NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (this "AGREEMENT") is made this ________
______ by and between CRITICAL HOME CARE, INC., a Nevada corporation (formerly
known as New York Medical Inc. and Mojave Southern, Inc.), with headquarters
located ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "COMPANY"), and the
undersigned investor (the "INVESTOR").
W I T N E S S E T H
WHEREAS, the Company is seeking to raise up to $2,000,000 through the
sale of convertible promissory notes in private placement (the "Private
Placement") pursuant to Rule 506 of Regulation D under the Securities Act of
1933, as amended (the "Securities Act"), solely to accredited investors
(collectively, the "Private Placement Investors"), including the Investor;
WHEREAS, the Company wishes to induce the Investor to loan to the
Company and the Investor wishes to loan to the Company, subject to the terms and
conditions set forth herein, the principal amount set forth on the signature
page of this Agreement; and
WHEREAS, the Company has established an escrow account in order to
receive funds from Private Placement Investors (the "Escrow Account"), which
funds shall be released upon receipt of an initial $250,000.
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. LOAN.
(a) Subject to the terms and conditions set forth herein,
the Investor hereby offers and subscribes to loan to the Company the amount set
forth after the Investor's name on the signature page of this Agreement (the
"LOAN") by depositing such amount in the Escrow Account by check or wire
transfer and execution and delivery of this Agreement and the other documents
identified in Section 3 of this Agreement.
(b) The net proceeds of the Loan shall be used solely for
working capital.
2. NOTE. The terms of the Loan shall be set forth in and evidenced
by a Convertible Promissory Note in favor of the Investor (the "NOTE") in
substantially the form provided to the Investor. Such Note shall be in the
initial principal amount of the Loan, set forth after the Investor's name on the
signature page to this Agreement.
3. MUTUAL DELIVERIES; ACCEPTANCE OF SUBSCRIPTIONS.
(a) Upon the delivery by the Investor of the Loan proceeds
to the Escrow Account (as provided in Section 1 above) and the Investor's
delivery to the Company of (i) an originally executed copy of this Agreement and
(ii) an executed original of the Purchaser Questionnaire and Statement in the
form provided to the Investor (the "PURCHASER STATEMENT"), the Company shall
accept or reject, within five (5) business days, the Investor's subscription, in
its sole discretion. Upon any rejection, the Company shall instruct the Escrow
Agent to return such Investor's funds to Investor, without interest. In the
event the Investor's subscription is accepted, the Company shall deliver notice
of acceptance to the Escrow Agent and upon closing of such subscription, shall
within five (5) business days time after the Closing deliver to the Investor or
to the designated representative of such Investor an originally executed Note
and an executed copy of this Agreement. The Closing of this Private Placement
shall not occur unless and until the aggregate of $250,000 in principal amount
of Loans shall have been subscribed for by Private Placement Investors.
(b) Execution and delivery of this Agreement shall
constitute a binding offer to make the Loan
and purchase the Note by the undersigned which may be accepted or rejected by
the Company in its sole discretion, but which may not be revoked by the Investor
without the Company's prior written consent.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company represents and warrants to the Investor that:
(a) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Nevada. The Company has the corporate power and authority to enter into this
Agreement and to deliver the Note and to perform its obligations hereunder and
thereunder. The execution and delivery by the Company of this Agreement and the
Note and the consummation by the Company of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of the Company. At the time of funding of the Loan and delivery of this
Agreement and the Note by the Company, this Agreement and the Note will
constitute valid and binding obligations of the Company enforceable against it
in accordance with their respective terms, subject to the effects of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and o the application of equitable
principles in any proceeding (legal or equitable).
(b) The execution, delivery and performance by the Company
of this Agreement and the Note and the consummation of the transactions
contemplated hereby and thereby do not and will not breach or constitute a
default under any applicable law or regulation or of any agreement, judgment,
order, decree or other instrument binding on the Company which breach or default
could reasonably by expected to have a material adverse effect on the Company
taken as a whole.
(c) For a period of six months from the date hereof, the
Company will not issue any shares of its Common Stock, including any Conversion
Shares (as defined in Section 5(c) below), or any form of stock, warrant,
option, derivative security, or any other security convertible into or
exchangeable for shares of common Stock of the Company for a price per share for
such Common Stock or Conversion Shares of less than $1.00 per shares. In the
event that that the Company issues any shares of Common Stock in breach of this
provision, the Conversion Rate (as defined in the Note shall be reduced to the
per shares price at which the additional shares of Common Stock are issued or
deemed to be issuable.
(d) So long as any Note is outstanding in the series of
Notes sold pursuant to the Private Placement, the Company shall not issue any
security convertible into or exchangeable for shares of common Stock of the
Company, or Conversion Shares, or any option, warrant, derivative security or
any other security for the purchase thereof, containing anti-dilution terms
which create a so-called "toxic convertible" or "death spiral convertible",
which permits continuous upward adjustment of the numbers of shares of Common
Stock or of underlying conversion shares, which may be purchased pursuant to
such security based upon the declining market price of the Common Stock or the
Conversion Shares.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR. The
Investor hereby represents and warrants to the Company that:
(a) The Investor has the power and authority to enter into
this Agreement and to perform its obligations hereunder and thereunder. The
execution and delivery by the Investor of this Agreement and the consummation by
the Investor of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Investor. This Agreement
has been duly executed and delivered by the Investor and constitutes a valid and
binding obligation of the Investor, enforceable against the Investor in
accordance with its terms, subject to the effects of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and to the application of equitable principles in any
proceeding (legal or equitable). As applicable, the undersigned has reached the
age of majority in the state in which the undersigned resides.
(b) The execution, delivery and performance by the Investor
of this Agreement and the consummation of the transactions contemplated hereby
and thereby do not and will not breach or constitute a default
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under any applicable law or regulation or of any agreement, judgment, order,
decree or other instrument binding on the Investor.
(c) Investor is acquiring the Note and any shares (the
"Conversion Shares") of the Company's Common Stock (as such term is defined in
the Note) issuable upon conversion of the Note for Investor's own account as
principal, not as a nominee or agent, for investment purposes only, and not with
a view to, or for, resale, distribution thereof in whole or in part, and no
other person has a direct or indirect beneficial interest in such Note or the
Conversion Shares. Further, Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant an interest
in the Note or the Conversion Shares to any third person.
(d) Investor acknowledges his understanding that the
offering and sale of the Note, and the conversion of the Note and issuance of
the Conversion Shares is intended to be exempt from registration under the
Securities Act by virtue of the provisions of Rule 506 of Regulation D
promulgated thereunder ("Regulation D"). In furtherance thereof, Investor
represents and warrants to and agrees with the Company and its affiliates as
follows:
(i) Investor is an "accredited investor" as that
term is defined in Rule 501 of Regulation D;
(ii) Investor is experienced in making investments of
the kind described in this Agreement and the Note;
(iii) Investor is able, by reason of the business and
financial experience of the Investor and its professional advisors (who
are not affiliated with or compensated in any way by the company or any
of its affiliates or selling agents), to protect Investor's own
interests in connection with the transactions described in this
Agreement; and
(iv) Investor has the financial ability to bear the
economic risk of Investor's investment, has adequate means for providing
for Investor's current needs and personal contingencies, has no need for
liquidity with respect to Investor's investment in the Company, and is
able to afford the entire loss of Investor's investment in the Company.
(e) Investor has been furnished with and had an opportunity
to review the public filings of Mojave Southern, Inc. (also known as New York
Medical Inc.) with the Securities and Exchange Commission, including, without
limitation the Form 8-K for September 26, 2002, the Schedule 14(f) filed on
September 19, 2002, the Annual Report on Form 10-KSB for the period ended
December 31, 2001, and Quarterly Report on Form 10-QSB for the quarter ended
June 30, 2002, attached as Exhibits 2, 3, 4 and 5, respectively, to the
Disclosure Package.
(f) Investor has been furnished with and had an opportunity
to review the Confidential Memorandum, dated September 27, 2002 of the Company.
The acquisition by Critical Home Care Inc. ("CHCI") of Mojave Southern, Inc.
occurred on September 26, 2002. All of the 18,000,000 issued and outstanding
shares of CHCI were converted into 18,000,000 shares of the Company's Common
Stock. The Company shall have the right to convert the Loans, evidenced by the
Notes to be sold in the Private Placement into the Company's Common Stock at the
rate of $1.00 per share, subject to adjustment. Accordingly, if the minimum of
$250,000 of Notes being offered for sale in the Private Placement are sold, they
will be convertible into 250,000 shares or up to a maximum of $2 Million of
Notes sold will be convertible into 2 million shares of the Company's Common
Stock.
(g) Investor has been furnished with and had an opportunity
to review the audited financial statements of CHCI, as of and for the year ended
December 31, 2001 attached hereto as Exhibit 2 and the unaudited financial
statements CHCI as at and for the six months ended June 30, 2002, attached
hereto as Exhibit 2. The undersigned ahs been supplied with or has sufficient
access to all information, including financial statements and other information
of the Company and has been afforded that opportunity to ask questions of and
receive answers concerning such information to which a reasonable investor would
attach significance in making investment decisions, so that as a reasonable
investor the undersigned has been able to make the undersigned's decision to
purchase the securities.
(h) Investor understands than an investment in the Notes and
the Conversion Shares, if the Note
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is converted, involves a high degree of risk.
THE FOLLOWING FACTORS ARE NOT INTENDED TO BE A COMPLETE LIST OF THE GENERAL OR
SPECIFIC RISKS RELATING TO THE INVESTMENT IN THE COMPANY. ALTHOUGH ADDITIONAL
RISK FACTORS RELATING TO AN INVESTMENT IN THE COMPANY ARE DESCRIBED THROUGHOUT
THIS NOTE PURCHASE AGREEMENT, THIS NOTE PURCHASE AGREEMENT DOES NOT CONTAIN A
COMPLETE LIST OF RISK FACTORS RELATED TO THE PURCHASE OF SECURITIES.
(i) Investor understands the Conversion Shares, if any when
issued, will be restricted securities that are not eligible for immediate resale
in any public market in the absence of an effective registration statement or an
exemption under federal and state securities laws. Moreover, even if such
Conversion Shares may be resold there can be no assurance that a liquid public
market for the Company's Common Stock will exist or that the Conversion Shares
may be sold for a price at or near the conversion price at or near the
conversion price under the Note.
(j) Investor understands that investment in the Company is
an illiquid investment. In particular, Investor recognizes that Investor may not
and represents, warrants and agrees that Investor will not sell or otherwise
transfer the Note or Conversion Shares without registration under the Securities
Act or an exemption therefrom and a favorable opinion of counsel for the Company
to that effect is obtained (if requested by the Company). Investor fully
understands and agrees that Investor must bear the economic risk of Investor's
purchase because, among other reasons, the Note and the Conversion Shares have
not been registered under the Securities Act or under the securities laws of any
state and, therefore, cannot be resold, pledged, assigned or otherwise disposed
of unless such securities are subsequently registered under the Securities Act
and under the applicable securities laws of such states or an exemption from
such registration is available.
(k) Investor has had the opportunity to engage the services
of an investment advisor, attorney and/or accountant to read all of the
documents furnished or made available by the Company to the Investor in
connection with this investment and to evaluate the merits and risks of this
investment. The undersigned in making the decision to purchase the securities
has relied upon independent investigations made by him or it or his or its
representations, if any. The undersigned has and/or his or its advisors have had
a reasonable opportunity to ask questions and receive answers from the Company
concerning the securities.
(l) Neither Investor nor any associate of Investor (i) is a
member of the National Association of Securities Dealers, Inc. ("NASD"), (ii) is
a person associated with a member of the NASD, or (iii) has made a loan to any
NASD member. Neither Investor nor any associate of Investor, as defined below,
is an owner of stock or other securities of any NASD member (other than
securities purchased in the open market). The NASD's By-Laws define the term
"member" to mean any broker or dealer admitted to membership in the NASD. The
NASD's By-Laws define a "person associated with a member" to mean every sole
proprietor, partner, officer, director or branch manager of any member, or any
natural person occupying a similar status or performing similar functions, or
any natural person engaged in the investment banking or securities business who
is directly or indirectly controlling or controlled by such member (for example,
any employee), whether or not such person is registered or exempt from
registration with the NASD.
6. REGISTRATION RIGHTS.
(a) Defined Terms. As used in this Section 6, terms defined
elsewhere herein shall have their assigned meanings and each of the following
terms shall have the following meanings (such definitions to be applicable to
both the plural and singular of the terms defined):
(i) REGISTERABLE SECURITIES. The term "REGISTERABLE
SECURITIES" shall mean any of the Conversion Shares, including any
shares of the Company's Common Stock or other securities received in
connection with any stock split, stock dividend, merger, reorganization,
recapitalization, reclassification or other distribution payable or
issuable upon shares of the Company's Common Stock. For the purposes of
this Agreement, securities will cease to be Registerable Securities upon
the earliest to occur of (A) a registration
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statement under the Securities Act covering such Registerable Securities
has been declared effective and (1) such Registerable Securities have
been disposed of pursuant to such effective registration statement or
(2) such registration statement has remained effective for 270
consecutive days, (B) such Registerable Securities are distributed to
the public pursuant to the Securities Act or pursuant to an exemption
from the registration requirements of the Securities Act, including, but
not limited to, Rules 144 and 144A promulgated under the Securities Act,
or (C) such Registerable Securities have been otherwise transferred and
the Company, in accordance with applicable law and regulations, has
delivered new certificates or other evidences of ownership for such
securities which are not subject to any stop transfer order or other
restriction on transfer.
(ii) RIGHTSHOLDERS. The term "RIGTHSHOLDERS" shall
include the Investor, all successors and assigns of the Investor, and
all transferees of Registerable Securities where such transfer
affirmatively includes the transfer and assignment of the rights,
representations, warranties, covenants, obligations and liabilities of
the transferor Rigthsholder under this Agreement with respect to the
transferred Registerable Securities; provided, however, that the term
"RIGTHSHOLDERS" shall not include any person or entity who has sold,
transferred, or assigned all of such person's or entity's Registerable
Securities.
(iii) The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Section 6 shall refer to this
Section 6 as a whole and not to any particular provision of this Section
6, and subsection, paragraph, clause, schedule and exhibit references
are to this Section 6 unless otherwise specified.
(b) IMMEDIATE REGISTRATION.
(i) The Company shall file with the Securities and
Exchange Commission (the "Commission"), no later than (A) 120 days
following completion of the Private Placement (the "Closing Date"), a
registration statement registering for resale all of the Registerable
Securities held by each Rightsholder: provided that such Rightsholder
completes, dates, signs and returns a questionnaire (a "SELLING
SECURITYHOLDER QUESTIONNAIRE") providing information concerning, among
other matters, such Rightsholder, such Rightsholder's equity ownership
in the Company and such Rigthsholder's plan of distribution of the
Rightsholder's Registerable Securities no later than ten days following
the distribution of a Selling Securityholder Questionnaire to such
Righsholder. The Company shall use its best efforts to cause such
registration statement to be declared effective by the Commission as
promptly following the filing of such registration statement as is
commercially reasonable. The Company shall provide the Selling
Securityholder Questionnaire to each Rightholder promptly following the
Closing Date.
(ii) Registration Expenses (as defined in Paragraph
6(e) hereof) in connection with the registration required under
Paragraph 6(b)(i) above, subject to the provisions of Section 6(e),
shall be borne by the Company, but the Company shall not be responsible
for the payment of any underwriter's discount, commission or selling
concession expenses in connection with any of the Registerable
Securities.
(c) PIGGY-BACK REGISTRATION.
(i) If, at any time on or after the Closing Date and
on or prior to two years from the Closing Date, the Company proposes to
file a registration statement under the Securities Act with respect to
an offering by the Company or any other party of any class of equity
security similar to any Registerable Securities (other than a
registration statement on Form S-4 or S-8 or any successor form or a
registration statement filed solely in connection with an exchange
offer, a business combination transaction or an offering of, or
reconfirmation offer with respect to, securities solely to the existing
stockholders or employees of the Company), then the Company, on each
such occasion, shall give written notice (each, a the "COMPANY
PIGGY-BACK NOTICE") of such proposed filing to all of the Rightsholders
owning Registerable Securities at least fifteen days before the
anticipated filing date of such registration statement, and such Company
Piggy-Back Notice also shall be required to offer to such Rightsholders
the opportunity to register such aggregate number of Registerable
Securities as each such Rightsholder may request. Each such Rightsholder
shall have the right, exercisable for the five days immediately
following the giving of a Company Piggy-Back Notice, to request, by
written notice (each, a "HOLDER NOTICE") to the Company, the inclusion
of all or any portion of the
5
Registerable Securities of such Rightsholders in such registration
statement. The Company shall use reasonable efforts to cause the
managing underwriter(s) of a proposed underwritten offering to permit
the inclusion of the Registerable Securities which were the subject of
all Holder Notices in such underwritten offering on the same terms and
conditions as any similar securities of the Company included therein.
Notwithstanding anything to the contrary contained in this Subparagraph
6(c)(i), if the managine underwriter(s) of such underwritten offering or
any proposed underwritten offering delivers a written opinion to the
Rightsholders of Registerable Securities which were the subject of all
Holder Notices that the total amount and kind of securities which they,
the Company and any other person intend to include in such offering is
such as to materially and adversely affect the success of such offering,
then the amount of securities to be offered for the accounts of such
Rightsholders and persons other than the Company shall be eliminated or
reduced pro rata (based oon the amount of securities owned by such
Rightsholders and other persons which carry registration rights) to the
extent necessary to reduce the total amount of securities to be included
in such offering to the amount recommended by such managing
underwriter(s) in its written opinion.
(ii) NUMBER OF PIGGY-BACK REGISTRATIONS; EXPENSES.
The obligations of the Company under this Paragraph 6(c) shall be
unlimited with respect to each Rightsholder. Subject to the provisions
of Paragraph 6(e) hereof, the Company will pay all Registration Expenses
in connection with any registration of Registerable Securities effected
pursuant to this Paragraph 6(c), but the Company shall not be
responsible for the payment of any underwriter's discount, commission or
selling concession expenses in connection therewith.
(iii) Withdrawal or Suspension of Registration
Statement. Notwithstanding anything contained to the contrary in this
Paragraph 6(c), the Company shall have the absolute right, whether
before or after the giving of a Company Piggy-Back Notice or Holder
Notice, to determine not to file a registration statement to which the
Rightsholders shall have the right to include their Registerable
Securities therein pursuant to this Paragraph 6(c), to withdraw such
registration statement or to delay or suspend pursuing the effectiveness
of such registration statement. In the event of such a determination
after the giving a Company Piggy-Back Notice, the Company shall give
notice of such determination to all Rightsholders and, thereupon, (A) in
the case of a determination not to register or to withdraw such
registration statement, the Company shall be relieved of its obligation
under this Paragraph 6(c) to register any of the Registerable Securities
in connection with such registration and (B) in the case of a
determination to delay the registration, the Company shall be permitted
to delay or suspend the registration of Registerable Securities pursuant
to this Paragraph 6(c) for the same period as the delay in the
registration of such other securities. No registration effected under
this Paragraph 6(c) shall relieve the Company of its obligation to
effect any registration upon demand otherwise granted to a Rightsholder
under Paragraph 6(b) hereof or any other agreement with the Company.
(d) REGISTRATION PROCEDURES.
(i) OBLIGATIONS OF THE COMPANY. The Company will, in
connection with any registration pursuant to Paragraph 6(b) or (c)
hereof, as expeditiously as possible:
(A) prepare and file with the Commission a
registration statement under the Securities Act on any
appropriate from chosen by the Company, in its sole discretion,
which shall be available for the sale of all Registerable
Securities in accordance with the intended method(s) of
distribution thereof set forth in all applicable demand
requests, tag-along requests and Holder Notices, and use its
commercially reasonable best efforts to cause such registration
statement to become effective as soon thereafter as reasonably
practicable, but in no event more than 120 days after receipt of
such notices or requests; PROVIDED, that, at least fifteen
business days before filing with the Commission of such
registration statement, the Company shall furnish to each
Rightsholder whose Registerable Securities are included therein
draft copies of such registration statement, including all
exhibits thereto and documents incorporated by reference
therein, and, upon the reasonable request of any such
Rightsholder, shall continue to provide drafts of such
registration statement until filed, and, after such filing, the
Company shall, as diligently as practicable, provide to each
such Rightsholders such
6
number of copies of such registration statement, each amendment
and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus),
all exhibits thereto and documents incorporated by reference
therein and such other documents as such Rightsholder may
reasonably request in order to facilitate the disposition of the
Registerable Securities owned by such Rightsholder and included
in such registration statement; PROVIDED, FURTHER, the Company
shall modify or amend the registration statement as it relates
to such Rightsholder as reasonably requested by such
Rightsholder and received by the business within five (5)
business days prior to the filing, and shall reasonably consider
other changes to the registration statement (but not including
any exhibit or document incorporated therein by reference)
reasonably requested by such Rightsholder and received by the
business within (5) business days prior to the filing, in light
of the requirements of the Securities Act and any other
applicable laws and regulations; and PROVIDED, FURTHER, that the
obligation of the Company to effect such registration and/or
cause such registration statement to become effective, may be
postponed for (1) such period of time when the financial
statements of the Company required to be included in such
registration statement are not available (due solely to the fact
that such financial statements have not been prepared in the
regular course of business of the Company) or (2) any other BONA
FIDE corporate purpose, but then only for a period not to exceed
90 days;
(B) prepare and file with the Commission
such amendments and post-effective amendments to a registration
statement as may be necessary to keep such registration
statement effective for up to nine months; and cause the related
prospectus to be supplemented by any required prospectus
supplement, and as o supplemented to be filed to the extent
required pursuant to Rule 424 promulgated under the Securities
Act, during such nine-month period; and otherwise comply with
the provisions of the Securities Act with respect to the
disposition of all Registerable Securities covered by such
registration statement during the applicable period in
accordance with the intended method(s) of disposition of such
Registerable Securities set forth in such registration
statement, prospectus or supplement to such prospectus;
(C) notify the Rightsholders whose
Registerable Securities are included in such registration
statement and the managing underwrite(s), if any, of an
underwritten offering of any of the Registerable Securities
included in such registration statement, and confirm such advice
in writing, (1) when a prospectus or any prospectus supplement
or post-effective amendment has been filed, and, with respect to
a registration statement or any post-effective amendment, when
the same has become effective, (2) of any request by the
Commission for amendments or supplements to a registration
statement or related prospectus or for additional information,
(3) of the issuance by the Commission of any stop order
suspending the effectiveness of a registration statement or the
initiation of any proceedings for that purpose, (4) if at any
time the representations and warranties of the Company
contemplated by clause (1) of Section 4(d)(i)(J) hereof cease to
be true and correct, (5) of the receipt by the Company of any
notification with respect to the suspension of the qualification
of any of the Registerable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding
for such purpose and (6) of the happening of any event which
makes any statement made in the registration statement, the
prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in the
registration statement or prospectus so that such registration
statement, prospectus or document incorporated by reference will
not contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(D) make reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of such
registration statement at the earliest possible moment and to
prevent the entry of such an order;
(E) use reasonable efforts to register or
qualify the Registerable Securities included in such
registration statement under such other securities or blue sky
laws of such jurisdictions as any Rightsholder whose
Registerable Securities are included in such registration
statement reasonably
7
requests in writing and do any and all other acts and thing
which may be necessary or advisable to enable such Rightsholder
to consummate the disposition in such jurisdictions of such
Registerable Securities; PROVIDED, that the Company will not be
required to (1) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify
but for this Subparagraph 4(d)(i)(E), (2) subject itself to
taxation in any such jurisdiction or (3) take any action which
would subject it to general service of process in any such
jurisdiction;
(F) make available for inspection by each
Rightsholder whose Registerable Securities are included in such
registration, any underwriter(s) (collectively, the
"INSPECTORS"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively,
the "RECORDS") as shall be reasonably necessary to enable them
to exercise their due diligence responsibility (or establish a
due diligence defense), and cause the officers, directors and
employees of the Company to supply all information reasonably
requested by any such Inspector in connection with such
registration statement; PROVIDED, that records which the Company
determines, in good faith, to be confidential and which it
notifies the Inspectors are confidential shall not be disclosed
by the Inspectors, unless (1) the release of such Records is
ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or (2) the disclosure of such Records is
required by any applicable law or regulation or any governmental
regulatory body with jurisdiction over such Rigthsholder or
underwriter; PROVIDED, FURTHER, that such Rightsholder or
underwriter(s) agree that such Rigthsholder or underwriter(s)
will, upon learning the disclosure of such Records is sought in
a court of competent jurisdiction, give notice to the Company
and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records deemed
confidential;
(G) cooperate with the Rigthsholder whose
Registerable Securities are included in such registration
statement and the managing underwriter(s), if any, to facilitate
the timely preparation and delivery of certificates representing
Registerable Securities to be sold thereunder, not bearing any
restrictive legends, and enable such Registerable Securities to
be in such denominations and registered in such names as such
Rightsholder or any managing underwriter(s) may reasonably
request at least two business days prior to any sale of
Registerable Securities;
(H) comply with all applicable rules and
regulations of the Commission and promptly make generally
available to its security holders an earnings statement covering
a period of twelve months commencing, (1) in an underwritten
offering, at the end of any fiscal quarter in which Registerable
Securities are sold to underwriter(s), or (2) in a
non-underwritten offering, with the first month of the Company's
first fiscal quarter beginning after the effective date of such
registration statement, which earnings statement in each case
shall satisfy the provisions of Section 11(a) of the Securities
Act;
(I) provide a CUSIP number for all
Registerable Securities not later than the effective date of the
registration statement relating to the first public offering of
Registerable Securities of the Company pursuant hereto;
(J) enter into such customary agreements
(including an underwriting agreement in customary form) and take
all such other actions reasonably requested by the Rigthsholders
holding a majority of the Registerable Securities included in
such registration statement or the managing underwriter(s) in
order to expedite and facilitate the disposition of such
Registerable Securities and in such connection, whether or not
an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (1) make such
representations and warranties, if any, to the holders of such
Registerable Securities and any underwriter(s) with respect to
the registration statement, prospectus and documents
incorporated by reference, if any, in form, substance and scope
as are customarily made by issuers to underwriter(s) in
underwritten offerings and confirm the same if
8
and when requested, (2) obtain opinions of counsel to the
Company and updates thereof addressed to each such Rightsholder
and the underwriter(s), if any, with respect to the registration
statement, prospectus and documents incorporated by reference,
if any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as
may be reasonably requested by such Rightsholders and
underwriter(s), (3) obtain a "cold comfort" letter and updates
thereof from the Company's independent certified public
accountants addressed to such Rightsholders and to the
underwriter(s), if any, which letters shall be in customary form
and cover matters of the type customarily covered in "cold
comfort" letters by accountants in connection with underwritten
offerings, and (4) deliver such documents and certificates as
may be reasonably requested by the Rightsholders holding a
majority of such Registerable Securities and managing
underwriter(s), if any, to evidence compliance with any
customary conditions contained in the underwriting agreement or
other agreement entered into by the Company; each such action
required by this Subparagraph 4(d)(i)(J) shall be done at each
closing under such underwriting or similar agreement or as and
to the extent required thereunder, and
(K) if requested by the holders of a
majority of the Registerable Securities included in such
registration statement, use its best efforts to cause all
Registerable Securities which are included in such registration
statement to be listed, subject to notice of issuance, by the
date of the first sale of any Registerable Securities pursuant
to such registration statement, on each securities exchange, if
any, on which securities similar to the Registered Securities
are listed.
(ii) Obligations of Rightsholders. In connection with
any registration of Registerable Securities of a Rightsholder pursuant
to Paragraph 6(b) or (c) hereof:
(A) The Company may require that each
Rightsholder whose Registerable Securities are included in such
registration statement furnish to the Company such information
regarding the distribution of such Registerable Securities and
such Rightsholder as the Company may from time to time
reasonably request in writing; and
(B) Eeach Rightsholder, upon receipt of any
notice from the Company of the happening of any event of the
kind described in clauses (2), (3), (5) and (6) of Subparagraph
4(d)(i)(C) hereof, shall forthwith discontinue disposition of
Registerable Securities pursuant to the registration statement
covering such Registerable Securities until such Rightsholder's
receipt of the copies of the supplemented or amended prospectus
contemplated by clause (1) of Subparagraph 4(d)(1)(C) hereof, or
until such Rightsholder is advised in writing (the "ADVICE") by
the Company that the use of the applicable prospectus may be
resumed, and until such Rightsholder has received copies of any
additional or supplemental filings which are incorporated by
reference in or to be attached to or the Company (at the expense
of the Company) all copies, other than permanent file copies
then in the possession of such Rightsholder, of the current
prospectus covering such Registerable Securities at the time of
receipt of such notice; the Company shall have the right to
demand that such Rightsholder or other holder verify its
agreement to the provisions of this Subparagraph 4(d)(ii)(B) in
any Demand Request, Tag-Along Request or Holder Notice of the
Rightsholder or in a separate document executed by the
Rightsholder.
(e) REGISTRATION EXPENSES. All expenses incident to the
performance of or compliance with this Agreement by the Company, including,
without imitation, all registration and filing fees of the Commission, NASD and
other agencies, fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the Registerable Securities), rating agency fees, printing
expenses, messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
the listing, if any, of the Registerable Securities on any securities exchange
and fees and disbursements of counsel for the Company and the Company's
independent certified public accountants (including the expenses of any special
audit or "cold comfort" letters required by or incidental to such performance),
Securities Act or other
9
liability insurance (if the Company elects to obtain such insurance), the fees
and expenses of any special experts retained by the Company in connection with
such registration and the fees and expenses of any other person retained by the
Company (but not including any underwriting discounts or commissions
attributable to the sale of Registerable Securities or other out-of-pocket
expenses of the Rightsholders, or the agents who act on their behalf, unless
reimbursement is specifically approved y the Company) will be borne by the
Company. All such expenses are herein referred to as "REGISTRATION EXPENSES."
(f) INDEMNIFICATION CONTRIBUTION.
(i) INDEMNIFICATION BY THE COMPANY. The Company
agrees to indemnify and hold harmless, to the full extent permitted by
law, each Rightsholder, it officers and directors and each person who
controls such Rightsholder (within the meaning of the Securities Act),
if any, and any agent thereof against all losses, claims, damages,
liabilities and expenses incurred by such party pursuant to any action
or threatened suit, action, proceeding or investigation (including
reasonable attorney's fees and expenses of investigation) arising out of
or based upon any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus or preliminary
prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein(in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, except insofar
as the same arise out of or are based upon, any such untrue statement or
omission based upon information with respect to such Rightsholder
furnished in writing to the Company by such Rigthsholder expressly for
use therein.
(ii) INDEMNIFICATION BY RIGHTSHOLDER. In connection
with any registration statement in which are Rightsholder is
participating, each such Rightsholder will be required to furnish to the
Company in writing such information with respect to such Rigthsholder as
the Company reasonably requests for use in connection with any such
registration statement or prospectus, and each Rigthsholder agrees to
the extent it is such a holder of Registerable Securities included in
such Registration Statement will be required to agree, to indemnify, to
the full extent permitted by law, the Company, the directors and
officers of the Company and each person who controls the Company (within
the meaning of the Securities Act) and any agent thereof, against any
losses, claims, damages, liabilities and expenses (including reasonable
attorney's fees and expenses of investigation incurred by such party
pursuant to any actual or threatened suit, action, proceeding or
investigation arising out of or based upon any untrue or alleged untrue
statement of a material fact or any omission or alleged omission of a
material fact necessary, to make the statements therein (in the case of
a prospectus, in the light of the circumstances under which they are
made) not misleading, to the extent, but only to the extent that such
untrue statement or omission is based upon information relating to such
Rightsholder or other holder furnished in writing to the Company
expressly for use therein.
(iii) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly
after receipt by an indemnified party under this Paragraph 6(f) of
written notice of the commencement of any action, proceeding, suit or
investigation or threat thereof made in writing for which such
indemnified party may claim indemnification or contribution pursuant to
this Agreement, such indemnified party shall notify in writing the
indemnifying party of such commencement or threat; but the omission so
to notify in writing the indemnifying party shall not relieve the
indemnifying party from any liability which the indemnifying party may
have to any indemnified party (A) hereunder, unless the indemnifying
party is actually prejudiced thereby, or (B) otherwise than under this
Paragraph 6(f). In case any such action, suit or proceeding shall be
brought against any indemnified party, and the indemnified party shall
notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein at its own
expense and the indemnifying party shall assume the defense thereof,
with counsel reasonably satisfactory to the indemnified party, and the
obligation to pay all expenses relating thereto. The indemnified party
shall have the right to employ separate counsel in any such action, suit
or proceeding and to participate in the defense thereof, bu the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (A) the indemnifying party has agreed to pay such fees and
expenses, (B) the indemnifying party shall have failed to assume the
defense of such action, suit or proceeding or to employ counsel
reasonably satisfactory to the indemnified party therein or to pay all
expenses
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relating thereto or (C) the names parties to any such action or
proceeding (including any impleaded parties) include both the
indemnified party and the indemnifying party and the indemnifying party
shall have been advised by counsel that there may be one or more legal
defenses available to the indemnified party which are different from or
additional to those available to the indemnifying party and which may
result in a conflict between the indemnifying party and such indemnified
party (in which case, if the indemnified party notifies the indemnifying
party in writing that the indemnified party elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party
shall not have the right to assume the defense of such action or
proceeding on behalf of the indemnified party; it being understood,
however, that the indemnifying party shall not, in connection with any
one such action, suit or proceeding or separate but substantially
similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys at any time for the indemnified party, which
firm shall be designated in writing by the indemnified party).
(iv) CONTRIBUTION. If the indemnification provided
for in this Paragraph 6(f) from the indemnifying party is unavailable to
an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (A)
in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other or (B) if the allocation provided by clause (A) above
is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other but also
the relatives fault of the indemnifying party and indemnified party, as
well as any other relevant equitable considerations. The relative fault
of such indemnifying party and the indemnified parties shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such indemnifying party
or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to the above shall be deemed
to include, subject to the limitation set forth in Paragraph 6(f)(v),
any legal or other fees or expenses reasonably incurred by such part in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Paragraph 6(f)(iv) were determined by pro rata
allocation or by any other method of allocation, which does not take into
account, the equitable considerations referred to in clauses (A) and (B) of the
immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f)) of the Securities Act)
shall be entitled to contribution from any person who was not guilty or such
fraudulent misrepresentation.
(v) LIMITATION. Anything to the contrary contained
in this Paragraph 6(f) notwithstanding, no holder of Registerable
Securities shall be liable for indemnification and contribution payments
aggregating an amount in excess of the maximum amount received by such
holder in connection with any sale of Registerable Securities as
contemplated herein.
(g) PARTICIPATION IN UNDERWRITING REGISTRATION. No
Rightsholder may participate in any underwritten registration hereunder unless
such Rightsholder (i) agrees to sell such holder's securities on the basis
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and to comply with Regulation M under the
Exchange Act and (ii) completes and executes all questionnaires, appropriate and
limited powers of attorney, escrow agreements, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangement; PROVIDED, that all such documents shall be consistent
with the provisions of Paragraph 6(e) hereof.
7. ASSIGNMENT. This Agreement and the Note may not be assigned by
the Investor without the written consent of the Company and the Company which
consent shall not be reasonably withheld. This Agreement shall survive the death
or disability of the undersigned and shall be binding upon the undersigned
heirs, executors,
11
Administrations, successors and permitted assigns.
8. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given upon (i) personal delivery, against written receipt therefore,
(ii) two business days after deposit with Federal Express or another nationally
recognized overnight courier service, or (iii) five business days after being
forwarded, postage paid, via certified or registered mail, return receipt
requested, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days advance written notice to each of the other parties hereto pursuant to the
provisions of this Section 8.
COMPANY: At the address first specified in this Agreement.
INVESTOR: At the address set forth on the signature page of this
Agreement.
9. SEVERABILITY. If a court of competent jurisdiction determines
that any provision of this Agreement and/or the Note are invalid, unenforceable
or illegal for any reason, such determination shall not affect or impair the
validity, legality and enforceability of the other provisions of this Agreement
and/or the Note. If any such invalidity, unenforceability or illegality of a
provision of this Agreement or the Note becomes known or apparent to any of the
parties hereto, the parties shall negotiate promptly and in good faith in an
attempt to make appropriate changes and adjustments to such provision
specifically and this Agreement and/or the Note generally to achieve as closely
as possible, consistent with applicable law, the intent and spirit of such
provision specifically and this Agreement and the Note generally.
10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same Agreement.
11. ENTIRE AGREEMENT. This Agreement and the Note contain the entire
agreement of the parties relating to the subject matter thereof.
12. LAW GOVERNING. This Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York
without giving effect to its conflicts of law principles.
13. ARBITRATION VENUE. Any dispute, controversy or claim arising out
of, relating to, or in connection with, this Agreement or the agreements or
transactions contemplated hereby shall be finally settled by arbitration
conducted in accordance with the provisions of this Section 13. The arbitration
shall be conducted and the arbitrator chosen in accordance with the rules of the
American Arbitration Association (the "AAA") in effect at the time of the
arbitration shall be in New York. Each of the Company and Investor hereby
irrevocably submits to the jurisdiction of the arbitrator in New York and waives
any defense in an arbitration based upon any claim that such party is not
subject personally to the jurisdiction of such arbitrator, that such arbitration
is brought in an inconvenient forum or that such venue is improper. The arbitral
award shall be in writing and shall be final and binding on each of the Company
and Investor. The award may include an award of costs, including reasonable
attorney's fees and disbursements. Judgment upon the award may be entered by any
court having jurisdiction thereof or having jurisdiction over the parties or
their assets. Investor acknowledges and agrees that by agreeing to the
provisions of this Section 13 Investor is waiving any right that Investor may
have to a jury trial with respect to the resolution of any dispute under this
Agreement or the Note.
12
14. Gender. All provisions and any variations thereof used herein shall
be deemed to refer to the masculine, feminine, neuter, singular nor plural as
the identity of the person or persons referred to may require.
15. Headings. Paragraph titles are for descriptive purposes only and
shall not control or alter the meaning of this Agreement as set forth in the
text.
IN WITNESS WHEREOF, the parties have executed this Note Purchase
Agreement as of the date first written above.
CRITICAL HOME CARE, INC.
By: ___________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
INVESTOR: Print Name: SDS Merchant Fund, LP
Address: c/o SDS Capital Partners, LLC
▇▇ ▇▇▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Social Security or Taxpayer I.D. No.: __________
If Individual Investor:
Signature: ____________________________
Co-Signature
(if required): ____________________________
If Entity Investor:
By: __________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: General Counsel
Taxpayer I.D. No.:
Address:
INVESTOR: Print Name:______________________
Address:____________________________
____________________________
____________________________
By signing where indicated above, Investor acknowledges his, her or its
understanding that an investment in the Notes and the Conversion Shares involves
a high degree of risk.
13
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFETIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLE SATISFACTORY TO CRITICAL HOME CARE, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
Right to Purchase UP to 250,000 Shares of Common Stock of
Critical Home Care, Inc.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. RKDA-1 Issue Date: March 11, 2004
Critical Home Care, Inc., a corporation organized under the laws of the
State of Nevada, hereby certifies that, for value received, ▇▇▇▇ MASTER FUND,
LTD., or assigns (the "Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company (as defined herein) from the after the Issue
Date of this Warrant and at any time or from time to time before 5:00 p.m., New
York time, through the close of business March 11, 2011 (the "Expiration Date"),
up to 250,000 fully paid and nonassessable shares of Common Stock (as
hereinafter defined) at an Exercise Price of $.50 per share. The number and
character of such shares of Common Stock and the applicable Exercise Price per
share are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Critical Home Care, Inc. (the
"Company") and any corporation which shall succeed, or assume the
obligations of, the Company hereunder.
(b) The term "Common Stock" includes (i) the Company's Common
Stock, par value $0.25 per share; and (ii) any other securities into which
or for which any of the securities described in (a) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger,
sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant at any time shall
be entitled to receive, or shall have received, on the exercise of the
Warrant, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in exchanged
for or in replacement of Common Stock or Other Securities pursuant to
Section 4 or otherwise.
1. EXERCISE OF WARRANT
1.1 NUMBER OF SHARES ISSUABLE UPON EXERCISE. From and
after the date hereof through and including the Expiration Date, the
Holder shall be entitled to receive, upon exercise of this Warrant
in whole or in part, by delivery of an original or fax copy of an
exercise notice in the form attached hereto as Exhibit A (the
"Exercise Notice"), shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.
1.2 FAIR MARKET VALUE. For purposes hereof, the "Fair
Market Value" of a share of Common Stock as of a particular date
(the "Determination Date") shall mean:
(a) If the Company's Common stock is traded on the American Stock
Exchange or another national exchange or is quoted on the National of
SmallCap Market of the Nasdaq Stock Market, Inc. ("Nasdaq"), then the
closing or last sale price, respectively, reported for the last business
day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on the American
Stock Exchange or another national exchange or on the Nasdaq but its
traded on the NASD OTC Bulletin Board, then the mean of the average of the
closing bid and asked prices reported for the last business day
immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company
agree or in the absence of agreement by arbitration in accordance with the
rules then in effect of the American Arbitration Association, before a
single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all
amounts to be payable per share to holders of the Common Stock pursuant to
the charter in the event of such liquidation, dissolution or winding up,
plus all other amounts to be payable per share in respect of the Common
Stock in liquidation under the charter, assuming for the purposes of this
clause (d) that all of the shares of Common Stock then issuable upon
exercise of the Warrant are outstanding at the Determination Date.
1.3 COMPANY ACKNOWLEDGEMENT. The Company will, at the
time of the exercise of the Warrant, upon the request of the holder
hereof acknowledger in writing its continuing obligation to afford
to such holder any rights to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of
this Warrant. If the holder shall fail to make
2
any request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such right.
1.4 TRUSTEE FOR WARRANT HOLDERS. In the event that a
blank or trust company shall have been appointed as trustee for the
holders of the Warrant pursuant to Subsection 3.2, such bank or
trust company shall have all the powers and duties of a warrant
agent (as hereinafter described) and shall accept, in its own name
for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or
such successor, as the case may be, on exercise of this Warrant
pursuant to this Section 1.
2. PROCEDURE FOR EXERCISE.
2.1 DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE.
The Company agrees tat the shares of Common Stock purchased upon
exercise of this Warrant shall be deemed to be issued to the Holder
as the record owner of such shares as of the close of business on
the dare on which this Warrant shall have been surrendered and
payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part,
ad in any event within three (3) business days thereafter, the
Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance
with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable
shares of Common Stock (or Other Securities) to which such Holder
shall be entitled on such exercise. Plus, in lieu of any fractional
share to which such holder would otherwise be entitled, cash equal
to such fraction multiplied by the then Fair Market Value of one
full share, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is
entitled upon such exercise pursuant to Section 1 or otherwise.
2.2 EXERCISE. Payment may be made either (i) in cash
or by certified or official bank check payable to the order of the
Company equal to the applicable aggregate Exercise Price, (ii) by
delivery of the Warrant, or shares of Common Stock and/or Common
Stock receivable upon exercise of the Warrant in accordance with
Section (b) below, or (iii) by a combination of any of the foregoing
methods, for the number of Common Shares specified in such Exercise
Notice (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to
the Holder per the terms of this Warrant) and the Holder shall
thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock
(or Other Securities) determined as provided herein. Notwithstanding
any provisions herein to the contrary, if the Fair Market Value of
one share of Common Stock is greater than the Exercise Price (at the
date of calculation as set forth below), in lieu of exercising this
Warrant for cash, the Holder may elect to receive shares equal to
the value (as determined below) of this Warrant (or the
3
portion thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed
Exercise Notice in which event the Company shall issue to the Holder
a number of shares of Common Stock computed using the following
formula:
X=Y (A-B)
-----
A
Where X= the number of shares of Common Stock to be issued to the Holder
Y= the number of shares of Common stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
A= the Fair Market Value of one share of the Company's Common Stock
(at the date of such calculation)
B= Exercise Price (as adjusted to the date of such calculation)
3. EFFECT OF REORGANIZATION, ETC.; ADJUSTMENT OF EXERCISE PRICE.
3.1 REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case at any time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person,
or (c) transfer all or substantially all of its properties or assets
to any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, as a condition
to the consummation of such a transaction, proper and adequate
provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1 at anytime
after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution, as the case may be
shall receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon
such consummation or in connection with such dissolution, as the
case may be, if such Holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment
thereafter as provided in Section 4.
3.2 DISSOLUTION. In the event of any dissolution of
the Company following the transfer of all or substantially all of
its properties or assets, the Company, concurrently with any
distributions made to holders of its Common Stock, shall at its
expense deliver or cause to be delivered to the Holder the stock and
other securities and property (including cash, where applicable)
receivable by the Holder of the Warrant pursuant to Section 3.1,
or, if the Holder shall so instruct the Company, to a bank or trust
company specified by the Holder and having its principal office in
New York, NY as trustee for the Holder of the Warrant.
4
3.3 CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any
transfer) referred to in this Section 3, this Warrant shall continue
in full force and effect and the terms hereof shall be applicable to
the shares of stock and other securities and property receivable on
the exercise of this Warrant after the consummation of such
reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and
shall be binding upon the issuer of any stock or other securities,
including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company,
whether or not such person shall have expressly assumed the terms of
this Warrant as provided in Section 4. In the event this Warrant
does not continue in full force and effect after the consummation of
the transactions described in this Section3, then the Company's
securities and property (including cash, where applicable)
receivable by the Holders of the Warrant will be delivered to Holder
or the Trustee as contemplated by Section 3.2.
4. EXTRAORDINARY EVENTS REGARDING COMMON STOCK. In the event that
the Company shall (a) issue additional shares of the Common Stock as a
dividend or other distribution on outstanding Common Stock, (b) subdivide
its outstanding shares of Common Stock, or (c) combine its outstanding
shares of Common Stock into a smaller number of shares of the Common
Stock, then, in each such event, the Exercise Price shall, simultaneously
with the happening of such event, be adjusted by multiplying the then
Exercise Price by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained
shall thereafter be the Exercise Price then in effect. The Exercise Price,
as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 4. The
number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise (but for the provisions of this Section 4) be
issuable on such exercise by a fraction of which (a) the numerator is the
Exercise Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Exercise Price in
effect on the date of such exercise.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment
or readjustment in the shares of Common Stock (or Other Securities)
issuable on the exercise of the Warrant, the Company at its expense will
promptly cause its Chief Financial Officer or other appropriate designee
to compute such adjustment or readjustment in accordance with the terms of
the Warrant and prepare a certificate setting forth such adjustment or
readjustment and showing in detail the cats upon which such adjustment or
readjustment is based, including a statement of (a) the consideration
received or receivable by the Company for any additional shares of Common
Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Exercise Price and
the number of shares of Common Stock to be received
5
upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in
this Warrant. The Company will forthwith mail a copy of each such
certificate to the holder of the Warrant and any Warrant agent of the
Company (appointed pursuant to Section 11 hereof).
6. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANT.
The Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrant, shares of Common
Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant.
7. ASSIGNMENT; EXCHANGE OF WARRANT. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby,
may be transferred by any registered holder hereof (a "Transferor") in
whole or in part. On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
"Transferor Endorsement Form") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable
securities laws, which shall include, without limitation, a legal opinion
from the Transferor's counsel that such transfer is exempt from the
registration requirements of applicable securities laws, the Company at
its expense but with payment by the Transferor thereof a new Warrant of
like tenor, in the name of the Transferor and/or the transferee(s)
specified in such Transferor Endorsement Form (each a "Transferee"),
calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock called for on the face or faces thereof the Warrant
so surrendered by the Transferor.
8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of this Warrant and, in the case of any such loss, theft or destruction of
this Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant of
like tenor.
9. REGISTRATION RIGHTS. The Holder of this Warrant has been
granted certain registration rights by the Company. These registration
rights are set forth in a Registration Rights Agreement entered into by
the Company and Purchaser dated as of even date of this Warrant.
10. MAXIMUM EXERCISE. The Holder shall not be entitled to exercise
this Warrant on an exercise date, in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Holder and its affiliates
on an exercise date, and (ii) the number of shares of Common Stock
issuable upon the exercise of this Warrant with respect to which the
determination of this proviso is being made on an exercise date, which
would result in beneficial ownership by the Holder and its affiliates of
more than 4.99% of the outstanding shares of Common Stock of the Company
on such date. For the purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall
6
be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13d-3 thereunder. Notwithstanding
the foregoing, the restriction described in this paragraph may be revoked
upon 75 days prior notice from the Holder to the Company and is
automatically null and void upon an Event of Default under the Note.
11. WARRANT AGENT. The Company may, by written notice to the each
Holder of the Warrant, appoint an agent for the purpose of issuing Common
Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing
this Warrant pursuant to Section 8, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such agent.
12. TRANSFER ON THE COMPANY'S BOOKS. Until this Warrant is
transferred on the books of the Company, the Company may treat the
registered holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
13. NOTICES, ETC. All notices and other communications from the
Company to the Holder of this Warrant shall be mailed by first class
registered or certified mail, postage prepaid, at such address as may have
been furnished to the Company in writing by such Holder or, until any such
Holder furnishes to the Company an address, then to, and at the address
of, the last Holder of this Warrant who has so furnished as address to the
Company.
14. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at any
time during the tern of this Warrant reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by the
board of Directors of the Company.
15. NO SHORTING. The Purchaser or any of its affiliates and
investment partners will not and will not cause any person or entity,
directly or indirectly, to engage in "short sales" of the Company's Common
Stock or any other hedging strategies.
16. REDEMPTION. This Warrant may be redeemed at the option of the
Company, at a redemption price of $.001 per Warrant, at any time between
the first anniversary date of the issuance and the Expiration Date upon 30
business-day written notice delivered to the Holder, provided: (a) the
Closing Bid or last sales price of the Common Stock issuable upon exercise
of such Warrant has been at least 200% of the Exercise Price then in
effect (as set forth in (d) above) for twenty (20) consecutive trading
days ending not more than 15 days prior to the dare of notice of
redemption, and (b) there is an effective registration statement with a
current prospectus available covering the shares of Common Stock issuable
upon exercise of this Warrant. On and after the date fixed for redemption,
the Holder shall have no rights with respect to this Warrant except to
receive the $.001 per Warrant upon surrender of this Certificate. All
Warrants must be redeemed if any are redeemed.
The notice of redemption shall specify: (i) the Redemption Price; (ii) the
date fixed for redemption (the "Redemption Date"); (iii) the place where Warrant
Certificates shall be
7
delivered and the redemption price paid; and (iv) that the right to exercise the
Warrants shall terminate at 5:00p.m. EST on the Business Day immediately
preceding the Redemption Date. An affidavit of the Secretary or an Assistant
Secretary of the Company that notice of redemption has been mailed shall, in the
absence of fraud, be conclusive evidence of the facts stated therein.
From and after the Redemption Date, the Company shall, at the place
specified in the notice of redemption, upon presentation and surrender to the
Company by or on behalf of the Holder thereof this Warrant, deliver or cause to
be delivered to or upon the written order of such holder a sum of cash equal to
the Redemption Price of each such Warrant. From and after the Redemption Date
and upon the deposit or setting aside by the Company of a sum sufficient to
redeem all the Warrants called for redemption, such Warrants shall expire and
become void and all rights hereunder and shall cease, except the right, if any,
to receive payment of the Redemption Price.
17. MISCELLANEOUS. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant shall be governed by and
construed in accordance with the laws of State of New York without regard
to principles of conflicts of laws. Any action brought concerning the
transactions contemplated by this Warrant shall be brought only in the
state courts of New York or in the federal courts located in the state of
New York; provided, however, that the Holder may choose to waive this
provision and bring an action outside the state of New York. The
individuals executing this Warrant on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of
this Warrant 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 such provision which may prove
invalid or unenforceable under any law shall not affect the validity or
enforceability of any other provision of this Warrant. The headings in
this Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the
validity or enforceability of any other provision. The Company
acknowledges that legal counsel participated in the preparation of this
Warrant and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be
applied in the interpretation of this Warrant to favor any party against
the other party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]
8
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
CRITICAL HOME CARE, INC.
WITNESS:
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Title: President
-------------------------------- --------------------------------
9
EXHIBIT A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)
To: CRITICAL HOME CARE, INC.
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):
_______ _______ shares of the Common Stock covered by such Warrant; or
_______ the maximum number of shares of Common Stock covered by such
Warrant pursuant to the cashless exercise procedure set forth in
Section 2.
The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is $_____.
Such payment takes the form of (check applicable box or boxes):
_______ $________ in lawful money of the United States; and/or
_______ the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock (using a
Fair Market Value of $_______ per share for purposes for this
calculation): and/or
_______ the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section 2.2,
to exercise this Warrant with respect to the maximum number of
shares of Common Stock purchasable pursuant to the cashless
exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued
in the name of and delivered to ________________________________________ whose
address is ______________________________________________.
The undersigned represents and warrants that all offers and sales by the
Undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: ________________________ ________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
Address: _______________________________
_______________________________
A-1
EXHIBIT B
FROM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Critical Home Care, Inc. (the "Company") to which the
within Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of the Company with full power of substitution in the premises.
Percentage Number
Transferees Address Transferred Transferred
----------- ------- ----------- -----------
_______________________ ______________________ ______________ _______________
_______________________ ______________________ ______________ _______________
_______________________ ______________________ ______________ _______________
_______________________ ______________________ ______________ _______________
Dated: ________________________ ________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
Address: _______________________________
_______________________________
SIGNED IN THE PRESENCE OF:
________________________________________
(Name)
ACCEPTED AND AGREED
[TRANSFEREE]
_______________________________
(Name)
B-1