INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (the "Agreement") is dated as of December 13,
2005, by and between CORNELL CAPITAL PARTNERS, LP, a Delaware limited
partnership (referred to as "Cornell" and/or a "Buyer"), and MEDICAL STAFFING
SOLUTIONS, INC., a corporation organized and existing under the laws of the
State of Nevada (the "Company").
RECITALS:
WHEREAS, the Company and the Buyer 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 "1933 Act");
WHEREAS, the Buyer has purchased from the Company the following
securities: (i) a twelve percent (12%) promissory note dated January 5, 2005 in
the original principal amount of One Million Ninety Five Thousand Four Hundred
Twenty Eight Dollars and Thirty Eight Cents ($1,095,428.38) and (ii) a twelve
percent (12%) promissory note dated April 25, 2005 in the original principal
amount of Five Hundred Six Thousand Nine Hundred Four Dollars and Eleven Cents
($506,904.11) (collectively referred to as the "Prior Securities"). On September
2, 2005 the Prior Securities were surrendered to the Company and converted into
a single twelve percent (12%) Convertible Debenture in the principal amount of
Two Million One Hundred Thirteen Thousand Three Hundred Thirty Two Dollars and
Eleven Cents ($2,113,332.11) (the "September 2005 Convertible Debenture"), for
consideration solely consisting of surrendering the Prior Securities, which
represented the entire original principal amount of the Prior Securities.
WHEREAS, as of the date hereof, the Buyer is the beneficial owner of the
September 2005 Convertible Debenture. The Buyer desires to surrender the
September 2005 Convertible Debenture plus accrued and unpaid interest on the
September 2005 Convertible Debenture through the date hereof ($2,113,332.11 in
principal plus $70,869.00 as and for interest on the September 2005 Convertible
Debenture, for a total amount equal to $2,184,201.11) for conversion into
preferred stock and to purchase additional preferred stock as outlined below for
the total purchase price of Three Million Dollars ($3,000,000);
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer, as
provided herein, and the Buyer shall purchase up to Three Million Dollars
($3,000,000) of Series A Preferred Shares (the "Series A Preferred Shares"),
which shall be convertible into shares of the Company's common stock, par value
$0.001 (the "Common Stock") (as converted, the "Conversion Shares") which amount
shall solely consist of the surrendering of the September 2005 Convertible
Debenture and an additional cash amount to be purchased by additional funding by
the Buyer (the "Cash Purchase Price") in an amount equal to Eight Hundred
Fifteen Thousand Seven Hundred Ninety-Eight Dollars and Eighty-Nine Cents
($815,798.89), of which Four Hundred Thousand Dollars ($400,000.00) shall be
funded within five (5) business days following the date hereof (the "First
Closing"), and Four Hundred Fifteen Thouand Seven Hundred and Ninety-Eight
Dollars and Eighty-Nine Cents ($415,798.89) shall be funded two (2) business
days prior to the date the registration statement (the "Registration Statement")
is filed, pursuant to the Investor Registration Rights Agreement dated the date
hereof, with the United States Securities and Exchange Commission (the "SEC")
(the "Second Closing") (individually referred to as a "Closing" collectively
referred to as the "Closings"), for a total purchase price of up to Three
Million Dollars ($3,000,000) (the "Purchase Price"); and
WHEREAS, the Company has authorized the following series of its preferred
stock, par value $0.001 per share, the Series A Preferred Shares, which shall be
convertible into shares of the Company's common stock, par value $0.001 per
share (the "Common Stock") and as converted, (the "Conversion Shares"), in
accordance with the terms of the Company Certificate of Designations,
Preferences, and Rights of the Series A Preferred Shares attached hereto as
Exhibit A (the "Certificate of Designations"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit B (the "Investor
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 there under, and applicable state securities laws; and
WHEREAS, the aggregate proceeds of the sale of the Series A Preferred
Shares contemplated hereby shall be held in escrow pursuant to the terms of an
Escrow Agreement substantially in the form attached hereto as Exhibit C (the
"Escrow Agreement"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions substantially in the form attached hereto as Exhibit D (the
"Irrevocable Transfer Agent Instructions"); and
NOW, THEREFORE, in consideration of the mutual premises herein set forth
and certain other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. ISSUANCE OF SHARES AND RELATED TRANSACTIONS.
1.1 Purchase Price. The Purchase Price for the Series A Preferred Shares
shall be paid to the Company in immediately available funds on the Closing Dates
(as set forth in Section 1.2 hereof. The Purchase Price shall be reduced by the
fees described in Section 15.9 hereof.
1.2 Closings. The parties to this Agreement shall consummate the
transactions contemplated by this Agreement and the Company shall issue and sell
to the Buyers for consideration solely consisting of surrendering the September
2005 Convertible Debenture and Eight Hundred Fifteen Thousand Seven Hundred and
Ninety-Eight Dollars and Eighty-Nine Cents ($815,798.89), as provided herein,
and the Buyers, upon surrender of the September 2005 Convertible Debenture plus
accrued and unpaid interest on the September 2005 Convertible Debenture through
the date hereof, shall purchase Three Million Dollars ($3,000,000) of Series A
Preferred Shares, plus funding the Cash Purchase Price, which shall have the
right and designations set forth on Exhibit A hereto of which Four Hundred
Thousand Dollars ($400,000.00) shall be funded on the fifth (5th) business day
following the date hereof (the "First Closing Date") and Four Hundred and
Fifteen Thousand Seven Hundred Ninety-Eight Dollars and Eighty-Nine Cents
($415,798.89) and shall be funded two (2) business days prior to the date the
Registration Statement is filed, pursuant to the Investor Registration Rights
Agreement dated the date hereof, with the SEC (the "Second Closing Date")
(collectively referred to as the "Closings Dates"); provided, in no event shall
the Closing Dates occur prior to the satisfaction of the conditions precedent
set forth in Sections 9, 10 and 11 hereof. The Closing Dates shall take place at
the offices of the Buyer or at such other place as may be mutually agreed upon
by the Buyers and the Company. On the Closing Dates, the Company shall deliver
to the Buyers certificates representing the Series A Preferred Shares.
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1.3 Issuance of Shares. At each Closing, subject to the terms,
restrictions and conditions of this Agreement, the Buyer shall surrender the
September 2005 Convertible Debenture plus accrued and unpaid interest on the
September 2005 Convertible Debenture through the date hereof and shall acquire,
and the Company shall sell, issue for consideration consisting of surrendering
the September 2005 Convertible Debenture and Eight Hundred and Fifteen Thousand
Seven Hundred and Ninety-Eight Dollars and Eighty-Nine Cents ($815,798.89), and
deliver to the Buyers Three Million (3,000,000) shares of Series A Preferred
Shares, which shall have the right and designations set forth on Exhibit A
hereto. All of the Series A Preferred Shares and the Conversion Shares into
which such the Series A Preferred Shares are convertible shall be free and clear
of all liens, claims, pledges, mortgages, restrictions, obligations, security
interests and encumbrances of any kind, nature and description (collectively,
"Encumbrances").
2. ADDITIONAL AGREEMENTS.
2.1 Investor Registration Rights Agreement. Contemporaneously with the
execution and delivery of this Agreement the parties hereto are executing and
delivering a Investor Registration Rights Agreement, substantially in the form
attached hereto as Exhibit B, pursuant to which the Company shall register the
Conversion Shares underlying the Series A Preferred Shares with the SEC.
2.2 Escrow Agreement. Contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering an Escrow
Agreement, substantially in the form attached hereto as Exhibit C, pursuant to
which the aggregate proceeds of the sale of the Series A Preferred Shares shall
be held in escrow pending the Closing.
2.3 Irrevocable Transfer Agent Agreement. Contemporaneously with the
execution and delivery of this Agreement, the parties hereto are executing and
delivering an Irrevocable Transfer Agent Instructions, substantially in the form
attached hereto as Exhibit D.
2.4 Collectively the Investor Registration Rights Agreement, the Escrow
Agreement, and the Irrevocable Transfer Agent Instructions, shall be referred to
as the "Transaction Documents".
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3. COVENANTS.
3.1 Access and Inspection, Etc. The Company shall allow the Buyer and its
authorized representatives full access during normal business hours from and
after the date hereof and prior to the Closing Date to all of the properties,
books, contracts, commitments and records of the Company for the purpose of
making such investigations as the Buyer may reasonably request in connection
with the transactions contemplated hereby, and shall cause the Company to
furnish the Buyer such information concerning its affairs as the Buyer may
reasonably request. The Company has caused and shall cause its personnel to
assist the Buyer in making such investigation and shall use their best efforts
to cause the counsel, accountants, engineers and other non-employee
representatives of the Company to be reasonably available to Buyer for such
purposes.
3.2 Public Announcements. The parties will consult with each other before
issuing any press releases or otherwise making any public statement with respect
to this Agreement or any of the transactions contemplated hereby and no party
will issue any such press release or make any such public statement without the
prior written consent of the other parties, except as may be required by law or
by the rules and regulations of any governmental authority or securities
exchange.
3.3 Best Efforts. Subject to the terms and conditions provided in this
Agreement, each of the parties shall use its best efforts in good faith to take
or cause to be taken as promptly as practicable all reasonable actions that are
within its power to cause to be fulfilled those conditions precedent to its
obligations or the obligations of the other parties to consummate the
transactions contemplated by this Agreement and the Transaction Documents that
are dependent upon its actions.
3.4 Further Assurances. The parties shall deliver any and all other
instruments or documents required to be delivered pursuant to, or necessary or
proper in order to give effect to, the provisions of this Agreement, including,
without limitation, to issue the Series A Preferred Shares and to consummate the
transactions contemplated by this Agreement and the Transaction Documents.
4. NEGATIVE COVENANTS.
The following covenants shall remain in effect for so long as the Series A
Preferred Shares are outstanding:
4.1 Lock-up Agreement. On the date hereof, the Company shall obtain from
each officer and director of the Company a lock-up agreement in the form
attached hereto as Exhibit E. Such lock-up agreement shall prohibit sales of the
Company's Common Stock in excess of the volume limitations of Rule 144 for so
long as the Series A Preferred Shares are outstanding.
4.2 Use of Proceeds. The Company covenants to the Buyers that the net
proceeds to be received by the Company in this transaction shall be used to fund
general corporate purposes.
4.3 No Merger or Sale of Business. The Company hereby agrees that it will
not merge or consolidate with any person or entity, or sell, lease or otherwise
dispose of its assets other than in the ordinary course of business involving an
aggregate consideration of more than ten percent (10%) of the book value of its
assets on a consolidated basis in any twelve (12) month period, or liquidate,
dissolve, recapitalize or reorganize.
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4.4 No Indebtedness. The Company shall not incur any indebtedness for
borrowed money or become a guarantor or otherwise contingently liable for any
such indebtedness except for factoring of its receivables, trade payables or
purchase money obligations incurred in the ordinary course of business.
4.5 No Other Registration Statements. The Company shall not file any other
registration statements on any form (including but not limited to Forms X-0,
XX-0, X-0 and S-8) without the prior written consent of the Buyer.
4.6 Restriction on Issuance of the Capital Stock. The Company covenants
and agrees that, so long as any of the preferred stock remains outstanding, the
Company shall not, without the prior consent of the Buyer, (i) issue or sell any
common stock or preferred stock with or without consideration, (ii) issue or
sell any preferred stock, warrant, option, right, contract, call, or other
security or instrument granting the holder thereof the right to acquire common
stock with or without consideration, (iii) enter into any security instrument
granting the holder a security interest in any of the assets of the Company or
any subsidiary now existing or later created or acquired, except for any
securities interest granted in correction of the factoring of the Company's
receivables, or (iv) file any registration statements on Form S-8.
5. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY.
To induce the Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, the Company represents and warrants to and
covenants with the Buyers as follows:
5.1 Organization; Compliance. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada. The
Company is: (a) entitled to own or lease its properties and to carry on its
business as and in the places where such business is now conducted, and (b) duly
licensed and qualified in all jurisdictions where the character of the property
owned by it or the nature of the business transacted by it makes such license or
qualification necessary, except where the failure to do so would not result in a
material adverse effect on the Company.
5.2 Capitalization and Related Matters.
(a) As of the date hereof, the authorized capital stock of the
Company consists of Three Hundred Million (300,000,000) shares of common stock,
par value $0.001 per share and Thirty Million (30,000,000) shares of preferred
shares, par value $0.001. As of the date hereof, the Company had One Hundred
Seventy Five Million Two Hundred Fifty Three Thousand Six Hundred Seventy Seven
(175,253,677) shares of common stock and zero (0) shares of Preferred Shares
issued and outstanding. No Common Stock (i) was issued in violation of the
preemptive rights of any shareholder, or (ii) is held as treasury stock.
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(b) Except as set forth in the Company's the Company's Form 10-KSB
for the fiscal year ended December 31, 2004 and Form 10-QSB for the fiscal
quarters ended March 31, 2005, June 30, 2005 and September 30, 2005 (the "SEC
Documents") there are no outstanding any securities convertible into Common
Stock or any other capital stock of the Company nor any rights to subscribe for
or to purchase, or any options for the purchase of, or any agreements providing
for the issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, such capital stock or securities
convertible into such capital stock (collectively, "Securities Rights"). The
Company: (i) is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its capital stock; or (ii) has
no liability for dividends or other distributions declared or accrued, but
unpaid, with respect to any capital stock.
(c) The Company is not a party to any agreement, understanding or
arrangement, direct or indirect, relating to any class or series of the
Company's capital stock, including, without limitation, any voting agreement,
restriction on resale, shareholder agreement or registration rights agreement,
other than the Permitted Registration Rights Agreements.
5.3 Subsidiaries and Investments.
(a) The SEC Documents disclose with respect to each Subsidiary (as
defined below) (i) its name, (ii) the jurisdiction of its organization, (iii)
the number of its authorized shares or other equity interests, (iv) the number
of its outstanding shares or other equity interests of each class or series, and
(v) the name of the owner and the number and percentage of outstanding shares or
other equity interests of each class or series of such Subsidiary owned of
record and, if different, owned beneficially by the Company and any other
person. All of the outstanding capital stock and other equity interests of each
of the Subsidiaries is validly issued, fully paid and nonassessable and was
issued in compliance with all applicable federal and state securities or "blue
sky" laws and regulations. There are no securities rights relating to any shares
of capital stock, other equity interests or other securities of any of the
Subsidiaries. The Company and the Subsidiaries have good, marketable and
exclusive title to the shares or other equity interests disclosed in the SEC
Documents as being owned by each of them, free and clear of all Encumbrances.
All rights and powers to vote such shares or other equity interests are held
exclusively by the Company, directly or indirectly through one or more of the
Subsidiaries, as the case may be. Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has the corporate power and authority to own
or lease its properties and to carry on its business as now conducted. For the
purposes hereof, a "Subsidiary" means any corporation, limited liability
company, partnership, joint venture or other entity in which the Company owns,
directly or indirectly, more than 20% of the outstanding voting securities or
equity interests.
(b) Except as disclosed in SEC Documents, the Company does not own,
nor has it ever owned, any equity interest in any corporation, limited liability
company, partnership, joint venture or other entity.
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5.4 Execution; No Inconsistent Agreements; Etc.
(a) This Agreement is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy or similar laws affecting the enforcement of creditors'
rights generally, and the availability of equitable remedies.
(b) The execution and delivery of this Agreement by the Company does
not, and the consummation of the transactions contemplated hereby will not,
constitute a breach or violation of the charter or bylaws of the Company, or a
default under any of the terms, conditions or provisions of (or an act or
omission that would give rise to any right of termination, cancellation or
acceleration under) any note, bond, mortgage, lease, indenture, agreement or
obligation to which the Company is a party, pursuant to which the Company
otherwise receives benefits, or to which any of the properties of the Company is
subject.
5.5 Corporate Records. The statutory records, including the stock register
and minute books of the Company, fully reflect all issuances, transfers and
redemptions of its capital stock, correctly show and will correctly show the
total number of shares of its capital stock issued and outstanding on the date
hereof and on the Closing Date, the charter or other organizational documents
and all amendments thereto, and bylaws as amended and currently in force.
5.6 Financial Statements.
(a) All the foregoing financial statements, and any financial
statements delivered pursuant to subsection (c) below, are referred to herein
collectively as the "Company Financial Statements."
(b) The Company Financial Statements have been and will be prepared
in accordance with U.S. GAAP, applied on a consistent basis (except that the
unaudited statements do not contain all the disclosures required by GAAP), and
fairly reflect and will reflect in all material respects the financial condition
of the Company as at the dates thereof and the results of the operations of the
Company for the periods then ended.
5.7 Liabilities. The Company has no material debt, liability or obligation
of any kind, whether accrued, absolute, contingent or otherwise, except: (a)
those reflected in the SEC Documents, including the notes thereto, and (b)
liabilities incurred in the ordinary course of business, none of which have had
or will have a material adverse effect on the financial condition of the
Company.
5.8 Absence of Changes. Except as described in the SEC Documents and in
the other Schedules to this Agreement:
(a) there has not been any adverse change in the business, assets,
liabilities, results of operations or financial condition of the Company or in
its relationships with suppliers, customers, employees, lessors or others other
than changes in the ordinary course of business, none of which, singularly or in
the aggregate, have had or will have a material adverse effect on the business,
properties or financial condition of the Company; and
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(b) the Company has complied with the covenants and restrictions set
forth in this Agreement.
5.9 Title to Properties. The Company has good and marketable title to all
of its properties and assets, real and personal, including, but not limited to,
those reflected in the SEC Documents (except as since sold or otherwise disposed
of in the ordinary course of business, or as expressly provided for in this
Agreement), free and clear of all Encumbrances of any kind or character except:
(a) those securing liabilities of the Company incurred in the ordinary course
(with respect to which no material default exists); (b) liens of real estate and
personal property taxes; and (c) imperfections of title and Encumbrances, if
any, which, in the aggregate (i) are not substantial in amount; (ii) do not
detract from the value of the property subject thereto or impair the operations
of the Company or; and (iii) do not have a material adverse effect on the
business, properties or assets of the Company.
5.10 Compliance With Law. The business and activities of the Company has
at all times been conducted in accordance with its articles of incorporation and
bylaws and any applicable law, regulation, ordinance, order, License (defined
below), permit, rule, injunction or other restriction or ruling of any court or
administrative or governmental agency, ministry, or body, except where the
failure to do so would not result in a material adverse effect on the Company.
5.11 Taxes. The Company has duly filed all material federal, state, local
and foreign tax returns and reports, and all returns and reports of all other
governmental units having jurisdiction with respect to taxes imposed on it or on
its income, properties, sales, franchises, operations or employee benefit plans
or trusts, all such returns were complete and accurate when filed, and all taxes
and assessments payable by the Company have been paid to the extent that such
taxes have become due. All taxes accrued or payable by the Company for all
periods have been accrued or paid in full, whether or not due and payable and
whether or not disputed. The Company has withheld proper and accurate amounts
from its employees for all periods in full compliance with the tax withholding
provisions of applicable foreign, federal, state and local tax laws. There are
no waivers or agreements by the Company for the extension of time for the
assessment of any taxes. The tax returns of the Company have never been examined
by any authority or other administrative body or court of any state or country.
There are not now any examinations of the income tax returns of the Company
pending, or any proposed deficiencies or assessments against the Company of
additional taxes of any kind. The Company shall duly and timely prepare and file
all material federal, state, local and foreign tax returns and reports necessary
and all returns and reports of all other governmental units having jurisdiction
with respect to taxes imposed on the Company or on its income, properties,
sales, franchises, operations or employee benefit plans or trusts, and all such
returns will be complete and accurate when filed.
5.12 Real Properties. The Company does not have an interest in any real
property, except for the Leases (as defined below).
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5.13 Leases of Real Property. All material leases pursuant to which the
Company is lessee or lessor of any real property (the "Leases") are listed in
the SEC Documents and are valid and enforceable in accordance with their terms.
There is not under any of such leases (a) any material default or any claimed
material default by the Company or any event of default or event which with
notice or lapse of time, or both, would constitute a material default by the
Company and in respect to which the Company has not taken adequate steps to
prevent a default on its part from occurring, or (b) to the knowledge of the
Company, any material default by any lessee of the Company or any event of
default or event which with notice or lapse of time, or both, would constitute a
material default by any lessee. The copies of the Leases heretofore furnished to
Buyers are true, correct and complete, and such Leases have not been modified in
any respect since the date they were so furnished, and are in full force and
effect in accordance with their terms. The Company is lawfully in possession of
all real properties of which they are a lessee (the "Leased Properties").
5.14 Contingencies. Except as disclosed in the SEC Documents, there are no
actions, suits, claims or proceedings pending, or to the knowledge of the
Company threatened against, by or affecting, the Company in any court or before
any arbitrator or governmental agency that may have a material adverse effect on
the Company or which could materially and adversely affect the right or ability
of the Company to consummate the transactions contemplated hereby. To the
knowledge of the Company, there is no valid basis upon which any such action,
suit, claim, or proceeding may be commenced or asserted against it. There are no
unsatisfied judgments against the Company and no consent decrees or similar
agreements to which the Company is subject and which could have a material
adverse effect on the Company.
5.15 Products Liability; Warranties; Insurance. The Company will have not
loss, damage, liability, fine, penalty, cost and expense (each, a "Liability")
that is not fully covered by insurance relating to any product manufactured,
distributed or sold by the Company prior to the Closing, whether or not such
Liability is related to products that are defective or improperly designed or
manufactured or are in breach of any express or implied product warranty.
5.16 Intellectual Property Rights.
(a) The Company owns and possesses all right, title and interest in
and to, or has a valid license to use, all of the Proprietary Rights (as defined
below) necessary for the operation of its business as presently conducted and
none of such Proprietary Rights have been abandoned;
(b) no claim by any third party contesting the validity,
enforceability, use or ownership of any such Proprietary Rights has been made,
is currently outstanding or, to the knowledge of the Company, is threatened, and
to the knowledge of the Company there is no reasonable basis for any such claim;
(c) neither the Company nor any registered agent of any of the
foregoing has received any notice of, nor is the Company aware of any reasonable
basis for an allegation of, any infringement or misappropriation by, or conflict
with, any third party with respect to such Proprietary Rights, nor has the
Company, or any registered agent of any of them received any claim of
infringement or misappropriation of or other conflict with any Proprietary
Rights of any third party;
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(d) the Company has not infringed, misappropriated or otherwise
violated any Proprietary Rights of any third parties, and the Company is not
aware of any infringement, misappropriation or conflict which will occur as a
result of the continued operation of the Company as presently operated and as
contemplated to be operated or as a result of the consummation of the
transactions contemplated hereby; and
(e) all employees who have contributed to or participated in the
conception and/or development of all or any part of the Proprietary Rights which
are not licensed to the Company from a third party either (i) have been party to
a "work-for-hire" arrangement or agreement with the Company, in accordance with
applicable federal and state law, that has accorded the Company full, effective,
exclusive, and original ownership of all tangible and intangible property
thereby arising, or (ii) have executed appropriate instruments of assignment in
favor of the Company as assignee that have conveyed to the Company full,
effective and exclusive ownership of all tangible and intangible property
thereby arising.
(f) As used herein, the term "Proprietary Rights" means all
proprietary information of the Company, as the case may be, including all
patents, patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice), all trademarks, service
marks, trade dress, trade names, corporate names, domain names, copyrights, all
trade secrets, confidential information, ideas, formulae, compositions,
know-how, processes and techniques, drawings, specifications, designs, logos,
plans, improvements, proposals, technical and computer data, documentation and
software, financial, business and marketing plans, and related information and
all other proprietary, industrial or intellectual property rights relating to
the business of the Company, including those proprietary, industrial or
intellectual property rights found at the Company's websites listed in the SEC
Documents.
(g) The consummation of the transactions contemplated by this
Agreement will not adversely affect the right of the Company to continue to use
the Proprietary Rights. To the extent that the registration of any Proprietary
Right is required by law, such Proprietary Right has been duly and validly
registered or filed, and any fees that are necessary to maintain in force any
Proprietary Rights or registrations thereof have been paid.
5.17 Material Contracts. The SEC Documents contain a complete list of all
material contracts of the Company (the "Material Contracts"). Except as
disclosed in the SEC Documents: (a) the Company has performed all material
obligations to be performed by them under all such contracts, and is not in
material default thereof, and (b) no condition exists or has occurred which with
the giving of notice or the lapse of time, or both, would constitute a material
default by the Company or accelerate the maturity of, or otherwise modify, any
such contract, and (c) all such contracts are in full force and effect. No
material default by any other party to any of such contracts is known or claimed
by the Company to exist.
5.18 Employee Benefit Matters.
(a) Except as disclosed in the SEC Documents, the Company does not
provide, nor is it obligated to provide, directly or indirectly, any benefits
for employees other than salaries, sales commissions and bonuses, including, but
not limited to, any pension, profit sharing, stock option, retirement, bonus,
hospitalization, insurance, severance, vacation or other employee benefits
(including any housing or social fund contributions) under any practice,
agreement or understanding.
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(b) With respect to each employee benefit plan maintained on behalf
of the Company (collectively, the "Employee Benefit Plans"), such plan: (a) no
litigation, administrative or other proceeding or claim is pending, or to the
knowledge of the Company, threatened or anticipated involving such plan; (b)
there are no outstanding requests for information by participants or
beneficiaries of such plan; and (c) such plan has been administered in
compliance in all material respects with all applicable laws and regulations.
(c) The Company has timely made payment in full of all contributions
to all of the Employee Benefit Plans which the Company was obligated to make
prior to the date hereof; and there are no contributions declared or payable by
the Company to any Employee Benefit Plan which, as of the date hereof, has not
been paid in full.
5.19 Possession of Franchises, Licences, Etc. The Company: (a) possesses
all material franchises, certificates, licenses, permits and other
authorizations (collectively, the "Licences") from governmental authorities,
political subdivisions or regulatory authorities that are necessary for the
ownership, maintenance and operation of its business in the manner presently
conducted; (b) are not in violation of any provisions thereof; and (c) have
maintained and amended, as necessary, all Licenses and duly completed all
filings and notifications in connection therewith.
5.20 Environmental Matters. Except as disclosed in the SEC Documents: (i)
the Company is not in violation, in any material respect, of any Environmental
Law (as defined below); (ii) the Company has received all permits and approvals
with respect to emissions into the environment and the proper collection,
storage, transport, distribution or disposal of Wastes (as defined below) and
other materials required for the operation of its business at present operating
levels; and (iii) the Company is not liable or responsible for any material
clean up, fines, liability or expense arising under any Environmental Law, as a
result of the disposal of Wastes or other materials in or on the property of the
Company (whether owned or leased), or in or on any other property, including
property no longer owned, leased or used by the Company. As used herein, (a)
"Environmental Laws" means, collectively, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Superfund
Amendments and Reauthorization Act of 1986, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act,
as amended, the Clean Water Act, as amended, any other "Superfund" or
"Superlien" law or any other federal, or applicable state or local statute, law,
ordinance, code, rule, regulation, order or decree (foreign or domestic)
regulating, relating to, or imposing liability or standards of conduct
concerning, Wastes, or the environment; and (b) "Wastes" means and includes any
hazardous, toxic or dangerous waste, liquid, substance or material (including
petroleum products and derivatives), the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Law.
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5.21 Agreements and Transactions with Related Parties. Except as disclosed
on the SEC Documents the Company is not, a party to any contract, agreement,
lease or transaction with, or any other commitment to, (a) a shareholder, (b)
any person related by blood, adoption or marriage to shareholder, (c) any
director or officer of the Company, (d) any corporation or other entity in which
any of the foregoing parties has, directly or indirectly, at least five percent
(5.0%) beneficial interest in the capital stock or other type of equity interest
in such corporation or other entity, or (e) any partnership in which any such
party is a general partner or a limited partner having a five percent (5%) or
more interest therein (any or all of the foregoing being herein referred to as a
"Related Party" and collectively as the "Related Parties"). Without limiting the
generality of the foregoing, except as set forth in the SEC Documents, (a) no
Related Party, directly or indirectly, owns or controls any assets or properties
which are or have been used in the business of the Company, and (b) no Related
Party, directly or indirectly, engages in or has any significant interest in or
connection with any business: (i) which is or which within the last two (2)
years has been a competitor, customer or supplier of, or has done business with,
the Company, or (ii) which as of the date hereof sells or distributes products
or provides services which are similar or related to the products or services of
the Company.
5.22 Business Practices. Except as disclosed in the SEC Documents, the
Company has not, at any time, directly or indirectly, made any contributions or
payment, or provided any compensation or benefit of any kind, to any municipal,
county, state, federal or foreign governmental officer or official, or any other
person charged with similar public or quasi-public duties, or any candidate for
political office. The Company's books, accounts and records (including, without
limitation, customer files, product packaging and invoices) accurately describe
and reflect, in all material respects, the nature and amount of the Company's
products, purchases, sales and other transactions. Without limiting the
generality of the foregoing, the Company has not engaged, directly or
indirectly, in: (a) the practice known as "double-invoicing" or the use or
issuance of pro-forma or dummy invoices; or (b) the incorrect or misleading
labeling, marketing or sale of refurbished goods as new goods.
5.23 Shareholder Matters. None of the matters set forth in this Agreement
require the approval of the Company's shareholders.
5.24 Full Disclosure. No representation or warranty of the Company
contained in this Agreement, and none of the statements or information
concerning the Company contained in this Agreement and the Schedules, contains
or will contain any untrue statement of a material fact nor will such
representations, warranties, covenants or statements taken as a whole omit 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.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER:
To induce the Company to enter into this Agreement and to consummate the
transactions contemplated hereby, the Buyer represents and warrants to and
covenant with the Company as follows:
6.1 Organization. The Buyer is a limited partnership duly organized,
validly existing and in good standing under the laws of Delaware. The Buyer has
all requisite power and authority to execute, deliver and carry out the terms of
this Agreement and the consummation of the transactions contemplated herein.
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6.2 Execution; No Inconsistent Agreements; Etc.
(a) The execution and delivery of this Agreement and the performance
of the transactions contemplated hereby have been duly and validly authorized
and approved by the Buyer and this Agreement is a valid and binding agreement of
the Buyer, enforceable against the Buyer in accordance with its terms, except as
such enforcement may be limited by bankruptcy or similar laws affecting the
enforcement of creditors' rights generally, and the availability of equitable
remedies.
(b) The execution and delivery of this Agreement by the Buyer does
not, and the consummation of the transactions contemplated hereby will not,
constitute a breach or violation of the charter or bylaws of the Buyer, or a
default under any of the terms, conditions or provisions of (or an act or
omission that would give rise to any right of termination, cancellation or
acceleration under) any material note, bond, mortgage, lease, indenture,
agreement or obligation to which the Buyer is a party, pursuant to which any of
them otherwise receive benefits, or by which any of their properties may be
bound.
6.3 Securities Laws.
(a) The Buyer is purchasing the Series A Preferred Shares for
investment purposes.
(b) Investment Representations. The Buyer has been offered the
opportunity to ask questions of, and receive answers from the Company's
management, and the Buyer has been given full and complete access to all
available information and data relating to the business and assets of the
Company and has obtained such additional information about the Company as the
Buyer has deemed necessary in order to evaluate the opportunities, both
financial and otherwise, with respect to the Company and, except as set forth
herein, has not relied on any representation, warranty or other statement
concerning the Company and its evaluation of the decision to consummate the
transactions contemplated herein. In its judgment, the Buyer is sufficiently
familiar with the Company to enable the Buyer to proceed with the transactions
contemplated hereby.
(c) The Buyer is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
(d) The Buyer is a sophisticated investor familiar with the type of
risks inherent in the acquisition of securities such as the Series A Preferred
Shares.
7. [INTENTIONALLY OMITTED]
8. CONDITIONS TO OBLIGATIONS OF ALL PARTIES.
The obligation of the Buyer and the Company to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or before the
Closing, of each of the following conditions; any or all of which may be waived
in whole or in part by the joint agreement of the Buyer and the Company:
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8.1 Absence of Actions. No action or proceeding shall have been brought or
threatened before any court or administrative agency to prevent the consummation
or to seek damages in a material amount by reason of the transactions
contemplated hereby, and no governmental authority shall have asserted that the
within transactions (or any other pending transaction involving the Buyer or the
Company when considered in light of the effect of the within transactions) shall
constitute a violation of law or give rise to material liability on the part of
the Company or the Buyer.
8.2 Consents. The parties shall have received from any suppliers, lessors,
lenders, lien holders or governmental authorities, bodies or agencies having
jurisdiction over the transactions contemplated by this Agreement, or any part
hereof, such consents, authorizations and approvals as are necessary for the
consummation hereof.
9. CONDITIONS TO OBLIGATIONS OF THE BUYER.
All obligations of the Buyer to consummate the transactions contemplated
by this Agreement are subject to the fulfillment and satisfaction of each and
every of the following conditions on or prior to the Closing, any or all of
which may be waived in whole or in part by the Buyers:
9.1 Representations and Warranties. The representations and warranties
contained in Section 5 of this Agreement and in any certificate, instrument,
schedule, agreement or other writing delivered by or on behalf of the Company in
connection with the transactions contemplated by this Agreement shall be true,
correct and complete in all material respects (except for representations and
warranties which are by their terms qualified by materiality, which shall be
true, correct and complete in all respects) as of the Closing Date.
9.2 Certificate of Designations, Preferences and Rights. The Company shall
have filed the Certificate of Designations, Preferences and Rights for the
Series A Preferred Shares with the Nevada Secretary of State and provided the
Buyers a stamped filed copy.
9.3 Compliance with Agreements and Conditions. The Company shall have
performed and complied with all material agreements and conditions required by
this Agreement to be performed or complied with by it prior to or on the Closing
Date.
9.4 Absence of Material Adverse Changes. No material adverse change in the
business, assets, financial condition, or prospects of the Company shall have
occurred, no substantial part of the assets of the Company not substantially
covered by insurance shall have been destroyed due to fire or other casualty,
and no event shall have occurred which has had or will have a material adverse
effect on the business, assets, financial condition or prospects of the Company.
9.5 Board Approval. The Company's Board of Directors shall have taken the
action required by them pursuant to this Agreement, including an amendment to
the Company's articles of incorporation to adopt the rights and preferences of
the Series A Preferred Shares, authorize issuance of the Series A Preferred
Shares and the Conversion Shares to be issued upon conversion of the Series A
Preferred Shares and the reservation of the shares of Conversion Shares to be
issued upon conversion of the Series A Preferred Shares.
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9.6 Other Agreements. The Company shall have executed and delivered to the
Buyers the Transaction Documents all in a form acceptable to the Buyer.
9.7 Other Documents. The Company shall have delivered to the Buyer such
other documents and instruments as the Buyer deems reasonably necessary or
desirable to consummate the transactions contemplated hereby.
9.8 The Buyer shall have received an opinion of counsel from Counsel to
the Company in a form satisfactory to the Buyer.
9.9 The Company shall have provided to the Buyer a certificate of good
standing from the secretary of state from the state in which the company is
incorporated.
9.10 The Company shall have provided to the Investor an acknowledgement,
to the satisfaction of the Buyer, from the Company's independent certified
public accountant as to the Company's ability to provide all consents required
in order to file a registration statement in connection with this transaction.
All documents delivered to the Buyer shall be in form and substance
reasonably satisfactory to the Buyer.
10. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
All of the obligations of the Company to consummate the transactions
contemplated by this Agreement are subject to the fulfillment and satisfaction
of each and every of the following conditions on or prior to the Closing, any or
all of which may be waived in whole or in part by the Company:
10.1 Representations and Warranties. The representations and warranties
contained in Section 6 of this Agreement and in any certificate, instrument,
schedule, agreement or other writing delivered by or on behalf of the Buyer in
connection with the transactions contemplated by this Agreement shall be true
and correct in all material respects (except for representations and warranties
which are by their terms qualified by materiality, which shall be true, correct
and complete in all respects) when made and shall be deemed to be made again at
and as of the Closing Date and shall be true at and as of such time in all
material respects (except for representations and warranties which are by their
terms qualified by materiality, which shall be true, correct and complete in all
respects).
10.2 Compliance with Agreements and Conditions. The Buyer shall have
performed and complied with all material agreements and conditions required by
this Agreement to be performed or complied with by the Buyer prior to or on the
Closing Date.
11. EVENTS OF DEAULT:
11.1 An "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
15
11.2 The Company shall fail to observe or perform any covenant, agreement
or warranty contained in, or otherwise commit any breach or default of any
provision contained herein or in any Transaction Document (as defined in the
Investment Agreement of even date herewith) which is not cured within any
applicable cure period;
11.3 The Company or any subsidiary of the Company shall commence, or there
shall be commenced against the Company or any subsidiary of the Company under
any applicable bankruptcy or insolvency laws as now or hereafter in effect or
any successor thereto, or the Company or any subsidiary of the Company commences
any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or any
subsidiary of the Company or there is commenced against the Company or any
subsidiary of the Company any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of sixty-one (61) days; or the Company or
any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is entered; or
the Company or any subsidiary of the Company suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of sixty-one (61) days; or the Company or any subsidiary of the Company
makes a general assignment for the benefit of creditors; or the Company or any
subsidiary of the Company shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or the
Company or any subsidiary of the Company shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its
debts; or the Company or any subsidiary of the Company shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Company
or any subsidiary of the Company for the purpose of effecting any of the
foregoing;
11.4 The Company or any subsidiary of the Company shall default in any of
its obligations under any other obligation or any mortgage, credit agreement or
other facility, indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be secured or evidenced
any indebtedness for borrowed money or money due under any long term leasing or
factoring arrangement of the Company or any subsidiary of the Company in an
amount exceeding One Hundred Thousand Dollars ($100,000), whether such
indebtedness now exists or shall hereafter be created and such default shall
result in such indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise become due and payable;
11.5 The Common Stock shall cease to be quoted for trading or listed for
trading on the Nasdaq OTC Bulletin Board ("OTC"), Nasdaq SmallCap Market, New
York Stock Exchange or the Nasdaq National Market (each, a "Subsequent Market")
and shall not again be quoted or listed for trading thereon within five (5)
Trading Days of such delisting; or
11.6 The Company shall fail for any reason to deliver Common Stock
certificates to a Holder prior to the fifth (5th) Trading Day after a conversion
or the Company shall provide notice to the Holder, including by way of public
announcement, at any time, of its intention not to comply with requests for
conversions of the Series A Preferred Stock in accordance with the terms hereof.
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11.7 During the time that any portion of the Series A Preferred Stock is
outstanding, if any Event of Default has occurred, all of the outstanding Series
A Preferred Stock and dividends under the Series A Preferred Shares shall be
immediately due and payable notwithstanding any limitations contained in the
Certificate of Designations or the Transaction Documents, as this term is
defined in the Investment Agreement. Upon an event of default the Holders shall
have the right (but not the obligation) to convert the entire amount of the
Series A Preferred Shares outstanding as provided for herein. Upon an Event of
Default, notwithstanding any other provision contained herein or any Transaction
Document, the Holder shall have no obligation to comply with or adhere to any
limitations, if any, on the conversion or sale of the Series A Preferred Stock.
12. INDEMNITY.
12.1 Indemnification by the Company. The Company (hereinafter collectively
called the "Company Indemnitor") shall defend, indemnify and hold harmless the
Buyer, its respective general partners, direct and indirect parent corporations,
subsidiaries and affiliates, its officers, members, directors, employees,
attorneys and agents (hereinafter collectively called the "Buyer Indemnitees")
against and in respect of any and all loss, damage, liability, fine, penalty,
cost and expense, including reasonable attorneys' fees and amounts paid in
settlement (collectively, the "Buyer Losses"), suffered or incurred by any Buyer
Indemnitee by reason of, or arising out of:
(a) any misrepresentation, breach of warranty or breach or
nonfulfillment of any covenant, obligation or agreement of the Company contained
in this Agreement or in any certificate, schedule, instrument or document
delivered to the Buyer by or on behalf of the Company pursuant to the provisions
of this Agreement (without regard to materiality thresholds contained therein);
and
(b) any liabilities of the Company of any nature whatsoever
(including tax liability, penalties and interest), whether accrued, absolute,
contingent or otherwise, (i) existing as of the date of the Company's balance
sheet and required to be shown therein in accordance with GAAP, to the extent
not reflected or reserved against in full in; or (ii) arising or occurring
between September 30, 2005 and the date of this Agreement, except for
liabilities arising in the ordinary course of business, none of which shall have
a material adverse effect on the Company.
(c) Indemnification by the Buyer. The Buyer (hereinafter called the
"Buyer Indemnitor") shall defend, indemnify and hold harmless the Company, its
direct and indirect parent corporations, subsidiaries and affiliates, their
officers, members, directors, employees, attorneys and agents (hereinafter
called "Company Indemnitee") against and in respect of any and all loss, damage,
liability, cost and expense, including reasonable attorneys' fees and amounts
paid in settlement (collectively, "Company Losses"), suffered or incurred by
Company Indemnitee by reason of or arising out of any misrepresentation, breach
of warranty or breach or non-fulfillment of any material covenant, obligation or
agreement of the Buyer contained in this Agreement or in any other certificate,
schedule, instrument or document delivered to the Company by or on behalf of the
Buyer pursuant to the provisions of this Agreement (without regard to
materiality thresholds contained therein).
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12.2 Defense of Claims.
(a) Each party seeking indemnification hereunder (an "Indemnitee"):
(i) shall provide the other party or parties (the "Indemnitor") written notice
of any claim or action by a third party for which an Indemnitor may be liable
under the terms of this Agreement, within ten (10) days after such claim or
action arises and is known to Indemnitee, and (ii) shall give the Indemnitor a
reasonable opportunity to participate in any proceedings and to settle or defend
any such claim or action. The expenses of all proceedings, contests or lawsuits
with respect to such claims or actions shall be borne by the Indemnitor. If the
Indemnitor wishes to assume the defense of such claim or action, the Indemnitor
shall give written notice to the Indemnitee within ten (10) days after notice
from the Indemnitee of such claim or action, and the Indemnitor shall thereafter
assume the defense of any such claim or liability, through counsel reasonably
satisfactory to the Indemnitee, provided that Indemnitee may participate in such
defense at their own expense, and the Indemnitor shall, in any event, have the
right to control the defense of the claim or action. The failure of an
Indemnitee to give any notice required by this Section shall not affect any of
such party's rights under this Section or otherwise, except and to the extent
that such failure is actually prejudicial to the rights or obligations of the
Indemnitor.
(b) If the Indemnitor shall not assume the defense of, or if after
so assuming it shall fail to defend, any such claim or action, the Indemnitee
may defend against any such claim or action in such manner as they may deem
appropriate and the Indemnitees may settle such claim or litigation on such
terms as they may deem appropriate but subject to the Indemnitor's approval,
such approval not to be unreasonably withheld; provided, however, that any such
settlement shall be deemed approved by the Indemnitor if the Indemnitor fails to
object thereto, by written notice to the Indemnitee, within fifteen (15) days
after the Indemnitor's receipt of a written summary of such settlement. The
Indemnitor shall promptly reimburse the Indemnitee for the amount of all
expenses, legal and otherwise, incurred by the Indemnitee in connection with the
defense and settlement of such claim or action.
(c) If a non-appealable judgment is rendered against any Indemnitee
in any action covered by the indemnification hereunder, or any lien attaches to
any of the assets of any of the Indemnitee, the Indemnitor shall immediately
upon such entry or attachment pay such judgment in full or discharge such lien
unless, at the expense and direction of the Indemnitor, an appeal is taken under
which the execution of the judgment or satisfaction of the lien is stayed. If
and when a final judgment is rendered in any such action, the Indemnitor shall
forthwith pay such judgment or discharge such lien before any Indemnitee is
compelled to do so.
12.3 Waiver. The failure of any Indemnitee to give any notice or to take
any action hereunder shall not be deemed a waiver of any of the rights of such
Indemnitee hereunder, except to the extent that Indemnitor is actually
prejudiced by such failure.
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13. TERMINATION.
13.1 Termination. This Agreement may be terminated at any time on or prior
to the Closing:
(a) By mutual consent of the Buyer and the Company; or
(b) At the election of the Buyer if: (i) a Company has breached or
failed to perform or comply with any of its representations, warranties,
covenants or obligations under this Agreement; or (ii) any of the conditions
precedent set forth in Section 3, 4 or 9 is not satisfied as and when required
by this Agreement; or (iii) the Closing has not been consummated by within five
(5) business days from the date hereof; or
(c) At the election of the Company if: (i) the Buyer has breached or
failed to perform or comply with any of its representations, warranties,
covenants or obligations under this Agreement; or (ii) any of the conditions
precedent set forth in Section 6 or 9 is not satisfied as and when required by
this Agreement; or (iii) the Closing has not been consummated by within five (5)
business days from the date hereof.
13.2 Manner and Effect of Termination. Written notice of any termination
("Termination Notice") pursuant to this Section 13 shall be given by the party
electing termination of this Agreement ("Terminating Party") to the other party
or parties (collectively, the "Terminated Party"), and such notice shall state
the reason for termination. The party or parties receiving Termination Notice
shall have a period of ten (10) days after receipt of Termination Notice to cure
the matters giving rise to such termination to the reasonable satisfaction of
the Terminating Party. If the matters giving rise to termination are not cured
as required hereby, this Agreement shall be terminated effective as of the close
of business on the tenth (10th) day following the Terminated Party's receipt of
Termination Notice. Upon termination of this Agreement prior to the consummation
of the Closing and in accordance with the terms hereof, this Agreement shall
become void and of no effect, and none of the parties shall have any liability
to the others, except that nothing contained herein shall relieve any party
from: (a) its obligations under Sections 3.2 and 3.3; or (b) liability for its
intentional breach of any representation, warranty or covenant contained herein,
or its intentional failure to comply with the terms and conditions of this
Agreement or to perform its obligations hereunder.
14. MISCELLANEOUS.
14.1 Notices.
(a) All notices, requests, demands, or other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given upon receipt if delivered in person, or upon the expiration of two (2)
days after the date sent, if sent by federal express (or similar overnight
courier service) to the parties at the following addresses:
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If to the Company, to: Medical Staffing Solutions, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xx. X.X. Xxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx - Xxxxx 0000
Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If the Buyer, to the address and facsimile numbers of Schedule I, with
copies to 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.
(b) Notices may also be given in any other manner permitted by law,
effective upon actual receipt. Any party may change the address to which
notices, requests, demands or other communications to such party shall be
delivered or mailed by giving notice thereof to the other parties hereto in the
manner provided herein.
14.2 Survival. The representations, warranties, agreements and
indemnifications of the parties contained in this Agreement or in any writing
delivered pursuant to the provisions of this Agreement shall survive any
investigation heretofore or hereafter made by the parties and the consummation
of the transactions contemplated herein and shall continue in full force and
effect after the Closing.
14.3 Counterparts; Interpretation. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same instrument. This Agreement supersedes
all prior discussions and agreements between the parties with respect to the
subject matter hereof, and this Agreement contains the sole and entire agreement
among the parties with respect to the matters covered hereby. All Schedules
hereto shall be deemed a part of this Agreement. This Agreement shall not be
altered or amended except by an instrument in writing signed by or on behalf of
all of the parties hereto. No ambiguity in any provision hereof shall be
construed against a party by reason of the fact it was drafted by such party or
its counsel. For purposes of this Agreement: "herein", "hereby", "hereunder",
"herewith", "hereafter" and "hereinafter" refer to this Agreement in its
entirety, and not to any particular subsection or paragraph. References to
"including" means including without limiting the generality of any description
preceding such term. Nothing expressed or implied in this Agreement is intended,
or shall be construed, to confer upon or give any person other than the parties
hereto any rights or remedies under or by reason of this Agreement.
14.4 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 exclusively in Xxxxxx County, New Jersey, and
expressly consent to the jurisdiction and venue of the Superior Court of New
Jersey, sitting in Xxxxxx County, New Jersey and the United States District
Court of New Jersey, sitting in Newark, New Jersey, for the adjudication of any
civil action asserted pursuant to this paragraph. Each party hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of any such action in the forum selected
hereby.
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14.5 Successors and Assigns; Assignment. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, legal representatives, and successors; provided, however, that
the Company may not assign this Agreement or any rights hereunder, in whole or
in part.
14.6 Partial Invalidity and Severability. All rights and restrictions
contained herein may be exercised and shall be applicable and binding only to
the extent that they do not violate any applicable laws and are intended to be
limited to the extent necessary to render this Agreement legal, valid and
enforceable. If any terms of this Agreement not essential to the commercial
purpose of this Agreement shall be held to be illegal, invalid or unenforceable
by a court of competent jurisdiction, it is the intention of the parties that
the remaining terms hereof shall constitute their agreement with respect to the
subject matter hereof and all such remaining terms shall remain in full force
and effect. To the extent legally permissible, any illegal, invalid or
unenforceable provision of this Agreement shall be replaced by a valid provision
which will implement the commercial purpose of the illegal, invalid or
unenforceable provision.
14.7 Waiver. Any term or condition of this Agreement may be waived at any
time by the party which is entitled to the benefit thereof, but only if such
waiver is evidenced by a writing signed by such party. No failure on the part of
a party hereto to exercise, and no delay in exercising, any right, power or
remedy created hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or remedy by any such party
preclude any other future exercise thereof or the exercise of any other right,
power or remedy. No waiver by any party hereto to any breach of or default in
any term or condition of this Agreement shall constitute a waiver of or assent
to any succeeding breach of or default in the same or any other term or
condition hereof.
14.8 Headings. The headings as to contents of particular paragraphs of
this Agreement are inserted for convenience only and shall not be construed as a
part of this Agreement or as a limitation on the scope of any terms or
provisions of this Agreement.
14.9 Expenses.
(a) Structuring Fees. The Company shall pay a structuring fee to
Yorkville Advisors, LLC of Ten Thousand Dollars ($10,000), which shall be paid
directly from the proceeds held in escrow of the First Closing.
(b) Fees and Expenses. Each of the Company and the Buyers shall pay
all costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of this
Agreement and all related documents to this transaction. The Company shall pay
Yorkville Advisors LLC a fee equal to Eighty-One Thousand Five Hundred
Seventy-Nine Dollars and Eighty-Nine Cents ($81,579.89), of which Forty Thousand
Dollars ($40,000) shall be paid directly from the proceeds held in escrow for
the First Closing and which shall be paid directly from the proceeds held in
escrow for the Second Closing.
21
(c) The Company shall issue also issue to the Buyer a warrant to
purchase Fifteen Million (15,000,000) shares of the Company's Common Stock (the
"Buyer Warrant") exercisable for a period of five (5) years at an exercise price
of Three Cents ($0.03) per share. The shares of the Company's Common Stock
issuable upon exercise of the Buyer Warrant shall have "piggy-back" and demand
registration rights.
14.10 Finder's Fees. The Buyer represents to the Company 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 have been
agreed to by the Buyer to be paid for or on account of the transactions
contemplated hereby. The Company represents to the Buyer that no broker, agent,
finder or other party has been retained by the Company 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.
14.11 Gender. Where the context requires, the use of the singular form
herein shall include the plural, the use of the plural shall include the
singular, and the use of any gender shall include any and all genders.
14.12 Currency. All foreign currency amounts required to be converted to
U.S. Dollars for purposes of this Agreement shall be converted in accordance
with GAAP.
14.13 Acceptance by Fax. This Agreement shall be accepted, effective and
binding, for all purposes, when the parties shall have signed and transmitted to
each other, by telecopier or otherwise, copies of the signature pages hereto.
14.14 Attorneys' Fees. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any provision of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees,
court costs and all expenses (including, without limitation, all such fees,
costs and expenses incident to appellate, bankruptcy, post-judgment and
alternative dispute resolution proceedings), incurred in that action or
proceeding, in addition to any other relief to which such party may be entitled.
22
14.15 NO JURY TRIAL. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT AND ANY DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS AGREEMENT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23
IN WITNESS WHEREOF, the parties have executed this Investment Agreement or
caused this Investment Agreement to be duly executed by their duly authorized
officers as of the day and year first above written.
COMPANY:
MEDICAL STAFFING SOLUTIONS, INC.
By: /s/ Xx. X.X. Xxxxx
-------------------------------------
Name: Xx. X.X. Xxxxx
Title: President
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
Its: President and Portfolio Manager
24
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF THE SERIES A PREFERRED SHARES
A-1
EXHIBIT B
FORM OF INVESTOR REGISTRATION RIGHTS AGREEMENT
B-1
EXHIBIT C
FORM OF ESCROW AGREEMENT
C-1
EXHIBIT D
FORM IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
D-1
EXHIBIT E
The undersigned hereby agrees that for a period commencing on December
___, 2005 and expiring on the later of (a) the date that all amounts owed to the
Buyers or any successors or assigns, under the Series A Preferred Shares issued
to the Buyers pursuant to the Investment Agreement between the Company and the
Buyers dated December___, 2005 have been paid or converted (the "Lock-up
Period"), he, she or it will not, directly or indirectly, without the prior
written consent of the Buyers, issue, offer, agree or offer to sell, sell, grant
an option for the purchase or sale of, transfer, pledge, assign, hypothecate,
distribute or otherwise encumber or dispose of except pursuant to Rule 144 of
the General Rules and Regulations under the Securities Act of 1933, as amended,
any securities of the Company, including common stock or options, rights,
warrants or other securities underlying, convertible into, exchangeable or
exercisable for or evidencing any right to purchase or subscribe for any common
stock (whether or not beneficially owned by the undersigned), or any beneficial
interest therein (collectively, the "Securities").
In order to enable the aforesaid covenants to be enforced, the undersigned
hereby consents to the placing of legends and/or stop-transfer orders with the
transfer agent of the Company's securities with respect to any of the Securities
registered in the name of the undersigned or beneficially owned by the
undersigned, and the undersigned hereby confirms the undersigned's investment in
the Company.
Dated: _______________, 2005 Signature
----------------------------------------
Name:
-----------------------------------
Address:
--------------------------------
City, State, Zip Code:
------------------
----------------------------------------
Print Social Security Number
or Taxpayer I.D. Number
E-1
SCHEDULE I
SCHEDULE OF BUYERS
--------------------------------------------------------------------------------------------------------
Address/Facsimile
Name Number of Buyers Amount of Subscription
--------------------------------------------------------------------------------------------------------
Cornell Capital Partners, LP 000 Xxxxxx Xxxxxx - Xxxxx 0000 $3,000,000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
With a copy to: Xxxxx Xxxxxxxx, Esq. 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
I-1
