AMENDED & RESTATED SECURITIES PURCHASE AGREEMENT
AMENDED & RESTATED SECURITIES PURCHASE AGREEMENT
THIS AMENDED & RESTATED SECURITIES PURCHASE AGREEMENT (this "Agreement"), was originally dated as of July 6, 2007 and is amended and restated as of September 18, 2007, by and among PACER HEALTH CORPORATION, a Florida corporation (the "Company"), and the Buyers listed on Schedule I attached hereto (individually, a "Buyer" or collectively "Buyers" or "Buyer(s)").
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and delivering this Agreement in reliance upon an exemption from securities registration pursuant to Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, the parties desire that, upon the
terms and subject to the conditions
contained herein, the Company shall issue and sell to the Buyer(s), as provided herein, and the
Buyer(s) shall purchase (i) up to Four Million Dollars ($4,000,000) of secured convertible
debentures in the form attached hereto as "Exhibit A" (the "Convertible Debentures"), which
shall be convertible into shares of the Company's common stock, par value $0.001 (the
"Common Stock") (as converted, the "Conversion Shares"), and (ii) warrants substantially in the
form attached hereto as "Exhibit B" (the "Warrants"), to acquire up to that number of additional
shares of Common Stock set forth opposite such Buyer's name in column (5) of the Schedule I
(as exercised, the "Warrant Shares") of which Three Million Five Hundred Thousand Dollars
($3,500,000) was funded on or about July 6, 2007 (the "First Closing") and Five Hundred
Thousand Dollars ($500,000) shall be funded on or about the date hereof (the "Second
Closing")(individually referred to as a "Closin " collectively referred to as the "Closings"), for a
total purchase price of up to Four Million Dollars ($4,000,000), (the "Purchase Price") in the
respective amounts set forth opposite each Buyer(s) name on Schedule I (the "Subscription
Amount");
WHEREAS, the parties hereto are executed and delivered a Registration Rights Agreement, dated as of July 6, 2007, pursuant to which the Company has agreed to provide certain registration rights under the Securities Act and the rules and regulations promulgated there under, and applicable state securities laws;
WHEREAS, the Convertible Debentures are (or will be) secured by (i) a security interest in all of the assets of the Company and of each of the Company's subsidiaries as evidenced by the security agreement of even date herewith (the "Security Agreement") and (ii) a pledge of certain shares of common stock owned by an officer of the Company (the "Pledged Shares") as evidenced by the pledge and escrow agreement of even date herewith (the "Pledge Agreement" and together with the Security Agreement, the "Security Documents");
WHEREAS, the parties hereto executed and delivered those certain Irrevocable Transfer Agent Instructions (the "Irrevocable Transfer Agent Instructions"), dated as of July 6, 2007; and
MI-247901 v2 0435230-00201
WHEREAS, the Convertible Debentures, the Conversion Shares, the Warrants, and the Warrants Shares collectively are referred to herein as the "Securities").
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in this Agreement the Company and the Buyer(s) hereby agree as follows:
1.
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a)
Purchase of Convertible Debentures. Subject to the satisfaction (or
waiver) of the terms and conditions of this Agreement, each Buyer agrees, severally and not jointly, to purchase at each Closing and the Company agrees to sell and issue to each Buyer, severally and not jointly, at each Closing, Convertible Debentures in amounts corresponding with the Subscription Amount set forth opposite each Buyer's name on Schedule I hereto and the Warrants to acquire up that number of Warrant Shares as set forth opposite such Buyer's name in column (5) on Schedule I.
(b)
Closing Dates. The First Closing of the purchase and sale of the
Convertible Debentures and Warrants took place on July 6, 2007 (the "First Closing Date") and
the Second Closing of the purchase and sale of the Convertible Debentures shall take place at
4:00 p.m. Eastern Standard Time on the date hereof, subject to notification of satisfaction of the
conditions to the Second Closing set forth herein and in Sections 6 and 7 below (or such later
date as is mutually agreed to by the Company and the Buyer(s)) (the "Second Closing Date")
(collectively referred to as the "Closing Dates"). The Closings shall occur on the respective
Closing Dates at the offices of Yorkville Advisors, LLC, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (or such other place as is mutually agreed to by the Company and the
Buyer(s)).
(c)
Form of Payment. Subject to the satisfaction of the terms and
conditions of this Agreement, on each Closing Date, (i) the Buyers shall deliver to the Company such aggregate proceeds for the Convertible Debentures and Warrants to be issued and sold to such Buyer at such Closing, minus the fees to be paid directly from the proceeds of such Closing as set forth herein and (ii) the Company shall deliver to each Buyer, Convertible Debentures and Warrants which such Buyer is purchasing at
such Closing in amounts indicated opposite such Buyer's name on Schedule I, duly executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES. Each Buyer represents and warrants, severally and not jointly, that:
(a)
Investment Purpose. Each Buyer is acquiring the Securities for its
own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, such Buyer reserves the right to dispose of the Securities at any time in accordance with or pursuant to an effective registration statement covering such Securities or an available exemption under the
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Securities Act. Such Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities.
(b)
Accredited Investor Status.
Each Buyer is an "Accredited
Investor" as that term is defined in Rule 501(a)(3) of Regulation D.
(c)
Reliance on Exemptions. Each Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer's compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.
(d)
Information. Each Buyer and its advisors (and his or, its counsel),
if any, have been furnished with all materials relating to the business, finances and operations of the Company and information he deemed material to making an informed investment decision regarding his purchase of the Securities, which have been requested by such Buyer. Each Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company and its management. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such Buyer's right to rely on the Company's representations and warranties contained in Section 3 below. Each Buyer understands that its investment in the Securities involves a high degree of risk. Each Buyer is in a position regarding the Company, which, based upon employment, family relationship or economic bargaining power, enabled and enables such Buyer to obtain information from the Company in order to evaluate the merits and risks of this investment. Each Buyer has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.
(e)
No Governmental Review. Each Buyerunderstands that no United
States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities, or the fairness or suitability of the investment in the Securities, nor have such authorities passed upon or endorsed the merits of
the offering of the Securities.
(f)
Transfer or Resale. Each Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration requirements or (C) such Buyer provides the Company with reasonable assurances (in the form of seller and broker representation letters) that such Securities can be sold, assigned or transferred pursuant to Rule 144, Rule 144(k), or Rule 144A promulgated under the Securities Act, as amended (or a successor rule thereto) (collectively, "Rule 144"), in each case following the applicable holding period set forth therein; (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with
3
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.
(g)
Legends. Each Buyer agrees to the imprinting, so long as is required by this Section 2(g), of 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 APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
Certificates evidencing the Conversion Shares or Warrant Shares shall not contain any legend (including the legend set forth above), (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Conversion Shares or Warrant Shares pursuant to Rule 144, (iii) if such Conversion Shares or Warrant Shares are eligible for sale under Rule 144(k) or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC). The Company shall cause its counsel to issue a legal opinion to the Company's transfer agent promptly after the effective date (the "Effective Date") of a Registration Statement if required by the Company's transfer agent to
effect the removal of the legend hereunder. If all or any portion of the Convertible Debentures or Warrants are exercised by a Buyer that is not an Affiliate of the Company (a "Non-Affiliated Buyer") at a time when there is an effective registration statement to cover the resale of the Conversion Shares or the Warrant Shares, such Conversion Shares or Warrant Shares shall be issued free of all legends. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 2(g), it will, no later than three (3) Trading Days following the delivery by a Non-Affiliated Buyer to the Company or the Company's transfer agent of a certificate representing Conversion Shares or Warrant Shares, as the case may be, issued with a restrictive legend (such third Trading Day, the "Legend Removal Date"), deliver or cause to be delivered to such Non-Affiliated Buyer a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the
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restrictions on transfer set forth in this Section. Each Buyer acknowledges that the Company's
agreement hereunder to remove all legends from Conversion Shares or Warrant Shares is not an
affirmative statement or representation that such Conversion Shares or Warrant Shares are freely
tradable. Each Buyer, severally and not jointly with the other Buyers, agrees that the removal of
the restrictive legend from certificates representing Securities as set forth in this Section 3(g) is
predicated upon the Company's reliance that the buyer will sell any Securities pursuant to either
the registration requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold pursuant to a
Registration Statement, they will be sold in compliance with the plan of distribution set forth
therein.
(h)
Authorization, Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a valid and binding agreement of such Buyer
enforceable in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies.
(i)
Receipt of Documents. Each Buyer and his or its counsel has
received and read in their entirety:
(i) this Agreement and each representation, warranty and covenant set forth herein and the Transaction Documents (as defined herein); (ii) all due diligence and other information necessary to verify the accuracy and completeness of such representations, warranties and covenants; (iii) the Company's Form 10-KSB for the fiscal year ended December 31, 2006; (iv) the Company's Form 10-QSB for the fiscal quarter ended March 31, 2006 and (v) answers to all questions each Buyer submitted to the Company regarding an investment in the Company; and each Buyer has relied on the information contained therein and has not been furnished any other documents, literature, memorandum or prospectus.
(j)
Due Formation of Corporate and Other Buyers. If the Buyer(s) is a
corporation, trust, partnership or other entity that is not an individual person, it has been formed and validly exists and has not been organized for the specific purpose of
purchasing the Securities and is not prohibited from doing so.
(k)
No Legal Advice From the Company. Each Buyer acknowledges,
that it had the opportunity to review this Agreement and the transactions contemplated by this
Agreement with his or its own legal counsel and investment and tax advisors. Each Buyer is
relying solely on such counsel and advisors and not on any statements or representations of the
Company or any of its representatives or agents for legal, tax or investment advice with respect
to this investment, the transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth under the corresponding section of the Disclosure Schedules which Disclosure Schedules shall be deemed a part hereof and to qualify any representation or warranty otherwise made herein to the extent of such disclosure, the Company hereby makes the representations and warranties set forth below to each Buyer:
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(a)
Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3(a). The Company owns,. directly or indirectly, all of the
capital stock or other equity interests of each subsidiary free and clear of any liens, and all the
issued and outstanding shares of capital stock of each subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase
securities.
(b)
Organization and Qualification. The Company and its subsidiaries
are corporations duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated, and have the requisite corporate. power to own their properties and to carry on their business as now being conducted. Each of the Company and its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing would not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company's ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a "Material Adverse Effect") and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification..
(c)
Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Convertible Debentures, the Warrants, the Security
Documents, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions, the
Mortgage, and each of the other agreements entered into by the parties hereto in connection with
the transactions contemplated by this Agreement (collectively the "Transaction Documents") and
to issue the Securities in accordance with the terms hereof and thereof, (ii) the execution and
delivery of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the issuance of the
Securities, the reservation for issuance and the issuance of the Conversion Shares, and the
reservation for issuance and the issuance of the Warrant Shares, have been duly authorized by
the Company's Board of Directors (the "Board") and no further consent or authorization is
required by the Company, the Board or its stockholders, (iii) the Transaction Documents have
been duly executed and delivered by the Company, (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies.
The authorized officer of the Company executing the Transaction Documents knows of no
reason why the Company cannot file the Registration Statement as required under the
Registration Rights Agreement or perform any of the Company's other obligations under the
Transaction Documents.
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(d)
Capitalization. The authorized capital stock of the Company
consists of Nine Hundred Thirty Million (930,000,000) shares of Common Stock and Twenty Million (20,000,000) shares of Preferred Stock, par value $0.0001 per share ("Preferred Stock") of which Five Hundred Eighty Million Six Hundred Ninety-Six Thousand Seven Hundred Seventy-Four (580,696,774) shares of Common Stock and zero (0) shares of Preferred Stock were issued and outstanding on July 3, 2007. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except as disclosed in the SEC Documents .(as such term is defined in Section 3(g) herein below): (i) none of the Company's capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (ii) 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 capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional capital stock of the Company or any of its subsidiaries or 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 capital stock of the Company or any of its subsidiaries; (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing indebtedness of the Company or any of its subsidiaries or by which the Company or any of its subsidiaries is or may become bound; (iv) there are no financing statements securing obligations in any material
amounts, either singly or in the aggregate, filed in connection with the Company or any of its
subsidiaries; (v) 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; (vi)
there are no securities or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities; (vii) the
Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement; and
(viii) the Company and its subsidiaries have no liabilities or obligations required to be disclosed
in the SEC Documents but not so disclosed in the SEC Documents, other than those incurred in
the ordinary course of the Company's or its subsidiaries' respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse Effect. The
Company has furnished to the Buyers true, correct and complete copies of the Company's
Articles of Incorporation, as amended and as in effect on the date hereof (the "Articles of
Incorporation"), and the Company's Bylaws, as amended and as in effect on the date hereof (the
`Bylaws"), and the terms of all securities convertible into, or exercisable or exchangeable for,
shares of Common Stock and the material rights of the holders thereof in respect thereto. No
further approval or authorization of any stockholder, the Board or others is required for the
issuance and sale of the Securities. There are no stockholders agreements, voting agreements or
other similar agreements with respect to the Company's capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company's
stockholders.
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(e)
Issuance of Securities. The issuance of the Convertible Debentures
and the Warrants is duly authorized and free from all taxes, liens and charges with respect to the issue thereof Upon conversion in accordance with the terms of the Convertible Debentures or exercise in accordance with the Warrants, as the case may be, the Conversion Shares and Warrant Shares, respectively, when issued will be validly issued, fully paid and nonassessable, free from all taxes, liens and charges with respect to the issue thereof The Company has reserved from its duly authorized capital stock the appropriate number of shares of Common Stock as set forth in this Agreement.
(f)
No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Convertible Debentures and the Warrants, and reservation for issuance and issuance of the Conversion Shares and the Warrant Shares) will not (i) result in
a violation of any certificate of incorporation, articles of incorporation, certificate of formation, any certificate of designations or other constituent documents of the Company or any of its subsidiaries, any capital stock of the Company or any of its subsidiaries or bylaws of the Company or any of its subsidiaries or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of the National Association of Securities Dealers Inc.'s OTC Bulletin Board) 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 in the case of each of clauses (ii) and (iii), such as could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. The business of the Company and its subsidiaries is not being conducted, and shall not be conducted in violation of any material law, ordinance, or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by this Agreement or the Registration Rights Agreement in accordance with the terms hereof or thereof. All consents, authorizations, orders; filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company and its subsidiaries are unaware of any facts or circumstance, which might give rise to any of the
foregoing.
(g)
SEC Documents; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required to be filed by it with the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for the two (2) years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (all of the foregoing filed prior to the date hereof or amended after the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the "SEC Documents") on timely basis or has received a valid extension of such time of filing and
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has filed any such SEC Document prior to the expiration of any such extension. The Company has delivered to the Buyers or their representatives, or made available through the SEC's website at ▇▇▇▇://▇▇▇.▇▇▇.▇▇▇., 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 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 the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Buyers which is not included in the SEC Documents, including, without limitation, information referred to in Section 2(i) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made and not misleading.
(h)
1ON-5. The SEC Documents do not include any untrue
statements of material fact, nor do they omit to state any material fact required to be stated therein necessary to make the statements made, in light of the circumstances under which they were made, not misleading.
(i)
Absence of Litigation. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company, the Common Stock or any of the Company's subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have a Material Adverse
Effect.
(j)
Acknowledgment Regarding Buyer's Purchase of the Convertible
Debentures. The Company acknowledges and agrees that each Buyer is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that each Buyer is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by each Buyer or any
of their respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer's purchase of the Securities.
The Company further represents to each Buyer that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation by the Company and its
representatives.
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(k)
No General Solicitation. Neither the Company, nor any of .its
affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Securities.
(1)
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 under the Securities Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of the Securities
Act.
(m) Employee Relations. Neither
the Company nor any of its subsidiaries is involved in any labor dispute or, to the knowledge of the Company or any of its subsidiaries, is any such dispute threatened. None of the Company's or its subsidiaries' employees is a member of a union and the Company and its subsidiaries believe that their relations with their employees are good.
(n)
Intellectual Property Rights. The Company and its subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names, service marks,
service ▇▇▇▇ registrations, service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks,
service ▇▇▇▇ registrations, trade secret or other similar rights of others, and, to the knowledge of
the Company there is no claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention,
copyright, license, service names,
service marks, service ▇▇▇▇ registrations, trade secret or other infringement; and the Company
and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the
foregoing.
(o)
Environmental Laws. The Company and its subsidiaries are (i) 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"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval.
(p)
Title. All 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 interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries.
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(q)
Insurance. The Company and each of its subsidiaries is insured by
insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged. Neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its subsidiaries, taken as a whole.
(r)
Regulatory Permits. The Company and its subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct 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.
(s)
Internal Accounting Controls. The Company and each of its
subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, and (iii) the recorded amounts for assets are compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(t)
No Material Adverse Breaches, etc. Neither the Company nor any
of its subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company's officers has or is expected in the future to have a Material Adverse Effect on the business, properties, operations, f inancial condition, results of operations or prospects of the Company or its subsidiaries. Neither the Company nor any of its subsidiaries is in breach of any contract or agreement which breach, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries.
(u)
Tax Status. The Company and each of its subsidiaries has made
and filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject and (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) 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 provision 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.
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(v)
Certain Transactions.
Except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from third parties and other than the grant of
stock options disclosed in the SEC Documents, none of the officers, directors, or employees of
the Company is presently a party to any transaction with the Company (other than for services as
employees, officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real or personal property
to or from, or otherwise requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an officer, director, trustee
or partner.
(w)
Fees and Rights of First Refusal. The Company is not obligated to
offer the securities offered hereunder on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third parties.
(x)
Investment Company. The Company is not, and is not an affiliate
of, and immediately after receipt of payment for the Securities, will not be or be an affiliate of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become subject
to the Investment Company Act.
(y)
Registration Rights. Other than each of the Buyers, no Person has
any right to cause the Company to effect the registration under the Securities Act of any securities of the Company. There are no outstanding registration statements not yet declared effective and there are no outstanding comment letters from the SEC or any other regulatory
agency.
(z)
Private Placement. Assuming the accuracy of the Buyers'
representations and warranties set forth in Section 2, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Buyers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Primary Market.
(aa)
Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to terminate, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. The Company has not, in the twelve (12) months preceding the date hereof, received notice from any Primary Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Primary Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.
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(bb) Manipulation of Price. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company's placement agent in connection with the placement of the Securities.
(cc)
Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Convertible Debentures and the Warrant Shares issuable upon exercise of the Warrants will increase in certain circumstances. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Convertible Debentures in accordance with this Agreement and the Convertible Debentures and its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement and the Warrants, in each case, is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.
4. COVENANTS.
(a)
Best Efforts. Each party shall use its best efforts to timely satisfy each of the conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b)
Form D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities, or obtain an exemption for the Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the states of the United States, and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date.
(c)
Reporting Status. Until the earlier of (i) the date as of which the
Buyer(s) may sell all of the Securities without restriction
pursuant to Rule 144(k) promulgated under the Securities Act (or successor thereto), or (ii) the date on which (A) the Buyers shall have sold all the Securities and (B) none of the Convertible Debentures or Warrants are outstanding (the "Registration Period"), the Company shall file in a timely manner all reports required to be filed with the SEC pursuant to the Exchange Act and the regulations of the SEC thereunder, 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 otherwise permit such termination.
(d)
Use of Proceeds. The Company will use the proceeds from the
sale of the Convertible Debentures to (i) redeem outstanding balances owing to YA Global Investments, L.P. (f/k/a Cornell Capital Partners, L.P. and herein after, "Cornell") on existing debentures in accordance with the terms therewith and (ii) for general corporate and working capital purposes.
13
(e)
Reservation of Shares. On the date hereof, the Company shall
reserve for issuance to the Buyers One Hundred Million (100,000,000) shares for issuance upon
conversions of the Convertible Dentures and Two Hundred Twenty Million (220,000,000) shares
for issuance upon exercise of the Warrants (collectively, the "Share Reserve"). The Company
represents that it has sufficient authorized and unissued shares of Common Stock available to
create the Share Reserve after considering all other commitments that may require the issuance
of Common Stock. The Company shall take all action reasonably necessary to at all times have
authorized, and reserved for the purpose of issuance, such number of shares of Common Stock as
shall be necessary to effect the full conversion of the Convertible Debentures and the full
exercise of the Warrants. If at any time the Share Reserve is insufficient to effect the full
conversion of the Convertible Debentures or the full exercise of the Warrants, the Company shall
increase the Share Reserve accordingly. If the Company does
not have sufficient authorized and
unissued shares of Common Stock available to increase the Share Reserve, the Company shall
call and hold a special meeting of the shareholders within thirty (30) days of such occurrence, for
the sole purpose of increasing the number of shares authorized. The Company's management
shall recommend to the shareholders to vote in favor of increasing the number of shares of Common Stock authorized. Management shall also vote all of its shares in favor of increasing
the number of authorized shares of Common Stock.
(f)
Listings or Quotation. The Common Stock shall be listed or
quoted for trading on any of (a) the American Stock Exchange, (b) New York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin Board ("OTCBB") (each, a "Primary Market"). The Company shall promptly secure the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement) upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance) and shall maintain such listing of all Registrable Securities from time to time issuable under the terms of the Transaction Documents.
(g)
Fees and Expenses; Repayment of
Existing Debt.
(i)
Each of the Company and the Buyer(s) shall pay all costs
and expenses incurred by such party in connection with the negotiation, investigation, preparation, execution and delivery of the Transaction Documents. The Company shall pay Yorkville Advisors LLC a fee equal to eight percent (8%) of the Purchase Price which shall be paid pro rata directly from the gross proceeds of each Closing.
(ii)
The Company shall pay a structuring and due diligence fee
to Yorkville Advisors LLC of Twenty-Five Thousand Dollars ($25,000), directly from the proceeds of the First Closing.
(iii)
The Company shall pay to Cornell $1,845,651 as payment
of debt validly due and owing on existing debentures issued by the Company to Cornell, which shall be paid directly from the proceeds of the First Closing.
(h)
Corporate Existence.
So long as any of the Convertible
Debentures remain outstanding, the Company shall not directly or indirectly consummate any merger, reorganization, restructuring, reverse stock split consolidation, sale of all or
substantially
14
all of the Company's assets or any similar transaction or related transactions
(each such transaction, an "Organizational Change") unless, prior to the consummation an Organizational Change, the Company obtains the written consent of each Buyer. In any such case, the Company will make appropriate provision with respect to such holders' rights and interests to insure that the provisions of this Section 4(h) will thereafter be applicable to the Convertible Debentures.
(i)
Transactions With Affiliates.
So long as any Convertible
Debentures are outstanding, the Company shall not, and shall cause each of its subsidiaries not to, enter into, amend, modify or supplement, or permit any subsidiary to enter into, amend,
modify or supplement any agreement, transaction, commitment, or arrangement with any of its
or any subsidiary's officers, directors, person who were officers or directors at any time during the previous two (2) years, stockholders who beneficially own five percent (5%) or more of the Common Stock, or Affiliates (as defined below) or with any individual related by blood, marriage, or adoption to any such individual or with any entity
in which any such entity or individual owns a five percent (5%) or more beneficial interest (each a "Related Party"), except for (a) customary employment arrangements and benefit programs on reasonable terms, (b) any investment in an Affiliate of the Company, (c) any agreement, transaction, commitment, or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a person other than such Related Party, (d) any agreement, transaction, commitment, or arrangement which is approved by a majority of the disinterested directors of the Company; for purposes hereof, any director who is also an officer of the Company or any subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment, or arrangement. "Affiliate" for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (i) has a
ten percent (10%) or more equity interest in that person or entity, (ii) has ten percent (10%) or more common ownership with that person or entity, (iii) controls that person or entity, or (iv) shares common control with that person or entity. "Control" or "controls" for purposes hereof means that a person or entity has the power, direct or indirect, to conduct or govern the policies of another person or entity.
6)
Transfer Agent. The Company covenants and agrees that, in the
event that the Company's agency relationship with the transfer agent should be terminated for
any reason prior to a date which is two (2) years after the Closing Date, the Company shall
immediately appoint a new transfer agent and shall require that the new transfer agent execute
and agree to be bound by the terms of the Irrevocable Transfer Agent Instructions (as defined
herein).
(k)
Restriction on Issuance of the Capital Stock. So long as any
Convertible Debentures are outstanding, the Company shall not, without the prior written consent of the Buyer(s), (i) issue or sell shares of Common Stock or Preferred Stock without consideration or for a consideration per share less than the bid price of the Common Stock
determined immediately prior to its issuance, (ii) issue any preferred stock, warrant, option, right,
contract, call, or other security or instrument granting the holder thereof the right to acquire Common Stock without consideration or for a consideration less than such Common Stock's Bid Price determined immediately prior to it's issuance, (iii) enter into any security instrument granting the holder a security interest in any and all assets of the Company or (iv) file any registration statement on Form S-8.
15
(1)
Neither the Buyer(s) nor any of its affiliates have an open short
position in the Common Stock of the Company, and the Buyer(s) agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the Common Stock as long as any Convertible Debentures shall remain outstanding.
(m) Rights of First Refusal. For a period of eighteen (18) months from the date of the First Closing, if the Company intends to raise additional capital by the issuance or sale of capital stock of the Company, including without limitation shares of any class of common stock, any class of preferred stock, options, warrants or any other securities convertible or exercisable into shares of common stock (whether the offering is conducted by the Company, underwriter, placement agent or any third party) the Company shall be obligated to offer to the Buyers such issuance or sale of capital stock, by providing in writing the principal amount of capital it intends to raise and outline of the material terms of such capital raise, prior to the offering such issuance or sale of capital stock to any third parties including, but not limited to, current or former officers or directors, current or former
shareholders and/or investors of the obligor, underwriters, brokers, agents or other third parties. The Buyers shall have ten (10) business days from receipt of such notice of the sale or issuance of capital stock to accept or reject all or a portion of such capital raising offer.
(n)
Additional Registration Statements. Until the effective date of the
initial Registration Statement, the Company will not file a registration statement under the Securities Act relating to securities that are not the Securities.
(o)
Review of Public Disclosures. All SEC filings (including, without
limitation, all filings required under the Exchange Act, which include Forms 10-Q and 10-QSB, 10-K and l0K-SB, 8-K, etc.) and other public disclosures made by the Company, including, without limitation, all press releases, investor relations materials, and scripts of analysts meetings and calls, shall be reviewed and approved for release by the Company's attorneys and, if containing financial information, the Company's independent certified public accountants.
(p)
Disclosure of Transaction.
Within four
(4) Business Days
following the date of this Agreement, the Company shall file a Current Report on Form 8-K describing the terms of the
transactions contemplated by the Transaction Documents in the form required by the Exchange, Act and attaching the material Transaction Documents (including, without limitation, this Agreement, the form of the Convertible Debenture, the form of Warrant and the form of the Registration Rights Agreement) as exhibits to such filing.
(q)
Acquisitions Requiring Consent. The parties hereto acknowledge
and agree that the Company is in the business of providing healthcare services with a primary focus on acquiring and restructuring hospitals. In the event the Company enters into a letter of intent whereby the Company would consummate an acquisition, the Company shall obtain the prior written consent from the Buyer(s) prior to the consummation of such acquisition if, (a) Mr. Rainier ▇▇▇▇▇▇▇▇ shall cease to serve as Chief Executive Officer of the Company; (b) over One Million Dollars ($1,000,000) shall be transferred to a third party in connection with such acquisition; or (c) the target business does not operate in the field of healthcare whereby such acquisition would be out of the ordinary course of business of the Company.
16
5. TRANSFER AGENT INSTRUCTIONS.
(a)
The Company shall issue the Irrevocable Transfer Agent
Instructions to its transfer agent, and any subsequent transfer agent, irrevocably appointing ▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq. as the Company's agent for purpose instructing its transfer agent to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company ("DTC"), registered in the name of each Buyer or its respective nominee(s), for the Conversion Shares and the Warrant Shares issued upon conversion of the Convertible Debentures or exercise of the Warrants as specified from time to time by each Buyer to the Company upon conversion of the Convertible Debentures or exercise of the Warrants. The Company shall not change its transfer agent without the express written consent of the Buyers, which may be withheld by the Buyers in their sole discretion. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(g) hereof (in the case of the Conversion Shares or Warrant Shares prior to registration of such shares under the
Securities Act) 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 other Transaction Documents. If a Buyer effects a sale, assignment or transfer of the Securities in accordance with Section 2(f), the Company shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by such Buyer to effect such sale, transfer or assignment and, with respect to any transfer, shall permit the transfer. In the event that such sale, assignment or transfer involves Conversion Shares or Warrant Shares sold, assigned or transferred pursuant to an effective registration statement or pursuant to Rule 144, the transfer agent shall issue such Securities to the Buyer, assignee or transferee, as the case may be, without any restrictive legend. Nothing in this Section 5 shall affect in any way the Buyer's obligations and agreement to comply with all applicable securities laws upon resale of Conversion Shares. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5, that the Buyer(s) shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Convertible Debentures to the Buyer(s) at the Closings is subject to the satisfaction, at or before the Closing Dates, of each of the following conditions, provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion:
(a)
Each Buyer shall have executed the Transaction Documents and
delivered them to the Company.
17
(b)
The Buyer(s) shall have delivered to the Company the Purchase
Price for the Convertible Debentures and Warrants in the respective amounts as set forth next to each Buyer as set forth on Schedule I attached hereto, minus any fees to be paid directly from the proceeds the Closings as set forth herein, by wire transfer of immediately available U.S. funds pursuant to the wire instructions provided by the Company.
(c)
The representations and warranties of the Buyer(s) shall be true
and correct in all material respects as of the date when made and as of the Closing Dates as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer(s) 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 Buyer(s) at or prior to the Closing Dates.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
(a)
The obligation of the
Buyer(s) hereunder to purchase the
Convertible Debentures at the First Closing is subject to the satisfaction, at or before the First
Closing Date, of each of the following conditions:
(i)
The Company shall have executed, with the exception of
the Mortgage, the Transaction Documents and delivered the same to the Buyers.
(ii)
The Common Stock shall be authorized for quotation or
trading on the Primary Market, trading in the Common Stock shall not have been suspended for any reason, and all the Conversion Shares issuable upon the conversion of the Convertible Debentures shall be approved for listing or trading on the Primary Market.
(iii)
The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 above, in which case, such representations and warranties shall be true and correct without further qualification) 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 speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the First Closing Date
(iv)
The Company shall have executed and delivered to the
Buyer(s) the Convertible Debentures and Warrants in the respective amounts set forth opposite
each Buyer's name on Schedule I attached hereto.
(v)
The Buyers shall have received an opinion of counsel from
counsel to the Company in a form satisfactory to the Buyers.
(vi)
The Company shall have provided to the Buyers a true
copy of a certificate of good standing evidencing the formation and good standing of the Company from the secretary of state (or comparable office) from the jurisdiction in which the Company is incorporated, as of a date within 10 days of the First Closing Date.
18
(vii)
The Company shall have delivered to the Buyers a
certificate, executed by the Secretary of the Company and dated as of the First Closing Date, as to (i) the resolutions consistent with Section 3(c) as adopted by the Board in a form reasonably acceptable to such Buyer, (ii) the Articles of Incorporation and (iii) the Bylaws, each as in effect at the First Closing.
(viii) The Pledged Shares as well as executed and medallion
guaranteed stock powers as required pursuant to the Pledge Agreement shall have been delivered to the Escrow Agent.
(ix)
The Company shall have provided to the Buyer an
acknowledgement, to the satisfaction of the Buyer, from the Company's independent certified
public accountants as to its ability to provide all consents required in order to file a registration
statement in connection with this transaction.
(x)
The Company shall have created the Share Reserve.
(xi)
The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company's transfer agent.
(b)
The obligation of the Buyer(s) hereunder to accept the Convertible
Debentures at the Second Closing is subject to the satisfaction, at or before the Second Closing Date, of each of the following conditions:
(i)
The Common Stock shall be authorized for quotation or
trading on the Primary Market, trading in the Common Stock shall not have been suspended for any reason, and all the Conversion Shares issuable upon the conversion of the Convertible Debentures shall be approved for listing or trading on the Primary Market.
(ii)
The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any of such representations and warranties is already
qualified as to materiality in Section 3 above, in which case, such representations and warranties shall be true and correct without further qualification) 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 speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Second Closing Date.
(iii)
The Company shall have executed and delivered to the
Buyers the Convertible Debentures in the respective amounts set forth opposite each Buyers name on Schedule I attached hereto.
(iv)
The Company shall certify that it will file, within five (5)
days following the Second Closing Date, a Registration Statement with the SEC materially in compliance with the rules and regulations promulgated by the SEC for filing thereof.
19
(v)
The Company shall have certified, in a certificate executed
by two (2) officers of the Company and dated as of the Second Closing Date, that all conditions to the Second Closing have been satisfied.
8. INDEMNIFICATION.
(a)
In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Convertible Debentures and the Conversion Shares hereunder, and
in addition to all of the Company's other obligations under this Agreement, the Company shall
defend, protect, indemnify and hold harmless the Buyer(s) and each other holder of the
Convertible Debentures and the Conversion Shares, and all of their officers, directors, employees
and agents (including, without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Buyer
Indemnitees") from and against any
and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such Buyer
Indemnitee is a party to the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by the
Buyer Indemnitees or any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the Company in this
Agreement, the Convertible Debentures or the other Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in this Agreement, or the other
Transaction Documents or any other certificate, instrument or document contemplated hereby or
thereby, or (c) any cause of action, suit or claim brought or made against such Buyer Indemnitee
and arising out of or resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant hereto by any of
the parties hereto, any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Convertible Debentures or the status of the
Buyer or holder of the Convertible Debentures the Conversion Shares, as a Buyer of
Convertible Debentures in the Company. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
(b)
In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Buyer's other obligations under this Agreement, the Buyer shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Company Indemnitees") from and against any and all Indemnified Liabilities incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Buyer(s) in this Agreement, instrument or document contemplated hereby or thereby executed by the Buyer, (b) any breach of any covenant, agreement or obligation of the Buyer(s) contained in this
Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby executed by the Buyer, or (c) any cause of action, suit or claim brought or made against such Company Indemnitee based on material misrepresentations or due to a material breach and
20
arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement, the Transaction Documents or any other instrument, document or agreement executed pursuant hereto by any of the parties hereto. To the extent that the foregoing undertaking by each Buyer may be unenforceable for any reason, each Buyer shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
(a)
Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New Jersey without regard to the principles of conflict of laws. The parties further agree that any action between them shall be heard in ▇▇▇▇▇▇ County, New Jersey, and expressly consent to the jurisdiction and venue of the Superior Court of New Jersey, sitting in ▇▇▇▇▇▇ County and the United States District Court for the District of New Jersey sitting in Newark, New Jersey for the adjudication of any civil action asserted
pursuant to this Paragraph.
(b)
Counterparts. This Agreement may be executed in two or more
identical 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. In the event any signature page is delivered by facsimile transmission, the party using such means of delivery shall cause four (4) additional original executed signature pages to be physically delivered to the other party within five (5) days of the execution and delivery-hereof.
(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 in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.
(e)
Entire Agreement, Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyer(s), the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and this Agreement
and the instruments referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be charged with
enforcement.
(f)
Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon confirmation of receipt, when sent by facsimile; (iii) three (3) days after being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day after deposit with a nationally
21
recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:
If to the Company, to:
Pacer Health Corporation
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Rainier ▇▇▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone:
(▇▇▇)▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇)▇▇▇-▇▇▇▇
If to the Buyer(s), to its address and facsimile number on Schedule I, with copies to the Buyer's counsel as set forth on Schedule I. Each party shall provide five (5) days' prior written notice to the other party of any change in address or facsimile number.
(g)
Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and assigns. Neither the Company nor any Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party hereto.
(h)
No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
(i)
Survival. Unless this Agreement is terminated under Section 9(1),
the representations and warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8, shall survive the Closing for a period of two (2) years following the date on which the Convertible Debentures are converted in full. The Buyer(s) shall be responsible only for its own representations, warranties, agreements and covenants hereunder.
(j)
Publicity. The Company and the Buyer(s) shall have the right to
approve, before issuance any press release or any other public statement with respect to the transactions contemplated hereby made by any party; provided, however, that the Company shall be entitled, without the prior approval of the Buyer(s), to issue any press release or other public disclosure with respect to such transactions required under applicable securities or other laws or regulations (the Company shall use its best efforts to consult the Buyer(s) in connection with any such press release or other public disclosure prior to its release and Buyer(s) shall be provided with a copy thereof upon release thereof).
22
(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.
(1)
Termination. In the event that the First Closing shall not have
occurred with respect to the Buyers on or before five (5) business days from the date hereof due to the Company's or the Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above (and the non-breaching party's failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party; provided, however, that if this Agreement is terminated by the Company pursuant to this Section 9 (1), the Company shall remain obligated to reimburse the Buyer(s) for the fees and expenses of Yorkville Advisors LLC described in Section 4(g) above.
(in)
Brokerage. The Company represents that no broker, agent, finder
or other party has been retained by it in connection with the transactions contemplated hereby and that no other fee or commission has been agreed by the Company to be paid for or on account of the transactions contemplated hereby.
(n)
No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
23
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.
COMPANY:
PACER HEALTH CORPORATION
By:
/s/ Rainier ▇▇▇▇▇▇▇▇
Name: Rainier ▇▇▇▇▇▇▇▇ Title: CEO
24
09/15/2007
16:24
3058282551
PACER HEALTH
PAGE
03/03
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.
COMPANY:
PACER HEALTH CORPORATION
By., /s/ Rainier ▇▇▇▇▇▇▇▇
Name: Rainier ▇▇▇▇▇▇▇▇
Title: CEO
24
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.
BUYERS:
YA GLOBAL INVESTMENTS, L.P.
By:
Yorkville Advisors, LLC
Its:
Investment Manager
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇
Its:
Portfolio Manager
25
DISCLOSURE SCHEDULE
Schedule 3(a):
Name
State of
Incorporation
Pacer Health Services, Inc.
Florida
Pacer Holdings of Arkansas, Inc.
Florida
Pacer Holdings of Georgia, Inc.
Florida
Pacer Holdings of Kentucky, Inc.
Florida
Pacer Holdings of Louisiana, Inc.
Florida
Pacer Health Management of Florida, LLC
Florida
Pacer Health Management Corporation of Kentucky
Kentucky
Pacer Health Holdings of Lafayette, Inc.
Louisiana
Pacer Health Management Corporation
Louisiana
Pacer Health Psychiatric, Inc.
Louisiana
Pacer Psychiatry of Calcasieu, Inc.
Louisiana
Pacer Health Management Corporation of Georgia
Georgia
Lakeside Regional Hospital, Inc.
Georgia
Woman's OBGYN Center, Inc.
Georgia
Lake Medical Center, Inc.
Georgia
Family Medical Associates, LLC
Georgia
EXHIBIT A
[FORM OF CONVERTIBLE DEBENTURE]
2
EXHIBIT B
[FORM OF WARRANT]
3