EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of April 12,
1999, between ▇▇▇▇▇▇ HEALTHCARE, INC., a corporation organized under the laws of
the State of Texas (the "COMPANY"), and each of the purchasers (the
"PURCHASERS") set forth on the execution pages hereof (the "EXECUTION PAGES").
WHEREAS:
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT").
B. The Company desires to sell, and each Purchaser desires to purchase,
severally and not jointly, in one or two tranches, upon the terms and conditions
stated in this Agreement, units (the "UNITS"), each Unit consisting of (i) one
share of the Company's Series C Convertible Preferred Stock, par value $.10 per
share (the "PREFERRED SHARES"), convertible into shares of the Company's common
stock, par value $.01 per share (the "COMMON STOCK"), and (ii) a warrant, in the
form attached hereto as EXHIBIT A (the "WARRANT"), to acquire 166.667 shares of
Common Stock. The rights, preferences and privileges of the Preferred Shares,
including the terms upon which such Preferred Shares are convertible into shares
of Common Stock, are set forth in the Statement of Designation of Rights and
Preferences of the Series C Convertible Preferred Stock of the Company, in the
form attached hereto as EXHIBIT B, filed in the Office of the Secretary of State
of Texas on April 12, 1999. Such Statement of Designation, as so filed,
corrected and amended, is referred to herein as the "STATEMENT OF DESIGNATION".
The shares of Common Stock issuable upon conversion of the Preferred Shares or
otherwise pursuant to the Statement of Designation are referred to herein as the
"CONVERSION SHARES" and the shares of Common Stock issuable upon exercise of or
otherwise pursuant to the Warrants are referred to herein as the "WARRANT
SHARES." The Preferred Shares, the Warrants, the Conversion Shares and the
Warrant Shares are collectively referred to herein as the "SECURITIES" and each
of them may individually be referred to herein as a "SECURITY."
C. 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 Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF UNITS.
(a) PURCHASE OF UNITS AND CLOSING. The issuance, sale and purchase of the
Preferred Shares and the Warrants shall occur in one or two tranches with
separate closings, hereinafter referred to as the "FIRST CLOSING" and the
"SECOND CLOSING," respectively. Each of the First Closing and the Second Closing
is hereinafter referred to as a "Closing." On the date of each Closing, subject
to the satisfaction (or waiver) of the conditions set forth in Section 6 and
Section 7 below, the Purchasers, severally but not jointly, agree to purchase,
that number of the Units set forth on such Purchaser's Execution Page. The
purchase price (the "PURCHASE PRICE") per Unit shall be equal to One Thousand
Dollars ($1,000.00). The aggregate purchase price of the Units being acquired by
each Purchaser at the Closing is set forth on such Purchaser's Execution Page.
Each Purchaser's obligation to purchase Units hereunder is distinct and separate
from each other Purchaser's obligation to purchase Units and no Purchaser shall
be required to purchase hereunder more than the number of Units set forth on
such Purchaser's Execution Page hereto notwithstanding any failure by any other
Purchaser to purchase Units hereunder nor shall any Purchaser have any liability
by reason of any such failure by any other Purchaser.
(b) FORM OF PAYMENT. On the Closing Date, each Purchaser shall pay the
aggregate Purchase Price for the Units being purchased by such Purchaser on the
Closing Date by wire transfer to the Company, in accordance with the Company's
written wiring instructions, against delivery of duly executed certificates
representing the Preferred Shares and duly executed Warrants being purchased by
such Purchaser and the Company shall deliver such certificates and Warrants
against delivery of such aggregate Purchase Price.
(c) CLOSING DATE. Subject to the satisfaction (or waiver) of the relevant
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Units shall be (i) in the case of the First
Closing, 12:00 noon Eastern Time on April 12, 1999 and (ii) in the case of the
Second Closing, 12:00 noon Eastern Time on the fifth (5th) trading day following
notification of satisfaction (or waiver) of the relevant conditions to such
Closing or, in each case, such other time as may be mutually agreed upon by the
Company and the Purchasers. The date of the First Closing or the Second Closing,
as the case may be, shall hereinafter be referred to as the "FIRST CLOSING DATE"
or the "SECOND CLOSING DATE," respectively. Each Closing shall occur at the
offices of Klehr, Harrison, ▇▇▇▇▇▇, Branzburg & ▇▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(d) ISSUANCE DATE. The parties acknowledge that they reached agreement on
the terms of the transactions described herein, and that the Purchasers were
prepared to fund the purchase of the Preferred Shares and Warrants on April 7,
1999. therefore, the parties have agreed that the effective date of this
Agreement and the issuance date of the Warrants shall be deemed April 7, 1999.
However, as the Statement was not filed until April 12, 1999, the issuance date
of the Preferred Shares shall be April 12, 1999.
2. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser severally and not jointly represents and warrants to the
Company as follows:
(a) PURCHASE FOR OWN ACCOUNT, ETC. Purchaser is purchasing the Units for
Purchaser's own account and not with a present view towards the public sale or
distribution thereof, except pursuant to sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act. Purchaser understands that Purchaser must bear the economic
risk of this investment indefinitely, unless the Securities are registered
pursuant to the Securities Act and any applicable state securities or blue sky
laws or an exemption from such registration is available, and that the Company
has no present intention of registering the resale of any such Securities other
than as contemplated by the Registration Rights Agreement. Notwithstanding
anything in this Section 2(a) to the contrary, by making the representations
herein, the Purchaser does not agree to hold 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
from the registration requirements under the Securities Act, subject to any
limitations set forth in the Statement of Designation.
(b) ACCREDITED INVESTOR STATUS. Purchaser is an "ACCREDITED INVESTOR" as
that term is defined in Rule 501(a) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Purchaser understands that the Units are being
offered and sold to Purchaser 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 Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire the
Units.
(d) INFORMATION. Purchaser and its counsel, if any, have been furnished
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Units which have been
specifically requested by Purchaser or its counsel. Purchaser and its counsel
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other investigation conducted by Purchaser or its counsel or
any of its representatives shall modify, amend or affect Purchaser's right to
rely on the Company's representations and warranties contained in Section 3
below. Purchaser understands that Purchaser's investment in the Units involves a
high degree of risk.
(e) GOVERNMENTAL REVIEW. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Units.
(f) TRANSFER OR RESALE. Purchaser understands that (i) except as provided
in the Registration Rights Agreement, the sale or resale of the Securities have
not been and are not being registered under the Securities Act or any state
securities laws, and the Securities may not be transferred unless (a) the resale
of the Securities has been registered thereunder; or (b) Purchaser shall have
delivered to the Company an opinion of counsel (which opinion 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; or (c) the
Securities are sold under Rule 144 promulgated under the Securities Act (or a
successor rule) ("RULE 144"); or (d) the Securities are sold or transferred to
an affiliate of Purchaser who agrees to sell or otherwise transfer the
Securities only in accordance with the provisions of this Section 2(f) and who
is an Accredited Investor; and (ii) neither the Company nor any other person is
under any obligation to register such Securities under the Securities Act or any
state securities laws (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.
(g) LEGENDS. Purchaser understands that the certificates for the Preferred
Shares and the Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the Securities Act (including
registration pursuant to Rule 416 thereunder) as contemplated by the
Registration Rights Agreement or otherwise may be sold by Purchaser under Rule
144, the certificates for the Conversion Shares and Warrant Shares may bear a
restrictive legend in substantially the following form:
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or the securities laws of any state
of the United States. The securities represented hereby may not be offered,
sold or transferred in the absence of an effective registration statement for
the securities under applicable securities laws unless offered, sold or
transferred under an available exemption from the registration requirements
of those laws.
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 state securities laws, (a) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder) as contemplated by the Registration Rights
Agreement; (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 Securities Act; or (c) such holder
provides the Company with reasonable assurances that such Security can be sold
under Rule 144(k). Purchaser agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, pursuant
to an effective registration statement, under an exemption from the registration
requirements of the Securities Act or in accordance with Rule 144(k). In the
event the above legend is removed from any Security and thereafter the
securities are not sold or the effectiveness of a registration statement
covering such Security is suspended or the Company determines that a supplement
or amendment thereto is required by applicable securities laws, then upon
reasonable advance notice to Purchaser the Company may require that the above
legend be placed on any such Security that cannot then be sold pursuant to an
effective registration statement or under Rule 144(k) and Purchaser shall
cooperate in the replacement of such legend. Such legend shall thereafter be
removed when such Security may again be sold pursuant to an effective
registration statement or under Rule 144(k).
(h) AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their terms.
(i) RESIDENCY. Purchaser is a resident of the jurisdiction set forth under
Purchaser's name on the Execution Page hereto executed by Purchaser.
(j) ACKNOWLEDGMENTS REGARDING PLACEMENT AGENT. Purchaser acknowledges that
The Zanett Securities Corporation is acting as placement agent (the "PLACEMENT
AGENT") for the Securities being offered hereby and will be compensated by the
Company for acting in such capacity. Purchaser further acknowledges that the
Placement Agent has acted solely as placement agent in connection with the
offering of the Securities by the Company, that the information and data
provided to Purchaser and referred to in subsection (d) above or otherwise in
connection with the transactions contemplated hereby have not been subjected to
independent verification by the Placement Agent, and that the Placement Agent
makes no representation or warranty with respect to the accuracy or completeness
of such information, data or other related disclosure material. Purchaser
further acknowledges that in making its decision to enter into this Agreement
and purchase the Securities it has relied on the Company's representations and
warranties contained in Section 3 below and on its own examination of the
Company and the terms of, and consequences of holding, the Securities. Purchaser
further acknowledges that the provisions of this Section 2(j) are for the
benefit of, and may be enforced by, the Placement Agent.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each as follows:
(a) ORGANIZATION AND QUALIFICATION. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. 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 of property or the nature of the business conducted by it
makes such qualification necessary and where the failure so to qualify would
have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material
adverse effect on (i) the Securities, (ii) the ability of the Company to perform
its obligations hereunder or under the Statement of Designation, the Warrants or
the Registration Rights Agreement or (iii) the business, operations, properties
or financial condition of the Company and its subsidiaries, taken as a whole.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Warrants and the Registration Rights Agreement, to issue and
sell the Units in accordance with the terms hereof, to issue the Conversion
Shares upon conversion of the Preferred Shares in accordance with the terms of
the Statement of Designation and to issue the Warrant Shares upon exercise of
the Warrants in accordance with the terms of such Warrants; (ii) the execution,
delivery and performance of this Agreement, the Warrants and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Preferred Shares and Warrants and the issuance and reservation for issuance
of the Conversion Shares and Warrant Shares) have been duly authorized by the
Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors, any committee of the Board of Directors or,
except for the shareholder approval required under Rule 4310(a)(25)(H) or
4460(i) promulgated by the National Association of Securities Dealers, Inc.
("NASD") or as set forth on SCHEDULE 3(B), the Company's shareholders is
required, and (iii) this Agreement constitutes, and, upon execution and delivery
by the Company of the Warrants and the Registration Rights Agreement, such
agreements will constitute, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms.
(c) STOCKHOLDER AUTHORIZATION. Except pursuant to the NASD Rules described
in Section 3(b), or as set forth on SCHEDULE 3(C), the Company believes that
neither the execution, delivery or performance of this Agreement, the Warrants
or the Registration Rights Agreement by the Company nor the consummation by it
of the transactions contemplated hereby or thereby (including, without
limitation, the issuance of the Preferred Shares or Warrants or the issuance,
reservation for issuance or listing of the Conversion Shares or Warrant Shares)
requires any consent, approval or authorization of the Company's stockholders.
(d) CAPITALIZATION. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Preferred Shares and Warrants)
exercisable or exchangeable for, or convertible into, any shares of capital
stock and the number of shares to be reserved for issuance upon conversion of
the Preferred Shares and exercise of the Warrants is set forth on SCHEDULE 3(D).
All of such outstanding shares of capital stock have been, or upon issuance in
accordance with the terms of any such warrants, options or preferred stock, will
be, validly issued, fully paid and non-assessable. No shares of capital stock of
the Company (including the Preferred Shares, the Conversion Shares and the
Warrant Shares) are subject to preemptive rights or any other similar rights of
the stockholders of the Company or any liens or encumbrances. Except for the
Securities and as set forth on SCHEDULE 3(d), as of the date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable 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,
and (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 Securities Act (except the Registration Rights Agreement).
Except as set forth on SCHEDULE 3(D), (i) there are no securities or instruments
containing Antidilution or similar provisions that will be triggered by the
issuance of the Securities in accordance with the terms of this Agreement, the
Statement of Designation or the Warrants, (ii) there are no outstanding
securities or instruments of the Company or any of its subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to redeem a security of the Company or any
of its subsidiaries, and (iii) the Company does not have any stock appreciation
rights or "phantom stock" plans or agreements or any similar plan or agreement.
The Company has furnished to the Purchasers 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 all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for capital stock of the
Company. The Statement of Designation, in the form attached hereto, will be duly
filed prior to Closing with the Secretary of State of the State of Texas and,
upon the issuance of the Preferred Shares in accordance with the terms hereof,
each Purchaser shall be entitled to the rights set forth therein.
(e) ISSUANCE OF SHARES. The Preferred Shares are duly authorized and, upon
issuance in accordance with the terms of this Agreement, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and
encumbrances and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability on
the holders thereof. The Conversion Shares and Warrant Shares are duly
authorized and, in accordance with the Statement of Designation, reserved for
issuance, and, upon conversion of the Preferred Shares and exercise of the
Warrants in accordance with the terms thereof, will be validly issued, fully
paid and non-assessable, and free from all taxes, liens, claims and encumbrances
and will not be subject to preemptive rights or other similar rights of
stockholders of the Company and will not impose personal liability upon the
holder thereof.
(f) NO CONFLICTS. Except as set forth on SCHEDULE 3(F), the execution,
delivery and performance of this Agreement, the Warrants and the Registration
Rights Agreement by the Company, the performance by the Company of its
obligations under the Statement of Designation, and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance, as applicable, of the
Preferred Shares, Warrants, Conversion Shares and Warrant Shares) will not (i)
result in a violation of the Articles of Incorporation or By-laws or (ii)
conflict with, or constitute a default (or an event which, with notice or lapse
of time or both, would become a default) under, or give to others any rights of
termination, amendment (including, without limitation, the triggering of any
anti-dilution provisions), acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and rules or
regulations of any self-regulatory organizations to which either 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, with respect to clause (ii), for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
that 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, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) 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, except for actual or possible
violations, defaults or rights that would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted,
and shall not be conducted so long as a Purchaser owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations the sanctions for which either singly or in the
aggregate would not have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and SCHEDULE 3(F) and the Registration Rights
Agreement, the Company is not required to obtain any consent, approval,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self regulatory agency in order for it
to execute, deliver or perform any of its obligations under this Agreement, the
Warrants or the Registration Rights Agreement or to perform its obligations
under the Statement of Designation, in each case in accordance with the terms
hereof or thereof. The Company is not in violation of the listing requirements
of the Nasdaq SmallCap Market and does not reasonably anticipate that the Common
Stock will be delisted by Nasdaq for the foreseeable future.
(g) SEC DOCUMENTS, FINANCIAL STATEMENTS. Since December 31, 1997, the
Company has timely filed (within applicable extension periods) 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 "EXCHANGE ACT") (all of the foregoing and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to herein as the
"SEC DOCUMENTS"). The Company has delivered to the Purchasers true and complete
copies of the SEC Documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act or
the Securities Act, as the case may be, 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 made prior to 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
applicable with respect thereto. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles ("GAAP"),
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 immaterial year-end audit adjustments). Except as set
forth in the financial statements of the Company included in the SEC Documents
filed prior to the date hereof and any of the liabilities described on SCHEDULE
3(H) hereto, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to the
date of such financial statements, (ii) liabilities not required by GAAP to be
disclosed on a balance sheet prepared in accordance with GAAP, and (iii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in such financial
statements, which liabilities and obligations referred to in clauses (i), (ii)
and (iii), individually or in the aggregate, are not material to the financial
condition or operating results of the Company. Neither the Company nor any of
its subsidiaries or any of their officers, directors, employees or agents have
provided the Purchasers with any material, nonpublic information.
(h) ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, except as disclosed in SCHEDULE
3(H) or in the SEC Documents filed prior to the date hereof.
(i) ABSENCE OF LITIGATION. Except as expressly disclosed in the SEC
Documents filed prior to the date hereof, there is no action, suit, proceeding,
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,
any of its subsidiaries, or any of their respective directors or officers in
their capacities as such. There are no facts which, if known by a potential
claimant or governmental authority, could give rise to a claim or proceeding
which, if asserted or conducted with results unfavorable to the Company or any
of its subsidiaries, could reasonably be expected to have a Material Adverse
Effect.
(j) INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries owns
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "INTANGIBLES")
which are material to the conduct of its business as now being conducted and as
described in the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997. To the best knowledge of the Company, neither the
Company nor any subsidiary of the Company infringes or
is in conflict with any right of any other person with respect to any
Intangibles which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries has received written notice of
any pending conflict with or infringement upon such third party Intangibles,
which alleged pending conflict or alleged infringement, if adversely determined,
would result in a Material Adverse Effect. Except as disclosed in the SEC
Documents filed prior to the date hereof hereto, the termination of the
Company's ownership of, or right to use, any single Intangible would not result
in a Material Adverse Effect on the Company. Neither the Company nor any of its
subsidiaries has entered into any consent agreement, indemnification agreement,
forbearance to ▇▇▇ or settlement agreement with respect to the validity of the
Company's or its subsidiaries' ownership or right to use its Intangibles and, to
the best knowledge of the Company, there is no reasonable basis for any such
claim to be successful. The Intangibles which are material to the conduct of the
Company's business are valid and enforceable and no registration relating
thereto has lapsed, expired or been abandoned or canceled or is the subject of
cancellation or other adversarial proceedings, and all applications therefor are
pending and in good standing. The Company and its subsidiaries have complied, in
all material respects, with their respective contractual obligations relating to
the protection of the Intangibles used pursuant to licenses. To the best
knowledge of the Company, no person is infringing on or violating the
Intangibles owned or used by the Company or its subsidiaries.
(k) 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;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
(l) DISCLOSURE. All information relating to or concerning the Company set
forth in this Agreement or provided to the Purchasers pursuant to Section 2(d)
hereof or 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 its subsidiaries or their respective businesses, properties,
operations or financial conditions, which has not been publicly disclosed but,
under applicable law, rule or regulation, would be required to be disclosed by
the Company in a registration statement filed on the date hereof by the Company
under the Securities Act with respect to the primary issuance of the Company's
securities.
(m) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF THE UNITS. The
Company acknowledges and agrees that none of the Purchasers or the Placement
Agent is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement or the transactions
contemplated hereby, the relationship between the Company and the Purchasers and
the Placement Agent is "arms-length" and any statement made by any Purchaser or
the Placement Agent 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 such Purchaser's purchase
of Securities or such Placement Agent's role as a placement agent and has not
been relied upon by the Company, its officers or its directors in any way. The
Company further acknowledges that the Company's decision to enter into this
Agreement has been based solely on an independent evaluation by the Company and
its representatives.
(n) FORM S-3 ELIGIBILITY. The Company is currently eligible to register
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. Except as disclosed on SCHEDULE 3(N), there exist no facts or
circumstances that would prohibit or delay the preparation and filing of a
registration statement on Form S-3 with respect to the Registrable Securities
(as defined in the Registration Rights Agreement).
(o) NO GENERAL SOLICITATION. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
(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 of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act or any applicable stockholder
approval provisions.
(q) NO BROKERS. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby, except for The Zanett Securities Corporation.
(r) ACKNOWLEDGMENT OF DILUTION. The number of Conversion Shares issuable
upon conversion of the Preferred Shares may increase in certain
circumstances, including if the trading price of the Common Stock declines. The
Company's executive officers have studied and fully understand the nature of the
Securities being sold hereunder. The Company acknowledges that its obligation to
issue Conversion Shares upon conversion of the Preferred Shares in accordance
with the Statement of Designation is absolute and unconditional, regardless of
the dilution that such issuance may have on the ownership interests of other
stockholders. Taking the foregoing into account, the Company's Board of
Directors has determined in its good faith business judgment that the issuance
of the Preferred Shares and Warrants hereunder and the consummation of the other
transactions contemplated hereby are in the best interests of the Company and
its stockholders.
(s) TITLE. The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and merchantable title to all
personal property owned by them that 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 the SEC Documents or such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries. 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 are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries.
(t) TAX STATUS. The Company and each of its subsidiaries has made or filed
all foreign, federal, state and local 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 any statute of limitations relating to the assessment or
collection of any federal, state or local tax. None of the Company's tax returns
is presently being audited by any taxing authority.
(u) ENVIRONMENTAL LAWS. The Company and each of its subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), except where noncompliance with such
Environmental Laws would not constitute a Material Adverse Effect, (ii) have
received all permits, licenses or other approvals required of them under
applicable Environmental Laws which are material to the conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such
permit, license or approval. No contaminant, pollutant or toxic or hazardous
waste has been generated, used, treated, stored or disposed of at, or
transported to or from, or released into the air, soil, surface or ground waters
at, on or under any real property while such real property has been owned,
leased, operated or used by the Company which would constitute or give rise to a
Material Adverse Effect. The Company is not currently involved in and no person
or entity has taken any action or threatened or proposed to involve the Company
in any environmental clean-up or remediation or sought to expose the Company to
contribution or liability for such remediation.
(v) REGULATORY PERMITS. The Company and each of its subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities which are material to the conduct of
their respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(w) NO OTHER AGREEMENTS. The Company has not, directly or indirectly, made
any agreements with any Purchasers relating to the terms or conditions of the
transactions contemplated by this Agreement, the Statement of Designation, the
Registration Rights Agreement and the Warrants except as set forth in such
documents.
4. COVENANTS.
(a) BEST EFFORTS. The parties shall use their commercially reasonable best
efforts timely to satisfy each of the conditions described in Section 6 and
Section 7 of this Agreement.
(b) FORM D: BLUE SKY LAWS. The Company shall file with the SEC a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Purchaser 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 Purchasers
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchasers on or prior to the
Closing Date.
(c) REPORTING STATUS. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination. In addition, the Company shall take all actions necessary to
continue to be eligible to register the resale of its Common Stock on a
registration statement on Form S-3 under the Securities Act.
(d) USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Preferred Shares and Warrants to pay off certain penalties with respect to
the Company's Series A Preferred Stock and Series B Preferred Stock or for
general corporate purposes and working capital.
(e) EXPENSES. Except as otherwise provided herein, in the Placement Agency
Agreement and in the Registration Rights Agreement, each party hereto shall be
responsible for its own expenses incurred in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the other
agreements to be executed in connection herewith.
(f) FINANCIAL INFORMATION. The Company shall send the following reports to
each Purchaser until such Purchaser transfers, assigns or sells all of its
Securities: (i) within 10 days after the filing with the SEC, a copy of its
Annual Report on Form 10-K or 10-KSB, its Quarterly Reports on Form 10-Q or
10-QSB, its proxy statements and any Current Reports on Form 8-K; (ii) within
one day after release, copies of all press releases issued by the Company or any
of its subsidiaries; and (iii) copies of any notices and other information made
available or given to shareholders of the Company generally, contemporaneously
with making available or giving thereof to such shareholders.
(g) 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 of the outstanding Preferred Shares and
issuance of the Conversion Shares in connection therewith and the full exercise
of the Warrants and the issuance of the Warrant Shares in connection therewith,
subject to and as otherwise required by the Statement of Designation and the
Warrants.
(h) 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 shall maintain, so long as
any Purchaser (or any of their affiliates) own any Securities, such listing of
all Conversion Shares and Warrant Shares from time to time issuable upon
conversion of the Preferred Shares and exercise of the Warrants; PROVIDED,
HOWEVER, that the Purchasers acknowledge and agree that the Company will be
required to obtain Shareholder approval for the issuance of the Conversion
Shares and the Warrant Shares subsequent to the First Closing in order to secure
such listing with respect to listing a number of shares in excess of the Cap
Amount (as defined in the Statement of Designation). The Company will use its
commercially reasonable best efforts to continue the listing and trading of its
Common Stock on The Nasdaq SmallCap Market ("NSCM"), The Nasdaq National Market
("NNM"), the New York Stock Exchange ("NYSE") or the American Stock Exchange
("AMEX") and will comply in all respects with the reporting, filing and other
obligations under the bylaws or rules of the NSCM, NNM, NYSE or AMEX as
applicable. The Company shall promptly provide to each holder of Preferred
Shares or Warrants copies of any notices it receives regarding the continued
eligibility of the Common Stock for trading on the NSCM or, if applicable, any
other securities exchange or automated quotation system on which securities of
the same class or series issued by the Company are then listed or quoted, if
any.
(i) CORPORATE EXISTENCE. So long as a Purchaser beneficially owns any
Securities, the Company shall maintain its corporate existence, and in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, the Company shall ensure that the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
Statement of Designation, the Warrants (except as otherwise provided therein)
and the agreements and instruments entered into in connection herewith
regardless of whether or not the Company would have had a sufficient number of
shares of Common Stock authorized and available for issuance in order to effect
the conversion of all Preferred Shares and exercise in full of all Warrants
outstanding as of the date of such transaction and (ii) is a publicly traded
corporation whose common stock is listed for trading on the NSCM, NNM, NYSE or
AMEX. Notwithstanding the foregoing, the Company covenants and agrees that it
will not engage in any merger, consolidation or sale of all or substantially all
of its assets at any time prior to the effectiveness of the registration
statement required to be filed pursuant to the Registration Rights Agreement
without (A) providing each Purchaser with written notice of such transaction at
least 60 days prior to the consummation of such transaction, (B) obtaining the
written consent of the Purchasers holding a majority-in-interest of the then
outstanding Preferred Shares on or before the 10th day after the delivery of
such notice by the Company, and (C) publicly announcing such transaction.
(j) NO INTEGRATED OFFERINGS. The Company shall not make any offers or
sales of any security (other than pursuant to this Agreement and the
Registration Rights Agreement) under circumstances that would require
registration of the Securities being offered or sold hereunder under the
Securities
Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for purposes of any stockholder approval
provision applicable to the Company or its securities.
(k) LEGAL COMPLIANCE. The Company shall conduct its business and the
business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
(l) FILING OF FORM 8-K. On or before the fifth (5th) business day
following the Closing Date, the Company shall file a Current Report on Form 8-K
with the SEC describing the terms of the transactions contemplated by this
Agreement, the Statement of Designation, the Registration Rights Agreement and
the Warrants in the form required by the Exchange Act.
(m) CAPITAL AND SURPLUS; SPECIAL RESERVES. The amount to be represented in
the capital account for the Series C Preferred Stock at all times for each
outstanding share of Series C Preferred Stock shall be an amount equal to the
Redemption Amount therefor.
(n) NO MANIPULATION. So long as a Purchaser beneficially owns any
Preferred Shares, neither the Purchaser nor any person acting on behalf of such
Purchaser shall take any action intended to decrease the trading price of the
Company's Common Stock during any period in which the Conversion Price (as
defined in the Statement of Designation) is being computed for purposes of any
conversion of Preferred Shares under the Statement of Designation. For as long
as the Preferred Shares are outstanding, each Purchaser agrees not to effect
"short" sales in the Common Stock, loan shares or otherwise participate in any
transaction which could be considered as a "short sale" under the rules and
regulations promulgated under the Exchange Act (a "SHORT SALE") and agrees to
prohibit each stockholder, executive, employee, representative, affiliate,
officer, director or control person of the Purchaser from effecting any Short
Sale. Notwithstanding the foregoing, the provisions of this subsection (n) shall
not prohibit a sale, including a Short Sale, by a Purchaser of shares of Common
Stock effected within two business days of the date on which a notice of
conversion of Preferred Shares is delivered to the Company entitling such
Purchaser to receive a number of shares of Common Stock at least equal to the
number of shares so sold.
(o) NO FIVE PERCENT HOLDERS. As more fully provided in the Statement of
Designation and subject to the terms and limitations provided in the Statement
of Designation, a holder of the Preferred Shares shall not be entitled to
receive shares of Common Stock upon conversion where receipt of such Common
Stock would result in such holder of Preferred Shares beneficially owning more
than 4.99% of the Company's outstanding Common Stock.
(p) ADDITIONAL EQUITY CAPITAL; RIGHT OF FIRST OFFER. The Company agrees
that, during the period beginning on the date hereof and ending on that date on
which the Purchasers no longer own twenty percent (20%) or more of the Preferred
Shares purchased at the First Closing (the "LOCK-UP PERIOD"), it will not,
without the prior written consent of the holders of a majority of the Preferred
Shares, contract with any other party to obtain additional financing in which
any equity or equity-linked securities are issued ("FUTURE OFFERINGS");
provided, however, the limitation contained in this sentence shall not apply to
any transaction if at the time of such transaction the aggregate number of
Conversion Shares issuable on conversion of Preferred Shares is less than twenty
percent (20%) of the average daily trading volume for shares of Common Stock on
the principal exchange or market on which such shares are traded for the ten
(10) trading days immediately preceding the date of such determination. The
Company agrees from the date of this Agreement until the end of the Lock-Up
Period it will not conduct any Future Offering unless it shall have first
delivered to each Purchaser at least ten (10) business days prior to the closing
of such Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof, and providing each Purchaser and its
affiliates, an option during the ten (10) business day period following delivery
of such notice to purchase up to the Applicable Portion (as defined below) 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 and
the immediately preceding sentence are collectively referred to as the "CAPITAL
RAISING LIMITATIONS"). The Capital Raising Limitations shall not apply to any
transaction involving issuances of securities as consideration in a merger,
consolidation or acquisition of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or as consideration for the acquisition of a business, product
or license by the Company, provided such shares are not covered by an effective
registration statement within one year of the date of consummation thereof. The
Capital Raising Limitations also shall not apply to (i) the issuance of
securities pursuant to an underwritten public offering, (ii) 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 (iii) the
grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option, bonus plan or restricted stock plan
for the benefit of the Company's employees, consultants or directors pursuant to
plans approved by a majority of the Board of Directors who are not officers of
the Company or a majority of the Board's compensation committee, if any. The
"APPLICABLE PORTION" shall mean a fraction, the numerator of which is the number
of Units purchased by such Purchaser hereunder and the denominator of which is
the total number of Units purchased by all of the Purchasers hereunder.
(q) STOCKHOLDERS' MEETING. The Company shall seek approval of the issuance
of the Preferred Shares and the matters contained in the Amendment Agreement (as
defined below) at the Company's regularly scheduled Annual
Meeting of Shareholders which in any event shall be held on or before July 1,
1999. The Company shall, through its Board of Directors, recommend to its
stockholders approval of such matters. The Company shall use its best efforts to
solicit from its stockholders proxies in favor of such matters sufficient to
comply with all relevant legal requirements, including, without limitation, Rule
4310(a)(25)(H) or 4460(i) promulgated by the NASD.
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Conversion
Shares and the Warrant Shares in such amounts as specified from time to time by
such Purchaser to the Company upon conversion of the Preferred Shares or
exercise of the Warrants, as applicable.
(b) The Company warrants that no instruction other than such instructions
referred to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) and (g) hereof in the case of the transfer of the Conversion Shares
or Warrant Shares prior to registration of the Conversion Shares and Warrant
Shares under the Securities Act or without an exemption therefrom, 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 each Purchaser's obligations and agreement
set forth in Section 2(g) hereof to resell the Securities pursuant to an
effective registration statement or under an exemption from the registration
requirements of applicable securities law.
(c) If a Purchaser provides the Company and the transfer agent with an
opinion of counsel, which opinion of counsel 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 registration, or a Purchaser provides the Company
with reasonable assurances that such Securities may be sold under Rule 144(k),
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 in such name and in such denominations as specified by such
Purchaser.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Units to a
Purchaser at the Closing is subject to the satisfaction, at or before the
relevant
Closing Date, of each of the following conditions, provided that such conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion by providing prior written notice to each Purchaser. The
obligation of the Company to issue and sell the Units to any Purchaser hereunder
is distinct and separate from its obligation to issue and sell Units to any
other Purchaser hereunder and any failure by one or more Purchasers to fulfill
the conditions set forth herein or to consummate the purchase of Units hereunder
will not relieve the Company of its obligations with respect to any other
Purchaser.
(a) In the case of a Closing Date, the applicable Purchaser shall have
executed this Agreement and the Registration Rights Agreement, and delivered
executed copies to the Company.
(b) The applicable Purchaser shall have delivered the Purchase Price for
the Units being purchased by it at such Closing in accordance with
Section 1(b) above.
(c) The representations and warranties of the applicable Purchaser shall
be true and correct in all material respects as of the date when made and as of
the date and time of such closing as though made at that time (except for
representations and warranties that relate to a different date, which shall be
true and correct as of such date), and the applicable Purchaser 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 Purchaser at or prior to the applicable
Closing Date.
(d) No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby that prohibits the consummation of any of the transactions contemplated
by this Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase the Units to be
purchased by it at the Closing is subject to the satisfaction, at or before the
relevant Closing Date, of each of the following conditions, provided that such
conditions are for such Purchaser's sole benefit and may be waived by such
Purchaser at any time in such Purchaser's sole discretion:
(a) With respect to the First Closing:
(i) The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered executed
copies to such Purchaser.
(ii) The Statement of Designation shall have been accepted for
filing with the Secretary of State of the State of Texas and a copy thereof
certified by the Secretary of State of the State of Texas shall have been
delivered to such Purchaser and the Statement of Designation shall remain in
full force and effect, in the form described in the definition thereof.
(iii) The Company shall have delivered to such Purchaser duly
executed certificates and Warrant agreements (each in such denominations as such
Purchaser shall request) representing the Preferred Shares and Warrants being so
purchased by such Purchaser in accordance with Section 1(b) above.
(iv) The Common Stock shall be authorized for quotation and listed
on the NSCM and trading in the Common Stock (or the NSCM generally) shall not
have been suspended by the SEC or the NSCM.
(v) 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
First Closing Date as though made at that time (except for representations and
warranties that relate to a different date, which shall be true and correct as
of such date) and the Company shall have performed, satisfied and complied 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 First
Closing Date. Such Purchaser shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the First Closing Date to
the foregoing effect and as to such other matters as such Purchaser may
reasonably request.
(vi) No litigation, statute, rule, regulation, executive order,
decree, ruling, injunction, action or proceeding shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby that questions the validity of, or challenges or
prohibits the consummation of, any of the transactions contemplated by this
Agreement.
(vii) Such Purchaser 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 Purchaser and in substantially the form of EXHIBIT D
attached hereto.
(viii) The Company shall have delivered evidence reasonably
satisfactory to the Purchasers that the Company's transfer agent has agreed to
act in accordance with irrevocable instructions in the form attached hereto as
EXHIBIT E.
(ix) There shall have been no material adverse changes and no
material adverse developments in the business, properties, operations, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole, since the date hereof, and no information, of which the Purchasers are
not currently aware, shall come to the attention of the Purchasers that is
materially adverse to the Company.
(x) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form reasonably
acceptable to such Purchaser.
(xi) The Company shall have delivered to such Purchaser a
certificate evidencing the incorporation and good standing of the Company, and
each of its subsidiaries organized in a jurisdiction in the United States, in
such corporation's state of incorporation issued by the Secretary of State of
such state of incorporation as of a date within ten days of the First Closing
Date.
(xii) The Company shall have delivered to such Purchaser a certified
copy of the Articles of Incorporation as certified by the Secretary of State of
the State of Texas within ten days of the Closing Date.
(xiii) The Company shall have delivered to such Purchaser a
secretary's certificate, dated as of the First Closing Date, as to (i) the
resolutions described in Section 7(k), (ii) the Articles of Incorporation and
(iii) the Bylaws, each as in effect at the Closing.
(xiv) The Company shall have delivered to the Purchasers the
executed Consent and Agreement of Stockholders in the form attached hereto as
EXHIBIT F.
(xv) The Company shall have executed and delivered to each holder of
the Company's Series B Preferred Stock and the holders of warrants to purchase
shares of Common Stock dated July 1, 1998 and August 1, 1998, an Amendment and
Exchange Agreement in the form attached hereto as EXHIBIT G. (the AAmendment
Agreement@) .
(xvi) The holders of the Company's Series B Preferred Stock shall
have executed and delivered to the Company a Waiver and Consent in the form
attached hereto
as EXHIBIT H.
(b) With respect to the Second Closing:
(i) The Company shall have delivered to such Purchaser duly executed
certificates and Warrant agreements (each in such denominations as
such Purchaser shall request) representing the Preferred Shares and Warrants
being so purchased by such Purchaser in accordance with Section 1(b) above.
(ii) The Common Stock shall be authorized for quotation and listed
on the NSCM and trading in the Common Stock (or the NSCM generally) shall not
have been suspended by the SEC or the NSCM.
(iii) 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
Second Closing Date as though made at that time (except for representations and
warranties that relate to a different date, which shall be true and correct as
of such date) and the Company shall have performed, satisfied and complied 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 Second
Closing Date. Such Purchaser shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Second Closing Date to
the foregoing effect and as to such other matters as such Purchaser may
reasonably request.
(iv) No litigation, statute, rule, regulation, executive order,
decree, ruling, injunction, action or proceeding shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby that questions the validity of, or challenges or
prohibits the consummation of, any of the transactions contemplated by this
Agreement.
(v) Such Purchaser 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 Purchaser and in substantially the form of EXHIBIT D
attached hereto.
(vi) The Company shall have delivered evidence reasonably
satisfactory to the Purchasers that the Company's transfer agent has agreed to
act in accordance with irrevocable instructions in the form attached hereto as
EXHIBIT E.
(vii) There shall have been no material adverse changes and no
material adverse developments in the business, properties, operations, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole, since the date hereof, and no information, of which the Purchasers are
not currently aware, shall come to the attention of the Purchasers that is
materially adverse to the Company.
(viii) The Company shall have delivered to such Purchaser a
certificate evidencing the incorporation and good standing of the Company and
each of its subsidiaries in such corporation's state of incorporation issued by
the Secretary of State of such state of incorporation as of a date within ten
days of the Second Closing Date.
(ix) The Company shall have delivered to such Purchaser a certified
copy of the Articles of Incorporation as certified by the Secretary of State of
the State of Texas within ten days of the Closing Date.
(x) The Company shall have delivered to such Purchaser a secretary's
certificate, dated as of the Second Closing Date, as to (i) the resolutions
described in Section 7(k), (ii) the Certificate of Incorporation and (iii) the
Bylaws, each as in effect at the Closing.
(xi) The First Closing shall have occurred.
(xii) The Company Milestones for the Second Closing, as set forth on
EXHIBIT I, shall have been met.
(xiii) The Placement Agent, on behalf of the Purchasers, has elected
to close by written notice to the Company.
8. GOVERNING LAW; MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of choice of law or conflicts of laws that would defer to the
substantive law of another jurisdiction. The Company irrevocably consents to the
jurisdiction of the United States federal courts and the state courts located in
the State of New York in any suit or proceeding based on or arising under this
Agreement and irrevocably agrees that any and all claims arising out of this
Agreement or related to the transactions contemplated by this Agreement shall be
determined exclusively in such courts. The Company irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company further agrees that service of process mailed by first class mail
shall be deemed in every respect effective service of process in any such suit
or proceeding. Nothing herein shall affect the right of any Purchaser to serve
process in any other manner permitted by law. The Company agrees 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.
(b) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered 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 parties 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 and shall not form part of, or affect the interpretation of, this
Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
referenced herein contain the entire understanding of the Purchasers, the
Company, their affiliates and persons acting on their behalf with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived other than by an instrument in writing signed by
the party to be charged with enforcement and no provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and a
majority in interest of the Purchasers.
(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 or by confirmed facsimile, and
shall be effective upon receipt or refusal of receipt, if delivered personally
or by courier or confirmed facsimile, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
▇▇▇▇▇▇ Healthcare, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
If to any Purchaser, to such address set forth under such Purchaser's name
on the Execution Page hereto executed by such Purchaser.
Each party shall provide notice to the other parties 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. Except
as provided herein or therein, the Company shall not assign this Agreement, the
Registration Rights Agreement or the Warrants or any rights or obligations
hereunder or thereunder.
(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, except for the provisions of Section 2(j) and Section 3(m) which
are for the benefit of, and may be enforced by, the Placement Agent.
(i) SURVIVAL. The representations, warranties, agreements and covenants of
the Company set forth in Sections 3, 4, 5 and 8 hereof shall survive the Closing
notwithstanding any investigation conducted by or on behalf of any Purchasers
until the date on which Purchasers no longer own any Preferred Shares,
Conversion Shares or Warrant Shares. None of the representations and warranties
made by the Company herein shall act as a waiver of any rights or remedies a
Purchaser may have under applicable federal or state securities laws. The
Company shall indemnify and hold harmless each Purchaser and each of such
Purchaser's officers, directors, employees, partners, members, agents and
affiliates for all losses or damages arising as a result of or related to any
breach or alleged breach by the Company of any of its representations or
covenants set forth herein, including advancement of reasonable expenses as they
are incurred.
(j) PUBLICITY. The Company and each Purchaser shall have the right to
review before issuance any press releases, SEC or NASDAQ filings, or any other
public statements with respect to the transactions contemplated hereby;
PROVIDED, HOWEVER, that the Company shall be entitled, without the prior review
of the Purchasers, to make any press release or SEC or NASDAQ filings with
respect to such transactions as is required by applicable law and regulations
(although the Purchasers shall be consulted by the Company in connection with
any such press release and filing prior to its release and shall be provided
with a copy thereof).
(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) TERMINATION. In the event that the First Closing shall not have
occurred on or before April 30, 1999, unless the parties agree otherwise, this
Agreement shall terminate at midnight, New York City time on such date.
Notwithstanding any termination of this Agreement, any party not in breach of
this Agreement shall preserve all rights and remedies it may have against
another party hereto for a breach of this Agreement prior to or relating to the
termination hereof.
(m) JOINT PARTICIPATION IN DRAFTING. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Statement of
Designation, the Warrants and the Registration Rights Agreement. As such, the
language used herein and therein shall be deemed to be the language chosen by
the parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any party to this Agreement.
(n) EQUITABLE RELIEF. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a Purchaser 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
hereunder (including, but not limited to, its obligations pursuant to Section 5
hereof) will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement (including, but not
limited to, its obligations pursuant to Section 5 hereof), that a Purchaser
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer of the
Securities, 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 Purchasers and the Company have caused
this Securities Purchase Agreement to be duly executed as of the date first
above written.
▇▇▇▇▇▇ HEALTHCARE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and CEO
PURCHASER:
ZANETT LOMBARDIER, LTD.
By: /s/ G. A. CICOGNA
Name:
Title:
RESIDENCE: Cayman Islands
ADDRESS: c/o Bank ▇▇▇▇▇▇ ▇▇▇▇ Trust Co.
▇▇▇▇ House, P.O. Box 1100
Grand Cayman, Cayman Islands
British West Indies
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with copies of all notices to:
The Zanett Securities Corporation
Tower 49, 31st Floor
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
SUBSCRIPTION AMOUNT
First Closing Second Closing
Number of Units: 750 1,500
Purchase Price ($1,000 per Unit): $750,000 1,500,000