SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of August 31,
2004, by and among MT Ultimate Healthcare Corp., a Nevada corporation, with
headquarters located at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the
"COMPANY"), and each of the purchasers set forth on the signature pages hereto
(the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by the
rules and regulations as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. Buyers desire to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement 10% secured
convertible notes of the Company, in the form attached hereto as EXHIBIT "A", in
the aggregate principal amount of Seven Hundred Thousand Dollars ($700,000)
(together with any note(s) issued in replacement thereof or as a dividend
thereon or otherwise with respect thereto in accordance with the terms thereof,
the "NOTES"), convertible into shares of common stock, par value $.001 per
share, of the Company (the "COMMON STOCK"), upon the terms and subject to the
limitations and conditions set forth in such Notes and warrants, in the form
attached hereto as EXHIBIT "B", to purchase 700,000 shares of Common Stock (the
"WARRANTS").
C. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, such principal amount of Notes and number of Warrants as is set
forth immediately below its name on the signature pages hereto; and
D. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
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A. PURCHASE OF NOTES AND WARRANTS. On the Closing Date (as defined
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below), the Company shall issue and sell to each Buyer and each Buyer
severally agrees to purchase from the Company such principal amount of
Notes and number of Warrants as is set forth immediately below such Buyer's
name on the signature pages hereto.
B. FORM OF PAYMENT. On the Closing Date (as defined below), each Buyer
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shall pay the purchase price for the Notes and the Warrants to be issued
and sold to it at the Closing (as defined below) (the "PURCHASE PRICE") by
wire transfer of immediately available funds to the Company, in accordance
with the Company's written wiring instructions, against delivery of the
Notes in the principal amount equal to the Purchase Price and the number of
Warrants as is set forth immediately below such Buyer's name on the
signature pages hereto, and the Company shall deliver such Notes and
Warrants duly executed on behalf of the Company, to such Buyer, against
delivery of such Purchase Price.
C. CLOSING DATE. Subject to the satisfaction (or written waiver) of
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the conditions thereto set forth in Section 6 and Section 7 below, the date
and time of the issuance and sale of the Notes and the Warrants pursuant to
this Agreement (the "CLOSING DATE") shall be 12:00 noon, Eastern Standard
Time on August 31, 2004, or such other mutually agreed upon time. The
closing of the transactions contemplated by this Agreement (the "CLOSING")
shall occur on the Closing Date at such location as may be agreed to by the
parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and
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not jointly) represents and warrants to the Company solely as to such Buyer
that:
A. INVESTMENT PURPOSE. As of the date hereof, the Buyer is purchasing
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the Notes and the shares of Common Stock issuable upon conversion of or
otherwise pursuant to the Notes (including, without limitation, such
additional shares of Common Stock, if any, as are issuable on account of
interest on the Notes, as a result of the events described in Sections 1.3
and 1.4(g) of the Notes and Section 2(c) of the Registration Rights
Agreement or in payment of the Standard Liquidated Damages Amount (as
defined in Section 2(f) below) pursuant to this Agreement, such shares of
Common Stock being collectively referred to herein as the "CONVERSION
SHARES") and the Warrants and the shares of Common Stock issuable upon
exercise thereof (the "WARRANT SHARES" and, collectively with the Notes,
Warrants and Conversion Shares, the "SECURITIES") for its own account and
not with a present view towards the public sale or distribution thereof,
except pursuant to sales registered or exempted from registration under the
1933 Act; provided, however, that by making the representations herein, the
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Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.
B. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor"
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as that term is defined in Rule 501(a) of Regulation D (an "ACCREDITED
INVESTOR").
C. RELIANCE ON EXEMPTIONS. The Buyer understands that the Securities
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are being offered and sold to it in reliance upon specific exemptions from
the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and
the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order
to determine the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
D. INFORMATION. The Buyer and its advisors, if any, have been, and for
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so long as the Notes and Warrants remain outstanding will continue to be,
furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The
Buyer and its advisors, if any, have been, and for so long as the Notes and
Warrants remain outstanding will continue to be, afforded the opportunity
to ask questions of the Company. Notwithstanding the foregoing, the Company
has not disclosed to the Buyer any material nonpublic information and will
not disclose such information unless such information is disclosed to the
public prior to or promptly following such disclosure to the Buyer. Neither
such inquiries nor any other due diligence investigation conducted by Buyer
or any of its advisors or representatives shall modify, amend or affect
Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer understands that its investment in
the Securities involves a significant degree of risk.
E. GOVERNMENTAL REVIEW. The Buyer understands that no United States
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federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
F. TRANSFER OR RE-SALE. The Buyer understands that except as provided
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in the Registration Rights Agreement, the sale or re-sale of the Securities
has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless the Securities are sold pursuant to an effective registration
statement under the 1933 Act, the Buyer shall have delivered to the Company
an opinion of counsel that shall be in form, substance and scope customary
for opinions of counsel in comparable transactions to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration, which opinion shall be accepted by the
Company, the Securities are sold or transferred to an "affiliate" (as
defined in Rule 144 promulgated under the 1933 Act (or a successor rule)
("RULE 144")) of the Buyer who agrees to sell or otherwise transfer the
Securities only in accordance with this Section 2(f) and who is an
Accredited Investor, the Securities are sold pursuant to Rule 144, or the
Securities are sold pursuant to Regulation S under the 1933 Act (or a
successor rule) ("REGULATION S"), and the Buyer shall have delivered to the
Company an opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in corporate transactions, which opinion
shall be accepted by the Company; (ii) any sale of such Securities made in
reliance on Rule 144 may be made only in accordance with the terms of said
Rule and further, if said Rule is not applicable, any re-sale of such
Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the ▇▇▇▇ ▇▇▇) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other person is under any obligation to
register such Securities under the 1933 Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder (in
each case, other than pursuant to the Registration Rights Agreement).
Notwithstanding the foregoing or anything else contained herein to the
contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement. In the
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event that the Company does not accept the opinion of counsel provided by
the Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144 or Regulation S, within five
(5) business days of delivery of the opinion to the Company, the Company
shall pay to the Buyer liquidated damages of three percent (3%) of the
outstanding amount of the Notes per month plus accrued and unpaid interest
on the Notes, prorated for partial months, in cash or shares at the option
of the Company ("STANDARD LIQUIDATED DAMAGES AMOUNT"). If the Company
elects to be pay the Standard Liquidated Damages Amount in shares of Common
Stock, such shares shall be issued at the Conversion Price at the time of
payment.
G. LEGENDS. The Buyer understands that the Notes and the Warrants and,
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until such time as the Conversion Shares and Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 or Regulation S
without any restriction as to the number of securities as of a particular
date that can then be immediately sold, the Conversion Shares and Warrant
Shares may bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities may not be sold, transferred or assigned in the
absence of an effective registration statement for the securities
under said Act, or an opinion of counsel, in form, substance and
scope customary for opinions of counsel in comparable
transactions, that registration is not required under said Act or
unless sold pursuant to Rule 144 or Regulation S under said Act."
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public
sale or transfer of such Security may be made without registration under the
1933 Act, which opinion shall be accepted by the Company so that the sale or
transfer is effected or (c) such holder provides the Company with reasonable
assurances that such Security can be sold pursuant to Rule 144 or Regulation S.
The Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable prospectus delivery requirements, if any.
H. AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
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Rights Agreement have been duly and validly authorized. This Agreement has
been duly executed and delivered on behalf of the Buyer, and this Agreement
constitutes, and upon execution and delivery by the Buyer of the
Registration Rights Agreement, such agreement will constitute, valid and
binding agreements of the Buyer enforceable in accordance with their terms.
I. RESIDENCY. The Buyer is a resident of the jurisdiction set forth
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immediately below such Buyer's name on the signature pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
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represents and warrants to each Buyer that:
A. ORGANIZATION AND QUALIFICATION. The Company and each of its
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Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and
other) to own, lease, use and operate its properties and to carry on its
business as and where now owned, leased, used, operated and conducted.
SCHEDULE 3(A) sets forth a list of all of the Subsidiaries of the Company
and the jurisdiction in which each is incorporated. The Company and each of
its Subsidiaries is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which its ownership or use
of property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. "MATERIAL ADVERSE
EFFECT" means any material adverse effect on the business, operations,
assets, financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith. "SUBSIDIARIES" means any corporation or other organization,
whether incorporated or unincorporated, in which the Company owns, directly
or indirectly, any equity or other ownership interest.
B. AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
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corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement, the Notes and the Warrants and to consummate
the transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Registration Rights
Agreement, the Notes and the Warrants by the Company and the consummation
by it of the transactions contemplated hereby and thereby (including
without limitation, the issuance of the Notes and the Warrants and the
issuance and reservation for issuance of the Conversion Shares and Warrant
Shares issuable upon conversion or exercise thereof) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its shareholders
is required, (iii) this Agreement has been duly executed and delivered by
the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to
sign this Agreement and the other documents executed in connection herewith
and bind the Company accordingly, and (iv) this Agreement constitutes, and
upon execution and delivery by the Company of the Registration Rights
Agreement, the Notes and the Warrants, each of such instruments will
constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
C. CAPITALIZATION. As of the date hereof, the authorized capital stock
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of the Company consists of (i) 400,000,000 shares of Common Stock, of which
53,560,040 shares are issued and outstanding, no shares are
reserved for issuance pursuant to the Company's stock option plans, no
shares are reserved for issuance pursuant to securities (other
than the Notes and the Warrants) exercisable for, or convertible into or
exchangeable for shares of Common Stock and 12,690,322 shares are reserved
for issuance upon conversion of the Notes and the Additional Notes (as
defined in Section 4(l)) and exercise of the Warrants and the Additional
Warrants (as defined in Section 4(l)) (subject to adjustment pursuant to
the Company's covenant set forth in Section 4(h) below); and (ii) no
shares of preferred stock are issued and outstanding.
All of such outstanding shares of capital stock are, or upon
issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the
Company or any liens or encumbrances imposed through the actions or failure
to act of the Company. Except as disclosed in SCHEDULE 3(C), as of the
effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments or rights
of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the
Company or any of its Subsidiaries, or arrangements by which the Company or
any of its Subsidiaries is or may become bound to issue additional shares
of capital stock of the Company or any of its Subsidiaries, (ii) there are
no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights Agreement)
and (iii) there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement
providing rights to security holders) that will be triggered by the
issuance of the Notes, the Warrants, the Conversion Shares or Warrant
Shares. The Company has furnished to the Buyer true and correct copies of
the Company's Articles of Incorporation as in effect on the date hereof
("ARTICLES OF INCORPORATION"), the Company's By-laws, as in effect on the
date hereof (the "BY-LAWS"), and the terms of all securities convertible
into or exercisable for Common Stock of the Company and the material rights
of the holders thereof in respect thereto. The Company shall provide the
Buyer with a written update of this representation signed by the Company's
Chief Executive or Chief Financial Officer on behalf of the Company as of
the Closing Date.
D. ISSUANCE OF SHARES. The Conversion Shares and Warrant Shares are
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duly authorized and reserved for issuance and, upon conversion of the Notes
and exercise of the Warrants in accordance with their respective terms,
will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability upon the
holder thereof.
E. ACKNOWLEDGMENT OF DILUTION. The Company understands and
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acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the
Note or exercise of the Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares and Warrant Shares upon conversion of
the Notes or exercise of the Warrants in accordance with this Agreement,
the Notes and the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of
other shareholders of the Company.
F. NO CONFLICTS. The execution, delivery and performance of this
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Agreement, the Registration Rights Agreement, the Notes and the Warrants by
the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance of the Conversion Shares and Warrant
Shares) will not (i) conflict with or result in a violation of any
provision of the Articles of Incorporation or By-laws or (ii) violate or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture,
patent, patent license or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject)
applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or
in the aggregate, have a Material Adverse Effect). Neither the Company nor
any of its Subsidiaries is in violation of its Articles of Incorporation,
By-laws or other organizational documents and neither the Company nor any
of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its
Subsidiaries in default) under, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action that would
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party or by which any property or
assets of the Company or any of its Subsidiaries is bound or affected,
except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the Company
and its Subsidiaries, if any, are not being conducted, and shall not be
conducted so long as a Buyer owns any of the Securities, in violation of
any law, ordinance or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the 1933
Act and any applicable state securities laws, the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory agency, self
regulatory organization or stock market or any third party in order for it
to execute, deliver or perform any of its obligations under this Agreement,
the Registration Rights Agreement, the Notes or the Warrants in accordance
with the terms hereof or thereof or to issue and sell the Notes and
Warrants in accordance with the terms hereof and to issue the Conversion
Shares upon conversion of the Notes and the Warrant Shares upon exercise of
the Warrants. Except as disclosed in SCHEDULE 3(F), all consents,
authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is not in violation of
the listing requirements of the Over-the-Counter Bulletin Board (the
"OTCBB") and does not reasonably anticipate that the Common Stock will be
delisted by the OTCBB in the foreseeable future. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing.
G. SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as disclosed in
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SCHEDULE 3(G), the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 ACT") (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits to such documents)
incorporated by reference therein, being hereinafter referred to herein as
the "SEC DOCUMENTS"). The Company has delivered to each Buyer true and
complete copies of the SEC Documents, except for such exhibits and
incorporated documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and
the rules and regulations of the SEC promulgated thereunder applicable to
the SEC Documents, and none of the SEC Documents, at the time they were
filed with the SEC, 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. None of the statements made in
any such SEC Documents is, or has been, required to be amended or updated
under applicable law (except for such statements as have been amended or
updated in subsequent filings prior the date hereof). As of their
respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles,
consistently applied, 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 consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to December 31, 2003 and (ii)
obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles
to be reflected in such financial statements, which, individually or in the
aggregate, are not material to the financial condition or operating results
of the Company.
H. ABSENCE OF CERTAIN CHANGES. Since December 31, 2003, there has been
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no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its
Subsidiaries.
I. ABSENCE OF LITIGATION. There is no action, suit, claim, proceeding,
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inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge
of the Company or any of its Subsidiaries, threatened against or affecting
the Company or any of its Subsidiaries, or their officers or directors in
their capacity as such, that could have a Material Adverse Effect. SCHEDULE
3(I) contains a complete list and summary description of any pending or
threatened proceeding against or affecting the Company or any of its
Subsidiaries, without regard to whether it would have a Material Adverse
Effect. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
J. PATENTS, COPYRIGHTS, ETC.
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(I) The Company and each of its Subsidiaries owns or possesses
the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets,
trademarks, trademark applications, service marks, service names,
trade names and copyrights ("INTELLECTUAL PROPERTY") necessary to
enable it to conduct its business as now operated (and, except as set
forth in SCHEDULE 3(J) hereof, to the best of the Company's knowledge,
as presently contemplated to be operated in the future); there is no
claim or action by any person pertaining to, or proceeding pending, or
to the Company's knowledge threatened, which challenges the right of
the Company or of a Subsidiary with respect to any Intellectual
Property necessary to enable it to conduct its business as now
operated (and, except as set forth in SCHEDULE 3(J) hereof, to the
best of the Company's knowledge, as presently contemplated to be
operated in the future); to the best of the Company's knowledge, the
Company's or its Subsidiaries' current and intended products, services
and processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The
Company and each of its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of their
Intellectual Property.
(II) All of the Company's computer software and computer
hardware, and other similar or related items of automated,
computerized or software systems that are used or relied on by the
Company in the conduct of its business or that were, or currently are
being, sold or licensed by the Company to customers (collectively,
"INFORMATION TECHNOLOGY"), are Year 2000 Compliant. For purposes of
this Agreement, the term "YEAR 2000 COMPLIANT" means, with respect to
the Company's Information Technology, that the Information Technology
is designed to be used prior to, during and after the calendar Year
2000, and the Information Technology used during each such time period
will accurately receive, provide and process date and time data
(including, but not limited to, calculating, comparing and sequencing)
from, into and between the 20th and 21st centuries, including the
years 1999 and 2000, and leap-year calculations, and will not
malfunction, cease to function, or provide invalid or incorrect
results as a result of the date or time data, to the extent that other
information technology, used in combination with the Information
Technology, properly exchanges date and time data with it. The Company
has delivered to the Buyers true and correct copies of all analyses,
reports, studies and similar written information, whether prepared by
the Company or another party, relating to whether the Information
Technology is Year 2000 Compliant, if any.
K. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any
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of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in
the judgment of the Company's officers has or is expected in the future to
have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment
of the Company's officers has or is expected to have a Material Adverse
Effect.
L. TAX STATUS. Except as set forth on SCHEDULE 3(L), the Company and
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each of its Subsidiaries has made or filed all federal, state and foreign
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and
has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim. The Company
has not executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal, state or
local tax. Except as set forth on SCHEDULE 3(L), none of the Company's tax
returns is presently being audited by any taxing authority.
M. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3(M) and
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except for arm's length transactions pursuant to which the Company or any
of its Subsidiaries makes payments in the ordinary course of business upon
terms no less favorable than the Company or any of its Subsidiaries could
obtain from third parties and other than the grant of stock options
disclosed on SCHEDULE 3(C), none of the officers, directors, or employees
of the Company is presently a party to any transaction with the Company or
any of its Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
N. DISCLOSURE. All information relating to or concerning the Company
----------
or any of its Subsidiaries set forth in this Agreement and provided to the
Buyers pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material
respects and the Company has not omitted to state any material fact
necessary in order to make the statements made herein or therein, in light
of the circumstances under which they were made, not misleading. No event
or circumstance has occurred or exists with respect to the Company or any
of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed (assuming for this
purpose that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company
under the 1933 Act).
O. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF SECURITIES. The
-------------------------------------------------------
Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Buyer is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Buyer or any of their
respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is not advice or a recommendation and
is merely incidental to the Buyers' purchase of the Securities. The Company
further represents to each Buyer that the Company's decision to enter into
this Agreement has been based solely on the independent evaluation of the
Company and its representatives.
P. 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 in any security or solicited any offers
to buy any security under circumstances that would require registration
under the 1933 Act of the issuance of the Securities to the Buyers. The
issuance of the Securities to the Buyers will not be integrated with any
other issuance of the Company's securities (past, current or future) for
purposes of any shareholder approval provisions applicable to the Company
or its securities.
Q. NO BROKERS. The Company has taken no action which would give rise
----------
to any claim by any person for brokerage commissions, transaction fees or
similar payments relating to this Agreement or the transactions
contemplated hereby.
R. PERMITS; COMPLIANCE. The Company and each of its Subsidiaries is in
-------------------
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and
orders necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), and there is no action pending or, to the knowledge of the
Company, threatened regarding suspension or cancellation of any of the
Company Permits. Neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any of the Company Permits,
except for any such conflicts, defaults or violations which, individually
or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect. Since December 31, 2003, neither the Company nor any of its
Subsidiaries has received any notification with respect to possible
conflicts, defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
S. ENVIRONMENTAL MATTERS.
---------------------
(I) Except as set forth in SCHEDULE 3(S), there are, to the
Company's knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present
violations of Environmental Laws (as defined below), releases of any
material into the environment, actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may
give rise to any common law environmental liability or any liability
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 or similar federal, state, local or foreign laws
and neither the Company nor any of its Subsidiaries has received any
notice with respect to any of the foregoing, nor is any action pending
or, to the Company's knowledge, threatened in connection with any of
the foregoing. The term "ENVIRONMENTAL LAWS" means all federal, state,
local or foreign laws relating to pollution or protection of human
health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants contaminants,
or toxic or hazardous substances or wastes (collectively, "HAZARDOUS
MATERIALS") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(II) Other than those that are or were stored, used or disposed
of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries during
the period the property was owned, leased or used by the Company or
any of its Subsidiaries, except in the normal course of the Company's
or any of its Subsidiaries' business.
(III) Except as set forth in SCHEDULE 3(S), there are no
underground storage tanks on or under any real property owned, leased
or used by the Company or any of its Subsidiaries that are not in
compliance with applicable law.
T. TITLE TO PROPERTY. The Company and its Subsidiaries have good and
-----------------
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear
of all liens, encumbrances and defects except such as are described in
SCHEDULE 3(T) or such as would not have a Material Adverse Effect. Any real
property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as would not have a Material Adverse Effect.
U. INSURANCE. The Company and each of its Subsidiaries are insured by
---------
insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has
any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
at a cost that would not have a Material Adverse Effect. The Company has
provided to Buyer true and correct copies of all policies relating to
directors' and officers' liability coverage, errors and omissions coverage,
and commercial general liability coverage.
V. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
----------------------------
Subsidiaries maintain a system of internal accounting controls sufficient,
in the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
W. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
-------------------------
Subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
X. SOLVENCY. The Company (after giving effect to the transactions
--------
contemplated by this Agreement) is solvent (i.e., its assets have a fair
---
market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not, after giving effect to the transaction
contemplated by this Agreement, have the ability to, nor does it intend to
take any action that would impair its ability to, pay its debts from time
to time incurred in connection therewith as such debts mature. The Company
did not receive a qualified opinion from its auditors with respect to its
most recent fiscal year end and, after giving effect to the transactions
contemplated by this Agreement, does not anticipate or know of any basis
upon which its auditors might issue a qualified opinion in respect of its
current fiscal year.
Y. NO INVESTMENT COMPANY. The Company is not, and upon the issuance
---------------------
and sale of the Securities as contemplated by this Agreement will not be an
"investment company" required to be registered under the Investment Company
Act of 1940 (an "INVESTMENT COMPANY"). The Company is not controlled by an
Investment Company.
Z. BREACH OF REPRESENTATIONS AND WARRANTIES BY THE COMPANY. If the
-------------------------------------------------------
Company breaches any of the representations or warranties set forth in this
Section 3, and in addition to any other remedies available to the Buyers
pursuant to this Agreement, the Company shall pay to the Buyer the Standard
Liquidated Damages Amount in cash or in shares of Common Stock at the
option of the Company, until such breach is cured. If the Company elects to
pay the Standard Liquidated Damages Amounts in shares of Common Stock, such
shares shall be issued at the Conversion Price at the time of payment.
4. COVENANTS.
---------
A. BEST EFFORTS. The parties shall use their best efforts to satisfy
------------
timely each of the conditions described in Section 6 and 7 of this
Agreement.
B. FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
---------------------
respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall,
on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers at the applicable closing pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States
(or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to each Buyer on or prior to the
Closing Date.
C. REPORTING STATUS; ELIGIBILITY TO USE FORM ▇-▇, ▇▇-▇ OR FORM S-1.
---------------------------------------------------------------
The Company's Common Stock is registered under Section 12(g) of the 1934
Act. The Company represents and warrants that it meets the requirements for
the use of Form S-3 (or if the Company is not eligible for the use of Form
S-3 as of the Filing Date (as defined in the Registration Rights
Agreement), the Company may use the form of registration for which it is
eligible at that time) for registration of the sale by the Buyer of the
Registrable Securities (as defined in the Registration Rights Agreement).
So long as the Buyer beneficially owns any of the Securities, the Company
shall timely file all reports required to be filed with the SEC pursuant to
the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination. The Company
further agrees to file all reports required to be filed by the Company with
the SEC in a timely manner so as to become eligible, and thereafter to
maintain its eligibility, for the use of Form S-3. The Company shall issue
a press release describing the materials terms of the transaction
contemplated hereby as soon as practicable following the Closing Date but
in no event more than two (2) business days of the Closing Date, which
press release shall be subject to prior review by the Buyers. The Company
agrees that such press release shall not disclose the name of the Buyers
unless expressly consented to in writing by the Buyers or unless required
by applicable law or regulation, and then only to the extent of such
requirement.
D. USE OF PROCEEDS. The Company shall use the proceeds from the sale
---------------
of the Notes and the Warrants in the manner set forth in SCHEDULE 4(D)
attached hereto and made a part hereof and shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership, enterprise or other person (except in connection
with its currently existing direct or indirect Subsidiaries)
E. FUTURE OFFERINGS. Subject to the exceptions described below, the
----------------
Company will not, without the prior written consent of a
majority-in-interest of the Buyers, not to be unreasonably withheld,
negotiate or contract with any party to obtain additional equity financing
(including debt financing with an equity component) that involves (A) the
issuance of Common Stock at a discount to the market price of the Common
Stock on the date of issuance (taking into account the value of any
warrants or options to acquire Common Stock issued in connection therewith)
or (B) the issuance of convertible securities that are convertible into an
indeterminate number of shares of Common Stock or (C) the issuance of
warrants during the period (the "LOCK-UP PERIOD") beginning on the Closing
Date and ending on the later of (i) two hundred seventy (270) days from the
Closing Date and (ii) one hundred eighty (180) days from the date the
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective (plus any days in which sales cannot be made
thereunder). In addition, subject to the exceptions described below, the
Company will not conduct any equity financing (including debt with an
equity component) ("FUTURE OFFERINGS") during the period beginning on the
Closing Date and ending two (2) years after the end of the Lock-up Period
unless it shall have first delivered to each Buyer, at least twenty (20)
business days prior to the closing of such Future Offering, written notice
describing the proposed Future Offering, including the terms and conditions
thereof and proposed definitive documentation to be entered into in
connection therewith, and providing each Buyer an option during the fifteen
(15) day period following delivery of such notice to purchase its pro rata
share (based on the ratio that the aggregate principal amount of Notes
purchased by it hereunder bears to the aggregate principal amount of Notes
purchased hereunder) of the securities being offered in the Future Offering
on the same terms as contemplated by such Future Offering (the limitations
referred to in this sentence and the preceding sentence are collectively
referred to as the "CAPITAL RAISING LIMITATIONS"). In the event the terms
and conditions of a proposed Future Offering are amended in any respect
after delivery of the notice to the Buyers concerning the proposed Future
Offering, the Company shall deliver a new notice to each Buyer describing
the amended terms and conditions of the proposed Future Offering and each
Buyer thereafter shall have an option during the fifteen (15) day period
following delivery of such new notice to purchase its pro rata share of the
securities being offered on the same terms as contemplated by such proposed
Future Offering, as amended. The foregoing sentence shall apply to
successive amendments to the terms and conditions of any proposed Future
Offering. The Capital Raising Limitations shall not apply to any
transaction involving (i) issuances of securities in a firm commitment
underwritten public offering (excluding a continuous offering pursuant to
Rule 415 under the ▇▇▇▇ ▇▇▇) or (ii) issuances of securities as
consideration for a merger, consolidation or purchase of assets, or in
connection with any strategic partnership or joint venture (the primary
purpose of which is not to raise equity capital), or in connection with the
disposition or acquisition of a business, product or license by the
Company. The Capital Raising Limitations also shall not apply to the
issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of the
date hereof or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or
restricted stock plan approved by the shareholders of the Company.
F. EXPENSES. At the Closing, the Company shall reimburse Buyers for
--------
expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other
agreements to be executed in connection herewith ("Documents"), including,
without limitation, attorneys' and consultants' fees and expenses, transfer
agent fees, fees for stock quotation services, fees relating to any
amendments or modifications of the Documents or any consents or waivers of
provisions in the Documents, fees for the preparation of opinions of
counsel, escrow fees, and costs of restructuring the transactions
contemplated by the Documents. When possible, the Company must pay these
fees directly, otherwise the Company must make immediate payment for
reimbursement to the Buyers for all fees and expenses immediately upon
written notice by the Buyer or the submission of an invoice by the Buyer If
the Company fails to reimburse the Buyer in full within three (3) business
days of the written notice or submission of invoice by the Buyer, the
Company shall pay interest on the total amount of fees to be reimbursed at
a rate of 15% per annum.
G. FINANCIAL INFORMATION. The Company agrees to promptly notify the
---------------------
Buyers of the filing or issuance of each of the following reports to each
Buyer until such Buyer transfers, assigns, or sells all of the Securities:
its Annual Report on Form 10-KSB its Quarterly Reports on Form 10-QSB and
any Current Reports on Form 8-K; all press releases issued by the Company
or any of its Subsidiaries; and contemporaneously with the making available
or giving to the shareholders of the Company, copies of any notices or
other information the Company makes available or gives to such
shareholders.
H. AUTHORIZATION AND RESERVATION OF SHARES. The Company shall at all
---------------------------------------
times have authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide for the full
conversion or exercise of the outstanding Notes and Warrants and issuance
of the Conversion Shares and Warrant Shares in connection therewith (based
on the Conversion Price of the Notes or Exercise Price of the Warrants in
effect from time to time) and as otherwise required by the Notes. The
Company shall not reduce the number of shares of Common Stock reserved for
issuance upon conversion of Notes and exercise of the Warrants without the
consent of each Buyer. The Company shall at all times maintain the number
of shares of Common Stock so reserved for issuance at an amount ("RESERVED
AMOUNT") equal to no less than two (2) times the number that is then
actually issuable upon full conversion of the Notes and Additional Notes
and upon exercise of the Warrants and the Additional Warrants (based on the
Conversion Price of the Notes or the Exercise Price of the Warrants in
effect from time to time). If at any time the number of shares of Common
Stock authorized and reserved for issuance ("AUTHORIZED AND RESERVED
SHARES") is below the Reserved Amount, the Company will promptly take all
corporate action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of
shareholders to authorize additional shares to meet the Company's
obligations under this Section 4(h), in the case of an insufficient number
of authorized shares, obtain shareholder approval of an increase in such
authorized number of shares, and voting the management shares of the
Company in favor of an increase in the authorized shares of the Company to
ensure that the number of authorized shares is sufficient to meet the
Reserved Amount. If the Company fails to obtain such shareholder approval
within thirty (30) days following the date on which the number of Reserved
Amount exceeds the Authorized and Reserved Shares, the Company shall pay to
the Borrower the Standard Liquidated Damages Amount, in cash or in shares
of Common Stock at the option of the Buyer. If the Buyer elects to be paid
the Standard Liquidated Damages Amount in shares of Common Stock, such
shares shall be issued at the Conversion Price at the time of payment. In
order to ensure that the Company has authorized a sufficient amount of
shares to meet the Reserved Amount at all times, the Company must deliver
to the Buyer at the end of every month a list detailing (1) the current
amount of shares authorized by the Company and reserved for the Buyer; and
(2) amount of shares issuable upon conversion of the Notes and upon
exercise of the Warrants and as payment of interest accrued on the Notes
for one year. If the Company fails to provide such list within five (5)
business days of the end of each month, the Company shall pay the Standard
Liquidated Damages Amount, in cash or in shares of Common Stock at the
option of the Buyer, until the list is delivered. If the Buyer elects to be
paid the Standard Liquidated Damages Amount in shares of Common Stock, such
shares shall be issued at the Conversion Price at the time of payment.
I. LISTING. The Company shall promptly secure the listing of the
-------
Conversion Shares and Warrant Shares upon each national securities exchange
or automated quotation system, if any, upon which shares of Common Stock
are then listed (subject to official notice of issuance) and, so long as
any Buyer owns any of the Securities, shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all Conversion
Shares and Warrant Shares from time to time issuable upon conversion of the
Notes or exercise of the Warrants. The Company will obtain and, so long as
any Buyer owns any of the Securities, maintain the listing and trading of
its Common Stock on the OTCBB or any equivalent replacement exchange, the
Nasdaq National Market ("NASDAQ"), the Nasdaq SmallCap Market ("NASDAQ
SMALLCAP"), the New York Stock Exchange ("NYSE"), or the American Stock
Exchange ("AMEX") and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers ("NASD") and such exchanges, as
applicable. The Company shall promptly provide to each Buyer copies of any
notices it receives from the OTCBB and any other exchanges or quotation
systems on which the Common Stock is then listed regarding the continued
eligibility of the Common Stock for listing on such exchanges and quotation
systems.
J. CORPORATE EXISTENCE. So long as a Buyer beneficially owns any Notes
-------------------
or Warrants, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except in the
event of a merger or consolidation or sale of all or substantially all of
the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is
a publicly traded corporation whose Common Stock is listed for trading on
the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
K. NO INTEGRATION. The Company shall not make any offers or sales of
--------------
any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder
under the 1933 Act or cause the offering of the Securities to be integrated
with any other offering of securities by the Company for the purpose of any
stockholder approval provision applicable to the Company or its securities.
L. SUBSEQUENT INVESTMENT. The Company and the Buyers agree that, upon
---------------------
the declaration of effectiveness of the Registration Statement to be filed
pursuant to the Registration Rights Agreement (the "EFFECTIVE DATE"), the
Buyers shall purchase additional notes ("ADDITIONAL NOTES") in the
aggregate principal amount of Two Hundred Thousand Dollars ($200,000) and
additional warrants (the "ADDITIONAL WARRANTS") to purchase an aggregate of
200,000 shares of Common Stock, for an aggregate purchase price of Two
Hundred Thousand Dollars ($200,000), with the closing of such purchase to
occur within five (5) days of the Effective Date; provided, however, that
-------- -------
the obligation of each Buyer to purchase the Additional Notes and the
Additional Warrants is subject to the satisfaction, at or before the
closing of such purchase and sale, of the conditions set forth in Section
7; and, provided, further, that there shall not have been a Material
-------- -------
Adverse Effect as of such effective date. The terms of the Additional Notes
and the Additional Warrants shall be identical to the terms of the Notes
and Warrants, as the case may be, to be issued on the Closing Date. The
Common Stock underlying the Additional Notes and the Additional Warrants
shall be Registrable Securities (as defined in the Registration Rights
Agreement) and shall be included in the Registration Statement to be filed
pursuant to the Registration Rights Agreement.
M. KEY MAN INSURANCE. The Company shall use its best efforts to
-----------------
obtain, on or before five (5) business days from the date hereof, key man
life insurance on all of the Company's officers and division heads.
N. BREACH OF COVENANTS. If the Company breaches any of the covenants
-------------------
set forth in this Section 4, and in addition to any other remedies
available to the Buyers pursuant to this Agreement, the Company shall pay
to the Buyers, within five (5) business days of notification by the Buyers
of such breach (unless such breach is cured) the Standard Liquidated
Damages Amount, in cash or in shares of Common Stock at the option of the
Company, until such breach is cured. If the Company elects to pay the
Standard Liquidated Damages Amount in shares, such shares shall be issued
at the Conversion Price at the time of payment.
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
---------------------------
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee, for the Conversion Shares and Warrant Shares in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes or exercise of the Warrants in accordance with the terms
thereof (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to registration
of the Conversion Shares and Warrant Shares under the 1933 Act or the date on
which the Conversion Shares and Warrant Shares may be sold pursuant to Rule 144
without any restriction as to the number of Securities as of a particular date
that can then be immediately sold, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately sold), will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the Securities. If a
Buyer provides the Company with (i) an opinion of counsel in form, substance and
scope customary for opinions in comparable transactions, to the effect that a
public sale or transfer of such Securities may be made without registration
under the 1933 Act and such sale or transfer is effected or (ii) the Buyer
provides reasonable assurances that the Securities can be sold pursuant to Rule
144, the Company shall permit the transfer, and, in the case of the Conversion
Shares and Warrant Shares, promptly instruct its transfer agent to issue one or
more certificates, free from restrictive legend, in such name and in such
denominations as specified by such Buyer. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyers, by vitiating the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 may be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section, that the Buyers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate transfer, without the necessity of showing economic loss and without
any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
----------------------------------------------
the Company hereunder to issue and sell the Notes and Warrants to a Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date of each of
the following conditions thereto, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
A. The applicable Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.
B. The applicable Buyer shall have delivered the Purchase Price in
accordance with Section 1(b) above.
C. The representations and warranties of the applicable Buyer shall be
true and correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the applicable Buyer
shall have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the applicable Buyer at or prior
to the Closing Date.
D. No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation
-------------------------------------------------
of each Buyer hereunder to purchase the Notes and Warrants at the Closing is
subject to the satisfaction, at or before the Closing Date of each of the
following conditions, provided that these conditions are for such Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
A. The Company shall have executed this Agreement and the Registration
Rights Agreement, and delivered the same to the Buyer.
B. The Company shall have delivered to such Buyer duly executed Notes
(in such denominations as the Buyer shall request) and Warrants in
accordance with Section 1(b) above.
C. The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to a majority-in-interest of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.
D. The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Closing Date. The Buyer shall have received a certificate or certificates,
executed by the chief executive officer of the Company, dated as of the
Closing Date, to the foregoing effect and as to such other matters as may
be reasonably requested by such Buyer including, but not limited to
certificates with respect to the Company's Articles of Incorporation,
By-laws and Board of Directors' resolutions relating to the transactions
contemplated hereby.
E. No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
F. No event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company.
G. The Conversion Shares and Warrant Shares shall have been authorized
for quotation on the OTCBB and trading in the Common Stock on the OTCBB
shall not have been suspended by the SEC or the OTCBB.
H. The Buyer shall have received an opinion of the Company's counsel,
dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as EXHIBIT "D"
attached hereto.
I. The Buyer shall have received an officer's certificate described in
Section 3(c) above, dated as of the Closing Date.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
A. GOVERNING LAW. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS
LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER
THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY
MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING
HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE
JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING
UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES,
INCLUDING ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION
WITH SUCH DISPUTE.
B. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
-------------------------------------
executed in one or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may
be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
C. HEADINGS. The headings of this Agreement are for convenience of
--------
reference only and shall not form part of, or affect the interpretation of,
this Agreement.
D. SEVERABILITY. In the event that any provision of this Agreement is
------------
invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
E. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
----------------------------
referenced herein contain the entire understanding of the parties with
respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
F. NOTICES. Any notices required or permitted to be given under the
-------
terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including
a recognized overnight delivery service) or by facsimile and shall be
effective five days after being placed in the mail, if mailed by regular
United States mail, or upon receipt, if delivered personally or by courier
(including a recognized overnight delivery service) or by facsimile, in
each case addressed to a party. The addresses for such communications shall
be:
If to the Company:
MT Ultimate Healthcare Corp.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇
Attorney at Law
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
With copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Ingersoll, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Each party shall provide notice to the other party of any change in
address.
G. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may
assign its rights hereunder to any person that purchases Securities in a
private transaction from a Buyer or to any of its "affiliates," as that
term is defined under the 1934 Act, without the consent of the Company.
H. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
-------------------------
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
I. SURVIVAL. The representations and warranties of the Company and the
--------
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive
the closing hereunder notwithstanding any due diligence investigation
conducted by or on behalf of the Buyers. The Company agrees to indemnify
and hold harmless each of the Buyers and all their officers, directors,
employees and agents for loss or damage arising as a result of or related
to any breach or alleged breach by the Company of any of its
representations, warranties and covenants set forth in Sections 3 and 4
hereof or any of its covenants and obligations under this Agreement or the
Registration Rights Agreement, including advancement of expenses as they
are incurred.
J. PUBLICITY. The Company and each of the Buyers shall have the right
---------
to review a reasonable period of time before issuance of any press
releases, SEC, OTCBB or NASD filings, or any other public statements with
respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of each of the
Buyers, to make any press release or SEC, OTCBB (or other applicable
trading market) or NASD filings with respect to such transactions as is
required by applicable law and regulations (although each of the Buyers
shall be consulted by the Company in connection with any such press release
prior to its release and shall be provided with a copy thereof and be given
an opportunity to comment thereon).
K. FURTHER ASSURANCES. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
L. NO STRICT CONSTRUCTION. The language used in this Agreement will be
----------------------
deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
M. REMEDIES. The Company acknowledges that a breach by it of its
--------
obligations hereunder will cause irreparable harm to the Buyers by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach
of its obligations under this Agreement will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions
of this Agreement, that the Buyers shall be entitled, in addition to all
other available remedies at law or in equity, and in addition to the
penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to enforce
specifically the terms and provisions hereof, without the necessity of
showing economic loss and without any bond or other security being
required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
Agreement to be duly executed as of the date first above written.
MT ULTIMATE HEALTHCARE CORP.
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
AJW PARTNERS, LLC
By: SMS Group, LLC
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
RESIDENCE: Delaware
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $80,000
Number of Warrants: 80,000
Aggregate Purchase Price: $80.000
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
RESIDENCE: Cayman Islands
ADDRESS: AJW Offshore, Ltd.
▇.▇. ▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, B.W.I.
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $185,000
Number of Warrants: 185,000
Aggregate Purchase Price: $185,000
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
RESIDENCE: New York
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $220,000
Number of Warrants: 220,000
Aggregate Purchase Price: $220,000
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLP
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
RESIDENCE: New York
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $15,000
Number of Warrants: 15,000
Aggregate Purchase Price: $15,000