of experience in negotiating at this level with a public company or as being a calculated tactic to end the settlement efforts, either of which made settlement impossible, with the likely result being continued litigation that would negatively impact the Company.
As you know in April of 2019 the Note Holders, by majority consent, elected to convert the notes at $0.10 by a vote of fifty-four and one third percent (54.3%) in favor of the conversion. The Note Agreement clearly states in “Section 8.2 Amendment.” That “This Agreement may be amended by an affirmative vote of more than 50% of the Note Holders with votes tabulated by the principal of the Notes held by such Note Holders, including any accrued and unpaid interest. If any amendments are proposed, Note Holders will receive 10-day notice of the proposed amendment with a ballot. Amendments may also be made by consent of a majority of the Holders in which case other Note Holders will receive a notice of such Amendment. This vote was NOT a “Forced Conversion”, but a vote that reflected the desire of the Noteholders to end litigation and move forward with operating the business. This vote, however, did not meet AXT and Mr. Buonincontri’s agenda, as further evidenced by AXT/Buonincontri informing the Company’s transfer agent in writing not to allow the conversion of the notes despite the majority consent.
It is the responsibility of the Board of Directors and management to do what is in the Company’s best interests, including the shareholders and Noteholders, and not a particular group or individual. Due to the majority-approved Note Conversion processing being blocked, the Board will proceed with a mandatory conversion of the Notes at US $.021 pursuant to “Section. 3.8 Mandatory Conversion.”
Section 3.8 provides: “If the Company’s Common Stock trades for ten (10) consecutive trading days at a Volume Weighted Average Price or “VWAP” greater than three times the conversion price, the Company can mandatorily convert the Notes into Common Stock by noticing the appropriate Holders.” (A copy of the Note Agreement is attached in the link below.)
The Mandatory Conversion will result in conclusion of the litigation, although we can expect AXT and Mr. Buonincontri to dispute the conversion. The Company does not believe that any further actions of Mr. Buonincontri or AXT could be considered to be in the interests of the Company or of Noteholders. The conversion will give significant equity and voting power to all former Noteholders. There will no longer be a Note Agent, and the Notes which are the subject to this litigation will no longer exist. This will allow the Company to move forward with a strategic plan that will benefit all investors in the Company. Additional information from the Company regarding the conversion will be forthcoming.
Your confidence in the Company, its Mission, and my role as CEO will be further strengthened as we move forward to an exciting next chapter. It is my sincere hope that this action will end all litigation with Mr. Buonincontri and AXT. The Board is prepared to actively engage with anyone, or any group that intends to affect ORHUB and its investors in a negative manner. I do not believe, nor do my advisors, nor any Noteholders I have spoken with, that Mr. Buonincontri’s continuation of this litigation in any way falls under his claim of having fiduciary responsibility for the entire group of Noteholders he contacted recently via email. The continuation of this litigation will have a negative impact on the Noteholders he claims to speak for, as well as the rest of the investors in this Company. His continued action would risk the loss of investment monies for all investors, a negative financial effect on Company employees, a potential loss of our ongoing and future customer accounts that are already having a positive impact in healthcare. It is also clear that such action would not be for the benefit of anybody except Mr. Buonincontri, and perhaps some of his affiliates.
I will close by letting you know that many positive things have happened since my tenure began– sales are moving forward and financial stability with regular reporting and auditing are the highest priorities. A long-term strategic plan is being completed, that includes the launch in a few weeks of a new extension of the Surgical Spotlight® product line. There is every reason to be positive about ORHUB as a Company with great potential to impact healthcare in positive ways with a potential dramatic return on investment dollars if the Company moves forward together.
Sincerely,
Robert R. Lazzara MD
CEO and Chairman, ORHUB, Inc.