EXHIBIT 10.1
PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement"), dated as of February 4,
2002, by and between I-TRAX, INC., a Delaware corporation (the "Company"), and
PALLADIN OPPORTUNITY FUND LLC (the "Purchaser").
The Company wishes to sell to the Purchaser, and the Purchaser
wishes to buy, on the terms and subject to the conditions set forth in this
Agreement, (i) a 6% Convertible Senior Debenture in the form attached hereto as
Exhibit A (the "Closing Debenture") and (ii) a Warrant in the form attached
hereto as Exhibit B (the "Closing Warrant"). In connection with such purchase
and sale, the Company has granted to the Purchaser an option to purchase an
additional debenture (the "Option Debenture") and an additional warrant (the
"Option Warrant"), in the forms of Exhibit A and Exhibit B, respectively. The
Closing Debenture and the Option Debenture are together referred to herein as
the "Debentures" and the Closing Warrant and the Option Warrant are together
referred to herein as the "Warrants". The Warrants are exercisable, from the
issue date therefor through the fifth anniversary thereof, into shares (the
"Warrant Shares") of the Company's common stock (the "Common Stock"), and the
Debentures are convertible into shares (the "Conversion Shares") of Common
Stock. The Debentures, the Warrants, the Conversion Shares and the Warrant
Shares are collectively referred to herein as the "Securities".
The sale of the Debentures and the Warrants by the Company
hereunder will be effected in reliance upon the exemption from securities
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and/or Rule 506 of Regulation D ("Regulation D") as
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act.
In consideration of the mutual agreements contained herein,
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF THE DEBENTURES AND WARRANTS.
1.1 Agreement to Purchase and Sell; Initial Closing. Upon the terms and
subject to the satisfaction or waiver of the conditions set forth herein, the
Company agrees to sell and the Purchaser agrees to purchase (i) a Closing
Debenture in the principal amount of $2,000,000 and (ii) a Closing Warrant
exercisable into 1,538,461 Warrant Shares. The Closing Warrant will have an
exercise price per share equal to $1.10. The date on which the closing (the
"Initial Closing") of the purchase and sale of the Closing Debenture and Closing
Warrant occurs is hereinafter referred to as the "Initial Closing Date". The
purchase price for the Closing Debenture and Closing Warrant (the "Purchase
Price") shall be equal to the principal amount of the Closing Debenture. Subject
to the satisfaction or waiver of the conditions set forth herein, the Initial
Closing will be deemed to occur when the Company and the Purchaser execute and
deliver this Agreement and the other Transaction Documents (as defined below),
which delivery may be effected by facsimile transmission, and full payment of
the Purchase Price has been made by wire transfer of immediately available funds
to one or more accounts designated by the Company against physical delivery by
the Company of duly executed certificates representing the Closing Debenture and
Closing Warrant.
1.2 Purchase of Option Debenture and Option Warrant.
(a) The Purchaser shall have the right to purchase from the
Company, at any time during the period beginning on the Initial Closing Date and
ending on the one-year anniversary thereof (the "Option Period"), (i) an Option
Debenture with a principal amount of $1 million (or such lesser amount as may be
determined by the Purchaser in its sole discretion) and (ii) an Option Warrant
exercisable into a number of shares of Common Stock equal to (A) the principal
amount of the Option Debenture divided by $1.30. For the avoidance of doubt, the
parties acknowledge that the Conversion Price for the Option Debenture
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(including without limitation the Initial Conversion Price) will be the same as
the Conversion Price for the Closing Debenture, and the Exercise Price for the
Option Warrant will be the same as the Exercise Price for the Closing Warrant.
(b) In order to exercise such option, the Purchaser must
deliver a written notice (the "Option Notice") to the Company specifying the
principal amount of the Option Debenture and the date on which the closing (the
"Option Closing") of the purchase and sale of the Option Debenture and Option
Warrant is to occur (the "Option Closing Date"), which date shall be at least
three (3) Business Days following delivery of the Option Notice to the Company.
The Purchaser may rescind the Option Notice and terminate its purchase of the
Option Debenture and the Option Warrant at any time prior to the Option Closing,
for any reason in its sole discretion, without any further obligation or
liability on its part with respect to the purchase of the Option Debenture and
the Option Warrant. The Initial Closing and the Option Closing are together
referred to herein as the "Closings" and the Initial Closing Date and the Option
Closing Date are together referred to herein as the "Closing Dates".
(c) At the Option Closing, (A) the Purchaser shall deliver to
the Company, in immediately available funds, the purchase price for the Option
Debenture and Option Warrant, which purchase price shall be equal to the
principal amount of the Option Debenture, and (B) the Company shall deliver to
the Purchaser (x) certificates representing the Option Debenture and Option
Warrant, respectively, (y) an opinion of counsel substantially in the form of
Exhibit 5.1.5 hereto, and (z) a certificate, signed by the Chief Executive
Officer of the Company, certifying that the representations and warranties of
the Company set forth in this Agreement are true and correct in all material
respects as of the Option Closing Date as if made on such date and that the
Company has complied with or performed in all material respects all of the
agreements, obligations and conditions set forth in this Agreement that are
required to be complied with or performed by the Company at or prior to the
Option Closing, and the Purchaser may rely on such certificate as though it were
a representation and warranty of the Company made herein.
1.3 Certain Definitions. When used herein, the following terms
shall have the respective meanings indicated:
"Affiliate" means, as to any Person (the "subject Person"),
any other Person (a) that directly or indirectly through one or more
intermediaries controls or is controlled by, or is under direct or indirect
common control with, the subject Person, (b) that directly or indirectly
beneficially owns or holds ten percent or more of any class of voting equity of
the subject Person, or (c) ten percent or more of the voting equity of which is
directly or indirectly beneficially owned or held by the subject Person. For the
purposes of this definition, "control" when used with respect to any Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, through
representation on such Person's Board of Directors or other management committee
or group, by contract or otherwise.
"Agreement" means this Agreement and any and all amendments,
modifications, supplements, renewals, extensions or restatements hereof, and all
attachments hereto.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks are authorized or required by law to close
in the City of New York.
"Conversion Price" shall have the meaning specified in the
Debentures.
"Debt" means as to any Person at any time (without
duplication): (a) all indebtedness, liabilities and obligations of such Person
for borrowed money; (b) all indebtedness, liabilities and obligations of such
Person to pay the deferred purchase price of Property or services, except trade
accounts payable of such Person arising in the ordinary course of business that
are not past due by more than 120 days and, to the extent such trade accounts
payable are past due by more than 90 days, are set forth on Schedule 3.5; (c)
all capital lease obligations of such Person; (d) all Debt of others guaranteed
by such Person; (e) all indebtedness, liabilities and obligations secured by a
Lien existing on Property owned by such Person, whether or not the indebtedness,
liabilities or obligations secured thereby have been assumed by such Person or
are non-recourse to such Person; (f) all reimbursement obligations of such
Person (whether contingent or otherwise) in respect of letters of credit,
bankers' acceptances, surety or other bonds and similar instruments; and (g) all
indebtedness, liabilities and obligations of such Person to redeem or retire
shares of capital stock of such Person.
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"Default" means an Event of Default or the occurrence of an
event or condition which with notice or lapse of time or both would become an
Event of Default.
"Environmental Law" means any federal, state, provincial,
local or foreign law, statute, code or ordinance, principle of common law, rule
or regulation, as well as any Permit, order, decree, judgment or injunction
issued, promulgated, approved or entered thereunder, relating to pollution or
the protection, cleanup or restoration of the environment or natural resources,
or to the public health or safety, or otherwise governing the generation, use,
handling, collection, treatment, storage, transportation, recovery, recycling,
discharge or disposal of hazardous materials.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder.
"Event of Default" has the meaning set forth in the
Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended (or any successor act), and the rules and regulations thereunder (or
respective successors thereto).
"Exercise Price" shall have the meaning specified in the
Warrants.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis, as set forth in opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or their respective
successors and which are applicable in the circumstances as of the date in
question. Accounting principles are applied on a "consistent basis" when the
accounting principles applied in a current period are comparable in all material
respects to those accounting principles applied in a preceding period.
"Governmental Authority" means any nation or government, any
state, provincial or political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including without limitation any stock exchange,
securities market or self-regulatory organization.
"Governmental Requirement" means any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction, franchise,
license or other directive or requirement of any federal, state, county,
municipal, parish, provincial or other Governmental Authority or any department,
commission, board, court, agency or any other instrumentality of any of them.
"Initial Conversion Price" shall have the meaning specified in
the Debentures.
"Intellectual Property" means any U.S. or foreign patents,
patent applications, trademarks, trade names, service marks, brand names, logos
and other trade designations (including unregistered names and marks), trademark
and service xxxx registrations and applications, copyrights and copyright
registrations and applications, inventions, invention disclosures, protected
formulae, formulations, processes, methods, trade secrets, computer software,
computer programs and source codes, manufacturing research and similar technical
information, engineering know-how, customer and supplier information, assembly
and test data drawings or royalty rights.
"Lien" means, with respect to any Property, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, tax lien, financing statement, pledge, charge, or other lien, charge,
easement (other than any easement not materially impairing usefulness),
encumbrance, preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever on or with respect to such Property
(including, without limitation, any conditional sale or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
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"Material Adverse Effect" means a material adverse effect on
(i) the consolidated business, operations, properties, financial condition, or
results of operations of the Company and its Subsidiaries taken as a whole or
(ii) the ability of the Company to perform its obligations under this Agreement
or under the other Transaction Documents (as defined below).
"Material Contracts" means, as to the Company, any supply,
purchase, service, employment, tax, indemnity, stockholder or other agreement or
contract for which the aggregate amount or value of services performed or to be
performed for or by, or funds or other Property transferred or to be transferred
to or by, the Company, or by which the Company or any of its Properties is
otherwise bound and any and all amendments, modifications, supplements, renewals
or restatements thereof.
"Maturity Date" with respect to a Debenture shall mean the
two-year anniversary of the issue date for such Debenture, or such earlier date
to which the Maturity Date may be accelerated pursuant to the terms of such
Debenture.
"Obligations" means any and all indebtedness, liabilities and
obligations of the Company to the Purchaser evidenced by and/or arising pursuant
to any of the Transaction Documents (including, without limitation, this
Agreement and the Debentures), now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, including, without
limitation, the obligations of the Company to repay principal of the Debentures,
to pay interest on the Debentures (including, without limitation, interest
accruing after any, if any, bankruptcy, insolvency, reorganization or other
similar filing) and to pay all fees, indemnities, costs and expenses (including
attorneys' fees) provided for in the Transaction Documents.
"Pension Plan" means an employee benefit plan (as defined in
ERISA) maintained by the Company for employees of the Company or any of its
Affiliates.
"Permitted Liens" mean those Liens listed on Schedule 1.3
hereto and the following:
(a) encumbrances consisting of easements,
rights-of-way, zoning restrictions or other restrictions on the use of
real Property or imperfections to title that do not (individually or in
the aggregate) materially impair the ability of the Company or any of
its Subsidiaries to use such Property in its businesses, and none of
which is violated in any material respect by existing or proposed
structures or land use;
(b) Liens for taxes, assessments or other
governmental charges that are not delinquent or which are being
contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the Property
subject to such Liens, and for which adequate reserves (as determined
in accordance with GAAP) have been established; and
(c) Liens of mechanics, materialmen, warehousemen,
carriers, landlords or other similar statutory Liens securing
obligations that are not yet due and are incurred in the ordinary
course of business or which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the Property subject to such
Liens, and for which adequate reserves (as determined in accordance
with GAAP) have been established.
"Person" means any individual, corporation, trust,
association, company, partnership, joint venture, limited liability company,
joint stock company, Governmental Authority or other entity.
"Property" means property and/or assets of all kinds, whether
real, personal or mixed, tangible or intangible (including, without limitation,
all rights relating thereto).
"Registration Rights Agreement" means the agreement of even
date herewith between the Company and the Purchaser relating to the registration
of the shares of Common Stock issuable pursuant to the Debentures and the
Warrants.
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"Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Restricted Payment" means (a) any dividend or other
distribution (whether in cash, Property or obligations), direct or indirect, on
account of (or the setting apart of money for a sinking or other analogous fund
for) any shares of any class of capital stock of the Company or any of its
Subsidiaries now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to all of the holders of that class; (b) any
redemption, conversion, exchange, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of capital stock of the Company or any of its Subsidiaries now or
hereafter outstanding, except (i) the Warrants and (ii) as may be set forth on
Schedule 1.3; (c) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, purchase, retirement or
defeasance of, or payment with respect to, any Debt other than with respect to
the Debentures and the Warrants; and (d) any loan, advance or payment to any
officer, director or stockholder of the Company or any of its Subsidiaries,
exclusive of reasonable compensation paid to officers or directors paid in the
ordinary course of business. Notwithstanding the foregoing, (x) the issuance of
securities upon exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof and set forth on
Schedule 3.5 or (y) the grant of additional options or warrants or the issuance
of additional securities, (i) in each such case, under any Company stock option
or restricted stock plan approved by the Board of Directors of the Company and
(ii) in the case of (y) above, not to exceed, individually or collectively with
all other such grants or issuances, on a fully-converted basis, five percent
(5%) of the number of shares of Common Stock outstanding on the date of such
grant or issuance, shall not be deemed to be a Restricted Payment.
"Subordinated Debt" means Debt of the Company which meets each
of the following requirements: (a) such Debt is wholly unsecured; and (b) such
Debt is contractually subordinated, as to payment, to the payment in full of the
Debentures and the Obligations on terms, and pursuant to written agreements in
form and substance, satisfactory to the Purchaser.
"Subordinated Debt Documents" means any and all agreements,
documents and instruments now or hereafter evidencing or governing the
subordination of any Subordinated Debt to the Obligations.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which at least a majority of the outstanding
shares of stock or other ownership interests having by the terms thereof
ordinary voting power to elect a majority of the board of directors (or Persons
performing similar functions) of such corporation or entity (irrespective of
whether or not at the time, in the case of a corporation, stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more of its Subsidiaries
or by such Person and one or more of its Subsidiaries.
"Trading Day" shall mean any day on which the Common Stock is
purchased and sold on the principal market on which the Common Stock is then
listed or traded.
"Transaction Documents" means (i) this Agreement, (ii) the
Debentures, (iii) the Warrants, (iv) the Registration Rights Agreement and (v)
all other agreements, documents and other instruments executed and delivered by
or on behalf of the Company or any of its officers at any Closing.
"WellComm Agreement" means the merger agreement, dated January
28, 2002, between the Company and WellComm Group, Inc. ("WellComm") concerning
the merger of WellComm with and into the Company.
1.4 Other Definitional Provisions. All definitions contained
in this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein" and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement.
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2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Company
and agrees with the Company that, as of the date of this Agreement:
2.1 Authorization; Enforceability. The Purchaser is duly
organized, validly existing and in good standing under the laws of Delaware with
full power and authority to purchase the Securities and to execute, deliver and
perform its obligations under this Agreement and the Registration Rights
Agreement. This Agreement and the Registration Rights Agreement each constitutes
the Purchaser's valid and legally binding obligation, enforceable in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally.
2.2 Accredited Investor; Purchase as Principal. The Purchaser
is an "accredited investor" as that term is defined in Rule 501 of Regulation D,
and is acquiring the Securities solely for its own account as a principal and
not with a present view to the public resale or distribution of all or any part
thereof, except pursuant to sales or other transfers (including without
limitation in connection with a pledge) that are exempt from the registration
requirements of the Securities Act and/or sales registered under the Securities;
provided, however that in making such representation, the Purchaser does not
agree to hold any Securities for any minimum or specific term and reserves the
right to sell, transfer or otherwise dispose of the Securities at any time in
accordance with the provisions of this Agreement and with Federal and state
securities law applicable to such sale, transfer or disposition, including
without limitation applicable prospectus delivery requirements.
2.3 Information. The Company has provided the Purchaser with
information regarding the business, operations and financial condition of the
Company, and has granted to the Purchaser the opportunity to ask questions of
and receive answers from representatives of the Company, its officers,
directors, employees and agents concerning the Company and materials relating to
the terms and conditions of the purchase and sale of the Securities. Neither
such information nor any other investigation conducted by the Purchaser or any
of its representatives shall modify, amend or otherwise affect the Purchaser's
right to rely on the Company's representations and warranties contained in this
Agreement.
2.4 Limitations on Disposition. The Purchaser acknowledges
that, except as provided in the Registration Rights Agreement, the Securities
have not been and are not being registered under the Securities Act and may not
be transferred or resold without registration under the Securities Act or unless
pursuant to an exemption therefrom. Notwithstanding the foregoing, the Purchaser
may at any time and from time to time pledge the Securities (or any portion
thereof) pursuant to a bona fide margin agreement with a broker-dealer or
financial institution
2.5 Legends. The Purchaser understands that the certificates
representing the Securities may bear at issuance 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 (the "Securities Act"), or the securities
laws of any state, and may not be offered or sold unless a registration
statement under the Securities Act and applicable state securities laws shall
have become effective with regard thereto, or an exemption from registration
under such laws is available in connection with such offer or sale."
Notwithstanding the foregoing, it is agreed that as long as
(A) the resale or transfer (including without limitation a pledge) of any of the
Securities is registered pursuant to an effective registration statement, (B)
such Securities have been publicly sold pursuant to Rule 144 under the
Securities Act ("Rule 144"), or (C) such Securities can be publicly sold
pursuant to Rule 144(k) under the Securities Act, such Securities shall be
issued without any legend or other restrictive language and, with respect to
such Securities upon which such legend is stamped, the Company shall issue new
certificates without such legend to the holder promptly upon request.
2.6 Reliance on Exemptions. The Purchaser understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of the
representations and warranties of the Purchaser set forth in this Section 2 in
order to determine the availability of such exemptions and the eligibility of
the Purchaser to acquire the Securities.
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3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser
and agrees with the Purchaser that, as of the date of this Agreement:
3.1 Organization, Good Standing and Qualification. Each of the
Company and its Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite corporate power and authority to carry on its business as
now conducted. Each of the Company and its Subsidiaries is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify has had or could reasonably be expected to have a Material
Adverse Effect.
3.2 Authorization; Consents. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
the Transaction Documents, to issue and sell the Debentures and Warrants to the
Purchaser in accordance with the terms hereof, to issue and deliver Conversion
Shares in accordance with the terms of the Debentures and to issue and deliver
Warrant Shares in accordance with the terms of the Warrants. All corporate
action on the part of the Company by its officers, directors and stockholders
necessary for the authorization, execution and delivery of, and the performance
by the Company of its obligations under, the Transaction Documents has been, or
as of such date will be, taken, and no further consent or authorization of the
Company, its Board of Directors, its stockholders, any governmental agency or
organization (other than such approval as may be required under the Securities
Act and applicable state securities laws in respect of the Registration Rights
Agreement), or any other person or entity is required (pursuant to any rule of
the National Association of Securities Dealers, Inc. (the "NASD"), or
otherwise).
3.3 Enforcement. Each of the Transaction Documents
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally.
3.4 Disclosure Documents; Agreements; Financial Statements;
Other Information. The Company has filed with the Commission: (i) the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2000, (ii) the
Company's Quarterly Reports on Form 10-QSB for the quarters ended March 31,
2001, June 30, 2001 and September 30, 2001, and (iii) all Current Reports on
Form 8-K filed during the period beginning on December 31, 2000 and ending on
January 30, 2002 (collectively, the "Disclosure Documents"). Except as set forth
on Schedule 3.4, the Company is not aware of any event occurring on or prior to
the Closing Date (other than the transactions effected hereby) that would
require the filing of, or with respect to which the Company intends to file, a
Form 8-K after such date. Each Disclosure Document, as of the date of the filing
thereof with the Commission, conformed in all material respects to the
requirements of the Exchange Act, and the rules and regulations thereunder and,
as of the date of such filing, such Disclosure Document did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All material
agreements required to be filed as exhibits to the Disclosure Documents have
been filed as required. Except as set forth in the Disclosure Documents, neither
the Company nor any of its Subsidiaries has any liabilities, contingent or
otherwise, other than liabilities incurred in the ordinary course of business
which, under generally accepted accounting principles, are not required to be
reflected in such financial statements (including the footnotes to such
financial statements) and which, individually or in the aggregate, are not
material to the consolidated business or financial condition of the Company and
its Subsidiaries taken as a whole. As of their respective dates, the financial
statements of the Company included in the Disclosure Documents have been
prepared in accordance with generally accepted accounting principles
consistently applied at the times and during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto, or
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(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 each of the Company and its
Subsidiaries 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 adjustments). The Company has not disclosed to the Purchaser
any event, circumstance or fact that would constitute material non-public
information, other than as set forth on Schedule 3.4 hereto.
3.5 Capitalization; Debt Schedule. The capitalization of the
Company, including its authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Debentures and the Warrants)
exercisable for, or convertible into or exchangeable for any shares of Common
Stock and the number of shares initially to be reserved for issuance upon
conversion of the Closing Debentures and upon exercise of the Closing Warrant is
set forth on Schedule 3.5 hereto. All of such outstanding shares of capital
stock have been, or upon issuance will be, validly issued, fully paid and
non-assessable. No shares of the capital stock of the Company are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any Liens created by or through the Company. Except as disclosed on Schedule
3.5, or as contemplated herein, there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries (whether pursuant to anti-dilution, "reset" or other
similar provisions). Schedule 3.5 identifies all currently outstanding Debt of
the Company, all of which constitutes Subordinated Debt.
3.6 Valid Issuance. The Debentures and the Warrants are duly
authorized and, when issued, sold and delivered in accordance with the terms
hereof, (i) will be duly and validly issued, free and clear of any Liens and
(ii) subject to the accuracy of the representations and warranties made herein
by the Purchaser, will be issued, sold and delivered in compliance with all
applicable Federal and state securities laws. The Conversion Shares are duly
authorized and reserved and, when issued in accordance with the terms of the
Debentures, (i) will be duly and validly issued, fully paid and non-assessable,
free and clear of any Liens and (ii) subject to the accuracy of the
representations and warranties made herein by the Purchaser, will be issued,
sold and delivered in compliance with all applicable Federal and state
securities laws. The Warrant Shares are duly authorized and reserved and, when
issued in accordance with the terms of the Warrants, (i) will be duly and
validly issued, fully paid and non-assessable, free and clear of any Liens and
(ii) subject to the accuracy of the representations and warranties made herein
by the Purchaser, will be issued, sold and delivered in compliance with all
applicable Federal and state securities laws. The Company's Board of Directors
has determined, at a duly convened meeting, that the issuance and sale of the
Securities, and the consummation of the transactions contemplated hereby and by
the other Transaction Documents (including without limitation the issuance of
Conversion Shares in accordance with the terms of the Debentures and Warrant
Shares in accordance with the terms of the Warrants) are in the best interests
of the Company.
3.7 No Violation, Default, Conflict with Other Instruments.
Neither the Company nor any of its Subsidiaries is in violation of any
provisions of its charter, bylaws or any other governing document as amended and
in effect on and as of the date hereof or in default (and no event has occurred
which, with notice or lapse of time or both, would constitute a default) under
any provision of any agreement, instrument or contract to which it is a party or
by which it is bound, or in violation of any provision of any Federal, state or
foreign judgment, writ, decree, order, law, statute, rule or governmental
regulation applicable to the Company, or any of its Subsidiaries which has had
or reasonably could be expected to have a Material Adverse Effect. The (i)
execution, delivery and performance of this Agreement and the other Transaction
Documents and (ii) consummation of the transactions contemplated hereby and
thereby (including without limitation the issuance of the Debentures and the
Warrants and the reservation for issuance and issuance of the Warrant Shares and
the Conversion Shares) will not, in any such case, result in any such violation
or be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision, instrument or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company or of any of its Subsidiaries or the
triggering of any preemptive or anti-dilution rights (including without
limitation pursuant to any "reset" or similar provisions) or rights of first
refusal or first offer, or any similar rights (whether pursuant to a "poison
pill" provision or otherwise), on the part of holders of the Company's
securities.
3.8 Financial Condition; Taxes; Litigation.
3.8.1 The Company's financial condition is, in all
material respects, as described in the Disclosure Documents, except for changes
8
in the ordinary course of business and normal year-end adjustments that are not,
in the aggregate, materially adverse to the consolidated business or financial
condition of the Company and its Subsidiaries taken as a whole. Except as
otherwise described in the Disclosure Documents or disclosed in writing by the
Company to the Purchaser prior to the Closing Date, there has been no change to
the Company's or any of its Subsidiaries' business, operations, properties,
financial condition, or results of operations since the date of the Company's
most recent audited financial statements contained in the Disclosure Documents,
except for such changes which have not had or could not reasonably be expected
to have a Material Adverse Effect.
3.8.2 The Company and each of its Subsidiaries has
filed all tax returns required to be filed by it and paid all taxes which are
due, except for taxes which it reasonably disputes or which have not had or
could not reasonably be expected to have a Material Adverse Effect.
3.8.3 Neither the Company nor any of its Subsidiaries
is the subject of any pending or, to the Company's knowledge, threatened
inquiry, investigation or administrative or legal proceeding by the Internal
Revenue Service, the taxing authorities of any state or local jurisdiction, the
Commission or any state securities commission or other governmental or
regulatory entity which have had or could reasonably be expected to have a
Material Adverse Effect.
3.8.4 Except as described in the Disclosure
Documents, there is no claim, litigation or administrative proceeding pending,
or, to the Company's knowledge, threatened or contemplated, against the Company
or any of its Subsidiaries, or, to the Company's knowledge, against any officer,
director or employee of the Company or any such Subsidiary in connection with
such person's employment therewith that, individually or in the aggregate, could
have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is a party to or subject to the provisions of, any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality which
has had or could reasonably be expected to have a Material Adverse Effect.
3.9 Reporting Company; Form SB-2. The Company is subject to
the reporting requirements of the Exchange Act, has a class of securities
registered under Section 12 of the Exchange Act, and has filed all reports
required thereby. The Company is eligible to register the Conversion Shares and
the Warrant Shares for resale by the Purchaser on a registration statement on
Form SB-2 under the Securities Act. To the Company's knowledge, there exist no
facts or circumstances (including without limitation any required approvals or
waivers of any circumstances that may delay or prevent the obtaining of
accountant's consents) that could reasonably be expected to prohibit or delay
the preparation and filing of a registration statement on Form SB-2 that will be
available for the resale of all Conversion Shares and Warrant Shares by the
Purchaser.
3.10 Acknowledgement of Dilution. The Company acknowledges
that the issuance of Conversion Shares and/or Warrant Shares may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that any such dilution shall not relieve the Company of its obligation to issue
Conversion Shares in accordance with the terms of the Debenture and Warrant
Shares in accordance with the terms of the Warrant.
3.11 Intellectual Property. All registrations and applications
of patents, trademarks and copyrights covering Intellectual Property owned or
used by the Company in the operation of its business is set forth on Schedule
3.11. The Company owns or possesses (or will be licensed or have the full right
to use) all Intellectual Property which is necessary or appropriate for the
operation of its businesses as presently conducted and as proposed to be
conducted, without any known conflict with the rights of others. The
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents will not materially alter or impair, individually or in
the aggregate, any of such rights of the Company. To the Company's knowledge,
none of its planned or current products or services infringes upon any
Intellectual Property of any other Person, and no claim or litigation is pending
or, to the knowledge of the Company, threatened against the Company contesting
its right to sell or otherwise use any product or material or service which
could reasonably be expected to have a Material Adverse Effect. There is no
violation by the Company of any right of the Company with respect to any
material Intellectual Property owned or used by the Company.
3.12 Registration Rights; Rights of Participation. Except as
described on Schedule 3.12 hereto, (A) the Company has not granted or agreed to
9
grant to any person or entity any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the Commission or
any other governmental authority and (B) no person or entity, including, but not
limited to, current or former stockholders of the Company, underwriters,
brokers, agents or other third parties, has any right of first refusal,
preemptive right, right of participation, anti-dilutive right or any similar
right to participate in, or to receive securities of the Company or other
consideration as a result of, the transactions contemplated by this Agreement or
the other Transaction Documents which has not been waived or will not be waived
or otherwise satisfied as of the Closing Date.
3.13 Trading on Bulletin Board. The Common Stock is eligible
for trading on the "bulletin board" of the NASD's automated quotation system and
the Company is, to its knowledge, in compliance with all eligibility criteria
thereof and is not aware of any inquiry by or received any notice from the NASD
regarding any failure or alleged failure by the Company to comply with such
criteria.
3.14 Solicitation; Other Issuances of Securities. Neither the
Company nor any of its Subsidiaries or Affiliates, nor any person acting on its
or their behalf, (i) has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities, (ii) has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under any
circumstances that would require registration of the Securities under the
Securities Act or (iii) has issued any shares of Common Stock or shares of any
series of preferred stock or other securities or instruments convertible into,
exchangeable for or otherwise entitling the holder thereof to acquire shares of
Common Stock which would be integrated with the sale of the Securities to the
Purchaser or the issuance of the Conversion Shares for purposes of the
Securities Act or of any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated, nor will the Company or any of its Subsidiaries or Affiliates take
any action or steps that would require registration of any of the Securities
under the 1933 Act or cause the offering of the Securities to be integrated with
other offerings.
3.15 Fees. Except as described on Schedule 3.15 hereto, the
Company is not obligated to pay any compensation or other fee, cost or related
expenditure to any underwriter, broker, agent or other representative or entity
in connection with the transactions contemplated hereby. The Company will
indemnify and hold harmless the Purchaser from and against any claim by any
person or entity alleging that the Purchaser is obligated to pay any such
compensation, fee, cost or related expenditure in connection with the
transactions contemplated hereby.
3.16 Regulatory Permits. Each of the Company and its
Subsidiaries possesses all certificates, authorizations, licenses and permits
issued by the appropriate federal, state or foreign regulatory authorities
necessary to conduct its business, except where the failure to so possess such
certificates, authorizations or permits has not had or could not reasonably be
expected to have a Material Adverse Effect, 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.
3.17 Key Employees. Each person whose name is set forth on
Schedule 3.17 (each, a "Key Employee") is currently serving in the capacity
indicated on such schedule on a full-time basis. The Company has no knowledge of
any fact or circumstance (including without limitation (i) the terms of any
agreement to which such person is a party or any litigation in which such person
is or may become involved and (ii) any illness or medical condition that could
reasonably be expected to result in the disability or incapacity of such person)
that would limit or prevent any such person from serving in such capacity on a
full-time basis in the foreseeable future, or of any intention on the part of
any such person to limit or terminate his or her employment with the Company. No
Key Employee has borrowed money pursuant to a currently outstanding loan that is
secured by Common Stock or any right or option to receive Common Stock. The
Company has obtained and currently maintains "key man life insurance" covering
the lives of Xxxxx Xxxxxx and Xxxx Xxxxx with a coverage amount of at least $3
million for each such individual; the Company will maintain such insurance for
at least four (4) years following the Initial Closing Date.
3.18 Environment. Except as disclosed in the Disclosure
Documents (i) there is no environmental liability, nor factors likely to give
rise to any environmental liability, affecting any of the properties of the
Company or any of its Subsidiaries that, individually or in the aggregate, would
10
have a Material Adverse Effect and (ii) neither the Company nor any of the
Subsidiaries has violated any environmental law applicable to it now or
previously in effect, other than such violations or infringements that,
individually or in the aggregate, have not had and will not have a Material
Adverse Effect.
3.19 ERISA. The Company does not maintain or contribute to, or
have any obligation under, any Pension Plan.
3.20 Disclosure. No written statement, information, report,
representation or warranty made by the Company in any Transaction Document or
furnished to the Purchaser by or on behalf of the Company in connection with (i)
the Transaction Documents, (ii) any transaction contemplated hereby or thereby,
or (iii) the Purchaser's due diligence investigation of the Company contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein, in light of the
circumstances in which made, not misleading. There is no fact known to the
Company which has had a Material Adverse Effect, and there is no fact known to
the Company which could reasonably be expected to have a Material Adverse Effect
except as may have been disclosed in writing to the Purchaser.
3.21 Insurance. The Company maintains insurance for itself and
its Subsidiaries in such amounts and covering such losses and risks as is
reasonably prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. No notice of cancellation has been received for any of
such policies and the Company is in compliance with all of the terms and
conditions thereof. The Company has no 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 without a significant increase in cost. Without limiting
the generality of the foregoing, the Company maintains Director's and Officer's
insurance in an amount not less than $3 million for each covered occurrence.
3.22 Rights in Properties; Liens. The Company does not own any
right, title or interest in any real Property, except for leasehold interests.
The Company has good and marketable title to all of its material properties and
assets, real and personal, except where failure to have good and marketable
title or valid leasehold interests could not reasonably be expected to have a
Material Adverse Effect, and none of the Properties of the Company (including
without limitation any Intellectual Property) is subject to any Lien, except
Permitted Liens. Any real property and facilities held under lease by the
Company are held under valid, subsisting and enforceable leases with such
exceptions as could not reasonably be expected to have a Material Adverse
Effect.
3.23 WellComm Agreement. The WellComm Agreement has been
executed and delivered by the Company and WellComm, Inc., and no event or
circumstance has occurred or is existing that could reasonably be expected to
result in the termination or expiration of the WellComm Agreement prior to the
consummation of the transactions contemplated thereby, whether with the lapse of
time, giving of notice or both. The Company reasonably believes that the
conditions to the consummation of such transactions have been or, on or before
February 15, 2002, will be satisfied in full.
4. COVENANTS OF THE COMPANY.
4.1 The Company agrees that it will, following each Closing:
(a) file a Form D with respect to the Securities issued
at such Closing as required under Regulation D and to provide a copy thereof to
the Purchaser promptly after such filing;
(b) take such action as the Company reasonably determines
upon the advice of counsel is necessary to qualify the Debenture and Warrant
issued at such Closing for sale under applicable state or "blue-sky" laws or
obtain an exemption therefrom, and shall provide evidence of any such action to
the Purchaser at the Purchaser's request; and
(c) (A) with respect to the Initial Closing, (i) issue a
press release describing the transactions contemplated by this Agreement and the
other Transaction Documents on or before the Business Day following the Initial
Closing Date and (ii) file with the Commission a Form 8-K describing the terms
of the transactions contemplated by this Agreement and the other Transaction
Documents, with this Agreement and all exhibits attached to such Form 8-K as an
11
exhibit thereto, on or before the third (3rd) Business Day following the Initial
Closing Date in the form required by the Exchange Act and (B) with respect to
the Option Closing, issue a press release announcing the issuance of the Option
Debenture and Option Warrant on or before the Business Day following delivery of
the Option Notice.
4.2 The Company agrees that it will, as long as the Purchaser
or any Affiliate of the Purchaser beneficially owns any Securities:
(a) maintain its corporate existence in good standing;
(b) maintain, keep and preserve all of its Properties
necessary in the proper conduct of its businesses in good repair, working order
and condition (ordinary wear and tear excepted) and make all necessary repairs,
renewals and replacements and improvements thereto, except where the failure to
do so does not result in a Material Adverse Effect;
(c) pay or discharge before becoming delinquent (a) all
taxes, levies, assessments and governmental charges imposed on it or its income
or profits or any of its Property and (b) all lawful claims for labor, material
and supplies, which, if unpaid, might become a Lien upon any of its Property,
except where the failure to do so does not result in a Material Adverse Effect;
provided, however, that the Company shall not be required to pay or discharge
any tax, levy, assessment or governmental charge, or claim for labor, material
or supplies, whose amount, applicability or validity is being contested in good
faith by appropriate proceedings being diligently pursued and for which adequate
reserves have been established under GAAP;
(d) comply with all Governmental Requirements applicable
to the operation of its business, except for instances of noncompliance that
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(e) comply with all agreements, documents and instruments
binding on it or affecting its Properties or business, including, without
limitation, all Material Contracts, except for instances of noncompliance that
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(f) provide the Purchaser with copies of all materials
sent to its stockholders, in each such case promptly after the filing thereof
with the Commission; and
(g) timely file with the Commission all reports required
to be filed pursuant to the Exchange Act and refrain from terminating its status
as an issuer required by the Exchange Act to file reports thereunder even if the
Exchange Act or the rules or regulations thereunder would permit such
termination.
4.4 Reservation of Common Stock. The Company shall, on the
Initial Closing Date, have authorized and reserved for issuance to the
Purchaser, free from any preemptive rights, a number of shares of Common Stock
equal to one hundred and fifty percent (150%) of the maximum number shares of
Common Stock issuable upon (A) conversion of the outstanding Debentures in full
(including all interest accrued thereon from and after the issue date for each
Debenture) at the Conversion Price(s) then in effect and (B) exercise of the
outstanding Warrants in full at the exercise price(s) then in effect, in each
such case without regard to any limitation or restriction on such conversion or
exercise that may be set forth in the Debentures or the Warrants (the "Reserved
Amount"). In the event that, as a result of a determination of or reset to the
Conversion Price(s) or the exercise price(s) for the Warrants, or upon the
issuance of the Option Debenture and the Option Warrant, or both, the Reserved
Amount is less than one hundred and twenty five percent (125%) of the aggregate
number of shares of Common Stock issuable upon conversion of the outstanding
Debentures and exercise of the outstanding Warrants in full at the respective
Conversion Price(s) and exercise price(s) then in effect (without regard to any
limitation or restriction on such conversion or exercise that may be set forth
in the Debentures or the Warrants), the Company shall immediately take such
action (including without limitation seeking stockholder approval) as may be
necessary so that the Reserved Amount shall be, following such action, equal to
or greater than one hundred and fifty percent (150%)of such aggregate number of
shares. The Company shall not reduce the Reserved Amount without the Purchaser's
prior written consent.
12
4.5 Quotation on Nasdaq. The Company shall use its reasonable
commercial efforts to maintain the designation and quotation, or listing, of the
Common Stock on the Nasdaq "bulletin board", the Nasdaq National or Small Cap
Market, the American Stock Exchange or the New York Stock Exchange for as long
as the Purchaser owns any Securities.
4.6 Management Restrictions. Except as set forth on Schedule
4.6, during the period beginning on the date of this Agreement and ending on the
one hundred and eightieth (180th) day following such date, no Key Employee may,
directly or indirectly, sell, transfer or otherwise dispose of (whether through
the writing or purchase of options, futures or derivative instruments), or
publicly announce (whether through the filing of a notice or otherwise) such
individual's intention to dispose of, any Common Stock held or beneficially
owned by such individual.
4.7 No Debt, Liens. At all times following the date of this
Agreement and while any Obligation is outstanding, the Company shall refrain,
and shall ensure that each of its Subsidiaries refrains, from (i) other than as
set forth on Schedule 4.7, incurring any Debt or increasing the amount of any
existing line of credit or other Debt facility beyond the amount outstanding on
the date hereof (other than, in either such case, with respect to Subordinated
Debt) and (ii) granting, establishing or maintaining any Lien on any of its
assets, including without limitation any pledge of securities owned or held by
it (including without limitation any securities issued by any such Subsidiary),
other than Permitted Liens (including the imposition of any mechanic's, tax or
similar statutory lien after the Closing Date, provided that, upon the
imposition of any such lien, the Company shall notify the Purchaser thereof and
shall use commercially reasonable efforts to remove such lien as soon as
practicable (including without limitation contesting such lien in good faith by
appropriate proceedings)).
4.8 Use of Proceeds. The Company agrees that it will use the
proceeds of the sale of the Debentures and Warrants (i) to fulfill its
obligations under the WellComm Agreement and (ii) for general corporate purposes
only, in the ordinary course of its business and consistent with past practice
and, without limiting the generality of the foregoing, shall not use such
proceeds to make a loan to any employee, officer, director or stockholder of the
Company, to repay any loan or other obligation of the Company or to repurchase
or pay a dividend on shares of Common Stock or other securities of the Company
(in any such case, regardless of whether such loan or payment was authorized by
the Company's Board of Directors prior to the date hereof), other than any such
repurchase or payment explicitly required, permitted or contemplated by the
terms of this Agreement or the other Transaction Documents.
4.9 Stockholder Approval. The Purchaser shall have the right
to demand at any time following the date hereof, as long Stockholder Approval
(as defined below) is then required by applicable law or by any rule or
regulation of any exchange or trading system of which the Company is a member or
on which its securities are traded, that the Company hold a meeting of its
stockholders for the purpose of seeking approval by the holders of Common Stock
for the issuance of Conversion Shares and Warrant Shares in excess of the Cap
Amount (as defined in the Debentures) ("Stockholder Approval"), such meeting to
be held no later than the sixtieth (60th) day following receipt by the Company
of such demand in writing.
4.10 Use of Purchaser Name. The Company shall, at all times
from and after the date of this Agreement, refrain from using, directly or
indirectly, the Purchaser's name or the name of any of its Affiliates in any
advertisement, announcement, press release or other similar communication unless
it has received the prior written consent of the Purchaser for the specific use
contemplated (which consent will not be unreasonably withheld) or as otherwise
required by applicable law or regulation.
4.11 Restricted Payments. As long as any Obligations are
outstanding, the Company will not, nor will it permit any Subsidiary of the
Company to, make any Restricted Payments, except that:
(a) the Company may make regularly scheduled payments of
principal and interest accrued on any Subordinated Debt (other than any loans
made by an officer or director of the Company) if and to the extent (but only if
and to the extent) permitted by the express terms of the Subordinated Debt
Documents governing such Subordinated Debt, which terms shall have been
expressly approved in writing by the Purchaser; and
(b) Subsidiaries of the Company may make Restricted
Payments to the Company;
13
provided, however, that no Restricted Payments may be made pursuant to clause
(a) or (b) preceding if a Default exists at the time of such Restricted Payment
or would result therefrom.
4.12 Transactions with Affiliates. As long as any Obligations
are outstanding, the Company will not, nor will it permit any Subsidiary of the
Company to, enter into any transaction, including, without limitation, the
purchase, sale or exchange of Property or the rendering of any service, with any
Affiliate of the Company except with the prior written approval of the
Purchaser.
4.13 Disposition of Property. As long as any Obligations are
outstanding, the Company will not, nor will it permit any Subsidiary of the
Company to, sell, lease, assign, transfer or otherwise dispose of any of its
Property, except dispositions of inventory by the Company and its Subsidiaries
in the ordinary course of business, and expenditures of money (including,
without limitation, money held in deposit accounts) made in the ordinary course
of business or for the purpose of making Restricted Payments expressly permitted
in accordance with this Agreement or Investments expressly permitted in
accordance with this Agreement.
4.14 Certain Transactions. As long as any Obligations are
outstanding, and except as may be expressly permitted or required by the
Transaction Documents, the Company will not, nor will it permit any Subsidiary
of the Company to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of the Company or any Subsidiary of the Company to (a) pay dividends or make any
other distribution to the Company or any Subsidiary of the Company in respect of
capital stock or with respect to any other interest or participation in, or
measured by, its profits, (b) pay any indebtedness owed to the Company or any
Subsidiary of the Company, (c) make any loan or advance or capital contribution
to the Company or any Subsidiary of the Company, (d) sell, lease or transfer any
of its Property to the Company or any Subsidiary of the Company, or (e) xxxxx x
Xxxx on any of its Properties.
4.15 Modification of Certain Agreements. As long as any
Obligations are outstanding, the Company will not, nor will it permit any of its
Subsidiaries to, consent to or implement any termination, amendment,
modification, supplement or waiver of (a) the certificate or articles of
incorporation, articles of organization, bylaws, regulations or other
constitutional documents of the Company or any such Subsidiary or (b) any
Material Contract to which it is a party; provided, however, that such documents
may be amended or modified if and to the extent that such amendment or
modification is not substantive or material and could not be adverse to the
Company or the Purchaser.
4.16 Further Assurances. The Company will execute and deliver
such further agreements, documents and instruments and take such further actions
as may be reasonably requested by the Purchaser to carry out the terms and
provisions and purposes of this Agreement and the other Transaction Documents
and to evidence the Obligations.
4.17 Right of First Offer. Prior to any offer or sale by the
Company of Common Stock or any other equity security of the Company (or any
security convertible into, or exercisable or exchangeable for, Common Stock or
any such equity security)(collectively, an "Equity Security") during the period
beginning on the Initial Closing Date and ending on the twelve (12) month
anniversary of the Closing Date, the Company must first deliver to the Purchaser
written notice describing the proposed issuance, including the terms and
conditions thereof, and provide the Purchaser with an option during the ten (10)
Trading Day period following delivery of such notice to purchase all or any part
of the Equity Securities being offered on the same terms as contemplated by such
issuance (the "Right of First Offer"). In the event that the Purchaser either
does not give notice within such ten (10) Trading Day period that it intends to
exercise the foregoing option or informs the Company in writing that it does not
intend to participate in all or any part of such issuance, the Company may offer
to a third party the option to purchase up to, in the aggregate, the amount of
Equity Securities which were declined by the Purchaser, on substantially the
same economic terms as were offered to the Purchaser. The Right of First Offer
shall not apply to any transaction involving (i) issuances of securities in a
firm commitment underwritten public offering, (ii) issuances of securities as
consideration for a merger, consolidation or purchase of assets, or in
connection with any strategic partnership or joint venture (the primary purpose
of which is not to raise equity capital), or in connection with the disposition
or acquisition of a business, product or license by the Company, (iii) the
issuance of Common Stock (or securities convertible or exercisable into Common
Stock) within sixty (60) days of the Initial Closing Date for an aggregate
purchase price not to exceed, individually or in the aggregate, two million
dollars ($2,000,000) and with an effective purchase price (or conversion or
14
exercise price, as applicable) per share of Common Stock not less than $0.75,
(iv) the issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of the date
hereof or (v) the grant of additional options or warrants, or the issuance of
additional securities, under any Company stock option or restricted stock plan
approved by the Board of Directors of the Company.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Purchaser's Obligations at Initial Closing.
The Purchaser's obligations at the Initial Closing, including without limitation
its obligation to purchase the Closing Debenture and Closing Warrant, are
conditioned upon the satisfaction by the Company (or waiver by the Purchaser) of
each of the following events as of the Initial Closing Date:
5.1.1 the representations and warranties of the
Company set forth in this Agreement shall be
true and correct in all material respects as
of such date as if made on such date, except
for representations and warranties that are
made as of a specific date;
5.1.2 the Company shall have complied with or
performed in all material respects all of
the agreements, obligations and conditions
set forth in this Agreement that are
required to be complied with or performed by
the Company on or before the Initial
Closing;
5.1.3 the Initial Closing Date shall occur on a
date that is not later than February 4,
2002;
5.1.4 the Company shall have delivered to the
Purchaser a certificate, signed by the Chief
Executive Officer of the Company, certifying
that the conditions specified in this
paragraph 5.1 have been fulfilled as of the
Initial Closing, it being understood that
the statements made in such certificate
shall be deemed to be representations and
warranties of the Company as though made
herein;
5.1.5 the Company shall have delivered to the
Purchaser an opinion of counsel for the
Company, dated as of such date, in
substantially the form set forth on Exhibit
5.1.5 hereto;
5.1.6 the Company shall have delivered to the
Purchaser duly executed certificates
representing the Closing Debenture and
Closing Warrant;
5.1.7 the Company shall have executed and
delivered the Registration Rights Agreement;
5.1.8 the Common Stock shall be eligible for
trading on the "bulletin board" and no
suspension of trading in the Common Stock
shall have occurred and be continuing as of
the Initial Closing Date;
5.1.9 the Company shall have authorized and
reserved for issuance the number of shares
of Common Stock required to be reserved
under paragraph 4.4 hereof, and shall have
provided the Purchaser with reasonable
evidence thereof; and
5.1.10 no litigation, statute, rule, regulation,
executive order, decree, ruling or
injunction shall have been enacted, entered,
promulgated or endorsed by or in any court
or governmental authority of competent
jurisdiction or any self-regulatory
organization having authority over the
matters contemplated hereby which prohibits
the consummation of any of the transactions
contemplated by this Agreement.
15
5.2 Conditions to Company's Obligations at the Initial
Closing. The Company's obligations at the Initial Closing are conditioned upon
the satisfaction (or waiver by the Company) of each of the following events as
of the Initial Closing Date:
5.2.1 the representations and warranties of the
Purchaser shall be true and correct in all
material respects as of such date as if made
on such date;
5.2.2 the Purchaser shall have complied with or
performed in all material respects all of
the agreements, obligations and conditions
set forth in this Agreement that are
required to be complied with or performed by
the Purchaser on or before the Initial
Closing;
5.2.3 the Purchaser shall have tendered delivery
of the Purchase Price; and
5.2.4 no litigation, statute, rule, regulation,
executive order, decree, ruling or
injunction shall have been enacted, entered,
promulgated or endorsed by or in any court
or governmental authority of competent
jurisdiction or any self-regulatory
organization having authority over the
matters contemplated hereby which prohibits
the consummation of any of the transactions
contemplated by this Agreement.
6. MISCELLANEOUS.
6.1 Survival. The representations and warranties made by the
parties herein shall survive each Closing notwithstanding any due diligence
investigation made by or on behalf of the party seeking to rely thereon. In the
event that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided that in
such case the parties shall negotiate in good faith to replace such provision
with a new provision which is not illegal, unenforceable or void, as long as
such new provision does not materially change the economic benefits of this
Agreement to the parties. Each party agrees to indemnify and hold harmless the
other party for any loss, claim, liability, damage or expense, as incurred by
the such other party, arising out of or in connection with a breach by such
party of any representation, warranty or agreement made herein or in any other
Transaction Document.
6.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. The Purchaser may assign its
rights and obligations hereunder, in connection with any private sale or
transfer of Securities pursuant to Section 2.4, as long as, as a condition
precedent to such transfer, the transferee executes an acknowledgment agreeing
to be bound by the applicable provisions of this Agreement, in which case the
term "Purchaser" shall be deemed to refer to such transferee as though such
transferee were an original signatory hereto. The Company may not assign it
rights or obligations under this Agreement except as specifically required or
permitted pursuant to the terms of any Transaction Document.
6.3 No Reliance. Each party acknowledges that (i) it has such
knowledge in business and financial matters as to be fully capable of evaluating
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice or
representation of the other party in connection with entering into this
Agreement, the other Transaction Documents or such transactions (other than the
representations made in this Agreement or the other Transaction Documents),
(iii) it has not received from the other party any assurance or guarantee as to
the merits (whether legal, regulatory, tax, financial or otherwise) of entering
into this Agreement or the other Transaction Documents or the performance of its
obligations hereunder and thereunder, and (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting advisors
to the extent that it has deemed necessary, and has entered into this Agreement
and the other Transaction Documents based on its own independent judgment and on
the advice of its advisors as it has deemed necessary, and not on any view
(whether written or oral) expressed by the other party.
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6.4 Injunctive Relief. Each party acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the other
party and that the remedy or remedies at law for any such breach will be
inadequate and agrees, in the event of any such breach, in addition to all other
available remedies, that such other party may seek an injunction restraining any
breach and requiring immediate and specific performance of such obligations
without the necessity of showing economic loss.
6.5 Governing Law; Jurisdiction; Waiver of Trial by Jury. This
Agreement shall be governed by and construed under the laws of the State of New
York without regard to the conflict of laws provisions thereof. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or under any other Transaction Document or
in connection herewith or therewith or with any transaction contemplated hereby
or thereby, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof (certified or registered mail, return receipt requested)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. Each party
hereby waives, to the fullest extent permitted by law, trial by jury in
connection with any suit, action or proceeding relating to a dispute hereunder
or under any other Transaction Document.
6.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
6.7 Headings; Drafting. The headings used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. The parties shall be deemed to have participated
jointly in the drafting of this Agreement and the other Transaction Documents,
and no provision hereof or thereof shall be construed against any party as the
drafter thereof.
6.8 Notices. Any notice, demand or request required or
permitted to be given by any party to any other party pursuant to the terms of
this Agreement shall be in writing and shall be deemed given (i) on a Business
Day when delivered personally or by verifiable facsimile transmission (with an
original to follow) on or before 5:00 p.m., eastern time, on such Business Day,
(ii) on the next Business Day after timely delivery to a nationally-recognized
overnight courier and (iii) on the Business Day actually received if deposited
in the U.S. mail (certified or registered mail, return receipt requested,
postage prepaid), addressed to the parties as follows:
If to the Company:
I-Trax, Inc.
One Xxxxx Square
000 X. 00xx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
I-Trax, Inc.
One Xxxxx Square
000 X. 00xx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxx Xxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
17
And to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Purchaser:
Palladin Opportunity Fund, LLP
c/o The Palladin Group, L.P.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Solomon, Zauderer, Ellenhorn, Xxxxxxxx & Xxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
6.9 Expenses. The Company and the Purchaser each shall pay all
costs and expenses that it incurs in connection with the negotiation, execution,
delivery and performance of this Agreement and the other Transaction Documents;
provided, however, that the Company shall reimburse the Purchaser at the Initial
Closing for all out-of-pocket expenses (including without limitation legal fees
and expenses) incurred by it in connection its due diligence investigation of
the Company and the negotiation, preparation, execution, delivery and
performance of this Agreement and the other Transaction Documents in the amount
of twenty five thousand dollars ($25,000), which amount may be deducted by the
Purchaser from the Purchase Price at the Initial Closing.
6.10 Entire Agreement; Amendments; Waiver. This Agreement and
the other Transaction Documents constitute the entire agreement between the
parties with regard to the subject matter hereof and thereof, superseding all
prior agreements or understandings, whether written or oral, between or among
the parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed by
the Company and the Purchaser.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first-above written.
I-TRAX, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman & CEO
PALLADIN OPPORTUNITY FUND LLC
By: /s/ Xxxxxx X. Xxxxxxx
----------------------
Name: Xxxxxx X. Xxxxxxx
Title: Manager
18
